-----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, A6d7Jk24xMh/EmgvnAIEGGWO3jAW0GuwcwUD+uhqZHlGS09xeUFsjBUKgFYDys// xPojN8JU40sg/xZ2o2p48A== 0001105944-07-000030.txt : 20070907 0001105944-07-000030.hdr.sgml : 20070907 20070907110951 ACCESSION NUMBER: 0001105944-07-000030 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20061231 FILED AS OF DATE: 20070907 DATE AS OF CHANGE: 20070907 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERCARE DX INC CENTRAL INDEX KEY: 0001103310 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 954304537 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-31281 FILM NUMBER: 071104643 BUSINESS ADDRESS: STREET 1: 6080 CENTER DRIVE 6TH FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90045 BUSINESS PHONE: 213-627-8878 MAIL ADDRESS: STREET 1: 6080 CENTER DRIVE 6TH FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90045 FORMER COMPANY: FORMER CONFORMED NAME: INTERCARE COM DX INC DATE OF NAME CHANGE: 20010514 FORMER COMPANY: FORMER CONFORMED NAME: INTERCARE COM INC DATE OF NAME CHANGE: 20000114 10KSB/A 1 icco10ksb2006c.txt AMENEDED 10KSB2006 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-KSB/A (Amendment#1) ( 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, 2006 ( ) 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 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 Center Drive, Suite 640, 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 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, 2006, InterCare DX, Inc., Registrant had 19,903,902 shares of its no par value common stock outstanding with a total market value of $1,194,234 Page 1 of 26 sequentially numbered pages Form 10-KSB Annual Report For The Fiscal Year Ended December 31, 2006 INDEX This Amendment Number 1 to our annual report on Form 10-KSB, for the year ended December 31, 2006, includes some minor changes to improve our disclosures, specifically in the independent auditors opinion letter, earnings per share for the period ended December 31, 2005, note 17 to the financial statement, item8a regarding Controls and Procedures, Changes in Internal Control over Financial Reporting and Exhibit 31 and 32 respectively. Except as required to reflect the changes noted above, this Form 10-KSB/A does not attempt to modify or update any other disclosures set forth in the original filing. Additionally this Form 10-KSB/A does not purport to provide a general update or discussion of any other developments at the Company subsequent to the original filing. Page Number PART I Item 1. Description of Business. . . . . . . . . . . . . . . . . . . . . 3 Item 2. Description of Property . . . . . . . . . . . . . . . . . . . . 9 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 9 Item 4. Submission of Matters to a Vote of Security Holders Our . 9 PART II Item 5. Market for Common Equity and Related Stockholder matters. 9 Item 6. Management's Discussion and Analysis . . . . . . . . . . . . . 11 Item 7. Financial Statements . . . . . . . . . . . . . . . . . . . . . . 11 Item 8. Changes In an Disagreements With Accountants on Accounting and 14 Financial Disclosure PART III Item 9. Directors, Executive Officers, Promoters and Control Persons. 14 Item 10. Executive Compensation . . . . . . . . . . . . . . . . . . . . .18 Item 11. Security Ownership of Certain Beneficial Owners and Management 19 Item 12. Certain Relationships and Related Transaction . . . . . . . .20 Item 13. Exhibits and Reports on Form 8-k . . . . . . . . . . . . . .20 2 PART I ITEM 1. DESCRIPTION OF BUSINESS 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) This is the latest product being commercialized by InterCare, after an extensive patient, provider and health insurance plan acceptance test. 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. CAD. 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 Current cardiovascular research has confirmed that heart attack, stroke, and most forms of peripheral vascular disease are caused by abnormalities in the arterial wall. Vasogram is a new technology that has been developed that allows physicians to assess the status of the arterial wall. The test is rapid and painless and can be performed with no risk to the patient in a physician's office. In addition, the cost of the testing is competitive with other noninvasive cardiovascular tests. For the first time, physicians will know how their patient's arteries compare to healthy subjects of the same gender and age. Further, they will know how their patient's arteries compare to subjects with known peripheral and coronary arterial disease, which is the direct cause of over one million deaths annually, generating over $100 billion direct and $180 billion. indirect treatment costs annually. The Vasogram 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. Market and Value Proposition Over 50% of the deaths attributed to CAD are of patients that exhibit no prior symptoms of heart disease. Further, existing procedures that accurately detect CAD are invasive and expensive, and therefore unlikely to be used in cases where symptoms are not present. The Vasocor device enables primary care physicians to easily identify CAD in situations where it would otherwise go undetected. Currently, primary care physicians test for CAD using risk profile screens, which include family history, lifestyle, and physiologic measurements of height, weight, body fat, blood pressure, blood glucose levels, and blood lipid levels. In situations where these screens indicate a high propensity for CAD, patients undergo more sophisticated tests such as Resting Electrocardiograms (ECGs), Stress ECGs and Stress Echocardiograms. In focus group surveys, primary care physicians indicated that the most common follow-up test is the Stress ECG or Echocardiogram. These tests are only suggestive; to actually confirm CAD a patient must undergo a coronary angiography procedure that enables the physician to directly view arterial obstructions. This is an invasive test that is not performed by a primary care physician but instead referred to an outpatient or inpatient facility, 3 significantly increasing the expense to both the patient and the insurer. Further, this test is most accurate only for late-stage CAD, when treatment often requires pharmaceuticals or surgery rather than lifestyle changes that can be effective if a physician identifies CAD early. The inaccuracy of risk profile testing and echocardiograms is a significant reason CAD is not detected early and a primary reason CAD is fatal in patients that do not exhibit prior symptoms. Clinical trials indicate that risk profile testing does not identify CAD when it is present (a False Negative) in males 60% of the time, and 30% of the time in females. One of the Vasocor Procedures (called a "Vasogram"), however, is 14% more predictive than any of the risk factors alone and 45% more predictive when used in combination with traditional risk factor screening. This improved accuracy reduces False Negatives from 60% to 27% in males and 30% to 23% in females. Furthermore, the Vasogram is more accurate than the follow-up tests typically administered by primary care physicians, such as Stress ECG and Stress Echocardiogram. In clinical trials comparing follow-up tests, 177 patients underwent MRI, Stress ECG, Stress Echocardiogram (the most popular tests) and Vasogram. The MRI (a visual measure of CAD) found CAD in 37 patients. Neither the Stress ECG nor the Echocardiogram identified any of these patients, while the Vasogram identified 76%. In addition to the diagnostic benefits of the Vasocor device, it is also economically advantageous to the primary care physician. Typically, patients that score high in risk factor analysis and Stress Echocardiogram are referred for