10QSB 1 in10qsb06302007.txt INTERCARE 10QSB FOR PERIOD ENDED JUNE 30, 2007 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-QSB ( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2007 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From ___________ to ____________ COMMISSION FILE NUMBER: 333-57780 INTERCARE 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) 6080 201 Center Drive, Los Angeles, California 90045 ---------------------------------------------------------------- (Address of Principal Executive Offices) (310) 242-5634 ---------------------------------------------------------------- (Registrant's telephone number, including area code) N/A ---------------------------------------------------------------- (Former name, former address and formal fiscal year, if changed since last report) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months and, (2) has been subject to such filing requirements for the past 90 days. Yes ( X ) No ( ) As of June 30, 2007, InterCare DX, Inc., Registrant had 19,903,902 shares of its no par value common stock outstanding with a total market value of $597,117 Page 1 of 19 sequentially numbered pages Form 10-QSB Second Quarter 2007 InterCare DX, Inc. INDEX PAGE ---- PART I. FINANCIAL INFORMATION Item 1 Financial Statement Balance Sheets - June 30, 2007 3 Statements of Operations for the six Months ended June 30, 2007 4 Statement of Cash Flows for the Three Months ended June 30, 2007 5 Notes to Financial Statements 6-9 Company Overview 10 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 16-18 Item 3 Controls and Procedures 18 PART II OTHER INFORMATION Additional Information 18 Signature 19 2 INTERCARE DX, INC. BALANCE SHEET (UNAUDITED)
As of June 30 December 31 2007 2006 ====== ====== ASSETS Current assets Cash $ 0 $ 4,378 Accounts Receivable (Note 1 ) 132,010 4,210 Other Current Assets 500 50,137 --------- ------ Total Current Assets.. . . . . . . . . . . 132,510 $ 58,725 Plant, Property, and Equipment 367 417 ========== ======== Total Assets 132,877 $59,142 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts Payable (Note 1) . . . . . . . . $ 80,914 80,914 Deferred Revenue 0 50,137 Advances from Officer 129,927 7,549 --------- -------- Total Current Liabilities . . . . . .209,841 . 138,600 Long term liabilities . . . . . .. . . . - - --------- -------- Total Liabilities . . . . . . . . . 210,841 138,600 --------- -------- Liabilities and Stockholders' Equity Stockholders' Equity Common stock (100,000,000 shares authorized no par value 19,903,902 and 19,403,902 shares issued and Outstanding as of June 30, 2007 and December 31, 2006) (Note 2) . . . . . . . . . .1,021,203 1,021,203 Accumulated Deficit (1,099,167) (1,120,908) ---------- ---------- Total Stockholders' Equity . . . . . .(77,964) (79,458) ---------- --------- Total Liabilities & Equity. . . . . . . . . . . $ 132,877 $ 59,142 ========== =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 3 INTERCARE DX, INC. Income Statement - Unaudited STATEMENT OF OPERATIONS
For three months ended June 30, Six months ended, June 30, 2007 2006 2007 2006 ===== ====== ======= ======== Revenues . . . . . . . . $ 147,905 $ 5,000 $ 242,415 $ 6,250 Less: COGS 59,162 - 20,247 - --------- ------- -------- ------- Gross Margin . 88,743 5,000 222,168 6,250 operating Expense. . . (20,715) (24,643) (166,712) (52,623) ------ ------- -------- -------- Other Expense(Income) 4,443 . 633 4,443 1,417 --------- -------- --------- -------- Net loss . . 63,585 (25,277) $ 51,013 (54,060) ========= ========= ========= ======== Weighted average number of shares 19,903,902 19,903,902 19,903,902 19,903,902 Weighted average earnings per share $(0.0) $ (0.0) $ (0.0) $ (0.0)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 4 INTERCARE DX, INC. STATEMENT OF CASH FLOW UNAUDITED
For the Six Months ended June 30, Three Months Ended June 30 2007 2006 2007 2006 ==== ==== ==== ==== CASH FLOWS FROM OPERATING ACTIVITIES Net Income (loss). . . . . . . . . $ 21,741 $ (54,060) 63,585 (25,277) Adjustments to reconcile net loss to net cash used in operating activities: Common Stock issued for services - - - - (Increase) Decrease in Current Assets . . . . . . . . . . . (127,800) 4,179 (127,800) 3,500 Increase(Decrease) in Current Liabilities. . . . . . . . . . ..(50,137) (16,000) (44,527)(15,409) ------- -------- ------- ------ NETCASH USED IN OPERATING ACTIVITIES . . . . .(156,196) (65,881) (108,742)(37,186) CASH FLOW FROM INVESTING ACTIVITIES Deferred Public Offering . . . . . . . . . - - - - -------- -------- -------- -------- NET CASH USED IN INVESTING ACTIVITES . . . . . . . . 0 0 0 0 CASH FLOW FROM FINANCING ACTIVITIES Advances from MH. . . . . . . . . . . . - 57,165 - 28,235 Advances from Officer 151,818 - 108,742 - Sales of Common Stock - 10,000 - 10,000 -------- -------- ------- ------- NET CASH PROVIDED BY FINANCING ACTIVITIES. . . . 151,818 67,165 108,742 38,235 Increase (Decrease) in cash . . . . . . (4,378) 1,284 0 1,049 CASH AT BEGINNING OF PERIOD. . . . . . . . . . 4,378 147 0 381 ----------- --------- -------- -------- CASH AT END OF PERIOD. . . . . . . . . . . . $ 0 $1,431 0 1,431 =========== ========== =========== =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 5 The accompanying notes are an integral part of this statement. InterCare DX, Inc. Notes to the Financial Statements Basis of Reporting The interim accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-QSB. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal, recurring accruals) considered necessary for a fair presentation have been included. For further information, management suggests that the reader refer to the audited financial statements for the year ended December 31, 2005 included in its Annual Report on Form 10-KSB. Operating results for the six-month period ended June 30, 2006 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2007. The interim financial statements of InterCare DX, Inc., for the six months end June 30, 2007 and 2006 are unaudited. The financial statements are prepared in accordance with the requirements for unaudited interim financial statements. In the opinion of management the accompanying financial statements contain all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the Company's financial position as of June 30, 2007 and December 31, 2006 and the results of operations and cash flows for the six Months ended June 30, 2007 and 2006 respectfully. Note 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES InterCare DX, Inc., is an innovative software products development and services company, specializing in developing healthcare management and information systems solutions. The company markets and resells the InterCare Clinical Explorer (ICE(tm), which is designed to integrate every aspect of the healthcare enterprise as well as the InterCare Vascular Diagnostic Centers device, which is a non-invasive cardiovascular diagnostic center. 1. Use of 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. 2. Account Receivable The Company recognizes account receivable to the extent that revenues have been earned, and collections are reasonably assured. 3. 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. 4. 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. 6 Capital assets are depreciated by the straight-line method over estimated useful lives of the related assets, normally five (5) to seven (7) years. Property and equipment consists of the following as of June 20, 2007 and December 31, 2006
2007 2006 ===== ===== Computer Hardware & Software $69,270 $69,270 Less: Accumulated Depreciation 68,903 68,853 ------- ------- $ 367 $ 417 ======== =======
5. Advertising The company has the policy of expensing advertising costs as incurred. There were no advertising costs charged to expense for the quarter ended June 30, 2007. 6. 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 of 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. 7. Recognition of Revenues. Revenues from sale of software and/or VVDC device are recorded upon delivery and installation of our products 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. 7 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. 8. Software Development Cost Software development costs are charged to current operations 9. Fair Value of Financial Instruments and Concentration of Credit Risk. The carrying amounts of cash, receivables, and accrued liabilities approximates fair value because of the immediate or short-term maturity of these financial instruments. 10. Income Taxes The Company has made no provisions for income taxes because of accumulated business and tax losses since its inception. 11. 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. 12. Stockholders' Equity 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. 13. Recent Accounting Pronouncements The Company has received current accounting pronouncements and has determined that the adoption of current accounting pronouncements would not have a material impact on the Company's financials. 14. Related Party Transactions Expenses related to the Company are routinely paid by Meridian Holdings, Inc., (an affiliated Company) under a management services agreement between Meridian and the Company. As such amounts are recorded as payable to Meridian, as incurred. 16. Going Concern The accompanying financial statements have been prepared in conformity with Generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has incurred losses since its inception and has not yet been successful in establishing a profitable operations. These factors raise substantial doubt about the ability of the Company to continue as a going Concern. Continuance of the Company as a going concern is dependent upon obtaining additional working capital through loans and/or additional sales of the Company's common stock. There is no assurance that the Company will be successful in raising this additional capital or achieving profitable 8 operations. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. The Company has initiated the commercialization of the Vasocor Vascular Diagnostic Center technology, with the hope of generating revenue from the sale of the already manufactured Vasocor device. Management believes that based on preliminary results from the initial marketing efforts, that the commercialization plan will be successful. Recent Events On June 19, 2007, the company received a work order from Batterjee Medical College, Jeddah Saudi Arabia, to supply and implement a Healthcare and Educational Management Information System, in the amount of 1.2 million Saudi Riyals. The phase one of this project will commence on or before September 15, 2007. 