UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2003 Or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _____________ Commission File Number: 000-33187 CareDecision Corporation ------------------------ (Exact name of registrant as specified in its charter) Nevada 91-2105842 ------ ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2660 Townsgate Road, Westlake Village, Suite 300, CA 91361 ---------------------------------------------------- ----- (Address of principal executive offices) (Zip Code) (805) 446-1973 -------------- (Registrant's telephone number, including area code) 2 Penn Plaza, 15th Floor, Suite 1500-53, New York, NY, 10121 ------------------------------------------------------------ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares outstanding of each of the issuer's classes of common stock as of the most recent practicable date: 113,784,921 /1/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Table of Contents Page PART I - FINANCIAL INFORMATION Item 1. Financial Statements 3 Consolidated Balance Sheet September 30, 2003 (unaudited) 4 Consolidated Statements of Operations For the Three and Nine Months 5 Ended September 30, 2003 and 2002 (unaudited) and For the Period July 6, 2000 (Inception) to September 30, 2003 (unaudited) Consolidated Statements of Cash Flows For the Nine Months Ended 6 September 30, 2003 and 2002 (unaudited) and For the Period July 6, 2000 (Inception) to September 30, 2003 (unaudited) Notes to Financial Statements 7 Item 2. Management's Discussion and Plan of Operation 11 PART II - OTHER INFORMATION Item 1. Legal Proceedings 15 Item 6(a). Exhibits 15 Item 6(b). Reports Filed on Form 8-K 16 SIGNATURES 17 /2/ Part I - Financial Information Item 1. Financial Statements CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Consolidated Balance Sheet as of September 30, 2003 (unaudited) and Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2003 and 2002 (unaudited), and For the Period July 6, 2000 (Inception) to September 30, 2003 (unaudited) and Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2003 and 2002 (unaudited), and For the Period July 6, 2000 (Inception) to September 30, 2003 (unaudited) /3/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Consolidated Balance Sheet (unaudited) September 30, Assets 2003 ------------- Current assets: Cash and equivalents $ 44,347 Accounts receivable, net of allowance for doubtful accounts of $12,500 21,748 ------------- Total current assets 66,095 ------------- Fixed assets, net 1,238,763 ------------- $ 1,304,858 ============= Liabilities and Stockholders' Equity Current liabilities: Note payable to shareholder $ 91,078 Stock subscription payable 13,750 Notes payable 513,527 ------------- Total current liabilities 618,355 ------------- 618,355 ------------- Stockholders' equity: Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding - Common stock, $0.001 par value, 200,000,000 shares authorized, 113,784,921 shares issued and outstanding 113,785 Additional paid-in capital 3,941,402 Treasury stock (96,750) (Deficit) accumulated during development stage (3,271,934) ------------- 686,503 ------------- $ 1,304,858 ============= The accompanying notes are an integral part of these financial statements. /4/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Consolidated Statements of Operations (unaudited) For the For the three months nine months July 6, 2000 ended September 30, ended September 30, (Inception) to -------------------- ---------------------- September 30, 2003 2002 2003 2002 2003 --------- --------- ----------- ----------- ----------- (Restated) (Restated) (Restated) Revenue $ 22,848 $ 500 $ 24,698 $ 1,555 $ 26,698 --------- --------- ----------- ----------- ---------- Expenses: General and admini- strative expenses 35,556 159,028 119,545 751,323 202,231 Payroll expense 48,415 - 171,209 - 358,028 Professional fees 11,465 - 54,693 - 226,545 Consulting expense 152,750 276,056 508,750 276,056 1,828,232 Software development - - 3,950 - 132,950 Depreciation 80,622 80,383 246,274 80,383 407,040 --------- --------- ----------- ----------- ---------- Total expenses 328,808 515,467 1,104,421 1,107,762 3,155,026 --------- --------- ----------- ----------- ---------- Other income (expenses): (Loss) on debt settlement (25,000) (68,363) (62,094) (68,363) (88,019) Interest income - 1,885 561 2,852 2,791 Interest (expenses) (12,754) (14,399) (35,558) (22,650) (58,378) --------- --------- ----------- ----------- ---------- Net (loss) $(343,714) $(595,844) $(1,176,814) $(1,194,368)$(3,271,934) Weighted average number of common shares outstanding - basic and fully diluted 100,990,475 21,027,802 92,711,681 33,279,930 =========== ========== ========== ========== Net (loss) per share - basic and fully diluted $ (0.00) $ (0.03) $ (0.01) $ (0.04) ========= ========= =========== =========== The accompanying notes are an integral part of these financial statements. /5/ 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, 2003 2002 2003 ------------ ------------ -------------- (Restated) (Restated) Cash flows from operating activities Net (loss) $ (1,176,814) $ (1,194,368) $ (3,271,934) Shares issued for services 508,750 276,056 1,828,232 Loss on debt settlement 62,094 68,363 88,019 Depreciation 246,274 80,383 407,040 Adjustments to reconcile net (loss) to net cash (used) by operating activities: Decrease in accounts receivable 5,376 - - (Increase) in notes receivable (34,248) (15,850) (21,748) ------------ ------------ -------------- Net cash (used) by operating activities (388,568) (785,416) (970,391) ------------ ------------ -------------- Cash flows from financing activities Proceeds from convertible notes - related party 50,000 - 50,000 Proceeds from notes payable 25,000 485,418 513,527 Payments on notes payable (1,890) - (37,493) Accrued interest 3,095 - 3,095 Proceeds from note payable to shareholder 130,606 - 130,606 Payments on note payable to shareholder (20,347) - (20,347) Stock subscription payable 13,750 - 13,750 Issuance