U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the
transition period from to .
Commission File Number 0-21427
INTEGRATED MEDICAL RESOURCES, INC.
(Exact name of Small Business Issuer as specified in its charter)
KANSAS 48-1096410
(State of other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
11320 WEST 79TH STREET, LENEXA, KS 66214
(Address of principal executive offices) (Zip code)
Issuer's Telephone Number: (913)962-7201
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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.
Yes X No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
As of May 1, 1997, there were 6,715,017 outstanding shares of common stock,
par value $.001 per share.
Transitional Small Business Disclosure Format (Check one): Yes No X
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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INTEGRATED MEDICAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
================================================================================
ASSETS MARCH 31, 1997 DECEMBER 31, 1996
(UNAUDITED)
------------------- --------------------
CURRENT ASSETS:
Cash and cash equivalents $ 3,851,432 $ 6,739,697
Accounts receivable, less allowance of $720,374 in
1997 and $605,315 in 1996 2,274,875 1,382,968
Receivable from Centers 886,635 499,083
Supplies 137,686 99,788
Prepaid expenses 262,515 260,619
------------------- --------------------
Total current assets 7,413,113 8,982,155
NON-CURRENT ASSETS:
Property and equipment
Office equipment and software 1,678,152 1,624,411
Furniture, fixtures and equipment 4,896,598 4,295,722
Leasehold improvements 137,360 125,476
------------------- --------------------
6,712,110 6,045,609
Accumulated depreciation 1,664,235 1,355,995
------------------- --------------------
5,047,875 4,689,614
Intangible assets 366,202 504,182
Other assets 409,634 335,947
------------------- --------------------
TOTAL ASSETS $ 13,236,824 $ 14,511,898
=================== ====================
See accompanying notes to financial statements
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================================================================================
INTEGRATED MEDICAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
================================================================================
MARCH 31, 1997 DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY (UNAUDITED) 1996
------------------- ---------------
CURRENT LIABILITIES:
Accounts payable $ 1,155,598 $ 929,564
Accrued payroll 330,790 289,470
Accrued advertising 458,018 350,725
Other accrued expenses 110,814 41,086
Current portion of long-term debt 749,587 623,603
Current portion of capital lease obligations 320,586 320,586
------------------- ---------------
Total current liabilities 3,125,393 2,555,034
NON-CURRENT LIABILITIES:
Deferred rent 175,932 175,932
Long-term debt, less current portion 1,101,009 1,008,278
Capital lease obligations, less current portion 376,490 473,281
------------------- ---------------
Total non-current liabilities 1,653,431 1,657,491
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value:
Authorized shares - 1,696,698
Issued and outstanding shares - none --- ---
Common stock, $.001 par value:
Authorized shares - 10,000,000
Issued and outstanding shares - 6,715,017 6,715 6,715
Additional paid-in capital 17,960,029 17,960,029
Accumulated deficit (9,508,744) (7,667,371)
------------------- ---------------
Total stockholders' equity 8,458,000 10,299,373
------------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,236,824 $ 14,511,898
=================== ===============
See accompanying notes to financial statements
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INTEGRATED MEDICAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
================================================================================
FOR THE THREE MONTHS ENDED
MARCH 31
========================================
1997 1996
------------------- --------------------
NET CENTER REVENUES: $ 4,055,866 $ 2,634,000
Center expenses:
Physician salaries 896,403 361,883
Cost of services 946,879 358,940
------------------- --------------------
1,843,282 720,823
------------------- --------------------
Net management revenue 2,212,584 1,913,177
------------------- --------------------
OPERATING EXPENSES:
Center staff salaries 547,117 357,171
Center facilities rent 324,142 149,850
Advertising 1,362,262 614,000
Depreciation and amortization 557,945 153,000
Selling, general and administrative 1,252,574 587,155
------------------- --------------------
4,044,040 1,861,176
------------------- --------------------
Operating income (loss) (1,831,456) 52,001
------------------- --------------------
OTHER INCOME (EXPENSE):
Interest income 61,570 ---
Interest expense (78,027) (31,288)
Other 6,540 ---
------------------- --------------------
(9,917) (31,288)
------------------- --------------------
NET INCOME (LOSS): $ (1,841,373) $ 20,713
------------------- --------------------
Net income (loss) per common and common equivalent
share $ (0.27) $ 0.00
------------------- --------------------
Weighted average common and common equivalent shares 6,715,017 2,906,000
=================== ====================
See accompanying notes to financial statements
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================================================================================
INTEGRATED MEDICAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
================================================================================
FOR THE THREE MONTHS ENDED
MARCH 31
========================================
1997 1996
------------------- --------------------
OPERATING ACTIVITIES
Net income (loss) $ (1,841,373) $ 20,713
Adjustments to reconcile net income (loss) to net
cash used in operating activities
Depreciation 301,659 95,701
Amortization 256,286 25,108
Deferred rent --- 23,440
Pre-opening costs incurred (64,478) (62,379)
Changes in operating assets and liabilities:
Accounts receivable (891,877) (265,143)
Receivable from centers (387,552) (196,508)
Supplies (37,898) (69,498)
Prepaid expenses (1,896) 24,806
Accounts payable 226,034 (33,679)
Accrued payroll 41,320 26,615
Accrued advertising 107,293 10,440
Other accrued expenses 69,728 43,691
------------------- --------------------
Net cash used in operating activities (2,222,754) (356,693)
------------------- --------------------
INVESTING ACTIVITIES
Purchases of property and equipment (167,920) (762,350)
Other (127,515) (15,495)
------------------- --------------------
Net cash used in investing activities (295,435) (777,845)
------------------- --------------------
FINANCING ACTIVITIES
Principal payments on long-term debt (273,285) (16,539)
Principal payments on capital lease obligations (96,791) (53,991)
Net proceeds from issuance of preferred stock --- 924,771
------------------- --------------------
Net cash provided by (used in) financing (370,076) 854,241
activities
------------------- --------------------
Net decrease in cash and cash equivalents (2,888,265) (280,297)
Cash and cash equivalents at beginning of year 6,739,697 2,122,794
------------------- --------------------
Cash and cash equivalents at end of year $ 3,851,432 $ 1,842,497
=================== ====================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest $ 78,027 $ 48,815
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Additions to property and equipment through
issuance of long term debt $ 492,000 $ ---
------------------- --------------------
See accompanying notes to financial statements
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INTEGRATED MEDICAL RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Integrated Medical Resources, Inc. and subsidiaries (the Company) is a
provider of disease management services for men suffering from sexual
dysfunction. At March 31, 1997, the Company operated 32 diagnostic clinics
under the name The Diagnostic Center for Men in 18 states (collectively the
Centers). Each of those 32 clinics is owned directly or beneficially by an
officer and stockholder of the Company and has entered into long-term
management contracts and lease agreements with the Company. Pursuant to these
contracts and agreements, the Company provides a wide array of business
services to the Centers in exchange for management fees. The Company has a
noncancelable option to designate the holder of the common stock of each Center
through the right to force each current holder to sell, at any time, the
outstanding shares of the professional corporations operating the Centers to
the Company's designee for a nominal amount which management believes is deeply
discounted from the fair value of the stock of the corporations. The amount to
be paid represents the reimbursement of the direct expenses of the stockholder
in forming the corporation operating the Center, and normally ranges from $100
to $500. In general, the Company is legally prohibited from owning the common
stock of the Centers.
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared by the Company, in accordance with generally accepted accounting
principals for interim financial information, and with the instructions to Form
10-QSB. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's December 31,
1996 annual report on Form 10-KSB. The results of operations for the three month
period ended March 31, 1997 are not necessarily indicative of the operating
results that may be expected for the year ended December 31, 1997.
NOTE 2 - CONTINGENCIES
The Company is subject to extensive federal and state laws and
regulations, many of which have not been the subject of judicial or regulatory
interpretation. Management believes the Company's operations are in substantial
compliance with laws and regulations. Although an adverse review or
determination by any such authority could be significant to the Company,
management believes the effects of any such review or determination would not be
material to the Company's financial condition.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is the leading provider of disease management services for
men suffering from sexual dysfunction, focusing primarily on the diagnosis and
treatment of erectile dysfunction, commonly known as impotence. The Company
provides comprehensive diagnostic, educational and treatment services designed
to address the medical and emotional needs of its patients and their partners
through the largest network of medical clinics in the United States dedicated
to the diagnosis and treatment of impotence. The Company currently operates 32
Centers in 18 states.
For the quarter ended March 31, 1997, approximately 77% of patient
billings were covered by medical insurance plans subject to applicable
deductible and other co-pay provisions paid by the patient. Approximately 33% of
patient billings were covered by Medicare and 44% were covered by numerous other
commercial insurance plans that offer coverage for impotence treatment services.
