U.S. SECURITES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Amendment 2) File Number: 333-101562 FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 CAREDECISION CORPORATION Nevada 7371 91-2105842 (State or other (Primary standard (I.R.S. employer jurisdiction of industrial identification incorporation) classification code number) number) 2 Penn Plaza, 15th Floor, Suite 1500-53 New York, New York 10121 Telephone: (212) 292-4959 Facsimile: (631) 544-0183 (Address and Telephone Number of Principal Executive Offices and Principal Place Of Business) ROBERT COX CHIEF EXECUTIVE OFFICER, PRESIDENT AND DIRECTOR 16 Wood Hollow Lane Fort Salonga, New York 11768 Telephone: (516) 680-4505 Facsimile: (631) 544-0183 (Name, Address and Telephone Number of Agent for Service) COPIES TO: Thomas C. Cook, Esq. Law Offices of Thomas C. Cook, Ltd. 4955 S. Durango Dr., Suite 214 Las Vegas, Nevada 89113-0157 Telephone: (702) 952-8519 Facsimile: (702) 952-8521 Approximate date of commencement of proposed sale to public: As soon as practicable after this Registration Statement becomes effective. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities of Act, check the following box and list the Securities Act registration statement number earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus will be made pursuant to Rule 434, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box: / / NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Prospectus (Subject to completion): Dated April 28, 2003. /1/ CALCULATION OF REGISTRATION FEE Title of Each Class Proposed Maximum Maximum Aggregate Amount of of Securities Aggregate Offering Price (1) Registration Fee to be Registered per Share (2) 69,105,469 shares of Common Stock, $0.001 $0.040 Per Share $2,764,218.76 $552.84 par value (3) ---------------------------------------------------------------------------- Total $0.040 Per Share $2,764,218.76 $552.84 69,105,469 shares of Common Stock (1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457. (2) Represents the average closing bid price of our common stock as of April 28, 2003. (3) Represents the maximum amount of shares of our common stock that we will be required to register in accordance with our Merger Agreement. This also includes, issued and distributed pursuant to consulting agreements, note conversions, shares underlying notes and warrant conversions. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(A) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the commission, acting pursuant to said Section 8(A), may determine. [Balance of this page intentionally left blank] /2/ Prospectus CareDecision Corporation Common Stock This is an offering of a total of 69,105,469, shares of our common stock, par value $.001. The Restricted Stockholders have acquired our restricted common shares through conversion of shares pursuant to the merger agreement, through a purchase of software and through consulting services. OTCBB symbol: The shares of our Common Stock are presently trading on the OTC Electronic Bulletin Board under the symbol "CDED." There can be no assurance that an active trading market will be sustained. As a result, an investor may find it difficult to dispose of, or to obtain adequate quotations as to the price of the shares of our common stock. Our most recent bid and ask quotations were $0.03 and $0.04 respectively. THESE ARE SPECULATIVE SECURITIES. RISK FACTORS ASSOCIATED WITH THESE SECURITIES CAN BE FOUND ON PAGE 8 IN THE SECTION TITLED RISK FACTORS. These securities have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission nor has the Securities and Exchange Commission or any state securities commission passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. Information in this document is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state. The Date Of This Prospectus is April 28, 2003. /3/ TABLE OF CONTENTS Page Prospectus Summary 5 Summary Financial Information 8 Risk Factors 9 Forward Looking Statements 11 Use Of Proceeds 11 Dividend Policy 11 Market for Common Equity and Related Stockholder Matters Market Info 11 Plan Of Distribution 12 Legal Matters 12 Experts 12 Additional Information 13 Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Business of the Company 15 Business Overview 15 Industry Trends 17 Industry Overview 17 Review of Products 17 Marketing 18 The Product Opportunity 18 The Need for Integration 19 Value Proposition 20 Solution & Benefits 21 Competition 23 Major Customers 24 Patents or Trademarks 25 Point Of Operation 25 Government Regulation 25 Employees 25 Facilities 25 Management 26 Executive Compensation 27 Certain Relationships And Related Transactions 27 Security Ownership of Certain Beneficial Owners and Management 27 Description of Securities 28 Shares Eligible For Future Sale 29 Security Holders and Recent Financing 31 /4/ Prospectus Summary THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. BECAUSE THIS IS A SUMMARY, IT MAY NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER BEFORE RECEIVING A DISTRIBUTION OF OUR COMMON STOCK. YOU SHOULD READ THIS ENTIRE PROSPECTUS CAREFULLY. Medicius, Inc. ("Medicius"), a Nevada corporation incorporated on July 6, 2000, was a developmental stage company with a principal business objective to provide Internet-enhanced information technology (IT) for physicians at the point of clinical decision. The software systems, communication tools and suite of software applications employed by Medicius permits the office practice physician to request critical patient medical and/or medication information via the Web on a Microsoft Windows CE-based PDA at, or prior to the point-of-care. The system captures and displays the requested information, and overlays medical treatment protocols and medical step therapies (steps and procedures that insurance companies issue for treating illnesses a physician has not treated before), creating not only a patient specific historical medical chart, but also suggested treatment alternatives, approved medications and diagnosis specific protocols. Utilization of this system by the practicing physician enhances clinical decision-making, improves physician productivity, insures formulary compliance, reduces the cost of healthcare and positively impacts the care provided to the patient. Medicius decided to merge with ATR and transfer its business model to ATR now known as CareDecision. The Offering Common stock outstanding: 75,364,137. This amount does not include an aggregate of shares of our common stock reserved for issuance upon the exercise of existing and outstanding Medicius options, warrants and convertible notes, or stock option agreements granted to our employees and consultants. Securities offered: 69,105,469-security holder restricted shares. The securities represent the maximum amount of shares of our common stock that we will be required to register in accordance with our Merger Agreement. This also includes issued and distributed pursuant to consulting agreements. Offering price: There is no offering price. The shares are being registered for the security holders only. Use of proceeds: We will not receive any proceeds from this offering. Risk factors: An investment in our common shares involves a high degree of risk and our common shares should not be purchased by anyone who cannot afford the loss of their entire investment. Prospective purchasers of the shares of our common stock should carefully review and consider the factors set forth under "Risk Factors" as well as other information in this document, before purchasing any of the shares of our common stock. The Company We are headquartered in New York, New York. We provide enhanced information technology (IT) for physicians. The technology employed allows this information to be provided within seconds of its request at the point of the physician's clinical decision making, either in the examining room or at bedside. /5/ The software systems, communication tools and suite of software applications employed by CareDecision permits the office practice physician to request critical patient medical and/or medication information via the Web on a Microsoft Windows Microsoft Window Based ("PDA") at, or prior to the point-of-care. We were formed as a Nevada corporation under the name ATR Search Corporation ("ATR") on March 2, 2001. On June 17, 2002 a shareholders' meeting was held and a shareholders' resolution adopted that resolved that ATR change its name to CareDecision Corporation ("CareDecision"), increase the number of authorized common shares to 200,000,000 and approve the merger between the Company and Medicius, Inc. As noted on Note 6 of the September 2002 financial statements, on June 21, 2001, the Company entered into an agreement with Care Technologies, LLC whereby Care Technologies, LLC sold all of the assets and liabilities of Care Technologies, LLC in exchange for a 10% ownership of the Company. The investment was recorded at $229,899, being the fair value of Care Technologies, LLC assets on the acquisition date (see September 30, 2002, Financials Note 4). Also, on June 21, 2002, the Company adopted Medicius, Inc's business model, which is to provide enhanced information technology (IT) for physicians at the point of clinical decision. On June 28, 2002 we filed a report on Form 8-K with the Securities and Exchange Commission, whereby Medicius, Inc. ("Medicius"), a Nevada corporation, merged with and into ATR. Pursuant to the terms of the merger agreement, ATR obtained the operations of Medicius. The material disclosures on the Form 8-K were as follows: ITEM 5. OTHER EVENTS This Current Report on Form 8-K contains forward- looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results and developments may differ materially from those described in this Report. For more information about ATR Search Corporation and risks arising when investing in ATR Search Corporation, investors are directed to ATR Search Corporation most recent Report on Form 10-KSB as filed with the Securities and Exchange Commission. On April 30, 2002, ATR SEARCH Corporation entered into a definitive Agreement and Plan of Merger (the "Merger Agreement"), by and among ATR Search Corporation ("ATR"), and Medicius, Inc., a Nevada corporation, ("Medicius"). Pursuant to the Merger Agreement and subject to the terms and conditions set forth therein, Medicius merged with and into ATR. Both Medicius and ATR are the surviving corporations in the Merger. The operations of Medicius will be conducted through ATR and the operations of ATR will be conducted through CareTechnologies LLC, which at the time of the closing of the transactions described herein, shall be a wholly owned subsidiary of ATR. ATR Search Corporation has adopted Medicius, Inc's business model, which is to provide enhanced information technology (IT) for physicians at the point of clinical decision. The Medicius software systems, communication tools and suite of software applications permits the office practice physician to request critical patient medical and/or medication information via the Web on a Microsoft Windows CE-based PDA at, or prior to the point-of-care. The system captures and displays the requested information, and overlays formulaic medical treatment protocols and medical step therapies, creating not only a patient specific historical medical chart, but also suggested treatment alternatives, approved medications and diagnosis specific protocols. Utilization of the Medicius system by the practicing physician enhances clinical decision-making, improves physician productivity, insures formulary compliance, reduces the cost of healthcare and positively impacts the care provided to the patient. Caredecision.net, the principal shareholder of Medicius, has filed a master patent /6/ application that at the appropriate juncture will be cleaved into four more specific patents. Also, Caredecision.net has applied for eleven software copyrights and five trademarks, and expects to assign these intellectual property rights to ATR. The Merger Agreement has been approved unanimously by both the board of directors of ATR Search Corporation and the board of directors of Medicius, Inc. The terms of the Merger Agreement were the result of arm's length negotiations among the parties. The merger, which is tax- free to the stockholders of both companies, was approved by the shareholders of both companies and has received regulatory approval. Under the terms of the Merger Agreement, upon consummation of the Merger, stockholders of Medicius will receive three shares of ATR Search Corporation common stock and .5 Warrant in exchange for each share of Medicius common stock that they hold. ATR expects to issue approximately 10,000,000 million shares of common stock in exchange for all outstanding shares of Medicius common stock. In addition, ATR would assume all outstanding Convertible Notes and Warrants of Medicius, which would be converted into the right to acquire approximately 20,000,000 million shares of ATR common stock. The transaction, which is subject to customary conditions to closing, including the receipt of regulatory approvals and the approval of the stockholders of both ATR and Medicius, closed on June 17, 2002. As of June 28, 2002, the Effective Date of the merger, the capital stock of Medicius issued and outstanding immediately prior to the Effective Date was converted into ATR Common Stock as follows: (i) Each share of Medicius Series A Preferred Stock was converted into 3.5 common stock shares of ATR and ..75 ATR common stock purchase Warrants. (ii) Each share of Medicius common stock was converted into 3.0 common stock shares of ATR and .5 ATR common stock purchase Warrants. (iii) After the Effective Date, all Medicius common stock purchase warrants that remain unexercised as of the Effective Date and any Medicius Convertible Notes that remain unconverted or unpaid on the Effective Date remain exercisable for or convertible into the number of common stock shares of ATR based on the same conversion ratio outlined in paragraph (ii) above. Following the merger between Medicius and ATR, both entities survived. ATR became CareDecision Corporation and Medicius became dormant. [Balance of this page intentionally left blank.] /7/ Summary Financial Information The following table sets forth a summary of historical financial information of CareDecision Corporation from June 21, 2001 (inception) to December 31, 2002 and for the nine months ended December 31, 2002 and 2001. The summary historical financial data should be read in conjunction with the financial statements, and notes of CareDecision Corporation and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus. June 21, 2001 (inception) to For the year Ended December 31, December 31, 2002 2002 2001 ---- ---- ---- Statement ofoperations data: Total revenue $ 2,000 $ 2,000 $ - ---------------------------------------- General and administrative expenses $ 82,686 $ 77,712 $ 4,974 Payroll Expense $ 186,819 $ 186,819 $ - Professional Fees $ 171,852 $ 171,852 $ - Consulting Expense $ 1,319,482 $1,319,482 $ - Software Development $ 129,000 $ 129,000 $ - Depreciation $ 40,778 $ 40,778 $ - ---------------------------------------- Net operating loss $(1,928,617) $(1,923,643) $ (4,974) Other income (expense) $ (22,820) (22,820) $ - ---------------------------------------- Net loss $(1,975,132) $(1,970,158) $ (4,974) Loss per share (basic and diluted): $ (0.05) $ (0.00) Weighted average shares outstanding $43,176,595 $19,180,000 Consolidated Balance sheet data: As of December 31, 2002 ----------------------- Working capital (deficit) $ (370,052) Total current assets $ 126,053 Total assets $ 1,545,426 Total current liabilities $ 496,105 Total long-term debt $ 0 Total stockholders' equity $ 1,049,321 [Balance of this page intentionally left blank] /8/ Risk Factors An investment in the securities being offered involves a high degree of risk. Prior to making any investment decision, prospective investors should carefully consider the following risk factors together with the other information presented in this prospectus including the financial statements and notes. Our limited operating history could delay our growth and minimize your investment. Microsoft Window Based We are considered a development stage company incorporated on March 2, 2001 and thus have a limited operating history on which to base an evaluation of our business and prospects. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development. Such risks include, but are not limited to, dependence on the growth of use of electronic medical information and services, the adoption of PDA based Internet appliances for the transmission and display of medical information, the need to establish our brand name, the ability to establish a sufficient client base, the level of use of medical providers and the management of growth. To address these risks, we must maintain and increase our customer base, implement and successfully execute our business and marketing strategy, continue to develop and improve our point of care software and patient processing system, provide superior customer service, respond to competitive developments and attract, retain, and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so could have a negative impact the value of our Company's common shares and could result in the loss of your entire investment. Auditors have issued an opinion raising substantial doubt as to our ability to continue as a going concern, which may diminish your return on investment. In a letter that accompanies this application, our accountant, G. Brad Beckstead, says in part, the accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company is in the development stage and, accordingly, has not yet generated a proven history of operations. Since its inception, the Company has been engaged substantially in financing activities and developing its product line, incurring substantial costs and expenses. As a result, the Company incurred accumulated net losses from June 21, 2001 (inception) through the year ended December 31, 2002 of $(2,009,532). In addition, the Company's development activities since inception have been financially sustained by capital contributions. The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating results. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities Our profitability and your investment will be directly affected by our competition. Many of CareDecision's potential competitors have longer operating histories, larger clientele bases, better service recognition and significantly greater financial, marketing and other resources than do we. Increased competition may result in reduced operating margins, loss of market share and a diminished brand franchise. There can be no assurance that we will be able to compete successfully against current and future competitors, and competitive pressures faced by us could harm our operating results, our business prospects, and financial condition. We may not be able to retain our key personnel or attract additional personnel, which could affect our ability to continue as a going concern, which may diminish your return on investment. Our performance is substantially dependent on the services and on the performance of our Management. CareDecision is, and will be, heavily dependent on the skill, acumen and services of Mr. Robert Cox (President, and Director). Our performance also depends on our ability to attract, hire, retain and motivate /9/ our officers and key employees. The loss of the services of our executives could have a material adverse effect on our business, prospects, financial condition and results of operations. We have not entered into a long-term employment agreements with our key personnel and currently have no "Key Employee" life insurance policies. Our future success may also depend on our ability to identify, attract, hire, train, retain and motivate other highly skilled technical, managerial, marketing and customer service personnel. Competition for such personnel is intense, and there can be no assurance that we will be able to successfully attract, assimilate or retain sufficiently qualified personnel. If we are unable to attract, retain, and train the necessary technical, managerial, marketing and customer service personnel, our expectations of increasing our clientele could be hindered, and the profitability of our Company reduced. The selling security holder shares are being registered for resale in this prospectus and the sale of such shares can dilute the market price of our common stock and your return on investment. The sale of shares can have a negative impact on the price of our common stock. No predictions can be made as to the effect, if any, that sales of our shares by the selling security holder shares being registered will have on the market price of our common stock. Nevertheless, sales of substantial amounts of our common stock, or the perception that such sales may occur, could reduce our market price. [Balance of this page intentionally left blank] /10/ Forward Looking Statements This prospectus includes "forward-looking statements" within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. Our actual results may differ significantly from the results discussed in such forward-looking statements. The safe harbors contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, which apply to forward-looking statements, are not applicable to this offering. Use Of Proceeds The shares of our common stock being offered are for the account of the security stockholders. Accordingly, we will not receive any of the proceeds from the resale of shares of our common stock by the security stockholders. We are registering the shares of our common stock under contractual arrangements. Dividend Policy We have never paid dividends on our common stock and do not anticipate paying such dividends in the foreseeable