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, 2004
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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
incorporation or organization) Identification No.)
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)
(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 14, 2005
- ----------------------------- ---------------------------------------
Common Stock ($.01 par value) 49,901,121 Shares
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX
PART 1. FINANCIAL INFORMATION PAGE NUMBER
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Item 1. Financial Statements
Consolidated Condensed Balance Sheets
December 31, 2004 and June 30, 2004 1
Consolidated Condensed Statements of Operations for the
Three and Six Months Ended December 31, 2004 and 2003 2
Consolidated Condensed Statements of Cash Flow for
the Three and Six Months Ended December 31, 2004 and 2003 3
Notes to Consolidated Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
Item 3. Controls and Procedures 13
PART II - OTHER INFORMATION
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Item 2. Changes In Securities 13
Item 6. Exhibits and Reports on Form 8-K 14
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
December 31, 2004 June 30, 2004
(UNAUDITED) (AUDITED)
ASSETS
Current Assets:
Cash $11,167 $29,257
Accounts receivable 663 14,074
Inventory 15,238 9,232
Marketable securities - 13,477
Other current assets 14,620 55,320
Interest receivable 10,266 7,702
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Total current assets 51,954 129,062
Property and equipment, net of accumulated depreciation 9,062 15,108
Capitalized software costs, net of accumulated amortization 361,769 370,965
Other assets 4,972 4,972
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Total assets $427,757 $520,106
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses 129,635 53,174
Credit line - bank 15,606 6,792
Notes payable, shareholder 150,000 150,000
Loans payable, shareholders 38,700 38,700
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Total liabilities 333,941 248,666
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Shareholders' equity: (Note 4)
Series C Preferred stock $.10 par value (200,000 authorized,
issued & outstanding) 20,000 20,000
Series E Preferred stock $.10 par value (100,000 authorized;
33,333 issued and outstanding) 3,333 3,333
Common stock $.01 par value (50,000,000 authorized;
49,901,121 and 45,580,582 issued & outstanding, respectively) 499,011 455,806
Additional paid-in capital 26,684,031 26,468,998
Accumulated deficit (26,920,059) (26,451,375)
Stock subscriptions receivable (130,000) (130,000)
Unrealized loss on marketable securities - (32,823)
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156,316 333,939
Less: Treasury stock, at cost (12,500 shares) (62,500) (62,500)
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Total shareholders' equity 93,816 271,439
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Total liabilities and shareholders' equity $427,757 $520,106
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1
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
December 31, December 31
2004 2003 2004 2003
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Revenues $42,262 $66,145 $124,407 $139,587
Less: Cost of sales 35,921 27,389 79,010 61,317
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Gross margin 6,341 38,756 45,397 78,270
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Expenses:
Marketing, general and administrative 65,155 32,652 112,996 67,465
Depreciation and amortization 29,163 20,489 60,581 39,971
Product development costs 39,738 47,148 85,974 89,350
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Total expenses 134,056 100,289 259,551 196,786
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Net loss from operations (127,715) (61,533) (214,154) (118,516)
Loss on sale of securities - 6,761 (41,300) 6,761
Interest - net (214,427) 1,838 (213,231) 8,808
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Net loss 342,142 52,934 468,683 102,947
============================================================
Weighted average number of shares outstanding during the
period 47,743,783 41,760,590 47,743,783 41,760,590
Loss per Common Share - basic and diluted (.00) (.00) (.00) (.00)
2
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended December 31,
2004 2003
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Cash flows from operating activities:
Net loss ($468,683) ($102,947)
----------------------------
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 60,581 39,971
Issuance of stock and warrants for services 215,033 6,000
Loss from sale of securities 41,300 6,761
Changes in assets and liabilities
Receivables 13,411 (18,930)
Prepaid expenses and other current assets 41,700 2,292
Inventory (6,006) (1,486)
Other current asset (3,564)
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Accounts payable and accrued expenses 46,461 (15,945)
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Total adjustment 408,916 5,141
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Net cash used in operating activities (59,769) (97,806)
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Cash flows from investing activities:
Capitalized software development costs (45,340) (89,844)
Proceeds from sale of marketable securities 5,000 132,761
Increase in property and equipment (5,657)
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Net cash used in investing activities (40,340) 37,260
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Cash flows from financing activities:
Increase (decrease) in loans payable - shareholder 30,000 -
Increase in credit line 8,814 2,150
Proceeds from sale of common stock 43,205 44,000
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Net cash provided by financing 82,019 156,150
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Net decrease in cash (18,090) 95,604
Cash, beginning of period 29,257 10,832
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Cash, end of period $11,167 $106,436
============================
Non-cash investing and financing activities: exchange of notes
receivable and related accrued interest for marketable securities $372,300
3
OCG TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, the unaudited consolidated condensed financial
statements include all adjustments, consisting only of normal recurring
adjustments, necessary for their fair presentation in conformity with accounting
principles generally accepted in the United States of America (U.S. GAAP).
