10QSB 1 qsb0930.txt 10QSB FOR 3RD QUARTER OF 2001 UNITED STATES 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 September 30, 2001 ( ) 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: 333-57780 INTERCARE.COM-DX,INC. ---------------------- (Exact Name of Registrant as Specified in its Charter) CALIFORNIA 95-4304537 ------------------------------- ------------------------ (State of Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 900 WILSHIRE BOULEVARD, SUITE 500, LOS ANGELES, CALIFORNIA 90017 ---------------------------------------------------------------- (Address of Principal Executive Offices) (213) 627-8878 ---------------------------------------------------------------- (Registrant's telephone number, including area code) N/A ---------------------------------------------------------------- (Former name, former address and formal fiscal year, if changed since last report) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months and, (2) has been subject to such filing requirements for the past 90 days. Yes ( X ) No ( ) As of September 30, 2001, InterCare.com-dx, Inc., Registrant had 12,230,902 shares of its no par value common stock outstanding. There is currently no public market for this stock. Page 1 of 13 sequentially numbered pages Form 10-Q Third Quarter 2001 Intercare.com-dx, Inc. INDEX PAGE ---- PART I. FINANCIAL INFORMATION Balance Sheets - September 30, 2001 3 Statements of Operations for the Nine Months ended September 30, 2001 4 Statement of Cash Flows for the Nine Months ended September 30, 2001 5 Notes to Financial Statements 6-8 Company Overview 9 Management's Discussion and Analysis of Financial Condition and Results of Operations 10-12 PART II OTHER INFORMATION Additional Information 12 Signature 13 2 INTERCARE.COM-DX, INC. CONSOLIDATED BALANCE SHEET (UNAUDITED)
Balance Sheet As At Sept. 30, 2001 2000 ====== ====== ASSETS Current assets Cash $ 10,225 $ 1,148 Accounts Receivable - Net (Note 1 ) 1,385,850 180,000 Inventories 160,461 83,339 Prepaid Expenses (50) 11,770 --------- ------ Total Current Assets.. . . . . . . . . . . . . . . . 1,555,474 276,187 --------- ------ Property, Plant, and Equipment Net Accumulated Depreciation (Note 1). . . . . . 9,070 10,836 Other Assets Cash Advance 500 - Deferred Public Offering Costs 35,636 13,000 ---------- -------- Total Assets 1,601,692 300,023 ========== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts Payable (Note 1) . . . . . . . . . . . . . 1,499,351 293,173 Others 25,692 - --------- -------- Total Current Liabilities . . . . . . . 1,525,043 293,173 --------- -------- Long term liabilities . . . . . .. . . . . 16,500 0 --------- -------- Total Liabilities . . . . . . . . . . . 1,541,543 293,173 --------- -------- Liabilities and Stockholders' Equity Stockholders' Equity Common stock (100,000,000 shares authorized no par value ; 12,230,902 shares issued and Outstanding) (Note 2) . . . . . . . . . . . . 698,089 650,628 Retained Earnings (187,099) Accumulated Deficit (450,841) (643,778) ---------- ---------- Total Stockholders' Equity . . . . . . . 60,149 6,850 ---------- --------- Total Liabilities & Equity. . . . . . . . . . . . $ 1,601,692 $300,023 ========== =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 3 INTERCARE.COM-DX, INC. Consolidated Statement - Unaudited STATEMENT OF OPERATIONS
For the: 3 Mos. Ended Sept. 30, 9 Mos. Ended Sept. 30, 2001 2000 2001 2000 ====== ===== ====== ===== Revenues . . . . . . . . $ 0 $ 180,000 $ 334,199 $ 180,000 Less: Cost of Revenues . 0 0 (126,897) 0 --------- ------- --------- ------- Gross Margin . 0 180,000 207,302 180,000 Operating Expense. . . . 197,600 130,971 659,906 268,736 Other Income and Expense 160 (1,506) 1,762 570 ---------- -------- ---------- ------- Net Income . . $ (197,440) $ 50,535 $ (450,841) $(89,306) ========= ======== ========== ======== Weighted average number of shares 12,230,902 11,000,000 12,230,902 11,000,000 $ (0.002) $ 0.004 $ (0.003) $ (0.008)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 4 INTERCARE.COM-DX, INC. STATEMENT OF CASH FLOW UNAUDITED
For the Nine Months Ended Sept. 30, 2001 2000 ==== ==== CASH FLOWS FROM OPERATING ACTIVITIES Net Income (loss). . . . . . . . . . . . . . . $ (450,841) $( 89,306) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation Expense 2,986 570 (Increase) Decrease in Accounts receivables . . . . . . . . . . . . . 3,835 (180,000) Inventories. . . . . . . . . . . . . . . . . . (71,123) - Prepaid Expenses . . . . . . . . . . . . . . . 50 - Increase(Decrease) in Accounts Payables. . . . . . . . . . . . . . . 489,214 293,173 -------- -------- NETCASH USED IN OPERATING ACTIVITIES . . . . . . . . (25,884) 24,437 CASH FLOW FROM INVESTING ACTIVITIES Deferred Public Offering . . . . . . . . . . . (22,636) (13,000) Acquisition of Fixed Assets. . . . . . . . . . - (11,153) --------- --------- NET CASH USED IN INVESTING ACTIVITES . . . . . . . . (22,636) (24,153) CASH FLOW FROM FINANCING ACTIVITIES Loan From MH . . . . . . . . . . . . . . . . 16,500 - Loan From Meridian Medical Group. . . . . . . . . . . 21,800 - Repayment of debt . . . . . . . . . . . . . . . (30,329) - Loan from Officer 3,800 - Sale of Common Stock . . . . . . . . . . . . . 47,450 - Proceeds from long term debt. . . . . . . . . . 358 - -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES. . . . . . 55,779 0 Increase (Decrease) in cash . . . . . . . . . . 7,264 284 CASH AT BEGINNING OF PERIOD. . . . . . . . . . . . . 