Patient billings average less for Medicare patients due to restrictions on
laboratory test reimbursement and standard professional fee discounts.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
items from the consolidated statements of operations of the Company as a
percentage of net Center revenues:
=========================
FOR THE THREE MONTHS
ENDED MARCH 31
=========================
1997 1996
---- ----
Net center revenues 100.0% 100.0%
Center expenses 45.4 27.4
---- ----
Net management revenue 54.6 72.6
Operating expenses:
Center staff salaries 13.5 13.5
Center facilities rent 8.0 5.7
Advertising 33.6 23.3
Depreciation and amortization 13.8 5.8
Selling, general and
administrative 30.9 22.3
---- ----
Total operating expenses 99.8 70.6
---- ----
Operating income (loss) (45.2) 2.0
Interest expense, net (0.4) (1.2)
Other income, net 0.2 0.0
--- ---
Net income (loss) (45.4) 0.8
============ ============
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
NET CENTER REVENUES. Net Center revenues increased 54% from $2.6 million
in 1996 to $4.1 million in 1997. This growth was attributable primarily to the
increase in the number of Centers open during each period which grew from 14 at
March 31, 1996 to 32 at March 31, 1997. Fees related to the use of Rigiscans
accounted for approximately 25% of revenues in each period.
CENTER EXPENSES. Center expenses represent direct operating expenses of
the Centers, including physician salaries, costs for laboratory and outsourced
services, diagnostic and treatment supplies, and treatment devices and
medications dispensed through the Centers. Center expenses increased 156% from
$720,823 in 1996 to $1,843,282 in 1997 due to the operation of additional
Centers during the 1997 period. As a percentage of net Center revenues, Center
expenses increased from 27.4% to 45.4%, which was primarily attributable to a
change in the mix of payors and services provided at certain existing Centers
and the fact that revenues at new Centers generally increase with patient
volumes over the first six months of operations while Center expenses are
substantially fixed after the first month of operation.
NET MANAGEMENT REVENUE. Net management revenue increased 16% from $1.9
million in 1996 to $2.2 million in 1997. As a percentage of net Center revenue,
net management revenue decreased from 72.6% to 54.6%, primarily due to the
timing of opening new Centers.
CENTER STAFF SALARIES. Center staff salaries increased from $357,171 in
1996 to $547,117 in 1997 due to the operation of additional Centers. As a
percentage of net Center revenue, Center staff salaries remained consistent at
13.5%. The effect of the reduction in average staff size from 3 to 4 employees
per clinic in 1996 to 2 to 3 employees per clinic in 1997 was offset by lower
revenues per clinic in 1997 as patient volumes continued growing over the
initial six months of operations.
CENTER FACILITIES RENT. Center facilities rent increased 116% from $
149,850 in 1996 to $324,142 in 1997 due to the operation of additional Centers
during the period. As a percentage of net Center revenue, Center facilities
rent increased from 5.7% to 8.0%, primarily due to the timing of opening new
centers.
ADVERTISING. Advertising expense increased 122% from $614,000 in 1996 to
$1,362,262 in 1997 due primarily to the increased number of Centers. As a
percentage of net Center revenue, advertising expense increased from 23.3% to
33.6%, which was primarily attributable to a change in media used from print
advertising to more costly broadcast media for a portion of the year, and the
engagement of an outside advertising agency in November 1996.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
265% from $153,000 in 1996 to $557,945 in 1997 due to depreciation charges for
clinical and office equipment purchased to support new Centers, increased
staffing at the Company's headquarters and increased amortization of pre-opening
costs incurred with respect to the significant growth in new Centers. As a
percentage of net Center revenues, depreciation and amortization increased from
5.8% to 13.8%, due primarily to the amortization of pre-opening costs for 4 new
clinics opened from March 1995 to March 1996, compared to 18 new clinics opened
from March 1996 to March 1997. Pre-opening costs are amortized over a 12_month
period.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expense increased 113% from $587,155 in 1996 to $1,252,574 in 1997 due
principally to the addition of an experienced management team and staff at the
Company's corporate headquarters and expansion of the telephone appointment
center staff to support additional Centers. As a percentage of net Center
revenues, selling, general and administrative expense increased from 22.3% to
30.9%, due primarily to the increased staffing needed to support the Company's
future growth and the opening of new Centers.
INTEREST EXPENSE, NET. Interest expense decreased from $31,288 in 1996
to $ 16,457 in 1997.
INCOME TAXES. No income tax provision or benefit was recorded in 1996 or
1997 as the deferred taxes otherwise provided were offset by valuation reserves
on deferred tax assets.
SEASONALITY
The Company's historical quarterly revenues and financial results have
demonstrated a seasonal pattern in which the first and fourth quarters are
typically stronger than the second and third quarters. The summer months of May
through August, spanning the second and third quarters, have shown seasonal
decreases in patient volume and billings. Because impotence is not an acute
condition, has typically persisted for some time in most patients, and usually
does not present immediate health risks, the Company believes that some
patients postpone scheduling visits with the Centers during the summer months.
The Company believes that this seasonality trend will likely continue. In
addition, the Company's quarterly results are affected by the timing of the
opening of new Centers.
LIQUIDITV AND CAPITAL RESOURCES
The Company has financed its operations and met its capital requirements
with cash flows from existing Centers, proceeds from private placements of
equity securities, an initial public offering of equity securities, the
utilization of bank lines of credit, bank loans and capital lease obligations.
In December 1995 and March 1996, the Company raised $4.0 million and $1.0
million, respectively, from the issuance of Series A Preferred Stock and Series
B Preferred Stock which was converted to Common Stock upon the consummation of
the initial public offering. The Company raised $12.6 million in net proceeds
from its initial public offering completed in November 1996. The Company has a
working capital line of credit with its bank under which it may borrow up to
$2.0 million through December 31, 1997, based on specified percentages of
eligible accounts receivable. At March 31, 1997, the Company had no borrowings
outstanding under this line of credit, and approximately $1,354,000 was
available under this line of credit based on eligible accounts receivable
balances. The interest rate applicable to the line of credit is 1% above the
bank's prime lending rate (which prime lending rate was 8.5% at March 31, 1997).
As of March 31, 1997, the Company had, for tax purposes, net operating
loss carry forwards of approximately $10.6 million, which are available to
offset future taxable income and expire in varying amounts through 2011, if
unused.
Due to the growth in the number of new Center openings, the Company has
experienced increased and varied operating cash flow deficits from 1994 through
1997. This resulted primarily from differences in working capital levels
(particularly, accounts receivable) required to accommodate the increased Center
operations and variances in operating results. The variances were principally
attributable to the fact that revenues at new Centers and, accordingly, net
management revenues have generally increased with patient volumes over the first
six months of operations while operating expenses have remained relatively fixed
from the first month of operation. In addition, the Company had increased
corporate staff, expanded the national call center and increased advertising
costs to support new Center openings, thereby significantly increasing
administrative expenses in advance of expected revenues.
At March 31, 1997, the Company had cash and cash equivalents of $3.85
million. The Company believes that existing cash balances, funds available
under the Company's credit lines and operating cash flows generated by
management services provided to the more mature Centers, will be sufficient to
fund its operations and satisfy its capital expenditures and working capital
requirements for the next twelve months. Despite the Company's existing
resources, opportunities may arise for new Center openings or acquisitions that
management believes would enhance the value of the Company which could require
financing not currently provided for.
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
ABILITY TO MANAGE GROWTH. The Company has recently experienced rapid
growth that has resulted in new and increased responsibilities for management
personnel and has placed increased demands on the Company's management,
operational and financial systems and resources. To accommodate this recent
growth and to compete effectively and manage future growth, the Company will be
required to continue to implement and improve its operational, financial and
management information systems, and to expand, train, motivate and manage its
work force. There can be no assurance that the Company's personnel, systems,
procedures and controls will be adequate to support the Company's operations.
Any failure to implement and improve the Company's operational, financial and
management systems or to expand, train, motivate or manage employees could have
a material adverse effect on the Company's financial condition and results of
operations.
The Company intends to establish Centers in new markets where it has
never before provided services. As part of its market selection analysis, the
Company has invested and will continue to invest substantial funds in the
compilation and examination of market data. There can be no assurance that the
market data will be accurate or complete or that the Company will select markets
in which it will achieve profitability.
In addition, the Company may pursue acquisitions of medical clinics or
practices providing male sexual health services. There are various risks
associated with the Company's acquisition strategy, including the risk that the
Company will be unable to identify, recruit or acquire suitable acquisition
candidates or to integrate and manage the acquired clinics or practices. There
can be no assurance that clinics and practices will be available for acquisition
by the Company on acceptable terms, or that any liabilities assumed in an
acquisition will not have a material adverse effect on the Company's financial
condition and results of operations.
