-----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, CSnR17z835hQbhAOpxNQrggVhFxooAh/RRvOLWdjZyTe6ELB3y/mTBHPVQ023enq Y8y1GyXk9L7OBbDu4ti9VQ== 0000849145-97-000013.txt : 19970912 0000849145-97-000013.hdr.sgml : 19970912 ACCESSION NUMBER: 0000849145-97-000013 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970904 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDCROSS INC CENTRAL INDEX KEY: 0000849145 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 592291344 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-17973 FILM NUMBER: 97675991 BUSINESS ADDRESS: STREET 1: 13751 S WADSWORTH PK DR STREET 2: STE 200 CITY: DRAPER STATE: UT ZIP: 84020 BUSINESS PHONE: 8015765000 MAIL ADDRESS: STREET 1: 3227 BENNET STREET NORTH CITY: ST PETERSBURG STATE: FL ZIP: 33713 10QSB/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB/A#1 (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-17973 MEDCROSS, INC. (Exact name of small business issuer as specified in its charter) FLORIDA 59-2291344 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 13751 S. Wadsworth Park Drive, Suite 200, Draper, Utah 84020 (Address of principal executive offices) (801) 576-5000 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Class Outstanding at May 15, 1997 Common Stock, par value $0.007 10,607,597 Traditional Small Business Disclosure Format (Check One): Yes [ ] No [X] 1 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements
MEDCROSS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (unaudited) ASSETS March 31 1997 Current assets: Cash and cash equivalents $ 2,196,343 Accounts receivable less allowance of $754,014 2,680,490 Certificate of deposit - restricted 208,500 Inventory less allowance of $260,033 557,996 Other current assets 176,753 ---------- Total current assets 5,820,082 ---------- Property and equipment: Property and equipment 6,625,280 Less accumulated depreciation ( 2,888,844) ---------- Net property and equipment 3,736,436 ---------- Other assets: Intangible assets, net of amortization of $358,098 2,834,700 Certificate of deposit - restricted 1,742,711 Other assets 85,182 ---------- Total other assets 4,662,593 ---------- Total assets $ 14,219,111 ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable and accrued expenses $ 3,678,134 Accrued litigation settlement 821,000 Notes payable - related party 88,000 Notes payable - other 1,052,852 Current portion of long-term debt - related party 43,554 Current portion of long-term debt - other 404,429 Current obligations under capital lease 187,047 ---------- Total current liabilities 6,275,016 ---------- Long-term debt 2,320,450 Obligations under capital leases 194,248 Minority interest equity in consolidated subsidiaries 319,687 ---------- Total liabilities 9,109,401 ---------- Commitments and contingencies Stockholders' equity: Preferred stock 2,475,000 Common stock 74,253 Additional paid-in capital 31,178,161 Common stock to be issued 2,414,583 Accumulated deficit (31,032,287) ---------- Total stockholders' equity 5,109,710 ---------- Total liabilities and stockholders' equity $ 14,219,111 ==========
The accompanying notes are an integral part of these consolidated financial statements. 2
MEDCROSS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three Months Ended March 31 ---------------------------- 1997 1996 ------------ ------------ Revenues: Telecommunication service revenue $ 2,147,216 $ - Health care service revenue 597,257 592,180 Other revenue - 17,026 --------- --------- Net operating revenue 2,744,473 609,206 --------- --------- Operating costs and expenses: Telecommunication network expense 2,891,082 98,233 Selling, general and administrative 2,647,144 994,603 Provision for doubtful accounts 135,225 41,244 Depreciation and amortization 401,495 329,373 Provision for inventory valuation and write-down of property and equipment 213,944 - Acquired in-process research and development - 4,777,943 Research and development 111,088 - --------- --------- Total operating costs and expenses 6,399,978 6,241,396 --------- --------- Operating loss (3,655,505) (5,632,190) --------- --------- Other income (expense): Interest expense (346,357) (992,639) Interest and other income 86,032 15,527 --------- --------- Total other expense (260,325) (977,112) --------- --------- Loss before minority interest in net loss (income) of consolidated subsidiaries (3,915,830) (6,609,302) Minority interest in net loss (income) of consolidated subsidiary 9,089 (1,943) --------- --------- Net loss $(3,906,741) $(6,611,245) ========= ========= Loss per common share after preferred dividends $( 0.40) $( 2.24) ========= ========= Weighted average common shares outstanding 10,607,597 2,971,400 ========== =========
The accompanying notes are an integral part of these consolidated financial statements. 3
