-----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, INN0Ksjd6emYJAPgJE0FdZAdrLfpCCJJfVfEnuIkNcdqXt6DYResQ+H4cpxG5/hd G6Nv+52qPwbARv5Zucyj6w== 0000931731-96-000333.txt : 19961121 0000931731-96-000333.hdr.sgml : 19961121 ACCESSION NUMBER: 0000931731-96-000333 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961119 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INMEDICA DEVELOPMENT CORP CENTRAL INDEX KEY: 0000726037 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 870397815 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-12968 FILM NUMBER: 96669236 BUSINESS ADDRESS: STREET 1: P O BOX 27557 STREET 2: 495 EAST 4500 SOUTH SUITE 230 CITY: SALT LAKE CITY STATE: UT ZIP: 84127 BUSINESS PHONE: 8012639190 MAIL ADDRESS: STREET 1: P O BOX 27557 STREET 2: 495 EAST 4500 SOUTH SUITE 230 CITY: SALT LAKE CITY STATE: UT ZIP: 84127 FORMER COMPANY: FORMER CONFORMED NAME: INMED DEVELOPMENT CORP DATE OF NAME CHANGE: 19840815 10QSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10 - QSB Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended September 30, 1996 Commission File No. 0-12968 INMEDICA DEVELOPMENT CORPORATION (Exact name of small business issuer as specified in its charter) Utah 87-0397815 (State or other jurisdiction of (I.R.S. Employer Identification incorporation of organization) Number) 60 South 600 East, Suite 150, Salt Lake City Utah 84102 (Address of principal executive offices) Registrant's telephone number including area code (801) 521-9300 Check whether the issuer (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes X No The number of shares outstanding of the registrant's only class of common stock, par value $.001 per share, as of November 1, 1996 was 7,745,570 shares. 1 PART I - FINANCIAL INFORMATION Page 1 of 2 - ------------------------------ Item 1. Financial Statements INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996 ASSETS September 30, 1996 (Unaudited) CURRENT ASSETS: Cash $ 161,812 Prepaid expenses 6,255 ------------ Total current assets 168,067 EQUIPMENT AND FURNITURE, at cost, less accumulated depreciation of $249,713 34,777 OTHER ASSETS 2,196 Total assets $ 205,040 ============ See notes to condensed consolidated financial statements. 2 Page 2 of 2 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996 LIABILITIES AND STOCKHOLDERS' DEFICIT September 30, 1996 (Unaudited) CURRENT LIABILITIES: Current portion of note payable $ 50,000 Accounts payable and accrued interest 12,072 Related party notes payable 25,500 Total current liabilities 87,572 NOTE PAYABLE, less current portion 385,000 STOCKHOLDERS' DEFICIT: Common stock, $.001 par value; 20,000,000 shares authorized, 7,745,570 shares outstanding 7,746 Preferred stock, 10,000,000 shares authorized; Series A preferred stock, cumulative and convertible, $4.50 par value, 1,000,000 shares designated, 67,633 shares outstanding 304,349 Additional paid-in capital 6,225,018 Accumulated deficit (6,804,645) Total stockholders' deficit ( 267,532) Total liabilities and stockholders' deficit $ 205,040 ========== See notes to condensed consolidated financial statements. 3 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the Three For the Nine Months Ended Months Ended September 30, September 30, 1996 1995 1996 1995 (Unaudited) (Unaudited) (Unaudited) (Unaudited) ROYALTIES $ 210,080 179,840 $ 336,480 $ 321,054 ----------- ----------- ----------- ----------- OPERATING EXPENSES: General and administrative 76,734 64,761 189,148 164,642 Research and development 21,386 -0- 86,179 -0- ----------- ---------- ---------- ---------- Total operating expenses 98,120 64,761 275,327 164,642 ----------- ----------- ----------- ---------- INCOME FROM OPERATIONS 111,960 115,079 61,153 156,412 ----------- ----------- ----------- ---------- OTHER (EXPENSE) INCOME: Interest and other income 489 16 519 16 Gain from sale of assets -0- 5,728 -0- 5,728 Interest expense (12,193) (38,311) (41,545) (119,521) ------------ ---------- ----------- -------- Total other expense, net (11,704) (32,567) (41,026) (113,777) ---------- ---------- ----------- -------- INCOME BEFORE EXTRAORDINARY GAIN 109,256 82,512 20,127 42,635 EXTRAORDINARY GAIN FROM DEBT EXTINGUISHMENT -0- 19,723 -0- 188,770 ----------- ----------- ---------- ----------- NET INCOME 101,256 102,235 20,127 231,405 ----------- ----------- ----------- --------- Less preferred stock dividends (6,087) -0- (19,723) -0- ----------- ----------- --------- -------- NET INCOME APPLICABLE TO COMMON SHARES $ 94,169 $ 102,235 $ 404 $ 231,405 =========== ========= ========== ======== NET INCOME PER COMMON SHARE: Income before extraordinary gain $ .01 $ .01 $ .00 $ .01 Extraordinary gain .00 .00 .00 .02 ----------- ----------- ---------- --------- Net income per common share $ .01 $ .01 $ .00 $ .03 =========== =========== ========== ========= Weighted average number of common shares outstanding 8,560,292 7,475,919 8,560,292 7,475,919 =========== =========== =========== =========== See notes to condensed consolidated financial statements. 