2,961 864 ----------- ---------- CASH AT END OF PERIOD. . . . . . . . . . . . . . . . $ 10,225 $ 1,148 =========== ==========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 5 The accompanying notes are an integral part of this statement. InterCare.com-dx, Inc. Notes to the Financial Statements Note 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES InterCare.com-dx, Inc. formerly known as Inter-Care Diagnostics, Inc., is organized in the State of California to pursue bio-medical software development, as well as Internet based healthcare transactions, contents and programs development. The Company was originally incorporated in 1991 for the purpose of operating a medical diagnostics laboratory and engaging in various medical services to clients. On June 30, 2000, the Company signed a master value added reseller agreement with Meridian Holdings, Inc., the parent company, to sell and support the now discontinued MedMaster suite of software technology. Significant terms of this agreement are that Intercare will sell, support, implement the MedMaster Suite of software programs, in exchange for 40% of net sales proceeds, and 60% of recurrent revenue from software support and implementation. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Account Receivable The Company recognizes account receivable to the extent that revenues have been earned, and collections are reasonably assured. Inventory Inventories consists of purchased computer and software products, stated at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method of valuation. Property and Equipment Property and equipment is recorded at cost. Maintenance and repairs are charged to expense as incurred. Major renewals and betterments are capitalized. When items of property are sold or retired, the related cost and accumulated depreciation is removed from the accounts and any resultant gain or loss is included in the results of operation. Capital assets are depreciated by the straight-line method over estimated useful lives of the related assets, normally five (5) to seven (7) years. Property and equipment consists of the following as of Sept. 30, 2001 and 2000:
2001 2000 ===== ===== Computer Hardware & Software $68,770 $68.120 Less: Accumulated Depreciation 59,700 57,284 ------- ------- $ 9,070 $10,836 ======== =======
6 Advertising The company has the policy of expensing advertising costs as incurred. There were no advertising costs charged to expense for the quarter ended Sept. 30, 2001. Stock-based Compensation Non Employee Stock-based compensation plans are recorded at fair value measurement criteria as described in SFAS 123, "Accounting for Stock-Based Compensation", and EITF 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services" Employee Stock-based compensation plans are accounted for, using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock issued to Employees". Under this method, compensation cost is recognized based on the excess of the fair value at the grant dates for awards under those plans, as determined by the Company's officers and directors. Recognition of Revenues. Revenues from sale of software are recorded upon delivery and installation of software at customer sites. The company provides a limited amount of post-contract customer support (PCS) at no additional charge Pursuant to SOP 97-2, the value of the PCS component of any sale is estimated based on vendor specific evidence of fair value (i.e. catalogue price). Revenues in respect of the value of the PCS, are recognized as earned ratably over the PCS period (generally 90 days). The company provides software implementation and professional services for all its enterprise software sold to its clients on a contractual basis. Professional services are billed on either an hourly rate or flat rate basis, and revenues recognized ratably over the service period, or upon completion of related services. Reimbursable expenses incurred on behalf of the customer are billed to the customer, and credited against the applicable expense. The customer has the option to purchase an implementation services from the Company. Revenues from implementation services contracts are deferred and recognized as earned as services are performed in contracts with hourly billing terms; and as related services are performed or expiration of the terms of the contract in flat rate contracts. The customer has the option to purchase a maintenance contract from the Company. Revenues from maintenance component are deferred and brought recognized income ratably over the maintenance service period. Currently, there are no such contracts in existence. The Company's proposed maintenance charges as based on vendor specific evidence of fair value. Software Development Cost Software development costs are charged to current operations Fair Value of Financial Instruments and Concentration of Credit Risk. The carrying amounts of cash, receivables, prepaid banner advertisements fees by Meridian Holdings, Inc. (the parent company), accounts payables and accrued liabilities approximates fair value because of the immediate or short-term maturity of these financial instruments. Deferred Costs Related To Proposed Public Offering. Costs incurred in connection with the proposed public offering of common stock 7 have been deferred and will be charged against capital if the offering is successful or against operations if it is unsuccessful. The estimated expenses of this offering in connection with the issuance and distribution of the securities being registered, all of which are to be paid by the Registrant, excluding commissions and fees payable to the Escrow Agent and broker/dealers are as follows:
Registration Fee $ 6,600.00 Legal Fees and Expenses 19,580.00 Accounting Fees and Expenses 2,000.00 Printing 3,785.00 Miscellaneous Expenses 3,671.00 --------- Total $35,636.00 ==========
Basic and Diluted Net Loss Per Common Share. In accordance with SFAS No. 128, "Computation of Earnings Per Share," basic Earnings/(loss) per share is computed by dividing the net earnings available to Common stockholders for the period by the weighted average number of common shares outstanding during the period. For purposes of computing the weighted average number of shares, all stock issued with regards to the founding of the Company is considered to be "cheap stock" as defined in SEC Staff Accounting Bulletin 4D and is therefore counted as outstanding for the entire period. Common equivalent shares, consisting of incremental common shares issuable upon the exercise of stock options and warrants are excluded from diluted earnings per share calculation if their effect is anti-dilutive. Note 2. RELATED PARTY TRANSACTIONS Mr. Russ Lyon waived his rights to exercise said option during the first quarter of 2001, in lieu of 200,000 shares of the registrant at zero par value, to be issued upon the effectiveness of the registrants registration statement. The shares will be issued pro-rata to the two years of the employment agreement. NOTE 3. SUBSEQUENT EVENTS Software Developers Agreement with QRS Diagnostics, LLC. On June 26, 2001, the registrant entered into a software developers agreement with QRS Diagnostics, LLC, a Minnesota Corporation. Under the terms of the agreement, QRS grants a non-exclusive, non-transferable license to the registrant to use the Software Developers Kit (SDK) delivered under this Agreement in accordance with the terms and conditions herein, which includes interfacing the software into the registrant next generation of clinical documentation and data acquisition software program known as ICE (InterCare Clinical Explorer). All copies of the SDK shall be the sole and exclusive property of QRS. Amended SB-2 Filing On September 5, 2001, the registrant amended SB-2 file with United States Securities and Exchange Commission was declared effective. In this amendment, the registrant updated its' business plan as well as the financial statements. Details of this amendment can be found in SEC Edgar website. InterCare.com-dx, Inc. Business Overview InterCare.com-dx, Inc., ("InterCare") formerly known as Inter-Care Diagnostics, Inc., is organized in the State of California. We are an innovative software products company specializing in state-of-the-art enterprise solutions for the 8 healthcare IT market. The Company developed the Mirage Systems Multimedia Biofeedback software program in 1994. This is a cross-platform program available in both Microsoft Windows 3.X including windows 95;98 and Apple Macintosh platforms. This software became the first United States FDA approved software program for neuromuscular re-education and biofeedback training. The Company also has four other software products in the market including the "Body Pain Trigger Points Program", one of our best selling software products, with over 20,000 copies sold. The Company intends to convert all its software programs to run in all the popular operating systems available, including but not limited to Microsoft Windows, Macintosh and Linux or Unix operating systems. The company is currently developing the next generation of clinical documentation, practice management and data acquisition software program, with multi-tasking, multi-lingual and full multi-media implementation. This soon to be released software application, will replace MedMaster product line, which has been pulled from the market by the registrant at the request of Meridian Holdings, Inc., our parent company, due to on going legal dispute regarding the rights to ownership of clear title between Lockheed Martin and the estate of Sirius Computerized Technology of Israel. Properties The Company's corporate offices are located at 900 Wilshire Boulevard, Suite 500, Los Angeles, California 90017. The Company is sharing an office space with Meridian Holdings, Inc., an affiliated Company, whereby the Company is required to pay 1/5 of the monthly rent of $4,791.00. Other property and equipment are stated at cost. Acquisitions having a useful life in excess of one (1) year are capitalized. Repairs and maintenance are expensed in the year incurred. Capital assets are depreciated by the straight-line method over estimated useful lives of the related assets. Legal Proceedings The Company knows of no litigation pending, threatened or contemplated, or unsatisfied judgments against it, or any proceedings in which the Company is a party. The Company knows of no legal actions pending or threatened or judgment entered against any officer or director of the Company in his capacity as such. There has been to date no petition under the bankruptcy act or any state insolvency law filed by or against the Company or its officers, directors or other key personnel. RISKS ASSOCIATED WITH MANAGING GROWTH The Company's anticipated level of growth, should it occur, will challenge the Company's management and its sales and marketing, customer support, research and development and finance and