coronary angiography. This test is not only More expensive, but does not generate revenue to the referring physician. Furthermore, in cases where it is actually not necessary, the test results in significantly higher costs to the patient and insurer. A Vasogram, in contrast, is easily administered in the primary care physician's office by unskilled staff in less than 15 minutes. With Medicare reimbursement of roughly $125 per procedure, physicians are not dissuaded from performing the test due to the economics, but instead can increase their revenue per patient visit. Furthermore, by accurately assessing CAD early in its development, the Vasocor device can reduce overall costs to patients and insurers by identifying the disease early enough so that lifestyle changes are effective forms of treatment rather than requiring pharmaceutical or surgical treatment. The Vasocor device offers a compelling value premise of accuracy, simplicity and cost savings to physicians, patients and health insurance providers. Based on the 80 million CAD-related procedures and one million deaths annually due to CAD, the Company and McKinsey & Company have estimated the immediate market opportunity for the Vasogram at $300 to $500 million, with a total market potential of over one billion. Clinical Trials and Publications Independent medical researchers have conducted three major clinical trials in four leading academic medical centers in the United States and two in Europe that validates the technology. This clinical testing has extended over eight years and has involved multiple versions of the device and associated technology. The first clinical trial involved comparing Arterial Compliance measurements with coronary artery disease as determined by invasive coronary angiography (Vasogram Improvement Program). The second clinical study was undertaken to determine repeatability of testing and expected values from a population of subjects over a large age range without cardiovascular disease (Precision Study). Because coronary angiography does not identify early cardiovascular disease, the third clinical trial compared Arterial Compliance measurements with degree of aortic atherosclerotic disease as measured by Magnetic Resonance Imaging (MRI). This study included subjects with a wide range of cardiovascular disease (Accuracy Study). Regulatory Approvals The VVDC device has received 510(k) pre-marketing approval by USFDA, in addition to a UL approval. In summary, the Company has been given clearance to commercialize the Vasocor Vascular Diagnostic Centers in the general areas of Non-invasive 4 cardiovascular disease assessment. Reimbursements Considerations Current Non-Invasive Cardiovascular disease management CPT and ICD-9 Codes are applicable for the Vasogram as well as for the Model 300's other built in applications such as Ankle / Arm Index Module, Segmental Limb Pressure Module, and Endogram Module (which measures Endothelial Function). The Medicare/Medicaid 80% reimbursement level for each of the applications currently return in the range $198 to $245. It is possible to apply to the AMA for a specific CPT Code for the Vasogram and Endogram Modules. There is no guarantee that the company will be able to obtain a new AMA specific CPT Code or these re-imbursement levels will be sustained for a very long time. Benefits The Vasogram addresses the need for an early-stage, non-invasive procedure to identify CAD patients without the need for outpatient services or clinics and represents a benefit to the patient, primary care physician, and the medical insurance industry. The Vasocor Model 300 is operational on a commercial scale, has proven effectiveness in robust clinical trials, has achieved FDA clearance for marketing and sales, and has attractive reimbursement status. Market Size The market potential of Vasocor technology for the diagnosis of CAD in the primary care physician's office and other locations is substantial. Current procedures for CAD range in price from $500 for an ECG Stress Test up to several thousand dollars for an angiogram. The total number of CAD diagnostics performed in the United States exceeds 80 million per year. Initial estimates for procedures involving Vasocor technology indicate Vasocor's total market opportunity, as estimated by McKinsey & Company, is between $300 million and $500 million of a total $1.4 billion market potential. Coronary Artery Disease Heart disease is still the single largest killer of Americans, claiming nearly a million lives a year. Approximately 60 million Americans are at risk of CAD. The direct cost of treating heart disease in the U.S. reached $100 billion in 1999, while the indirect costs exceeded $180 billion. Successfully diagnosing CAD is complicated by the fact that over 50% of people who die from heart attacks experience no symptoms of heart disease prior to the initial event, which is often death. Atherosclerosis, fatty substance deposits or plaque in arteries, causes structural changes in the arterial wall that alters the arteries' physical properties. Two types of plaques are Calcified plaque and Vulnerable plaque. Calcified plaque is a hard lesion and is a manifestation of late stage disease. Vulnerable plaque is a soft, lipid-rich pool with a hard surface that can rupture into the arterial flow surface, leading to rapid obstruction. These events that occur in patients with no previous symptoms, and which are responsible for over 50% of heart attack deaths, are generally thought to be caused by Vulnerable plaque, not by Calcified plaque. There is a significant need for a new technology capable of identifying early symptoms of cardiovascular disease, including Vulnerable plaque. Such diagnostic tools, combined with recent and upcoming intervention techniques, create the possibility of treating patients at an earlier stage in the disease, thereby preventing some of the more than one million heart attacks that occur annually in the United States. Atherosclerosis is the underlying abnormality associated with coronary artery disease (myocardial infarction or heart attack), cerebrovascular accident (stroke), and peripheral vascular disease (diabetes, amputations, etc). Coronary artery disease is the leading cause of death in the United States; cerebrovascular accidents are the third leading cause of death and the number one cause of permanent disability Major risk factors for atherosclerosis includes: cigarette smoking, hypertension, diabetes, elevated blood lipids, lack of exercise, and obesity. Modern medicine has developed powerful weapons to combat these risks. Despite these advances, a substantial number of coronary and atherosclerosis-related 5 events occur each year in individuals who currently do not qualify for drug therapy based on current primary-prevention guidelines. Therefore, more effective strategies are required to identify individuals who would benefit from more aggressive therapy. Atherosclerosis is known to thicken the arterial wall, thus making the artery more stiff and resistant to expansion secondary to pressure change during the cardiac cycle. The Vasogram(tm) device has the capability of accurately measuring arterial stiffness in vessels in the lower extremity (thigh and calf levels). This device is noninvasive (i.e. safe), inexpensive, not space restrictive, and can be operated by non-physicians and non-nurses. Identification of Coronary Artery Disease Currently, no effective, low-cost diagnostic exists for CAD in the primary care physician's office. The less expensive CAD diagnostics, such as the ECG and the ECG Stress Test (including Echocardiography), are blinded to early CAD and therefore are limited to identifying advanced atherosclerotic coronary disease. Once the disease is at such a stage, treatment