UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 2002
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to___________
Commission file number 0-5186
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OCG TECHNOLOGY, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 13-2643655
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
56 Harrison Street, New Rochelle, New York 10801
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(Address of principal executive offices)
(914) 576- 8457
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(Issuer's telephone number)
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(Former name, address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. [X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Shares Outstanding at February 3, 2003
- ----------------------------- ----------------------------------------
Common Stock ($.01 par value) 41,273,613 Shares
1
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX
PART I. - FINANCIAL INFORMATION PAGE NUMBER
- -------------------------------- -----------
Consolidated Condensed Balance Sheets
December 31, 2002 and June 30, 2002 1
Consolidated Condensed Statements of Loss for the
Three and Six Months Ended December 31, 2002 and 2001 2
Consolidated Condensed Statements of Cash Flow for
the Six Months Ended December 31, 2002 and 2001 3
Notes to Consolidated Condensed Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
PART II - OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K 11
2
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
December 31, 2002 June 30, 2002
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ASSETS (UNAUDITED) (AUDITED)
Current Assets:
Cash $ 5,951 $ 37,191
Accounts receivable 326 326
Inventory 11,648 14,531
Other current assets 99,085 44,877
Notes receivable 334,500 325,000
Interest receivable 24,882 8,362
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Total current assets 476,392 430,287
Property and equipment, net of accumulated depreciation of
($616,654) ($601,590) 21,939 27,061
Capitalized software costs, net of accumulated amortization
($264,799) ($139,939) 455,329 426,826
Other assets 4,972 4,972
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Total assets $ 958,632 $ 889,146
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses 48,741 52,599
Bank loans payable 14,343
Notes Payable 226,700
Other liabilities: Notes Payable - long term 150,000 239,500
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Total liabilities 439,784 292,099
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Shareholders' equity: (Note 4)
Preferred stock $.10 par value, Series C 6,000 6,000
Preferred stock $.10 par value, Series E 3,333 3,333
Common stock $.01 par value 412,736 391,736
Additional paid-in capital 25,687,759 25,486,759
Accumulated deficit (25,363,980) (25,163,281)
Stock subscriptions receivable (164,500) (65,000)
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581,348 724,547
Less: treasury stock, at cost (12,500 shares) (62,500) (62,500)
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Total shareholders' equity 518,848 724,547
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Total liabilities and shareholders' equity $ 958,632 $ 889,146
================= =================
See accompanying notes to consolidated condensed financial statements
1
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended December 31, Six Months Ended December 31,
2002 2001 2002 2001
------------- ------------- ------------- -------------
Revenue:
Sales $ 49,578 $ 28,334 $ 96,923 $ 39,108
------------- ------------- ------------- -------------
Costs and expenses:
Cost of sales 23,799 15,325 48,754 17,319
Marketing, general and administrative 36,528 130,827 93,396 241,579
Depreciation and amortization 40,887 31,574 79,924 62,425
Other product costs 44,273 39,323 88,114 81,649
Interest - net (5,917) 34 (12,526) 34
------------- ------------- ------------- -------------
Total costs and expenses 139,570 217,083 297,622 402,826
------------- ------------- ------------- -------------
Net profit (loss) from operations $ (89,992) $ (188,749) $ (200,699) $ (363,718)
============= ============= ============= =============
Weighted average number of shares
outstanding during the period 40,165,066 35,223,613 40,165,066 35,223,613
============= ============= ============= =============
Loss per Common Share $ (0.01) $ (0.01) $ (0.01) $ (0.01)
============= ============= ============= =============
See accompanying notes to consolidated condensed financial statements
2
OCG TECHNOLOGY, INC. AND SUBSIDIARIESSTATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended December 31,
2002 2001
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Cash flows from operating activities:
Net income (loss) $ (200,699) $ (363,718)
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Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 79,924 62,425
Issuance of stock and warrants for services 12,000 12,000
Changes in assets and liabilities
(Increase) decrease in receivables (16,520) 7,899
(Increase) decrease in notes receivables (9,500) (25,000)
(Increase) decrease in other current assets 32,792 179,961
(Increase) decrease in inventory 2,883 (8,061)
(Increase) decrease in accounts payable and
accrued expenses (3,858) (27,391)
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Total adjustments 97,721 201,833
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Net cash used in operating activities (102,978) (161,885)
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Cash flows from investing activities:
Capitalized software development costs (93,364) (76,186)
(Increase) decrease in property and equipment (9,941) 0
Cash flows from financing activities:
Increase (decrease) in notes payable 137,200 (206,000)
Increase (decrease) in bank loans 14,343 4,110
Proceeds from sale of common stock 210,000 0
Proceeds from issuance of Series C Preferred Stock 0 450,000
(Increase) decrease in subscriptions receivable (186,500) 0
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Net cash changes from investing & financing 71,738 171,924
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Net increase (decrease) in cash (31,240) 10,039
Cash, beginning of period 37,191 7,774
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Cash, end of period $ 5,951 $ 17,813
============= =============
See accompanying notes to consolidated condensed financial statements
3
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. In the opinion of the Company, (which, together with its subsidiaries, unless
the context otherwise requires, is referred to as "OCGT"), the accompanying
unaudited consolidated condensed financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the financial position as of December 31, 2002 and the results of operations for
the three and six months ended December 31, 2002 and 2001 and the statements of
cash flows for the six months ended December 31, 2002 and 2001. The June 30,
2002 balance sheet has been derived from OCGT's audited financial statements.