Certain information and footnote disclosure normally included in annual
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted pursuant
to the rules and regulations of the Securities and Exchange Commission regarding
interim financial statements. Preparing financial statements requires management
to make estimates and assumptions that affect the reported amount of assets,
liabilities, revenues and expenses. Actual results and outcomes may differ
significantly from management's estimates and assumptions.
Interim results are not necessarily indicative of results for a full year. The
information included in this Form 10-QSB should be read in conjunction with the
audited financial statements and notes included in the Form 10-KSB for the year
ended June 30, 2004.Revenue Recognition
NOTE 2 - SHAREHOLDERS' EQUITY
During the Six months ended December 31, 2004, an aggregate of 4,320,539 shares
of the Company's common stock were sold for $43,205.39 or $0.01 per share plus
warrants to purchase 4,320,539 shares at $0.02 per share. The financial
statements include recognition of an additional $215,033 related to these stock
transactions, characterized as paid in capital and interest expense. No shares
of common stock are reserved for the exercise of the warrants. Exercise of the
warrants is contingent upon the shareholders approving an increase in the
authorized common stock to at least 100,000,000 shares.
4
OCG 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 Condensed 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 the Company 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 the Company'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.
The Company has experienced recurring losses from operations and has relied on
the sale of equity interests in the Company to fund its operations. If
necessary, the Company intends to provide additional working capital through the
sale of equity interests in the Company. Although, in the past, the Company has
been able to provide working capital through the sale of equity interests in the
Company, there can be no assurances that the Company will succeed in its
efforts, which creates a doubt about its ability to continue as a going concern.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raises substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Critical Accounting Policies and Estimates
- ------------------------------------------
Our discussion and analysis of our financial condition and results of operations
following are based upon our condensed consolidated financial statements, which
have been prepared in accordance with generally accepted accounting principles
of the United States of America. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. We believe that the estimates, assumptions and judgments
involved in the accounting policies described below have the greatest potential
impact on our financial statements, so we consider these to be our critical
accounting policies. Because of the uncertainty inherent in these matters,
actual results could differ from the estimates we use in applying the critical
accounting policies. Within the context of these critical accounting policies,
we are not currently aware of any reasonably likely events or circumstances that
would result in materially different amounts being reported.
Capitalized Software Costs
- --------------------------
Capitalized software costs are amortized over the estimated useful life. Changes
in circumstances, such as technological advances or shortfalls in marketing
estimates, can result in differences between the actual and estimated useful
life. In that case, we re-estimate the value and useful life of this long-lived
asset and make the necessary adjustments to reflect the asset at its proper
estimated value and amortize it over the remaining estimated useful life.
Periodically, and when conditions dictate, we reevaluate the recoverability of
the carrying value and useful life of this long-lived asset and make the
necessary adjustments to reflect the asset at its proper estimated value and
amortize it over the remaining estimated useful life.