future. The payment of future cash dividends by us on our common stock will be at the discretion of our Board of Directors and will depend on our earnings, financial condition, cash flows, capital requirements and other considerations as our board of directors may consider relevant. Although dividends are not limited currently by any agreements, it is anticipated that future agreements, if any, with institutional lenders or others may limit our ability to pay dividends on our common stock. Market for Common Equity and Related Stockholder Matters Market Information Our shares of common stock are currently traded on the OTC Electronic Bulletin Board under the symbol "CDED". The common stock was approved for trading February 1, 2002. There is no assurance that an active trading market will develop that will provide liquidity for CareDecision's existing shareholders or for the selling shareholders whose common stock is being registered through this filing. The Commission has adopted regulations which generally define a "penny stock" to be any equity security that has a market price less than $5.00 per share. Thus, our common stock is presently a penny stock subject to rules that impose additional sales practice requirements on broker- dealers who sell such securities to persons other than established customers and accredited investors. This would generally include institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. Based on the above, investors who are not established customers of broker-dealers or accredited investors may find it difficult to purchase our common stock without satisfying numerous requirements. The reported high and low bid prices for our common stock are shown below for each quarter beginning with the quarter ended March 31, 2002. The high and low bid price for the first, second and third quarter of 2002 are quotations from the OTCBB. The quotations reflect inter- dealer prices and do not include retail mark-ups, mark-downs or commissions. The prices do not necessarily reflect actual transactions. PERIOD HIGH BID LOW BID 2002 - First Quarter .30 .06 2002 - Second Quarter .08 .03 2002 - Third Quarter .11 .03 2002 - Fourth Quarter .11 .04 2003 - First Quarter .08 .04 As of August 2, 2002, we are authorized to issue 200,000,000 shares of our common stock at par value $0.001 and 5,000,000 shares of our Preferred stock at par value $0.001. Currently, we have shares of our common stock issued and outstanding held by approximately 88 individual holders and no shares of our preferred stock issued and outstanding. /11/ Plan Of Distribution Shares of our common stock may be sold from time to time to purchasers directly by the selling security holders. Alternatively, the selling security holders may from time to time offer shares through underwriters, dealers or agents, who may receive compensation in the form of underwriting discounts, concessions or commissions from the selling security holders for whom they may act as agent. The selling security holders and any underwriters, dealers or agents that participate in the distribution of our common stock may be deemed to be underwriters, and any commissions or concessions received by any such underwriters, dealers or agents may be deemed to be underwriting discounts and commissions under the Securities Act. Shares may be sold from time to time by the selling security holders in one or more transactions at a fixed offering price, which may be changed, or at varying prices determined at the time of sale or at negotiated prices. We will pay our own legal and accounting fees and other expenses incurred in connection with the offering. We estimate the amount of offering expenses will be $3,000. Legal Matters The Law Offices of Thomas C. Cook, Ltd., 4955 S. Durango Drive, Suite 214, Las Vegas, Nevada 89113 will pass upon the validity of the common shares offered for us. M&E Equities, LLC ("M&E") and Blimie Mendlowitz (the "Plaintiffs") have filed a complaint, case # 600092-03, in the Supreme Court of The State of New York County of New York, [M&E Equities, LLC, and Blimie Mendlowitz against CareDecision Corporation, Medicius, Inc., Keith Berman, and William Lyons (the "Defendants")] alleging in individual and collective plaintiff claims of cross-defaults, a failure to repay note principal and interest, and a failure to deliver common stock warrants. Plaintiffs also claim fraudulent inducement and misrepresentation. The Plaintiffs are seeking the amount of the notes plus interest at no less than $475,000 and 225,000 warrants in Medicius, Inc. The Plaintiffs are also seeking up to $4,000,000 in damages and punitive damages. The Company strongly believes there is no basis for any of the Plaintiffs' allegations. The Company will vigorously and fully defend against the claims, and believes that the Plaintiffs are simply attempting to pressure the Company into paying off $475,000 in notes a year prior to maturity. This litigation is still in the summons and complaint phase and the ultimate outcome cannot presently be determined. Based on the uncertain outcome of these contingencies, no provision for any loss or gain that may result upon adjudication has been made in the accompanying financial statements, and the possible effect it will have on future financial statements is unknown. Experts The financial statements of CareDecision Corporation as of December 31, 2002 are included in this Prospectus and have been prepared by Beckstead and Watts LLC, Certified Public Accountants. Along with their audit, Mr. Beckstead and Mr. Watts have also included their expert opinion. [Balance of this page intentionally left blank.] /12/ Additional Information We have filed with the SEC a prospectus on Form SB-2 under the Securities Act for the common stock being offered under this prospectus. This prospectus, which is part of the registration statement, does not contain all of the information set forth in the prospectus and accompanying exhibits. This prospectus contains descriptions of certain agreements or documents that are exhibits to the prospectus. The statements as to the contents of such exhibits, however, are brief descriptions and are not necessarily complete, and each statement is qualified in all respects by reference to such agreement or document. In addition, we file annual, quarterly and other reports, proxy statements and other information with the SEC. You can review the registration statement and its exhibits and schedules at the public reference facility maintained by the SEC at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The registration statement is also available electronically on the World Wide Web at http://www.sec.gov. You can also call or write us at any time with any questions you may have. We would be pleased to speak with you about any aspect of our business and this offering. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations for period ended December 31, 2002. The financial statements for the year ended December 31, 2002 have been prepared on a going concern basis. The issuance of a going concern opinion by the auditors indicates that the auditors have substantial doubt about CareDecision's ability to continue as a going concern. CareDecision incurred net losses of $1,923,643 for period ended December 31, 2002. This indicates that CareDecision's continuation, as a going concern is dependent upon our ability to obtain adequate financing. If CareDecision were unable to obtain adequate financing necessary to continue our operations, advance our plan of operations, increase our sales, increase our inventory and working capital, we would be substantially limited. If CareDecision were unable to properly fund our plan of operations, our continuation would be jeopardized. Management's plan to overcome our financial difficulties consists of raising additional capital and obtaining revenues from the acquired assets of Medicius, Inc. At this point, CareDecision has no definite plans to raise money. For the year ended December 31, 2002 Statement of operations data: Total revenue $ 2,000 General and administrative expenses $ 77,712 Payroll Expense $ 186,819 Professional Fees $ 171,852 Consulting Expense $ 1,319,482 Software Development $ 129,000 Depreciation $ 40,778 Net operating loss $ (1,923,643) Other income (expense) $ (22,820) Net loss $ (1,970,158) Inventory - /13/ Results of operations for the years ended December 30, 2002 and 2001. For the years ended December 31, 2002 2001 ---- ---- Statement of operations data: Total revenue $ 2,000 $ - General and administrative expenses $ 77,712 $ 4,974 Payroll Expense $ 186,819 $ - Professional Fees $ 171,852 $ - Consulting Expense $ 1,319,482 $ - Software Development $ 129,000 $ - Depreciation $ 40,778 $ - Net operating loss $ (1,923,643) $ (4,974) Other income (expense) $ (22,820) $ - Net loss $ (1,970,158) $ (4,974) Inventory - - Net Income (Loss) We had net losses of $1,923,643 or a loss of $0.05 per share for the year ending December 31, 2002. This loss was due in large part to the merger completed with Medicius, Inc. in June of 2002. Internal and External Sources of Liquidity We believe our cash on hand of $111,101 will be sufficient to fund ongoing fiscal 2003 and 2004 operations and provide for our working capital needs, however, we have negative working capital of $370,052. Our accountant has issued a note concerning our ability to continue as a going concern. As we are still considered to be in the development stage, our prospects of continuing as a going concern are contingent upon our ability to achieve and maintain profitable operations. Revenues generated over and above expenses will be used for further development of our services, to provide financing for marketing and promotion, to secure additional customers, equipment and personnel, and for other working capital purposes. To date, we have financed our cash flow requirements through a public issuance of common stock and through the issuance of notes. During our normal course of business, we will experience net negative cash flows from operations, pending receipt of revenues. Further, we may be required to obtain financing to fund operations through additional common stock offerings and bank borrowings, to the extent available, or to obtain additional financing to the extent necessary to augment our available working capital. Consulting Agreements On February 17, 2002, the Company executed a business consulting agreement with MLSA whereby the Company issued 1,350,000 shares of its $0.001 par value common stock to Mark Lancaster for consulting services valued at $162,000. The consulting services are to be rendered over a period of 90 days with an automatic three-month renewal provision. Previously filed via an S-8 on 3/1/02. On February 26, 2002, the Company executed a consulting agreement with Qurag, Inc. whereby the Company issued 475,000 shares of its $0.001 par value common stock to Chaim Drizin, a shareholder of the Company, for consulting services valued at $30,875. The consulting services are to be rendered over a period of 90 days with an automatic three- month renewal provision. Previously filed via an S-8 on 3/1/02. /14/ On March 27, 2002, the Company executed a consulting agreement with Promark, Inc. whereby the Company issued 500,000 shares of its $0.001 par value common stock to Ken Lowman for consulting services valued at $50,000. The consulting services are to be rendered over a period of 90 days with an automatic three-month renewal provision. Previously filed via an S-8 on 4/17/02. On April 20, 2002, Medicius executed a secured convertible revolving promissory note agreement with M&E Equities, LLC ("M&E") whereby Medicius granted M&E a continuing security interest in and a general lien upon the Collateral for a loan valued at $500,000. Except as otherwise contemplated in the transaction more fully described in the Letter of Intent by and between ATR Search, Inc. and Medicius, Inc., dated April 5, 2002. On October 21, 2002, the Company executed a consulting agreement with Robert Koch whereby the Company issued 2,000,000 its $0.001 par value common stock to Mr. Koch, for consulting services. The consulting services are to be rendered over a period of nine months. The consulting services are to be rendered over a period of one hundred and twenty days. On December 11, 2002, the Company executed a service agreement with Robert Jagunich, a shareholder of the Company, whereby the Company issued 4,127,093 shares of its $0.001 par value common stock to CRS, for consulting services. The consulting services are to be rendered over a period of nine months. On December 13, 2002, the Company executed a consulting agreement with Barbara Asbell, a shareholder of the Company, whereby the Company issued 1,000,000 shares of its $0.001 par value common stock to CRS, for consulting services. The consulting services are to be rendered over a period of 90 days with an automatic three-month renewal provision. On December 13, 2002, the Company executed a consulting agreement with Wizard Enterprises 9"wizard"), whereby the Company issued 2,500,000 shares of its $0.001 par value common stock to CRS, for consulting services. The consulting services are to be rendered until the Agreement terminates pursuant to written notification by either the Company or Wizard, which notification may occur at any time for any reason. On December 20, 2002, the Company executed a consulting agreement with Wizard Enterprises 9"wizard"), whereby the Company issued 1,888,855 shares of its $0.001 par value common stock to CRS, for consulting services. The consulting services are to be rendered until the Agreement terminates pursuant to written notification by either the Company or Wizard, which notification may occur at any time for any reason. Business of the Company Business Overview CareDecision Corporation ("CareDecision"), a Nevada corporation incorporated on March 2, 2001, is a developmental stage company with a principal business objective to provide enhanced information technology (IT) for physicians. The technology employees allows this information to be provided within seconds of its request at the point of the physician's clinical decision making, either in the examining room or at bedside.. The software systems, communication tools and suite of software applications employed by CareDecision permits the office practice physician to request critical patient medical and/or medication information via the Web on a Microsoft Windows based Personal Digital Assistant ("PDA") at, or prior to the point-of-care. The system captures and displays the requested information, and overlays medical treatment protocols and medical step therapies (steps and procedures Insurance companies issue for treating illnesses a physician has not /15/ treated before), creating not only a patient specific historical medical chart, but also suggested treatment alternatives, approved medications and diagnosis specific protocols. Utilization of this system by the practicing physician enhances clinical decision-making, improves physician productivity, insures formulary compliance, reduces the cost of healthcare and positively impacts the care provided to the patient. The elements of our business strategy include: expanding geographically into key markets through a combination of opening new offices and developing relationships with clients to generate demand for our services; recruiting qualified, medical software and other technical personnel to perform technical, implementation and support duties as contracts are entered into, although there can be no assurance that any such contracts will be secured; and pursuing entry into new markets complementary to CareDecision's proposed operations. Future operations are dependent upon our ability to implement our business and marketing strategies and to establish relationships and contracts with health insurers and HMOs to provide our e- health products and services. On June 17, 2002 a shareholders' meeting was held and a shareholders' resolution adopted that resolved that ATR change its name to CareDecision Corporation ("CareDecision"), increase the number of authorized common shares to 200,000,000 and approve the merger between the Company and Medicius, Inc. As noted on Note 6 of the September, 2002 financial statements, on June 21, 2001, the Company entered into an agreement with Care Technologies, LLC whereby the Company sold all of the assets and liabilities of the Company in exchange for a 10% ownership of Care Technologies, LLC. The investment was recorded at $229,899, being the fair value of the Company's assets on the acquisition date (see Financials Note 4). Also, on June 21, 2002, the Company adopted Medicius, Inc's business model, which is to provide enhanced information technology (IT) for physicians at the point of clinical decision. On June 28, 2002 we filed a report on Form 8-K with the Securities and Exchange Commission, whereby Medicius, Inc. ("Medicius"), a Nevada corporation, merged with and the Company. Pursuant to the terms of the merger agreement, the Company obtained the operations of Medicius. As of June 28, 2002, the Effective Date of the merger, the capital stock of Medicius issued and outstanding immediately prior to the Effective Date was converted into CareDecision Corporation Common Stock as follows: (i) Each share of Medicius Series A Preferred Stock was converted into 3.5 common stock shares of ATR and ..75 ATR common stock purchase Warrants. (ii) Each share of Medicius common stock was converted into 3.0 common stock shares of ATR and .5 ATR common stock purchase Warrants. (iii) After the Effective Date, all Medicius common stock purchase warrants that remain unexercised as of the Effective Date and any Medicius Convertible Notes that remain unconverted or unpaid on the Effective Date remain exercisable for or convertible into the number of common stock shares of ATR based on the same conversion ratio outlined in paragraph (ii) above. Following the merger between Medicius and ATR, both entities survived. ATR became CareDecision Corporation and Medicius became dormant. We have a website at http://www.caredecision.net., which provides a description of our services and products. /16/ Industry Trends The overwhelming majority of clinical information is currently trapped in proprietary Active Server Pages (paper, mainframes, and physician practice management systems). The trend is moving towards taking all the information and transferring it into electronic format for easy access. The extraction and sharing of that information is a time consuming and costly process. Each industry segment recognizes and embraces the efficiencies and cost reductions that can be realized through the electronic exchange of data. A number of technologies, even those employing the Internet as a backbone, have failed to achieve the expected information transformation. In almost all instances the communication of electronic data within the paradigm has the universal support of the payors and industry service providers (pharmacies, labs, etc.). The movement of combining the information stored in the Active Server Pages and transferring it to electronic format will benefit our short-term and long-term liquidity, our net sales and revenues, and our income from continuing operations. Our short-term liquidity will increase with the initial sales of our product. Our long-term liquidity will also increase from the ongoing fees connected with our service, which in turn will increase our income from continuing operations. Industry Overview Over the last decade managed care has transformed healthcare into a highly competitive and market driven industry. The transition has resulted in the elimination of many of the unnecessary costs that had historically contributed to the continued and unabated acceleration of the cost of health care. One crucial segment, which has remained resistant to ongoing efforts to realize real and obvious opportunities to affect cost reductions, lies in the means of communications resident within the industry. The nature of domestic healthcare delivery has resulted in a highly fragmented system involving hundreds of thousands of payor and provider organizations scattered across a broad geographical landscape. Each of these locations employs diverse and incompatible information systems that have restricted electronic communication of vital medical and administrative information between the participants. The overwhelming majority of clinical information is currently trapped in proprietary Active Server Pages (paper, mainframes, and physician practice management systems). The extraction and sharing of that information is a time consuming and costly process. Additionally, healthcare mainly relies on paper communication processes. We estimate that current healthcare administration costs exceed $300 billion annually. It is management's belief that online process automation and transaction processing solutions can eliminate over 50% of those costs, which are directly attributable to the time and expense associated with manual processing for routine processes and transactions. Although the growth of Internet access and utilization has clearly become the basis for accelerating the digital integration of healthcare, progress remains limited with full, broad user based deployment. A number of technologies, even those employing the Internet as a backbone, have failed to achieve the expected information transformation. In almost all instances the communication of electronic data within the paradigm has the universal support of the payors and industry service providers (pharmacies, labs, etc.). Each industry segment recognizes and embraces the efficiencies and cost reductions that can be realized through the electronic exchange of data. Review of Products The e-Health handheld information appliance software offered by CareDecision