MEDCROSS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Three Months Ended March 31 ---------------------------- 1997 1996 ------------ ------------ Cash flows from operating activities: Net loss $(3,906,741) $(6,611,245) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation and amortization 401,495 329,373 Provision for doubtful accounts 135,225 41,244 Imputed interest on convertible notes 320,000 945,000 Acquired in-process research and development - 4,777,943 Provision for inventory valuation and write-down of property and equipment 213,944 - Minority interest in net income (loss) of consolidated subsidiaries (9,089) 1,943 Increase (decrease) from changes in: Accounts receivable (878,713) (60,623) Inventory (960) (304) Other assets 121,060 (180,029) Other current assets (41,264) (9,087) Accounts payable and accrued expenses 1,137,424 153,041 ------------ ------------ Net cash used by operating activities (2,507,619) ( 612,744) ------------ ------------ Cash flows from investing activities Purchase of property and equipment (88,275) (6,827) Proceeds from maturity of certificate of deposit - restricted - 60,000 Cash received from purchase of FTI 435,312 - ------------ ------------ Net cash provided by investing activities 347,037 53,173 ------------ ------------ Cash flows from financing activities: Repayment of note payable - related party - (73,333) Proceeds from notes payable - other - 1,040,000 Repayment of notes payable - other (90,378) (74,435) Repayment of long-term debt (10,465) (42,075) Payment of capital lease obligations (42,457) (73,289) Issuance of common stock - 124,296 ------------ ------------ Net cash provided (used) by financing activities (143,300) 901,164 ------------ ------------ Effect of foreign currency translation on cash flows - 1 ------------ ------------ Increase (decrease) in cash and cash equivalents (2,303,882) 341,594 Cash and cash equivalents at beginning of period 4,500,225 80,157 ------------ ------------ Cash and cash equivalents at end of period $ 2,196,343 $ 421,751 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 4 MEDCROSS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Financial Statements The interim financial data are unaudited; however, in the opinion of the management of Medcross, Inc. and Subsidiaries (the "Company"), the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of (a) the results of operations for the three-month periods ended March 31, 1997 and March 31, 1996, (b) the financial position at March 31, 1997, and (c) cash flows for the three-month periods ended March 31, 1997 and March 31, 1996. The financial statements should be read in conjunction with the Company's annual report of Form 10-KSB for the year ended December 31, 1996 and its quarterly report on Amendment #1 to Form 10-QSB for the three months ended March 31, 1996 (amended in May 1997). The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three-month period ended March 31, 1997 are not necessarily indicative of those to be expected for the entire year. Certain balances in the March 31, 1996 financial statements as amended have been reclassified to conform with the current period presentation. These changes had no effect on previously reported net loss, total assets, liabilities or stockholders' equity. Note 2 - Supplemental cash flow information In February 1996, the Company acquired all of the issued and outstanding stock of I-Link Worldwide, Inc. in exchange for the issuance of an aggregate of 4,000,000 shares of common stock of the Company, of which 2,600,000 shares were held in escrow as of March 31, 1996. In February 1996, a holder of Class A Preferred Stock converted 40,000 shares into 978,891 shares of common stock of the Company. In January 1997, the Company agreed to issue 400,000 shares of common stock to acquire all of the issued and outstanding stock of Family Telecommunications Inc. ("FTI") effective January 1, 1997. Note 3 - Acquisition of subsidiary On January 13, 1997, pursuant to the terms of a Share Exchange Agreement for the Acquisition of Family Telecommunications Incorporated by Medcross, Inc. effective as of January 1, 1997 (the "Exchange Agreement"), the Company acquired the outstanding stock of Family Telecommunications Incorporated, a Utah corporation ("FTI"), from the stockholders of FTI, namely Robert W. Edwards, Jr. and Jerald L. Nelson. The consideration for the transaction consists of an aggregate of 400,000 shares of the Company's common stock to be issued by the Company upon the satisfaction of certain conditions including approval by the Company's shareholders of an amendment to the Articles of Incorporation authorizing an increase in the number of shares of common stock from 20 million to 50 million and no material breach of any representation by the former stockholders. The purchase price was determined upon the negotiated value of the assets and operations of FTI. The acquisition has been accounted for using the purchase method of accounting in the quarter ended March 31, 1997. FTI is an FCC licensed long-distance carrier and provider of telecommunications services. John W. Edwards, President, a Director and Chief Executive Officer of the Company, and Robert W. Edwards, Jr., the principal shareholder and one of the two shareholders of FTI, are brothers. There was no affiliation or relationship between the Company, its affiliates, officers or directors or associates of such persons and FTI or any if it's officers, directors or stockholders prior to the execution of the Exchange Agreement except as set forth herein. 