The Company had a write off of $187,819 of capitalized software costs during the
year ended June 30, 2003 in compliance with the Company's policy relating to
reevaluating the value and useful life of this long-lived asset.
5
Revenue Recognition
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The Company has four sources of income: (1) sale of inventoried merchandise on
its Web sites; (2) commissions received from vendors who link to our Web sites;
(3) advertising fees; and (4) software license fees.
Sale of inventoried merchandise.
- --------------------------------
This revenue stream is reported on a gross basis in compliance with EITF 99-19,
because we purchase the merchandise from the source we select; are at risk for
the purchaser's credit; and we ship the merchandise. We report the gross sales
price as revenue and expense the cost of the merchandise and the shipping costs
as cost of sales. The Company is almost always paid by credit card at the time
of purchase and occasionally by check. Sales are booked when the merchandise is
shipped. The merchandise is not shipped until the credit is approved.
Commissions received from vendors
- ---------------------------------
The Company acts as a commissioned broker by displaying vendors' products on the
Company's Web sites. When a consumer indicates a desire to purchase an item, the
order is collected through the Web site and processed by the third party seller.
The Company receives a commission on such sale after it is consummated. When the
Company is paid, it reports the commissions on a net basis in compliance with
EITF 99-19. The Company reports commissions this way because: (a) it does not
have any direct costs; (b) it does not purchase the product sold; and (C)) it
does not have any credit risk on the sale, and it does not handle or ship the
product when sold. The Company notifies the seller of an interested buyer and it
receives a commission check from the seller upon the consummation of a sale. At
that time we report the revenue on a net basis.
Advertising fees
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The Company receives fees for placing advertisements on its Web sites. At the
end of the month the Company sends an invoice to the advertiser and enters it on
its books as income from advertising fees.
Software license fees
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The Company accounts for software license fees in accordance with SOP 97-2.
Revenues are recognized when all of the following criteria are met: (a)
persuasive evidence of an arrangement exists; (b) delivery has occurred; (C))
the vendor's fee is fixed or determinable; and (d) collectiblity is probable.
All licenses are evidenced by a written contract. License fees are either annual
fees, generally payable quarterly in advance, or are based on uses, which are
purchased before use. The license fee includes updates to the software, but only
during the term of the license. The software contains considerable medical
information and the Company keeps this medical content reasonably current. The
Company does not sell the software or any updates separately and therefore, has
not established VSOE. The Company recognizes income ratably over the license
term.
Results of Operations
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Total revenues decreased $23,883 and $15,180 for the three and six months ended
December 31, 2004, as compared to the same period for 2003, primarily due to the
write-off of bad debts in the amount of $24,653. Cost of sales increased $8,532
and $17,693 for the three and six months ended December 31, 2004 as compared to
the same period for 2003. The Company's revenues for the six months ended
December 31, 2004, consisted of: $135,406 from the sale of merchandise (an
increase of $38,957 for the same period in 2003); $12,956 from commissions (a
decrease of $426 for the same period in 2003); and $76 from advertising fees (a
decrease of $29,680 over the same period in 2003).
Marketing, general and administrative expenses increased $32,504 and $45,530 for
the three and six months ended December 31, 2004, as compared to the same period
for 2003, primarily from the increase of approximately: $29,000 in corporate
expenses and $12,000 auditing fees.
Amortization of capitalized software costs increased approximately$8,700 and
$20,600 for the Three and Six months ended December 31, 2004, as a result of the
increase in the development costs of the PrimeCare Patient Management System,
Version Nine. In both periods, the item was included in Depreciation and
amortization rather than Cost of sales because they relate to PrimeCare Version
9, which did not generate income.