9 InterCare DX, Inc. Business Overview InterCare DX, Inc. formerly known as InterCare.com dx,, 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, with our main office located at 6201 Bristol Parkway, Culver City USA, and international partners located worldwide. In business since 1991, we have created, published, and marketed software products embedded with sound, text and video for the purpose of relaxation training and stress management. We have also developed Internet-ready applications for healthcare transactions management as well as medical and health-related content and information targeted toward the education, consumer, and healthcare industry markets. Our Products and Services Vasocor Vascular Diagnostic Centers (VVDC) It is a freestanding diagnostic device, that employs a revolutionary non-invasive inexpensive, easy to use procedure that has been clinically proven to detect coronary artery disease (CAD) earlier and more accurately than existing Techniques. The Vasocor Device has FDA pre-market approval, validated clinical trial data, Medicare/Medicaid and Indemnity insurance re-imbursement eligibility. In addition to coronary arterial disease, the device can also be used in the non-invasive diagnosis of peripheral vascular disease and estimating endothelial function The VVDC technology will be most helpful in identifying subjects at risk. With this identification treatment will start early and outcomes will improve. Finally, this testing will target subjects who will benefit from more expensive and perhaps invasive testing. Regulatory Approvals The VVDC device has received 510(k) pre-marketing approval by USFDA, in addition to a UL approval. Competition The existing CAD diagnostics available to primary care physicians have several important limitations that create significant opportunities for a new, low-cost, office-based, procedure such as VVDC technology. First, as CAD diagnostics, both the ECG and the ECG Stress Test produce a relatively high number of false negatives and false positives. More importantly these tests are limited to the diagnosis of advanced atherosclerotic disease. An estimated 50% of patients given an ECG receive borderline test results and 25% of patients tested on an ECG Stress Test also fall into the borderline category. Although the Stress Thallium and Echocardiogram are more accurate than the ECG and the ECG Stress Test, these procedures are also more expensive and more difficult to perform and interpret. Coronary angiography is widely considered to be the "gold standard" for diagnosing CAD; however, this procedure is both costly and highly invasive, and is a late stage disease diagnostic tool. Physicians have estimated, between 10-20% of coronary angiograms performed find little or no disease in the patient. Further, intravascular ultrasound has shown coronary angiograms often miss significant atherosclerotic disease, when coronary lumen is not compromised. With the exception of ECGs, which are often conducted in a physician's office, the majority of the existing CAD diagnostics take place in hospitals or cardiac clinics. The high cost of the equipment, skill needed to perform the tests and space requirements prohibit primary care physicians from using most CAD diagnostics 10 in their office. Currently, primary care physicians do not have a low-cost assessment alternative that they can use in their own office to assist them in determining whether a patient should be referred for further testing or whether life style modifications and lipid-lowering drugs and other pharmacological therapies are the appropriate next step. For peripheral vascular disease (PAD) the existing commonly used assessment tool is Ankle/Brachial Index (ABI). This noninvasive procedure can accurately identify patients with PAD. To conduct an ABI procedure with current technology, the examiner needs to be skilled in using Doppler ultrasound. This is a technique-sensitive procedure whose results may vary depending on the skill of the examiner. Thus, this method is not widely used in primary care offices. The VVDC device includes the ABIgram(tm) module, which is a Doppler-free method of performing Ankle/Brachial Index with this module virtually any health care provider can obtain this important measurement. If PAD is found, the device offers another PAD tool called the PADogram(tm). This module measures thigh and calf segmental limb systolic pressure, which is helpful in identifying location of arterial obstruction. New Competitors / Complementers Due to the attractiveness of this market, there are several new technologies at Various stages of development aspiring to meet the need for new CAD diagnostics. The strongest likely emerging competitors to arterial compliance are the C-reactive protein assay, IL-1 genetic test, and EBCT/Ultra Fast CT. Each of these technologies detects coronary artery disease at different stages in the progression of the disease. Arterial compliance measurement is the only early assessment procedure that is noninvasive, cost effective and easy to perform in primary care physician's office. C-reactive Protein Assay The C-reactive protein assay is a blood test that may be able to add information about a patient's risk for a coronary event beyond traditional risk factors. In clinical trials conducted on 1,000 frozen blood samples from the Physician's Health Study, subjects with high protein levels were three times as likely to have a stroke or heart attack as those with lower levels. In another trial conducted on 3,000 frozen blood samples, C-reactive protein levels declined 38% in