-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NN9qBEZ+5+Z4ZWOJyLaDS1lC0KjB00z6Z0F8oCaXoVuVY1hETTRehtAD2qlhuhl2 la73xeP/LQI40y0FgJIyXw== 0001105944-03-000026.txt : 20030501 0001105944-03-000026.hdr.sgml : 20030501 20030501093132 ACCESSION NUMBER: 0001105944-03-000026 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERCARE COM DX INC CENTRAL INDEX KEY: 0001103310 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 954304537 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-31281 FILM NUMBER: 03674987 BUSINESS ADDRESS: STREET 1: 900 WILSHIRE BLVD #500 CITY: LOS ANGELES STATE: CA ZIP: 90017 MAIL ADDRESS: STREET 1: 900 WILSHIRE BLVD #500 CITY: LOS ANGELES STATE: CA ZIP: 90017 FORMER COMPANY: FORMER CONFORMED NAME: INTERCARE COM INC DATE OF NAME CHANGE: 20000114 10KSB/A 1 int10ksb02a.txt INTERCARE.COM-DX, 2002 10KSB/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-KSB/A ( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Period Ended December 31, 2002 ( ) 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: 333-94813 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 former 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 December 31, 2002, InterCare.com-dx, Inc., Registrant had 13,293,403 shares of its zero par value common stock outstanding. Based upon the closing price at such date, aggregate market value was $797,604. Page 1 of 26 sequentially numbered pages Form 10-KSB Annual Report For The Fiscal Year Ended December 31, 2002 TABLE OF CONTENTS Page Number PART I Item 1. Description of Business . . . . . . . . . . . . . . . . . . . . . . . 3 Item 2. Description of Property . . . . . . . . . . . . . . . . . . . . . . .18 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Item 4. Submission of Matters to a Vote of Security Holders Our . . . ... . . 18 PART II Item 5. Market for Common Equity and Related Stockholder matters . . . . . .. 18 Item 6. Management's Discussion and Analysis . . . . . . . . . . . . . . . . 22 Item 7. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .22 Item 8. Changes In an Disagreements With Accountants on Accounting and .. . ..22 Financial Disclosure PART III Item 9. Directors, Executive Officers, Promoters and Control Persons . . . . .22 Item 10. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . .27 Item 11. Security Ownership of Certain Beneficial Owners and Management . . . 28 Item 12. Certain Relationships and Related Transaction . . . . . . . . . . .. 29 Item 13. Exhibits and Reports on Form 8-k . . . . . . . . . . . . . . . . . .29 2 PART I ITEM 1. DESCRIPTION OF BUSINESS BUSINESS OVERVIEW InterCare.com-dx, Inc. formerly known as Inter-Care Diagnostics, Inc., is organized in the State of California. We are an innovative software products and services company specializing in providing healthcare management and information systems solutions. 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 January 17, 1994, a 6.8 magnitude earthquake centered in Northridge, California caused wide spread damage to commercial and residential structures, and to major freeways, causing business interruptions and disrupting the normal flow of traffic. The Company experienced irreversible damage to all its high-tech computers and diagnostic equipment. Since that time, the Company has been devoting substantially all its efforts to establishing a new business entity that develops software for the healthcare industry and other related activities over the Internet. We have created, published and marketed software products that is embedded with sound, text and video, for purpose of relaxation training and stress management. We have also developed Internet-ready applications for healthcare transactions management, medical and health-related contents and information targeted towards the education, consumer and healthcare industry markets. Our Products and Services 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. 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 MedMaster(tm) 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. On June 30, 2001, the company discontinued its sale of Medmaster software at the request of Meridian Holdings, Inc., and instead embarked upon a joint development effort with Meridian Holdings, Inc., for a new replacement software known as ICE(tm) (InterCare Clinical Explorer), that was released to the market in the third quarter of 2002. The strength of ICE application is derived from differentiated core technologies consisting of: Mainstream SQL Database with full open architecture; human anatomy and graphical user interfaces that simplify documentation and information access; data mining and data query tools; end-user tool sets; and interface capabilities to facilitate peaceful coexistence with other systems. Benefits of ICE(tm) Products to Healthcare Payors and Providers include: Point of Care Documentation Applications enabling all care providers (e.g. physicians, nurses, PA's, technologists, therapists, dieticians, etc.) to document objective and subjective patient data at the point-of-care in a manner that enhances 3 compliance, reduces time, enhances communications, controls resource utilization and enhances revenue generation. Order entry and results reporting Simplified multi-disciplinary communication of orders, referrals, consultations, notes and retrieval of results including Laboratory, Radiology, Pharmacy, Respiratory Therapy, Dietary, Physiotherapy, Nursing and the like. Imaging and general archiving On-line viewing, manipulation and annotation of digital images and documents such as X-rays, CAT Scans, MRIs, Ultrasounds, digitized images, scanned paper documents, etc. This is particularly important in emergency and urgent care settings where speed and provider viewing and interpretation is needed to enhance care delivery. This is the foundation for an integrated healthcare delivery system, using both Local and Wide area networks. Multi-disciplinary Clinical decision support Provision of advanced clinical functionality including protocols, pathways, care plans, order sets, alerts, advanced directives, costing, staffing, time standards and templates that facilitate care management, resources control and outcome management. Clinical workflow and productivity management Personal desktop that organizes individual user tasks, simplifies follow up and documentation requirements, improves workflow, facilitates quality assurance and management intervention in order to make better use of time. Care provider communication management On-line, simplified message routing and communication that interfaces to e-mail, voice mail and like systems to enhance coordination and follow up among care providers. Central Data Repository Aggregation of all patient-centric data in the enterprise from all legacy and newer information systems, including Registration, ADT, lab, radiology, pharmacy PACS, departmental systems and ICE(tm). Medical knowledge base / lexicon Multiple third-party knowledge bases and lexicons can be readily incorporated into ICE(tm) including ICD9, CPT4, DSM-4, application objects, lexicon objects, security objects and individual user preferences. Bi-directional legacy integration middleware Data exchange in real-time between ICE(tm) and legacy systems to facilitate data merging, data normalization and information consolidation. Real-time Electrophysiological and Clinical Data Acqusition InterCare has obtained a developers license from QRS Diagnostics, inc., to integrate their Medic Software application into ICE(tm), thus making it possible to add such medical diagnostic data as ECG, Temperature, Weight Spirometry and Pulse-oximetry into ICE(tm) database real-time. Data discovery, mining and analysis Suite of ad-hoc, programming free tools, enabling novice users experimental "cruising" of all enterprise data in real-time. InterCare's ICE(tm) software operates over a customizable and highly adaptable operating environment. ICE(tm) is designed to concurrently serve all care providers throughout the continuum-of-care from acute and 4 long-term care to ambulatory and home health care: - - The various medical professions (i.e. physician, nurse, therapists, technologists, dietician, etc.) - - The various medical specialties (i.e. Primary care, OB/Gyn, Pediatrics, Surgery, etc.) - - The various facility types (i.e. acute care, ambulatory care, long term care and home care) ICE(tm) can seamlessly integrate with legacy systems (utilizing any off- the- shelf interface engine) through both HL7 and proprietary legacy interfaces. A 12-tier security paradigm offers industry leading confidentiality and control of information. Security "behavior" rules are fully configurable by privileged system administrator(s), without programming, through the underlying knowledge bases. ICE(tm)'s embedded security will be fully HIPAA (Health Insurance Portability and Accountability Act of 1996 ) compliant when the final rulings are released, and supports data compartmentalization down to the level of specific value in any data field. OUR COMPETITION InterCare.com-dx participates in a large and growing marketplace domestically and internationally. The US healthcare information systems and services market currently represents a $20 billion annual market. Electronic Medical Record (EMR), CDR and clinical systems, being a part of an emerging arena, are accountable for $2 US Billion of this sum Clinical systems' market volume is expected to accelerate its growth because of the recent HIPAA regulations requirements. The EMR / CDR market is primarily dominated by large scale players (see table below). These players primarily emerged from a prior dominant position in the administrative, financial and clinical ancillary market segments for enterprise healthcare IT software programs. In the past few years, resulting from the rapid growth of the Internet, a variety of young companies emerged and quickly became dominant players in the Healthcare IT terrain. WebMD is the most dominant new player in the e-health's administrative and financial arena. WebMD incorporates a crop of young e-health corporations acquired through M&As. The most pro-active e-health players are Eclypsis, IDX and McKesson-HBOC. Yet, each of these players has thousands of existing customers operationally using its legacy systems. Thus, their e-health transition strategy is slow both technically and business wise. There are no specific figures available for estimating the portion of Internet EMR/CDR sales within the annual $2 US Billion sales of traditional EMR/CDR and clinical systems. Yet, it is prudent to assume that it is still below the 10% mark. Thus, the sales of traditional (legacy) enterprise EMR/CDR software programs still dominate the market and are expected to continue such dominance for quite some time. Mergers or consolidations among our competitors, or acquisitions of small competitors by larger companies, would make such combined entities more formidable competitors to us. Large companies may have advantages over us because of their longer operating histories, greater name recognition, or greater financial, technical and marketing resources. As a result, they may be able to adapt more quickly to new or emerging technologies and changes in customer requirements. They can also devote greater resources to the promotion and sale of their products or services than we can. For the above reasons, we may not be able to compete successfully against our current and future competitors. Increased competition may result in reduced gross margins and loss of market share. 