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 June 30, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________________ to ______________
Commission file number: 333-47924
IDMEDICAL.COM, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in it charter)
COLORADO 84-1506325
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1 BEACH DRIVE, UNIT 41, ST. PETERSBURG, FLORIDA
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(727) 822-7011
---------------------------
(issuer's telephone number)
- --------------------------------------------------------------------------------
(Former name, former 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 such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: AS OF AUGUST 19, 2002, THE ISSUER HAD
30,299,560 SHARES OF $.001 PAR VALUE COMMON STOCK OUTSTANDING.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
INDEX
<Table>
<Caption>
PAGE
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed balance sheet, June 30, 2002 (unaudited) F-1
Condensed statements of operations, three and
six months ended June 30, 2002 and 2001 (unaudited) and June 17, 1999
(inception) through June 30, 2002 (unaudited) F-2
Condensed statements of cash flows, six months ended June 30, 2002 and 2001
(unaudited) and June 17, 1999 (inception) through
June 30, 2002 (unaudited) F-3
Notes to condensed financial statements (unaudited) F-4
Item 2. Management's Plan of Operation. 2
PART 2 - OTHER INFORMATION
Item 1. Legal Proceedings 4
Item 2. Changes in Securities and Use of Proceeds 4
Item 3. Defaults upon Senior Securities 4
Item 4. Submission of Matters to a Vote of Security Holders 4
Item 5. Other Information 4
Item 6. Exhibits and Reports on Form 8-K 5
Signatures and Certification 7
</Table>
PART 1. ITEM 1. FINANCIAL INFORMATION
IDMEDICAL.COM, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEET
(Unaudited)
June 30, 2002
<Table>
ASSETS
Cash ................................................................. $ 19,402
Property and equipment, less accumulated depreciation and
amortization of $29,430 .......................................... 19,591
Intangible assets, less accumulated amortization of $404 ............. 81
Other assets ......................................................... 31,917
------------
$ 70,991
============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Liabilities:
Accounts payable and accrued expenses ........................... $ 79,521
Due to former merger candidate (Note F) ......................... 150,000
Loans payable (Note D) .......................................... 32,130
Accrued interest payable (Note D) ............................... 268
Unearned revenue ................................................ 45
Capital lease obligations ....................................... 5,768
------------
Total liabilities 267,732
------------
Shareholders' equity (Note E):
Preferred stock ................................................. --
Common stock .................................................... 26,571
Outstanding common stock options ................................ 221,858
Outstanding warrants ............................................ 293,250
Additional paid-in capital ...................................... 3,065,535
Deficit accumulated during development stage .................... (3,803,955)
------------
Total shareholders' deficit (196,741)
------------
$ 70,991
============
</Table>
See accompanying notes to condensed financial statements
F-1
IDMEDICAL.COM, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
<Table>
<Caption>
June 17,
1999
Three Months Ended Six Months Ended (Inception)
June 30, June 30, Through
----------------------------- ----------------------------- June 30,
2002 2001 2002 2001 2002
------------ ------------ ------------ ------------ ------------
Revenue, net ................................ $ 89 $ 936 $ 272 $ 1,360 $ 2,390
Operating expenses:
Stock-based compensation (Note E) ....... -- -- 1,134,650 -- 1,558,124
Selling, general and administrative ..... 130,280 130,828 159,077 289,921 1,544,349
Cost for rescission of Plan of
Reorganization (Note F) .............. 150,000 -- 150,000 -- 150,000
Record label inducement fee (Note G) .... 400,000 -- 400,000 -- 400,000
Depreciation and amortization ........... 3,538 34,805 7,077 68,258 162,535
------------ ------------ ------------ ------------ ------------
Total operating expenses 683,818 165,633 1,850,804 358,179 3,815,008
------------ ------------ ------------ ------------ ------------
Operating loss (683,729) (164,697) (1,850,532) (356,819) (3,812,618)
Interest income ............................. 21 2,875 21 3,954 16,719
Interest expense ............................ (457) (1,188) (1,421) (2,531) (8,056)
------------ ------------ ------------ ------------ ------------
Net loss before income taxes (684,165) (163,010) (1,851,932) (355,396) (3,803,955)
Income taxes (Note C) ....................... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net loss $ (684,165) $ (163,010) $ (1,851,932) $ (355,396) $ (3,803,955)
============ ============ ============ ============ ============
Basic loss per common share ................. $ (0.03) $ (0.02) $ (0.09) $ (0.04)