advances the state-of-industry technology into a new generation. These PDA technology innovations will lead to competitive imitation that we anticipate will grow into the industry standard. Competitors within the sector /17/ currently offer an outpatient, PDA-based prescription writing device and suggest the eventual inclusion of such features as lab test order entry and fulfillment. The sector has recently been witness to its own shakeout with first generation, outdated product entries limiting growth prospects of several companies. CareDecision presently has a complete suite of medical information and communication applications, all integrated, and all on one PDA Internet appliance. These applications have been designed to meet the needs of both the inpatient and outpatient environments and are not just commercially viable but also regulatory standard compliant. Further, we believe that CareDecision has conceived and implemented the ability to monitor patient treatment plans on a handheld information appliance. Marketing Management intends to implement an aggressive but targeted marketing campaign to educate healthcare providers about CareDecision's technology solutions and the benefits obtained through its use. The industry focused marketing campaign is intended to leverage our efforts by qualifying customers' needs and interests. The CareDecision marketing strategy ultimately targets the physician provider through the provision of technology and services that specifically respond to their needs and requirements. The physician will be the ultimate determinant as to the success of any given system; therefore, it is incumbent on any marketing strategy to focus on the satisfaction of their needs. CareDecision has created PDA-centric products and a suite of Internet enhanced software applications that includes those features that specifically respond to the requirements of the practicing physician. We believe that the combination of unique and responsive benefits derived from our system coupled with its simplicity, portability, convenience and ease of use will initiate and propel the desired transition from paper processes. Healthcare is an interdependent web of payors and providers. CareDecision's success is reliant on targeting multiple segments within the industry. As has been previously stated, although the physician will determine a product's utilization, it is the other components of the system that will bear the cost of the product's introduction and ongoing employment. Insurers and industry service providers must participate in the electronic network, both logistically and financially to complete the link that will provide utility and value to all participants. It is incumbent on us to therefore extend our marketing strategy to facilitate this reality. We will concentrate our marketing efforts in specific target geographic locations that will permit the completion of our density strategy crucial to sustained penetration and long-term success. Implicit to this strategy is the contracting of multiple payors, pharmacy benefit management entities, medical case management entities and payment for transactions communicated to or from the participating physicians. Once the network has been established the product will be distributed to those physicians included within the contracted payors Provider Network. We will rely on those contracted payors to support and assist in the distribution of the product to the said physicians. The creation of such networks will be conducted in multiple geographic locations simultaneously. Upon their completion the process employed will be introduced and replicated in other locations targeted for access. The Product Opportunity Healthcare is a matrix of interrelated providers and payers. The physician resides at the core of the complex structure, initiating the vast majority of interactions between the participants. It is the physician who is responsible for the disposition of 80% of the healthcare dollar either, directly through the provision of service, or indirectly through patient direction to other services (prescriptions, lab tests, hospital admissions, CAT scans, X- rays, home health products, etc.) Correspondingly, it is those physician activities, which generate the preponderance of paper communications cluttering the system. The physician office practice then is central to the solution and stands to benefit most from the introduction of that solution. Paradoxically, however, it is the physician office that has been the central impediment to the adoption of the technologies that would permit system-wide, instantaneous communication of clinical, /18/ administrative and financial information between and amongst the multitude of payors, providers and support industries composing the enterprise. Physicians are reluctant to adapt to technological advances for a variety of reasons. Most of their objections have been approached and resolved by the vendors participating in the sector. Several, however, continue to remain unresolved and serve as a continuing impediment to physician acceptance of the new technology: 1. Patient information that is vital for the conduct of the examination, such as, medical history, accurately diagnose a malady, and provide a remedy, must be available to the physician during or before the patient encounter; 2. The tool employed to capture information prospectively, and record and distribute the prescribed remedy must be portable, easy to use and fit within the existing workflow of the office practice; and 3. The adopted tool must diminish, not add, to the work of the physician or the staff. Many technology companies have developed impressive technologies, but have failed to satisfy the specific demands of the physician community for acceptance of innovative communication technology and digital integration of their paper processes. In order to be accepted by the physician population, by winning space on their valuable "medical desktops," a medical IT company, even one with an Internet connectivity solution, must be embraced by doctors as a comprehensive enhancement to their practices. CareDecision's system improves the quality and efficiency of the physician's practice by providing clinical information at the point of care. We are focused on point of medical care (patient examining room, patient bedside) tools and products. The Need for Integration Our software is designed to integrate point of care medical applications, treatment protocols and up to the moment patient histories coupled with real-time on-line medical insurance claims submission. The ultimate key to success resides in providing the private practice physician with the capability to, sequentially, learn about the history of his or her patient during, or prior to, entering the examining room, treat the patient and update the insurer of the episode of care. Accomplishing this objective resolves a major dilemma for the health care provider; instantaneous communication of vital patient related information at or before the patient encounter. The technology is grounded in the central need to furnish the doctor with the crucial patient information rapidly and reliably on a PDA. It utilizes the power of the Web to move large amounts of data to and from a variety of platforms securely via a powerful Windows CE based PDA designed for portability and upgradability. Totally compliant with the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), this PDA technology is the first to offer legacy system applications on a totally portable (PDA) appliance. 1. The PDA software operates on any Microsoft Windows CE "Pocket PC" based handheld device, either in a wireless or "wired" mode. The local host for the company's PDA devices is a Windows (9X, NT or later) based PC in the physician's office, which, in turn, permits one to eight of the aforementioned PDAs to be linked to the medical network. 2. The PDA software allows each PDA to become a uniquely identified mobile node on the medical network, independent of PC linkage, thereby, assisting the doctor in the review of relevant patient medical history, medications and prescriptions, lab test ordering, medical step processes and protocols and specialist referral processes. The PDA software provides rules based software capabilities and the ability to receive order fulfillment information for over 5,000 patients, which represents approximately 3 years of patient encounters in a typical primary care medical practice and allows for providers to access payor and health plan business rules, and policy/plan coverage's directly from the plan(s). /19/ 3. The Web server software establishes a real-time link to health plans, lab and other service organizations legacy systems. 4. Our system allows for providers to access payor and health plan business rules, and policy/plan coverage's directly from the plan(s). Value Proposition The PDA offered by CareDecision will enhance the likelihood that the physician will prescribe the right drugs, order the needed lab tests and refer to only authorized specialists. The physician is guided by health plan published treatment and step protocols while in the presence of the patient. Typical post-examination activities conducted by the doctor and his staff will result in better time efficiency, fewer mistakes, corrections and duplication of paperwork. On the other side of the equation, if the health plan is able to positively influence (manage) physician ordering of services and medications without having to resort to "charging" the doctor for his own mistakes and inefficiencies, adoption of the tool or service is more likely. This unique workflow equation distinguishes CareDecision from other service companies begun prior to 1998. Although they initially defined the need for these tools and demonstrated their cost saving potential, they failed to induce broad user based adoption of their technologies, because their tools did not provide the requisite utility at the "point of care." CareDecision offers a unique point of patient care medical efficacy and treatment tool. The software system offered by CareDecision satisfies all the clinical and utilization requirements of the practicing physician. CareDecision believes the products we offer provide the utmost in efficiency., From the standpoint of the physician, processing of patient information is nearly automatic. Relevant data is pre- loaded onto the PDA according to the doctor's schedule of patients. Thus, physician induced data entry is kept to a minimum, thereby overcoming one of the largest obstacles to admission to the physician's "desk-top." To win the battle for space on the "physician desktop," a medical IT company, even one with an Internet connectivity solution, must be embraced by doctors as an enhancement to their practices. The system CareDecision is offering improves the quality and efficiency of the physician's practice by providing clinical information at the point of care. The applications and communication software permit the physician to discard the piles of manila folders and reference manuals. The PDA bearing proprietary software enables the physician at the point-of-care to: 1. Review the patient's recent and/or long term medical history; 2. Check the patient's eligibility to receive services from a health plan; 3. Request care review of medical protocols and medical step processes, to assure a minimum standard of care according to each patient's diagnoses and health plan; 4. Electronically order laboratory tests or radiology exams, and review the fulfillment of those orders by electronic receipt of the medical test results; 5. Review the safety of a proposed prescription and its propensity to interact with other prescribed medications for a given patient. Identify the optimum medication contained within the patient's benefit plan formulary; 6. Electronically refer the patient to a medical specialist, and retrieve and review any report(s) sent from the specialist related to the referral; and 7. Initiate care protocols, or step therapies, based on the patient's diagnosis, and automatically follow the progress or efficacy of the "steps" through an auto- reminder. [Balance of this page intentionally left blank.] /20 The PDA technology and applications are a tightly designed integration of application sets. The system captures all current patient activity at the point of care (the examining room or bedside) and then merges it with the patient's history allowing various on-demand treatment protocols to emerge, providing a wealth of data for prospective treatment. Information supplied to and from the physician via the PDA appliance includes: Case/Episode Diagnosis 1. Episode by episode multiple diagnosis and physician chosen treatment; 2. Patient cumulative treatment (electronic medical record) histories, including hospitalizations and histories from patient; and 3. Eight levels best care medical protocols. --------------------------------------------------------------- Medical Order Entry and 1. Full Pharmacy Benefits Management Fulfillment programs with electronic script writing with drug formulary and drug-drug interaction checks; 2. Lab Order Entry with complete reporting including results, pending, tickler, out of limits, historical, summary, etc.; and 3. Accident/Worker's Compensation intervention modules. In addition, CareDecision software applications provide both on-line and off-line (fax) order entry. --------------------------------------------------------------- Payor-Related 1. Plan and Procedure Eligibility; Applications 2. Procedure/Drug Authorization; 3. Patient Referral; and 4. Hospitalization Admission Decision Tree. The communication and integration system coupled with its clinical and administrative applications constructs a compelling and convincing rationale for adoption and utilization by the physician within the office practice. Solution & Benefits Built on Industry Acceptable Standards The System creates a fully secured series of private communications networks and establishes, for the user's organization, a medical network consisting of both size and power. In effect, the System creates multiple Private data networks, using the Internet and any service provider as its backbone. The created network(s) become fully secure private networks for the exclusive use of the participants. They provide maximum security for all medical communications. Currently, the System utilizes a desktop computer as the client-server link to the Internet with one to four PDAs docked to it. Each PDA battery is charged and data is exchanged specific to each PDA's unique identifier. In addition, the communication software has been designed, and is currently resident on each suite delivered, to accommodate direct connection of the PDA through a wireless link to the Internet. From a practical standpoint, a number of technological and economic issues must be overcome before a wireless connection to the Internet in a healthcare setting can be implemented. These issues include: (a) the reliability and bandwidth of wireless Intranet communications; (b) PDA battery life; (c) wireless connect costs; and (d) the need for relatively expensive wireless amplification and routing stations. The broad-based technology is for utilizing low bandwidth, seamless, automatic, (basically) free FTP (file transfer protocol) nets, using the Internet. These applications (medical, communications and database) are local to each physician's palm-top, providing a comfort level to the physician and the patient. This means that sensitive or critical medical information can be provided automatically or upon request behind the closed door of an examining room, or at the patient bedside. Communication modules resident in the medical networks effect transmissions automatically and seamlessly. The entire cycle takes less than /21/ 3 minutes using encrypted, encoded and "whittled" message packets that are; (a) thrice cleaved into header, body and footer segments that are then compressed with check digits, allowing blocked transfer; (b) data packets to be transmitted through a proprietary message parser along three separate, non-competing Internet channels; and (d) automatically reassembled at the receiving end. Connecting Through Integration The PDA based applications provide a complete set of clinical applications for managing patient care, streamlining clinical paperwork, providing the physician with Best Medical Care pathways and guidelines, and increasing efficiency while improving the accuracy of tracking patient care. There are three categories of application modules. 1. Case/Episode Diagnosis and Treatment modules include: (a) episode by episode multiple diagnosis and physician chosen treatment pathways; (b) patient cumulative treatment (electronic medical record) histories, including hospitalizations and histories from patient encounters with other physicians; (c) eight levels of Best Care Medical Protocols, and (d) tentacle links to the Physician Desktop Reference (PDR) and prescription drug databases; 2. Medical (outbound) Order Entry modules include: (a) full Pharmacy Benefits Management programs with electronic script, drug formulary and drug interaction modules; (b) Lab Order Entry with complete reporting: results, pending, tickler, out of limits, historical, summary, etc., and (c) Accident/Worker's Compensation intervention modules. Additionally, CareDecision software applications provide both on-line and off-line (fax) order entry; and 3. Payor related applications modules include: (a) Plan and Procedure Eligibility; (b) Procedure/Drug Authorization; (c) Patient Referral, and (d) Hospitalization Admission Decision Tree. Real B2-B Model The Internet serves not just as a portal, but a true Business-to-Business destination to integrate all of the constituents and trading partners for a revolutionary means of transacting medical business. It doesn't just connect insurer to physician, hospital to doctor's office or billing to payment but rather, fully integrates the entire medical care giving cycle within one host deployed processing framework. It is generally understood and accepted that physicians will not bear the cost of being interconnected to health plans and service providers, even though CareDecision type solutions improve the efficiency and clinical effectiveness of their practices. CareDecision anticipates that health plans and service providers, such as clinical laboratories, will subsidize (sponsor) the physician networks. That subsidy will be provided because the Plans and Service Providers will financially benefit from the creation of the electronic data network. Paper processing and physician non-compliance with a health plan's prescription formulary are estimated to be $10 per year for each insured. Service providers believe that they can capture incremental market share while protecting their base through this technological linkage. The CareDecision model derives its principal source of revenue from transaction fees driven by the physician's use of the PDA. The costs of installing and maintaining the components of the network in physician offices will be borne by the health plan "sponsors" that the company has labeled, E- trading partners. The system presents a visible and definable cost savings to the sponsoring health plan through a transaction fee structure that offers advance cost savings benefits. The added indirect management capabilities offered the sponsor make the adoption of CareDecision's point of care concept unique in the industry. /22/ The following table describes the types of fees that we will charge and the payor of such fees. Fee Category Specific Transaction Payor of Fee --------------- ---------------------- --------------------- Insurance a. Patient Eligibility Clerk Specific Insurer b. Procedure Eligibility Clerk c. Patient Referral d. Procedure/Drug Authorization Laboratory a. Laboratory Tests and Results Specific Laboratory b. Historical Patient Lab Profile c. Lab Supplies d. Lab Supplies Order e. Laboratory Super Bill Pharmacy a. Drug Formulary Check Insurer or Benefit b. Best Care Drug Guidelines Insurer's PBM c. Drug Interaction Check d. Electronic Prescription Hospital a. Hospital Pre-Admission Checklist Specific Hospital b. Discharge Report c. Remote Physician Inquiry to EMR d. Patient Insurance Profile We anticipate that health plans and service providers, such as clinical laboratories, will subsidize (sponsor) the physician networks. As this is not assured, our costs will be paid, by selling our PDA's through other avenues. We have a business model to sell our PDA units through distribution outlets. We have brought in one distributor in California to test the feasibility of our business model. Competition The medical industry is highly competitive in the attraction and retention of physician customers, insurers and other medical providers. The number of competing companies and the size of such companies varies in different geographic areas. Generally, CareDecision is in competition with other PDA technology companies that offer medically related software suites, with the most effective competition coming from companies that possess greater capital resources, have longer operating histories, larger customer bases, greater name recognition and significantly greater financial, marketing and other resources than do we. There are a number of small and large companies that have announced their intentions to provide some type of Internet interconnectivity for physicians to the healthcare systems: 1. Large publicly traded companies: WebMD formerly known as Healtheon (HLTH), the former MedicaLogic/Medscape ( HLTH) and to a slightly lesser degree Cerner/Citation (CERN), IDX Corporation (IDXC) and venerable Shared Medical (acquired by Seimens) are very broadly involved in healthcare Internet based services including consumer services, E-commerce and connectivity. Of these companies only Cerner is working on a PDA based interface for physicians, although Healtheon has identified the PDA as a critical component for a network and is "evaluating potential partners to provide physicians with hand-held computers after an in-house product was deemphasized after beta testing." 