5 Note 3 - Acquisition of subsidiary - continued The acquisition cost of $2,415,000 (representing the fair value of the 400,000 shares to be issued ) was allocated to the net liabilities of $135,000 (based on their fair market value) with the balance of $2,550,000 allocated to intangible assets including goodwill. The fair value of assets acquired and liabilities assumed in conjunction with this acquisition was as follows: Current assets (including cash of $435,312) $ 1,740,000 Long-term assets 3,716,000 Current liabilities (1,330,000) Long-term liabilities (1,711,000) --------- Net purchase price $ 2,415,000 ========= Proforma financial information concerning revenues, loss and loss per share of the Company and FTI, as applicable for the three months ended March 31, 1997 and 1996 assuming such transaction had occurred on March 20, 1996 (date of inception of FTI) is not presented as the impact to either period is not significant. As part of the common stock acquisition of FTI, the Company assumed current and long-term obligations in the amount of $1,991,000 as of December 31, 1996 to a long-distance provider for FTI's line costs. The note was increased approximately $700,000 for long-distance usage for January 1997. The note bears interest at 7% per annum. The note calls for payments of $50,000 per month beginning May 5, 1997 increasing to $75,000 on April 5, 1998 and $150,000 on October 5, 1998 with the balance of $1,100,000 due on April 5, 1999. Remaining principal payments under this specific note as of March 31, 1997 are as follows: March 31, 1998 $ 404,000 March 31, 1999 455,000 March 31, 2000 1,832,000 --------- Total $ 2,691,000 ========= Note 4 - Imputed Interest on Convertible Notes Simultaneous with the closing of the Company's offering of Class C Preferred Stock in September 1996, the Company issued an aggregate of $717,000 in principal amount of Convertible Promissory Notes. The Company has recorded interest expense (non-cash) of $320,000 related to these promissory notes in the three months ended March 31, 1997. The interest expense is calculated as the difference between the conversion price per common share per the promissory notes as compared to the market price for the common stock on the date the notes were issued. The interest expense was recognized over the period between the date the promissory notes were issued and the date the promissory notes could first be converted. Note 5 - Commitments and Contingencies In February 1996, the Company agreed to issue 4,000,000 shares of common stock to acquire the common stock of I-Link Worldwide Inc. As of March 31, 1997 the Company has issued 3,000,000 shares. The remaining 1,000,000 shares are to be released upon the first to occur of the following: (i) The monthly revenue derived from subscribers serviced by I-Link and revenue derived from the sale of related products and/or services equals or exceeds $1,000,000; or (ii) The number of subscribers serviced by I-Link exceeds 100,000 one year from the date of receipt by the Company of gross proceeds equal to $4,000,000 from the sale of its securities pursuant to one or more private or public offerings. 6 Note 6 - Income Taxes The Company recognized no income tax benefit for the losses generated in 1997 and 1996. Note 7 - Loss Per Common Share After Preferred Dividends Loss per common share is calculated as the net loss for the respective period plus cumulative preferred stock dividends not paid in current period of $289,147 and $32,154 for the three months ended March 31, 1997 and 1996 respectively, divided by the weighted average number of common shares outstanding. Options, warrants and convertible preferred stock are excluded from the calculation when their effect would be antidilutive. Note 8 - Options and Warrants During the first quarter of 1997 the Company granted 324,000 options to employees and a consultant of the Company at a price equal to the common stock price on the day of grant. No options or warrants were exercised during the first quarter of 1997. Note 9 - Subsequent Events A complaint was filed on April 12, 1996 by JW Charles Financial Services, Inc. ("JWC") against the Company in which JWC alleged that the Company breached the terms of a warrant to purchase 331,126 shares of the Company's common stock ("warrant") by failing to prepare and file with the Securities and Exchange Commission ("SEC") a registration