of common stock 121,600 649,801 361,600 ------------ ------------ -------------- Net cash provided by financing activities 321,814 1,135,219 1,014,738 ------------ ------------ -------------- Net increase in cash (66,754) 349,803 44,347 Cash - beginning 111,101 4 - ------------ ------------ -------------- Cash - ending $ 44,347 $ 349,807 $ 44,347 ============ ============ ============== Supplemental disclosures: Interest paid $ - $ - $ - ============ ============ ============== Income taxes paid $ - $ - $ - ============ ============ ============== Non-cash transactions: Number of shares issued for services provided 26,309,748 276,056 45,927,485 ============ ============ ============== Number of shares issued to acquire technology 2,500,000 - 2,500,000 ============ ============ ============== Number of shares issued for debt settlement 741,875 - 741,875 ============ ============ ============== The accompanying notes are an integral part of these financial statements. /6/ 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, 2002 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, 2003 of $3,271,934. 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 - Change in accounting principle The Company determined during the nine months ending September 30, 2003 that it is appropriate to reclassify software acquired in 2002 from intellectual property to fixed assets. The effect of the change in accounting principle requires a restatement of the December 31, 2002, and March 31, 2003 financial statements in order to properly reflect the asset reclassification and the related adjustment to depreciation expense. The effect of this change was to decrease net income for the year ended December 31, 2002 and the three months ended March 31, 2003 by $119,988 and $63,409, respectively. Retained earnings as of January 1, 2002 has been adjusted for the retroactive application of the change in accounting principle. Note 4 - Fixed assets On February 5, 2003, the Company acquired fully-developed software valued at $181,250 from CareDecision.net, Inc., the former parent corporation of Medicius, Inc. Medicius, Inc. was acquired by the Company in June 2002. Several of the control persons from CareDecision.net, Inc. are in similar positions of control at the Company. Depreciation expense totaled $246,274 for the nine-month period ended September 30, 2003. /7/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Notes Note 5 - Notes payable - related party During the nine months ended September 30, 2003, the Company received loans totaling $130,606 from a Company shareholder and director. The notes bear interest at 9% per annum and are due 365 days from date of issuance. During the nine months ended September 30, 2003, the Company recorded interest expense of $35,558. Note 6 - Convertible notes During the nine months ended September 30, 2003, the Company received a loan totaling $50,000 from a Company shareholder. The note is convertible into 1,538,500 shares of the Company's $0.001 par value common stock at a strike price of $0.0325 per share. The convertible note also carried with it 1,538,500 warrants exercisable on a one-for-one basis at a strike price of $0.0325 per share. On April 22, 2003, the holder elected to convert the note into 1,538,500 shares of the Company's $0.001 par value common stock. Note 7 - Stockholder's equity During the nine months ended September 30, 2003, the Company issued 8,000,000 shares of $0.001 par value common stock to various individuals for consulting services valued at $356,000. During the nine months ended September 30, 2003, the Company issued 2,500,000 shares of $0.001 par value common stock to acquire developed software valued at $181,250 from CareDecision.net, Inc. During the nine months ended September 30, 2003, the Company issued 741,875 shares of its $0.001 par value common stock to an individual as settlement for past debts valued at $37,094. On July 21, 2003, the Company issued an 8% share dividend to its shareholders of record. The Company issued 6,469,132 shares of its $0.001 par value common stock pursuant to the dividend issuance. On July 1, 2003, the Company entered into a consulting agreement with Anthony Quintiliana to perform information technology services for the Company. As consideration, the Company issued 1,500,000 shares of $0.001 par value common stock on August 18, 2003, and stock options to purchase an additional 2,000,000 shares of $0.001 par value common stock at a strike price of $0.05 per share pursuant to the Company's 2003 Stock Option Plan. The shares will be registered and free-trading via Form S-8. On September 18, 2003, Mr. Quintiliana exercised his options and purchased 2,000,000 shares of stock for cash totaling $101,600. On July 1, 2003, the Company entered into a consulting agreement with Barbara Asbell to perform medical information technology services for the Company. As consideration, the Company issued 2,500,000 shares of $0.001 par value common stock. The shares will be registered and free-trading via Form S-8. Based upon the terms of her consulting agreements, Ms. Asbell has agreed to rescind an equal number of her existing shares bearing a restricted legend. On July 15, 2003, the Company entered into a consulting agreement with Leslie-Michelle Abraham to perform corporate administrative services for the Company. As consideration, the Company issued stock options to purchase 850,000 shares of $0.001 par value common stock at a strike price of $0.05 per share pursuant to the Company's 2003 Stock Option Plan. The shares will be registered and free-trading via Form S-8. On September 30, 2003, Ms. Abraham exercised her options and acquired 850,000 shares of the Company's $0.001 par value common stock for cash and services totaling $42,500. /8/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Notes On August 18, 2003, the Company issued 300,000 shares of its $0.001 par value common stock to its employees for services valued at $20,833. On September 12, 2003, the Company issued 