6
Liquidity and Capital Resources
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At December 31, 2004, the Company had a current ratio of .18 to 1 compared to
4.15 to 1 as of December 31, 2003. The decrease in current ratio is due to the
exchange of notes receivable to marketable securities that were sold and the
proceeds used to sustain operations, and notes payable to shareholders, in the
amount of $150,000, become payable during the current fiscal year. The net loss
for the Six months ended December 31, 2004, was $468,683 compared to $102,947
for the same period of 2003. The increased loss was primarily due to recognition
of $215,033 interest expense related to stock transactions, a loss from the sale
of marketable securities of $41,300, the write-off of accounts receivable of
$24,653 and an increase of approximately $20,000 in depreciation and
amortization for the Six months ended December 31, 2004, as compared to the same
period of 2003. Approximately $357,000 or 76% of the net loss from operations
for the Six months ended December 31, 2004, were non-cash charges consisting of
imputed Interest Expense of $215,033, Depreciation and Amortization in the
amount of $60,581; Consulting Services in the amount of $40,000 paid through the
issuance of shares of stock; and a loss from the sale of Marketable Securities
in the amount of $41,300. The Company 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 the
Company, and the exercise of warrants and loans from shareholders to fund its
operations.
Cash on hand, inventory and receivables were $28,068 at December 31, 2004.
During the six months ended December 31, 2004, the Company raised $43,205
through the sale of Common stock. The Company also raised $5,000 from the sale
of marketable securities. As of December 2003, the Company has $13,000 of demand
notes receivable related to the purchase of the Company's common stock through
the exercise of warrants. Although, in the past, the Company's principal means
of overcoming its cash shortfalls from operations was from the sale of the
Company's stock, loans and the exercise of warrants, there can be no assurances
that the Company will succeed in its efforts in the future, especially since
49,901,121 shares of Common stock of the 50,000,000 authorized have been issued
and approval of the shareholders is required to increase the authorized Common
stock. However, the Company does have Preferred shares available for issue.
The Company believes that it could obtain sufficient working capital from
operations through marketing PrimeCare(TM) Version 9 and its Internet products.
Marketable securities
- ---------------------
The Company has advanced funds totaling $334,500, plus accrued interest at 7%
per annum, pursuant to a grid note, dated February 4, 2002 (the "Note"). In
consideration for these advances, the Company 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. The Company 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 health care system for certain countries. On October 10, 2003, the Company
agreed to accept 3,709,230 restricted (unregistered) shares of the borrower's
common stock, par value $0.0001 per share, (the "Stock") in full payment of the
Note ($334,500 of principal, plus $36,423 of accrued interest, for the total
amount of $370,923). The market value on October 10, 2003, of the Stock received
was $704,753. During the year ended June 30, 2004, the Company realized $162,761
from the sale of 3,260,000 shares, which resulted in a loss of $163,239.During
the six months ending December 31, 2004, the Company sold the balance of the
shares for $5,000, realizing an additional loss of $41,300.
Competition:
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The Company has not identified any competitive patient management system, which
embodies all the features of the PrimeCare(TM) Version 9, in particular the
complaint specific, interactive Questionnaires completed by the patient, and the
report generated by the patient's responses. The Company believes that it has
the most effective 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 The Company and its competitors has
been limited.
7
Products Overview.