subjects given Pravachol (statin lipid-lower drug) and the effect was independent of changes in cholesterol. A new test for C-reactive protein, developed at Brigham and Women's Hospital in Boston and launched in November 1999, is gaining momentum in the marketplace. This test is thought to be much more accurate than a previous test for C-reactive protein that met with limited success in the marketplace. At this point, however, there are no studies published that show C-reactive protein to have predictive power above Framingham Risk Profiles. Further, in clinical trials, Vasogram(tm) endpoints correlated more closely with aortic atherosclerosis than C-reactive protein measurements. Interleukin-1 (IL-1) Genetic Test The IL-1 genetic test is a finger-stick blood test that detects genetic Predisposition for CAD by examining factors that regulate the inflammatory process. Clinical trials conducted at the Mayo Clinic revealed a strong association between IL-1 and CAD in patients 60 years old or younger. The test was developed by Interleukin Genetics, Inc. and is expected to be launched in the next few years at a cost of approximately $200 per test. EBCT / Ultra Fast CT The EBCT/Ultra Fast CT uses imaging to detect coronary arterial calcification, which has been shown to be correlated with the severity of atherosclerosis. In clinical trials, a calcium score of over 400 indicated a 15 fold greater risk of a major coronary obstruction. An eighteen-month study of 1200 asymptomatic patients showed that those who experienced coronary events had calcium scores 6.5 times higher than those who had no such events. In addition, a 150 patient 11 Clinical trial of EBCT's efficacy as a treatment monitor revealed a strong correlation between reductions in cholesterol and calcium deposits. EBCT is manufactured by San Francisco based Imatron which has since been acquired by General Electric Corporation. InterCare Clinical Explorer (ICE(tm)) InterCare Clinical Explorer (ICE ), is a developed by InterCare DX, Inc., an innovative enterprise level clinical documentation application designed to integrate virtually all aspects of the health care enterprise, both inpatient and outpatient. ICE(tm)'s extensive, scalable system flexibility allows its adaptation to clinical workflow, operating independently in centralized and decentralized facilities. The program features intuitive order entry, "tapering" orders, a clinical knowledge base, digital video enhanced patient education, real-time electro-physiological data capture and display, voice command and recognition, a digital dictation module, and numerous other capabilities to complement and document the diagnostic and treatment processes, including unlimited free-text notes. 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. OUR COMPETITION InterCare DX, Inc., 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 most pro-active e-health players are Eclypsis, Cerner, GE Medical, IDX and McKesson-HBOC, however 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. 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. 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 12 low as possible. - OUR STRATEGIC PARTNER STRENGTH. Partnerships with CGI Communications Services, Inc., our parent company Meridian Holdings, Inc., Meganet Corporation, Sager Midern Computers., Acer America Corporation, ViewSonic Corporation, Microsoft Corporation, Tech Data Corporation, QRS Diagnostics, Inc., and Novantus Corporation 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 BUSINES STRATEGY Our current efforts are targeted on taking advantage of our strengths in the application of high technology in the healthcare arena. InterCare most apparent weaknesses when operating in the US market are: - Very small customer base. - 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 EHR 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 13 - InterCare control over competitive product packaging and pricing strategies - 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 e-Health market space, coupled with its revised service-based sales model, to make these strengths a significant competitive advantage over its competition. 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. 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. 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 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. 14 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 as amended. 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. Furthermore, our recent involvement with the VVDC technology makes us an FDA regulated entity. The release of future VVDC products will require FDA approval. We will be seeking for European Union approval or the CE mark, in order to market our product in European Countries. There is no guarantee that such approval will be obtained in a timely manner or at all. Any delay in obtaining such approval will impact our revenue. EMPLOYEES We presently have five full time employees and seven independent contractors. We outsource some of our personnel needs to third parties such as The Sales Group. our sales force and marketing Consultants. DESCRIPTION OF PROPERTY We are presently occupying 1/2 of an office space leased by Meridian, an Affiliated company at 6080 Center Drive, Los Angeles, California. The agreed cost attributable to us for the use of the facility is based on 1/2 of the total amount of cost