administrative operations. The Company's future performance will depend in part on its ability to manage any such growth, should it occur, and to adapt its operational and financial control systems, if necessary, to respond to changes resulting from any such growth. There can be no assurance that the Company will be able to successfully manage any future growth or to adapt its systems to manage such growth, if any, and its failure to do so would have a material adverse effect on the Company's business, financial condition and results of operations. LACK OF A PRESENT MARKET FOR SECURITIES The Common Stock is currently not listed or trading in any exchange at this Time MARKET FOR COMMON STOCK The Company intends to begin trading its common stock in the NASDAQ Small Cap Market, upon completing its current public offering of its common stock, as well as meeting the minimum listing requirements. There can be no assurance that the Company's common stock will be listed, or trade in such market at all. If the Company is unable to trade in such market, it may apply to trade on the OTC Bulletin Board administered by the National Association of Security Dealers. 9 SELECTED FINANCIAL DATA The Company had no revenues from operations in the quarter ended Sept 30, 2001, this compares moderately with the comparable period in 2000. The entire quarter was devoted (in conjunction with its parent company, Meridian Holdings, Inc. (MEHO)) to developing and testing its new family of software. The Company is nearing completion of the first phase and anticipates to begin licensing in the fourth quarter of 2001. The selected financial data set forth above should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements notes thereto. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with our financial statements and notes, as well as the other information included elsewhere in this prospectus. Our discussion contains forward-looking statements that involve risks and uncertainties, including those referring to the period of time the Company's existing capital resources will meet the Company's future capital needs, the Company's future operating results, the market acceptance of the services of the Company, the Company's efforts to establish and the development of new services, and the Company's planned investment in the marketing of its current services and research and development with regard to future endeavors. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including: domestic and global economic patterns and trends. LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY Long-term cash requirements, other than normal operating expenses, are anticipated for the continued development of the Company's business plans. The Sb2 registration statement filed by the registrant in order to raise up to $25,000,000 was declared effective initially or January 29, 2001 by the United States Securities and Exchange Commission. An amended SB2 filed subsequent to that was declared effective as of April 3, 2001. As of this writing, the offering is on going and there is no assurance that the registrant will be able to raise all the funds required or any fund at all. If unable to raise the $500,000 minimum through this offering, the registrant may not be able to break escrow, and will therefore cancel the offering. This will seriously impact the liquidity of the registrant. RESULTS OF OPERATIONS We have experienced, and expect to continue to experience, seasonality in our license revenues and results of operations, with a disproportionately greater amount of our license revenues for any fiscal year being recognized in our fourth fiscal quarter. As a result, our first quarter revenues can be less than those of the preceding quarter. In some cases, the products will be sold on a consignment basis, in which case, we only get paid by the vendor after the vendor sells the product. Furthermore, our quarterly revenues could be significantly affected based on how applicable accounting standards are amended or interpreted over time. Due to these and other factors, we believe that period-to-period comparisons of our results of operations are not meaningful and should not be relied upon as indicators of our future performance. It is possible that in some future periods our results of operations may be below the expectations of public market analysts and investors. If this occurs, the price of our common stock may decline. We will depend on the commercial success of our product suite, which has not yet been shipped. We have generated substantially all of our revenues from licenses and services related to current and prior versions of our product suite. REVENUES The company is currently developing the next generation of clinical 10 documentation, practice management and data acquisition software program, with multi-tasking, multi-lingual and full multi-media implementation. This soon to be released software application, will replace MedMaster product line, which has been pulled from the market by the applicant at the request of Meridian Holdings, Inc., an affiliated company, due to on going legal dispute regarding the rights to ownership of clear title between Lockheed Martin and the estate of Sirius Computerized Technology of Israel. For nine months period ended Sept 30,2001, the registrant generated approximately $334,199 in total revenue, as oppose to $180,0000 revenue for comparable period in 2000. The increase in revenue was due to