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PrimeCare(TM) Patient Management System, Version 9
- --------------------------------------------------
PrimeCare(TM) Patient Management System, Version 9 ("PrimeCare(TM) Version 9")
is a complete, ground-up redesign and re-write of the Company's initial
electronic medical record ("EMR") system, the PrimeCare(TM) Patient Management
System ("PCPMS"). The overall system architecture has been changed; the
supporting data base structures have been enhanced; the client interface has
been redesigned to more accurately reflect the operational needs of the
end-users, and user installation has been greatly simplified. PrimeCare(TM)
Version 9 is a user friendly, patient management system that is patient,
physician and staff, interactive. PrimeCare(TM) Version 9: (I) creates an
electronic medical record documenting the patient physician encounter; (ii) is
compatible with practice management and billing systems, EMR and CPR systems;
(iii) is Health Insurance Portability Accountability Act ("HIPAA") compliant;
(iv) is designed for use in national and local health care systems, military
organizations, correctional facilities, HMOs, hospitals with outpatient
services, ambulatory clinics, group practices and solo practitioners; (v) uses
an authoritative and comprehensive knowledge database of approximately 280
symptom and problem oriented patient Questionnaires for diagnostic and follow-up
office visits; (vi) collectively contains over 100,000 complaint and disease
state questions, over 2,000 diagnoses, over 675 physician reference articles,
over 300 patient education articles; (vii) allows the staff to schedule the
appropriate Questionnaire and enter the patients' vital signs; (viii) interacts
directly with the patient by having the patient select the answers that apply to
their problem from the Questionnaire; (ix) does not require the patient to have
computer or typing skills; (x) enables the physician to obtain their patients'
detailed History of Present Illness ("HPI") by having the patient answer the
Questionnaires without requiring physician or staff time; (xi) allows the
physician to interact directly with PrimeCare(TM) Version 9 to select and
document the normal and abnormal physical findings, assessments, tests,
prescriptions and treatment plan for the patient; (xii) provides automatic (real
time) calculation of HCFA's Evaluation and Management ("E&M") code, with a full
audit trail, used for determining the reimbursement level by Medicare, health
insurance providers and other third party payors for the office visit; (xiii)
virtually eliminates dictation and transcription costs; (xiv) reduces risk of
malpractice liability due to errors of omission and "failure to consider"; (xv)
permits patients to answer Questionnaires at their own speed (xvi) creates
significant clinical and patient databases for outcomes research.
When the patient arrives at the doctor's office, a designated staff member
selects the appropriate Questionnaire based upon the patient's chief complaint
and/or symptom and enters the patient's vital signs. The patient is then seated
at a computer and answers complaint-specific questions by using either the
keyboard number keys or mouse to indicate answers that apply to him or her. No
typing or computer skills are required. When the patient has completed the
Questionnaire, PrimeCare(TM) Version 9 creates a Preliminary Report (the
"Report") for the physician to review before examining the patient. The Report
contains the patient's current problems, medications and allergies, and the
patient's detailed HPI that includes all of positive and significant negative
subjective responses, vital signs and an alphabetical list of the diagnostic
possibilities with the patient's responses repeated that support, or give rise,
to each diagnostic possibility. By freeing up the time physicians would normally
have to spend asking patient history questions and recording responses,
PrimeCare(TM) Version 9 permits physicians to see more patients and to spend
more quality time with each patient. PrimeCare(TM) Version 9 is also easy for
physicians to understand and use. The same simple key stroke or mouse click
process allows the physician or appropriate staff member to select and document
the: physical findings (normal and abnormal), assessment, tests, treatment plan,
prescribed medications, and patient education materials to be distributed and to
schedule follow-up visits. The physician or appropriate staff member can also
type a comment that expands upon: an answer selected by the patient in the
Questionnaire, a physical finding, an assessment, a treatment plan, a
prescription, or about any subject that may be appropriate. At the conclusion of
the encounter a final summary report of the visit that includes, the patient's
HPI, physical findings, assessment, tests, prescriptions, treatment plan,
patient educational materials and the scheduled follow-up visit, are stored
electronically in the patient's file, and a copy can be printed for the patient.
PrimeCare(TM) Version 9: standardizes the patient record; assures consistency in
patient care; creates a patient database for clinical and outcomes research;
supports 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, with appropriate security controls, both
8
local and remote, on-line electronic retrieval of patient records and hard copy
print outs; enables rapid access to important patient data for clinical care;
contains and provides patient education materials about disease, disease
management, tests and medications; and provides physician reference materials.
PrimeCare(TM) Version 9's overall system architecture has been redesigned away
from a local network based two-tier client-server application, used in the prior
version of the PCPMS, to incorporate a robust three-tier
client-provider-relational database management system ("RDBMS") application,
designed for geographically separated tiers. The client (end-user) tier of
PrimeCare(TM) Version 9 is designed to connect with the middle or provider
(server) tier via secure Internet communications. The provider and data base
tiers are designed to support multiple, distinct clients simultaneously. The
client application has been designed to allow easy internalization and
localization.