5 OUR COMPETITIVE ADVANTAGE - OUR KNOWLEDGEABLE AND GROWING SALES FORCE AND TECHNICAL STAFF. We will be making sure that the sales force is trained on the "high-end" networking elements in which we deal so they will be able to service the needs of their customers. - OUR BUSINESS MODEL COST, EFFICIENCY AND FLEXIBILITY. We have addressed the largest cost factor in the methodology for deploying our services through an outsourcing strategy rather than a building the human resources from the scratch strategy. This keeps start-up costs as low as possible. - OUR STRATEGIC PARTNER STRENGTH. Partnerships with CGI Communications Services, Inc., our parent company Meridian Holdings, Inc., Ingram-Micro Inc., Acer America Corporation, ViewSonic Corporation, Microsoft Corporation, Tech Data Corporation, and QRS Diagnostics, Inc., will give us the ability to deliver our software products faster and at a lower cost than the competition - INTEGRATION. We can seamlessly integrate all of the different technological solutions and custom applications development. We use different strategic partners to tailor the optimum solution for our customer. - AUTOMATION AND ADVANCED TELECOMMUNICATIONS TECHNOLOGY. Our Network Management tools are automated which leads to less downtime, and lower labor costs. We use the latest equipment, work closely with strategic partners that are forerunners in their fields, and are not hampered by existing legacy infrastructures. - OUR CUSTOMIZED CUSTOMER APPROACH. We emphasize direct relationships with our customers. These relationships enable us to learn information from our customers about their needs and preferences and help us expand our service offerings to include additional value-added services based on customer demand. We believe that these customer relationships increase customer loyalty and reduce turnover. In addition, our existing customers have provided customer referrals and we believe strong relationships will result in customer referrals in the future. Our success depends upon careful planning and the selection of partners. We can meet the customer's needs more efficiently with entrenched procedures. This enables us to excel at customer service. Our Product Features and Benefits ICE(tm) incorporates a wide variety of capabilities and functionality, which differentiate it from other generally available Electronic Medical Record/Central Database Repository (EMR/CDR) software programs in the global Healthcare Information Technology (IT) market. The most significant differentiators are: Fully integrated Software Program ICE(tm) is not an aggregation of unrelated and disintegrated legacy products acquired through M&As. ICE(tm) is designed and developed as a fully integrated suite of products, which utilize an identical graphic user interface on top of a scaleable and highly adaptable component architecture. Thus, each of the variety of ICE(tm) products is inherently integrated (data model and business rules alike) with the other products, and the underlying CDR/MKB. Human anatomy image annotation and embedding, point-and-click data entry 6 Three-dimensional (3D) MKB (Medical Knowledge Base) navigation utilizing gender-sensitive, human anatomy drawings. Keyboardless medical documentation through drag-and-drop of findings on top of human anatomy . Presentation of lifetime medical history data over a single full-body drawing. Automatic generation of all progress notes and forms from the graphical queues entered by the end user on top of human anatomy drawings as well as annotation of an embedded image referenced in the body of the document. Customizable, component-based architecture Multi-tier, common enterprise architecture for all ICE(tm) products Multi-threaded engines & components. Automatic and manual load balancing & distribution through multiple engines utilizing entry level PC hardware. Knowledge driven applications Knowledge base driven clinical workstation applications. Most of the applications' "behavior" (e.g. business rules) is derived from the underlying database(s), which is fully customizable without the need for programming by the novice end user. This also includes extended support for visually "painting" (e.g. designing) additional input & output screens, inclusive of its business rules. Repository, data warehouse and datamart unification While ICE(tm) master central data repository engine(s) will serve the multitude of concurrent enterprise users, its live backup(s) simultaneously will serve as data warehouse and datamart for ad-hoc data discovery, mining and analysis in real-time. Third-party legacy integration Seamless bi-directional integration with ancillary, administrative and financial legacy systems. Concurrent support for both HL7 and proprietary legacy messaging. Plug-and-play legacy interface(s) addition and/or modification. Immediate value and ROI to the enterprise by integration of legacy systems only into the ICE(Tm) CDR prior to any ICE(Tm) application implementation. Current Resell Partners China Business Chain Group, LLC. The Company has entered into an exclusive reseller agreement with China Business Chain Group to market and implement the Chinese version of ICE(tm), to prospective clients in China and Taiwan. Telehealth, LLC. The Company has entered into an exclusive reseller agreement with Telehealth, LLC.,to market and implement the Arabic version of ICE(tm), to prospective clients in the Arabic speaking countries in the Middle-East. The key elements of our business strategy include the following: - Fully exploit the expanding Integrated Healthcare delivery system Information Technology and Internet market - Expand into related healthcare consumer market with our relaxation training and stress management software program. - Convert all our existing software programs to an Internet based applications, in order to attract a larger user and install base. - Penetrate the National and International markets for large customers such as corporations, correctional facilities, military, hospitals, universities and government with our Internet based applications and healthcare information technologies. 7 FUTURE GROWTH OF OUR BUSINESS MODEL The Internet has created new and evolving ways for conducting commerce. According to Forrester Research, business-to-business electronic commerce is expected to grow to $1.3 trillion in 2003, accounting for more than 90% of the dollar value of electronic commerce in the United States. The market for applications that enable business-to-business electronic commerce is expected to reach $1.5 billion by year-end, according to Dataquest. Enterprises that have successfully implemented web-enabled customer interfaces now face the challenge of utilizing the Internet and intranets to gain the same level of increased efficiencies in their supply chain. In the changing world of healthcare, one trend serves the common interests of doctors, patients, and medical administrators: to maintain and increase the quality of care through new and more cost-effective technologies, hence the Company's interest in the emerging healthcare transactions and tele-medicine services and software applications development. There are several different reports and articles discussing the tele-medicine market. Each of them looks at tele-medicine in a slightly different way and provides different estimates, as follows: - - Business Communications Company (BCC): A large consulting firm that produces industry reports on many industry sectors. In February 1998 the firm produced a report titled: Tele-medicine Opportunities for Medical and Electronic Providers (240 pages, cost: $1,350). Ben Grimley, an industry analyst who specializes in health and information technology issues, prepared the report. BCC estimates that the current U.S. market for tele-medicine is $65 million and will reach $3 billion by the year 2002 based on the high growth rates of leading market segments and an assumption that full reimbursement for tele-medicine services will continue to become more common. They predict the overall growth rate for tele-medicine to be 35 percent per year over the next five years with a 42 percent increase in public sector investments and an 89 percent growth in sites over the same period. The report cites provider plans for predicting a 280 percent growth in prison tele-medicine sites over five years and a doubling of military investment over seven years. The predicted rates of growth for tele-medicine is particularly important given the firm's prediction that the market for overall health-care related information is expected to grow only three percent per year. - - Feedback Research Services (FRS): A market research firm that specializes in high-tech health care delivery systems. Overall, FRS states that the current annual U.S. market for telepathology, teleradiology, and videoconferencing tele-medicine systems is under $100 million. According to FRS, tele-medicine-related videoconferencing equipment sales in Europe, North America, and the Pacific Rim accounted for $250 million in revenues in 1996. They estimate that worldwide sales of products and services during the 1990s reached an estimated $520 million, cumulative, through the year-end of 1996. They project the annual worldwide growth rate to be 15 percent. They project that Europe and the Pacific Rim combined may represent cumulative tele-medicine expenditures of $1.4 billion by 2001. - - Frost and Sullivan (F&S): An international marketing, consulting and training firm covering many different markets. A representative from F&S wrote an article in the April 1998 issue of ADVANCE for Administrators in Radiology & Radiation Oncology that provided market forecasts for PACS and Teleradiology. According to the article, the current total PACS and teleradiology systems market revenue for the U.S. and Europe is estimated for 1998 at $368.8 million with the United States generating 81 percent of this market. They project a growth rate of about 28 percent over the next six years yielding a total annual market of $1.6 billion by 2004. In a separate report on U.S. hospital communications equipment markets, including tele-medicine videoconferencing as well as other segments, F&S forecasts a 30 percent growth in this market. - - Waterford Advisors: An investment firm specializing in healthcare and information systems. The firm has developed the Waterford Tele-medicine Index (WTI), an index of stock prices from various 8 tele-medicine-related companies. WTI was debuted in the April 1998 issue of Tele-medicine and Telehealth Networks and will be a regular feature of the magazine. The index does not attempt to predict market size. Rather, the index is designed to be a monitor of the overall performance of the industry and a way to estimate the economic value of tele-medicine companies. Since the index is new, there is little information about the recent performance of tele-medicine companies in the market. The index currently includes 38 companies. - - The Healthcare Information and Systems Society (HIMSS) recently conducted their ninth annual survey of senior healthcare executives. Of the 1,754 respondents, 34 percent reported that their organizations currently use tele-medicine, ten-percent plan on using tele-medicine within the next 21 months and 28 percent are investigating its use in the future. - - Tele-medicine and Telehealth Networks Magazine: This magazine recently completed a survey of selected tele-medicine program managers. Ninety-three percent reported that they expect to expand their operations in the next five years. OUR BUSINES STRATEGY Our current efforts are targeted on taking advantage of our strengths in the application of high technology in the following areas: - The development and/or acquisition, through licensure or purchase, of third party technologies to be integrated into ICE software. - The development, through licensing and/or acquisition, of streaming video technology to facilitate the delivery of high-resolution video-based tele-medicine and other content over the Internet. The server-side software would be marketed to Internet and intranet providers. A basic client-side browser plug-in would be offered as a free download from InterCare.com-dx, while a more robust stand alone player would be offered for sale as an upgrade. - The development of direct reseller relationships with manufacturers of tele-medicine hardware and software (e.g. Sony). In addition to reselling tele-medicine equipment and software, InterCare.com-dx will provide tele-medicine systems design and integration, installation and support services, with the latter entailing both face-to-face client contact and a unique interactive multimedia Internet site devoted to answering most questions about tele-medicine, including tutorials, chat and forum capabilities. - The provision of web-site design & development services, including the production and/or acquisition and conversion of interactive multimedia content, for all of the above areas and for the other subsidiaries of Meridian Holdings, Inc., our parent company. OUR