The results of operations for the six months ended December 31, 2002 are
not necessarily indicative of the results to be expected for the full year.
While OCGT believes that the disclosures presented are adequate to make
the information not misleading, it is suggested that these condensed financial
statements be read in conjunction with the financial statements and the notes
thereto included in OCGT's latest annual report on Form 10-KSB.
The accompanying consolidated financial statements have been prepared on
a going concern basis which contemplates continuity of operations and
realization of assets and liquidation of liabilities in the ordinary course of
business. Because of significant operating losses, OCGT's ability to continue as
a going concern is dependent upon its ability to obtain sufficient additional
financing and, ultimately, upon future profitable operations. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of
liabilities that might be necessary should OCGT be unable to continue in
existence.
2. Earnings per share is computed using the weighted average number of shares
outstanding during the periods. The effect of warrants outstanding would be
anti-dilutive.
3. Other current assets, as stated in the Consolidated Condensed Balance Sheets,
includes $87,000 of subscriptions receivable which were received by the Company
after December 31, 2002 but prior to filing this Form 10QSB. Therefore, this
amount was not included in Stock Subscriptions Receivable as a deduction from
Equity.
4. Capital Changes:
During the six months ended December 31, 2002, for services rendered in
accord with the terms of a consulting agreement, warrants were issued to
purchase a total of 30,000 shares of the Company's common stock at exercise
prices ranging between $0.15 to $0.25 per share with exercise dates of said
warrants expiring between July 1 to December 31, 2004. The Company reflected a
total expense of $12,000 for the six month period ending December 31, 2002.
During the three months ended September 30, 2002, warrants were exercised
to purchase an aggregate of 1,900,000 shares of the Company's common stock at an
exercise price $0.10 per share.
During the three months ended December 31, 2002, warrants were exercised
to purchase an aggregate of 200,000 shares of the Company's common stock at an
exercise price $0.10 per share.
4
CG TECHNOLOGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A SUMMARY OF INCREASES (DECREASES) IN THE ITEMS INCLUDED IN
THE CONSOLIDATED STATEMENTS OF LOSS IS SHOWN BELOW:
General
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The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes thereto appearing elsewhere herein.
The following discussion contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 and OCGT intends that such forward-looking
statements be subject to the safe harbors created thereby. These forward-looking
statements include predictions, estimates and other statements that involve a
number of risks and uncertainties. While this outlook represents OCGT's current
judgment on the future direction of the business, such risks and uncertainties
could cause actual results to differ materially from any future performance
suggested herein.
OCGT has experienced recurring losses from operations and has relied on the sale
of equity interests in OCGT to fund its operations. If necessary, OCGT intends
to provide additional working capital through the sale of equity interests in
OCGT. Although, in the past, OCGT has been able to provide working capital
through the sale of equity interests in OCGT, there can be no assurances that
OCGT will succeed in its efforts, which creates a doubt about its ability to
continue as a going concern. The results of operations for prior periods is
based on OCGT's continuing operations.
Results of Operations
- ---------------------
Total revenues increased $21,244 and $57,815 for the three and six months ended
December 31, 2002, as compared to the same period for 2001. The sales of OCGT
and PSI were $0 and $96,923 respectively, for the six months ended December 31,
2002.