statement covering the common stock underlying the JWC warrant. JWC was seeking specific performance, i.e. registering the shares with the SEC, and monetary damages. On April 11, 1997 the Company reached an agreement in principle relating to settlement of the lawsuit. The lawsuit was dismissed upon payment of $600,000 to JWC in consideration for the warrant. The JWC warrant was purchased by an investor group led by the Company's general counsel and its treasurer and chief financial officer. The Company's funds were not utilized in the settlement. In connection with the purchase of the JWC warrant, the Company granted additional consideration to the investor group including new warrants to purchase 175,000 shares of common stock at an exercise price of $2.50 with certain reset provisions. Such warrants have registration rights and anti-dilutive provisions. The Company recorded on its financial statements for the year ended December 31, 1996 a liability and related expense for the settlement of litigation in the amount of $821,000 representing the estimated difference between the warrant price and the value of the warrant. Note 10 - Changes in Stockholders' Equity During the quarter ended March 31, 1997 changes in stockholders equity were as follows: Additional paid in capital increased $303,251, which was associated with the balance of amortization of interest expense associated with the issuance of convertible notes at a discount in 1996. Common stock to be issued in the amount of $2,414,583 was recorded in relation to the acquisition of FTI. The amount is recorded as common stock to be issued as the Company does not presently have sufficient authorized shares to issue to FTI. Accumulated deficit increased by $3,906,741 which was the net loss for the quarter ended March 31, 1997. 7 Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS The following discussion should be read in conjunction with the information contained in the financial statements of the Company and the notes thereto appearing elsewhere herein and in conjunction with the Management's Discussion and Analysis set forth in the Company's Form 10-KSB for the year ended December 31, 1996. Forward Looking Information This report contains certain forward-looking statements and information relating to the Company that are based on the beliefs of management as well as assumptions made by and information currently available to management. When used in this document, the words "anticipate", "believe", "estimate", "expect", and "intended" and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. Such statements reflect the current view of the Company respecting future events and are subject to certain risks, uncertainties, and assumptions, including the risks and uncertainties noted. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected, or intended. Operations Prior to 1997 the Company's primary source of revenue was related to health care services. The primary expenses of the Company prior to 1997 were related to delivery of health care services and the development of a proprietary data communication network. With the Company's acquisition of FTI (effective January 1, 1997), a regional long-distance telecommunications carrier with nation-wide delivery of telecommunications services over traditional switched telecommunications networks, the Company launched its marketing efforts and began to obtain customers for its long-distance telecommunications services. The Company is expanding its customer base through its marketing activities and plans to expand through strategic acquisitions of existing customer bases. In the second quarter of 1997, the Company began to organize a multi-level marketing line of business which the Company anticipates will result in increasing revenues beginning in the latter part of the second quarter. Financial Condition Working Capital The working capital position of the Company was a deficit of $454,934 at March 31, 1997 and $1,579,501 at December 31, 1996. Cash on hand at March 31, 1997 was $2,196,343 as compared to $4,500,227 as of December 31, 1996. The decrease in cash on hand was primarily attributable to cash flow used by operating activities during the three months ended March 31, 1997. Cash flow used by operating activities was $2,507,619 in the first quarter of 1997 compared to cash flow used by operating activities of $612,744 for the same period in 1996. Cash flow used by operating activities includes approximately $580,000 attributable to the inclusion of FTI in the first quarter of 1997. Investing Activities Effective January 1, 1997, the Company entered into an agreement to acquire all of the outstanding shares of Family Telecommunications, Inc. (FTI) in exchange for 400,000 shares of the Company's common stock. The acquisition is conditioned upon the satisfaction of certain conditions, at which time the shares will be issued. FTI is an FCC licensed long-distance carrier and provider of telecommunication services and as such provides the Company with an existing customer base and related revenues. Investing activities during the first quarter of 1997 provided net cash of $347,037. The primarily source of cash flow was cash acquired in the amount of $435,312 included in the acquisition of FTI. The Company expended $88,275 for acquisition of property and equipment during the first quarter of 1997. 