sale of software license as well as revenue generated from software implementation and maintenance services in the first quarter of 2001. SALES AND MARKETING The registrant is focusing all its resources in research and development of the next generation of software applications and utility tools for the healthcare industry, as a result no sales or marketing expenses were incurred during the three month period ended Sept 30, 2001. PRODUCT AND CONTENT DEVELOPMENT Software products and Internet content development expenses is anticipated to increase significantly during the next coming year, due to website redesign and other Internet initiative launch costs, consisting primarily of personnel and consulting costs. The Company projects to spend over $1,000,000 during the next 12 months to fund project and content development. This is contingent upon the Company's ability to raise funds from investors. GENERAL AND ADMINISTRATIVE General and administrative expenses for the third quarter ended Sept 30, 2001 was $197,600, compared to $130,971 during the comparable period in 2000. For nine month period ended September 30, 2001, general administrative expenses, the Company had incurred $659,906 compared to $268,736 in the comparable period in 2000. The increase in operating expense is due to the additional operating costs of increased personnel requirement, consultant fees, as well as research and further development of the MedMaster software program in the first quarter as a value added reseller, and most recently, due to development of new family of software. Of the $659,906 expense in 2001, $357,000 was spent on research and development. Approximately $105,000 was spent on salary to employees, $64,000 spent on facilities and supplies, $ 71,000 on consultants, and the remaining balance was for general corporate purposes. The Company anticipates future increases in general and administrative expenses as it embarks on aggressive product development, sales and marketing with its associated increase in personnel costs and legal and accounting expenses related to the public offering of its common stock. OPERATING LOSS As a result of the factors described above, Company expects further increases in operating expenses for the year 2001, assuming additional funding is raised from this offering to be used in financing future operating costs. There is no guarantee that the Company will be able to raise additional funds to finance all the anticipated operating costs. In absence of such funds being available, the Company may not be able to operate, and this could have a material impact in the overall execution of the Company's business plan. NET LOSS The Company had a net loss of $(450,841) or (0.003) per share for the Nine months period ended Sept 30, 2001, compared with net loss of $89,306 in the comparable period in 2000. The increase in net loss was due to increased operating expense in the absence of corresponding revenue as described above. 11 PLAN OF OPERATIONS A registration statement filed by the Company for the purpose of raising up to $25,000,000, was approved by United States Securities and Exchange Commission on January 29, 2001. The offering prospectus was amended on March 27, 2001, in which the number of shares authorized for sell was increased from 2,500,000 to 5,000,000, and the offering price was decreased from $10 per share to $5 per share. The latter was declared effective as of April 3rd, 2001. The registrant filed yet another amendment to the registration statement, which was declared effective on September 5, 2001. In this amendment, the registrant disclosed a change in its' business plan, as well as updated financial statement. The offering period was also extended for additional twelve months from September 5th 2001 to September 5 2002. Details of this amended filing can be found at the SEC Edgar website. The Company intends to use part of the funds raised during this offering for product launching and general corporate purposes. If adequate funds are not available or not available on acceptable terms, we may be unable to fund our expansion, successfully promote our brand name, take advantage of acquisition opportunities, develop or enhance services or respond to competitive pressures, any of which could have a material adverse effect on our business, financial condition and results of operations. The Company is also planning to embark on an advertisement campaign over the next several months in news media, consumer and healthcare journals of all its products and services. There is no assurance that such advertisement campaign will yield any dividend. PART II - OTHER INFORMATION ADDITIONAL INFORMATION On June 26, 2001, the registrant entered into a software developers agreement with QRS Diagnostics, LLC, a Minnesota Corporation. Under the terms of the agreement, QRS grants a non-exclusive, non-transferable license to the registrant to use the Software Developers Kit (SDK) delivered under this Agreement in accordance with the terms and conditions herein, which includes interfacing the software into the registrant next generation of clinical documentation and data acquisition software program known as ICE (InterCare Clinical Explorer). All copies of the SDK shall be the sole and exclusive property of QRS. SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INTERCARE.COM-DX, INC. DATE: November 14, 2001 By: /s/ Philip Falese ------------------- Philip Falese Chief Financial Officer 12 13