Cost of sales for the six months ended December 31, 2002, as compared to the
same period for 2001, increased from $17,319 to $48,754 as a result of changing
the mode of operation on Internet sales of particular items from receiving
commissions on sales to selling from inventory.
Prior to September, 2002, OCGT's income consisted of fees and commissions. OCGT
acted as a commissioned broker to sell various items of merchandise on its Web
sites. In those instances, when a consumer indicated a desire to purchase an
item, the order was collected through the Web site and then processed by the
third party seller and OCGT received a commission on such sale. In September
2001, although OCGT continued to be a commission broker for certain merchandise,
it decided to become a direct seller of one of the category of items it was
previously selling as a commissioned broker. To accomplish this end, OCGT
purchased merchandise and maintains an inventory for sale on one of its Web
sites. OCGT is generally paid by credit card at the time of purchase and ships
the item from its inventory. As a result, the major cause for the increase in
revenues is that revenues now reflect the total sales price, not just a
commission. The gross profit from sales (revenues less cost of sales) for the
six months ended December 31, 2002, as compared to the same period for 2001,
increased from $21,759 to 48,169. This results from basically two reasons: (1)
the increased profit per sale resulting from the increased mark-up from selling
from inventory rather than receiving a commission; and (2) an increase in the
number of units sold as a result of an increase in the number of visitors to our
Web site.
Marketing, general and administrative expenses decreased $94,299 and $148,223
for the three and six months ended December 31, 2002, as compared to the same
period for 2001, primarily from the decrease in legal fees as a result of the
successful completion of a law suit and also a reduction in business development
costs..
Other product costs increased $4,950 and $6,645 for the three and six months
ended December 31, 2002, as compared to the same period for 2001.
5
Liquidity and Capital Resources
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At December 31, 2002, OCGT had a current ratio of 1.34 to 1 compared to 1.97 to
1 as of December 31,2001. The decrease in current ratio is due to the increase
in Notes Payable. The net loss from operations for the six months ended December
31, 2002, was $200,699 compared to $363,718 for the prior year. The reduction in
the net loss from operations was primarily due to the decrease in "marketing,
general and administrative expenses" during the current year (see "marketing,
general and administrative expenses" above). $111,252 or 55% of the net loss
from operations for the six months, were non-cash charges consisting of
Depreciation and Amortization in the amount of $93,356; Consulting Services in
the amount of $12,000 paid through the issuance of 30,000 warrants and
amortization of prepaid expenses in the amount of $5,896 paid through the
issuance of shares of common stock. OCGT has experienced recurring losses from
operations and has been unable to provide sufficient working capital from
operations and has relied significantly on the sale of equity interests in OCGT,
and the exercise of warrants and loans from shareholders to fund its operations.
OCGT's auditors have included an explanatory paragraph regarding the ability of
OCGT to continue as a "going concern".
Cash on hand, inventory, accounts receivable, and notes receivable were $17,925
at December 31, 2002. As of that date, OCGT also has $251,500 of collateralized
demand notes receivable related to the purchase of OCGT's common stock through
the exercise of warrants. Since December 31, 2002, OCGT has received $87,000 in
cash, reducing the outstanding balance of these notes to $164,500. Although, in
the past, OCGT has been able to provide working capital through the sale of
equity interests in OCGT and through the exercise of warrants, there can be no
assurances that OCGT will succeed in these efforts in the future.
Notes receivable
- ----------------
OCGT has advanced funds totaling $334,500, plus accrued interest at 7% per
annum, pursuant to a grid note, dated February 4, 2002. In consideration for
these advances, OCGT received warrants to purchase common stock of the borrower,
exercisable over a period of three years from the date of issuance, at a price
of $0.25 per share. OCGT received a security interest in accounts receivable of
the borrower anticipated to be generated under certain sales contracts which
provide for borrower to install and maintain the healthcare system for certain
countries. OCGT is also a subcontractor of the borrower.
Products and Competition.
- -------------------------
OCGT's revenues are primarily derived through its wholly owned subsidiary
PrimeCare Systems, Inc.(" PSI"), which developed, owns and maintains the
PrimeCareTM Patient Management System ("the PrimeCareTM System"), which is
protected by copyrights. (hereafter "OCGT" shall mean OCGT and/or PSI as the
context requires).