INTERNET BUSINESS STRATEGY The Vision General Providing a virtual community software program, based on Internet technologies And infrastructure, which enables the variety of participants in healthcare delivery: consumers/patients, care providers, healthcare enterprise management, healthcare IT professionals and payers, to improve the quality of care and reduce the cost of care delivery through effective care data standardization, management, sharing and communication. For care providers Facilitate anytime & anywhere secure access, through portable and Internet technologies, to a variety of patient information and personal productivity services. These should continuously encourage improved reimbursement, reduced administrative overhead, reduced medico-legal liability exposure and improved 9 patient care. For consumers / patients Facilitate and encourage consumer/patient participation in the care delivery process through Internet technologies. Facilitate anytime & anywhere secure access to the patient's lifetime medical record as maintained by the healthcare enterprise. Enable the consumer/patient to obtain a variety of services from his care providers and from the healthcare enterprise. Facilitate consumer/patient access to quality healthcare content, encouraging self-treatment of minor healthcare problems outside the care system. For healthcare enterprise management Facilitate optimization of care cost/outcomes standardization throughout the healthcare enterprise. Facilitate improved collaboration and sharing of patient-centric information between care providers and patients. Facilitate increased revenue generation through improvements in reimbursement and reduction in claims rejection. Facilitate reduction of care delivery cost through minimization of redundant/unnecessary procedures. Facilitate improved control over the enterprise's operations through real-time enterprise data mining and analysis. For healthcare IT professionals Facilitate continuous improvements in the central control, management, administration and maintenance of ICE(tm) as a centerpiece component of the healthcare enterprise integrated IT software program. Enable flexible distribution of system management and administration responsibilities between care providers, IT professionals and outsourced / ASP services. For payers Facilitate improvement of care quality while reducing the cost of care. Enabling improved analysis and control over fraud and abuse. Facilitate improvements in automated approval/rejection of care procedures before its execution. Facilitate real-time comparative analysis of performance vs. cost of care providers. Market Positioning Current Market Space Spot The ICE(tm) EMR/CDR software program is currently positioned and competing in the conventional healthcare IT enterprise space. This space is primarily occupied by large strong competitors, each leveraging a large customer base, significant recurring revenue (from maintenance services), and a broad product offering. This market space has been undergoing significant consolidations during last couple of years, and are expected to continue well into this century. A typical healthcare IT sales contract in this market space requires significant capital investments by the customer, and places the entire risk on the customer. Meta Group estimates that 5-year healthcare IT cost s are ~$100M per a typical Hospital in the US, with 70% of the software programs purchased failing expectations and replaced within 2-3 years. The ICE(tm) software program will offer significant advantages over the competition in a variety of technical and functional aspects required from an enterprise EMR/CDR software program. Yet, the market's immaturity and the extent of risk involved with significant up-front capital investments, makes it a greater challenge for InterCare.com-dx to successfully play in this market space. New Market Space Spot With the transition of its enterprise software program to the Internet, and the expansion of its solutions' scope to incorporate support for both consumers and payers, InterCare is now re-positioning its offering into a new market space: eHealth Virtual Community Solution. Unlike the conventional healthcare IT enterprise market, this market space is currently less populated (although all large players are expected to vigorously play in this market space sooner or later). This re-positioning also incorporates a fundamental change in the company's business and revenue models. It involves 10 transitioning from the traditional up-front capital investment sales model into a service-based (per-user, per month fees) turn-key software program sales model, with or without support of a pure ASP model. This transition is focusing on better leveraging the strengths of the InterCare ICE(tm) software program, while trying to minimize the effects of current weaknesses of the company over customers, strategic partners and investors. Strengths and weaknesses Weaknesses Intercare most apparent weaknesses when operating in the US market are: - - Very small customer base in the USA - - Partial proof/testimony of live enterprise sites using ICE(tm) in the USA - - Insufficient customer services and support infrastructure in the USA - - Perception of a small ("thin") company in comparison with well established (and public) US healthcare IT companies - - Limited number of strategic partners in complementary expertise areas Strengths InterCare strengths when operating in the US market are: - - Point-Of-Care EMR management, care standards, workflow management, personal productivity management, common enterprise knowledge base, enterprise data warehouse, legacy integration middleware and data mining, which are generally available (ICE(tm)) - - ICE(tm) architecture initially designed to support Internet (n-tier) implementations - - ICE(tm) architecture supportive of concurrent multi-lingual users - - ICE(tm) architecture supportive of remote administration and maintenance - - InterCare control over competitive product packaging and pricing strategies - - InterCare proven quick turn-around compliance to market trends and demands (6-9 months between major versions) - - InterCare competitive lower cost of enterprise product development - - Extensive, multi-level customization of ICE(tm) software programs' components, requiring no source code intervention - - Compliance with HIPAA through customer controlled security business rules. - - InterCare expects its transition to the eHealth market space, coupled with its revised service-based sales model, to make these strengths a significant competitive advantage over its competition. Competition in the new market space The current and potential competition in the eHealth Virtual Community Solutions market is coming from the following categories: - - Pure Internet players - - Legacy + Internet players - - EMR/Clinical players - - Legacy players (see attached comparison analysis tables of current and potential competitors). Important recent transactions/events in the healthcare IT market space, which are significant to mention in the context of current and potential competition 11 to InterCare: Healtheon acquisition of WebMD and MedEX Eclipsys acquisition of Transition Systems/Healthvision McKessonHBOC acquisition of Abaton.com Market segment focus Short Term InterCare intends to primarily focus on the low-to-mid market of Integrated Healthcare Delivery Networks & hospitals in the USA, typically ranging from 150 beds to 350 beds. Within this market segment, InterCare intends to place specific focus on MeditechMAGIC and SMS Allegra/Allegra 2000 customers. The reason: weakness of these vendors in the Internet and EMR space, difficulties of these customers to finance up-front capital investments in healthcare IT and difficulty by such customers to recruit and hold to skilled healthcare IT professionals. Mid-to-Long Term InterCare intends to expand its target market to include: (a) Large Integrated Healthcare Delivery Networks & hospital, typically with 500+ beds (b) Managed care organizations. This market focus expansion requires further functional product support of loosely-coupled healthcare enterprises. Prospective Customer Access/Sales Process Leadership Short-term InterCare intends to establish a strong sales & sales support organization, which will enable the company to pro-actively push sales closure and market penetration. Initially, on a case-by-case basis, the company will take the decision whether to position InterCare as the prime contractor, or one of InterCare's strategic system integration partners as prime contractor (InterCare initially expects to become prime contractor to customers with up to 200 beds). Mid-to-Long Term InterCare expects to "divide" the market between itself and its strategic partners. InterCare will exclusively focus on the low-to-mid market, and its strategic partners, as VARs, will focus on the mid-to-high market. InterCare strategic partners will also exclusively approach national networks (such as Colombia/HCA, Tenet, etc.). InterCare sales and sales support organization will provide extensive support to the strategic partners in its efforts to acquire additional customers. Contract Model Principles Short-term InterCare initially intends to offer its prospective customers a fixed-fee, service-based software application, which defines deliverables (rather than time and materials), and distributes the cost of the entire turn-key software application to 60 monthly payments, starting 6-9 months after contract signing. This type of contract involves some level of risk taking with the customer, but not in a level which can endanger the profitability of each contract. (see definition of such contract principles in an attached document) Mid-to-Long Term InterCare intends to offer its prospective customers, after better studying the risk exposure involved, a risk-sharing contract which incorporates a lower level of monthly fees, yet participates in the financial improvements/upsides as reflected in the "bottom line" of such customers after system implementation. InterCare intends to work with a variety of healthcare market experts in order to formulate and verify its commitments, upsides and exposure levels in pilot contract(s) prior to making such contract model generally available. 12 Product Packaging & Pricing Short Term In order to enable quick transition to the new service-based sales model, InterCare does not intend to modify the current (and simple) packaging of its ICE(tm) software application . This includes 4 "rentable" software components: (a) Acute care workstation (b) Ambulatory care workstation, (c) Care standards workstation, and (d) Imaging archiving workstation. Each of these software components is priced between $49 - $79 per-user per-month for unlimited use (depending on the aggregate number of users), where the customer defines how many users license each of these components. With an expected average of 500 licensed users per a typical healthcare enterprise and $99 average per user per month fees, this should translate into ~$50,000 per month on behalf of software usage. Mid-to-Long Term InterCare intends to "comply" with the developing market conventions in clinical Internet product packaging (i.e. separate packaging and licensing for Lab, Radiology, Prescription, EMR, Reports, etc.). InterCare, however, intends to evaluate another dimension in product packaging. This includes the establishment of Standard, Professional and Enterprise editions per product/component, further enabling the company to exercise effective "foot-in-the-door" customer acquisition strategies. As the number of "products" grow (comparing to the current 4 products packaging), the monthly fees per "product", per user, per month are expected to be lower than the competition. The ASP model Short-term The ASP (Application Service Provider) model is gaining momentum in the IT market, although the healthcare market is slower in adopting it. InterCare expects different variations of the ASP model to be requested by a limited portion of its customers, ranging from remotely operating the system located in the customer's facilities, all the way through full outsourcing using the ASP servers farm model. In order to being able to offer prospective customers a pure ASP