is costly. In addition, a significant number of patients fall into the "gray area" where physicians are uncertain as to whether the patient should be referred for additional testing, put on medication, or simply followed with risk factor modification. The relatively more accurate diagnostic tests, such as Stress Thallium, are somewhat difficult to perform and interpret, and costly to administer. Coronary angiography is widely considered to be the "gold standard" for diagnosing CAD; however, this procedure is both costly and highly invasive. All of these tests also are indicative of advanced atherosclerotic disease (or other cardiac problems not associated with atherosclerosis). None of these procedures are routinely performed in the office of primary care physicians. Peripheral Arterial Disease (PAD) PAD is atherosclerosis involving peripheral arteries, such as the brain, extremities, and visceral vessels. PAD is a highly prevalent disease that affects approximately 8 to 12 million people in the United States. In a recent study it was estimated over 50% of patients with PAD elude diagnosis. PAD is clearly associated with increased risk of other vascular disease, which include cardiac and cerebro-vascular mortality and morbidity. 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 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 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 6 life style modifications and lipid-lowering drugs and other pharmacological therapies are the appropriate next step. For 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 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 7 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. We have signed partnership and/or reseller agreements in place to utilize, or have plans to incorporate the following third-party products and/or technology into ICE : 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. Medical knowledge base / lexicon ICE Clinical Observation Language (ICOL(tm)) - -------------------------------------------- There is no single published or accepted language that comprehensively and logically describes the discrete facts about a patient's clinical condition that can be used scientifically to create a standardized methodology for analyzing a myriad of clinical observations, interventions and outcome in medicine, hence the development of ICE Clinical Observation Language vocabulary (ICOL). The unique feature of ICOL is that it is made up of short phrases that could be plugged-in to a note without any modification, or joined with other phrases in the ICOL knowledge base to form a complete sentence. Developed by the InterCare team of clinical experts, ICOL contains over 50,000 phrases and clinical terminology which are linked to over 200,000 clinical terms and codes that could be customized or used as-is to generate a research-quality outcome measures without compromising the quality of clinical documentation and patient care. ICE Clinical Observation Language (ICOL) provides the corroborating 'glue' that ties together the outcomes, diagnoses, interventions, procedures, activities and patient responses to care delivery into the complete scientific, granular, and comparable clinical content. When a significant number of patient encounters are recorded using the same clinical vocabulary, the value of the resulting clinical information is profound. Use of this data will facilitate unprecedented and rapid improvement in the consistency and quality of care delivery for an individual patient. This capability will be facilitated by the ability to accurately and consistently measure and improve patient outcomes in response to care rendered while at the same time reducing the cost. ICE(tm) clinical documentation provides the necessary granularity and consistency in the recording of patient health observations required for this process to work. Summary of the languages implemented and supported in ICE(tm) are: - - International Classification of Diseases (ICD-9-CM) - - Alternative Complementary Therapy Code (ABC code) - - CPT - - Nursing Interventions Classification (NIC) - - Nursing Outcome Classification (NOC) - - NANDA - - ICE Clinical Observation Language (ICOL(tm)) - - DSM-IV - - Other Third party clinical libraries such as SNOMED, LOINC and Read Codes. Industry Trend The US Initiative The Bush Administration's health care agenda has outlined a comprehensive vision for helping all Americans benefit from the potential of American health care in 8 the 21st century. The President's health care agenda is designed to improve the accessibility, affordability and accountability of health care for every American -- and to make sure that American health care keeps getting better. ICE is positioned to facilitate many aspects of the Bush Administration's health care initiatives. 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. 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. 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 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, 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. 9 - 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 BUSINESS 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 DX, Inc., 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 DX, Inc., 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. 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 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 10 - - 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 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. Most recently, the Center for Medicare and Medicaid Services announced that it has released a beta version of the Veteran Administration EMR software called called Vista Office(Veteran Health Information Systems and Technology Architecture) (www.vista-office.org), for download by physicians free of charge to use in their offices. This application is like the VA EMR, popularly known as VisTA and uses outlines and facilitates the documentation of what has been done for prevention purposes using "form filled hypertext" whereby one clicks on questionnaire answers (in outline form) and the text is automatically generated in the note. The application is written in Delphi, and the database is Intersystems' Cache - a hierarchical database.(www.intersystems.com. The final release of this software is still pending, and the impact of this move by the Federal Government is believed to encourage physicians to transition from paper medical record keeping to an electronic one. 11 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. 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. 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. 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 12 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. 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. Further, sales in the traditional retail high technology industry are significantly 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 1/3 of an office space leased by Meridian Holdings, Inc., our parent company, at 6201 Bristol Parkway, Culver City California. The agreed cost attributable to us for the use of the facility is based on 1/3 of the total amount of cost to Meridian Holdings, Inc., for operating the suites. ITEM 3. 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. 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, 2006. 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 $.10 and a low bid of $0.04 per share. The above prices represent inter-dealer quotations without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions. The following information with respect to the high and low bid price of our shares was obtained from the National Quotation Bureau.