Products: OCGT markets the PrimeCareTM System, the CodeComplierTM and Internet
enhanced versions of parts of the PrimeCare(TM) System on the following Web
sites (1)YourOwnDoctor.com, (2) PrimeCareOnTheWeb.com and (3)YourOwnHealth.com.
OCGT also created, maintains and markets a Web site known as DeniseAustin.com.
OCGT completed and has started to market the PrimeCare(TM) System Version 9
("PrimeCare Version 9"). PrimeCare Version 9 is a complete, ground-up redesign
and re-write of the entire PrimeCareTM System undertaken during this past fiscal
year.
PrimeCare's Version 9 reduces installation and maintenance costs required by the
PrimeCare System, and has great flexibility which enables it to be adapted to a
wide variety of health care organizational uses, i.e., national and local health
care systems, military organizations, correctional facilities, HMOs, hospitals
with outpatient services, clinics, group practices and solo practitioners.
OCGT products are unique and are of significant benefit to healthcare providers
and their patients, consumers, pharmaceutical companies and other companies in
the healthcare industry and fitness field. Physicians agree that the most
important and time consuming part of any medical encounter is the collection of
the patient's detailed history of present illness ("HPI"). Most physicians agree
that in as many as 8 of every 10 patients, the diagnosis can be obtained from a
detailed HPI. Amongst many other benefits, the PrimeCareTM System is of great
aid to the physician in obtaining the HPI.
6
Products:
- --------
PrimeCareTM Patient Management System ("the PrimeCareTM System") is an
in-office client server based, user friendly, patient management system, and,
also, is uniquely patient interactive, as well as physician and staff
interactive. The PrimeCareTM System: (i) creates an electronic medical record
documenting the patient/physician encounter; (ii) is compatible with practice
management and billing systems; (iii) is Health Insurance Portability
Accountability Act ("HIPAA") compliant; (iv) is designed for use in ambulatory
clinics, group and individual practices; (v) uses an authoritative and
comprehensive knowledge database of approximately 280 symptom and problem
oriented patient questionnaires (the "Questionnaires") used to obtain the
patient's history of present illness ("HPI") for diagnostic and follow-up
visits; (vi) collectively contains over 100,000 complaint and disease state
questions, over 1,600 diagnoses, 1,250 physician reference articles, 1,700
patient education articles; (vii) allows the staff to schedule the appropriate
Questionnaire and enter the vital signs; (viii) interacts directly with the
patient by having the patient select the answers that apply to their problem
from the Questionnaire, in English or Spanish, without requiring physician or
staff time; (ix) does not require the patient to have computer or typing skills;
(x) allows the physician to interact directly with the PrimeCareTM System to
select and document the normal and abnormal physical findings, assessments,
tests, prescriptions and treatment plan for the patient; (xi) automatic (real
time) calculation of HCFA's Evaluation and Management code, with full audit
trail, used for determining the reimbursement level by Medicare and other third
party payors for the office visit; (xii) encrypts all medical data for storage;
(xiii) eliminates dictation and transcription costs; (xiv) reduces risk of
malpractice liability due to errors of omission and "failure to consider"; and
(xv) allows staff to schedule Questionnaires for patient interview via the
Internet using PrimeCareOnTheWeb.
The PrimeCareTM System: standardizes the patient record; assures consistency in
patient care; creates a patient database for clinical and outcomes research;
offers, both local and remote, means for utilization review and quality
assurance audits; improves the quality of care; increases efficiency and
productivity of the physician's practice; automatically generates a problem
list; incorporates patient care algorithms and clinical practice guidelines;
permits, both local and remote, on-line electronic retrieval of patient record
and hard copy print out with appropriate security controls; enables rapid access
to important patient data for clinical care; contains and provides patient
education, complaint oriented and medication specific; provides physician
reference materials.
The PrimeCare System is fully functional in current Windows operating
environments including Windows 95, 98, ME, and Windows NT, 2000. PSI's
interfaces enable the PrimeCare(TM) System to communicate with other practice
management systems used in medical facilities. This provides a method for these
systems to transfer information to the PrimeCare(TM) System, such as patient
demographics and appointment scheduling, and the PrimeCare(TM) System to
transfer information (such as billing information including E&M codes, ICD9
codes and CPT codes) to these other systems.