Supporting databases have been redesigned to remove unnecessary redundancies,
including a major redesign of the patient/physician encounter questionnaire.
Also, provisions have been added for support of an unlimited number of
alternative languages. Currently, language support is offered in, or being
developed, for English, Spanish, French, and Simplified Chinese.
PrimeCare(TM) Version 9 continues to be a Windows(TM) application. Although the
client tier will run on Windows 95 or any later Windows desktop operating
system, it performs best when hosted on Windows 2000, Windows NT, or Windows XP.
The server (provider tier) and data base tiers of PrimeCare(TM) Version 9 should
be hosted on redundant Windows 2000 or Windows XP servers with appropriate
backup, and standby support.
The three-tier architecture of PrimeCare(TM) Version 9 provides many advantages,
including easy client installation; reduced on-site support requirements;
enhanced data security; and maximum flexibility. PrimeCare(TM) Version 9's
reduced installation and maintenance costs and its flexibility enables it to be
adapted to a wide variety of health care organizational uses, including national
and local health care systems, military organizations, correctional facilities,
HMOs, hospitals with outpatient services, clinics, group practices and solo
practitioners.
As a three-tier application, PrimeCare(TM) Version 9 requires only that the
client tier application be installed at the end-user location. This system
architecture greatly simplifies both user installation and system maintenance.
Although the client (end-user) tier uses the Internet to communicate with the
provider and data base tiers, it is not a browser-based application, thereby
eliminating the many compatibility and security issues involved in supporting
multiple browser configurations. The PrimeCare(TM) Version 9 client is a
specially written front-end application, designed to be downloaded by the client
via a web connection, and then installed at the client's location using normal
Windows installation procedures.
The system is designed to support multiple reimbursement models, including free
demo, no-charge use, sponsored use, flat fee, periodic (monthly / annual) fee,
activity based fees, and option-based fees.
PrimeCare(TM) Patient Management System ("PCPMS")
-------------------------------------------------
The PCPMS was the Company's initial EMR offering. The Company has discontinued
marketing the PCPMS
CodeComplier(TM):
-----------------
The Company has also developed CodeComplier(TM) an application software program
that was designed to be used in conjunction with The Company's PrimeCare(TM)
Version 9 and PrimeCareOnTheWeb(TM). As each item of information is entered into
and collected by PrimeCare(TM) during the patient encounter, the
CodeComplier(TM) 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 payers for the History, Physical Findings and
Decision Making sections of the office visit. It totally eliminates the time and
effort that would otherwise be required by the physician or office personnel to
complete this task. CodeComplier(TM) takes the guesswork out of E&M and third
party payer compliance. CodeComplier(TM) is an integral part of PrimeCare(TM)
Version 9.
9
PrimeCareOnTheWeb.com (the "PCW Site"):
---------------------------------------
The PCW Site is a unique physician and patient interactive Site that: (I) uses
PrimeCare(TM) Version 9's unique Questionnaires for diagnostic and follow-up
office visits, physician reference articles, patient education material,
CodeComplier(TM) for real time calculation of E&M code and the scheduler portion
of PrimeCare(TM) Version 9; (ii) enables physicians to obtain their patient's
detailed HPI by having the patient answer Questionnaires via the Internet
without requiring physician time; (iii) saves the physician and staff the time
required to obtain the HPI, thus allowing them to give more attention to each
patient and/or see more patients; (iv) produces an extremely comprehensive HPI
that includes all of the "yes" answers, pertinent negatives and a list of the
diagnostic possibilities with the answers repeated that support each diagnostic
consideration; (v) is HIPAA compliant; (vi) protects all Internet communication
and the confidentiality rights of every user through a unique user ID and
password per Questionnaire to be answered and secure digital certificates from
VeriSign(TM), (vii) encrypts all data for storage; (viii) enables creating a
significant database for outcomes research; and (ix) automatically provides
registered physicians individual Web sites on YourOwnDoctor(TM).