to Meridian for operating the suites. LEGAL PROCEEDINGS From time to time, we may be engaged in litigation in the ordinary course of our business or in respect of which we are insured or the cumulative effect of which litigation our management does not believe may reasonably be expected to be materially adverse. With respect to existing claims or litigation, our management does not believe that they will have a material adverse effect on our consolidated financial condition, results of operations, or future cash flows. RISKS ASSOCIATED WITH MANAGING GROWTH The Company's anticipated level of growth, should it occur, will challenge the Company's management and its sales and marketing, customer support, research and development and finance and administrative operations. The Company's future performance will depend in part on its ability to manage any such growth, should it occur, and to adapt its operational and financial control systems, if necessary, to respond to changes resulting from any such growth. There can be no assurance that the Company will be able to successfully manage any future growth or to adapt its systems to manage such growth, if any, and its failure to do so would have a material adverse effect on the Company's business, financial condition and results of operations. MARKET FOR COMMON STOCK 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 $0.02 per share. The above prices represent inter-dealer quotations without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions. 15 SELECTED FINANCIAL DATA The Company had net working capital of $ (77,964) as at June 30, 2007 compared to networking capital of $ (79,458) as at December 31, 2006. The negative working capital is due to minimal income from operations during the periods then ended. The selected financial data set forth above should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements notes thereto. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with our financial statements and notes, as well as the other information included elsewhere in this prospectus. Our discussion contains forward-looking statements that involve risks and uncertainties, including those referring to the period of time the Company's existing capital resources will meet the Company's future capital needs, the Company's future operating results, the market acceptance of the services of the Company, the Company's efforts to establish and the development of new services, and the Company's planned investment in the marketing of its current services and research and development with regard to future endeavors. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including: domestic and global economic patterns and trends. LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY Long-term cash requirements, other than normal operating expenses, are anticipated for the continued development of the Company's business plans. The Company will need to raise additional funds from investors in order to complete these business plans. If we need additional capital to fund our operations, there can be no assurance that such additional capital can be obtained or, if obtained, that it will be on terms acceptable to us. The incurring or assumption of additional indebtedness could result in the issuance of additional equity and/or debt which could have a dilutive effect on current shareholders and a significant impact on our operations. The Company is currently able to meet its financial obligations through debt financial support from our chairman and CEO and Meridian Holdings, Inc. RESULTS OF OPERATIONS We have experienced, and expect to continue to experience, very low revenue from our current operation. 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 some of which has not yet been shipped. We have generated substantially all of our revenues from licenses and services related to current and prior versions of our product suite. REVENUES The company generated $147,905 revenue from during the Quarter ended June 30, 2007, as compared to $5,000 during comparable period 16 in 2006. There were no software license revenue generated during comparable periods in 2006 and 2007 respectively. COST OF REVENUES The cost of revenue for the three months ended June 30, 2007 is 59,162. There were no cost of revenue during comparable period in 2006. 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 software enhancement, pilot testing of the VVDC devices and debugging of our software. The Company is allocating a substantial amount of time and efforts towards sales and marketing of the ICE(tm) software and the VVDC device. To this end, the company has retained a Marketing consultant to assist in developing global awareness of our products and services. There can be no assurance that these marketing efforts will result is any significant sales of our product and services in the near term. PRODUCT DEVELOPMENT. The Company will continue to update and enhance both the VVDC device as well as ICE(tm)Software products with the result that there will be an anticipated increase in product research and development expenses during the next coming year. There can be no assurance that any new development or update to the VVDC devices will be approved for marketing by USFDA in a timely manner. Inability to obtain USFDA approval, or any delay in approval may impact our operating results and revenue stream. GENERAL AND ADMINISTRATIVE General