============ ============ ============ ============
Basic weighted average common
shares outstanding ...................... 25,464,166 9,931,500 20,484,585 9,931,500
============ ============ ============ ============
</Table>
See accompanying notes to condensed financial statements
F-2
IDMEDICAL.COM, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
<Table>
<Caption>
June 17,
1999
Six Months Ended (Inception)
June 30, Through
------------------------------ June 30,
2002 2001 2002
------------ ------------ ------------
Net cash used in operating activities ........................... $ (590,625) $ (355,664) $ (1,383,261)
------------ ------------ ------------
Cash flows from investing activities:
Cash paid for copyright ..................................... -- -- (485)
Cash paid for trademark ..................................... -- -- (2,460)
Cash paid for web site ...................................... -- (123,549) (345,935)
Cash paid for patent ........................................ -- (2,657) (29,457)
Cash paid for leasehold improvements ........................ -- -- (2,802)
Equipment purchases ......................................... -- (2,400) (19,054)
------------ ------------ ------------
Net cash used in investing activities -- (128,606) (400,193)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from sale of common stock, net of
offering costs ........................................... 620,000 -- 1,778,150
Proceeds from exercise of stock options ..................... -- -- 6,100
Lease payments .............................................. (13,100) (3,880) (23,524)
Proceeds from director loans ................................ -- -- 30,000
Repayment of director loans (Note B) ........................ (30,000) -- (30,000)
Proceeds from short-term loans (Note D) ..................... 32,130 -- 32,130
Contributed capital ......................................... -- -- 10,000
------------ ------------ ------------
Net cash (used in) provided by financing activities 609,030 (3,880) 1,802,856
------------ ------------ ------------
Net change in cash 18,405 (488,150) 19,402
Cash, beginning of period ....................................... 997 566,709 --
------------ ------------ ------------
Cash, end of period $ 19,402 $ 78,559 $ 19,402
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ................................................. $ 1,153 $ 2,531 $ 7,788
============ ============ ============
Income taxes ............................................. $ -- $ -- $ --
============ ============ ============
Non-cash financing activities:
Equipment acquired under capital lease ................... $ -- $ 29,967 $ 29,967
============ ============ ============
</Table>
See accompanying notes to condensed financial statements
F-3
IDMEDICAL.COM, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE A: BASIS OF PRESENTATION
The financial statements presented herein have been prepared by the Company in
accordance with the accounting policies in its Form 10-KSB dated December 31,
2001, and should be read in conjunction with the notes thereto.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary to provide a fair presentation of
operating results for the interim period presented have been made. The results
of operations for the periods presented are not necessarily indicative of the
results to be expected for the year.
The Company is in the development stage in accordance with Statements of
Financial Accounting Standards (SFAS) No. 7 "Accounting and Reporting by
Development Stage Enterprises". As of June 30, 2002, the Company has devoted
substantially all of its efforts to financial planning, raising capital and
developing markets and its web site. However, on October 19, 2001, the Company
entered into an Agreement and Plan of Reorganization with ToolTrust Corporation
("ToolTrust"), a Nevada corporation (see Note F).
Financial data presented herein are unaudited.
NOTE B: RELATED PARTY TRANSACTIONS
On August 23, 2001, three directors each advanced the Company $10,000 for
working capital. The advances are non-interest bearing and are due on demand.
The Company repaid the advances in February 2002.
NOTE C: INCOME TAXES
The Company records its income taxes in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". The Company incurred
net operating losses during the three and six months ended June 30, 2002
resulting in a deferred tax asset, which was fully allowed for; therefore, the
net benefit and expense resulted in $-0- income taxes.
NOTE D: SHORT-TERM LOANS
During the six months ended June 30, 2002, a shareholder loaned the Company
$32,130 for working capital. The loan carries an interest rate of 10 percent and
matures on May 31, 2003. Accrued interest on the loan totaled $268 at June 30,
2002.
NOTE E: SHAREHOLDERS' EQUITY
COMMON STOCK
On January 10, 2002, the Company issued 280,000 shares of its common stock to
its attorney in exchange for legal services. The market value of the common
stock on the transaction date was $.75 per share. Stock-based compensation
expense of $210,000 was recognized in the accompanying condensed financial
statements for the six months ended June 30, 2002.