SEASONALITY AND FLUCTUATIONS IN QUARTERLY RESULTS. The Company's
historical quarterly revenues and financial results have demonstrated a seasonal
pattern in which the first and fourth quarters are typically stronger than the
second and third quarters. The summer months of May through August have shown
seasonal decreases in patient volume and billings. The Company expects this
seasonality to continue and there can be no assurance that seasonal fluctuations
will not produce decreased revenues and poorer financial results. The failure to
open new Centers on anticipated schedules, the opening of multiple Centers in
the same quarter or the timing of acquisitions may also have the effect of
increasing the volatility of quarterly results. Any of these factors could have
a material adverse impact on the Company's stock price.
DEPENDENCE ON REIMBURSEMENT BV THIRD PARTY PAYORS. For the quarter ended
March 31, 1997, approximately 77% of patient billings were covered by medical
insurance plans subject to applicable deductibles and other co-pay provisions
paid by the patient. Approximately 33% of patient billings were covered by
Medicare and 44% were covered by numerous other commercial insurance plans that
offer coverage for impotence treatment services. The health care industry is
undergoing cost containment pressures as both government and non-government
third party payors seek to impose lower reimbursement and utilization rates and
to negotiate reduced payment schedules with providers. This trend may result in
a reduction from historical levels of per-patient revenue for such health care
providers. Further reductions in third party payments to physicians or other
changes in reimbursement for health care services could have a direct or
indirect material adverse effect on the Company's financial condition and
results of operations. In addition, as managed Medicare arrangements continue
to become more prevalent, there can be no assurance that the Centers will
qualify as a provider for relevant arrangements, or that participation in such
arrangements would be profitable. Any loss of business due to the increased
penetration of managed Medicare arrangements could have a material adverse
effect on the Company's financial condition and results of operations.
The Company's net income is affected by changes in sources of the
Centers' revenues. Rates paid by commercial insurers, including those which
provide Medicare supplemental insurance, are generally based on established
provider charges, and are generally higher than Medicare reimbursement rates. A
change in the payor mix of the Company's patients resulting in a decrease in
patients covered by commercial insurance could adversely affect the Company's
financial condition and results of operations.
HEALTH CARE INDUSTRY AND REGULATION. The health care industry is highly
regulated at both the state and federal levels. The Company and the Centers are
subject to a number of laws governing issues as diverse as relationships between
health care providers and their referral sources, prohibitions against a
provider referring patients to an entity with which the provider has a financial
relationship, licensure and other regulatory approvals, professional advertising
restrictions, corporate practice of medicine, Medicare billing regulations,
dispensing of pharmaceuticals and regulation of unprofessional conduct of
providers, including fee-splitting arrangements. Many facets of the contractual
and operational structure of the Company's relationships with each of the
Centers have not been the subject of judicial or regulatory interpretation. An
adverse review or determination by any one of such authorities, or changes in
the regulatory requirements, or otherwise, could have a material adverse effect
on the operations, financial condition and results of operations of the Company.
In addition, expansion of the operations of the Company into certain
jurisdictions may require modifications to the Company's relationships with the
Centers located there. These modifications could include changes in such states
in the way in which the Company's services and lease fees are determined and the
way in which the ownership and control of the Centers are structured. Such
modifications may have a material adverse effect on the Company's financial
condition and results of operations.
In recent years, numerous legislative proposals have been introduced or
proposed in the United States Congress and in some state legislatures that would
effect major changes in the United States health care system at both the
national and state level. It is not clear at this time which proposals, if any,
will be adopted or, if adopted, what effect such proposals would have on the
Company's business. There can be no assurance that currently proposed or future
health care legislation or other changes in the administration or interpretation
of governmental health care programs will not have a material adverse effect on
the Company's financial condition and results of operations.
Furthermore, there can be no assurance that the method of payment for
the products and services furnished by the Centers will not be radically altered
in the future by changes in the health care industry. Changes in the system of
reimbursement, including Medicare, for the products and services provided by the
Centers that increase the difficulty of obtaining payment for medical services
could have a material adverse effect on the Company's financial condition and
results of operations, as the Company's income stream depends upon revenues of
the Centers. If revenues of the Centers are diminished, either in quantity or in
continuity, the Company will be adversely affected.
CORPORATE PRACTICE OF MEDICINE. Most states limit the practice of
medicine to licensed individuals or professional organizations comprised of
licensed individuals. Many states also limit the scope of business relationships
between business entities such as the Company and licensed professionals and
professional corporations, particularly with respect to fee-splitting between a
physician and another person or entity and non-physicians exercising control
over physicians engaged in the practice of medicine. Most of the Centers are
organized as professional corporations, entities authorized to employ
physicians, so as to comply with state statutes and state common law prohibiting
the corporate practice of medicine. Because the laws governing the corporate
practice of medicine vary from state to state and the application of those laws
is often ambiguous, any expansion of the operations of the Company to a state
with strict corporate practice of medicine laws, or the application of these
laws in states with existing Centers, may require the Company to modify its
operations with respect to one or more Centers, which could result in increased
financial risk to the Company. Further, there can be no assurance that the
Company's arrangements will not be successfully challenged as constituting the
unauthorized practice of medicine or that certain provisions of its services
agreements with the Centers (the "Services Agreements"), options to designate
ownership of the professional corporations, employment agreements with
physicians or covenants not to compete will be enforceable. Alleged violations
of the corporate practice of medicine doctrine have also been used successfully
by physicians to declare a contract to be void as against public policy. There
can be no assurance that a state or professional regulatory agency would not
attempt to revoke or suspend a physician's license or the corporate charter or
license of a professional corporation owning a Center or the corporate charter
of the Company or one of its subsidiaries.
DEPENDENCE ON RIGISCANS; POTENTIAL IMPACT OF INNOVATIONS. Rigiscan
patient monitoring devices accounted for approximately 25% of the Centers'
revenues for the quarter ended March 31, 1997. As a consequence, any material
adverse development with respect to the Rigiscan devices, limitation in the
availability of such devices or material increase in the costs of such devices
could have a material adverse effect on the financial condition and results of
operations of the Company. In addition, innovations in diagnostic tools and
therapies for male sexual dysfunction or changes in reimbursement practices by
third party payors for such diagnostic tools and therapies could have a material
adverse effect on the financial condition and results of operations of the
Company.
COMPETITION. Competition in the diagnosis and treatment of impotence
stems from a wide variety of sources. The Centers face competition from
urologists, general practitioners, internists and other primary care physicians
who treat impotent patients, as well as hospitals, physician practice management
companies ("PPMs"), HMOs and non-physician providers of services related to
sexual dysfunction. If federal or state governments enact laws that attract
other health care providers to the male sexual dysfunction market, the Company
may encounter increased competition from other parties which seek to increase
their presence in the managed care market and which have substantially greater
resources than the Company. Any of these providers, many of which have far
greater resources than the Company, could adversely affect the Centers or
preclude the Company from entering those markets that can sustain only limited
competition. There can be no assurance that the Centers will be able to compete
effectively with their competitors, or that additional competitors will not
enter the market.
There are also many companies that provide management services to
medical practices, and the management industry continues to evolve in response
to pressures to find the most cost-effective method of providing quality health
care. There can be no assurance that the Company will be able to compete
effectively with its competitors, that additional competitors will not enter the
market, or that such competition will not make it more difficult to acquire the
assets of, and provide management services for, medical practices on terms
beneficial to the Company.
DEVELOPING MARKET; UNCERTAIN ACCEPTANCE OF THE COMPANY'S SERVICES. Over
90% of new patient visits result from the Company's direct-to-patient
advertising. The market for the Company's services has only recently begun to
develop, and there can be no assurance that the public will accept the Company's
services on a widespread basis. The Company's future operating results are
highly dependent upon its ability to continually attract new patients. There can
be no assurance that demand for the Company's services will continue in existing
markets, or that it will develop in new markets. The Company makes significant
expenditures for advertising, and there can be no assurance that such
advertising will be effective in increasing market acceptance of, or generating
demand for, the Company's services. Failure to achieve widespread market
acceptance of the Company's services or to continually attract new patients
could have a material adverse effect on the Company's financial condition and
results of operations.
PART II
OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
Not Applicable
ITEM 2: CHANGES IN SECURITIES
Not Applicable
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
Not Applicable
ITEM 5: OTHER INFORMATION
Not Applicable
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS REQUIRED TO BE FILED BY ITEM 601 OF REGULATION S-B
10(s) Agreement dated March 1, 1997 by and between the Company
and TheraCom Inc.