4 Page 1 of 2 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH For the For the Nine Months Nine Months Ended Ended September 30, 1996 September 30, 1995 (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 20,127 $ 231,405 Adjustments to reconcile net income to net cash provided by operating activities- Non-cash consulting expense 6,584 Depreciation 668 24,517 Extraordinary gain from debt extinguishment -0- (188,770) Gain from sale of assets -0- (5,728) Change in assets and liabilities- Decrease in royalties receivable 227,520 301,375 Decrease in prepaid expenses 20,461 20,024 Decrease in accounts payable (3,461) (6,961) Increase (decrease) in accrued liabilities 573 (148,866) Decrease in related party payable (113,026) -0- Net cash provided by operating activities 159,446 226,996 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of assets -0- 6,200 Purchase of equipment and furniture (31,375) (3,466) Net cash (used in) provided by investing activities (31,375) 2,734 ------------ ------- See notes to condensed consolidated financial statements. 5 Page 2 of 2 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH For the For the Nine Months Nine Months Ended Ended September 30, 1996 September 30, 1995 (Unaudited) (Unaudited) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on convertible debentures $ (22,768) $ (233,453) Preferred stock dividends paid (19,723) -0- Principal payments on note payable (37,500) -0- Proceeds from bank loan -0- 150,000 Proceeds from issuance of common stock -0- 338 Net cash used in financing activities (79,991) (83,115) ---------- --------- NET INCREASE IN CASH 48,080 146,615 CASH AT BEGINNING OF PERIOD 113,732 3,080 --------- -------- CASH AT END OF PERIOD $ 161,812 $149,695 ========= ======== See notes to condensed consolidated financial statements. 6 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note A--Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310b of Regulation SB. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These consolidated statements include the accounts of InMedica Development Corporation and its wholly owned subsidiary, MicroCor, Inc. ("MicroCor"). All material intercompany accounts and transactions have been eliminated. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. For further information, refer to the consolidated financial statements included in the Company's Form 10-KSB for the year ended December 31, 1995. Note B--Reduction and Grant of Certain Stock Options During the period October 1995 through April 1996, the Company granted stock options to officers, directors and consultants aggregating 1,100,000 shares. At a board meeting held July 31, 1996, the Company reduced these options by 25% effective August 1, 1996, reducing the total options granted and outstanding to 825,000. Effective September 3, 1996, the Company entered into a consulting contract with Ruben Engineering, Paul Ruben and Calvin Ruben for engineering consulting services relating to the development of the Company's hematocrit technology. The contract grants the Rubens options to purchase a total of 300,000 shares of the common stock of the Company for $1.16 per share. A block of 200,000 options become exercisable and vest 25,000 per quarter beginning December 1, 1996. An additional 100,000 options become exercisable and non-forfeitable only upon the date satisfactory clinical trials have been completed on the hematocrit technology. All options are immediately exercisable and non-forfeitable if the FDA approves the Company's hematocrit technology or if InMedica is sold or acquired or the non-invasive hematocrit technology is sold or acquired. In connection with the granting of these options the Company has recognized $178,000 of consulting expenses of which 7 $171,416 has been deferred until the services have been provided. Effective September 17, 1996, Dr. Allan Kaminsky severed his employment relationship with the Company resulting in the cancellation of his options to purchase 435,000 shares of the Company's common stock. NOTE C--Extension of Preferred Stock Conversion Exercise Period Effective September 30, 1996, the Company extended from October 1, 1996 through November 1, 1996, the period during which the preferred stockholders of the Company are entitled to convert shares of the Series A preferred stock to common stock of the Company at the rate of six shares of common for each share of preferred. NOTE D--Subsequent Event During October 1996, eight of the Company's Series A preferred stockholders converted an aggregate of 42,277 shares of par value $4.50 Series A Convertible preferred stock to an aggregate of 253,662 shares of common stock of the Company. The conversion rate was six shares