YourOwnDoctor.com (the "YOD Site"):
-----------------------------------
The YOD Site is a web community created, owned, operated and maintained by the
Company that: (I) provides free individual Web sites for physicians, physician
groups, and other health care providers that register for PrimeCareOnTheWeb(TM);
(ii) enables physicians to promote their services through displaying
credentials, including photos of each physician and staff in the office, listing
specialties, 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 appropriate Questionnaire and complete; (v) provides direct
link to YourOwnHealth(TM) for use by patients.
YourOwnHealth.com (the "YOH Site"):
-----------------------------------
The YOH Site is a unique, free online health and wellness site designed to
empower health care 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 approximately 110
of the 280 Questionnaires contained in PrimeCare(TM) Version 9; (ii) generates
and makes available to the 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 VeriSign(TM) for Internet communication; (v) provides banner links to the
YOD Site and www.DeniseAustin.com. (2) "YourOwnHealth(TM) 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; (iii) encrypts all medical data and uses digital certificates from
VeriSign(TM) for Internet communication; (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 their completed HPI Questionnaire reports and to add personal
notes and reminders to the record. (3) "YourOwnHealth(TM) Reference" provides
extensive health care consumer education material relating to diseases, disease
management, medical procedures and prescription and common over the counter
medications, including drug interaction.
The Market:
- -----------
The Company's domestic and international markets for: (a) the PrimeCare(TM)
Version 9, the PCW, YOH and the YOD Sites are ambulatory/outpatient medical
facilities, such as, primary care physicians, medical clinics, group practices,
health maintenance organizations, health care insurance companies and in
general, health care 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.
Revenue Sources and Marketing Strategy:
- ---------------------------------------
During the fiscal year ended June 30, 2002, the PrimeCare(TM) System was
selected to be part of a major international health care information management
program, anticipated to be installed in a number of countries as their health
care system. To date these contracts have not materialized.
The need for new approaches in health care delivery is critical. PrimeCare(TM)
Version 9 is a software system that provides for the creation of new health care
insurance products to meet the needs of millions of uninsured Americans at a
cost that they can afford. It will enable the insurer to reduce the cost of care
for current enrollees and introduce new cost-effective products while
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maintaining the quality of care. Towards that goal discussions with major U.S.
health insurers and foreign government sponsored health plans.
Licensing Fees:
- ---------------
The Company believes that the increased awareness of PrimeCare(TM) Version 9
will enhance the Company's ability to obtain additional contracts and annual
licensing fees from large fixed population groups, which includes, but is not
limited to, other countries, labor unions, medical insurance companies, HMOs,
military forces and correctional facilities.
Advertising Fees:
- -----------------
Advertising revenues are dependant upon the number of visitors that use the
Company's Web sites. The Company believes that the use of PrimeCare(TM) Version
9 by licensees will increase awareness and use of the Company's Web sites and
thus result in increased advertising fees.
Outcomes Research.
- ------------------
Potentially, the Company could receive fees or grants for conducting outcomes
research for pharmaceutical companies, teaching hospitals, governmental agencies
and philanthropic organizations. The Company anonymizes, encrypts and stores the
data from 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.
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, a 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 Company's PCW Site and YOH Site. The Company's
advertising revenues are dependent upon HUMC's marketing efforts to its Staff
Physicians and patients.
Fitness Web Site:
- -----------------
The Company's marketing of the Denise Austin website has been revised. The
Company no longer operates DeniseAustin.com, however, the Company has entered
into two agreements with the new manager of the Web site. Under one agreement,
the Company operates the "shopping cart" on the site and the second agreement
retains the Company as the exclusive seller of Denise Austin videos and DVDs.
The new manager has agreed to commence an aggressive marketing campaign to
promote the site. The Company's percentage of revenues has been reduced.