Code ComplierTM: OCGT has also developed Code ComplierTM an application
software program that was designed to be used in conjunction with the
PrimeCareTM System and PrimeCareOnTheWeb.com. As each item of information is
entered into and collected by the PrimeCareTM System during the patient
encounter, the CodeComplierTM organizes the data in the proper classification
and using the 1997 HCFA guidelines, automatically calculates HCFA's Evaluation
and Management code level, with full audit trail, used for determining the
reimbursement level by Medicare and other third party payors for the History,
Physical Findings and Decision Making sections the office visit. It totally
eliminates the time and effort which would otherwise be required by physician
office personnel to complete this task. CodeComplierTM takes the guess work out
of E&M compliance.
PrimeCareOnTheWeb.com (the "PCW Site"): The PCW Site is a unique
physician and patient interactive Site that enables physicians to obtain their
patient's detailed HPI by having the patient answer Questionnaires via the
Internet. Like the PrimeCareTM System, PCW produces an extremely comprehensive
HPI that includes all of the "yes" answers, pertinent negatives and a list of
the diagnostic possibilities with the answers that support each diagnostic
consideration. It is HIPAA compliant and protects the confidentiality rights of
every user through a unique user ID and password and the use of secure digital
certificates from VeriSignTM.. All data is encrypted . PCW automatically
provides its registered physicians individual Web sites on YourOwnDoctorTM.com.
YourOwnDoctor.com (the "YOD Site"): The YOD Site is a web community
created that: (i) provides free individual Web sites for physicians, physician
groups, and other healthcare providers that register for
7
PrimeCareOnTheWebTM; (ii) enables physicians to promote their services through
displaying credentials, including photos of each physician and staff in the
office, listing specialities, office hours, directions, maps, phone numbers,
e-mail addresses, and accepted insurance plans; (iii) provides useful links to
other medical sites; (iv) provides a direct link from physician site to PCW that
enables patient to access and complete appropriate Questionnaires; and (v)
provides direct link to YourOwnHealth.comTM for use by patients.
YourOwnHealth.com (the "YOH Site"): The YOH Site is a unique, free online
health and wellness site and empowers healthcare consumers to be better prepared
for their next visit to the doctor. The YOH Site offers: (1) the "Medical
Interview" that: (i) enables visitors to securely and anonymously select and
complete from 110 of the 280 diagnostic problem specific Questionnaires
contained in the PrimeCareTM System; (ii) generates and makes available to the
ste visitor a detailed HPI report based upon their responses; (iii) permits the
visitor to answer the Questionnaires in either English or Spanish; (iv) encrypts
all medical data and uses digital certificates from VeriSignTM for Internet
communication; (v) provides banner links to the YOD Site and
www.DeniseAustin.com. (2) "YourOwnHealthTM Notebook": (i) is a secure depository
for storage of personal and family medical data for Registered Members; (ii) can
be accessed only through the use of registered IDs and Passwords; (iv) provides
a convenient way to keep track of personal health issues such as allergies,
immunizations, medications and others that can be kept and edited on designated
lists; (v) allows the Member to save the completed Questionnaire HPI report and
to add personal notes and reminders to the record. (3) "YourOwnHealthTM
Reference" provides extensive healthcare consumer education material relating to
diseases, disease management, medical procedures and prescription and common
over the counter medications, including drug interaction.
Competition:
- ------------
OCGT has not identified any competitive patient management system which embodies
all the features of the PrimeCare(TM) System, in particular the complaint
specific, interactive Questionnaires completed by the patient and the report
generated by the patient's responses. OCGT believes that it has the only
in-office patient management system and Web sites that enable physicians to
obtain the patient's detailed HPI by having the patient answer problem-specific
HPI Questionnaires on a PC in the office or via the Internet. However, other
companies market systems which may have some of the features of the
PrimeCare(TM) System and some companies market medical office products which
perform different functions than those performed by the PrimeCare(TM) System. To
date, market penetration by both OCGT and its competitors has been very small.
The Market:
- ----------
OCGT's markets for: (a) the PrimeCare System, the PCW Site and the YOD Site are
ambulatory/outpatient medical facilities, such as, primary care physicians,
medical clinics, group practices, health maintenance organizations, and in
general, healthcare providers other than those providing care to patients
confined to hospital beds; and (b) the YOH Site is for the use of the general
public.