of common stock for each share of preferred. The Company presently has five remaining preferred stockholders. Total aggregate dividends payable on the remaining preferred stock outstanding is $9,128 per year. 8 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources During the nine months ended September 30, 1996, the Company recognized royalty revenues from two payments received from J & J Medical, Inc. totalling $336,480, up slightly from the same period in 1995. The Company's revenue recognition policy of recording revenues only after the cash is received results in the Company reporting royalty revenues one quarter in arrears during the first three quarters of each year. The Company's sole source of revenue is royalty payments received from J & J Medical, Inc., which are paid to the Company on a quarterly basis. Royalty revenues being received by the Company may be insufficient to sustain research and development costs, fund operations and retire indebtedness when it comes due. InMedica consequently continues to look for funding sources. InMedica achieved profitable operations during the fiscal years ended December 31, 1995 and 1994. Profitable operations resulted from increased royalty receipts coupled with expense reductions and the suspension of research and development efforts in 1994, and an extraordinary gain in 1995. However, the Company has a total stockholders' deficit of $267,532 and an accumulated deficit of $6,804,645 as of September 30, 1996. In order for InMedica to continue its research and development activities and meet its obligations, it must secure additional financing, for which it has no commitments. It is impossible to estimate the amount of the J & J Medical, Inc. royalties which may be received in the future. Such royalty revenue is dependent upon the continued sales of a certain product line by J & J Medical Inc. which includes the Company's base technology upon which the royalty is paid. Results of Operations See "Liquidity and Capital Resources" for an explanation as to the reporting of two quarters of revenue receipts during the first three quarters of the year. The net income from operations decreased to $20,127 for the nine months ended September 30, 1996 compared to $42,635 for the comparable nine months of the prior year due to an increase in general and administrative expenses and research and development expenses. 9 PART II - OTHER INFORMATION Item 1. Legal Proceedings: None Item 2. Changes in Securities: See Note C to the financial statements for information on a change in the exercise period for certain conversion rights of the preferred stockholders. Item 3. Defaults Upon Senior Securities: None Item 4. Submission of Matters to a Vote of Security Holders: None Item 5. Other Information: During August 1996, Dr. Allan Kaminsky (a former President, Chief Executive Officer, Director and key employee of the Company) orally advised a member of the Company's board of directors that he would no longer pursue obtaining control of the Company by a proxy contest or litigation. Dr. Kaminsky subsequently sent a letter dated September 6, 1996 to Mr. Larry E. Clark offering his continued efforts on behalf of the Company, without cash compensation, in exchange for certain commitments by the Company, which included a right exercisable by Dr. Kaminsky to appoint five persons to the Board of Directors (in the event he was able to develop a device which could measure hematocrit within certain ranges) and rights for Dr. Kaminsky to purchase one million or more shares of stock in the Company at 50% of market value (in the event the Company achieved the ability to fabricate a marketable product or executed a merger/acquisition). The letter advised the Company that if Dr. Kaminsky did not receive a reply from the Company by September 16, 1996 that he would "irreversibly" sever any association with the Company (employment, consulting and advisory). After considering Dr. Kaminsky's proposal, the Company determined to make no response to the letter and considers its association with Dr. Kaminsky to be terminated and that his 435,000 options have expired. On September 17, 1996, Dr. Kaminsky advised the Company that his offer to negotiate had expired, that he had no association (employment, consulting, advisory) with InMedica/MicroCor, other than being a passive shareholder and that his action was permanent and irreversible. Dr. Kaminsky continues to be a principal shareholder of the Company; see Form 10-KSB for the year ended 1995, "Principal Shareholders". 10 Item 6. Exhibits and reports on Form 8-K: Exhibits: (1) Agreement dated September 3, 1996 between InMedica Development Corporation and Paul Ruben dba Ruben Engineering and Calvin Ruben, incorporated by reference to the Exhibits to Form 8-K dated September 20, 1996. (2) Form of conversion agreement executed by eight Preferred stockholders during October 1996 to convert Series A preferred to common stock of the Company. (3) Financial Data Schedule Form 8-K: The Company filed a Form 8-K dated September 20, 1996. 