2. Non-PDA based start-ups and small publicly traded companies: CyBear (merged last year into parent Andrx), Medix Resources (MXR), Advanced Health (merged into Proxymed) and Abaton.com /23/ (merged into HBO-McKesson and then shut down) have or had announced some form of connectivity systems that are non-PDA based and have, at best, limited numbers of clinical installations. 3. More mature companies such as Kinetra (acquired by HLTH), McKesson-HBOC and ProxyMed (PILL), have launched Internet enhanced ventures without any clinical successes. 4. PDA-based start-ups: PatientKeeper Corp. (formerly Virtmed), ePhysician (recently downsized and sold assets) and iScribe (recently reorganized and then merged) have announced products that reside on 3-Com's Palm PC. The PatientKeeper product will allow physicians to capture billing information for hospital-based accounts and purports to manage receivable transactions (a mix of a 1st generation feature on a 3rd generation technology). ePhysician's product offering allows prescription ordering from a PDA. On the surface, the former iScribe system offers a few of the features of CareDecision's system, but has chosen to implement a wireless wide-area network solution through an Internet link to a legacy system server. This approach has greater capital cost and platform data management disadvantages compared to CareDecision's product line. Yet, iScribe, even with its costly and incremental approach, and its history of financial troubles nonetheless garnered an impressive valuation.. All of the embryonic PDA technology based companies have a similar broad goal to deliver PDA based data management to physicians. One company, AllScripts (MDRX) appears to be positioned to advance to a market leadership position. However, this position is defined by a product distribution of less than 2000 physicians' office sites (1% of the total market) and does not possess a major factor in any medical trade area. Increased competition may result in reduced operating margins and a loss in our clientele base. There can be no assurance that we will be able to compete successfully against current and future competitors, and competitive pressures faced by us may have a material adverse effect on our business, prospects, financial condition and results of operations. Further, as a strategic response to changes in the competitive environment, management may from time to time make certain pricing, service or marketing decisions or acquisitions that could have a material adverse effect on our business, prospects, financial condition and results of operations. Based on management's industry experience, CareDecision believes it will build a strong reputation for the quality of our products and services as well as our client-oriented approach. We believe that our experienced employees, broad range of products and services, local and broad market expertise, and operating infrastructure enable us to compete effectively in each of our business disciplines. (See "Risk Factors - Competition") Major Customers As we are still in the development stage, CareDecision has yet to generate significant revenue. However, pursuant to an Agency Agreement with CareDecision.net, Inc.,CareDecision will receive 90% of the total revenue, which CareDecision.net, Inc. is to receive through a Program Agreement with Pharmacare, Inc., a wholly owned subsidiary of CVS Corporation, a leading provider of pharmacy benefit services to health insurers. Pharmacare and the Company plan to jointly market the CareDecision products. Thus far the two companies have embarked upon a program to jointly introduce the benefits of CareDecision.net's products to several east coast based health plans that insure over five million lives. The material compensation terms of the Agency Agreement are as follows: A. Exclusivity Compensation. Agent agrees to pay Company 10% of any sales revenues, services or training revenues received as compensation for Company's appointing Agent as exclusive Agent for the Products in the Territory. B. Compensation for PDA Design Changes. The PDA based product listed in Section 1(A) /24/ is complete, commercial ready and fully functional. However, the PDA based Product listed in Section 1(A) functions in a manner that allows Company to charge end users, or their sponsors, use fees according to a proprietary Internet e- commerce model. Agent agrees to pay, or cause Company to be paid, 10% of any revenues received as compensation for Company's agreement to alter the functionality and workflow of the PDA based Product so that it/they may be sold or licensed in Agent's Territory." Patents or Trademarks We have filed for several patents & trademarks early in 2001. We also filed for additional patents and trademarks in late 2002. The applications are still pending. Point Of Operation CareDecision maintains its headquarters and administrative operations in New York, New York. Government Regulation Federal, state, local and foreign governmental organizations may propose or institute laws or regulations concerning various aspects of the medical industry, including electronic claims processing, electronic prescriptions and privacy matters. CareDecision is not currently subject to direct regulation by any domestic or foreign governmental agency, other than regulations applicable to businesses generally, and laws or regulations directly applicable to the medical industry. However, due to the increasing popularity and use of the Internet and other online services, it is possible that a number of laws and regulations may be adopted with respect to the Internet or other online services covering issues such as user privacy, pricing, content, copyrights, distribution and characteristics and quality of products and services. Furthermore, the growth and development of the market for online commerce may prompt calls for more stringent consumer protection laws that may impose additional burdens on those companies conducting business online. The adoption of any additional laws or regulations may decrease the demand for our products and services and increase our cost of doing business, or otherwise have an adverse effect on our business, prospects, financial condition and results of operations. Employees CareDecision currently has 2 part time and 8 full staff employees. The full time employees are situated as follows: 6 are located in the California office, one is in Chicago and one is in the New York office. Management does not foresee hiring additional employees for at least the next twelve to twenty-four months, or until we generate sufficient revenues, in management's opinion, to support hiring additional staff. No employees are covered by labor agreements or contracts and management believes our relations with our employees are good. Facilities The Company's headquarters and facilities are located at 2 Penn Plaza, 15th Floor, Suite 1500-53, New York, New York 10121. The CEO of CareDecision, Robert Cox, at no cost to the corporation, is currently providing for these facilities. Additionally, the company has assumed the lease on the space Medicius occupied, approximately 2300 sq. feet, located at 2660 Townsgate Road, Suite 300, Westlake Village, CA. As of April 1, 2003 there are 17 months remaining on that lease at $3,750.00 per month. If additional facilities are needed, management believes that suitable expansion space is available to meet our future needs at commercially reasonable terms. Currently, management believes that our office provides sufficient workspace to commence with initial operations. /25/ Management Directors And Executive Officers The following sets forth certain information with respect to the executive officers, directors, key employees and advisors of our company as of the date of this prospectus: NAME AGE POSITION ---- --- -------- Robert Cox 43 President, Director, and Chief Executive Officer Keith Berman 49 Secretary, Treasurer and Director William Lyons 49 Director Robert Jagunich 56 Director Robert L. Cox, Chairman, President, Director, and Chief Executive Officer - Prior to joining CareDecision, Mr. Cox was the Chief Executive Officer, President and Director of Tower Realty Trust, Inc., a publicly traded Real Estate Investment Trust ("REIT"). Prior to holding the positions of CEO and President, since 1995 Mr. Cox served as the Executive Vice President and Chief Operating Officer of Tower Equities until October of 1997, when Tower Equities became a public company (Tower Realty Trust, Inc.). Prior to that, Mr. Cox served as Vice President of Development and Construction of Tower Equities from March 1987 to March 1995, where his main responsibilities included supervising all of Tower Equities' development and construction projects. Mr. Cox is a graduate of Florida State University. Mr, Cox does not hold any directorships of other reporting companies. Keith Berman, Secretary, Treasurer and Director - Mr. Berman has over 22 years experience in healthcare with such companies as Technicon Corporation and Boehringer-Mannheim Corporation, and in the last 15 years providing healthcare software including intranet and Internet systems. Mr. Berman was the founder of Cymedix, the operating division of public Medix Resources, Inc. (MXR). Mr. Berman received a BA and MBA from Indiana University. William Lyons, Director - Mr. Lyons, has over 20 years experience in healthcare endeavors, and for the past fifteen years has concentrated on medical communications and medical IT. Mr. Lyons, former President of Cybear, Inc. (CYBA) and an original member of the management team at AllScripts (MDRX), manages the company's sales and marketing efforts. Mr. Lyons received a BA from St. Michael's College and an MBA from Pace University. Robert Jagunich, Director - Mr. Jagunich has as a director of Cymedix Corporation, the operating entity of Medix Resources, Inc. (AMEX:MXR), from April 1996 through December 1997. Mr. Jagunich has 27 years of experience in the medical systems and device industry. Recently, he has held the position of President at new Abilities Systems, a privately-held manufacturer of advanced electronic systems used in rehabilitation. He also consults to companies such as Johnson and Johnson and has served as a senior executive in such publicly-held companies as Laserscope and Acuson. He received his B.S., M.S. and M.B.A. from the University of Michigan. Committees of the Board We presently do not have any committees. [Balance of this page intentionally left blank] /26/ Executive Compensation The following table sets forth all compensation paid to our executive officers for the calendar years of 2001 & 2002: Annual Compensation Awards Payouts ------------------- ------ ------- Other Annual Restr- Long-Term All Name & Compen- icted Securities Incentive Other Principal Salary Bonus sation Stock Underlying Plan Compen- Position Year ($) ($) ($) Award(s) Options (#) Payouts ($) sation($) ---------------------------------------------------------------------------- Robert 2002 30,000 0 0 0 0 0 0 Cox President 2001 100,000 0 0 0 0 0 0 Executive Employment Agreements Currently, there are no employment agreements with executives. Certain Relationships And Related Transactions There has been one actual or proposed transactions that occurred over the past two years to which any person related to the issuer had or is to have a direct or indirect material interest as set forth in item 404 of Regulation S-B of the Securities and Exchange Act of 1933. During the period ended September 30, 2002, the Company acquired Intellectual Property from CareDecision.net, Inc, a private stockholder owned corporation that completed several transactions the Company. As a result of the merger and the acquired intellectual property, two of the beneficial owners of CareDecision.net are now beneficial owners of the Company. Pursuant to the agreement, the Company paid CareDecision.net, Inc. the sum of $187,500 with 700,000 shares of the Company's $0.001 par value preferred stock. CareDecision.net, Inc. then elected to convert its preferred shares into 5,075,000 shares of the Company's $0.001 par value common stock. The two indirect beneficial owners are Keith Berman and William Lyons. Transactions with promoters We have not had any transactions with promoters since inception. Security Ownership of Certain Beneficial Owners and Management The following table presents certain information as of December 31, 2002, with respect to the beneficial ownership of our common stock by: (a) Each person who is known to be the beneficial owner of more than 5.0% of any outstanding share; (b) Each director and executive officer of our company; and (c) All executive officers and directors as a group. As of December 31, 2002 there are 75,364,137 shares issued and outstanding common stock. Please note that unless otherwise specified, the named beneficial owner has, to our knowledge, sole voting and investment power. /27/ Common Stock Shares Percentage of Name and Address Beneficially Owned Shares Outstanding ---------------- ------------------ ------------------ Anfel Trading1 4,206,531 5.58% 505 Park Avenue New York, NY 10022 Keith Berman 6,383,325 8.47% 1623 Elmsford Westlake, CA 91361 Robert L. Cox 1,123,861 1.49% 16 Wood Hollow Lane Fort Salonga, NY 11768 Cede & Co.2 20,508,927 27.21% PO Box 222 Bowling Green Station New York, NY 10274 Robert Jagunich 1,465,000 1.94% 765 Christine Drive Palo A lot, CA 94303 William Lyons 2,792,224 3.70% 617 Joshhue Court Naperville, IL 60540 ------------------ ------------------ Total ownership by our 11,764,410 15.60% officers and directors (four individuals) Footnotes 1. The principal executive officer of Anfel Trading is Jackie Bronner. 2. Cede & Co. is a clearing company. Of the 35 individuals that have their securities on deposit, none own a position of more than 5% of the Common Stock of the Company. Description of Securities Our authorized capital stock is 200,000,000 shares of common stock, par value $0.001 per share and 5,000,000 shares of preferred Stock, par value $.001 per share. As of December 31, 2002, we had issued 75,364,137 of our shares of common stock and no shares of preferred stock. The following brief description of our common stock and preferred stock is subject in all respects to Nevada law and to the provisions of our Articles of Incorporation, as amended and our Bylaws, copies of which have been filed as exhibits to our initial 10-SB Registration Statement filed with the Securities and Exchange Commission on September 27, 2001. Common Stock As a holder of our common stock: (a) You have equal rights to dividends from funds legally available, ratably, when as and if declared by our Board of Directors; /28/ (b) You are entitled to share, ratably, in all of our assets available for distribution upon liquidation, dissolution, or winding up of our business affairs; (c) You do not have preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions applicable; (d) You are entitled to 1 vote per share of common stock you own, on all matters that stockholders may vote, and at all meetings of shareholders; and (e) Your shares are fully paid and non-assessable. Additionally, there is no cumulative voting for the election of directors. Preferred Stock We are also authorized to issue up to 5,000,000 shares of preferred stock, $0.001 par value. Although, we have not issued any preferred stock to date, nor have we developed the descriptive attributes of these preferred shares, we can issue shares of preferred stock in series with such preferences and designations as our board of directors may determine. Our board can, without shareholder approval, issue preferred stock with voting, dividend, liquidation, and conversion rights. This could dilute the voting strength of the holders of common stock and may help our management impede a takeover or attempted change in control. Nevada Anti-Takeover Provisions The anti-takeover provisions of Sections 78.411 through 78.445 of the Nevada Corporation Law apply to CareDecision Corporation Section 78.438 of the Nevada law prohibits us from merging with or selling CareDecision Corporation or more than 5% of our assets or stock to any shareholder who owns or owned more than 10% of any stock or any entity related to a 10% shareholder for three years after the date on which the shareholder acquired the CareDecision Corporation shares, unless the transaction is approved by the Board of Directors of CareDecision Corporation. The provisions also prohibit us from completing any of the transactions described in the preceding sentence with a 10% shareholder who has held the shares more than three years and its related entities unless the transaction is approved by our Board of Directors or a majority of our shares, other than shares owned by that 10% shareholder or any related entity. These provisions could delay, defer or prevent a change in control of CareDecision Corporation. Anti-Dilution The shares of the CareDecision's preferred stock shall not be subject to dilution unless all the holders of the preferred stock vote to change this preference. In addition, the preferred stock shall maintain its status even if the common stock undertakes a reverse or forward split of its shares. The preferred stock cannot be diluted unless it is converted to common stock. The transfer agent and registrar for our common stock is Pacific Stock Transfer Company, 500 E. Warm Springs Road, Suite 240, Las Vegas, Nevada 89119, (702)361-3033. Shares Eligible For Future Sale The outstanding shares of our common stock include shares of common stock outstanding that are "restricted securities," as that term is defined under Rule 144 of the Securities Act, because such shares were purchased or acquired by such stockholders of CareDecision in transactions not involving a public offering, and may only be sold if there is an effective registration statement filed with the Securities Act, in compliance with the exemption provisions of Rule 144, or if there is another exemption under the Securities Act. All the restricted shares of common stock that have been issued at least one year are eligible for sale under Rule 144, subject to certain volume limitations. The outstanding shares also include shares of common stock held by the Selling Security Holders. Such shares have been registered for resale in this document. /29/ In general, under Rule 144 as currently in effect, a shareholder, including an affiliate of CareDecision, may sell shares of common stock after at least one year has elapsed since such shares were acquired from CareDecision or an affiliate of CareDecision. The number of shares of common stock, which may be sold within any three-month period, is limited to the greater of 1% of the then outstanding common stock or the average weekly trading volume in the common stock during the four calendar weeks before the date on which notice of such sale was filed under Rule 144. Other requirements of Rule 144 concerning availability of public information, manner of sale and notice of sale must also be satisfied. In addition, a shareholder who is not an affiliate of CareDecision, and who has not been an affiliate of CareDecision for 90 days prior to the sale, and who has beneficially owned shares acquired from CareDecision or an affiliate of CareDecision for over two years may resell the shares of common stock without compliance with the foregoing requirements under Rule 144. No predictions can be made as to the effect, if any, that future sales of shares, or the availability of shares for future sale, will have on the market price of our common stock prevailing from time to time. Nevertheless, sales of substantial amounts of our common stock, or the perception that such sales may occur, could cause the price of our common stock to decrease and could impair our ability to raise capital through the sale of our equity securities. [Balance of this page intentionally left blank] /30/ Security Holders and Recent Financing On June 28, 2002 we filed a report on Form 8-K with the Securities and Exchange Commission, whereby Medicius, Inc. ("Medicius"), a Nevada corporation, merged with and into CareDecision Corporation ("CareDecision"). Pursuant to the terms of the merger agreement, CareDecision obtained the operations of Medicius. As of June 28, 2002, the Effective Date of the merger, the capital stock of Medicius issued and outstanding immediately prior to the Effective Date was converted into CareDecision Common Stock as follows: (i) Each share of Medicius Series A Preferred Stock was converted into 3.5 common stock shares of CareDecision and .75 CareDecision common stock purchase Warrants. (ii) Each share of Medicius common stock was converted into 3.0 common stock shares of ATR and .5 CareDecision common stock purchase Warrants. (iii) After the Effective Date, all Medicius common stock purchase warrants that remain unexercised as of the Effective Date and any Medicius Convertible Notes that remain unconverted or unpaid on the Effective Date remain exercisable for or convertible into the number of common stock shares of CareDecision based on the same conversion ratio outlined in paragraph (ii) above. The following tables list the shares that were distributed pursuant to the merger agreement. AMOUNT OWNED AMOUNT INVESTORS AMOUNT OF AFTER 3:1 WANT INVESTOR4 INVESTMENT1 CONVERSION2 REGISTERED3 --------- ----------- ------------- ----------- Anfel Trading $147,270.00 3,681,750 3,681,750 Asbell, Barbara $ 47,100.00 1,177,500 1,177,500 Belcher, Michael $ 2,100.00 52,500 52,500 Berman, Keith $255,333.00 6,383,325 6,383,325 