According to the American Medical Association, there are in excess of 675,000
physicians in the U.S. OCGT estimates that, of this group, at least 300,000
physicians would benefit from the use of OCGT's healthcare products.
According to a Harris Interactive nationwide survey of practicing physicians
released March 28, 2001,
51% of physicians access the Internet from their personal office areas
34% of physicians access the Internet in their clinical work areas
It is reasonable, therefore, to assume that, at the present time, 150,000
physicians have the capability to use OCGT's Web sites from their office, and
100,000 can use it from various areas of their office. It should be noted that
the Harris survey is approximately two years old.
The Pew tracking report shows the continuing growth in Internet access, with an
18% increase in the last six months of the year 2001. It is therefore reasonable
to assume that the potential market is currently actually larger and is
continuing to grow.
8
The Pew Internet & American Life Project: An Internet tracking report, released
on February 18, 2001, stated, "Comparing figures gathered in our tracking survey
in May and June with figures gathered between Thanksgiving and Christmas, we
find that the number of American adults with Internet access grew from about 88
million to more than 104 million in the second half of 2001." This is an 18%
increase in six months.
The Pew Internet & American Life Project: An online life report, released
November 26, 2001, stated that "Fifty-two million American adults, or 55% of
those with Internet access, have used the Web to get health or medical
information." It further stated that, "a majority of them go online at least
once a month for health information. A great many health seekers say the
resources they find on the Web have a direct effect on the decisions they make
about their health care and on their interactions with doctors." This report
signifies a very large, continually growing potential market for OCGT's YOH
Site.
Revenue Sources and Marketing Strategy: During the prior fiscal year, OCGT's
marketing efforts had been concentrated on its Web products. However, during the
fiscal year ended June 30, 2002, the PrimeCareTM System has been selected to be
part of a major, multi-year international healthcare information management
program anticipated to be installed in a number of countries as their healthcare
system. See Notes Receivable above. PrimeCare Version 9 will be part of this
international healthcare information management program. Successful completion
of these contracts would produce very significant revenues for OCGT. There can
be no assurance, however, that this project will move forward or in the event
that it does, the extent to which the PrimeCareTM System will be used.
Advertising Revenues. An article appearing in CNET News.com from
Knowledge@Wharton.com, August 7, 2001 stated, ".... Pharmaceutical companies
currently spend $2 billion in direct-to-consumer advertising. Johnson & Johnson
has said it will move 40 percent of its ad budget to the Internet. If everyone
moves 40 percent to the Internet, that's almost $1 billion....". This could
create the availability of significant advertising dollars for the Company's Web
products which are viewed by consumers.
Physicians see, on average, 500 patients per month. OCGT believes that this
segment of the healthcare market is capable of generating the greatest activity
at its Web sites and thus, the largest amount of advertising revenues.
In an effort to maximize the healthcare provider's desire to use OCGT's Web
Sites, OCGT devised a marketing strategy which gives each healthcare provider a
share of the revenues generated through that providers use of OCGT's Web
products. In addition, OCGT offers physicians free access to, and use of, its
Web products. Its "revenue sharing" concept is supported by an October 2001
survey, conducted by Medem, the secure patient-physician e-health network,
founded by the nation's leading medical specialty societies and the American
Medical Association (AMA), released on November 6, 2001, which stated "that
physicians overwhelmingly believe in the value of a robust Web site for their
practice. In addition, half of physicians surveyed said they would be more
interested in using e-mail to communicate with patients if they were reimbursed
for it." The survey also stated, "These results show that physicians embrace the
concept of online communications with their patients if a clear office function
is addressed or an increased office efficiency can be demonstrated." OCGT's
products should meet those criteria.
The fact that the physicians share in the advertising revenues is a strong
motivation for physicians to use OCGT's healthcare Web sites. Their use would
relieve OCGT of the enormous costs normally associated with driving traffic to
Web sites.
The advertising revenue potential from patients viewing impressions on the HPI
Questionnaires may be substantial. Patient interactive HPI Questionnaires
average 25 screen pages per Questionnaire. Each page has room for two
sponsorships by advertisers and up to 7 ad impressions, for a total of 9
impressions per page. Assuming only 5 of the 9 impressions per page are sold at
$.03 per impression (a $30 cost-per-thousand rate), potential revenue per
Questionnaire is $3.75. Physicians average 500 patient visits per month.