10(t) Services Agreement dated January 6, 1997 by and between
the Company and Strategem, Inc.
10(u) Registration Rights Agreement dated January 6, 1997 by and
between the Company and Strategem, Inc.
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
INTEGRATED MEDICAL RESOURCES, INC.
Date: May 15, 1997 By: /s/ Beverly O. Elving
-------------------------
Beverly O. Elving
Chief Financial Officer and Vice
President, Finance and Administration
(Authorized Officer and Principal
Financial and Accounting Officer)
EXHIBIT 10 (s)
PHARMACEUTICAL SERVICES AGREEMENT
PHARMACEUTICAL SERVICES AGREEMENT executed March 1, 1997, between THERACOM,
INC., an Ohio corporation with its principal office located at 6931 Arlington
Road, Suite 501, Bethesda, Maryland 20814 ("TheraCom"), and INTEGRATED MEDICAL
RESOURCES, INC., a Kansas corporation with its principal office located at 11320
West 79th Street, Lenexa, Kansas 66214 (the "Company").
W I T N E S S E T H:
WHEREAS, TheraCom is engaged in the business of furnishing mail-order
pharmacy dispensing, delivery and reimbursement services in connection with
specific patient populations; and
WHEREAS, the Company is in the business of managing Diagnostic Centers
for Men (the "Clinics"); and
WHEREAS, the Company and the Clinics desire to obtain the services of
TheraCom to provide certain services pursuant to the terms of this Agreement,
and TheraCom is willing to provide such services on the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the parties hereto agree as follows:
1. RESPONSIBILITIES OF THERACOM. TheraCom will provide the Services to
the Clinics and to patients of the Clinics ("Patients"). For all purposes of
this Agreement, "Services" shall mean the warehousing, mail-order pharmacy
distribution, dispensing and reimbursement services specified on Schedule 1
hereto, which Schedule is incorporated herein and forms a part hereof; it being
understood that TheraCom shall not be required to render any services which in
any way could be construed as practicing medicine under any applicable law.
Other than as expressly set forth herein, TheraCom shall have no obligations or
responsibilities to the Company to or in respect of the Clients.
2. RESPONSIBILITIES OF THE COMPANY AND THE CLINICS.
(a). The Clinics will provide all medical and related services to
the Patients, other than the Services. TheraCom will not provide any medical or
nursing services to the Patients. The Clinics will maintain the relationship of
health care provider and patient with the Patients, and will be solely
professionally responsible for all medical advice to and treatment of the
Patients.
(b). The Company and the Clinics hereby engage TheraCom solely in
respect of the provision of the Services as defined herein and for no other
purpose, express or implied. All aspects of the medical care of the Patients,
other than the Services, shall be within the sole and complete control of the
Clinics and TheraCom shall have no responsibility therefor or in respect
thereof. The Company and the Clinics agree that TheraCom will be their sole
provider of the warehousing, pharmacy distribution, dispensing and reimbursement
services comprising the Services.
(c). The Company agrees to provide TheraCom with such information
regarding the Clinics or the Patients, access to the personnel and agents of the
Company and the Clinics, and other materials, documentation and assistance as
TheraCom shall reasonably require in order to enable it to provide the Services
in a timely and efficient manner.
3. COMPENSATION TO THERACOM. As full compensation for the provision of
the Services hereunder, TheraCom shall be entitled to receive from the Company
such compensation, at such times, as is specified on Schedule 2 hereto, which
Schedule is incorporated herein and forms a part hereof. Any reimbursable
expenses in excess of $500.00 in the aggregate in any month must be preapproved
by the Company. Any amounts due and payable to TheraCom hereunder (other than
shipping costs) shall be paid in full within fifteen (15) days after receipt by
the Company of the invoice therefor. Shipping costs shall be paid to TheraCom
within fifteen (15) days after receipt by the Company of the invoice therefor.
Any overdue payments shall bear interest until paid in full at the rate of
eighteen percent (18%) per annum; provided, however, that such late charge shall
be assessed only if the Company does not cure a late payment within ten (10)
days after receipt by the Company of written notice of late payment.
4. TERM OF AGREEMENT.
(a). The initial term of this Agreement is for one (1) year and
thereafter shall automatically renew for additional one (1) year periods;
provided, however, either party may terminate this Agreement at any time by
giving the other party at least ninety (90) days' prior written notice of
termination.
(b). If either party (the "Defaulting Party") is in breach of any
of its obligations hereunder to the other party hereto (the "Non-Defaulting
Party"), the Non-Defaulting Party shall give written notice of such breach to
the Defaulting Party. If the Defaulting Party shall not have remedied such
breach within ten (10) business days of its receipt of such notice from the
Non-Defaulting Party, the Non-Defaulting Party may, at its sole option,
terminate this Agreement without further notice.
(c). Upon a termination of this Agreement pursuant to subsections
(a) or (b), above, neither party hereto shall have any further obligations
hereunder to the other party, other than in respect of the obligations created
by Sections 3 and 6 hereof, which obligations shall survive any such
termination; provided, however, that (1) TheraCom shall immediately upon the
request of the Company deliver all items of the Company's inventory in
TheraCom's possession at the time of termination to such location as the Company
may direct, (2) TheraCom shall complete all Patient orders in process and
continue to collect and remit to the Company all Patient accounts receivable
existing at or after the time of termination, and (3) TheraCom will maintain on
the Pharmacy premises all prescriptions and refill records for a period of not
less than five years from the date filled and will recognize the patient
confidentiality of such records and release information as requested and
permitted by law.
5. RELATIONSHIP OF THE COMPANY AND THERACOM. The Company has contracted
with TheraCom only for the purposes and to the extent set forth in this
Agreement, and the Company's relationship to TheraCom during the term of this
Agreement shall be that of independent contracting parties and not that of
principal and agent, partners or co-venturers.
6. INSURANCE AND INDEMNIFICATION.
(a). Each of TheraCom and the Company at all times shall, at its
respective sole cost and expense, maintain one or more policies of liability
insurance and errors and omissions insurance in such amounts as are reasonably
appropriate to the business operations then conducted by it. Each of TheraCom
and the Company shall furnish the other with a Certificate of Insurance
evidencing such policies upon request of the other.
(b). The Clinics shall indemnify TheraCom, its shareholders,
officers, directors, employees and agents and hold them harmless and defend them
from any and all claims, liabilities (whether contingent or otherwise,
liquidated or unliquidated), losses, costs and expenses (including reasonable
attorneys' fees) (collectively, "Claims"), which may arise out of or relate to
any services performed by or on behalf of the Clinics for the Patients;
provided, however, that the foregoing provisions shall not apply to any Claims
arising out of TheraCom's failure to perform or negligent performance of the
Services or failure to comply with any applicable law or regulation.
(c). The Company shall indemnify TheraCom, its shareholders,
officers, directors, employees, and agents, and hold them harmless and defend
them from any and all Claims which may arise out of or relate to actions by the
Company that may be in contravention of any law or regulation proscribing
referrals for medical services.
(d). TheraCom shall indemnify the Company and the Clinics, their
shareholders, officers, directors, employees and agents and hold them harmless
and defend them from any and all Claims which may arise out of or relate to
TheraCom's failure to perform or negligent performance of any Services or
TheraCom's failure to comply with any applicable law or regulation. TheraCom
shall have no liability to the Company other than for its failure to perform or
negligent performance of the Services or TheraCom's failure to comply with any
applicable law or regulation.
7. MISCELLANEOUS. This Agreement shall be construed in accordance with
and governed by the laws of the State of Kansas. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Neither party shall assign its duties or rights
hereunder without the prior written consent of the other. This Agreement,
together with the Schedules hereto, constitutes the entire agreement of the
parties and supersedes any prior written or oral agreement or understanding in
respect of the subject matter hereof. This Agreement is entered into by and for
the benefit of the parties hereto and is not intended, and shall not be deemed
to create, any rights or benefits in or for any person or entity and party
hereto. Neither party shall be liable for any delays in or suspension of the
performance of its obligations hereunder arising out of causes incident to or
resulting from any emergency conditions or other causes beyond its reasonable
control, including (without limitation) transportation delays or interruptions,
labor disputes or other work stoppages, or acts of God. No modification or
amendment of this Agreement shall be effective unless signed by both of the
parties hereto. If any one or more of the provisions contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of all remaining provisions shall not in any way be
affected or impaired. The captions contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
8. COUNTERPARTS. This Agreement may be executed in any number of
counterparts each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and TheraCom have caused this
Agreement to be executed as of the day and year first above written.
THERACOM, INC.