model, InterCare needs to establish a relationship with at least one ASP (which yet needs to be established). Any variation of ASP software application model does not mitigate the need to integrate the ICE(tm) software application with the existing legacy systems operational at the customer's enterprise. Mid-To-Long Term InterCare expects a meaningful portion of its customers to contract for the ASP model. By this time, InterCare and its strategic partners are expected to have established relationships with leading healthcare IT ASP providers. InterCare further expects some of the potential system integration partners to expand their offering and start serving as ASPs. This is expected to ease the product support requirements from InterCare, as the same partner will aggregate the expertise necessary for both one time and on-going support services. ICE(tm) Virtual Community Solution Vision & Scope General Overview The ICE(tm) enterprise software application in its generally available Version 1.0 will provide a wide range of capabilities/functionality in the following areas: Lifetime Electronic Medical Record Management - - Acute care 13 - - Ambulatory care - - Long term care - - Home care Multi-disciplinary care standards - - Protocols - - Pathways - - Care plans Quality & cost management - - Staffing - - Cost - - Case management Order entry & Result reporting - - Lab - - Radiology - - Pharmacy - - Nursing - - Diet - - Consultation - - Transcription - - Other Personal productivity - - Personal desktop - - Cover sheet - - Automatic document/form generation - - Automatic encounter codification Groupware productivity - - Unit charting - - Communication & messaging Security (HIPAA compliant) - - Security - - Confidentiality - - Compartmentalization Enterprise Knowledge base (multi-lingual) - - Enterprise lexicon - - Containers - - Legacy normalization Enterprise data warehouse - - Demography/Administrative - - ADT - - Clinical e.g ECG, Temperature, Spirometry, Pulse-Oximetry etc. - - Orders & Results - - Multimedia Legacy system integration - - Mini MPI (Master Patient Index) - - Bi-directional legacy data normalization Although InterCare intends to continue adding capabilities to its core Enterprise platform, the prime effort in the near term will be directed toward completing its transition to support the Internet application server paradigm. In addition, InterCare intends to put both focus and efforts on developing the complementary "pieces" of the ICE(tm) Virtual Community Solution, namely the provider and consumer components utilizing thin client technology. The Enterprise Software application InterCare is now utilizing Microsoft Visual Basic and SQL Server as the Technology infrastructure for ICE(tm). InterCare is also evaluating in parallel 3 additional options for implementing the GUI tier: - - ActiveX/JavaScript GUI components (for the enterprise's Intranet implementation); 14 - - Terminal Server architecture; - - JAVA based GUI. Beyond the Internet transition and the "natural" expansion of clinically-focused functionality, InterCare intends to place significant focus on the integration of financial / administrative topics into the existing ICE(tm) software application . These include: - - Verification of patient eligibility & health plan authorization of procedures being ordered at the point-of-care; - - Improved point-of-care alerts (through rules-based mechanism); - - Automatic optimization of encounter reimbursement codification (ambulatory care & acute care); - - Financial performance of a variety of aspects of the healthcare enterprise's operations. These and additional capabilities are based on off-the-shelf technologies/services commercially available from third-party vendors, and InterCare intends to partner with a variety of such vendors and integrate Their products into ICE(tm). Such products includes Video-Conferencing, Voice recognition, Medical transcription, Embededed Images with annotation capabilities etc. Anytime & Anywhere Secure Access by Authorized Enterprise Users Browser-based, thin client software application , enabling care providers with privileges within the healthcare enterprise to access the enterprise CDR with a sub-set of the functions provided by the ICE(tm) enterprise software application . These include: - - Retrieving and reviewing lifetime patient data - - Reviewing and approving new results - - Initiating new orders - - Operating the personal desktop (administrative) This component enables care providers to timely access the system, primarily From home, friends house or when they are on the road. It minimizes the need of the care provider to physically arrive at the enterprise facilities in order to gain access to the system. InterCare intends to incorporate, beyond password-based entry, biometric voice-authentication technologies (such as from Nuance), to further improve patient file access security. Secure Access by Non-affiliated Care Providers A browser-based, thin client software application , enabling care providers not affiliated with the healthcare enterprise access to a specific patient file. The access to the specific patient file is enabled through a patient-controlled password, which provides for secure access into the enterprises CDR to view only the authorizing patient's lifetime medical records. InterCare intends to incorporate, beyond password-based entry, biometric voice-authentication technologies (such as the one from Nuance), to further improve patient file access security. using this component, non affiliated care providers (e.g. with no access privileges within the healthcare enterprise) to use the following functionality: - - Retrieving and reviewing lifetime patient data - - Reviewing new results - - Initiating new orders This component provides significant benefit to the consumer/patient, as it enables care providers distant from his home/community to timely access his lifetime medical records. In the future, InterCare intends to expand its multi-lingual patient data retrieval support, so foreign care providers (when the consumer/patient is abroad), are able to retrieve the patient's medical record in their own language. Health Plan Member Anytime & Anywhere Secure Access A browser-based, thin client software application , which serves as the "entry point" for the consumer/patient in his relationship with the health 15 plan/healthcare enterprise. This component will be comprised of 5 main modules: Electronic Medical Record: Within this module, the consumer/patient will be able to execute the following functions: - - Retrieve, review and print the variety of segments comprising his lifetime medical records - - Enter problem-driven information prior to a physician appointment - - Enter outcome progress data after an acute care / ambulatory care encounter - - Enable non-affiliated physician(s) secure access to his personal lifetime medical records Retrieve and view the log file of who accesses his medical records, and which segments of it Services within this module, the consumer /patient will define service preferences, and gain access to a variety of healthcare enterprise services, including: - - Update personal & address details - - Service preference definition: lab, pharmacy, radiology, care providers, etc. - - Encounter scheduling request & approval - - Prescription generation & routing (to preferred pharmacy) - - Forms / certification generation - - Communication with care providers Medical Content Within this module, the consumer / patient will gain access to a variety of accredited medical content resources. These should help the consumer / patient become more knowledgeable, encourage self-treatment of minor problems, and tighten the relationship between the consumer / patient and the healthcare enterprise. Risk Factors CHANGES IN THE HEALTH CARE INDUSTRY COULD ADVERSELY AFFECT OUR BUSINESS. The $1 trillion health care industry is currently going through a period of tremendous change. Nowhere is this more evident than the patient care delivery network where the three main components--physician groups, insurers and hospitals - are scrambling for market share, volume and control. The health care industry is also subject to changing political, economic, and regulatory influences. These factors affect the purchasing practices and operations of health care organizations. Changes in current health care financing and reimbursement systems could cause us to make unplanned enhancements of applications or services, or result in delays or cancellations of orders, or in the revocation of endorsement of our applications and services by health care participants. Federal and state legislatures have periodically considered programs to reform or amend the U.S. health care system at both the federal and state level. Such programs may increase governmental involvement in health care, lower reimbursement rates, or otherwise change the environment in which health care industry participants operate. Health care industry participants may respond by reducing their investments or postponing investment decisions, including investments in our applications and services. Many health care industry participants are consolidating to create integrated health care delivery systems with greater market power. As the health care industry consolidates, competition to provide products and services to industry participants will become even more intense, as will the importance of establishing a relationship with each industry participant These industry participants may try to use their market power to negotiate price reductions for our products and services. If we were forced to reduce our prices, our operating results could suffer as a result if we cannot achieve corresponding reductions in our expenses. GOVERNMENT REGULATION OF THE HEALTH CARE INDUSTRY COULD ADVERSELY AFFECT OUR BUSINESS. We are subject to extensive regulation relating to the confidentiality and release of patient records. Additional legislation governing the distribution of medical records has been proposed at both the state and federal level. It may be expensive to implement security or other measures designed to comply with new 16 legislation. Moreover, we may be restricted or prevented from delivering patient records electronically. For example, until recently, the Health Care Financing Administration guidelines prohibited transmission of Medicare eligibility information over the Internet. Legislation currently being considered at the federal level could affect our business. For example, the Health Insurance Portability and Accountability Act of 1996 mandates the use of standard transactions, standard identifiers, security, and other provisions by the year 2000. We are designing our platform and applications to comply with these proposed regulations; however, until these regulations become final, they could change, which could cause us to use additional resources and lead to delays as we revise our platform and applications. In addition, our success depends on other health care participants complying with these regulations. Seasonality Of Revenue As a result of the Company's limited operating history and the emerging nature of the markets in which it competes, the Company is unable to accurately forecast its revenues. The Company's current and future expense levels are based largely on its investment plans and estimates of future revenues are to a large extent fixed. Sales and operating results generally depend on the timing of and ability to fulfill orders received, which are difficult to forecast. The Company may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenues in relation to the Company's planned expenditures would have an immediate adverse effect on the Company's business, prospects, financial condition and results of operations. Further, as a strategic response to changes in the competitive environment, the Company may from time to time make unavoidable pricing, service, marketing and/or acquisition decisions that could have material adverse effect on its business, prospects, financial condition and results of operations. For example, the Company has agreed in certain of its promotional arrangements with Internet aggregators to make significant fixed payments. There can be no assurance that these arrangements will generate