F-4
IDMEDICAL.COM, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
On January 10, 2002, the Company issued 150,000 shares of its common stock in
exchange for consulting services. The market value of the common stock on the
transaction date was $.75 per share. Stock-based compensation expense of
$112,500 was recognized in the accompanying condensed financial statements for
the six months ended June 30, 2002.
During February 2002, the Company sold 173,333 shares of its $.001 par value
common stock for $120,000 in a private offering pursuant to an exemption from
registration under Rule 506 (a) of Regulation D of the Securities Act of 1933,
as amended.
On February 5, 2002, the Company issued 20,000,000 shares of its common stock as
part of a Plan of Reorganization (see Note E). Pursuant to the Share Exchange
Agreements in May 2002, 9,300,000 of the common shares were rescinded.
On February 27, 2002, the Company issued 251,000 shares of its common stock to
its attorney in exchange for legal services. The market value of the common
stock on the transaction date was $.17 per share. Stock-based compensation
expense of $42,670 was recognized in the accompanying condensed financial
statements for the six months ended June 30, 2002.
On March 8, 2002, the Company issued 400,000 shares of its common stock to its
attorney in exchange for legal services. The market value of the common stock on
the transaction date was $.13 per share. Stock-based compensation expense of
$52,000 was recognized in the accompanying condensed financial statements for
the six months ended June 30, 2002.
On March 22, 2002, the Company issued 2,675,000 shares of its common stock in
exchange for consulting services. The market value of the common stock on the
transaction date was $.14 per share. Stock-based compensation expense of
$374,500 was recognized in the accompanying condensed financial statements for
the six months ended June 30, 2002.
On May 28, 2002, the Company sold 1,000,000 shares of its common stock to an
individual for $500,000. The Company believes this private placement was exempt
from registration under Section 4(2) and Rule 506 of the Securities Act of 1933.
On June 3, 2002, the Company issued 439,897 shares of its common stock to its
attorney in exchange for legal services. The market value of the common stock on
the transaction date was $.20 per share. Stock-based compensation expense of
$87,980 was recognized in the accompanying condensed financial statements for
the six months ended June 30, 2002.
F-5
IDMEDICAL.COM, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
STOCK OPTIONS
There were 619,000 options outstanding under the Company's non-qualified stock
option plan as of December 31, 2001. The Company granted options to purchase an
additional 9,637,500 shares of common stock during the six months ended June 30,
2002. According to the Company's policy, options granted to non-employees are
accounted for under the fair value method, while options granted to employees
and directors are accounted for using the intrinsic method. The fair value of
the Company's common stock was determined by the market value of the common
stock.
The fair value of each option granted has been estimated as of the grant date
using the Black-Scholes option pricing model. The following weighted-average
assumptions were used for the six months ended June 30, 2002: risk-free interest
rate of 2.0 percent, expected volatility of 6.5 percent, expected life of two
years, and no expected dividends.
The weighted average exercise price and fair value of options granted were $.65
and $.02, respectively on the date of grant for options granted with an exercise
price greater than the fair value of the stock. There were no options granted
with exercise prices that equaled or were less than the fair value of the
underlying stock on the date of grant.
STOCK WARRANTS
There were 2,250,000 warrants outstanding as of December 31, 2001. The Company
granted warrants to purchase an additional 1,500,003 shares of common stock
during the six months ended June 30, 2002.
The fair value of each warrant granted has been estimated as of the grant date
using the Black-Scholes option pricing model. The following weighted-average
assumptions were used for the six months ended June 30, 2002: risk-free interest
rate of 2.0 percent, expected volatility of 6.5 percent, expected life of two
years, and no expected dividends.
The weighted average exercise price and fair value of options granted were $1.17
and $.03, respectively on the date of grant for options granted with an exercise
price greater than the fair value of the stock. There were no options granted
with exercise prices that equaled or were less than the fair value of the
underlying stock on the date of grant.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options and warrants, which have no vesting restrictions
and are fully transferable. Option valuation models also require the input of
highly subjective assumptions such as expected option life and expected stock
price volatility. Because the Company's stock-based awards have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, the
Company believes that the existing option valuation models do not necessarily
provide a reliable single measure of the fair value of its stock-based awards.