High Low High Low Calendar 2006 Quarter ended March 31 0.06 0.04 Quarter ended June 30 0.02 0.02 Quarter ended September 30 0.02 0.02 Year ended December 31, 2005 0.06 0.05 13 Calendar 2005 Quarter ended March 31 0.07 0.05 Quarter ended June 30 0.07 0.05 Quarter ended September 30 0.06 0.05 Year ended December 31, 2005 0.06 0.04 At December 31, 2006, the company had approximately 455 shareholders of record for its common stock. Our preferred shares have never been offered to the public, therefore have never been publicly traded.
DESCRIPTION OF SECURITIES PREFERRED STOCK We authorized 20,000,000 shares of preferred stock, with no par value. No shares of preferred stock have been issued. COMMON STOCK We are authorized to issue up to 100,000,000 shares of common stock, no par value, of which 19,903,902 shares were issued and outstanding as of December 31, 2006. 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. 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. 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. 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. 14 Recent Sales of Unregistered Securities The following information is given with regard to unregistered securities sold by the registrant during the past year, 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 03/10/06 Common Stock 1,000,000 Anthony C. Dike incentive stock option exercise valued at $0.002 per share (2) 03/10/06 Common Stock 250,000 John Hoffman Stock Issued for Services at 0.04 cents per share (2) 03/10/06 Common Stock 250,000 Jeff Raines Stock issued for services at 0.04 cents per share. 06/10/2006 Common Stock 500,000 Steve Nnachetam purchased at 0.02 Per share. (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.
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 15 decline. We will depend on the commercial success of our product suite, which has not yet been shipped. We have generated substantially all of our revenues from licenses and services related to current and prior versions of our product suite. REVENUES. The company generated $112,050 in revenues from operations as of December 31, 2006 and $12,010 revenue for comparable period in 2005. The increase in revenue for the period ended in December 31, 2006 is primarily attributable to sales of the company's VVDC device. The Company anticipate increase in revenue from the sale of Vasocor Vascular Diagnostics Devices (VVDC), software licenses, implementation and maintenance services continuing in fiscal year of 2007, of which negotiations are in progress with potential customers who are interested in purchasing the Company's products and services. COST OF REVENUES. There cost of revenue incurred during 2006 totaled $45,000 compared to zero in 2005. 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. 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. In ability to obtain USFDA proved, or any delay in approval may impact our revenue stream. GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased by 26% for the year ending December 31, 2006 to $125,727 compared to $170,374 in 2005. The decrease in expense during the period ended 2006, was due to business restructuring and lay-off of some personnel. 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 2006. 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 LOSS The Company had a net loss of $59,624 for the year ended December 31, 2006 as compared to net loss of $1,661,757 for the year ended December 31, 2005. The decrease in net loss is due to bad debt expense in the amount of $1,385,850 and write-off of inventory and public offering costs against operations in the amount of $117,543 during the period ended December 31, 2005. The Company anticipates future revenue increases, as it embarks upon aggressive commercialization of the VVDC device as well as sales of ICE(tm) software 16 licenses, implementation and training. 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., and commercialization of the VVDC technology, 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 Research and Development of the VVDC 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 will 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. The company has continued to redefine itself as a leader in the area of Medical Informatics, Cardio-Vascular Devices, Telemedicne and Telehealh. The Company anticipates to participate in the several Trade shows and industry presentations during the next several months. The Company is also actively involved in various E-health Initiatives in United States and abroad, which the company believes will provide more exposure to the products and Services of the Company. The Company continues to face several challenges in trying to deploy the ICE(tm) software from various regulatory bodies, including the now implemented HIPAA rules, and other activities in the Electronic Health Records arena that will potentially increase the competitive atmosphere for various Electronic Health Records software vendors. For instance, the Center for Medicare and Medicaid Services recently announced that it has released a beta version of the Veteran Administration EMR software also called Vista Office(Veteran Health Information Systems and Technology Architecture) (www.vista-office.org), for download by physicians free of charge to use in their offices. This application is like the VA EMR, popularly known as VisTA and uses outlines and facilitates the documentation of what has been done for prevention purposes using "form filled hypertext" whereby one clicks on questionnaire answers (in outline form) and the text is automatically generated in the note. The application is written in Delphi, and the database is Intersystems' Cache - a hierarchical database.(www.intersystems.com.) The final release of this software is still pending, and the impact of this move by the Federal Government is believed to encourage physicians to transition from paper medical record keeping to an electronic one. 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. Recent Events On January 19, 2007, the registrant entered into a software licensing agreement with Microsoft Corporation for the Microsoft ConferenceXP Software Technology, which will be integrated with the registrants' ICE(tm) Enterprise Clinical Documentation, Telemedicine and Tele-health software for commercialization. 17 The significant part of this agreement calls for payment of royalties to Microsoft Corporation in the amount of 10% of net proceeds from the sale of the combined software application by the registrant. On February 26, 2007 the company engaged Bayou Road Investments (a Deleware Corporation), to provide management and interim CFO services. On March 10, 2007 the following individuals were re-elected to serve as directors Of The company until the next annual meeting: Jude Uwaezole, Donald Stanford and Wesley Bradford. Anthony C. Dike, was re-elected for another three year term. Additionally, shareholders ratified the appointment of Pollard-Kelley, as the Independent auditor for the fiscal year ending December 31, 2006 and re-approved The Company 's 2001 Joint Incentive and Non-Qualified Stock Option Plan for Fiscal Year 2006. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None Item 3. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to our management including our Chief Executive Officer/Interim Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. 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 the end of the period covered by this report. 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 foregoing evaluation, the Management concluded that as of the end of the reporting period, 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 18 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. 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 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 four directors, three of which are outside members and one is an officer of the Company. The Board members will serve until their successors are elected at the 2008 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, 2006, directors, control persons, and executive Officers of the Company were as follows:
Name Age Title Anthony C. Dike, MD 52 Chairman, Director Chief Executive Officer, Secretary Treasurer Jude Uwaezuoke 62 Director Donald Stanford 56 Director Wesley Bradford 67 Director With the exception of Anthony C. Dike, MD, Chairman & CEO, 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
19 THE BOARD OF DIRECTORS Anthony C. Dike, MD 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, was 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. Wesley G. Bradford, MD, MPH 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. Jude Uwaezoke, MBA Jude Uwaezuoke, who has over 15 years of administrative, marketing and financial management experience, is president of Speedy-Care Medical Distributors 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. Mr. Donald Stanford Donald Stanford is a seasoned executive who has spent the last 23 years in Senior Management of a successful technology company that has enjoyed considerable success in growth, industry leadership and creating value for its shareholders. He possesses the rare combination of technology skills, hands-on P&L expertise, corporate leadership and customer communications with the ability to work in a team environment and achieve extraordinary results under challenging conditions. He was formerly the Senior Vice President and Chief Technology officer of GTECH Holdings, Inc., a multi-national information technology company. During his 20 twenty-two years with GTECH, the Company has grown from a market share of 5% and sales of less than $1 million to a dominant worldwide market share of 70% and sales in excess of $1 billion as of the end of 2002. The Company has been consistently profitable and has been the driving force in the last decade in the development and installation of on-line lottery systems in North America, Europe, South America, Africa and Asia, and employs over 4,500 people worldwide. As an important factor in this success, Mr. Stanford has traveled extensively and collaborated with a large number of domestic and international customers and partners. In addition to being the Company's chief technical strategist, he was also a vital part of the sales and marketing and project management activities that were critical to the Company's overall success As a recently retired employee and GTECH Holdings Fellow, he advises the GTECH Holdings Corporation in the areas of future technologies and architectures that may be of value to the Company's future growth strategies. Mr. Stanford earned a Bachelor of Arts in International Relations in 1972 and a Master's in Computer Science/Applied Math in 1977 from Brown University. He has recently been appointed Adjunct Professor of Computer Science at Brown University and in 1999 received the Black Engineer of the Year Award for Professional Achievement. 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; - Meets separately and independently with the Chief Financial officer, Internal Audit and our independent auditors. It is composed of Messrs. Uwaezuoke, Bradford, and Stanford 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, Jude Uwaezuoke and Bradford. Meetings of the Board of Directors During the fiscal year ended December 31, 2006, the Company's Board of Directors acted five times by a unanimous written consent in lieu of a meeting. Each member of the Board participated in each action of the Board. 21 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, Pollard-Kelley CPA 's, is 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 DX, Inc.,2006 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 non-audit 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. Members of the Audit and Ethics Committee: Jude Uwaezeoke Chairman Donald Stanford Wesley Bradford Clinical Advisory Board Duties and Functions Members of InterCare 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 our products and services. This panel will be expanded in future to include experts from different healthcare profession Members of the Clinical Advisory Board Professor Jeff Raines, is the Chairman of the Scientific Advisory Board for the Vasogram Technology, which has now been officially introduced to the market after almost one year of pilot testing of the product by InterCare DX, Inc, for patient and healthcare providers acceptance. 22 Professor Raines, professional experience includes over forty years in academia, having received a Doctorate degree in Mechanical Engineering from Massachusetts Institute of Technology and Doctorate degree in medicine from Harvard Medical School under an NIH MD/PhD Training Fellowship in 1972. He has an extensive formal education in the areas of clinical cardiovascular medicine with surgical exposure, engineering and research. Professor Raines is a Fellow of American College of Cardiology. He has published extensively in the area of Cardiovascular medicine. He holds seven acclaimed United States patents for the Vasogram and Endogram technology. He most recently retired as a Professor of Surgery from University of Miami, Florida, USA. His role in InterCare will include working with the Research and Development division of InterCare to continue to enhance and update the Vasogram Technology for both United States and International commercialization. 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. 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 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. 23 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 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
Name Year Salary Bonus Stock Option All Other Compensation (Common Stock) Anthony C. Dike (1) 2006 $0 0 100,000 0 1. As of December 31, 2006, 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.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of December 31, 2006 to the extent known to the Company, certain information regarding the ownership of the Company's Common Stock by (i) each person who is known by the Company to own of record or beneficially more than five percent of the Company's Common Stock, (ii) each of the Company's directors and executive officers and (iii) all directors and executive officers as a group. Except as otherwise indicated, the shareholders listed in the table have sole voting and investment powers with respect to the shares indicated. The following tables set forth information regarding the beneficial owners of our common stock, as of December 31, 2006, 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 24 shares of common stock held by them. As of the table date we had 19,903,902 common shares outstanding.