By: /s/ Mark D. Hansan
----------------------
Its: President
INTEGRATED MEDICAL RESOURCES, INC.
By: /s/ T. Scott Jenkins
------------------------
Its: President
EXHIBIT 10 (t)
SERVICES AGREEMENT
THIS AGREEMENT is dated as of January 6, 1997, by and between Integrated
Medical Resources, Inc., a Kansas corporation ("IMR"), and Strategem, Inc., a
Kansas corporation ("Strategem").
RECITALS
A. IMR is engaged in the business of providing administrative,
management, and other services to a network of medical clinics (the "DCMs")
specializing in the rendering of medical services in the area of male sexual
health.
B. Strategem is engaged in the business of providing marketing,
educational, and consulting services.
C. IMR desires to engage Strategem to educate physicians about the
services available at the DCMs, and Strategem desires to accept such engagement,
in accordance with the terms and conditions set forth in this Agreement.
AGREEMENT
In consideration of the premises hereof, the promises herein, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, IMR and Strategem hereby agree as follows:
1. Nature and Scope of Services.
1.1 The Services. Strategem agrees to establish, maintain, and
direct a team of representatives experienced in the promotion of medical
services (the "Field Representatives") to promote the services available at the
DCMs. Specifically, Strategem agrees that the Field Representatives will make a
Total Office Call (as defined in Section 1.4 below) to a minimum of 100
physicians on the Target Call List (as defined in Section 1.3 below) per month
in each Market (as defined in Section 1.2 below) (the "Services").
1.2 Markets. The "Markets" shall consist of (a) during Phase 1
(as defined in Subsection 4.1(a) below), the geographic markets set forth in
Exhibit A attached hereto and (b) during Phase 2 (as defined in Subsection
4.1(b) below) and Phase 3 (as defined in Subsection 4.1(c), all geographic
markets in which a DCM may exist, as IMR shall notify Strategem from time to
time.
1.3 The Target Call List. Strategem shall prepare a list of
physicians within the Markets whose patient base is expected to include persons
who may be interested in the services available at the DCMs, as determined by
IMR (the "Target Call List"). The Target Call List may be changed, modified, or
updated by Strategem from time to time.
1.4 Total Office Calls. A "Total Office Call" means a
face-to-face meeting with a physician listed in the Target Call List during
which a Field Representative will deliver an informational message,
predetermined by IMR and Strategem, designed to promote awareness of the
services available at the DCMs. In addition, at each Total Office Call, the
Field Representative shall leave with the physician a toll-free number(s)
disclosed by IMR only to Strategem (the "Strategem Number") which may be called
to (a) seek additional information about the DCMs and the nature of services
provided there or (b) schedule an appointment for consultation or treatment at a
DCM.
1.5 Reporting. Strategem agrees that each Field Representative
shall keep and maintain an accurate and complete record of each of his or her
Total Office Calls. Such records shall be in form reasonably satisfactory to
IMR, which shall have the right to inspect such records from time to time upon
request. Strategem further agrees to prepare and deliver to IMR, within 30 days
following the last day of each calendar month during the term hereof, a report,
in form reasonably satisfactory to IMR, summarizing the activities of Strategem
and the Field Representatives performed in connection with this Agreement
(including, without limitation, the aggregate number of Total Office Calls made
in each Market) during such month (the "Summary Report").
2. Fees and Expenses.
2.1 Incident Fee; Payment. In consideration of the Services to be
provided by Strategem hereunder, IMR shall pay to Strategem a fee equal to (a)
during Phase 1, $375.00 per Incident (as defined in Section 2.2 below) and (b)
during Phase 2 and Phase 3, $250.00 per Incident (the "Incident Fee").
The Incident Fee shall be calculated as of the last business day of each
calendar month and payable to Strategem as soon as practicable (but in no
event later than 20 days) thereafter.
2.2 Identification of Incidents. IMR shall maintain a system
whereby IMR can identify those patients (a) who schedule (or have scheduled for
them) an appointment with a DCM by using the Strategem Number and/or (b) for
whom a physician office schedules an appointment by calling the local DCM
directly, and, in each case, the "Incidents" shall consist of such patients who
actually attend such appointments (provided, however, for the avoidance of
doubt, that each patient can consist of only one Incident, even if such patient
attends more than one appointment at a DCM). IMR shall keep and maintain
records, in form reasonably satisfactory to Strategem, detailing the use of the
Strategem Number and itemizing the number of Incidents in each Market, and such
records shall be made available for Strategem's review upon request.
2.3 Training and Printing Expenses. IMR will from time to time
upon reasonable notice to Strategem conduct training meetings to educate the
Field Representatives as to the DCMs and the services provided there. IMR shall
reimburse Strategem in full for all reasonable costs and expenses as are
approved in advance in writing by IMR and incurred by Strategem and the Field
Representatives in connection with such meetings upon Strategem's provision of
reasonably satisfactory evidence thereof. In addition, IMR may from time to time
provide the Field Representatives with such marketing and informational
literature in respect of the DCMs and the marketing thereof as IMR may in its
discretion deem necessary or advisable, which such literature may be intended
either for the use and study of the Field Representatives or for distribution to
physicians in connection with Total Office Calls. IMR shall pay directly all
design, research, printing, delivery, and other costs and expenses relating to
the development of such literature.
2.4 Per Call Expenses. Strategem shall be responsible for all
costs and expenses (including, without limitation, travel and meal expenses)
incurred by the Field Representatives or Strategem in connection with the making
of Total Office Calls.
2.5 Advances. On the first day of each calendar month of Phase 2
and Phase 3, IMR shall pay Strategem an amount equal to $40.00 times the product
of 100 and the number of Markets in which the Field Representatives operate
hereunder on such date (the "Advance"). Each Advance shall be credited against
the corresponding monthly Incident Fee payable by IMR (with any excess Advance
carried over as credit against succeeding monthly Incident Fees), and Strategem
agrees to reimburse IMR for any excess of the Advances over the Incident Fee
payable as of the expiration or termination of this Agreement.
3. Stock Options.
3.1 Phase 1 Stock Option. On the date hereof, Strategem shall
receive from IMR an option (the "Phase 1 Option") to purchase 50,000 shares of
IMR common stock ("Stock"); provided, however, that the Phase 1 option shall
vest upon the earlier to occur of (a) the date on which the Field
Representatives have generated an aggregate of 1,000 Incidents or (b) June 14,
1997, or, if later, the date on which Strategem has provided IMR with reasonable
evidence that the Field Representatives have made an aggregate of 8,000 Total
Office Calls. The Phase 1 Option shall (c) be evidenced by (and subject to the
terms and conditions of) an option agreement in substantially the form attached
hereto as Exhibit B (the "Phase 1 Option Agreement") and (d) have a per share
exercise price equal to $3.875.
3.2 Phase 2 Stock Option. On the commencement date of Phase 2,
Strategem shall receive from IMR an option to purchase 85,000 shares of Stock
(the "Phase 2 Option"); provided, however, that the Phase 2 Option shall vest as
follows: Strategem may exercise its option to purchase (a) 15,000 shares of
Stock on such date as the Field Representatives have generated, during Phase 2,
an aggregate of 14,400 Incidents, (b) 30,000 shares of Stock on such date as the
Field Representatives have generated, during Phase 2, an aggregate of 28,800
Incidents, and (c) 40,000 shares of Stock on such date as the Field
Representatives have generated, during Phase 2, an aggregate of 36,000
Incidents. The Phase 2 Option shall (d) be evidenced by (and subject to the
terms and conditions of) an option agreement in substantially the form attached
hereto as Exhibit C (the "Phase 2 Option Agreement") and (e) have a per share
exercise price equal to the market price of one share of Stock as of the close
of business on the last business day prior to the date of the Phase 2 Option
Agreement.
3.3 Phase 3 Stock Option. On the date on which the Field
Representatives generate, during Phase 2, an aggregate of 14,400 Incidents
(the "Phase 3 Option Date"), Strategem shall receive from IMR an option to
purchase 96,250 shares of Stock (the "Phase 3 Option"); provided, however,
that the Phase 3 Option shall vest as follows: Strategem may exercise its
option to purchase (a) 17,500 shares of Stock on such date as the Field
Representatives have generated, during Phase 3, such number of Incidents as
equals 480 multiplied by the number of Markets as of the commencement date of
Phase 3, (b) 35,000 shares of Stock on such date as the Field Representatives
have generated, during Phase 3, such number of Incidents as equals 960
multiplied by the number of Markets as of the commencement date of Phase 3, and
(c) 43,750 shares of Stock on such date as the Field Representatives have
generated, during Phase 3, such number of Incidents as equals 1,200
multiplied by the number of Markets as of the commencement date of Phase 3.