F-6
IDMEDICAL.COM, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
OPTIONS GRANTED TO NON-EMPLOYEES, ACCOUNTED FOR UNDER THE FAIR VALUE METHOD
On March 22, 2002, the Company entered into agreements with thirteen unrelated
third party consultants to provide consulting and advisory services to the
Company. The Company granted certain of the consultants fully vested options to
purchase an aggregate of 6,950,000 shares of the Company's common stock. On
March 22, 2002 the market value of the stock was $.14. The exercise prices on
the options range from $.25 to $1.50 and expire on May 31, 2005. The Company
determined the fair value of the options in accordance with SFAS 123 to be $.03
per share and have recorded stock based compensation expense of $205,000.
OPTIONS GRANTED TO EMPLOYEES, ACCOUNTED FOR UNDER THE FAIR VALUE METHOD (PRO
FORMA)
Employees of the Company were granted options to purchase 2,687,500 shares of
common stock on March 22, 2002. Had compensation expense been recorded based on
the fair value at the grant date, consistent with the provisions of SFAS 123,
the Company's net loss and net loss per share would have increased to the pro
forma amounts indicated below:
<Table>
<Caption>
June 17, 1999
Six Months Ended (Inception)
June 30, Through
------------------------------ June 30,
2002 2001 2002
------------ ------------ -------------
Net loss, as reported ............................ $ (1,851,932) $ (355,396) $ (3,803,955)
Decrease due to:
Employee stock options .................... (108,750) -- (108,750)
------------ ------------ ------------
Pro forma net loss ............................... $ (1,960,682) $ (355,396) $ (3,912,705)
============ ============ ============
As reported:
Net loss per share - basic and diluted ....... $ (0.09) $ (0.04)
============ ============
Pro Forma:
Net loss per share - basic and diluted ....... $ (0.10) $ (0.04)
============ ============
</Table>
F-7
IDMEDICAL.COM, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
SUMMARY
Following is a summary of the Company's stock option and stock warrant awards to
purchase shares of common stock as of June 30, 2002, and the changes since
inception:
<Table>
<Caption>
Fixed Options Options Warrants
- -------------------------------------------------- ---------- ----------
Outstanding at June 17, 1999 (inception) ......... -- --
Granted .......................................... 250,000 --
Exercised ........................................ -- --
Canceled ......................................... -- --
---------- ----------
Outstanding at December 31, 1999 ................. 250,000 --
Granted .......................................... 230,000 2,250,000
Exercised ........................................ (61,000) --
Canceled ......................................... -- --
---------- ----------
Outstanding at December 31, 2000 ................. 419,000 2,250,000
Granted .......................................... 200,000 --
Exercised ........................................ -- --
Canceled ......................................... -- --
---------- ----------
Outstanding at December 31, 2001 ................. 619,000 2,250,000
Granted .......................................... 9,637,500 1,500,003
Exercised ........................................ -- --
Canceled ......................................... -- --
---------- ----------
Outstanding at June 30, 2002 ..................... 10,256,500 3,750,003
========== ==========
</Table>
F-8
IDMEDICAL.COM, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Following is a statement of changes in shareholders' deficit for the six months
ended June 30, 2002:
<Table>
<Caption>
Deficit
Outstanding Outstanding Accumulated
Common stock Common Common Additional During the
---------------------- Stock Stock Paid-in Development
Shares Par Value Options Warrants Capital Stage Total
---------- --------- ----------- ----------- ---------- ----------- -----------
Balance, January 1, 2002 .......... 10,501,500 $ 10,501 $ 16,858 $ 243,250 $1,581,955 $(1,952,023) $ (99,459)
January 2002, stock issued to
attorney in exchange for
services ........................ 280,000 280 -- -- 209,720 -- 210,000
January 2002, stock issued to
consultant in exchange for
services ........................ 150,000 150 -- -- 112,350 -- 112,500
February 2002, sale of common
stock ........................... 173,333 174 -- -- 119,826 -- 120,000
February 2002, stock issued in
Plan of Reorganization, net of
rescinded shares ................ 10,700,000 10,700 -- -- (10,700) -- --
February 2002, options granted