Name and Address of Amount and Nature of Beneficial Owner Title Beneficial Ownership Status Percent of Class - --------------------------- -------- -------------------- -------- ----------------- Anthony C. Dike (1) Chairman 15,050,100 Active 70% 6201 Bristol Parkway CEO Culver City, CA 90230 Director Donald Stanford Director 100,000 Active 0.5% 6201 Bristol Parkway Culver City, CA 90230 Jude Uwaezuoke Director 300,000 Active 1.4% 6201 Bristol Parkway Culver City, CA 90230 Karunyan Arulanantham Director 100,000 Inactive 0.5% 6201 Bristol Parkway as of 06-2006 Culver City, CA 90230 Wesley Bradford Director 300,000 Active 1.4%% 6201 Bristol Parkway Culver City, CA 90230 Named Officers and 15,850,100 74% Directors As a Group (1) Other Public Shareholders 5,811,302 26% Total number of shares outstanding 19,903,902 100% (1) Officer or Directors: 15,850,100 shares of Common Stock listed above includes 7,000,000 shares already issued and 3,550,000 shares of Common Stock options granted to Anthony C. Dike. Also, Anthony C. Dike, is the sole director and an indirect beneficial owner of 3,600,200 shares of common stock held by Meridian Medical Group, P.C., and 900,100 shares of Common stock held by MMG Investments, Inc., 300,000 shares of Common Stock option granted to Jude Uwaezuoke, 300,000 shares of Common Stock Option granted to Wesley Bradford; 100,000 shares of Common Stock of option granted to Donald Stanford, and 100,000 Shares of Common Stock option granted to Karunyan Arulananthan as of December 31, 2006, disclosed as if they were issued.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Name Year Stock Option Anthony C. Dike 2006 100,000 Wesley G. Bradford 2006 100,000 Karunyan Arulanantham 2006 100,000 Jude Uwaezoke 2006 100,000 Donald Stanford 2006 100,000
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS 03/10/06 Common Stock 1,000,000 On March 10, 2006, Anthony C. Dike our chairman and CEO exercised his option to acquire 1,000,000 of our common stock at 0.002 per share. 25 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 6. Exhibits and Reports on Form 8-K 31.1 Certification pursuant to Section 302 of The Sarbanes-Oxley Act of 2002 of Anthony C. Dike 32.1 Certification pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 of Anthony C. Dike 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: September 3, 2007 Signature By: /s/ Anthony C. Dike ----------------------------- Anthony C. Dike Chairman and CEO 26 Pollard-Kelley Auditing Services, Inc. 4500 Rockside Suite 450 Independence OH 44131 330-836-2558 Report of Independent Registered Public Accounting Firm - ------------------------------------------------------- Board of Directors InterCare DX, Inc. We have audited the accompanying balance sheets of InterCare DX, Inc. and Subsidiaries as of December 31, 2006 and 2005, and the related statements of income, changes in stockholders' equity, and cash flows for the two year period ended December 31, 2006. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conduct our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we 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. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company at December 31, 2006 and 2005 and the results of its operations and it cash flows for two year period ended December 31, 2006, in conformity with U.S. generally accepted accounting standards. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 18 to the financial statements, the Company has incurred accumulated losses since inception and is dependent upon obtaining adequate financing to sustain operations. These factors raise substantial doubt the Company will be able to continue as a going concern. Management 's plans in regard to these matters are also discussed in Note 18. The financial statements do not include any adj ustments that might result from the outcome of this uncertainty. The 2005 financials have been restated to inventory certain costs in connection with work that was invoiced in 2006. The inventorying of these costs at December 31, 2005, provided a better matching of revenue and expenses in both 2005 and 2006. Pollard-Kelley Auditing Services, Inc. /S/ Pollard-Kelley Auditing Services, Inc. Fairlawn, Ohio September 6, 2007 2 InterCare DX, Inc. Balance Sheet At December 31st