11 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INMEDICA DEVELOPMENT CORPORATION /s/ Larry E. Clark By Larry E. Clark, CEO /s/ Richard Bruggeman Date: November 18, 1996 By Richard Bruggeman, Treasurer 12 EXHIBITS Exhibits filed with the Form 10-QSB of InMedica Development Corporation, SEC File No. 0-12968: Exhibit No. SB Item No. Description (10) Agreement dated September 3, 1996 between InMedica Development Corporation and Paul Ruben dba Ruben Engineering and Calvin Ruben, incorporated by reference to the Exhibits to Form 8-K dated September 20, 1996. 1 (10) Form of conversion agreement executed by eight preferred stockholders during October 1996 to convert Series A preferred to common stock of the Company. 2 (27) Financial Data Schedule 13 EX-10 2 MATERIAL CONTRACTS Exhibit 1 CONVERSION AGREEMENT AN AGREEMENT made the day of , 1996 by and between the Preferred Stockholder (hereinafter "Holder") whose name is subscribed below and whose name, address and shareholdings are identified on Appendix I attached hereto, and InMedica Development Corporation, a Utah corporation, with its principal place of business at 60 South 600 East, Suite 150, Salt Lake City, Utah, (hereinafter, "InMedica" or the "Company"). RECITALS Whereas the Preferred Stock of the Company by its terms is presently convertible to common stock of the Company at the conversion rate of six shares of common stock per one share of Preferred Stock; and Whereas the Company desires to afford the Holder the opportunity to consider and give notice of conversion as required by the Articles of Incorporation of the Company if the Holder desires to do so; and Whereas the undersigned Holder is knowledgeable regarding the business, and affairs of the Company, has had opportunity to ask and receive answers to questions regarding the Company, and has reviewed or had opportunity to review disclosure documents regarding the Company and now considers himself to be fully informed and in possession of every material fact he deems necessary in order to consider the exercise of his conversion rights with respect to the Preferred Stock; NOW THEREFORE, in consideration of the mutual agreements contained herein, the parties agree as follows: 1. Notice and Exchange. Holder hereby gives notice of conversion of his Preferred shares to common stock of the Company on the basis of six common shares per each Preferred share presently outstanding. Holder will deliver a signed copy of this agreement and his Preferred Stock Certificate endorsed in blank to the Company. 2. Issuance of Shares. Upon receipt by the Company of this signed Agreement and the Preferred Stock certificate of the Holder, the Company will issue to Holder six restricted common shares, $.001 par value, of the Company for each preferred share presently outstanding in the preferred shareholder's name. 14 3. Effective Date and Dividends. Holder and the Company agree that the exchange transaction contemplated by this Agreement, shall be effective as of November 1, 1996, upon the acceptance by the Company of the Holders' Agreement, notwithstanding the actual date of delivery of the stock certificate representing the Shares. The parties further agree that the Company shall pay dividends on the preferred stock to Holder only through the third quarter of 1996. 4. Conditions. The consummation of the exchange transaction contemplated by this Agreement is expressly conditioned upon the satisfaction or waiver of the following conditions precedent and subsequent: 4.1 The full and due execution and delivery of this Agreement by Holder and the Company; 4.2 The execution and delivery by Holder of the Questionnaire attached to this Agreement as Exhibit "F" and made a part hereof; 4.3 The continued accuracy and validity of the representations and warranties of Holder set forth in Section 5 and elsewhere in this Agreement; 4.4 The approval of this Agreement by InMedica; 5. Representations and Warranties of Holder. Holder hereby agrees, represents and, to the extent the context shall require, warrants to the Company as set forth below and agrees that such agreements, representations and warranties shall expressly survive the consummation of the exchange transaction contemplated hereby and shall be unaffected by any investigation made by any party at any time; 5.1 Holder understands that the Preferred Stock is being exchanged and the Shares are being issued without registration under the Federal Securities Act of 1933, as amended (the "Federal Act"), in reliance upon an exemption or exemptions available under the Federal Act, including those available under Section 3(a)(9) and/or Section 4(2) and/or Regulation D thereof. Holder