to purchase 9,637,500 shares
of common stock ................. -- -- 205,000 -- -- -- 205,000
February 2002, warrants granted
to purchase 1,500,003 shares
of common stock ................. -- -- -- 50,000 -- -- 50,000
February 2002, stock issued to
attorney in exchange for
services ........................ 251,000 251 -- -- 42,419 -- 42,670
March 2002, stock issued to
attorney in exchange for
services ........................ 400,000 400 -- -- 51,600 -- 52,000
March 2002, stock issued to
consultants in exchange for
services ........................ 2,675,000 2,675 -- -- 371,825 -- 374,500
May 2002, sale of common
stock ........................... 1,000,000 1,000 -- -- 499,000 -- 500,000
June 2002, stock issued to
attorney in exchange for
services ........................ 439,897 440 -- -- 87,540 -- 87,980
Net loss for the six months
ended June 30, 2002 ............. -- -- -- -- -- (1,851,932) (1,851,932)
---------- --------- ----------- ----------- ---------- ----------- -----------
Balance, June 30, 2002 26,570,730 $ 26,571 $ 221,858 $ 293,250 $3,065,535 $(3,803,955) $ (196,741)
========== ========= =========== =========== ========== =========== ===========
</Table>
F-9
IDMEDICAL.COM, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE F: AGREEMENT AND PLAN OF REORGANIZATION AND SUBSEQUENT PARTIAL RESCISSION
On February 5, 2002, the Company acquired 100 percent of the issued and
outstanding common stock of ToolTrust Corporation, a private Nevada corporation,
in exchange for an aggregate of 20,000,000 shares of the Company's common stock
pursuant to an Agreement and Plan of Reorganization dated October 19, 2001 (the
"Reorganization"). At the time of the Reorganization, ClearDialog
Communications, Inc. ("ClearDialog") and LocalToolbox Corporation
("LocalToolbox") were wholly-owned subsidiaries of ToolTrust. In connection with
the Reorganization, the Company formed a wholly-owned subsidiary to operate the
on-line medical records business.
On May 9, 2002, the Company entered into share exchange agreements with certain
former shareholders of ClearDialog and LocalToolbox wherein the former
shareholders reacquired their shares of ClearDialog and LocalToolbox in exchange
for approximately 9,300,000 shares of the 20,000,000 shares of the Company's
common stock to be issued pursuant to the Reorganization. As a result of the
transactions, ToolTrust no longer has an interest in these entities. The Company
granted to LocalToolbox a license to utilize the Company's technology related to
on-line medical records. The Company is also obligated to pay LocalToolBox a
total of $150,000 in two $75,000 payments that are due on October 19, 2002 and
April 19, 2003. Payment of the settlement amount is secured by 1,500,000 shares
of the Company's restricted common stock and the Company's technology and
pending patent application related to its online medical records business.
Pursuant to an agreement dated May 9, 2002, Robert L. Evans, James K. Robbins
and Garrett J. Girvan resigned their respective positions as officers and
directors of the Company and its subsidiaries IDMedical, Inc. and ToolTrust
Corporation. Messrs. Evans, Robbins and Girvan will continue as
officers/directors of LocalToolbox and ClearDialog.
NOTE G: RECORD LABEL AGREEMENT
In May 2002, the Company sold 1,000,000 shares of its restricted common stock to
an individual for gross proceeds of $500,000. $400,000 of the proceeds were paid
to MJJ Ventures, Inc. ("MJJ") as an inducement fee pursuant to a Label Term
Sheet Agreement ("Label Agreement") dated May 11, 2002, between the Company's
subsidiary, ToolTrust Corporation ("ToolTrust"), and MJJ, as described below.
The Company intends to change its name to reflect its new business initiative.
The label Agreement contemplates that ToolTrust and MJJ will form a California
Limited Liability Company to operate a music label, tentatively called
"Neverland Records". The Label Agreement obligates ToolTrust to pay MJJ a total
of $3,800,000 as an inducement fee, which is non-refundable. Of this amount,
ToolTrust had paid MJJ $400,000. The label Agreement also obligates ToolTrust to
have a minimum of $1,500,000 in funds for the initial year of operation of the
music label. ToolTrust must also provide a minimum of $2,000,000 per year to
fund the overhead portion of the music label's annual budget for the remaining
six years of the term of the Label Agreement.
F-10
IDMEDICAL.COM, INC.
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The Label Agreement contemplates the substantial involvement of Michael J.