2006 2005 ========= ======== ASSETS Current assets Cash . . . . . . . . . . . . . . . . . . . . . . . . $ 4,378 $ 147 Accounts Receivable.(Note 2) . . . . . . . . . . . . 4,210 9,588 Inventory. . . . . . . . . . . . . . . . . . . . . . 50,137 1,385,080 --------- --------- Total Current Assets . . . . . . . . . . . . . . . . . . 58,725 1,394,815 Property, Plant, and Equipment Net of accumulated Depreciation . . . . . . . . . .. 417 - Other Assets Deferred Public Offering Cost . . .. . . . . . . . - --------- ------- Total Assets . . . . . . . . . . . . . . . . . . . . . . $ 59,142 $ 1,394,815 ========= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts Payable . . . . . . . . . . . . . $ 80,914 49,009 Deferred Revenue (Note 7) 50,137 1,524,036 Advances from Officer 7,549 26,500 - - --------- -------- Total Current Liabilities. . . . . . . . . . . . . . . . 138,600 $ 1,599,545 Long term liabilities . . . . . . . . . . . . . . . . - 76,677 --------- ---------- Total Liabilities. . . . . . . . . . . . . . . . . . . . 138,600 1,676,222 Stockholders' equity Common stock (100,000,000 shares authorized, no par value, 19,903,903 and 17,903,902 shares issued and outstanding as at December 31, 2006 and 2005 respectively. 1,021,203 969,203 Accumulated Deficit. . . . . . . . . . . . . . . . . . . (1,120,908) (1,250,610) -------- -------- Total Equity (79,458) (281,407) -------- ---------- Total Liabilities & Equity . . . . . . . . . . . . . . $ 59,142 $ 1,394,815 ========= ==========
See Accountants Report and Notes to Financial Statements 3 InterCare DX, Inc. Statement of Operations For the: Year Ended December. 31,
2006 2005 ====== ===== Revenues . . . . . . . . $ 1,636,086 $ 12,010 --------- ------- Cost of Revenues 1,379,943 0 --------- --------- Gross Margin 256,143 12,010 Operating Expense. General and Administrative 126,674 170,374 Write off of Inventory and Public offering cost. - 118,313 --------- -------- Total Expense 126,674 288,687 Net Income . . $129,702 $(276,677) ========= ========= Net income(loss) per share Weighted average number of Common shares outstanding 19,512,121 17,903,902 Net income per share $ 0.01 $ (0.02)
See Accountants Report and Notes to Financial Statements 4 InterCare DX, Inc Statement of Changes in Stockholders' Equity For the Year Ended December 31, 2006 and 2005
Common Stock Common Stock Accumulated Transaction and Date Shares Amount deficit ============= ========== =========== Balance at December 31, 2004 15,713,903 $772,203 ($973,933) Shares issued for cash at $0.25 per share 440,000 110,000 - Shares issued in lieu of compensation; at $0.12 per share 650,000 78,000 - Shares issued for services; valued at $0.07 per share 100,000 7,000 Shares issued from option exercise of officer, valued at $.002 per share 1,000,000 2,000 - Net(Loss) for period (Restated) - - (276,677) ---------- --------- ---------- Balance at December 31, 2005 17,903,903 $ 969,203 $(1,250,610) Shares issued from option exercise of officer, valued at $.002 per share 1,000,000 2,000 - Shares issued for services; valued at $0.04 per share 500,000 20,000 - Shares issued for cash at $0.02 per share 500,000 10,000 - Net (Loss) for period - - 129,702 ----------- ----------- ----------- Balance at December 31, 2006 19,903,902 $1,021,203 $(1,120,908) =========== =========== ============
See Accountants Report and Notes to Financial Statements 5 InterCare DX, Inc Statement of Cashflows For the Year Ended December 31, 2006 and 200 For the Twelve Months ended, December 31
2006 2005 ==== ==== CASH FLOWS FROM OPERATING ACTIVITIES Net Income (loss). . . . . . . . . $ 129,702 $ (276,677) Adjustments to reconcile net loss to net cash Provided by operating activities: Stock issued for services - 85,000 Stock issued for licensing - - Changes to operating assets and liabilities Increase(Decrease) in Accounts receivables . . . . . . . . . . 5,378 Other Assets . . . . . . . . . . . . . . . - 117,543 Inventory. . . . . . . . . . . . . . . . .1,334,943 (1,385,080) Advances to officer - (950) Accounts Payable . . . . . . . . . . . . . 31,905 23,989 Deferred Revenue . . . . . . . . . . . . (1,412,069) 1,324,312 -------- -------- NET CASH USED IN OPERATING ACTIVITIES . . . . . 89,859 (111,863) CASH FLOW FROM FINANCING ACTIVITIES Proceeds from sale of Common Stock. . . . . .10,000 110,000 Repayments on long term liabilities (76,677) (120) Advances (Reimbursement) by Officer (18,951) - -------- ---------- NET CASH PROVIDED BY FINANCING ACTIVITIES. . . . (85,628) 109,880 -------- ---------- Increase (Decrease) in cash . . . . . . . .4,231 (1,983) CASH AT BEGINNING OF PERIOD. . . . . . . . . . .147 2,130 ----------- --------- CASH AT END OF PERIOD. . . . . . . . . . . . $ 4,378 $ 147 =========== ==========
See Accountants Report and Notes to Financial Statements 6 InterCare DX, Inc. Notes to the Financial Statements Note 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. InterCare DX, Inc.(formerly known as InterCare.com dx), is organized in the State of California. InterCare is 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, California, 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. 1. Reclassification Certain reclassifications have been made to all periods presented in the financial statements to conform with current year presentation. Including the reclassification of $1.5 million from current liability to deferred revenue and the reclassification of bad debt expense to inventory, for costs previously determined to be uncollectible. As a result the company has restated net income for 2005 and retained earnings. The effect of the restatement is to increase net income for 2005 by $1.4 million or .07 per share and increase retained earnings for the same amount.