The Phase 3 Option shall (d) be evidenced by (and subject to the terms and
conditions of) an option agreement in substantially the form attached hereto
as Exhibit D (the "Phase 3 Option Agreement") and (e) have a per share exercise
price equal to the market price of one share of Stock as of the close of
business on the last business day prior to the Phase 3 Option Date.
3.4 Registration Rights. IMR shall grant Strategem "piggy-back"
registration rights in respect of any shares of Stock issued by IMR upon the
exercise of the Phase 1 Option, the Phase 2 Option, or the Phase 3 Option in
accordance with the terms and conditions of a registration rights agreement in
substantially the form attached hereto as Exhibit E and to be signed by IMR and
Strategem on the date hereof.
4. Term and Termination.
4.1 Term.
(a) "Phase 1" of this Agreement shall commence on the date
hereof and shall continue in effect until the earlier to occur of (i)
June 13, 1997, or (ii) the date on which the Field Representatives have
generated an aggregate of 800 Incidents.
(b) Subject to Section 4.2 below, "Phase 2" of this
Agreement shall commence on the earlier to occur of (i) June 14, 1997,
or (ii) the date on which the Field Representatives have generated an
aggregate of 800 Incidents and shall continue in effect for the
approximately one-year period ending on June 13, 1998.
(c) Subject to Section 4.2 below, "Phase 3" of this
Agreement shall commence on the earlier to occur of (i) June 14, 1998,
or (ii) the date on which the Field Representatives have generated,
during Phase 2, an aggregate of 79,200 Incidents and shall continue in
effect for a period of 12 months from such commencement date.
4.2 Termination. This Agreement may be terminated as follows:
(a) Upon the mutual consent of the parties hereto;
(b) By IMR, upon 30-days' notice to Strategem, if the
Field Representatives fail to generate an aggregate of 800 Incidents
during Phase 1;
(c) By IMR, upon 30-days' notice to Strategem, if the
Field Representatives fail to generate an aggregate of 14,400 Incidents
during Phase 2;
(d) By either party if the other party breaches (and, for
the avoidance of doubt, for purposes of this provision, a breach by a
Field Representative shall constitute a breach by Strategem) a material
provision of this Agreement and such breach is not cured to the
reasonable satisfaction of the non-breaching party within 30 days of
receipt of written notice specifying such breach (provided, however,
that a breach by a Field Representative hereunder shall be deemed cured
if the Field Representative is terminated by Strategem within 30 days of
written notice specifying such breach); and
(e) By either party if bankruptcy or insolvency
proceedings are initiated by or against the other party and, if
initiated against the other party, are not dismissed within 30 days such
initiation.
4.3 Effects of Certain Terminations. Upon any termination of this
Agreement by IMR under Subsection 4.2(b), 4.2(c), or 4.2(d) above, all
obligations of the terminating party hereunder shall cease and all stock
options, other than the Phase 1 Option, granted to Strategem hereunder shall
lapse and become void.
5. Strategem's Representations, Warranties, and Covenants. Strategem hereby
represents, warrants, and covenants, in each case as of the date hereof and
throughout the term of this Agreement, as follows:
5.1 Due Organization.
Strategem is (a) a duly organized and validly existing Kansas corporation and
(b) qualified to do business in each state in which its activities and
operations so require.
5.2 Legal Authority. Strategem has full legal right, power, and
authority to enter into and perform its obligations under this Agreement and
neither Strategem's execution and delivery of this Agreement nor Strategem's
compliance with this Agreement's provisions will conflict with or result in a
breach of (or constitute a default under) any law, rule, regulation, judgment,
decree, order or agreement applicable to or binding on Strategem.
5.3 No Misleading Statements. In providing the Services, neither
Strategem nor the Field Representatives will make any statement or
representation which is (a) false or misleading or omits to state a material
fact concerning IMR, the DCMs, or the services available at the DCMs or (b)
inconsistent with any marketing, informational, or other literature provided by
IMR to Strategem or the Field Representatives hereunder.
5.4 No Compensation of Physicians. Neither Strategem nor the
Field Representatives will offer to pay or pay any remuneration directly or
indirectly, overtly or covertly, in cash or in kind to any physician to induce
such physician to refer a patient to any DCM.
5.5 No Alteration of Literature. Neither Strategem nor the Field
Representatives shall alter any written training, marketing, informational, or
other literature provided to Strategem or the Field Representatives by IMR
hereunder without the prior written consent of IMR; provided, however, that,
notwithstanding the foregoing, the Field Representatives may affix to such
literature stickers or other items provided by IMR to Strategem for the purpose
of identifying the Incidents.
5.6 Status of Field Representatives. The Field Representatives
are employees of Strategem and Strategem acknowledges that all obligations of
the Field Representatives hereunder shall be obligations for which Strategem is
responsible in full.
6. IMR's Representations, Warranties, and Covenants. IMR hereby represents,
warrants, and covenants, in each case as of the date hereof and throughout the
term of this Agreement, as follows:
6.1 Due Organization. IMR is (a) a duly organized and validly
existing Kansas corporation and (b) qualified to do business in each state in
which its activities and operations so require.
6.2 Legal Authority. IMR has full legal right, power, and
authority to enter into and perform its obligations under this Agreement and
neither IMR's execution and delivery of this Agreement nor IMR's compliance with
this Agreement's provisions will conflict with or result in a breach of (or
constitute a default under) any law, rule, regulation, judgment, decree, order
or agreement applicable to or binding on IMR.
6.3 Accuracy of Written Materials. To the best of IMR's
knowledge, all information contained in the training, marketing, information,
and other literature provided by IMR to Strategem and the Field Representatives
hereunder is true, accurate, and complete.
7. Independent Contractor. Strategem shall have responsibility for, and
control over, the means and details of performing the Services. Accordingly,
Strategem and the Field Representatives shall, for all purposes, be considered
to be an independent contractor of IMR and shall have no authority to act for,
bind, or represent IMR in any way as a partner, employee, representative, agent,
or otherwise. As the employer of the Field Representatives, Strategem is solely
and fully responsible for all compensation, benefits, and employment-related
taxes for the Field Representatives.
8. Exclusivity. During the term of this Agreement, Strategem agrees that
neither it nor any Field Representative shall, directly or indirectly, provide
(or engage independent contractors to provide) or administer services for
individuals or entities (other than IMR and DCMs) in the business of the
diagnosis and treatment of male sexual dysfunction.
9. Confidentiality. Strategem acknowledges that all written and oral
information relating to the DCMs (including, without limitation, information
relating to the medical therapies and procedures available at the DCMs) (the
"Confidential Information") constitutes confidential information of IMR.
Accordingly, Strategem agrees during the term of this Agreement and for a period
of 10 years thereafter, to (a) treat all of the Confidential Information as
confidential, (b) not disclose the Confidential Information to any third party
except in connection with the performance of its duties under this Agreement,
(c) not use the Confidential Information except in connection with the
performance of its duties under this Agreement, (d) return to IMR all
Confidential Information in its possession immediately upon IMR's request or the
termination of this Agreement for any reason, (e) inform the Field
Representatives and other Strategem directors, officer, employees, and
representatives of the restrictions on disclosure and use of the Confidential
Information and require such persons to abide by the restrictions set forth in
this Section 9. IMR acknowledges and agrees that the Confidential Information
shall not include any information in the public domain or which has become
available to Strategem from a source other than IMR or a DCM (provided that such
source is not bound by a confidentiality agreement with or other obligation of
secrecy to IMR or any DCM). If requested by IMR, Strategem will cause any Field
Representative to acknowledge in writing his or her agreement with and
acceptance of the restrictions of this Section 9.
10. Indemnification.
10.1 By IMR. IMR agrees to defend, indemnify, and hold harmless
Strategem, its directors, officers, employees, agents, representatives,
successors, and assigns from, against, and in respect of any and all loss,
damage, liability, cause of action, or expense (including attorneys' fees)
suffered or incurred by Strategem and arising from (a) the breach of any
obligation, warranty, or covenant of IMR hereunder, (b) the failure of any of
IMR's representations herein to have been true when made or during the term of
this Agreement, or (c) the rendering of services at any DCM.
10.2 By Strategem. Strategem agrees to defend, indemnify, and
hold harmless IMR, its directors, officers, employees, agents, representatives,
successors, and assigns from, against, and in respect of any and all loss,
damage, liability, cause of action, or expense (including attorneys' fees)
suffered or incurred by IMR and arising from (a) the breach of any obligation,
warranty, or covenant of Strategem hereunder (including any actions of the Field
Representatives), (b) the failure of any of Strategem's representations herein
to have been true when made or during the term of this Agreement, or (c) the
manner and method of providing the Services.