adequate revenue to cover the associated expenditures and any significant shortfall would have a material adverse effect on the Company's financial condition and results of operations. The Company expects to experience significant fluctuations in its future quarterly operating results due to a variety of factors, many of which are outside the Company's control. Factors that may adversely affect the Company's quarterly operating results include: (i) the Company's ability to retain existing customers, attract new customers at a steady rate and maintain customer satisfaction; (ii) the Company's ability to acquire product, to maintain appropriate inventory levels and to manage fulfillment operations; (iii) the Company's ability to maintain gross margins in its existing business and in future product lines and markets; (iv) the development, announcement or introduction of new sites, services and products by the Company and its competitors; (v) price competition or higher wholesale prices in the industry; (vi) the level of use of the Internet and online services and increasing consumer acceptance of the Internet and other online services for the purchase of consumer products such as those offered by the Company; (vii) the Company's ability to upgrade and develop its systems and infrastructure and attract new personnel in a timely and effective manner; (viii) the level of traffic on the Company's Web site; (ix) technical difficulties, system downtime or Internet brownouts; (x) the amount and timing of operating costs and capital expenditures relating to expansion of the Company's business, operations and infrastructure; (xi) the number of popular high technology products introduced during the period; (xii) the level of merchandise returns experienced by the Company; (xiii) governmental regulation and taxation policies; (xiv) disruptions in service by common carriers due to strikes or otherwise; and (xv) general economic conditions and economic conditions specific to the Internet, online commerce and the high technology products industry. The Company expects that it will experience seasonality in its business, reflecting a combination of seasonal fluctuations in new software licenses sale and traditional retail seasonality patterns. Internet usage and the rate of Internet growth may be expected to decline during the summer. Further, sales in the traditional retail high technology industry are significantly 17 higher in the fourth calendar quarter of each year than in the preceding three quarters. EMPLOYEES We presently have five full time employees and seven independent contractors. We also out-source some of the personnel requirements to Meridian Holdings, Inc. an affiliated company. ITEM 2. DESCRIPTION OF PROPERTY We are presently occupying 1/5 of an office space leased by Meridian Holdings, Inc., our parent company, at 900 Wilshire blvd., Suite 500-508 Los Angeles California. The agreed cost attributable to us for the use of the facility is based on 1/5 of the total amount of cost to Meridian Holdings, Inc., for operating the suites. ITEM 3. LEGAL PROCEEDINGS We are not currently a party to any material legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters was submitted to a vote of the security holders, through the Solicitation of proxies or otherwise, during the twelve months ended December 31, 2002. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTER The Company's Common Stock is traded on the Bulletin Board maintained by the National Association of Securities Dealers, Inc. under the symbol "ICCO." The price range of the Company's Common Stock has varied significantly in the past months ranging from a high bid of $.03 and a low bid of $0.01 per share. The above prices represent inter-dealer quotations without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions. DESCRIPTION OF SECURITIES COMMON STOCK We are authorized to issue up to 100,000,000 shares of common stock, no par value, of which 13,293,403 shares were issued and outstanding as of December 31, 2002. All outstanding shares of our common stock are fully paid and nonassessable and the shares of our common stock offered by this prospectus will be, upon issuance, fully paid and nonassessable. The following is a summary of the material rights and privileges of our common stock. PREFERRED STOCK We authorized 20,000,000 shares of preferred stock, with no par value. No shares of preferred stock have been issued. VOTING. Holders of our common stock are entitled to cast one vote for each share held at all shareholder meetings for all purposes, including the election of directors. The holders of more than 50% of the voting power of our common stock issued and outstanding and entitled to vote and present in person or by proxy, together with any preferred stock issued and outstanding and entitled to vote and present in person or by proxy, constitute a quorum at all meetings of our shareholders. The vote of the holders of a majority of our common stock present and entitled to vote at a meeting, together with any preferred stock present and entitled to vote at a meeting, will decide any question brought before the meeting, except when California law, our Articles of Incorporation, or our bylaws require a greater vote and except when California law requires a vote of any preferred stock issued and outstanding, voting as a separate class, to approve a matter brought before the meeting. Holders of our common stock do not have cumulative voting for the election of directors. 18 DIVIDENDS Holders of our common stock are entitled to dividends when, as and if declared by the Board of Directors out of funds available for distribution. The payment of any dividends may be limited or prohibited by loan agreement provisions or priority dividends for preferred stock that may be outstanding. On December 10, 1999, as provided in Article IV of this Company's Articles of Incorporation, as amended, this Company has one hundred million (100,000,000) shares of common stock authorized and as of December 7, 1999, an aggregate of one hundred thousand (100,000) shares of common stock were issued and outstanding. The Board of Directors by way of a written consent declared a stock dividend of one hundred (100) shares of common stock for every one (1) share of common stock currently issued and outstanding, to be payable to shareholders of record as of December 30th, 1999. Meridian Holdings, Inc., the 51% owner of the outstanding shares of the Company's common stock declared a dividend simultaneously to all its shareholders of record who owns a share in Meridian Holdings, Inc., to receive five (5) shares of common stock of InterCare.com-dx. PREEMPTIVE RIGHTS. The holders of our common stock have no preemptive rights to subscribe for any additional shares of any class of our capital stock or for any issue of bonds, notes or other securities convertible into any class of our capital stock. LIQUIDATION. If we liquidate or dissolve, the holders of each outstanding share of our common stock will be entitled to share equally in our assets legally available for distribution to our shareholders after payment of all liabilities and after distributions to holders of preferred stock legally entitled to be paid distributions prior to the payment of distributions to holders of our common stock. TRANSFER AGENT. Corporate Stock Transfer of Denver, Colorado will serve as our transfer agent. Telephone number 303-282-4800. Recent Sales of Unregistered Securities The following information is given with regard to unregistered securities sold by the registrant during the past three years, including the dates and amounts of securities sold; the persons to whom we sold the securities; the consideration received in connection with such sales and if the securities were issued or sold other than for cash, the description of the transaction and the type and amount of consideration received.
Date Title Amount of Persons Cash or Non cash consideration Securities Sold 10/20/02 Common Stock 500,000 Anthony C. Dike Non cash compensation for services valued at $0.002 per share (2) 12/30/02 Common Stock 500,000 Anthony C. Dike Non cash compensation for services valued at $0.002 per share (2) (1) Anthony C. Dike is the founder and CEO of the Company since 1991, and has been compensated since inception of the Company by Common Stock and Stock Options (Please see related party transactions section below). (2) We relied upon Section 4(2) of the Act as the basis for the exemption from the registration requirements of the Act and there was no public solicitation involved. The shares of restricted common stock were sold to private investors who are "accredited investors" as defined under Rule 501(a)(3) under the Act.
19 ITEM 6. 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. 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. Total revenues for the year ended December 31, 2002 was $364,452 compared to $334,199 in the year ending December 31, 2001. The increase in revenue was due to the one time revenue generated from the sale of the Intellectual property asset of the company to Meridian Holdings, Inc., an affiliated company. The Company anticipate increase in revenue from the sale of software licenses, implementation and maintenance services starting in the second quarter of 2003. COST OF REVENUES. Cost of revenues decreased from $361,228 for the year ending December 31, 2001 to $ -0- in the comparable period in 2002. This represent 100% decrease. This decrease in cost of revenue was as a direct result of lack of sales and marketing associated with revenue generation. SALES AND MARKETING. Only minimal sales and marketing has been done by the Company, since focusing most of its resources at the moment in our Internet strategies, and software enhancement, testing and debugging. The Company is allocating a substantial amount of time and efforts towards sales and marketing of the ICE software. There can be no assurance that such efforts will materialize into a significant sales or revenue generation for the 2003 fiscal year.. 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 20 other Internet initiative launch costs, consisting primarily of personnel and consulting costs. The Company projects to spend over $1,250,000 during the next 12 months to fund project and content development. This is contingent upon the Company's ability to raise funds from investors. There can be no assurance that the company will be able to raise such any funds from the investors. Even if the funds were to be available, the terms may be prohibitive and will dilute the interest of the existing shareholders. GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased 97% for the year ending December 31, 2002 to $16,579, compared to $623,210 in 2001. The decrease in operating expense is due to the fact that Meridian Holdings,Inc. an affiliated company has absorbed all operating costs of the company as a means of repayment of the $325,000 being the amount of additional payments made to Meridian Holdings for the enhancement and maintenance of MedMaster software that was not delivered due to the decision of Meridian Holdings, Inc., to abandon the purchase of the MedMaster asset. 