However, the Company believes the increased visitors to the site, as a result of
the marketing campaign being instituted by the new site manager, will result in
greater net income for the Company. The fitness and wellness Web site known as
www.DeniseAustin.com features Denise Austin, a nationally known fitness expert
who has had a daily fitness show on television for over 15 years, the Company
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: The Company operates the comprehensive shopping area on the DA
Web site, which offers a broad range of noncompeting products within the fitness
industry. The Company will share income from two sources - advertising revenues
and e-commerce. The Company derives revenues from this operation.
Competition: Although there are a number of fitness TV shows, Denise
Austin's Daily Workout is reputed to be the number one fitness show on
television with over four million viewers each weekday morning.
11
The Company believes that it could obtain sufficient working capital from
operations through marketing PrimeCare(TM) Version 9 and its other Internet
products, the.
Currently, the Company has lines of credit with RBC Centura Bank for a maximum
of borrowing of $20,000 and has no material commitments for capital expenditures
outstanding.
Item 3. Controls and Procedures
An evaluation was carried out under the supervision and with the participation
of the Company's management, including the President/Chief Financial Officer
("CFO"), of the effectiveness of the Company's disclosure controls and
procedures. Based on that evaluation, the President/CFO have concluded that as
of the end of the period covered by this report, the Company's disclosure
controls and procedures are effective to provide reasonable assurance that
information required to be disclosed by the Company in reports that it files or
submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and timely reported as provided in the Securities and Exchange
Commission rules and forms. The Company periodically reviews the design and
effectiveness of our internal controls over financial reporting, including
compliance with various laws and regulations that apply to the Company's
operations. The Company makes modifications to improve the design and
effectiveness of its internal control structure, and may take other corrective
action, if the Company's reviews identify deficiencies or weaknesses in its
controls. No changes occurred during the quarter ended December 31, 2004 in the
Company's internal controls over financial reporting that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.
PART II - OTHER INFORMATION
Item 2. Changes In Securities
During the six months ended December 31, 2004, an aggregate of 4,320,539 shares
of the Company's Common Stock, were sold for $43,205 or $0.01 per share plus
warrants to purchase 4,320,539 shares at $0.02 per share, in an unregistered
private placement.. No shares of common stock are reserved for the exercise of
the warrants. Exercise of the warrants is contingent upon the shareholders
approving an increase in the authorized common stock to at least 100,000,000
shares.
In consummating the above described private placement, the Company relied upon
the exemptions from registration provided by Sections 4(2) of the Securities Act
of 1933, as amended (the "Securities Act"), and Rule 506 promulgated there under
based upon: representations from the investor that he, she or it, (a) met one of
the categories of accredited investor set forth in Rule 501, (b) was acquiring
the securities for his, her or its own account and not with a view towards
further distribution and (c) had such sufficient knowledge and experience in
financial and business matters to be capable of evaluating the merits and risks
connected with the applicable investment, and the fact that (a) no general
solicitation of the securities was made by the Company, (b) the securities
issued were "restricted securities" as that term is defined under Rule 144
promulgated under the Securities Act, (c) the Company placed appropriate
restrictive legends on the certificates representing the securities regarding
the restricted nature of these securities and (d) prior to the completion of
each transaction, each investor was informed in writing of the restricted nature
of the securities, provided with all information regarding the Company as
required under Rule 502 of Regulation D and was given the opportunity to ask
questions of and receive additional information from the Company regarding its
financial condition and operations.
Item 6. Exhibits and Reports on Form 8-K
(a) 31.1 Certification pursuant to Rule 13a-14 AND 15d-14 of the Securities
Exchange act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley act of 2002
12
(b) Reports on Form 8-K
No Report on Form 8-K was filed during the quarter ended December 31,
2004. However, a report on Form 8-K was filed on February 8, 2005, regarding the
change in the Company's Certifying Accountant.
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
OCG TECHNOLOGY, INC.
BY /s/ EDWARD C. LEVINE
---------------------------
EDWARD C. LEVINE,
PRESIDENT
(CHIEF FINANCIAL OFFICER)
DATED: February 18, 2005
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