11. Miscellaneous.
11.1 Assignment. This Agreement shall not be assigned by either
party without the prior written consent of the other party, and any attempted
assignment without such consent shall be null and void and without legal effect;
provided, however, that IMR may assign this Agreement without such consent to
any entity that controls, is controlled by, or is under common control with IMR
or that succeeds to the ownership or control of IMR's assets or business.
11.2 Successors. This Agreement shall be binding upon and shall
inure to the benefit of both of the parties hereto and to their respective
successors and permitted assigns.
11.3 Waiver. The observance of any provision of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively) if the waiver is in writing, signed by the party
making the waiver. No delay or omission by either party in exercising any of its
rights hereunder shall operate as a waiver of that or any other right. Unless
otherwise expressly stated, a waiver given by either party on any one occasion
shall be effective only in that instance and shall not be construed as a waiver
of that right on any other occasion.
11.4 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision hereof, and such invalid or unenforceable provision shall be
enforced in accordance with its terms to the greatest extent permitted by law.
11.5 Notices. All notices and other communications hereunder
shall be given in writing and deemed to be duly given if delivered by hand, sent
by certified or registered mail (return receipt requested, postage prepaid), or
sent by facsimile (with receipt confirmed), in each case to the address and
facsimile number as follows:
If to IMR, to:
Integrated Medical Resources, Inc.
Attention: T. Scott Jenkins
11320 W. 79th Street
Lenexa, Kansas 66214
Facsimile No.: (913) 962-7063
with a copy to:
Blackwell Sanders Matheny Weary & Lombardi L.C.
Attention: James M. Ash, Esq.
2300 Main Street, Suite 1100
Kansas City, Missouri 64108
Facsimile No.: (816) 274-6914
If to Strategem, to:
Strategem, Inc.
Attention: Ben A. Blackshire
8012 State Line Road
Leawood, Kansas 66208
Facsimile No.: (913) 385-7777
with a copy to:
Payne & Jones, Chartered
Attention: Thomas K. Jones, Esq.
11000 King
Overland Park, Kansas 66210
Facsimile No.: (913) 469-8182
or to such other address as either party may provide to the other in writing.
All such notices and other communications shall be effective on the date of
delivery, mailing, or facsimile transmission.
11.6 Entire Agreement. This Agreement embodies the entire
agreement between the parties hereto with respect to the transactions
contemplated herein and supersedes all prior agreements and understandings
relating to such subject matter. There have been and are no agreements,
representations, warranties, or covenants between the parties other than those
set forth or provided for herein.
11.7 Negotiated Transaction. The provisions of this
Agreement were negotiated by the parties hereto, and said Agreement shall be
deemed to have been drafted by all the parties hereto.
11.8 Headings. The headings used in this Agreement are for
convenience only and shall not constitute a part of this Agreement.
11.9 Exhibits. All of the exhibits attached hereto are
incorporated herein and made a part of this Agreement by reference thereto.
11.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute but one and the same instrument.
11.11 Amendment. This Agreement may be amended only pursuant
to a writing signed by both parties hereto.
11.12 Governing Law. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the state of Kansas,
without regard to the choice of law rules of such state.
IN WITNESS WHEREOF, the parties have duly signed this Agreement as of
the date first above written.
IMR:
INTEGRATED MEDICAL RESOURCES, INC.
/s/ T. Scott Jenkins
--------------------
T. Scott Jenkins
President
STRATEGEM:
STRATEGEM, INC.
/s/ Ben A. Blackshire
---------------------
Ben A. Blackshire
President
EXHIBIT 10(u)
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is dated as of January 6, 1997, by
and between Integrated Medical Resources, a Kansas corporation ("IMR"), and
Strategem, Inc., a Kansas corporation ("Strategem").
RECITALS
A. IMR and Strategem have entered into a Services Agreement, dated
January 6, 1997 (the "Services Agreement"), pursuant to which Strategem has
agreed to provide valuable services to IMR.
B. The Services Agreement provides, in addition to the payment of fees
by IMR to Strategem, that Strategem shall receive one or more options (the
"Options") to purchase shares of IMR's common stock ("Stock") in the event that
Strategem achieves certain performance targets specified in the Services
Agreement.
C. The Services Agreement provides that IMR shall grant Strategem
"piggy-back" registration rights in respect of any shares of Stock issued upon
the exercise of any Option in accordance with the terms and conditions of this
Agreement.
AGREEMENT
In consideration of the premises hereof, the promises herein, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, IMR and Strategem hereby agree as follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" means the Securities and Exchange Commission, or any other
Federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the
Commission issued under the Exchange Act, as they each may, from time to
time, be in effect.
The terms "register," "registered," and "registration" refer to a
registration of securities effected by preparing and filing a
Registration Statement in compliance with the Securities Act and the
declaration or ordering of the effectiveness of such Registration
Statement.
"Registrable Shares" means (i) shares of Stock now or hereafter issued
to Strategem upon the exercise of any Option and (ii) any corresponding
shares of Stock issued to Strategem pursuant to a stock split, stock
dividend, reclassification, recapitalization, or similar event;
provided, however, in each case, that shares of Stock shall only be
Registrable Shares if and so long as they have not been sold to or
through a broker, dealer, or underwriter in a public distribution or a
public securities transaction.
"Registration Expenses" means all expenses, other than Selling Expenses,
incurred by IMR in complying with this Agreement, including, without
limitation, all registration fees, qualification fees, filing fees,
printing expenses, escrow fees, exchange listing fees, fees of
accountants for IMR, fees and disbursements of counsel for IMR, state
blue sky fees and expenses, and all expenses of any special audits
incident to or required by any such registration.
"Registration Statement" means a registration statement filed by IMR
with the Commission for a public offering and sale of securities of IMR
(other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
issued under the Securities Act, as they each may, from time to time, be
in effect.
"Selling Expenses" means all underwriting discounts, selling
commissions, registration fees allocable to the Registrable Shares, and
stock transfer taxes applicable to the securities registered on behalf
of Strategem.
2. Incidental Registration
2.1 Notice, Request, and Registration. If at any time or from
time to time IMR shall determine to file a Registration Statement, it will
promptly give written notice to Strategem of its intention to do so and, upon
the written request of Strategem given within 10 days after IMR provides such
notice, IMR shall use its best efforts to cause all Registrable Shares which IMR
has been requested by Strategem to register to be registered under the
Securities Act to the extent necessary to permit their sale or other
disposition.
2.2 Underwriting. In connection with any offering under Section
2.1 above involving an underwriting, IMR shall not be required to include any
Registrable Shares in such underwriting unless Strategem accepts the terms of
the underwriting as agreed upon between IMR and the underwriters selected by it,
and then only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by IMR. If in the opinion of the managing
underwriter the registration of all, or part of, the Registrable Shares which
Strategem has requested to be included would materially and adversely affect
such public offering, then IMR shall be required to include in the underwriting
only that number of Registrable Shares, if any, which the managing underwriter
believes may be sold without causing such adverse effect; provided, however,
that, in any event, Strategem shall be entitled to participate in such
underwriting on not less than a pro rata basis with all other holders of Stock
having rights similar to those granted to Strategem pursuant to this Agreement.
2.3 Right to Terminate Registration. IMR shall have the right to
terminate or withdraw any registration initiated by it under this Section 2
prior to the effectiveness of such registration irrespective of whether
Strategem has requested to include Registrable Shares in such registration. The
Registration Expenses of such withdrawn registration shall be borne by IMR in
accordance with Section 4 below.
3. Registration Procedures. If and whenever IMR is required by the
provisions of this Agreement to use its best efforts to effect the registration
of any of the Registrable Shares under the Securities Act, IMR shall:
(a) File with the Commission a Registration Statement with
respect to such Registrable Shares and use reasonable efforts to cause
that Registration Statement to become and remain effective;
(b) As expeditiously as possible use its best efforts to
register or qualify the Registrable Shares covered by the Registration
Statement under the securities or blue sky laws of such states as the
underwriter shall reasonably request, and do any and all other acts and
things that may be necessary or desirable to enable the underwriter to
consummate the public sale or other disposition of the Registrable
Shares by the underwriter in such states; provided, however, that IMR
shall not be required in connection with this paragraph (b) to qualify
as a foreign corporation or execute a general consent to service of
process in any jurisdiction; and
(c) Use its best efforts to cause the Registrable Shares
to be listed on the principal securities exchange on which similar
securities of IMR are then listed, if the listing of such shares is then
permitted under the rules of such exchange.
4. Allocation of expenses. All Registration Expenses incurred in
connection with registrations pursuant to this Agreement shall be borne by IMR.