2005 2005 (restated) ==== ==== ASSETS Current assets Cash . . . . . . . . . . . . . . . . . . . $ 147 $ 147 Accounts Receivable.(Note 2) . . . . . . . . . . . 9,588 9,588 Inventory. . . . . . . . . . . . . . . . . . 0 1,385,080 --------- --------- Total Current Assets . . . . . . . . . . . . . . 9,735 1,394,815 Property, Plant, and Equipment Net of accumulated Depreciation . . . - - Other Assets Deferred Public Offering Cost - --------- ------- Total Assets . . . . . . . . . . . . . . . . . $ 9,735 $1,394,815 ========= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts Payable . . . . . . $ 1,573,045 49,009 Deferred Revenue (Note 7) - 1,524,036 Advances from Officer 26,500 26,500 --------- -------- Total Current Liabilities. . . . . . . . . . $ 1,599,545 $ 1,599,545 Long term liabilities . . . . . . . . . . $ 76,677 76,677 --------- ---------- Total Liabilities. . . . . . . . . . . . . . . $ 1,676,222 $ 1,676,222 ========= ========== Consequently, The Company, recorded revenue during 2006 since the company has completed the software development to customer specifications and has delivered the completed software package to Meridian Holdings, Inc. (Please see note 8 below)
7 2. Use of Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. Account Receivable The Company recognizes accounts receivable to the extent that revenues have been earned, and collections are reasonably assured. As a result of Meridian Holdings, Inc., written notice to the registrant in 2001 to discontinue the sale of the MedMaster Software (originally owned by Sirius Computerized Technology of Israel) purchased from an Israeli Bankruptcy Court in July, 2000 following an Atlanta Georgia Court decision to award the Asset of Sirius commonly known as MedMaster, including all its components and subsystems to Lockheed Martin/ExcelCare, in partial satisfaction of their civil judgement against Sirius etal. in April of 2001. Following the above development in 2001 the company entered into a software development agreement with Meridian Holdings, Inc., an affiliated company to develop a replacement software for MedMaster(tm) Software which was withdrawn from the market. Meridian advanced the company approximately $1,500,000 to develop a replacement software for the customers who purchased the MedMaster Software. The company recognized deferred revenue upon receipt of the advance and subsequently, recorded revenue during 2006 since the company has completed the software development to customer specifications and has delivered the completed software package to Meridian Holdings. As such, the company recognized the deferred revenue as income during fiscal year 2006. 4. Inventory Inventories consist 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. The company classified as inventory the ICE software licenses developed for Meridian Holdings, for delivery to the customers as inventory during the period ended December 31, 2005, in the amount of $1,385,080. These software licenses were delivered to Meridian Holdings, Inc at December 31, 2006 after having met all the conditions for acceptance of the developed software. (please see note 2 above) 5. 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 to seven years. Property and equipment consists of the following as of December 31, 2006 and 2005: 2006 2005 ===== ===== Computer Hardware &Software $68,681 $ 68,264 Less: Accumulated Depreciation 68,264 68,264 ------- ------- $ 417 $ 0 ======== =======
6 6. 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, 2006 and 2005. 7. 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. 8. 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. As a result of Meridian Holdings, Inc., written notice to the registrant in 2001 to discontinue the sale of the MedMaster Software (originally owned by Sirius Computerized Technology of Israel) purchased from an Israeli Bankruptcy Court in July, 2000 following an Atlanta Georgia Court decision to award the Asset of Sirius commonly known as "MedMaster ", including all its components and subsystems to Lockheed Martin/ExcelCare, in partial satisfaction of their civil judgement against Sirius etal. in April of 2001. Following the above development in 2001 the company entered into a software development agreement with Meridian Holdings, Inc., an affiliated company to develop a replacement software for MedMaster(tm) Software which withdrawn from the market. Meridian advanced the company approximately $1,500,000 to develop a replacement software for the customers who purchased the MedMaster Software. The company recognized deferred revenue upon receipt of the advance and subsequently, recorded revenue during 2006 since the company has completed the software development to customer specifications and has delivered the completed software package to Meridian Holdings. As such, the company recognized the deferred revenue as income during fiscal year 2006. 9 9. Software Development Cost Software development costs are charged to current operations 10. Fair Value of Financial Instruments and Concentration of Credit Risk. The carrying amounts of cash, receivables, prepaid banner advertisements fees by Meridian Holdings, Inc. (an affiliated Company), accounts payables and accrued liabilities approximates fair value because of the immediate or short-term maturity of these financial instruments. 11. Deferred Costs Related to Proposed Public Offering Deferred costs recorded in prior years for a proposed public offering were written off in 2005 due to the abandonment of such proposal, in the amount of $65,331. These costs were charged to operations. 12. Income Taxes The Company utilizes the liability method of accounting for income taxes, as set forth in Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Under the liability method, deferred taxes are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Valuation allowances are recorded against deferred tax assets when it is considered more likely than not that the deferred tax assets will not be utilized. The current years tax liability was offset by the Company's NOL carry forward which had been fully reserved. Tax liability $39,060 NOL carry forward benefit (39,060) Total tax provision recognized this period $0 13. 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. 14. 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. The Company has 20,000,000 shares of Preferred Stock authorized. The Board of Directors has the authority to set the terms of each Preferred share issued. There were no shares outstanding at December 31, 2006, and 2005 respectively. 15. Recent Accounting Pronouncements The Company has received current accounting pronouncements and has determined that the adoption of any current accounting pronouncements would not have a material impact on the Company's financial condition or the results of operations. 16. RELATED PARTY TRANSACTIONS On March 10, 2006, Anthony C. Dike, the Chairman/CEO of the Company exercised his option to purchase 1,000,000 of InterCare DX, Inc., common stock at $0.002 per share. Expenses related to the Company are routinely paid by Meridian Holdings, Inc., 10 (an affiliated Company) under a management services agreement. As such amounts are recorded as payable to Meridian, as incurred. 17. Joint Venture On June 14, 2005, the Company executed a Memorandum of understanding (MOU) with the Saudi German Hospital Group, whereby both parties desire to form a joint venture limited liability company in the Dubai, United Arab Emirate for the purposes of selling InterCare's ICE(tm) software licenses to physicians and other healthcare providers. As of December 31, 2006, no operations have commenced related to this joint venture. 18. 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 operations. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. 19. Subsequent Events On February 22, 2007, the Company entered into a management agreement with Bayou Road Investments.(a private company) to provide interim CFO services and financial management. 11 EX-32 2 exhibit322c.txt EXHIBIT32 Exhibit 32.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the report of InterCare DX, Inc. (the "Company") on Form 10-KSB for the period ending December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Anthony C. Dike, the Chief Executive Officer, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to InterCare DX, Inc., and will be retained by InterCare DX, Inc., and furnished to the Securities and Exchange Commission or its staff upon request. DATE: September 3, 2007 By: /s/ Anthony C. Dike ------------------- Anthony C. Dike Chairman and CEO (Principal Executive and Financial Officer) EX-31 3 exhibit311c.txt EXHIBIT31 EXHIBIT 31.1 I, Anthony C. Dike, certify that: 1. I have reviewed this report on Form 10KSB of InterCare DX, Inc.; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) for the registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and c) disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; 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 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: September 3, 2007 By:_/s/ Anthony C. Dike - -------------------------- Anthony C. Dike Chairman and CEO (Principal Executive and Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----