8 Financing Activities In the first quarter of 1997, the Company reduced its notes payable, long-term debt and capital lease obligations by $143,300. These reductions include payments in the amount of $60,378 on indebtedness acquired in the acquisition of FTI. The inclusion of FTI in the first quarter of 1997 increased notes payable by $693,333, and notes payable to others of $104,575. The Company will require additional financing in order to successfully integrate the business of FTI, to fund the Company's cash flow operating deficit, to expand its business and to discharge outstanding indebtedness. The Company continues to investigate the availability of additional sources of equity, third-party debt or similar financing for development of its telecommunications infrastructure, research and development and ongoing operations. The availability of capital resources to support the Company's financial requirements will depend on prevailing market conditions, interest rates, and financial position and results of operations of the Company. Therefore, there can be no assurance that such financing will be available or that the Company will not be required to issue significant debt or equity securities in order to obtain such financing. Results of Operations Comparison of First Quarter 1997 to First Quarter 1996 Two significant events affect the comparability of the Company's results of operations for the first quarters of 1997 and 1996. First, the acquisition of I-Link in February 1996 which resulted in expense recognition of $4,777,943 related to acquired in-process research and development which did not recur in the first quarter of 1997. Second, the acquisition of Family Telecommunications Inc (FTI) in January 1997 (effective January 1, 1997) which for the first time provided the Company with revenue from long-distance telecommunications services. Prior to January 1, 1997, operations consisted primarily of health care service revenue. Therefore the Company's results of operations for the three months ended March 31, 1997 includes three months of long-distance telecommunications service revenue and related costs of service and administrative costs whereas the three months ended March 31, 1996 includes no revenue or related costs from the long-distance telecommunications services. Therefore, results of operations for the three months ended March 31, 1997 and 1996 are not comparable. Telecommunication Service Revenue Telecommunication service revenue in the first quarter of 1997 was $2,147,216. There was no such revenue in the first quarter of 1996 as this revenue began with the acquisition of FTI in January 1997. Health Care Service Revenue Health care service revenue increased $5,077 in the first quarter of 1997 to $597,257 as compared to $592,180 in the same quarter of 1996. The increase was primarily due to the addition of a management contract, offset by a decrease in the operating revenue generated from the diagnostic imaging facilities which decrease was due to the loss of certain service contracts with hospital clients in February 1997. The Company intends to pursue the retail segment of the MRI market to compensate for the loss of the hospital contracts. In the retail segment of the MRI market, the revenue per procedure is considerably higher than the revenue per procedure realized under the hospital service contracts. The Company believes its revenue from the retail segment of the MRI market will be adequate to replace the revenue lost by the expiration of the hospital contracts. Other Revenue Other revenue decreased $17,026 in the first quarter of 1997 to $0 as compared to $17,026 in the same quarter of 1996. The decrease is primarily due to internet service provider revenues in 1996 that did not recur in 1997. 