All Selling Expenses relating to securities registered on behalf of Strategem
hereunder shall be borne by Strategem.
5. Indemnification.
5.1 By IMR. In the event of any registration of any of the
Registrable Shares under the Securities Act pursuant to this Agreement, IMR will
indemnify and hold harmless, Strategem, each underwriter of such Registrable
Shares, and each other person, if any, who controls Strategem or such
underwriter within the meaning of the Securities Act or the Exchange Act against
any losses, claims, damages, or liabilities, joint or several, to which
Strategem or such underwriter or controlling person may become subject under the
Securities Act, the Exchange Act, state blue sky laws, or otherwise, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any Registration Statement under which such
Registrable Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained in the Registration Statement, or any
amendment or supplement to such Registration Statement, or arise out of or are
based upon the omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading;
and IMR will reimburse Strategem, such underwriter, and each such controlling
person for any legal or any other expenses reasonably incurred by Strategem or
such underwriter or controlling person in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that IMR will not be liable in any such case to the extent that any such loss,
claim, damage, or liability arises out of or is based upon any untrue statement
or omission made in such Registration Statement, preliminary prospectus or
prospectus, or any such amendment or supplement, in reliance upon and in
conformity with information furnished to IMR, in writing, by or on behalf of
Strategem or such underwriter or controlling person specifically for use in the
preparation thereof.
5.2 By Strategem. In the event of any registration of any of the
Registrable Shares under the Securities Act pursuant to this Agreement,
Strategem will indemnify and hold harmless IMR, each of its directors and
officers, each underwriter (if any), and each person (if any) who controls IMR
against any losses, claims, damages, or liabilities, joint or several, to which
IMR, such directors and officers, underwriter, or controlling person may become
subject under the Securities Act, the Exchange Act, state blue sky laws, or
otherwise, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement under which such Registrable Shares were registered under the
Securities Act, any preliminary prospectus or final prospectus contained in the
Registration Statement, or any amendment or supplement to the Registration
Statement, or arise out of or are based upon any omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, if the statement or omission was made in
reliance upon and in conformity with information furnished in writing to IMR by
or on behalf of Strategem specifically for use in connection with the
preparation of such Registration Statement, prospectus, amendment, or
supplement; provided, however, that the obligations of Strategem hereunder shall
be limited to an amount equal to the proceeds to Strategem of Registrable Shares
sold as contemplated herein.
5.3 Indemnification Procedures. The party entitled to
indemnification under this Section 5 (the "Indemnified Party") shall give notice
to the party required to provide indemnification (the "Indemnifying Party")
promptly after the Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim or any litigation resulting therefrom; provided,
however, that counsel for the Indemnifying Party, who shall conduct the defense
of such claim or litigation, shall be approved by the Indemnified Party (which
may not unreasonably withhold such approval); and, provided, further, that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 5 unless
the failure to give such notice is materially prejudicial to the Indemnifying
Party's ability to defend such claim or litigation. The Indemnified Party may
participate in such defense at such party's expense; provided, however, that the
Indemnifying Party shall pay such expense if representation of such Indemnified
Party by the counsel retained by the Indemnifying Party would be inappropriate
due to actual or potential differing interests between the Indemnified Party and
any other party represented by such counsel in such proceeding. No Indemnifying
Party, in the defense of any such claim or litigation shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect of such claim or litigation. No Indemnified Party shall
consent to entry of any judgment or settle such claim or litigation without the
prior written consent of the Indemnifying Party.
6. Information by Strategem. Strategem shall furnish to IMR such
information regarding Strategem, the Registrable Shares, and the distribution of
such Registrable Shares proposed by Strategem as IMR may request in writing and
as shall be required in connection with any registration, qualification, or
compliance referred to in this Agreement.
7. "Lock-Up" Agreement. Strategem, if requested by IMR and an
underwriter of Stock or other securities of IMR, shall agree not to sell, make
any short sale of, loan, grant any option for the purchase of, or otherwise
transfer or dispose of any Registrable Shares or other securities of IMR held by
Strategem for a specified period of time (not to exceed 180 days) following the
effective date of a Registration Statement. Such agreement shall be in writing
in a form satisfactory to IMR and such underwriter. IMR may impose stop transfer
instructions with respect to the Registrable Shares or other securities subject
to the foregoing restriction until the end of the lock-up period.
8. Transfer of Rights. The rights granted to Strategem under this
Agreement may not be assigned or transferred in any manner whatsoever
(including, without limitation, by operation of law) without the prior written
consent of IMR.
9. Termination of Rights. The rights granted to Strategem under this
Agreement in respect of Registrable Shares issued to Strategem upon the exercise
of any Option shall exist for a period of two years from the date of issuance of
such Registrable Shares. The rights granted to Strategem under this Agreement in
respect of Registrable Shares issued to Strategem pursuant to a stock split,
stock dividend, reclassification, recapitalization, or similar event shall exist
for a period of two years from the date(s) of issuance of the corresponding
Registrable Shares held prior to such event.
10. Miscellaneous.
10.1 Successors. This Agreement shall be binding upon and shall
inure to the benefit of both of the parties hereto and to their respective
successors and permitted assigns.
10.2 Waiver. The observance of any provision of this Agreement
may be waived (either generally or in a particular instance and either
retroactively or prospectively) if the waiver is in writing, signed by the party
making the waiver. No delay or omission by either party in exercising any of its
rights hereunder shall operate as a waiver of that or any other right. Unless
otherwise expressly stated, a waiver given by either party on any one occasion
shall be effective only in that instance and shall not be construed as a waiver
of that right on any other occasion.
10.3 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision hereof, and such invalid or unenforceable provision shall be
enforced in accordance with its terms to the greatest extent permitted by law.
10.4 Notices. All notices and other communications hereunder
shall be given in writing and deemed to be duly given if delivered by hand, sent
by certified or registered mail (return receipt requested, postage prepaid), or
sent by facsimile (with receipt confirmed), in each case to the address and
facsimile number as follows:
If to IMR, to:
Integrated Medical Resources, Inc.
Attention: T. Scott Jenkins
11320 W. 79th Street
Lenexa, Kansas 66214
Facsimile No.: (913) 962-7063
with a copy to:
Blackwell Sanders Matheny Weary & Lombardi L.C.
Attention: James M. Ash, Esq.
2300 Main Street, Suite 1100
Kansas City, Missouri 64108
Facsimile No.: (816) 274-6914
If to Strategem, to:
Strategem, Inc.
Attention: Mr. Ben A. Blackshire
8012 State Line Road
Leawood, Kansas 66208
Facsimile No.: (913) 385-7777
with a copy to:
Payne & Jones, Chartered
Attention: Thomas K. Jones, Esq.
11000 King
Overland Park, Kansas 66210
Facsimile No.: (913) 469-8182
or to such other address as either party may provide to the other in writing.
All such notices and other communications shall be effective on the date of
delivery, mailing, or facsimile transmission.
10.5 Entire Agreement. This Agreement embodies the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings relating to such subject
matter.
10.6 Negotiated Transaction. The provisions of this Agreement
were negotiated by the parties hereto, and said Agreement shall be deemed to
have been drafted by all the parties hereto.
10.7 Headings. The headings used in this Agreement are for
convenience only and shall not constitute a part of this Agreement.
10.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute but one and the same instrument.
10.9 Amendment. This Agreement may be amended only pursuant
to a writing signed by both parties hereto.
10.10 Governing Law. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the state of Kansas,
without regard to the choice of law rules of such state.
IN WITNESS WHEREOF, the parties have duly signed this Agreement as of
the date first above written.
IMR:
INTEGRATED MEDICAL RESOURCES, INC.
/s/ T. Scott Jenkins
--------------------
T. Scott Jenkins
President
STRATEGEM:
STRATEGEM, INC.
/s/ Ben A.Blackshire
--------------------
Ben A. Blackshire
President
EXHIBIT 11
INTEGRATED MEDICAL RESOURCE'S INC. AND CENTERS
NET LOSS per COMMON AND COMMON EQUIVALENT SHARE
For the three months ended March 31
1997 1996
--------------------------------------
Net Income (Loss) per Common and
Common Equivalent Share
Net Income (loss) $ (1,841,373) $ 20,713
======================================
Weighted average common shares
outstanding 6,715,017 2,906,000
Shares of common stock issuable upon
exercise of options issued with an
exercise price below the initial public
offering price (determined using the
"treasury stock method") 0 107,033
--------------------------------------
Weighted average common and common
equivalent shares outstanding 6,715,017 3,013,033
======================================
Net loss per common and
common equivalent share $ (0.27) $ (0.00)
======================================