Jackson, and provides Mr. Jackson with discretion to grant or deny approval of
any artist seeking to sign a recording agreement. Mr. Jackson also shall have
final approval of all creative elements in connection with master recordings and
videos. Ultimately, however, Mr. Jackson's level of participation with the music
label, if any, shall be determined at his sole discretion. MJJ may "opt-out" of
the Label Agreement if the music label is unable to secure a distribution deal
or the music label has not substantially satisfied any material goals set forth
in its business plan. Mr. Jackson may opt-out for any reason after three years.
In any such case, ToolTrust is obligated to but-out MJJ's interest in the music
label. All trademarks, label names, domain names, and logos associated with the
music label are to remain the property of Mr. Jackson, and while the parties may
negotiate ToolTrust's use of certain trademarks associated with the music label,
there is no obligation for Mr. Jackson to grant such rights to ToolTrust.
NOTE H: SUBSEQUENT EVENTS
COMMON STOCK
On July 23, 2002, the Company issued 725,000 shares of its common stock to
officers and directors in exchange for consulting services. The market value of
the common stock on the transaction date was $.075 per share, resulting in
stock-based compensation expense of $54,375.
On July 23, 2002, the Company issued 3,250,000 shares of its common stock in
exchange for consulting services. The market value of the common stock on the
transaction date was $.075 per share, resulting in stock-based compensation
expense of $243,750.
Following the above common stock issuances, the Company had 30,545,730 common
shares outstanding.
STOCK OPTIONS
On July 23, 2002, the Company granted options to purchase 100,000 shares of
common stock at an exercise price of $.25 per share. The options expire on July
31, 2005.
On July 23, 2002, the Company cancelled options to purchase 100,000 shares of
common stock at an exercise price of $.50 per share and options to purchase
200,000 shares of common stock at $1.00 per share.
Following the above stock option transactions, the Company had 10,056,500 stock
options and 3,750,003 warrants outstanding.
F-11
ITEM 2. PLAN OF OPERATION
The following discussion should be read in conjunction with the Company's
financial statements and notes thereto included elsewhere in this Form 10-QSB.
Except for the historical information contained herein, the discussion in this
Form 10-QSB contains certain forward looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Form 10-QSB
should be read as being applicable to all related forward-looking statements
wherever they appear herein. The Company's actual results could differ
materially from those discussed here.
The financial information furnished herein has not been audited by an
independent accountant; however, in the opinion of management, all adjustments
(only consisting of normal recurring accruals) necessary for a fair presentation
of the results of operations for the period ended June 30, 2002 have been
included.
FINANCIAL RESULTS
The Company recorded revenues of $89.00 from its online medical records business
during the quarter ended June 30, 2002 compared to revenues of $936 for the
quarter ended June 30, 2002. The Company remains a development stage company for
accounting purposes. From inception on June 17, 1999 through June 30, 2002, the
Company has incurred a cumulative net loss of approximately $3,715,975.00. The
Company is in immediate need of financing to execute its business plan, as
described below.
REORGANIZATION
On February 5, 2002, the Company acquired 100 percent of the issued and
outstanding common stock of ToolTrust Corporation, a Nevada corporation, from
the shareholders of ToolTrust, in exchange for an aggregate of 20,000,000 shares
of the Company's common stock pursuant to an Agreement and Plan of
Reorganization dated October 19, 2001 (the "Reorganization"). At the time of the
Reorganization, ClearDialog Communications, Inc. ("ClearDialog") and
LocalToolbox Corporation ("LocalToolbox") were wholly-owned subsidiaries of
ToolTrust. As of May 9, 2002, the parties to the Reorganization had not actually
exchanged share certificates representing ownership of the respective entities.
On May 9, 2002, the Company entered into share exchange agreements with certain
former shareholders of ClearDialog and LocalToolbox, who were parties to the
reorganization. Pursuant to the share exchanges, the former shareholders are
deemed to have acquired their shares of ClearDialog and LocalToolbox in exchange
for 9,300,000 shares of the Company's common stock. As a result of the
transactions, ToolTrust no longer owns ClearDialog and LocalToolbox, and the
Company will only issue 10,700,000 shares of its common stock to ToolTrust
shareholders pursuant to the Reorganization. As of the date of this report,
10,000,000 shares had been issued.
Pursuant to an agreement dated May 9, 2002, the Company agreed to pay to
LocalToolbox $150,000 as full settlement of amounts owed to LocalToolbox by the
Company. Payment of the settlement amount is secured by 1,500,000 shares of the
Company's restricted common stock and the Company's technology and pending
patent application related to its online medical records business. Robert L.