9 Telecommunication Network Expenses Telecommunication network expenses increased $2,792,849 in the first quarter of 1997 to $2,891,082 as compared to $98,233 for the same quarter of 1996. These expenses include costs relative to the continuing development and deployment of the Company's communications network. The increase is primarily due to the inclusion of FTI operations during 1997 which includes significant expenses such as line costs. Selling, General and Administrative Selling, general and administrative expenses increased $1,652,541 to $2,647,144 in the first quarter of 1997 as compared to $994,603 in the first quarter of 1996. The increase is primarily due to the inclusion of FTI in 1997 and three months worth of expenses from I-Link in 1997 as compared to 1-1/2 months in 1996 (I-Link was acquired in February 1996). Provision for Doubtful Accounts Provision for doubtful accounts increased $93,981 to $135,225 in the first quarter of 1997 as compared to $41,244 in the same quarter of 1996. The increase is primarily due to a provision related to telecommunications revenues in 1997 which did not exist in 1996. Depreciation and Amortization Depreciation and amortization increased $72,122 to $401,495 in the first quarter of 1997 as compared to $329,373 in the first quarter of 1996. The increase is primarily due to increased depreciation associated with assets acquired and related amortization of intangible assets (including goodwill) related to the FTI acquisition in 1997. Provision for Inventory Valuation and Write-down of Property and Equipment The provision for inventory valuation and write-down of property and equipment in the first quarter of 1997 (none in the same quarter of 1996) includes a valuation allowance for inventory of $55,341 and a write off of tenant improvements abandoned when I-Link moved corporate headquarters in January 1997 in the amount of $158,603. Acquired In-Process Research and Development In 1996 the Company recorded an expense of $4,777,943 related to acquired in-process research and development costs acquired in the acquisition of I-Link in February 1996. No such costs were incurred in 1997. Research and Development Research and development increased $111,088 to $111,088 in the first quarter of 1997 as compared to $0 in 1996. The increase is associated with the Company's continuing telecommunication network research and development efforts. Interest Expense Interest expense decreased $646,282 to $346,357 in the first quarter of 1997 as compared to $992,639 in the same quarter of 1996. The decrease is primarily due to a decrease in imputed interest expense (non-cash) of $625,000 to $320,000 in the first quarter of 1997 as compared to $945,000 in the same period of 1996. The imputed interest was related to certain convertible promissory notes issued in 1996. Interest and Other Income Interest and other income increased $70,505 to $86,032 in the first quarter of 1997 as compared to the first quarter of 1996. The increase was primarily due to an increase in interest income of $66,788 in 1997 over 1996 due to an increased average balance of cash on hand as a result of proceeds from the Company's sale of Class C Preferred Stock in 1996. 10 PART II - OTHER INFORMATION Item 1. Legal Proceedings A complaint was filed on April 12, 1996 by JW Charles Financial Services, Inc. ("JWC") against the Company in which JWC alleged that the Company breached the terms of a warrant to purchase 331,126 shares of the Company's common stock ("warrant") by failing to prepare and file with the Securities and Exchange Commission ("SEC") a registration statement covering the common stock underlying the JWC warrant. JWC was seeking specific performance, i.e. registering the shares with the SEC, and monetary damages. On April 11, 1997 the Company reached an agreement in principle relating to settlement of the lawsuit. The lawsuit was dismissed upon payment of $600,000 to JWC in consideration for the warrant. The JWC warrant was purchased by an investor group led by the Company's general counsel and its treasurer and chief financial officer. The Company's funds were not utilized in the settlement. In connection with the purchase of the JWC warrant, the Company granted additional consideration to the investor group including new warrants to purchase 175,000 shares of common stock at an exercise price of $2.50 with certain reset provisions. Such warrants have registration rights and anti- dilutive provisions. The Company recorded on its financial statements for the year ended December 31, 1996 a liability and related expense for the settlement of litigation in the amount of $821,000 representing the estimated difference between the warrant price and the value of the warrant. Item 6(a) - Exhibits None Item 6(b) - Reports on Form 8-K A report on Form 8-K dated January 13, 1997 was filed by the Company regarding the acquisition of the securities of Family Telecommunications Incorporated ("FTI"). 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunder duly authorized. MEDCROSS, INC. (Registrant) Date: September 4, 1997 By: /s/ John W. Edwards John W. Edwards President, Chief Executive Officer By: /s/ Karl S. Ryser, Jr. Karl S. Ryser, Jr. Chief Financial Officer, Treasurer 12 EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS DATED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. 3-MOS DEC-31-1997 MAR-31-1997 2196343 0 3434504 754014 557996 5820082 6625280 2888844 14219111 6275016 0 0 2475000 74253 2560457 14219111 2744473 2744473 0 6399978 0 0 346357 (3906741) 0 (3906741) 0 0 0 (3906741) (.40) (.40)
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