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 2003. Efforts are being made to raise more funds to be used in financing future operating costs. There is no guarantee that the Company will be able to raise such additional funds to finance all the anticipated operating costs. NET INCOME. The Company had net income of 347,873 or (0.027) per share for the year ended December 31, 2002, compared to net loss of $648,422 or (0.053) per share for the year ended December 31, 2001. The increase in net income was due to one time revenue generated from the sale of the intellectual property asset of the company to Meridian Holdings, Inc., an affiliated company. LIQUIDITY AND CAPITAL RESOURCES The Company has experienced a substantial increase in expenditures since entering into a master-value added reseller agreement with Meridian Holdings, Inc., as well as the launch of our Internet strategy, through the growth in those operations and related staffing. Management anticipates that these increased expenditure levels will continue for the foreseeable future. Management anticipates incurring additional expenses to increase our marketing and sales efforts, for content development and for technology and infrastructure development. Additionally, we will continue to evaluate possible investments in businesses, products and technologies and the expansion of our marketing and sales programs. The Company uses working capital to finance ongoing operations, fund the development and introduction of our new business strategy and acquire capital equipment. There is no guarantee that the Company will be able to raise additional funds, and if such funds becomes available, the cost incurred for securing such funds may not be on favorable terms to the Company, and this could have an adverse impact on the entire operation. PLAN OF OPERATIONS The Company has entered into joint marketing agreement with United System, Inc., HealthCPR Technologies, Inc., China Business Chain Group, LLC, Telehealth LLC Viewsonic Corporation, Acer America, Rx-Card, Inc., and QRS Diagnostics to market each others products and services. On November 25, 2002 the Company announced the availability for deployment of 21 InterCare Clinical Explorer (ICE), an innovative and robust software application designed to integrate every aspect of the healthcare enterprise on Tablet PC. With the release of the enhanced Windows XP operating system for Tablet PC from Microsoft and the launch of new Tablet PC hardware from such hardware manufacturers as HP, Toshiba, ViewSonic, Acer and Fujitsu, to name a few, InterCare leverages the power of this important new platform to make the ICE clinical applications even more seamless and easier for healthcare providers to adapt, faster than ever before. The Company will also embark on an advertisement campaign over the next several months in major newspapers and consumer and healthcare journals of all its new products and services. There is no assurance that such advertisement campaign will yield any dividend. ITEM 7. FINANCIAL STATEMENTS The financial statements required to be filed hereunder are included under Item 13 Exhibit 99.1 of this report. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. Board of Directors The business of the Company is managed under the direction of the Board. The Board presently consists of five directors, three of which are outside members and two are officers of the Company. The Board members will serve until their successors are elected at the 2003 Annual Meeting, unless they earlier resign or are removed as provided in the Bylaws. The terms of the Board of Directors is staggered over a three year period. Executive Officers Our officers are elected by the Board of Directors and hold office at the will of the Board. As of December 31, 2002, directors, control persons, and executive Officers of the Company were as follows:
Name Age Title Anthony C. Dike, MD 48 Chairman, Director Chief Executive Officer, Secretary Treasurer Russell Lyon, MA 55 President, Director, Chief Technology Officer Felipe Carino, MSc., MBA 46 Senior Vice President Marketing and New Business Development Jude Uwaezuoke 58 Director Randall Maxey 61 Director Wesley Bradford 62 Director
22 Anthony C. Dike, MD, our Chairman, Chief Executive Officer, Secretary and a director. Dr. Dike has been the Chairman of the Board, CEO and President of the Company since August, 1999. Anthony C. Dike, a physician by training and an entrepreneur that has funded and developed various start-up high technology businesses from inception to fruition through his private Investment Firm, MMG Investments Inc., a California corporation. He is the founder of CGI Communications Services, Inc. He also is the founder of the registrant formerly known as Intercare Diagnostics, Inc., a United States Food and Drug Administration (USFDA) registered Bio-Medical Software Manufacturing Company, with over 5 Multimedia healthcare related software programs in the market. He also pioneered the design and development of the Mirage Systems Biofeedback Software Program, the first United States Food and Drug Administration approved software only for Biofeedback and Relaxation Training. He is also the founder of Capnet IPA, and Meridian Health Systems, Inc. Anthony C. Dike, MD, is also a member of the peer-review standing panel for United States Department of Education National Institute for Disability and Rehabilitation Research. He has served as a consultant to United Nations Development Project-Sustainable Human Development Program. He most recently pioneered the design and development of "InterCare Clinical Explorer (ICE)", a scalable software application specifically designed to effect cost-effective integration of all aspects of the healthcare enterprise through documentation, information tracking and error reduction that supports patient safety and greater efficiency among healthcare providers. Russell A. Lyon, MA, our President, Chief Technology Officer and a Director, will devote approximately 100% of his time to our affairs. Russell Lyon has been a designer and developer of computer-based educational and training programs for nearly two decades. He has served as both designer and developer on major training projects for a variety of corporate entities, including TRW, Unocal, Union Bank and Southern California Edison. As the founder and principal of Kinetic Media, he was a Level II Authorized Developer for Macromedia Director and has been a featured speaker at the Macromedia International User Conference on innovative uses of Director. He has developed or produced over a dozen separate commercial software titles, including The Mirage Systems Interactive Multimedia Biofeedback Interface for Intercare Diagnostics. He holds a BA degree in Psychology from Cornell University and an MA degree in both Educational Psychology and Instructional Technology form California State University, Long Beach. Felipe Carino, Jr, MSc, MBA, Felipe Carino, Jr. is SVP Marketing and New Business Development at InterCare.com-DX, Inc. Felipe has over 23 years of experience in the Information Technology area with a number of leading companies. He has a unique background and is a visionary entrepreneur. He has conceived and led several pioneering visionary products with hands-on technical development, management, marketing, new business development and competitive pre-sales, then followed by customer deployment and innovative use of these leading-edge products. Felipe's career spans leading-edge research institutions (like Bell Labs) to conceiving developing new product concepts at established companies (like Fairchild, Ford Aerospace) to entrepreneurial positions (at Teradata and FileTek) as well as startups where he was a founding employee. In 1986, he founded a company to commercialize heterogeneous databases. Felipe developed new product ideas at these companies years before they were validated commercial concepts. For example, in 1978 he developed a relational database concept one year before Oracle was founded in 1979, and in 1980 a UNIX workstation concept at Fairchild which SUN validated in 1983. Most recently, at UltiData he developed autonomic self-tuning tools for database, storage and overall system optimization. At FileTek, Felipe negotiated a strategic OEM deal with IBM for UDB/DB2 DataJoiner which created a new database product no other company had at the time. Felipe holds seven patents, has 20 major journal/conference publications and has presented papers at major industry conferences. Felipe holds an Executive MBA from USC, as well as a Master of Science degree in Computer Science and two Bachelor's degrees (Computer Science and Mathematics) from New York University. Felipe also took an Entrepreneurship course at Loyola Marymount University. Finally, Felipe is an area editor for Information Systems Journal, a leading academic publication 23 Dr. Bradford, a graduate of New York University School of Medicine is Medical Director of Capnet IPA (Los Angeles). Since 1982, has served on the Clinical faculty in family medicine at Harbor-UCLA Medical Center since 1982. He is co-author of a pharmaceutical proposal that helps the center save over $1 million annually. In conjunction with his humanitarian work as a member of the Rotarian Polio-Corrective Surgery Team for Crippled Children, he has worked toward bettering the lives of crippled children in both Uganda and India. In 1987 he co-founded a medical group in Torrance, Calif. Bradford, who has a Masters Degree in public health from UCLA and an MBA from Cal State Long Beach, is a Fellow of the American Academy of Family Physicians since 1980. He has a special academic interest in electronic medical record systems has served as a consultant to the state, county and municipal governments in the areas of electronic death registration system development, primary care case management, and health care access. Dr. Bradford has not held any position in a reporting public company during the last five years. Dr. Maxey, a physician specializing in renal medicine, is chairman of the National Medical Association Board of Trustees. Licensed to practice medicine in California and Guam, Maxey is affiliated with a number of hospitals in the Los Angeles area, including the Daniel Freeman Hospitals, Robert F. Kennedy Medical Center and Cedars Sinai Medical Centers. In addition to serving as an attending physician at the Guam Memorial Hospital (Tumuning, Guam), he is the supervising medical director of the Los Angeles Dialysis Center and the Premiere Pacific Dialysis Center (Dededo, Guam). A published lecturer and award-winning presenter, Maxey received a BS in pharmacy from the University of Cincinnati, a PhD in cardiovascular pharmacology and MD from Howard University. He is founder and president of the Church Health Network and serves on the boards of various health organizations, including the Guam Renal Care Corporation, of which he is chairman. Dr. Maxey has not held any position in a reporting public company during the last five years. Jude Uwaezuoke, who has over 15 years of administrative, marketing and financial management experience, is president of Speedy-Care Medical Distributors (Inglewood, Calif.), a privately held durable medical equipment retailer. Currently in his third year of study at West Los Angeles University Law School, Uwaezuoke received a BS from California State University Dominguez Hills and an MBA from West Coast University. With the exception of Anthony C. Dike, MD, Chairman & CEO, and Mr. Russ Lyon none of the other directors are, or have been employed by the Company. There are no family relationships between any directors or executive officers. Meetings And Committees of The Board of Directors COMMITTEES OF THE BOARD OF DIRECTORS FUNCTIONS OF COMMITTEES AUDIT AND ETHICS COMMITTEE: - Has general powers relating to accounting disclosure and auditing matters; - Recommends the selection and monitors the independence of our independent auditors; - Reviews the scope and timing of the independent auditors' work; - Reviews the financial accounting and reporting policies and principles appropriate for the Corporation, and recommendations to improve existing practices; - Reviews the financial statements to be included in the Corporation's Annual Report on Form 10-KSB - Reviews accounting and financial reporting issues, including the adequacy of disclosures; - Monitors compliance with the Code of Ethics and Standards of Conduct; - Reviews and resolves all matters presented to it by our Ethics office; - Reviews and monitors the adequacy of our policies and procedures, and the organizational structure for ensuring general compliance with environmental, health and safety laws and regulations; - Reviews with the General Counsel the status of pending claims, litigation and other legal matters; 24 - Meets separately and independently with the Chief Financial officer, Internal Audit and our independent auditors. It is composed of Messrs. Uwaezuoke, Bradford, and Maxey EXECUTIVE COMMITTEE: The Executive Committee may exercise the power of the Board of Directors in the management of the business and affairs of the Corporation at any time when the Board of Directors is not in session. The Executive Committee shall, however, be subject to the specific direction of the Board of Directors and all actions must be by unanimous vote. It is composed of Messrs. Dike, Lyon, and