and administrative expenses for the three months ended June 2007 was $20,715 as against $24,631 for the comparable period in June 2006. Of the $20,715 expense incurred for the three months ended June 2007, $16,500 was for management share of cost, and the rest was for general corporate purposes. For the six months ended June 30, 2007, general administrative expense was $166,712 as compared to $52,623 for the comparable period in 2006. The increase in General and administrative expense was as a result of hiring of additional consultants, as well as expenses incurred from the sale and marketing of the VVDC device The Company anticipates future increases in general and administrative expenses as it embarks on aggressive product development, sales and marketing. OPERATING LOSS As a result of the factors described above, Company expects further increases in operating expenses for the year 2007, assuming additional funding is raised from equity investors to be used in financing future operating costs. There is no guarantee that the Company will be able to raise additional funds to finance all the anticipated operating costs. In absence of such funds being available, the Company may not be able to operate, and this could have a material impact in the overall execution of the Company's business plan. NET LOSS The Company had a net loss of $63,585 for three months ended June 30, 2007, compared to a net loss of $25,277 in the comparable period in 2006. For the six months ended June 30, 2007 the Company sustained a net loss of $51,013 as compared to $ 54,060 for the comparable period in 2006. The Company anticipates future revenue increases, as it embarks upon aggressive commercialization of the VVDC device as well as sales of ICE(tm) software licenses, implementation and training. 17 PLAN OF OPERATIONS The company has initiated a full commercialization plan for the sales and marketing of the VVDC device in the US Market, with the assistants of the Sales Group, Inc., as well as other independent sales consultants. In addition, the company is seeking for an alliance with medical device distributors, world-wide to facilitate the sales and distribution of the VVDC device. On June 19, 2007, the company received a work order from Batterjee Medical College, Jeddah Saudi Arabia, to supply and implement a Healthcare and Educational Management Information System, in the amount of 1.2 million Saudi Riyals. The phase one of this project will commence on or before September 15, 2007. We have entered into several product teaming agreements with various vendors and complementary technology companies. Item 3. Controls and Procedures Evaluation of Disclosure Controls and Procedures As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act" ), the Company carried out an evaluation under the Supervision and with the participation of the Company's management, including the Chief Executive Officer and President and the Principal Financial Officer, of the effectiveness of the Company's disclosure controls and procedures as of June 30, 2007. In designing and evaluating the Company's disclosure controls and procedures, the Company and its management recognize that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, the Company's management was required to apply its reasonable judgment. Based upon the required evaluation, the Management concluded that as of June 30, 2007, the Company's disclosure controls and procedures were effective (at the "reasonable assurance" level mentioned above) to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. From time to time, the Company and its management have conducted and will continue to conduct further reviews and, from time to time put in place additional documentation, of the Company's disclosure controls and procedures, as well as its internal control over financial reporting. The Company may from time to time make changes aimed at enhancing their effectiveness, as well as changes aimed at ensuring that the Company's systems evolve with, and meet the needs of, the Company's business. These changes may include changes necessary or desirable to address recommendations of the Company's management, its counsel and/or its independent auditors, including any recommendations of its independent auditors arising out of their audits and reviews of the Company's financial statements. These changes may include changes to the Company's own systems, as well as to the systems of businesses that the Company has acquired or that the Company may acquire in the future and will, if made, be intended to enhance the effectiveness of the Company's controls and procedures. The Company is also continually striving to improve its management and operational efficiency and the Company expects that its efforts in that regard will from time to time directly or indirectly affect the Company's disclosure controls and procedures, as well as the Company's internal control over financial reporting. 18 Changes in Internal Control Over Financial Reporting There have been no changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to the date of the evaluation. PART II - OTHER INFORMATION None ADDITIONAL INFORMATION Exhibits 31.1 Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002 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 DX, Inc. Date: August 14, 2007 Signature By: /s/ Anthony C. Dike, MD ----------------------------- Anthony C. Dike, MD Chairman & CEO