further understands that the Preferred Stock is being exchanged and the Shares are being issued pursuant to an exemption from the registration provisions of the applicable state laws and understands that the availability of the exemption or exemptions from registration and qualification under the Federal Act and the state laws depend in part upon the accuracy of certain of the representations, declarations and warranties contained herein, and those which are made in the Questionnaire attached as Exhibit "F" hereto, executed by Holder with the intent that the same may be relied upon by the Company in determining Holder's suitability as 15 an investor in the Company. Holder further acknowledges that this transaction has not been and will not be reviewed by the Securities and Exchange Commission nor by the securities administrator of any state. 5.2 Holder is a resident and domiciliary, not a temporary or transient resident, of the State shown as part of Holder's address in Holder's Questionnaire. 5.3 Holder is acquiring the Shares to be issued for investment and not with a view to the public resale or distribution thereof. The undersigned has no contract, undertaking, agreement or arrangement with any person to sell, transfer or pledge to such person or anyone else the Shares or any portion thereof or interest therein, and the undersigned has no present plans to enter into such contract, undertaking, agreement or arrangement. 5.4 Holder acknowledges that the certificate evidencing the Shares, and any and all replacements thereof, shall bear and be subject to legends in substantially the following form affecting the transferability of the Shares and that the Company will place appropriate stop transfer orders with its transfer agent: "The shares of stock evidenced by this certificate have not been registered under the Securities Act of 1933, as amended, and have been issued in reliance upon one or more exemptions from the requirements for such registration including an exemption for non-public offerings. Accordingly, the sale, transfer, pledge, hypothecation or other disposition of the shares evidenced hereby or any portion thereof or interest therein may not be accomplished in the absence of an effective registration statement under that act, or an opinion of counsel satisfactory in form and substance to the Company to the effect that such a registration is not required." 5.5 Holder further understands and agrees that if he desires to make any transfer of the Shares, the Company is in a position to impede such transfer through prior stop orders placed with its transfer agent or otherwise and that the Company will promptly remove such impediments placed by it only when: (i) The Company has received a satisfactory opinion of counsel to the effect that the proposed transfer does not require registration or qualification pursuant to the Federal Act or the state laws by reason of an exemption provided thereunder and a representation and agreement of the proposed transferee in form and substance satisfactory to the Company, and the Company shall have advised Holder that such opinion, representation and agreement are satisfactory to the Company; or (ii) The Company has received a satisfactory opinion of counsel to the effect that the proposed transfer complies with the provisions 16 of Rule 144 under the Federal Act and the Company shall have advised the Holder that such counsel and such opinion are satisfactory to the Company; or (iii) A Registration statement covering the proposed transfer has been filed with the Securities and Exchange Commission and has been declared effective. 5.6 Holder agrees that, in any event, Holder will not attempt to dispose of the Shares or any portion or interest therein, unless and until the Company has determined to its satisfaction that the proposed disposition does not violate the registration or qualification requirements of the Federal Act or applicable state laws. 5.7 Holder understands that the Company has no obligation or intention to register or qualify the Shares in order to permit sales thereof in accordance with the registration or qualification provisions of the Federal Act or the applicable state laws. 5.8 Holder hereby agrees to indemnify the Company and its officers, directors, agents and attorneys and to hold the Company and such persons harmless from any liability, costs or expenses (including reasonable attorneys' fees) arising as a result of the sale or distribution of the Shares or any portion thereof or interest therein by him in violation of the Federal Act or applicable state laws. 5.9 Holder agrees to indemnify the Company and its officers and directors, agents and attorneys and to hold the Company and such persons harmless from and against any and all loss, damage, liabilities, costs or expenses (including reasonable attorneys' fees) to which they may be put or which they may have incurred by reason of or in connection with any misrepresentation made by Holder, for any breach of any of Holder's warranties or Holder's failure to fulfill any of Holder's covenants or agreements under this Agreement. 