Carino. Meetings of the Board of Directors During the fiscal year ended December 31, 2002, the Company's Board of Directors acted Four times by a unanimous written consent in lieu of a meeting. Each member of the Board participated in each action of the Board. AUDIT AND ETHICS COMMITTEE REPORT Management has the primary responsibility for the financial reporting process and the audited consolidated financial statements, including the systems of internal controls. The Corporation's independent auditors, Messr. Andrew Smith CPA, and its predecessor Haskell & White LLP are responsible for expressing an opinion on the quality and conformity of consolidated financial statements with accounting principles generally accepted in the United States. In our capacity as members of the Audit and Ethics Committee and on behalf of the Board of Directors, we oversee the Corporation's financial reporting process and monitor compliance with its Code of Ethics and Business Conduct. The Audit Committee has not adopted a written charter, which has been approved by the Board of Directors The members of the Audit and Ethics Committee are independent as defined by the listing standards of the National Association of Securities Dealers(NASD) In connection with our oversight responsibilities, we have: - discussed with the internal and independent auditors the overall scope and plans for their audits; - reviewed and discussed the audited consolidated financial statements included in InterCare.com, DX, Inc.,2002 Annual Report with management and the independent auditors; - discussed with the independent auditors the matters (including the quality of the financial statements and clarity of disclosures) required to be discussed under the American Institute of Certified Public Accountants' Statement on Auditing Standards No. 61, Communications with Audit Committees, which generally requires that certain matters related to the performance of an audit be communicated to the audit committee; - received from the independent auditors and reviewed the written disclosures and the letter required from the independent auditors required by the Independence Standards Board, and have discussed with them their independence from management and the Corporation; - considered the nature of the nonaudit services performed by the independent auditors and the compatibility of those services with their independence; and - met with the internal and independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Corporation's internal controls, and the overall quality of the Corporation's financial reporting. Based on the reviews and discussions referred to above, we recommended to the Board of Directors (and the Board has approved) the inclusion of the audited Consolidated financial statements referred to above in the Corporation's Annual Report on Form 10-KSB for the year ended December 31, 2001 and 2002, for filing with the Securities and Exchange Commission. 25 Members of the Audit and Ethics Committee: Jude Uwaezeoke Chairman Randall Maxey Wesley Bradford Clinical Advisory Board Duties and Functions Members of InterCare.com-DX, Inc. clinical advisory board will assist the company in updating its knowledge-based clinical content and develop clinical guidelines, pathways and protocols. Additionally, the advisory board, working with program developers and management, will review programmatic issues relating to compliance with appropriate regulatory authorities. They will also serve on InterCare's Speakers Bureau regarding practical, clinical issues relating to ICE(tm), the company's scalable healthcare software solution. ICE is specifically designed to effect cost-effective integration of all aspects of the healthcare enterprise through documentation, information tracking and error reduction that supports patient safety and greater efficiency among healthcare providers. This panel will be expanded in future to include experts from different healthcare profession Members of the Clinical Advisory Board Dr. Wesley Bradford, a graduate of New York University School of Medicine, is Medical Director of Capnet IPA (Los Angeles). He has served on the clinical faculty in family medicine at Harbor-UCLA Medical Center since 1982. He was co-author of a pharmaceutical proposal that helps the center save over $1 million annually. He has done humanitarian work in both Uganda and India as a member of an international Rotarian Polio-Corrective Surgery Team for Crippled Children, bettering the lives of crippled children there. In 1987 he co-founded a medical group in Torrance, California. Bradford, who has a Masters Degree in public health from UCLA and an MBA from Cal State Long Beach, has been a Fellow of the American Academy of Family Physicians since 1980. He has a special academic interest in electronic medical record systems, and has served as a consultant to the state and county governments in the areas of electronic death registration system development, primary care case management, and health care access. Dr. Rosalyn Scott, a cardiovascular and thoracic surgeon, is an associate professor with the Department of surgery at Charles R. Drew University of Medicine and Science (Los Angeles). She received her medical degree from New York University School of Medicine and a Masters Degree in health administration from the University of Colorado. She is an adjunct professor with Arizona State University's School of Health Administration and Policy. She is a staff physician with the Brotman Medical Center (Culver City), Harbor-UCLA Medical Center and King/Drew Medical Center. Dr. Scott, the author of numerous professional and technical articles, has served extensively on national, state and local advisory committees. Dr. Wignes Warren, an assistant clinical professor of pediatrics at the University of Southern California, is licensed to practice medicine in the states of California, New York , and holds current medical practice licenses with the Ceylon Medical Council and the United Kingdom. He received an MD with honors from the University of Sri Lanka and served as the Chief Resident of Methodist Hospital (New York City) after serving internships at General Hospital and Children's Hospital in Colombo, Sri Lanka. He is a Fellow of the American Academy of Pediatrics. Certified by the American Board of Managed Care Medicine, the American Board of Quality Assurance and Utilization Review Physicians, and the American Board of Forensic Medicine, Dr. Warren is currently a member of the Peer Review Committee of Blue Shield of California. Anthony C. Dike, MD, our Chairman, Chief Executive Officer, Secretary and a director. Dr. Dike has been the Chairman of the Board, CEO and President of the Company since August, 1999. Anthony C. Dike, a physician by training 26 and an entrepreneur that has funded and developed various start-up high technology businesses from inception to fruition through his private Investment Firm, MMG Investments Inc., a California corporation. He is the founder of CGI Communications Services, Inc. He also is the founder of the registrant formerly known as Intercare Diagnostics, Inc., a United States Food and Drug Administration (USFDA) registered Bio-Medical Software Manufacturing Company, with over 5 Multimedia healthcare related software programs in the market. He also pioneered the design and development of the Mirage Systems Biofeedback Software Program, the first United States Food and Drug Administration approved software only for Biofeedback and Relaxation Training. He is also the founder of Capnet IPA, and Meridian Health Systems, Inc. Anthony C. Dike, MD, is also a member of the peer-review standing panel for United States Department of Education National Institute for Disability and Rehabilitation Research. He has served as a consultant to United Nations Development Project-Sustainable Human Development Program. He most recently pioneered the design and development of "InterCare Clinical Explorer (ICE)", a scalable software application specifically designed to effect cost-effective integration of all aspects of the healthcare enterprise through documentation, information tracking and error reduction that supports patient safety and greater efficiency among healthcare providers. Indemnification Our Articles of Incorporation provide that we shall indemnify, to the full extent permitted by California law, any of our directors, officers, employees or agents who are made, or threatened to be made, a party to a proceeding by reason of the fact that he or she is or was one of our directors, officers, employees or agents against judgments, penalties, fines, settlements and reasonable expenses incurred by the person in connection with the proceeding if specified standards are met. Although indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons under these provisions, we have been advised that, in the opinion of the SEC, indemnification for liabilities arising under the Securities Act of 1933 is against public policy as expressed in the Securities Act and is, therefore, unenforceable. ITEM 10. EXECUTIVE COMPENSATION Executive Officers The executive officers of the Company are as follows: Anthony C. Dike, Chairman/CEO Russ A. Lyon, President/CTO Felipe Carino Senior Vice President Business Development EXECUTIVE COMPENSATION The table below shows information concerning the annual and long-term compensation for services in all capacities to the Company for the Chief Executive Officer and other full-time employee executive officers of the Company: Annual Compensation
Anthony C. Dike (1) 2002 $0 0 100,000 0 Russ A. Lyon (2) 2002 $100,000 0 100,000 100,000 Felipe Carino (3) 2002 $ 72,000 100,000 50,000 1. As of December 31, 2002, Anthony C. Dike has not received any salary from the registrant, and has deferred such payment until the registrant can afford to pay after meeting all other obligations. 27 2. Mr. Russ A. Lyon since the beginning of the 2002 fiscal year, has received about 50% of his approved salary of $100,000,and has deferred the remaining portion until such a time the company can afford to make such payment. The restricted shares were issued to Mr. Lyon, as part of his compensation package pursuant to certain amended stock Compensation agreement entered between Mr. Lyon and the registrant in 2001. 3. Mr. Felipe Carino joined the company in November of 2002, his signing bonus was 50,000 of our common stock to be awarded at the end of one year anniversary of his employment contract.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following tables set forth information regarding the beneficial owners of our common stock, as of December 31 , 2002, by the following individuals or groups: Each of our executive officers; Each of our directors; Each person, or group of affiliated persons, whom we know beneficially owns more than 5% of our outstanding stock; and All of our directors and executive officers as a group. Except as otherwise noted, and, to the best of our knowledge, the persons named in this table have sole voting and investing power with respect to all of the shares of common stock held by them. As of the table date we had 13,293,403 common shares outstanding.
Name and Address of Amount and Nature of Beneficial Owner Title Beneficial Ownership Status Percent of Class - ------------------------------ -------- -------------------- -------- ----------------- Anthony C. Dike (1)(2) Chairman 5,500,000 Active 41% 4127 West 62nd Street CEO Los Angeles, CA 90043 Director Russ Lyon President 210,000 Active 1.5% 900 Wilshire Blvd, #500 CTO Los Angeles, CA 90017 Director Jude Uwaezuoke Director 0 Active 0% 900 Wilshire Blvd, #500 Los Angeles, CA 90017 Randall Maxey Director 0 Active 0% 900 Wilshire Blvd, #500 Los Angeles, CA 90017 Wesley Bradford Director 0 Active 0%% 900 Wilshire Blvd, #500 Los Angeles, CA 90017 Named Officers and 5,710,000 42.5% Directors As a Group (1) Other Beneficial Owners Meridian Holdings, Inc. 3,578,250 27 % MMG Investments, Inc 900.100 6.8% Total number of shares outstanding 13,293,403 100% (1) Officer or Directors' 5,710,000 shares of Common Stock listed above does not include 3,850,000 shares of Common Stock options granted to Anthony C. Dike, and 100,000 granted to all the members of the board of directors as of December 31, 2002, as indicated in the table below.