Evans, James K. Robbins and Garrett J. Girvan resigned their respective
positions as officers and directors of the Company and its subsidiaries
IDMedical, Inc. and ToolTrust Corporation. Messrs. Evans, Robbins and Girvan
will continue as officers/directors of LocalToolbox and ClearDialog. As of the
date of this report, the 1,500,000 shares of common stock had not been issued.
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MUSIC LABEL
In May 2002, the Company sold 1,000,000 shares of its restricted common stock to
one person, with gross proceeds to the Company of $500,000. $400,000 of the
proceeds were paid to MJJ Ventures, Inc. ("MJJ Ventures") pursuant to a Label
Term Sheet agreement ("Label Agreement") dated May 11, 2002, between the
Company's subsidiary, ToolTrust Corporation ("ToolTrust"), and MJJ Ventures, as
described below. The Company intends to change its name to reflect its new
business initiative.
The Label Agreement contemplates that ToolTrust and MJJ Ventures will form a
California Limited Liability Company to operate a music label, tentatively
called "Neverland Records." The Label Agreement obligates ToolTrust to pay to
MJJ Ventures $3,800,000, which is non-refundable. Of this amount, ToolTrust has
paid to MJJ Ventures $400,000. The Label Agreement also obligates ToolTrust to
have a minimum of $1,500,000 in funds for the initial year of operation of the
music label. ToolTrust must also provide a minimum of $2,000,000 per year to
fund the overhead portion of the music label's annual budget for the remaining
six years of the term of the Label Agreement.
The Label Agreement provides recording artist Michael J. Jackson with discretion
to grant or deny approval of any artist seeking to sign a recording agreement.
Mr. Jackson also shall have final approval of all creative elements in
connection with master recordings and videos. Ultimately, however, Mr. Jackson's
level of participation with the music label (or none at all) shall be determined
at his sole discretion. MJJ Ventures may "opt-out" of the Label Agreement if the
music label is unable to secure a distribution deal or the music label has not
substantially satisfied any material goals set forth in its business plan. Mr.
Jackson may opt-out for any reason after three years. In any such case,
ToolTrust is obligated to buy out MJJ venture's interest in the music label. All
trademarks, label names, domain names and logos associated with the music label
are to remain the property of Michael Jackson, and while the parties may
negotiate ToolTrust's use of certain trademarks to be associated with the music
label, there is no obligation for Mr. Jackson to grant such rights to ToolTrust.
ONLINE MEDICAL RECORDS BUSINESS
The Company's subsidiary, IDMedical, Inc., which operates an online medical
records database for use by physicians and patients, has generated minimal
revenues to date, and the Company continues to evaluate its business plan.
The Company is in immediate need of funding to complete the music label venture
described above and to carry out day-to-day operations, including funding of the
online medical records business. If the Company does not secure financing to
sufficiently fund operations, it may lose all amounts paid to MJJ Ventures.
There can be no assurance that financing will be available when needed or on
terms acceptable to the Company. There can be no assurance that the Company will
be able to continue as a going concern, or achieve material revenues and
profitable operations.
3
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There has been no material change in the legal proceedings described in the
Company's annual report on Form 10-KSB for the year ended December 31, 2001,
filed April 16, 2002.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In May 2002, the Company sold 1,000,000 shares of its restricted common stock to
one person, with gross proceeds to the Company of $500,000. The Company believes
this private placement was exempt from registration under Section 4(2) and Rule
506 of the Securities Act of 1933. The transaction did not involve a public
offering, no sales commissions were paid, and a restrictive legend was placed on
each certificate evidencing the shares.
In July 2002, the Company issued 10,000,000 shares of its restricted common
stock to the shareholders of ToolTrust Corporation ("ToolTrust"), pursuant to
the February 2002 acquisition of ToolTrust, as described above in Part I, Item
2. The Company believes that the transactions are exempt from registration
pursuant to Section 4(2) and Rule 506 of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
a. On May 24, 2002, the Company's Board of Directors appointed Craig Stout as a
director to fill a vacancy.
b. A meeting of shareholders will be held on September 12, 2002. Only
shareholders of record on July 26, 2002 shall be entitled to vote. The purpose
of the meeting is to vote on the following matters:
1. To elect three Directors to serve until the
next annual meeting of stockholders and
until their successors are duly elected and
qualified.