Binder, Alan $ 1,200.00 30,000 30,000 CareDecision.net $ 84,323.76 2,108,094 1,761,958 Cox, Robert $ 26,145.00 653,625 653,625 CRS, LLC $ 42,000.00 1,050,000 1,050,000 Drizin, Chaim $ 42,000.00 1,050,000 1,050,000 Eiskowitz, Leon $ 3,000.00 75,000 75,000 Friedman, Allen Zev $ 12,800.04 320,001 320,001 Garber, John $ 78,840.00 1,971,000 1,971,000 Goldner, Ari $ 17,184.00 429,600 429,600 Jagunich, Robert $167,133.00 4,178,325 825,000 Kernochan, William $ 30,000.00 750,000 750,000 Kriger, Marlene $ 3,200.04 80,001 80,001 Lyons, William $100,800.00 2,520,000 2,520,000 Makowsky, Frady $ 3,657.60 91,440 91,440 Makowsky, Joseph $ 7,315.20 182,880 182,880 Mayer, Benjamin $ 15,831.48 395,787 395,787 Mendlowitz, Moshe $110,400.00 2,760,000 2,760,000 NY Auto Mall $ 18,284.76 457,119 457,119 Patel, Sanjay $ 26,400.00 660,000 660,000 /31/ Petras, Michael $ 14,440.00 360,000 360,000 Poff, Tom $ 2,100.00 52,500 52,500 P. R. Diamonds $ 6,000.00 150,000 150,000 Schiffman, Jennifer $ 3,600.00 90,000 90,000 Schneierson, Daniel $ 15,831.48 395,787 395,787 Sharabi, Shabnam $ 1,200.00 30,000 30,000 Weinstein, David $ 20,790.00 519,750 519,750 Weiss, Morris $ 1,599.96 39,999 39,999 Williger, Moshe $ 7,315.20 182,880 182,880 Wolf, Leslie $ 3,600.00 90,000 90,000 ----------- ------------- ----------- TOTAL $1,318,754.52 32,968,863 29,269,402 Footnotes: (1) Consideration for Medicius shares at $0.04 per share. (2) The conversion has been calculated by converting each share of Medicius common stock into 3.0 common stock shares of CareDecision Corporation. (3) Amount investors want to register in this Registration statement. (4) The principals for the following corporations are as follows: Anfel Trading - Jackie Bronner; CareDecision.net - Keith Berman; CRS, LLC - Glen E. Greenfelder, Jr.; NY Auto Mall - Isaac Orzechowitz; and P. R. Diamonds - Pincus Reisz. AMOUNT OWNED AFTER PREFERRED AMOUNT INVESTORS AMOUNT OF STOCK AND OTHER WANT INVESTOR4 INVESTMENT1 CONVERSIONS2 REGISTERED3 --------- ----------- ------------- ----------- Anfel Trading $ 20,991.24 524,781 524,781 Asbell, Barbara $ 34,222.28 855,557 855,557 Belcher, Michael $ 388.88 9,722 9,722 Binder, Alan $ 222.24 5,556 5,556 CareDecision.net $ 70,478.32 1,761,958 1,761,958 DeWitt, Catherine $ 29,040.00 726,000 726,000 Dobson, William F. $ 33,555.00 838,875 838,875 Drizin, Chaim $ 42,000.00 1,050,000 1,050,000 Ducat, Frank $ 9,300.00 232,500 232,500 Eiskowitz, Leon $ 1,522.80 38,070 38,070 Friedman, Allen Zev $ 6,090.00 152,250 152,250 Garber, John $ 31,942.44 798,561 798,561 Kriger, Marlene $ 1,522.80 38,070 38,070 Lyons, William $ 10,888.96 272,224 272,224 Makowsky, Frady $ 1,735.80 43,395 43,395 Makowsky, Joseph $ 3,480.60 87,015 87,015 Mayer, Benjamin $ 24,000.00 600,000 600,000 Mund, Sharon $ 7,555.52 188,888 188,888 NY Auto Mall $ 8,699.40 217,485 217,485 Patel, Bharat K. $ 1,500.00 37,500 37,500 Patel, Kiritkumar $ 3,000.00 75,000 75,000 Patel, Mafatbhai $ 3,000.00 75,000 75,000 Patel, Navin A. $ 1,500.00 37,500 37,500 Patel, Sanjay $ 18,981.44 474,536 474,536 Pazderik, Dennis $ 1,500.00 37,500 37,500 /32/ Petras, Michael $ 17,066.68 66,667 66,667 Poff, Tom $ 388.88 9,722 9,722 P. R. Diamonds $ 3,045.00 76,125 76,125 Schiffman, Jennifer $ 9,690.00 242,250 242,250 Schneierson, Daniel $ 15,831.48 395,787 395,787 Schwartz, David $ 32,400.00 810,000 810,000 Sharabi, Shabnam $ 222.24 5,556 5,556 Weiss, Morris $ 2,454.00 61,350 61,350 Williger, Moshe $ 3,480.60 87,015 87,015 Wolf, Leslie $ 666.68 16,667 16,667 ----------- ------------- ----------- TOTAL $452,362.96 10,949,082 10,949,082 Footnotes: (1) Consideration for Medicius shares at $0.04 per share. (2) The conversion has been calculated by converting each share of Medicius common stock into 3.0 common stock shares of CareDecision Corporation. (3) Amount investors want to register in this Registration statement; (4) The principals for the following corporations are as follows: Anfel Trading - Jackie Bronner; CareDecision.net - Keith Berman; CRS, LLC - Glen E. Greenfelder, Jr.; NY Auto Mall - Isaac Orzechowitz; and P. R. Diamonds - Pincus Reisz. The following table lists the shares that were issued pursuant to consulting, service, employment agreements, and retirement of/or underlying shares of notes, or exercise of warrants. PARTY DATE CONSIDERATION SHARES ISSUED Paradigm Partners1 9/30/02 $101,582.96 2,539,574 Robert Jagunich 9/30/02 $ 32,500 650,000 Keith Berman 9/30/02 $ 42,266 1,267,963 CareDecision.net, Inc. 9/30/02 $ 16,500 875,000 M&E Equities, LLC2 4/20/03 $475,000 8,000,000 (1) The principal for the following corporation is as follows: Paradigm Partners - Joel Weintraub. (2) The principal for the following limited liability company is as follows: M&E Equities - Moshe Mendlowitz. The following table lists the shares have been authorized pursuant to consulting, service, employment agreements, and retirement of notes or exercise of warrants; but not yet issued. PARTY DATE CONSIDERATION SHARES ISSUED Robert Koch 10/21/02 $ 80,000 500,000 Barbara Asbell 10/21/02 $ 60,000 1,500,000 Robert Jagunich 12/13/02 $165,084 4,127,093 Barbara Asbell 12/13/02 $ 40,000 1,000,000 Wizard Enterprises 12/13/02 $100,000 2,500,000 Wizard Enterprises 12/20/02 $ 75,554 1,888,855 CareDecision.net, Inc. 02/23/03 $181,250 2,500,000 Thomas Chillemi 03/28/03 $ 50,000 1,538,500 We issued 12,625,000 shares of our $0.001 par value common stock to our founders for cash of $64,525. /33/ We issued 3,500,000 shares of our $0.001 par value common stock at $0.10 per share to Sarcor Management, SA, a British Virgin Island corporation, as a $350,000 down payment on a technology licensing agreement. We issued 350,000 shares of our $0.001 par value common stock to Corporate Regulatory Services for consulting services valued at $26,250. We issued 150,000 shares of our $0.001 par value common stock to Mary Lou Cox, mother of Robert Cox, the Company's president, for consulting services valued at $15,000. We issued 500,000 shares of our $0.001 par value common stock to James De Luca, an independent consultant, for consulting services valued at $50,000. We issued 1,340,000 shares of our $0.001 par value common stock at $0.10 per share for cash of $134,000. The shares were sold pursuant to a Regulation D, Rule 505 of the Securities and Exchange Commission offering. We issued 115,000 shares of our $0.001 par value common stock to extinguish promissory notes totaling $11,500. We issued 600,000 shares of our $0.001 par value common stock to Quarg, Inc. for consulting services valued at $60,000. On July 9, 2002, we issued a total of 32,968,863 shares of its $0.001 par value common stock pursuant to its reverse merger with Medicius, Inc. whereby each shareholder received three Company shares for every one Medicius, Inc. share held. During the nine-months ended September 30, 2002, we issued 1,725,000 shares of our $0.001 par value common stock to CareDecision.net, Inc. pursuant to its election to convert 700,000 shares of the Company's $0.001 par value preferred stock into common stock. During the nine-months ended September 30, 2002, we issued 6,927,737 shares of our $0.001 par value common stock to various persons and entities and to note-holders pursuant to their election to convert $64,288 in convertible debt inclusive of accrued interest. During the nine-months ended September 30, 2002, we issued 6,340,000 shares of our $0.001 par value common stock to various individuals and entities for consulting services valued at $276,056, the fair market value of the underlying shares on the date of issuance. Should M&E Equities, LLC convert its Medicius Note into reserved merger shares, those shares shall total a maximum of eight million 8,000,000 shares, or a portion thereof, and shall be valued a the time(s) of conversion. The total number of shares to be registered through this SB- 2 filing is 69,105,469. [Balance of this page intentionally left blank.] /34/ Part F/S: CareDecision Corporation, Financial Statements CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) TABLE OF CONTENTS PAGE INDEPENDENT AUDITOR'S REPORT F-1 CONSOLIDATED BALANCE SHEET F-2 CONSOLIDATED STATEMENTS OF OPERATIONS F-3 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY F-4 CONSOLIDATED STATEMENTS OF CASH FLOWS F-5 NOTES TO FINANCIAL STATEMENTS F-6 to F-11 /35/ Beckstead and Watts, LLP Certified Public Accountants 3340 Wynn Road, Suite B Las Vegas, NV 89102 702.257.1984 702.362.0540(fax) INDEPENDENT AUDITORS' REPORT Board of Directors CareDecision Corporation (formerly ATR Search Corporation) We have audited the Balance Sheets of CareDecision Corporation (formerly ATR Search Corporation) (the "Company") (A Development Stage Company), as of December 31, 2002 and 2001, and the related Statements of Operations, Stockholders' Equity, and Cash Flows for the period June 21, 2001 (Date of Inception) to December 31, 2002. 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 audit. We conducted our audit in accordance with generally accepted auditing standards in the United States of America. 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 statement presentation. 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 audit provides 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 CareDecision Corporation (formerly ATR Search Corporation) (A Development Stage Company), as of December 31, 2002 and 2001, and the results of its operations and cash flows for the years then ended and for the period June 21, 2001 (Date of Inception) to December 31, 2002, in conformity with generally accepted accounting principles in the United States of America. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has had limited operations and have not commenced planned principal operations. This raises substantial doubt about its ability to continue as a going concern. Management's plan in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Beckstead and Watts, LLP April 4, 2003 F-1 /36/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Consolidated Balance Sheet December 31, Assets 2002 ------------ Current assets: Cash and equivalents $ 111,101 Loan to shareholder 9,576 Notes receivable 5,376 ------------ Total current assets 126,053 ------------ Fixed assets, net 219,508 Intellectual property, net 1,199,865 ------------ $ 1,545,426 ============ Liabilities and Stockholders' Equity Current liabilities: Notes payable $ 496,105 ------------ Total current liabilities 496,105 ------------ Stockholders' Equity Common stock, $0.001 par value, 200,000,000 shares authorized, 75,364,137 shares issued and outstanding 75,364 Additional paid-in capital 3,045,839 Treasury stock (96,750) (Deficit) accumulated during development stage (1,975,132) ------------ 1,049,321 ------------ $ 1,545,426 ============ The accompanying notes are an integral part of these financial statements. F-2 /37/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Consolidated Statements of Operations For the year ended June 21, 2001 December 31, (inception) to ---------------------- December 31, 2002 2001 2002 ---------- ---------- ------------- Revenue $ 2,000 $ - $ 2,000 ---------- ---------- ------------- Expenses: General & administrative expenses 77,712 4,974 82,686 Payroll expense 186,819 - 186,819 Professional fees 171,852 - 171,852 Consulting expense 1,319,482 - 1,319,482 Software development 129,000 - 129,000 Depreciation 40,778 - 40,778 ---------- ---------- ------------- Total expenses 1,925,643 4,974 1,930,617 ---------- ---------- ------------- Net operating (loss) (1,923,643) (4,974) (1,928,617) Other income (expense): (Loss) on debt settlement (25,925) - (25,925) Interest income 2,230 - 2,230 Interest (expenses) (22,820) - (22,820) ---------- ---------- ------------- Net (loss) $(1,970,158) $ (4,974) $ (1,975,132) ========== ========== ============= Weighted average number of common shares outstanding - basic and 43,176,595 19,180,000 fully diluted ========== ========== Net (loss) per share - $ (0.05) $ (0.00) basic and fully diluted ========== ========== The accompanying notes are an integral part of these financial statements. F-3 /38/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Consolidated Statement of Changes in Stockholders' Equity (Deficit) Accumulated Common Stock Additional During Total Paid-in Treasury Development Stockholders' Shares Amount Capital Stock Stage Equity -------- -------- --------- ------ ----------- ---------- Balance, 19,180,000 $ 19,180 $ 692,095 $ - $ (4,974) $706,301 December 31, 2001 Shares issued 1,825,000 1,825 271,925 273,750 for consulting services Shares issued 500,000 500 42,000 42,500 for consulting services Rescinded shares (1,935,000) (1,935) (96,750) (98,685) Shares issued 32,968,863 32,969 733,162 766,131 pursuant to merger agmt Shares issued 3,000,000 3,000 147,000 150,000 for consulting services Shares issued 1,725,000 1,725 84,525 86,250 for conv preferred shares Shares issued 2,000,000 2,000 138,000 140,000 for consulting services Shares issued 950,000 950 41,800 42,750 for consulting services Shares issued 6,327,737 6,328 310,059 316,387 for consulting services Shares issued 2,539,574 2,540 197,460 200,000 for cash Shares issued 3,515,000 3,515 253,080 256,595 for consulting services Shares issued 1,267,963 1,268 38,732 40,000 for cash Shares issued 1,500,000 1,500 96,000 97,500 for consulting services Net (loss), (1,970,158) (1,970,158) year ended -------- -------- --------- ------ ----------- ---------- December 31, 2002 75,364,137 $75,364 $3,045,839 $(96,750) $(1,975,132) $1,049,321 ========== ======= ========== ======== =========== ========== The accompanying notes are an integral part of these financial statements. F-4 /39/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Consolidated Statements of Cash Flows For the year ended June 21, 2001 December 31, (inception) to ------------------------ December 31, 2002 2001 2002 ----------- ----------- ------------- Cash flows from operating activities Net (loss) $(1,970,158) $ (4,974) $ (1,975,132) Shares issued for consulting 1,319,482 - 1,319,482 services Loss on debt settlement 25,925 - 25,925 Depreciation 40,778 - 40,778 Adjustments to reconcile net (loss) to net cash (used) by operating activities: (Increase) in loan to (9,576) - (9,576) shareholder (Increase) in notes receivable (5,376) - (5,376) Increase (decrease) in accounts (4,974) 4,974 - payable ----------- ----------- ------------- Net cash (used) by operating (603,899) - (603,899) activities ----------- ----------- ------------- Cash flows from investing - - - activities ----------- ----------- ------------- Cash flows from financing activities Increase in notes payable 475,000 - 475,000 Issuance of common stock 240,000 - 240,000 ----------- ----------- ------------- Net cash provided by financing 715,000 - 715,000 activities ----------- ----------- ------------- Net increase in cash 111,101 - 111,101 Cash - beginning - - - ----------- ----------- ------------- Cash - ending $ 111,101 $ - $ 111,101 =========== =========== ============= Supplemental disclosures: Interest paid $ - $ - $ - =========== =========== ============= Income taxes paid $ - $ - $ - =========== =========== ============= Non-cash transactions: Number of shares issued for 19,617,737 - 19,617,737 consulting services =========== =========== ============= The accompanying notes are an integral part of these financial statements. F-5 /40/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Notes Note 1 - Significant accounting policies and procedures Organization The Company was organized March 2, 2001 (Date of Inception) under the laws of the State of Nevada, as ATR Search Corporation. On June 21, 2002, the Company merged Medicius, Inc. and filed amended articles of incorporation changing its name to CareDecision Corporation. The Company has a limited history of operations, and in accordance with SFAS #7, the Company is considered a development stage company. Cash and cash equivalents The Company maintains a cash balance in a non-interest-bearing account that currently does not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. There are no cash equivalents as of December 31, 2002. Investments Investments in companies over which the Company exercises significant influence are accounted for by the equity method whereby the Company includes its proportionate share of earnings and losses of such companies in earnings. Other long-term investments are recorded at cost and are written down to their estimated recoverable amount if there is evidence of a decline in value which is other than temporary. Property, plant and equipment Property, plant and equipment are stated at the lower of cost or estimated net recoverable amount. The cost of property, plant and equipment is depreciated using the straight-line method based on the lesser of the estimated useful lives of the assets or the lease term based on the following life expectancy: Computer equipment 5 years Vehicles 5 years Office furniture and fixtures 7 years Repairs and maintenance expenditures are charged to operations as incurred. Major improvements and replacements, which extend the useful life of an asset, are capitalized and depreciated over the remaining estimated useful life of the asset. When assets are retired or sold, the costs and related accumulated depreciation and amortization are eliminated and any resulting gain or loss is reflected in operations. Revenue recognition Revenue from proprietary software sales that does not require further commitment from the company is recognized upon shipment. Consulting revenue is recognized when the services are rendered. License revenue is recognized ratably over the term of the license. The cost of services, consisting of staff payroll, outside services, equipment rental, communication costs and supplies, is expensed as incurred. Advertising costs The Company expenses all costs of advertising as incurred. There were no advertising costs included in general and administrative expenses as of December 31, 2002. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. F-6 /41/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Notes Fair value of financial instruments Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2002. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand. Impairment of long-lived assets The Company reviews its long-lived assets and intangibles periodically to determine potential impairment by comparing the carrying value of the long-lived assets with the estimated future cash flows expected to result from the use of the assets, including cash flows from disposition. Should the sum of the expected future cash flows be less than the carrying value, the Company would recognize an impairment loss. An impairment loss would be measured by comparing the amount by which the carrying value exceeds the fair value of the long-lived assets and intangibles. There were no impairment losses recognized in 2002. Reporting on the costs of start-up activities Statement of Position 98-5 (SOP 98-5), "Reporting on the Costs of Start-Up Activities," which provides guidance on the financial reporting of start-up costs and organizational costs, requires most costs of start-up activities and organizational costs to be expensed as incurred. SOP 98-5 is effective for fiscal years beginning after December 15, 1998. With the adoption of SOP 98-5, there has been little or no effect on the Company's financial statements. Loss per share Net loss per share is provided in accordance with Statement of Financial Accounting Standards No. 128 (SFAS #128) "Earnings Per Share". Basic loss per share is computed by dividing losses available to common stockholders by the weighted average number of common shares outstanding during the period. As of December 31, 2002, the Company had no dilutive common stock equivalents, such as stock options or warrants. Dividends The Company has not yet adopted any policy regarding payment of dividends. No dividends have been paid or declared since inception. Comprehensive Income SFAS No. 130, "Reporting Comprehensive Income", establishes standards for the reporting and display of comprehensive income and its components in the financial statements. The Company had no items of other comprehensive income and therefore has not presented a statement of comprehensive income. Segment reporting The Company follows Statement of Financial Accounting Standards No. 130, "Disclosures About Segments of an Enterprise and Related Information." The Company operates as a single segment and will evaluate additional segment disclosure requirements as it expands its operations. Income taxes The Company follows Statement of Financial Accounting Standard No. 109, "Accounting for Income Taxes" ("SFAS No. 109") for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. F-7 /42/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Notes Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. Recent pronouncements In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities", which addresses financial accounting and reporting for costs associated with exit or disposal activities and supersedes EITF No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF No. 94-3, a liability for an exit cost was recognized at the date of an entity's commitment to an exit plan. SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. The provisions of SFAS No. 146 will be adopted for exit or disposal activities that are initiated after December 31, 2002. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure-an amendment of SFAS No. 123." This Statement amends SFAS No. 123, "Accounting for Stock-Based Compensation", to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The adoption of SFAS No. 148 is not expected to have a material impact on the company's financial position or results of operations. In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45, "Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees and Indebtedness of Others", an interpretation of FIN No. 5, 57 and 107, and rescission of FIN No. 34, "Disclosure of Indirect Guarantees of Indebtedness of Others". FIN 45 elaborates on the disclosures to be made by the guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also requires that a guarantor recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002; while, the provisions of the disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The company believes that the adoption of such interpretation will not have a material impact on its financial position or results of operations and will adopt such interpretation during fiscal year 2003, as required. In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities", an interpretation of Accounting Research Bulletin No. 51. FIN No. 46 requires that variable interest entities be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or is entitled to receive a majority of the entity's residual returns or both. FIN No. 46 also requires disclosures about variable interest entities that companies are not required to consolidate but in which a company has a significant variable interest. The consolidation requirements of FIN No. 46 will apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements will apply to entities established prior to January 31, 2003 in the first fiscal year or interim period beginning after June 15, 2003. The disclosure requirements will apply in all financial statements issued after January 31, 2003. The company will begin to adopt the provisions of FIN No. 46 during the first quarter of fiscal 2003. F-8 /43/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Notes Stock-Based Compensation The Company accounts for stock-based awards to employees in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations and has adopted the disclosure-only alternative of SFAS No. 123, "Accounting for Stock-Based Compensation." Options granted to consultants, independent representatives and other non-employees are accounted for using the fair value method as prescribed by SFAS No. 123. Year end The Company has adopted December 31 as its fiscal year end. Note 2 - Going concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. As noted above, the Company is in the development stage and, accordingly, has not yet generated a proven history of operations. Since its inception, the Company has been engaged substantially in financing activities and developing its product line, incurring substantial costs and expenses. As a result, the Company incurred accumulated net losses from June 21, 2001 (inception) through the year ended December 31, 2002 of $(2,009,532). In addition, the Company's development activities since inception have been financially sustained by capital contributions. The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating results. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities. Note 3 - Fixed assets Fixed assets consists of the following: December 31, 2002 ----------------- Computer and office equipment $ 260,286 Less accumulated depreciation (40,778) ----------------- Total $ 219,508 ================= Depreciation expense totaled $40,778 for the year ended December 31, 2002. Note 4 - Notes receivable On January 15, 2002, Medicius loaned an officer a total of $15,000 which is due in one year at an interest rate of 8% per annum. At the close of the merger this note was assumed by the Company. Interest income totaled $2,230 during the year ended December 31, 2002. Note 5 - Intellectual property During the year ended December 31, 2002, the Company acquired Intellectual Property from CareDecision.net, Inc, a private stockholder owned corporation that completed several transactions the Company. As a result of the merger and the acquired intellectual property, two of the beneficial owners of CareDecision.net are now beneficial owners of the Company. Pursuant to the agreement, the Company F-9 /44/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Notes paid CareDecision.net, Inc. the sum of $187,500 with 700,000 shares of the Company's $0.001 par value preferred stock. During the year ended December 31, 2002, CareDecision.net, Inc. converted its preferred stock into 1,725,000 shares of the Company's $0.001 par value common stock. Note 6 - Notes payable On January 15, 2002, the Company received $40,000 from Keith Berman, a beneficial owner of the Company, which was due on December 31, 2003 and accrues interest at 8% per annum. The principal and accrued interest were convertible at a rate of $0.10 per share. During September 2002, Mr. Berman converted his $40,000 loan plus interest into 1,267,963 shares of the Company's $0.001 par value common stock. On April 23, 2002, the Company was loaned $475,000 from M and E Equities, LLC. The loan is due in full on April 23, 2004, and bears interest at a rate of 9% per annum. The principal and interest of the note are convertible into five shares of the Company's $0.001 par value common stock for each $1 of debt. The note is secured by all the assets of the Company including accounts receivable, inventory, fixed assets, and intangible assets. During the year ended December 31, 2002, the Company recorded a total of $62,573 from various entities and individuals. The notes are due on demand and accrue interest of $1,715 at a rate of 8%. During the year ended December 31, 2002, the note-holders converted their debt and accrued interest into 664,644 shares of the Company's $0.001 par value common stock. The Company recorded interest expense of $22,820 during the year ended December 31, 2002. Note 7 - Income taxes The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), which requires use of the liability method. SFAS No. 109 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized. The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The sources and tax effects of the differences are as follows: U.S federal statutory rate (34.0%) Valuation reserve 34.0% ----- Total -% ===== As of December 31, 2002, the Company has a net operating loss carry forward of approximately $2,010,000. The related deferred asset has been fully reserved. Note 8 - Stockholder's equity The Company issued a total of 32,968,863 shares of its $0.001 par value common stock pursuant to its reverse merger with Medicius, Inc. whereby each shareholder received three Company shares for every one Medicius, Inc. share held. F-10 /45/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Notes The Company issued 1,725,000 shares of its $0.001 par value common stock to CareDecision.net, Inc. pursuant to its election to convert 700,000 shares of the Company's $0.001 par value preferred stock into common stock. The Company issued 2,539,574 shares of its $0.001 par value common stock for cash totaling $200,000. The Company issued 1,267,963 shares of its $0.001 par value common stock to an officer of the Company for cash totaling $40,000. The Company issued 19,617,737 shares of its $0.001 par value common stock to various individuals and entities for consulting services valued at $1,405,732, the fair market value of the underlying shares on the dates of issuance. The Company rescinded 1,935,000 shares of its $0.001 par value common stock into treasury stock at a value of $98,685, the fair market value of the shares on the date of rescission. There have been no other issuances of common stock. Note 9 - Related party transactions The Company received equipment in the amount of $27,857 from Keith Berman, a beneficial owner of the Company. The Company acquired Intellectual Property from CareDecision.net, Inc, a private stockholder owned corporation that completed several transactions the Company. As a result of the merger and the acquired intellectual property, two of the beneficial owners of CareDecision.net are now beneficial owners of the Company. Pursuant to the agreement, the Company paid CareDecision.net, Inc. the sum of $187,500 with 700,000 shares of the Company's $0.001 par value preferred stock. CareDecision.net, Inc. then elected to convert its preferred shares into 1,725,000 shares of the Company's $0.001 par value common stock. The Company received $40,000 from Keith Berman, a beneficial owner of the Company, due on December 31, 2003 and accruing interest at 8% per annum. During the year ended December 31, 2002, Mr. Berman elected to convert the note plus interest into 1,267,963 shares of the Company's $0.001 par value common stock. Note 10 - Warrants The Company issued 5,540,795 Class A non-callable warrants to Medicius, Inc. shareholders pursuant to the merger agreement (see Note 11 below). Each Class A warrant unit is exercisable into one share of the Company's $0.001 par value common stock at $0.04 per share plus 0.5 Class C warrants. The Class A warrant units expire on June 30, 2005. Note 11 - Reverse acquisitions agreement with Medicius, Inc. (MED) On June 21, 2001, the Company entered into an agreement with MED whereby the Company acquired all of the issued and outstanding common stock of MED in exchange for 38,043,863 voting shares of the Company's $0.001 par value common stock. The acquisition was accounted for using the purchase method of accounting as applicable to reverse acquisitions because the former stockholders of the MED controlled the Company's common stock immediately upon conclusion of the transaction. Under reverse acquisition accounting, the post-acquisition entity was accounted for as a recapitalization of MED. The continuing company has retained December 31 as its fiscal year end. F-11 /46/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Table of Contents Page Independent Accountant's Review Report F-1 Consolidated Balance Sheet September 30, 2002 F-2 (unaudited) Consolidated Statements of Operations For the Three F-3 Months Ended September 30, 2002 and 2001 (unaudited) and For the Nine Months Ended September 30, 2002 and 2001 (unaudited) and For the Period July 6, 2000 (Inception) to September 30, 2002 (unaudited) Consolidated Statements of Cash Flows For the Nine F-4 Months Ended September 30, 2002 and 2001 (unaudited) and For the Period July 6, 2000 (Inception) to September 30, 2002 (unaudited) Notes to Financial Statements F-5 /47/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Consolidated Balance Sheet as of September 30, 2002 (unaudited) and Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2002 and 2001 (unaudited), and For the Period July 6, 2000 (Inception) to September 30, 2002 (unaudited) and Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2002 and 2001 (unaudited), and For the Period July 6, 2000 (Inception) to September 30, 2002 (unaudited) /48/ Beckstead and Watts, LLP Certified Public Accountants 3340 Wynn Road, Suite C Las Vegas, NV 89102 702.257.1984 702.362.0540 fax INDEPENDENT ACCOUNTANT'S REVIEW REPORT Board of Directors CareDecision Corporation (formerly ATR Search Corporation) (a Development Stage Company) New York, NY We have reviewed the accompanying balance sheet of CareDecision Corporation (former1y ATR Search Corporation) (a Nevada corporation) (a development stage company) as of September 30, 2002 and the related statements of operations for the three-months and nine-months ended September 30, 2002 and 2001 and for the period July 6, 2000 (Inception) to September 30, 2002, and statements of cash flows for the nine-months ended September 30, 2002 and 2001 and for the period July 6, 2000 (Inception) to September 30, 2002. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying financial statements referred to above for them to be in conformity with generally accepted accounting principles in the United States of America. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has had limited operations and has not commenced planned principal operations. This raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. G. Brad Beckstead, CPA has previously audited, in accordance with generally accepted auditing standards, the balance sheet of CareDecision Corporation (former1y ATR Search Corporation) (a development stage company) as of December 31, 2001, and the related statements of operations, stockholders' equity, and cash flows for the year then ended (not presented herein) and in his report dated Apri1 15, 2002, he expressed an unqualified opinion on those financial statements. /s/ Beckstead and Watts, LLP November 8, 2002 F-1 /49/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Consolidated Balance Sheet (unaudited) September 30, Assets 2002 Current assets: ------------- Cash and equivalents $ 349,807 Notes receivable 15,850 ------------- Total current assets 365,657 ------------- Fixed assets, net 256,393 Intellectual property, net 1,113,615 ------------- $ 1,735,665 ============= Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 10,000 Notes payable 485,418 ------------- Total current liabilities 495,418 ------------- Stockholders' equity: Common stock, $0.001 par value; 100,000,000 shares 69,681 authorized, 73,864,137 shares issued and outstanding Additional paid-in capital 2,696,498 (Deficit) accumulated during development stage (1,525,932) ------------- 1,240,247 ------------- $ 1,735,665 ============= F-2 The accompanying notes are an integral part of these financial statements. /50/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Consolidated Statements of Operations (unaudited) For three months For nine months July 6, 2000 ended Sept 30, ended Sept 30, (inception) to -------------- ---------------- Sept 30, 2002 2001 2002 2001 2002 ------ ------ ------- ------- ------------- Revenue $ 500 $ - $ 1,555 $ - $ 1,555 ------ ------ ------- ------- ------------- Expenses: General&administrative 159,028 - 751,323 4,974 766,514 expenses Consulting expense 276,056 - 276,056 - 601,056 Depreciation 1,363 - 2,756 - 71,756 ------ ------ ------- ------- ------------- Total expenses 436,447 - 1,030,135 4,974 1,439,326 ------ ------ ------- ------- ------------- Other income (expense): (Loss) on debt settlement(68,363) - (68,363) - (68,363) Interest income 1,885 - 2,852 - 2,852 Interest (expenses) (14,399) - (22,650) - (22,650) ------ ------ ------- ------- ------------- Net (loss) $(516,824) $ -$(1,116,741) $(4,974) $ (1,525,932) ====== ====== ======= ======= ============= Weighted average number of common shares outstanding - basic and fully diluted 21,027,802 16,100,000 33,279,930 16,100,000 ========== ========== ========== ========== Net (loss) per share - basic & fully diluted $ (0.02) $ - $ (0.03) $ (0.00) ========= ====== ======= ======= F-3 The accompanying notes are an integral part of these financial statements. /51/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Consolidated Statements of Cash Flows (unaudited) For the nine months ended July 6, 2000 September 30, (inception) to ------------------------ September 30, 2002 2001 2002 ---------- ---------- ------------ Cash flows from operating activities Net (loss) $(1,116,741) $ - $ (1,525,932) Shares issued for services 276,056 - 601,056 Loss on debt settlement 68,363 - 68,363 Depreciation 2,756 - 71,756 Adjustments to reconcile net (loss) to net cash (used) by operating activities: (Increase) in notes receivable (15,850) - (15,850) Increase in accounts payable 10,000 - 10,000 ---------- ---------- ------------ Net cash (used) by operating activities (785,416) - (800,607) ---------- ---------- ------------ Cash flows from investing activities - - - ---------- ---------- ------------ Cash flows from financing activities Increase in notes payable 485,418 - 485,418 Issuance of common stock 649,801 - 664,996 ---------- ---------- ------------ Net cash provided by financing activities 1,135,219 - 1,150,414 ---------- ---------- ------------ Net increase in cash 349,803 - 349,807 Cash - beginning 4 - - ---------- ---------- ------------ Cash - ending $ 349,807 $ - $ 349,807 ========== ========== ============ Supplemental disclosures: Interest paid $ - $ - $ - ========== ========== ============ Income taxes paid $ - $ - $ - ========== ========== ============ Non-cash transactions: Shares issued for services provided $ 276,056 $ - $ 601,056 ========== ========== ============ F-4 The accompanying notes are an integral part of these financial statements. /52/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Notes Note 1 - Basis of presentation The consolidated interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these consolidated interim financial statements be read in conjunction with the consolidated financial statements of the Company for the period ended December 31, 2001 and notes thereto included in the Company's Form 10-KSB. The Company follows the same accounting policies in the preparation of consolidated interim reports. Results of operations for the interim periods are not indicative of annual results. Note 2 - Going concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. As noted above, the Company is in the development stage and, accordingly, has not yet generated a proven history of operations. Since its inception, the Company has been engaged substantially in financing activities and developing its product line, incurring substantial costs and expenses. As a result, the Company incurred accumulated net losses from July 6, 2000 (inception) through the period ended September 30, 2002 of $(1,525,932). In addition, the Company's development activities since inception have been financially sustained by capital contributions. The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating results. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities. Note 3 - Notes receivable On January 15, 2002, Medicius loaned an officer a total of $15,000, which is due in one year at an interest rate of 8% per annum. At the close of the merger this note was assumed by the Company. During the period ended June 30, 2002, the total interest income is $1,885. Note 4 - Fixed assets As of September 30, 2002, the Company received equipment in the amount of $27,857 from Keith Berman, a beneficial owner of the Company. As of September 30, 2002, the Company reclassified equipment in the amount of $229,899 from Investment in Subsidiary pursuant to its merger with Medicius, Inc. Depreciation expense totaled $2,756 for the nine-month period ended September 30, 2002. F-5 /53/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Notes Note 5 - Intellectual property During the period ended September 30, 2002, the Company acquired Intellectual Property from CareDecision.net, Inc, a private stockholder owned corporation that completed several transactions the Company. As a result of the merger and the acquired intellectual property, two of the beneficial owners of CareDecision.net are now beneficial owners of the Company. Pursuant to the agreement, the Company paid CareDecision.net, Inc. the sum of $187,500 with 700,000 shares of the Company's $0.001 par value preferred stock. During the three-months ended September 20, 2002, CareDecision.net, Inc. converted its preferred stock into 1,725,000 shares of the Company's $0.001 par value common stock. Note 6 - Investment in Care Technologies, LLC On June 21, 2001, the Company entered into an agreement with Care Technologies, LLC whereby the Company sold all of the assets and liabilities of the Company in exchange for a 10% ownership of Care Technologies, LLC. The investment was recorded at $229,899, being the fair value of the Company's assets on the acquisition date (see Note 4 above). Note 7 - Notes payable On January 15, 2002, the Company received $40,000 from Keith Berman, a beneficial owner of the Company, which is due on December 31, 2003 and accrued interest at 8% per annum. The principal and accrued interest can be converted at a rate of $0.10 per share. During September 2002, Mr. Berman converted his $40,000 loan plus interest into 1,267,963 shares of the Company's $0.001 par value common stock. On April 23, 2002, the Company received $475,000 from M and E Equities, LLC, which is due in two years at an interest rate of 9% per annum. The principal and interest of the note can be converted into five shares of the Company's $0.001 par value common stock for each $1 of debt. This note is secured by all the assets of the Company to include accounts receivable, inventory, fixed assets, and intangible assets. During the nine-months ended September 30, 2002, the Company recorded a total of $62,573 from various entities and individuals, which is due upon demand, and accrued interest of $1,715 at a rate of 8%. During the three-months ended September 30, 2002, the note-holders converted their debt and accrued interest into 664,644 shares of the Company's $0.001 par value common stock During the nine-months ended September 30, 2002, the Company recorded interest expense of $22,650. Note 8 - Stockholder's equity During the nine-months ended September 30, 2002, the Company issued a total of 32,968,863 shares of its $0.001 par value common stock pursuant to its reverse merger with Medicius, Inc. whereby each shareholder received three Company shares for every one Medicius, Inc. share held. During the nine-months ended September 30, 2002, the Company issued 1,725,000 shares of its $0.001 par value common stock to CareDecision.net, Inc. pursuant to its election to convert 700,000 shares of the Company's $0.001 par value preferred stock into common stock. During the nine-months ended September 30, 2002, the Company issued 6,927,737 shares of its $0.001 par value common stock to various persons and entities and to note-holders pursuant to their election to convert $64,288 in convertible debt inclusive of accrued interest. During the nine-months ended September 30, 2002, the Company issued 6,340,000 shares of its $0.001 par value common stock to various individuals and entities for consulting services valued at $276,056, the fair market value of the underlying shares on the date of issuance. F-6 /54/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Notes During the nine-months ended