5.10 Holder hereby confirms that all statements in the Holder's Questionnaire attached as Exhibit "F" hereto were and remain true and correct and undertakes to immediately notify the Company of any material changes occurring thereto prior to consummation of this exchange transaction. 5.11 Holder acknowledges that Holder and/or Holder's professional advisor have had the opportunity to ask questions of, and receive answers from the Company, and has/have had access to all information concerning the terms and conditions of this exchange and the financial and operating condition of the Company and to obtain additional information to verify the accuracy of such information. Further, Holder has reviewed the disclosure materials included herewith, including the financial statements contained 17 therein and is familiar with their contents and further acknowledges that Holder has had the opportunity and access to obtain further information from the Company regarding such financial, business and management information. Disclosure materials attached hereto are as follows: Form 10-KSB for the Year Ended 12/31/95 ..........Exhibit A Articles of Incorporation of InMedica Development Corporation, including Series "A" Preferred Stock Amendment........................................Exhibit B Bylaws of InMedica Development Corporation........Exhibit C Additional Material Information...................Exhibit D Risk Factors......................................Exhibit E Questionnaire.....................................Exhibit F Form 10-QSB for the Quarter Ended 6/30/96.........Exhibit G Form 8-K dated September 20, 1996.................Exhibit H 5.12 Holder understands that, as indicated above, the Shares to be issued will be restricted securities and, as such, and in addition to the other restrictions described above, the Shares may be subsequently transferred only in accordance with the provisions of Rule 144 under the Federal Act which requires, among other things, that the Shares be held for not less than two years, known as the "holding period", including the tacking of any prior holding period permitted by Rule 144. 5.13 Holder understands that by its terms, this exchange is made at the option of the Holder, and the Holder, is free to accept or reject this Conversion Agreement. 5.14 The number of shares of the Preferred Stock held by Holder as of the date shown, is accurate and represents the full number of shares of the Preferred Stock held by the Holder and that all dividends owning on the Preferred Stock have been paid in full and Holder waives and forever relinquishes any dividends on the Preferred Stock accruing following the third quarter of 1996 and thereafter. 5.15 Holder understands that Larry E. Clark, the Company's Chief Executive Officer, purchased from Allan L. Kaminsky, then CEO of the Company, 1,000,000 shares of the Company's common stock for $100,000 ($.10 per share) during April, 1995 and that other transactions or exchanges in the securities of the Company have occurred in which the common stock of the Company was valued at substantially less than the arbitrary $.75 per share conversion ratio utilized 18 in this transaction (see Exhibit A, Form 10-KSB for the year ended December 31, 1995, "Preferred Stock," "Debentures" and "Price Range for Common Stock"). 5.16 Holder acknowledges that the Company makes no representations or assurances as to the federal or state income tax implications, either to the Holder or the Company, of this Exchange Agreement. The Company has offered no opinion or advice in this respect and Holder acknowledges that the Company and its management have urged Holder to consult with his professional advisors with respect to any such tax implications. 5.17 Holder acknowledges that no representations or assurances have been given to Holder by the Company or anyone acting in its behalf as to the continued operations of the Company or the financial or other success thereof and Holder recognizes that the Shares represent a speculative investment and involve risk factors including, but not limited to, those set forth in the Exhibits hereto including the risk of loss of Holder's entire investment in the Company. 5.18 Holder has not assigned or transferred the Preferred Stock or any interest therein and the exchange thereof by Holder under this Agreement, to the knowledge of Holder, will not result in any breach of any of the terms, conditions or provisions of, or constitute a default under, or result in the creation of any lien, charge or encumbrance on, the Preferred Stock or the Shares pursuant to any agreement, contract or other instrument to which the Holder or the Preferred Stock is or may be bound. 