2. To ratify the appointment of Cordovano and
Harvey, P.C. as independent auditors for
2002.
3. To ratify the IDMedical.com, Inc. 2002 Stock
Plan.
4. To amend the Articles of Incorporation to
change the Company's name to Opus Media
Group, Inc.
5. To transact such other business as may
properly come before the Meeting or any
adjournments thereof.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
- ------ -----------
2.1 Agreement and Plan of Reorganization dated October 25, 2001 by
and among the Company, ToolTrust Corporation ("ToolTrust") and
certain shareholders of ToolTrust (Incorporated by reference
to Exhibit 2.1 to the Registrant's quarterly report on Form
10-QSB filed November 19, 2001).
2.2 Share Exchange Agreement dated May 9, 2002, by and among the
Company, ToolTrust Corporation, and certain former
shareholders of LocalToolbox Corporation (Incorporated by
reference to Exhibit 2.2 to the Registrant's quarterly report
on Form 10-QSB filed June 5, 2002.).
2.3 Share Exchange Agreement dated May 9, 2002, by and among the
Company, ToolTrust and certain former shareholders of
ClearDialog Communications, Inc. (Incorporated by reference to
Exhibit 2.3 to the Registrant's quarterly report on Form
10-QSB filed June 5, 2002.).
3.1 The Company's Articles of Incorporation, as currently in
effect, which define the rights of holders of the equity
securities being registered. (Incorporated by reference to
Exhibit 3.1 of the Company's Registration Statement on Form
SB-2, filed October 13, 2000).
3.2 The Company's Bylaws, as currently in effect, which define the
rights of holders of the equity securities being registered.
(Incorporated by reference to Exhibit 3.2 of the Company's
Registration Statement on Form SB-2, filed October 13, 2000).
10.2 Form of Common Stock Purchase Warrant, exercise price $1.10
(Incorporated by reference to Exhibit 10.2 of the Company's
Registration Statement on Form SB-2, filed October 13, 2000).
10.3 Form of Common Stock Purchase Warrant, exercise price $2.00
(Incorporated by reference to Exhibit 10.3 of the Company's
Registration Statement on Form SB-2, filed October 13, 2000).
10.8 Consulting Agreement with Juliard Communications, Inc. dated
April 1, 2001 and as amended July 10, 2001 (Incorporated by
reference to Exhibit 10.8 of the Company's Quarterly Report on
Form 10-QSB filed August 14, 2001).
10.9 Agreement dated May 9, 2002, by and among the Company,
ToolTrust, LocalToolbox, ClearDialog, Robert P. Gordon, Robert
L. Evans, Garrett J. Girvan, and James K. Robbins
(Incorporated by reference to Exhibit 10.9 to the Registrant's
quarterly report on Form 10-QSB filed June 5, 2002.).
10.10 Perpetual Software License Agreement dated May 9, 2002, by and
between LocalToolbox and the Company (Incorporated by
reference to Exhibit 10.10 to the Registrant's quarterly
report on Form 10-QSB filed June 5, 2002.)
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10.11 IDMedical.com, Inc. 2002 Stock Plan (Incorporated by reference
to Exhibit 10.11 of the Company's Registration Statement on
Form S-8 filed March 8, 2002).
(b) Reports on Form 8-K
There were no reports on Form 8-K.
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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 thereunto duly authorized.
IDMEDICAL.COM, INC.
(Registrant)
DATE: August 19, 2002 By: /s/ Robert P. Gordon
--------------------------------------
Robert P. Gordon
CEO, Treasurer and Chairman of the
Board
CERTIFICATION
Solely for the purposes of complying with, and the extent required by 18 U.S.C.
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the
undersigned certifies, in his capacity as an officer of IDMedical.com, Inc.
("IDMedical"), that, to his knowledge, the Quarterly Report of IDMedical on Form
10-QSB for the period ended June 30, 2002, fully complies with the requirements
of Section 13(a) of the Securities Exchange Act of 1934 and that the information
contained in the report fairly presents, in all material respects, the company's
financial condition and results of operations.
By: /s/ Robert P. Gordon
--------------------------------------
Robert P. Gordon, Chief Executive
Officer and Chief Financial Officer
DATE: August 19, 2002
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