28 OPTIONS/SAR GRANTS IN LAST FISCAL YEAR The following table shows information regarding grants of stock options in this last completed fiscal year to the members of the management team of our Company:
Individual Grants Number of % of Total Securities Options/SARs Underlying Granted to Exercise Options/SARs Employees or Base Expiration Name Granted (#) in Fiscal Year Price ($/sh) Date (a) (b) (c) (d) (e) Anthony C. Dike 100,000 100% Variable 12-31-2007 Russ A. Lyon 100,000 100% Variable 12-31-2007 Felipe Carino 100,000 100% Variable 12-31-2007 Ruben Patolsky 100,000 100% Variable 12-31-2007 Guy Gani 100,000 100% Variable 12-31-2007 Deepa Jayaraman 100,000 100% Variable 12-31-2007 Randall Maxey 100,000 100% Variable 12-31-2007 Jude Uwaezuoke 100,000 100% Variable 12-31-2007 Wesley Bradford 100,000 100% Variable 12-31-2007 Foday Conteh 100,000 100% Variable 12-31-2007 Elizabeth Campos 100,000 100% Variable 12-31-2007
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS During the second quarter of 2002, the registrant sold all the intellectual property rights of ICE(tm) to Meridian Holdings, Inc., an affiliated company for $325,000. ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS OF FORM 8-K ITEM DESCRIPTION Exhibit 99.1 Independent Auditors Financial Statement and Schedules, when available ITEM 14. CONTROLS AND PROCEDURES Our management, including our CEO and President, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-14(c) promulgated under the Securities and Exchange Act of 1934, as amended) as of a date (the "Evaluation Date") within 90 days prior to the filing date of this report. Based upon that evaluation, our CEO and President have concluded, that our disclosure controls and procedures are effective for timely gathering, analyzing and disclosing the information we are required to disclose in our reports filed under the Securities Exchange Act of 1934, as amended. There have been no significant changes made in our internal controls or in other factors that could significantly affect our internal controls subsequent to the Evaluation Date. 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: March 27, 2003 Signature By: /s/ Russ A. Lyon ----------------------------- Russ A. Lyon President and Chief Technology Officer 29 EXHIBIT 99.1 I, Anthony C. Dike, certify that: 1. I have reviewed this annual report on Form 10-KSB of InterCare.com-Dx, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the ""Evaluation Date""); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 27, 2003 By:_/s/ Anthony C. Dike Anthony C. Dike Chairman and CEO (Principal Executive Officer) 30 InterCare.com-dx, Inc. Financial Statements And Independent Auditor's Report As of December 31, 2002
Table of Contents Page Independent Auditor's Report . . . . . . . . . . . . . . . . . . .1 Audited Financial Statements: Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Statements of Operations . . . . . . . . . . . . . . . . . . . . .3 Statements of Changes in Stockholders' Equity . . . . . . . . .4 Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . 5 Notes to Financial Statements . . . . . . . . . . . . . . . . . .6
1 INDEPENDENT AUDITOR'S REPORT To the Board of Directors InterCare.com-dx, Inc. I have audited the accompanying balance sheet of InterCare.com-dx, Inc., as of December 31, 2002 and 2001 and the related statements of income, stockholders' equity, and cash flows for the year then ended. My responsibility is to express an opinion on these financial statements based on my audit. I have conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of InterCare.com-dx, Inc., as of December 31, 2002 and 2001 and the results of their operations and their cash flows for the year then ended, in conformity with generally-accepted accounting principles. ANDREW M. SMITH CERTIFIED PUBLIC ACCOUNTANT Long Beach, California March 27, 2003 2 InterCare.com-dx, Inc. Balance Sheet As At December 31st
2002 2001 ========= ======== ASSETS Current assets Cash . . . . . . . . . . . . . . . . . . . . . . . . $ 2,930 $ 3,327 Accounts Receivable.(Note 2) . . . . . . . . . . . . . . . . 1,386,350 1,386,350 Less: Allowance for Doubtful Accounts . . . . . . . . . . . - - --------- --------- 1,386,350 1,386,350 --------- --------- Inventory. . . . . . . . . . . . . . . . . . . . . . 52,211 52,211 Prepaid Expense . . . . . . . . . . . . . . . - - --------- --------- Total Current Assets . . . . . . . . . . . . . . . . . . 1,441,491 1,441,888 Property, Plant, and Equipment Net of accumulated Depreciation (Note 1) . . . . . . . . . .. - - Other Assets Organizational Costs . . . . . . . . . . . . . . . - - Deferred Public Offering Cost (Note 5) . . . . . . . . . . . 65,332 65,332 --------- ------- Total Assets . . . . . . . . . . . . . . . . . . . . . . $ 1,506,823 $1,507,210 ========= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts Payable (Note 3) . . . . . . . . . . . . . $ 1,228,949 1,586,210 --------- -------- Total Current Liabilities. . . . . . . . . . . . . . . . $ 1,586,210 Long term liabilities . . . . . . . . . . . . . . . . 55,800 46,800 --------- -------- Total Liabilities. . . . . . . . . . . . . . . . . . . . $ 1,284,749 $ 1,633,010 ========= ======= Stockholders' equity Common stock (100,000,000 shares authorized, no par value, 13,293,403 shares issued and outstanding) (Note 2). . . . . . . . . . . . . . . . . . 710,078 710,078 Accumulated Deficit. . . . . . . . . . . . . . . . . . . 488,005 (835,878) -------- -------- Total Equity 222,074 (125,800) -------- -------- Total Liabilities & Equity . . . . . . . . . . . . . . . $1,506,823 $ 1,507,210 ========= ========
See Accountants Report and Notes to Financial Statements 3 InterCare.com-dx, Inc. Statement of Operations Year ended on as of December 31,
2002 2001 ===== ===== Revenue $ 364,452 $ 334,199 --------- ------- Less: Cost of Revenues $ (361,228) --------- ------- Gross Margin $ 364,452 $ (27,029) ========= ======= Operating Expense 16,579 623,210 --------- ------- Other Income and Expense 1,817 --------- ------- Net Income $ 347,873 $ (648,422) ========= ======= Weighted average number of shares 12,768,098 11,621,396 Earnings (loss) per common share $ 0.027 $ (0.053)
See Accountants Report and Notes to Financial Statements 4 InterCare.com-dx, Inc Statement of Cashflows For the Year Ended December 31
2002 2001 ====== ====== CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 347,873 $ (648,422) Adjustments to reconcile net income to net cash Provided by operating activities Depreciation Expense 9,070 (Increase) Decrease in Accounts receivable 3,835 Inventories 14,460 Prepaid Expenses - 11,700 Accounts Payable (357,271) 566,920 ---------- -------- NET CASH USED IN OPERATING ACTIVITIES (9,397) (54,137) ========== ========= CASH FLOW FROM INVESTING ACTIVITIES Disposal of Fixed Assets 575 Deferred Offering Costs (52,322) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (51,747) ======== ======== CASH FLOWS FROM FINANCING ACTIVITIES Proceeds From Sale of Stock 59,450 Repayment of debt - - Proceeds from long-term debt 9,000 46,800 ------- ------- NET CASH PROVIDED BY FINANCING ACTIVITIES 9,000 106,250 ------- ------- Increase (Decrease in cash) (397) 366 CASH AT BEGINNING OF PERIOD 3,327 2,961 -------- ------- CASH AT END OF PERIOD $ 2,930 $ 3,327 ======== =======
See Accountants Report and Notes to Financial Statements 5 InterCare.com-dx, Inc. Statement of Changes in Stockholders' Equity
Common Stock Accumulated Total Transaction and Date Shares Amount Deficit Equity ============ ======= ========= ========= Balance as at December 31, 1998 4,900,000 $ 75,000 $ (440,049) $ (365,049) ------------ -------- -------- -------- Net Loss Year Ended 12/31/99 (114,423) (114,423) Sold 51% to Meridian Holdings, Inc.(Note 2) 5,100,000 575,628 575,628 Shares issued to A. C. Dike for services (Note 3) 1,000,000 ----------- -------- -------- -------- Balance as at December 31, 1999 . . . . . . 11,000,000 650,628 (554,472) 96,156 ----------- --------- -------- -------- Net Income Year Ended 12/31/2000 367,016 367,016 ----------- -------- -------- -------- Balance as at December 31, 2000 . . . . . . 11,000,000 $ 650,628 $ (187,456) $ 463,172 ----------- ---------- -------- ------- Net Income Year Ended 12/31/2001 (648,422) (648,422) Shares issued to employees and Consultants 1,230,902 Shares sold 11,890 59,450 59,450 ---------- -------- --------- -------- Bal December 31, 2002 12,242,792 $ 710,078 $ (835,878) $ (125,800) Net Income 347,873 347,873 Shares in lieu of compensation 1,050,611 ---------- -------- --------- -------- 13,293,403 $ 710,078 $ 488,005 $ 222,073 =========== ========== ========== ==========
See Accountants Report and Notes to Financial Statements 6 InterCare.com-dx, Inc. Notes to the Financial Statements Note 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES 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. On June 30, 2001, the company discontinued its sale of Medmaster software at the request of Meridian Holings, Inc., and instead embarked upon a joint development effort with Meridian Holdings, Inc., for a new replacement software known as ICE(tm)(InterCare Clinical Explorer), that was released in the third quarter of 2003. 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. 7 Property and equipment consists of the following as of December 31, 2002 and 2001:
2002 2001 ===== ===== Computer Hardware & Software $68,264 $68,264 Less: Accumulated Depreciation 68,264 68,264 ------- ------- $ 0 $ 0 ======== =======
Advertising The company has the policy of expensing advertising costs as incurred. There were no advertising costs charged to expense for the year ended December 31, 2002. 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. The intrinsic market value of such share were deemed negligible for year ended December 31, 2002, resulting in no increase in compensation or shareholder equity. 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. During the fiscal year ended December 31, 2001, the company sold software licenses in the amount of 8 $150,000 to Tenet Health Systems, Medical, Inc. 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 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 42,233.59 Accounting Fees and Expenses 5,750.00 Printing 7,077.00 Miscellaneous Expenses 3,671.00 --------- Total $65,331.59 ==========
Income Taxes The Company has made no provision for income taxes because of accumulated business and tax losses since its inception. 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. Recent Accounting Pronouncements In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" which was amended by SFAS No. 137. The Company is required to adopt this new standard in April 2001. SFAS No. 133 establishes methods of accounting for derivative financial instruments and hedging activities related to those instruments as well as other hedging activities. Because the Company currently holds no derivative financial instruments and does not currently engage in hedging activities, adoption of SFAS No. 133 is expected to have no material impact on the Company's financial condition or results of operations. 9 In April 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on Costs of Start-up Activities" ("SOP 98-5"), which is effective for fiscal years beginning after December 15, 1998. SOP 98-5 requires that costs of start-up activities and organization costs be expensed as incurred. The adoption of SOP 98-5 had no material effect on the Company's financial position or results of operations. The Company adopted SFAS No. 130, "Reporting Comprehensive Income." For year-end financial statements, SFAS No. 130 requires that comprehensive income, which is the total of net income and all other non-owner changes in equity, be displayed in a financial statement with the same prominence as other consolidated financial statements. The Company displays the components of other comprehensive income in the accompanying statements of stockholders' equity and comprehensive income (loss). The Company has adopted SFAS No. 101, "Revenue Recognition." This rule stipulates that revenue be recognized when the purchase price for the product is fixed and determined between the seller and the buyer, and the collectibility is reasonably assured. This policy will not have a material impact on the companies financial position or results of operation. Note 3. RELATED PARTY TRANSACTIONS During the second quarter of 2002, the registrant sold all the intellectual property rights of ICE(tm) software including the source-code to Meridian Holdings, Inc., an affiliated Company in the amount of $325,000. Note 4. STOCK-BASED COMPENSATION 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". NOTE 5. LEGAL FEES The Company has also agreed to pay Mr. Randolph Katz, Esq., of Bryan Cave LLP, for his legal Services in connection to our initial public offering as invoiced, which as of this writing is approximately $25,000. These obligation have been accrued in the accompanying balance sheet and the costs are included in deferred public offering costs. 11 -----END PRIVACY-ENHANCED MESSAGE-----