5.19 Holder acknowledges that the conversion ratio for the Exchange of the Preferred Stock for the Shares has been arbitrarily determined by the Company and bears no relationship to book value, present or future tangible or intangible assets of the Company or earnings of the Company or any usual investment criteria. 6. Loss of Priority. Holder acknowledges that under the terms of the Preferred Stock, conversion is at the option of the Preferred Stockholder. If the Holder does not convert and execute this Exchange Agreement, then the Preferred Stock will continue to pay or accrue dividends at the rate of 8% per annum and the Preferred Stock would have a preference in any liquidation of the Company over the common stockholders. If the Holder exchanges the Holder's Preferred Stock, the Holder forever relinquishes any priority the Holder would have had as compared to the common shareholders in a liquidation of the Company. 7. Further Assurances. Each party shall, at any time and from time to time, at the other's request, execute, acknowledge and deliver any instrument that may be necessary or proper to carry out the provisions of this Agreement. 19 8. Time of the Essence. Time shall be of the essence in satisfying the terms and conditions of this Agreement. 9. Attorneys' Fees. In the event a dispute arises with respect to this Agreement, and such dispute is not resolved prior to final judicial determination, the party prevailing in such dispute shall be entitled to recover all expenses, including, without limitation, reasonable attorneys' fees and expenses. 10. Complete Agreement of the Parties. This Agreement supersedes any and all other agreements, either oral or in writing, between the parties with respect to the subject matter hereof and contains all of the covenants and agreements between the parties with respect to such subject matter in any manner whatsoever. Each party to this Agreement acknowledges that no representations, inducements, promises or agreements, oral or otherwise, have been made by any party, or anyone herein, and that no other agreement, statement or promise not contained in this Agreement shall be valid or binding. This Agreement may be changed or amended only by an amendment in writing signed by all of the parties or their respective successors in interest. 11. Assignment. This Agreement and the rights and obligations of Holder hereunder are personal to Holder and may not be transferred or assigned without the prior written consent of the Company. 12. Binding. Subject to the provisions of Section 11 hereof, this Agreement shall be binding upon and inure to the benefit of the successors in interest, assigns and personal representatives of the respective parties. 13. Number and Gender. Whenever the singular number is used in this Agreement and when required by the context, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders and the word "person" shall include corporation, firm, partnership or other form of association. 14. Failure to Object Not a Waiver. The failure of either party to this Agreement to object to, or to take affirmative action with respect to, any conduct of the other which is in violation of the terms of this Agreement, shall not be construed as a waiver of the violation or breach or of any future violation, breach or wrongful conduct. 15. Unenforceable Terms. Any provision hereof prohibited by law or unenforceable under any applicable law of any jurisdiction shall as to such jurisdiction be ineffective without affecting any other provision of this Agreement. To the full extent, however, that the provisions of such applicable law may be waived, they are hereby waived to the end that this Agreement be deemed to be a valid and binding enforceable agreement in accordance with its terms 20 16. Miscellaneous Provisions. The various headings and numbers herein and the groupings of provisions of this Agreement into separate articles and paragraphs are for the purpose of convenience only and shall not be considered a part hereof. The language in all parts of this Agreement shall in all cases be construed in accordance to its fair meaning as if prepared by all parties to the Agreement and not strictly for or against any of the parties. EXECUTED AS OF THE DATE FIRST ABOVE WRITTEN INMEDICA DEVELOPMENT CORPORATION (Holder Signature) (Print Name) By Larry E. Clark, President 21 EX-27 3 FDS --
5 9-MOS 9-MOS DEC-31-1996 DEC-31-1995 SEP-30-1996 SEP-30-1995 161812 0 0 0 0 0 0 0 0 0 168067 0 284490 0 249713 0 205040 0 84572 0 0 0 0 0 304349 0 7746 0 (579627) 0 205040 0 0 0 336480 321054 0 0 275327 164642 0 0 0 0 41545 119521 20127 42635 0 0 20127 42635 0 0 0 188770 0 0 20127 231405 .00 .03 .00 .03 Additional paid in capital and retained earnings.
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