September 30, 2002, the Company issued 2,539,574 shares of its $0.001 par value common stock for cash totaling $200,000. There have been no other issuances of common stock. Note 9 - Related party transactions During the period ended September 30, 2002 the Company received equipment in the amount of $27,857 from Keith Berman, a beneficial owner of the Company. During the period ended September 30, 2002, the Company acquired Intellectual Property from CareDecision.net, Inc, a private stockholder owned corporation that completed several transactions the Company. As a result of the merger and the acquired intellectual property, two of the beneficial owners of CareDecision.net are now beneficial owners of the Company.. Pursuant to the agreement, the Company paid CareDecision.net, Inc. the sum of $187,500 with 700,000 shares of the Company's $0.001 par value preferred stock. CareDecision.net, Inc. then elected to convert its preferred shares into 5,075,000 shares of the Company's $0.001 par value common stock. On January 15, 2002, the Company received $40,000 from Keith Berman, a beneficial owner of the Company, which is due on December 31, 2003 and accrued interest at 8% per annum. During the three-months ended September 30, 2002, Mr. Berman elected to convert the note plus interest totaling $42,266 into 1,267,963 shares of the Company's $0.001 par value common stock. Note 10 - Warrants During the nine-months ended September 30, 2002, the Company has issued 5,540,795 Class A non-callable warrants to Medicius, Inc. shareholders pursuant to the merger agreement (see Note 11 below). Each Class A warrant unit is exercisable into one share of the Company's $0.001 par value common stock at $0.04 per share plus 0.5 Class C warrants. The Class A warrant units expire on June 30, 2005. Note 11 - Reverse acquisitions agreement with Medicius, Inc. (MED) On June 21, 2001, the Company entered into an agreement with MED whereby the Company acquired all of the issued and outstanding common stock of NDI in exchange for 38,043,863 voting shares of the Company's $0.001 par value common stock. The acquisition was accounted for using the purchase method of accounting as applicable to reverse acquisitions because the former stockholders of the MED controlled the Company's common stock immediately upon conclusion of the transaction. Under reverse acquisition accounting, the post-acquisition entity was accounted for as a recapitalization of MED. The common stock issued was recorded at $0, being the fair value of the Company's assets on the acquisition date. The continuing company has retained December 31 as its fiscal year end. F-7 /55/ TABLE OF CONTENTS PAGE INDEPENDENT AUDITOR'S REPORT F-1 CONSOLIDATED BALANCE SHEET F-2 CONSOLIDATED STATEMENT OF OPERATIONS F-3 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY F-4 CONSOLIDATED STATEMENT OF CASH FLOWS F-5 NOTES TO FINANCIAL STATEMENTS F-6 /56/ G. BRAD BECKSTEAD Certified Public Accountant 330 E. Warm Springs Las Vegas, NV 89119 702.257.1984 702.362.0540(fax) INDEPENDENT AUDITOR'S REPORT April 15, 2002 Board of Directors ATR Search Corporation Las Vegas, NV I have audited the Consolidated Balance Sheet of ATR Search Corporation and its subsidiary (the "Company") (A Development Stage Company), as of December 31, 2001, and the related Consolidated Statements of Operations, Stockholders' Equity, and Cash Flows for the period March 2, 2001 (Date of Inception) to December 31, 2001. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement presentation. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the consolidated balance sheet of ATR Search Corporation and its subsidiary, (A Development Stage Company), as of December 31, 2001, and its related consolidated statements of operations, equity and cash flows for the period March 2, 2001 (Date of Inception) to December 31, 2001, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has had limited operations and have not commenced planned principal operations. This raises substantial doubt about its ability to continue as a going concern. Management's plan in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ G. Brad Beckstead F-1 /57/ ATR Search Corporation (a Development Stage Company) Consolidated Balance Sheet Assets December 31, 2001 ------------ Current assets: Cash and equivalents $ 25,693 Accounts receivable 168,650 Other current assets 30,766 ------------ Total current assets 225,109 ------------ Fixed assets, net 11,362 Acquired technology, net 1,275,000 ------------ $ 1,511,471 ============ Liabilities and Stockholders' Equity Current liabilities: Accrued interest 86,250 Accrued interest - related party 2,696 Short-term note payable 50,000 Current portion of capital lease obligation 120,000 ------------ Total current liabilities 258,946 Capital lease obligation, net of current portion 1,030,000 ------------ 1,288,946 ------------ Stockholders' Equity Common stock, $0.001 par value, 100,000,000 shares authorized, 19,180,000 shares issued and outstanding as of 12/31/01 19,180 Additional paid-in capital 692,095 (Defict) accumulated during development stage (488,750) ------------ 222,525 ------------ $ 1,511,471 ============ F-2 The accompanying notes are an integral part of these financial statements. /58/ ATR Search Corporation (a Development Stage Company) Consolidated Statement of Operations March 2, 2001 (date of inception) to December 31, 2001 -------------- Revenue $ 940,621 -------------- Cost of services: Subcontractors 338,508 Consultants 207,619 Other costs 36,016 -------------- Total costs of services 582,143 -------------- Gross profit 358,478 -------------- Expenses: General and administrative 366,709 Consulting fees 151,250 Amortization and depreciation 225,607 Organizational costs 12,250 -------------- Total expenses 755,816 -------------- Net operating (loss) (397,338) Other (expenses): Interest expense (88,716) Interest expense - related party (2,696) -------------- Net (loss) $ (488,750) ============== Weighted average number of common shares outstanding - basic and fully diluted 19,180,000 ============== Net (loss) per share - basic and fully diluted $ (0.025) ============== F-3 The accompanying notes are an integral part of these financial statements. /59/ ATR Search Corporation (a Development Stage Company) Consolidated Statement of Changes in Stockholders' Equity (Deficit) Accumulated Common Stock Additional During Total Paid-in Development Stockholders' Shares Amount Capital Stage Equity -------- -------- --------- ----------- ---------- Founders shares issued for cash 12,625,000 $ 12,625 $ 51,900 $ - $ 64,525 Shares issued for licensed technology 3,500,000 3,500 346,500 350,000 Shares issued for consulting 350,000 350 25,900 26,250 Shares issued for services 650,000 650 64,350 65,000 Shares issued for cash pursuant to Rule 504 offering 1,340,000 1,340 132,660 134,000 Shares issued for conversion of debt 115,000 115 11,385 11,500 Shares issued for consulting 600,000 600 59,400 60,000 Net (loss), March 2, 2001 (inception) to December 31, 2001 (488,750) (488,750) -------- -------- --------- ----------- ---------- Balance, December 31, 2001 19,180,000 $ 19,180 $ 692,095 $ (488,750) $ 222,525 F-4 The accompanying notes are an integral part of these financial statements. /60/ ATR Search Corporation (a Development Stage Company) Consolidated Statement of Cash Flows March 2, 2001 (date of inception) to December 31, 2001 -------------- Cash flows from operating activities Net (loss) $ (488,750) Shares issued to acquire technology 350,000 Shares issued for services 151,250 Amortization and depreciation 225,607 Adjustments to reconcile net income to cash provided by operations: (Increase) in accounts receivable (168,650) (Increase) in other current assets (30,766) Increase in accrued interest 86,250 Increase in accrued interest - related party 2,696 -------------- Net cash provided by operating activities 127,637 -------------- Cash flows from investing activities Short-term note payable 50,000 Long-term debt 1,150,000 Purchased fixed assets (11,969) Acquired technology (1,500,000) -------------- Net cash (used) by investing activities (311,969) -------------- Cash flows from financing activities Issuance of common stock 210,025 -------------- Net cash provided by financing activities 210,025 -------------- Net increase in cash 25,693 Cash - beginning - -------------- Cash - ending $ 25,693 -------------- Supplemental disclosures: Interest paid $ 329 ============== Income taxes paid $ - ============== Non-cash transactions: Number of shares issued to acquire technology 3,500,000 ============== Number of shares issued for services 1,600,000 ============== F-5 The accompanying notes are an integral part of these financial statements. /61/ ATR Search Corporation Notes Note 1 - Significant accounting policies and procedures Organization The Company was organized March 2, 2001 (Date of Inception) under the laws of the State of Nevada, as ATR Search Corporation. The Company has a limited history of operations, and in accordance with SFAS #7, the Company is considered a development stage company. As of March 14, 2001, the Company had a wholly owned subsidiary, ATR Search, LLC. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Cash and cash equivalents The Company maintains a cash balance in a non-interest- bearing account that currently does not exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. Fixed Assets The cost of fixed assets is depreciated over the following estimated useful life of the asset utilizing the straight- line method of depreciation: Furniture and fixtures 5 years Leasehold improvements 7 years Revenue recognition The Company recognizes revenue on an accrual basis as it invoices for services. Reporting on the costs of start-up activities Statement of Position 98-5 (SOP 98-5), "Reporting on the Costs of Start-Up Activities," which provides guidance on the financial reporting of start-up costs and organizational costs, requires most costs of start-up activities and organizational costs to be expensed as incurred. SOP 98-5 is effective for fiscal years beginning after December 15, 1998. With the adoption of SOP 98-5, there has been little or no effect on the Company's financial statements. Earnings per share The Company follows Statement of Financial Accounting Standards No. 128. "Earnings Per Share" ("SFAS No. 128"). Basic earnings per common share ("EPS") calculations are determined by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. Diluted earning per common share calculations are determined by dividing net income (loss) by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation. Advertising Costs The Company expenses all costs of advertising as incurred. There were no advertising costs included in selling, general and administrative expenses during the period ended December 31, 2001. Fair value of financial instruments Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2001. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand. F-6 /62/ ATR Search Corporation Notes Software Licenses The Company capitalizes the costs associated with the purchase of licenses for major business process application software used in providing staffing and/or placement services. Acquired technology costs are amortized over sixty months. Impairment of long lived assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. The Company does not perform a periodic assessment of assets for impairment in the absence of such information or indicators. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or a significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. For long-lived assets to be held and used, the Company measures fair value based on quoted market prices or based on discounted estimates of future cash flows. Long-lived assets to be disposed of are carried at fair value less costs to sell. No such impairments have been identified by management at September 30, 2001. Segment reporting The Company follows Statement of Financial Accounting Standards No. 130, "Disclosures About Segments of an Enterprise and Related Information". The Company operates as a single segment and will evaluate additional segment disclosure requirements as it expands its operations. Dividends The Company has not yet adopted any policy regarding payment of dividends. No dividends have been paid or declared since inception. Income taxes The Company follows Statement of Financial Accounting Standard No. 109, "Accounting for Income Taxes" ("SFAS No. 109") for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. F-7 /63/ ATR Search Corporation Notes Recent pronouncements The FASB recently issued Statement No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of Effective Date of FASB Statement No. 133". The Statement defers for one year the effective date of FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities". The rule now will apply to all fiscal quarters of all fiscal years beginning after June 15, 2000. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Statement will require the company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income, if the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The company does not expect SFAS No. 133 to have a material impact on earnings and financial position. In December 1999, the Securities and Exchange Commission released Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB No. 101), which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. SAB No. 101 did not impact the company's revenue recognition policies. Stock-Based Compensation The Company accounts for stock-based awards to employees in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations and has adopted the disclosure-only alternative of FAS No. 123, "Accounting for Stock-Based Compensation." Options granted to consultants, independent representatives and other non-employees are accounted for using the fair value method as prescribed by FAS No. 123. Year end The Company has adopted December 31 as its fiscal year end. Note 2 - Going concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. As noted above, the Company is in the development stage and, accordingly, has not yet generated a proven history of operations. Since its inception, the Company has been engaged substantially in financing activities and developing its product line, incurring substantial costs and expenses. As a result, the Company incurred accumulated net losses from March 2, 2001 (inception) through the period ended December 31, 2001 of $(488,750). In addition, the Company's development activities since inception have been financially sustained by capital contributions. The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating results. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities. Note 3 - Fixed assets The Company acquired the following assets during the period ended December 31, 2001: Furniture & fixtures $ 1,969 Leasehold improvements 10,000 ------- $11,969 Depreciation expense totaled $607 for the period ended December 31, 2001. F-8 /64/ ATR Search Corporation Notes Note 4 - Intellectual Property, Patents, and Other Intangibles On March 28, 2001, the Company acquired the rights to use technology known as "human resource compiler based search recognition software and hardware" from Sarcor Management, SA, a British Virgin Islands corporation, in exchange for a lease agreement and the issuance of 3,500,000 common shares of stock valued at $350,000. Amortization expense totaled $225,000 for the period ended December 31, 2001. The Company relies on trademark, unfair competition and copyright law, trade secret protection and contracts such as confidentiality and license agreements with its employees, customers, partners and others to protect its proprietary rights. Despite precautions, it may be possible for competitors to obtain and/or use the proprietary information without authorization, or to develop technologies similar to the Company's and independently create a similarly functioning infrastructure. Furthermore, the protection of proprietary rights in Internet-related industries is uncertain and still evolving. The laws of some foreign countries do not protect proprietary rights to the same extent as do the laws of the United States. Protecting the Company's proprietary rights in the United States or abroad may not be adequate. Note 5 - Stockholder's equity The Company was originally authorized to issue 20,000,000 shares of its $0.001 par value common stock. Effective May 7, 2001, the Company amended its articles of incorporation increasing its authorized shares to 100,000,000 shares of $0.001 par value common stock. All references to shares issued and outstanding reflect the increase of authorization of 100,000,000 issuable shares effected May 7, 2001. The Company issued 12,625,000 shares of its $0.001 par value common stock to its founders for cash of $64,525. The Company issued 3,500,000 shares of its $0.001 par value common stock at $0.10 per share to Sarcor Management, SA, a British Virgin Island corporation, as a $350,000 down payment on a technology licensing agreement. The Company issued 350,000 shares of its $0.001 par value common stock to Corporate Regulatory Services for consulting services valued at $26,250. The Company issued 150,000 shares of its $0.001 par value common stock to Mary Lou Cox, mother of Robert Cox, the Company's president, for consulting services valued at $15,000. The Company issued 500,000 shares of its $0.001 par value common stock to James De Luca, an independent consultant, for consulting services valued at $50,000. The Company issued 1,340,000 shares of its $0.001 par value common stock at $0.10 per share for cash of $134,000. The shares were sold pursuant to a Regulation D, Rule 505 of the Securities and Exchange Commission offering. The Company issued 115,000 shares of its $0.001 par value common stock to extinguish promissory notes totaling $11,500. The Company issued 600,000 shares of its $0.001 par value common stock to Quarg, Inc. for consulting services valued at $60,000. There have been no other issuances of common stock. F-9 /65/ ATR Search Corporation Notes Note 6 - Income taxes The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), which requires use of the liability method. SFAS No. 109 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences. Deferred tax assets and liabilities at the end of each period are determined using the currently enacted tax rates applied to taxable income in the periods in which the deferred tax assets and liabilities are expected to be settled or realized. The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The sources and tax effects of the differences are based on a 34% US federal statutory rate. As of December 31, 2001, the Company has a net operating loss of approximately $(488,750). The related tax asset of approximately $112,829 has been fully reserved and, if not used, will expire in 2021. A valuation adjustment has been made in the event the asset is not realizable. Note 7 - Capital lease and rent obligations 10% capital lease payable to Sarcor Management, SA with monthly interest-only payments beginning in April 2001 of $5,000, increasing to $10,000 in April 2002, $15,000 in April 2003, and $19,100 thereafter, secured by software licensing rights, due March 2011. $1,150,000 Less current portion ( 120,000) ---------- Total long-term debt $1,030,000 ========== Summary of Future Minimum Lease Payments: Fiscal Year Amount 2001 $ 15,000 2002 150,000 2003 180,000 2004 229,200 2005 229,200 Thereafter 1,173,000 --------- Total lease payments over the contractual period $1,976,400 Less: Interest (476,400) --------- Original cost 1,500,000 ========= Interest expense for the capital lease totaled $57,500 for the period ended December 31, 2001. Of which none has been paid as of December 31, 2001. On April 1, 2001, the Company entered into a sublease agreement to rent office space for a period of four years at a rate of $2,502 per month. Rent expense totaled $23,133 at December 31, 2001. Note 8 - Short term note payable On May 5, 2001, the Company executed a promissory note with Robert Cox, the president of the Company, in the amount of $50,000, which is due in 2 years. Interest in accrued on a quarterly basis at an interest rate of 8% per annum. On May 5, 2003, the unpaid balance of principal and accrued interest will convert into common stock at a ratio of one share of the Company's $0.001 par value common stock for each $5. As of December 31, 2001, interest expense totaled $3,025 of which $329 has been paid. F-10 /66/ ATR Search Corporation Notes Note 9 - Related party transactions On May 5, 2001, the Company executed a promissory note with Robert Cox, the president of the Company, in the amount of $50,000. (See Note 8 above.) On May 24, 2001, the Company issued 150,000 shares of its $0.001 par value common stock to Mary Lou Cox, mother of Robert Cox, the Company's president, for consulting services valued at $15,000. Note 10 - Warrants and options As of December 31, 2001, there were no warrants or options outstanding to acquire any additional shares of common stock. Note 11 - Subsequent events On February 17, 2002, the Company executed a business consulting agreement with MLSA whereby the Company issued 1,350,000 shares of its $0.001 par value common stock to Mark Lancaster for consulting services valued at $162,000. The consulting services are to be rendered over a period of 90 days with an automatic three-month renewal provision. On February 26, 2002, the Company executed a consulting agreement with Qurag, Inc. whereby the Company issued 475,000 shares of its $0.001 par value common stock to Chaim Drizin, a shareholder of the Company, for consulting services valued at $30,875. The consulting services are to be rendered over a period of 90 days with an automatic three- month renewal provision. On March 1, 2002, the Company executed a consulting agreement with Corporate Regulatory Services, LLC (CRS), a shareholder of the Company, whereby the Company issued 250,000 shares of its $0.001 par value common stock to CRS, for consulting services valued at $16,250. The consulting services are to be rendered over a period of approximately 1 year. As of March 7, 2002, the Company issued 62,500 warrants to CRS, a shareholder of the Company, to purchase the Company's $0.001 par value common stock on a one-for-one basis. The warrant exercise price is $0.10 per share of common stock and substantially all warrants will expire on or before March 7, 2007. On March 27, 2002, the Company executed a consulting agreement with Promark, Inc. whereby the Company issued 500,000 shares of its $0.001 par value common stock to Ken Lowman for consulting services valued at $50,000. The consulting services are to be rendered over a period of 90 days with an automatic three-month renewal provision. F-11 /67/ Part II - Information Not Required In Prospectus Item 24: Indemnification of Directors and Officers THE ARTICLES OF INCORPORATION OF THE COMPANY PROVIDE FOR INDEMNIFICATION OF EMPLOYEES AND OFFICERS IN CERTAIN CASES. INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED THAT IN THE OPINION OF THE SECURTIES AND EXCHANGE COMMISSION SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE. In addition, Section 78.751 of the Nevada General Corporation Laws provides as follows: 78.751 Indemnification of officers, directors, employees and agents; advance of expenses. 1. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorney's fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suitor proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful. 2. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. 3. To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 1 and 2, or in defense of any claim, issue or matter therein, he must be indemnified by the corporation against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense. 4. Any indemnification under subsections 1 and 2, unless ordered by a court or advanced pursuant to subsection 5, must be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made: (a) By the stockholders: (b) By the board of directors by majority vote /68/ of a quorum consisting o directors who were not parties to act, suit or proceeding; (c) If a majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding so orders, by independent legal counsel in a written opinion; or (d) If a quorum consisting of directors who were not parties to the act, suit or proceeding cannot to obtained, by independent legal counsel in a written opinion; or 5. The Articles of Incorporation, the Bylaws or an agreement made by the corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by corporation. The provisions of this subsection do not affect any rights to advancement of expenses to which corporate personnel other than the directors or officers may be entitled under any contract or otherwise by law. 6. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this section: (a) Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to subsection 2 or for the advancement of expenses made pursuant to subsection 5, may not be made to or on behalf of any director or officer if a final adjudication establishes that his act or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action. (b) Continues for a person who has ceased to be a director, officer, employee or agent and endures to the benefit of the heirs, executors and administrators of such a person. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. Item 25. Other Expenses of Issuance and Distribution The following table sets forth the estimated expenses to be borne by us (also referred to within as the Registrant) in connection with the issuance and distribution of our Common Shares pursuant to the Offering. Nature of Expenses Amount SEC Registration Fee $ 474.69 Accounting Fees and Expenses $ 5,000 Legal Fees and Expenses $ 5,000 Printing Expenses $ 2,000 Blue Sky Qualification Fees and Expenses $ 0 Transfer Agent's Fee $ 1,000 TOTAL $ 13,552.84 (1) The amounts set forth above, except for the SEC fees, are in each case estimated. /69/ ITEM 26. Recent Sales of Unregistered Securities On March 2, 2001, the Company was incorporated under the laws of the State of Nevada as ATR Search Corporation. The Company is authorized to issue 100,000,000 shares of common stock, par value $0.001, and 5,000,000 shares of preferred stock, par value $0.001. At the Initial Meeting of the Board of Directors on March 16, 2001, it was resolved that a formal Code of Bylaws be adopted for the Corporation. At that same meeting, the Company issued 875,000 shares of its $0.001 par value common stock to Mr. Michael Vogel for cash of $875 and 1,750,000 shares of par value common stock to Mr. Robert L. Cox in exchange for cash in the amount of $1,750. During March 2001, the Company issued 11,975,000 shares of its $0.001 par value common stock to its officers as founders stock issued for cash of $15,000. During March 2001, the Company issued 1,525,000 shares of its $0.001 par value common stock to investors for cash of $49,500. During March 2001, we issued 350,000 shares to one shareholder in lieu of services rendered in the amount of $26,250. The issuance of shares represented payment to a consulting company for facilitating the preparation of the documentation necessary to become a publicly traded company. This stock issuance was made in accordance with Section 4(2) of the Securities Act of 1933, as amended. The consulting company is a sophisticated purchaser. They were provided full and complete access to our corporate records, as they assisted us in preparing our offering documentation. No brokers or dealers were involved in this transaction and no discounts or commissions were paid. We were originally authorized to issue 20,000,000 shares of its $0.001 par value common stock. Effective May 7, 2001, we amended our articles of incorporation increasing our authorized shares to 100,000,000 shares of $0.001 par value common stock. All references to shares issued and outstanding reflect the increase of authorization of 100,000,000 issuable shares affected May 7, 2001. We issued 12,625,000 shares of our $0.001 par value common stock to our founders for cash of $64,525. We issued 3,500,000 shares of our $0.001 par value common stock at $0.10 per share to Sarcor Management, SA, a British Virgin Island corporation, as a $350,000 down payment on a technology licensing agreement. We issued 350,000 shares of our $0.001 par value common stock to Corporate Regulatory Services for consulting services valued at $26,250. We issued 150,000 shares of our $0.001 par value common stock to Mary Lou Cox, mother of Robert Cox, the Company's president, for consulting services valued at $15,000. We issued 500,000 shares of our $0.001 par value common stock to James De Luca, an independent consultant, for consulting services valued at $50,000. We issued 1,340,000 shares of our $0.001 par value common stock at $0.10 per share for cash of $134,000. The shares were sold pursuant to a Regulation D, Rule 505 of the Securities and Exchange Commission offering. We issued 115,000 shares of our $0.001 par value common stock to extinguish promissory notes totaling $11,500. /70/ We issued 600,000 shares of our $0.001 par value common stock to Quarg, Inc. for consulting services valued at $60,000. On May 26, 2001 we conducted an offering in which we issued 1,340,000 shares of common stock to 17 unaffiliated shareholders at a price of $0.10 per share, for total receipts of $134,000 in cash. This offering was made in reliance upon an exemption from the registration provisions of the Securities Act of 1933, as amended, in accordance with Regulation D, Rule 504 of the Act. In addition, this offering was made on a best efforts basis and was not underwritten. In regards to the May 2001 offering, listed below are the requirements set forth under Regulation D, Rule 504 and the facts which support the availability of Rule 504 to the May 2001 offering: a. Exemption. Offers and sales of securities that satisfy the conditions in paragraph (b) of this Rule 504 by an issuer that is not: 1. subject to the reporting requirements of section 13 or 15(d) of the Exchange Act; 2. an investment company; or 3. a development stage company that either has no specific business plan or purpose or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies, or other entity or person, shall be exempt from the provision of section 5 of the Act under section 3(b) of the Act. Facts: At the time of the May 2001 offering, we were not subject to the reporting requirements of section 13 or section 15(d) of the Exchange Act. Further, we are not now, nor were we at the time of the May 2001 offering, considered to be an investment company. Finally, since inception, we have pursued a specific business plan of placing information technology ("IT") professionals with technology sector companies on a temporary or permanent basis and continue to do so. b. Conditions to be met. 1. General Conditions. To qualify for exemption under this Rule 504, offers and sales must satisfy the terms and conditions of Rule 501 and Rule 502 (a), (c) and (d), except that the provisions of Rule 502 (c) and (d) will not apply to offers and sales of securities under this Rule 504 that are made: i. Exclusively in one or more states that provide for the registration of the securities, and require the public filing and delivery to investors of a substantive disclosure document before sale, and are made in accordance with those state provisions; ii. In one or more states that have no provision for the registration of the securities or the public filing or delivery of a disclosure document before sale, if the securities have been registered in at least one state that provides for such registration, public filing and delivery before sale, offers and sales are made in that state in accordance with such provisions, and the disclosure document is delivered before sale to all purchasers (including those in the states that have no such procedure); or iii. Exclusively according to state law exemptions from registration that permit general solicitation and general advertising so long as sales are made only to "accredited investors" as defined in Rule 501(a). Facts: On May 17, 2001, we were issued a permit to sell securities by the State of New York, pursuant to our application for registration by qualification of our offering of Common Stock in that state. The application for registration by qualification was filed pursuant to the provisions of Section 359-e of the New York General Business Law, which requires the public filing and delivery to investors of a substantive disclosure document before sale. On August 24, 2001, we completed a public offering of shares of our common stock pursuant to Regulation D, Rule 504 of the Securities Act of 1933, as amended, and the registration by qualification of said offering in the State of New York, whereby we sold 1,340,000 shares of Common Stock to approximately 17 unaffiliated shareholders of record, none of whom were or are officers or directors of ours. The entire offering was conducted exclusively in the State of New York, pursuant to the permit issued by the State of New York. /71/ 2. The aggregate offering price for an offering of securities under this Rule 504, as defined in Rule 501(c), shall not exceed $1,000,000, less the aggregate offering price for all securities sold within the twelve months before the start of and during the offering of securities under this Rule 504, in reliance on any exemption under section 3(b), or in violation of section 5(a) of the Securities Act. Facts: The aggregate offering price for the May 2001 offering was $400,000, of which $134,000 was raised in the offering. During June 2001, we issued 1,250,000 shares to three shareholders in lieu of services rendered in the amount of $125,000. The issuance of shares represented payment to three consulting companies for marketing and consulting services including site location and development. These stock issuances were made in accordance with Section 4(2) of the Securities Act of 1933, as amended. The consulting companies are sophisticated purchasers. They were provided full and complete access to our corporate records, as they assisted us in the development stage of our Company. No brokers or dealers were involved in these transactions and no discounts or commissions were paid. During June 2001, we issued 115,000 shares to four shareholders who elected to convert promissory notes to common stock in the amount of $11,500. These stock issuances were made in accordance with Section 4(2) of the Securities Act of 1933, as amended. No brokers or dealers were involved in these transactions and no discounts or commissions were paid. The following paragraphs set forth information with respect to all securities sold by us within the past 14 months without registration under the Securities Act of 1933, as amended (the "Securities Act"). The information includes the names of the purchasers, the date of issuance, the title and number of securities sold and the consideration received by us for the issuance of these shares. The consulting services agreements were made with such investors that are sophisticated investors based on their financial resources and knowledge of investments. They had access to or were provided with relevant financial and other information relating to the CareDecision Corporation. Accordingly, the issuance of shares was exempt from the registration requirements of the Act pursuant to Section 4(2) of the Act. On February 17, 2002, we issued 1,350,000 shares of our Common Stock to Mark W. Lancaster for consulting services valued at $155,250. On February 26, 2002, we issued 475,000 shares of our Common Stock to Chaim Drizin for consulting services valued at $54,625. On April 4, 2002, we rescinded an aggregate of 1,935,000 shares of our Common Stock. On July 9, 2002, we issued a total of 32,968,863 shares of its $0.001 par value common stock pursuant to its reverse merger with Medicius, Inc. whereby each shareholder received three Company shares for every one Medicius, Inc. share held. On August 1, 2002, we issued 3,000,00 shares of our Common Stock to Ken Lowman for consulting services valued at $150,000. On August 1, 2002, CareDecision.net, Inc. then elected to convert its preferred shares into 5,075,000 shares of the Company's $0.001 par value common stock. On August 9, 2002, we issued 2,000,000 restricted shares of our Common Stock to Barbara Asbell for consulting services valued at $80,000. On September 4, 2002, we issued 950,000 shares of our Common Stock to Barbara Asbell for consulting services valued at $38,000. /72/ On September 30, 2002, we issued 875,000 restricted shares of common stock, to CareDecision.net, Inc., for purchasing the empower care software and the care.net web domain of CareDecision.net, Inc. On September 30, 2002, we issued 1,267,963 restricted shares of CareDecision Corporation common stock, to Keith Berman for his retiring his CareDecision Corporation note. On September 30, 200, we issued 640,000 restricted shares of CareDecision Corporation common stock to Robert Jagunich for his exercising 640,000 warrants at a strike price of $0.05; On September 30, 2002, we issued 2,539,574 restricted shares of our Common Stock to Paradigm Partners for consulting services valued at $101,582.96. During the nine-months ended September 30, 2002, we issued 1,725,000 shares of our $0.001 par value common stock to CareDecision.net, Inc. pursuant to its election to convert 700,000 shares of the Company's $0.001 par value preferred stock into common stock. During the nine-months ended September 30, 2002, we issued 6,927,737 shares of our $0.001 par value common stock to various persons and entities and to note-holders pursuant to their election to convert $64,288 in convertible debt inclusive of accrued interest. During the nine-months ended September 30, 2002, we issued 6,340,000 shares of our $0.001 par value common stock to various individuals and entities for consulting services valued at $276,056, the fair market value of the underlying shares on the date of issuance. On October 8, 2002 we issued 6,327,737 shares of our Common Stock as follows: NAME NUMBER OF SHARES Anfel Trading 524,781 Barbara Asbell 218,057 Michael Belcher 9,722 Keith Berman 848,768 Alan Binder 5,556 Catherine Dewitt 726,000 Leon B. Eisikowitz 38,070 Allen Zev Friedman 152,250 John Garber 365,001 Robert Jagunich 773,768 Marlene Kriger 38,070 William Lyons 272,224 Frady Makowsky 43,395 Joseph Makowsky 87,015 Benjamin Mayer 600,000 New York Auto Mall 217,485 P R Diamonds 76,125 Sanjay Patel 122,223 Michael Petras 66,667 Tom Poff 9,722 Jennifer C. Schiffman 152,250 David Schwartz 810,000 Shabnam Sharabi 5,556 Morris Weiss 61,350 Moshe Williger 87,015 Leslie Wolf 16,667 /73/ On October 9, 2002, we rescinded an aggregate of 3,350,000 shares of our Common Stock. On October 21, 2002, we issued 500,000 restricted shares of our Common Stock to Robert Koch for consulting services valued at $20,000. On October 21, 2002, we issued 1,500,000 restricted shares of our Common Stock to Robert Koch for consulting services valued at $60,000. On December 11, 2002, we issued 4,127,093 restricted shares of our Common Stock to Robert Jagunich for consulting services value at $165,084. On December 13, 2002, we issued 1,000,000 restricted shares of our Common Stock to Barbara Asbell for consulting services value at $40,000. On December 13, 2002, we issued 2,500,000 restricted shares of our Common Stock to Wizard Enterprises for consulting services value at $100,000. On December 20, 2002, we issued 1,888,855 restricted shares of our Common Stock to Wizard Enterprises for consulting services value at $75,554. Should M&E Equities, LLC convert its Medicius Note into reserved merger shares, those shares shall total a maximum of seven million five hundred thousand 8,000,000 shares, or a portion thereof, and shall be valued a the time(s) of conversion. [Balance of this page intentionally left blank.] /74/ Item 27. Exhibits Exhibits. The following is a complete list of Exhibits filed as part of this registration statement. Exhibit 3a Articles of Incorporation - Filed March 2, 2001 (Rendered as Previously Filed) Exhibit 3b Articles of Amendments to Articles of Incorporation - Filed May 9, 2001 (Rendered as Previously Filed) Exhibit 3c Articles of Amendments to Articles of Incorporation - Filed August 2, 2002 (Rendered as Previously Filed) Exhibit 3d Bylaws of CareDecision Corporation (formerly ATR Search Corporation) (Rendered as Previously Filed) Exhibit 10.1 Consulting Agreement with Dailyfinancial.com, Inc. Exhibit 10.2 Agent's Representation Agreement. Exhibit 10.3 Robert Jagunich Service Agreement. Exhibit 10.4 M&E Secured Convertible Revolving Promissory Note Agreement. Exhibit 10.5 Robert Jagunich Service Agreement. Exhibit 10.6 Wizard Enterprises Consulting Agreement. Exhibit 10.7 Wizard Enterprises Consulting Agreement. Exhibit 10.8 Barbara Asbell Consulting Agreement. Exhibit 10.9 Program Agreement. Exhibit 10.10 Paradigm Partners Consulting Agreement. Exhibit 10.11 Letter of Intent for Plan of Merger. Exhibit 5 Attorney Legal Opinion and Consent Letter (Rendered as Previously Filed) Exhibit 23 Independent Auditor's Consent Item 28. Undertakings 1. The Registrant will, during any period in which it offers or sells securities, file a post-effective amendment to this registration statement to: (i) Include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and /75/ (iii) Include any additional or changed material information on the plan of distribution. 2. The Registrant will, for determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. 3. The Registrant will file a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. 4. The Registrant will provide to each purchaser, if any, at the closing certificates in such denominations and registered in such names to permit prompt delivery to each purchaser. 5. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. 6. For purposes of determining any liability under the Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant under Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this registration statement as of the time the Commission declared it effective. Signatures Pursuant to the requirements of the Securities and Exchange Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form SB-2 and has duly caused this Form SB-2 Registration Statement to be signed on its behalf by the undersigned, there unto duly authorized, in the City of New York, State of New York on the 28th day of April 2003. CareDecision Corporation By: /s/ Robert Cox ---------------- President and Director By: /s/ Keith Berman ----------------- Keith Berman Secretary, Treasurer and Director /76/ POWER OF ATTORNEY Pursuant to the requirements of the Act, the following persons in the capacities and on the dates indicated have signed this Registration Statement. We, the undersigned officers and directors of CareDecision Corporation hereby severally constitute and appoint Thomas C. Cook, our true and lawful attorney-in-fact and agent with full power of substitution for us in our stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and all documents relating thereto, and to file the same, with all exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent in full power and authority to do and perform each and every act and thing necessary or advisable to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in- fact and agent or his substitute or substitutes, any lawfully do or cause to be done by virtue hereof. SIGNATURE TITLE DATE /s/ Robert Cox President, Director, and April 28, 2003 ------------------ Chief Executive Officer Robert Cox /77/ End of Filing