Therefore, assuming that a physician spends an aggregate of two months on
vacations, holidays, seminars, conferences, etc. the potential annual ad revenue
per physician using OCGT's PCW is $18,750.Therefore, 1,000 physicians could
generate $18,750,000 per year.
Outcomes Research. Potentially, OCGT could receive fees for conducting outcomes
research for pharmaceutical
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companies and teaching hospitals. OCGT anonymizes, encrypts and stores both the
completed diagnostic and follow-up Questionnaires. This ever-growing medical
database can be analyzed in various ways to determine the effectiveness of
treatment plans, medications, etc.
Licensing Fees: OCGT believes that annual licensing fees from large fixed
population groups, which includes, but is not limited to, labor unions, medical
insurance companies, HMOs, military forces and correctional facilities, may be a
potential source of revenues.
Targeting The Market: OCGT is targeting healthcare provider organizations whose
physicians can drive the most traffic to OCGT's Web sites. OCGT is attempting to
establish business relationships with organizations that currently deal with
healthcare providers. These organizations consist of healthcare providers,
marketers of software and hardware, such as, office management system vendors,
any other healthcare Web sites. OCGT would enter into revenue sharing agreements
with these organizations. OCGT currently attempts to recruit and train these
organizations through: (a) its sales and marketing staff; and (b) through
independent consultants. The independent consultants are compensated solely on a
commission basis. OCGT intends to expand its efforts with the launch of
PrimeCare Version 9.
The Company has entered into an agreement with Hackensack University Medical
Center ("HUMC"). The agreement provides for the use of the Company's Web sites
by HUMC's medical services organization ("MSO"), North Jersey Medical Management
Services, L.L.C. This MSO has over 1,000 physicians. HUMC, and its Physicians
Hospital Organization, have created www.HUMCMD.net , the only complete
Physician/Patient Internet Service Provider ("ISP") providing top quality
Internet connectivity to members of its physician network, plus access to key
internal HUMC applications.
The HUMCMD site has both a "Physician Portal" and "Patient Portal". The site
currently contains the OCGT's PCW Site and YOH Site. The Company is dependent
upon HUMC's marketing efforts to its Staff Physicians.
OCGT continues to offer the PrimeCare System and the CodeComplier as turnkey
systems within a physician's office.
Fitness Web Site: OCGT designed, created, operates, maintains and markets a
fitness and wellness Web site known as www.DeniseAustin.com. Through a revenue
sharing agreement with Denise Austin, a nationally known fitness expert who has
had a daily fitness show on television for over 14 years, OCGT promotes and
markets a variety of Denise Austin products on the Web site. Visitors and fans
are able to shop online for their favorite Denise Austin signature exercise
videos, books, equipment, gear, and private label apparel and nutraceuticals
(when available), as well as sign up for her monthly news letter, enjoy fitness
tips, exercises, motivation messages, and some of her favorite healthy recipes.
Marketing: OCGT has expanded the comprehensive shopping area on the DA
Web site which offers a broad range of noncompeting products within the fitness
industry. OCGT will share income from two sources - advertising revenues and
e-commerce. YourOwnHealth(TM) is currently positioned at the Denise Austin Web
Site with banners and sponsorship of the monthly newsletter which directs
traffic to YourOwnHealth(TM). YourOwnHealth(TM) intends to take advantage of the
opportunity to position its interactive tools directly from www.DeniseAustin.com
to facilitate a greater increase of traffic.
Competition: Denise Austin's Daily Workout is reputed to be the number
one fitness show on television with over one million viewers each weekday
morning. Her videos have sold over 4 million copies.
OCGT believes that it could obtain sufficient working capital from operations
through marketing its Internet products, the PrimeCareTM System and
CodeComplierTM.
Currently, OCGT has no lines of credit and has no material commitments for
capital expenditures outstanding.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
No Report on Form 8-K, was filed during the quarter ended
December 31, 2002.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
OCG TECHNOLOGY, INC.
BY /s/ Edward C. Levine
---------------------------------
EDWARD C. LEVINE,
PRESIDENT
(PRINCIPAL FINANCIAL OFFICER)
DATED: February 10, 2003
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