15,059,748 shares of its $0.001 par value common stock to various individuals and entities for past services valued at $644,001. The services have been previously expensed and accrued for by the Company throughout the year ended December 31, 2002, and during the nine months ended September 30, 2003. There have been no other issuances of preferred or common stock. Note 8 - Related party transactions During the nine months ended September 30, 2003, the Company acquired fully-developed software from CareDecision.net, Inc, a private corporation with several control persons serving in similar positions at the Company. Pursuant to the agreement, the Company paid CareDecision.net, Inc. the sum of $181,250 with 2,500,000 shares of the Company's $0.001 par value common stock. During the nine months ended September 30, 2003, the Company received $100,150 from Robert Cox, a Company shareholder and Chairman of the Board. The notes are due on 365 days from issuance and accrued interest at 9% per annum. During the nine months ended September 30, 2003, the Company received $50,000 from Dr. Thomas Chillemi, a Company shareholder, the note is convertible into 1,538,500 shares of the Company's $0.001 par value common stock and carries with it 1,538,500 warrants exercisable on a one-for-one basis at a strike price at $0.0325 per share. On April 22, 2003 Dr. Chillemi exercised the convertible portion of his note and converted the $50,000 debt into 1,538,500 shares of the Company's $.001 par value common stock. On July 10, 2003, the Company entered into a consulting agreement with Dr. Thomas Chillemi, a Company shareholder, to perform corporate development services for the Company. As consideration, the Company issued stock options to purchase 3,000,000 shares of $0.001 par value common stock at a strike price of $0.05 per share pursuant to the Company's 2003 Stock Option Plan. The shares will be registered and free-trading via Form S-8. On July 15, 2003, the Company entered into a consulting agreement with Dr. Joseph A. Wolf, a Company shareholder to perform medical information technology services for the Company. As consideration, the Company issued stock options to purchase 950,000 shares of $0.001 par value common stock at a strike price of $0.05 per share pursuant to the Company's 2003 Stock Option Plan. The shares will be registered and free-trading via Form S- 8. Note 9 - Stock option plan On January 1, 2003, the Company adopted its "2003 Stock Option Plan" (the "Plan") and granted incentive and nonqualified stock options with rights to purchase 25,000,000 shares of the Company's $0.001 par value common stock. The Company issued 13,500,000 shares of stock pursuant to the plan during the nine months ended September 30, 2003. On August 5, 2003, the Company entered into a consulting agreement with Ely Mandell to perform corporate strategic and developmental services for the Company. As consideration, the Company issued stock options to purchase 150,000 shares of $0.001 par value common stock at a strike price of $0.05 per share pursuant to the Company's 2003 Stock Option Plan. The shares will be registered and free-trading via Form S-8. /9/ CareDecision Corporation [formerly ATR Search Corporation] (a Development Stage Company) Notes Note 10 - Subsequent events On October 31, 2003 Dr. Wolf exercised all 950,000 of his stock options by rendering $47,500.00 in cash. On October 1, 2003 Dr. Chillemi exercised 1,000,000 of his stock options as consideration for services performed valued at $50,000. On November 1, 2003, Dr. Chillemi exercised an additional 1,000,000 of his stock options as consideration for services performed valued at $50,000. Note 11 - Reverse acquisitions agreement with Medicius, Inc. (MED) On June 21, 2002, 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. /10/ Item 2. Management's Discussion and Plan of Operation Forward-Looking Statements This Quarterly Report contains forward-looking statements about our business, financial condition and prospects that reflect our assumptions and beliefs based on information currently available. We can give no assurance that the expectations indicated by such forward-looking statements will be realized. If any of our assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, our actual results may differ materially from those indicated by the forward-looking statements. The key factors that are not within our control and that may have a direct bearing on operating results include, but are not limited to, acceptance of our services, our ability to expand our customer base, our ability to raise capital in the future, the retention of key employees and changes in the regulation of our industry. There may be other risks and circumstances that we are unable to predict. When used in this Quarterly Report, words such as, "believes," "expects," "intends," "plans," "anticipates," "estimates" and similar expressions are intended to identify forward-looking statements, although there may be certain forward-looking statements not accompanied by such expressions. General The company is still in the development stage and is only now beginning commercial delivery of its products and services. In the quarter ended September 30, 2003 the company booked its first revenues as a direct result of the implementation of its proprietary technologies and products. Our principal products are: an E-Health handheld information appliance (PDA) software application package, and a permanently affixed handheld information appliance and Wi-Fi (wireless) network designed for the hotel, motel and apartment marketplace. The company has applied for and received provisional approval for a family of trademarks making use of the mark MD@. The provisional approval applies to the first six individual marks applied for by the company. In addition, the company is in the process of applying for marks associated with its ResidenceWare hotel/motel products and technologies. We presently have a comprehensive suite of medical information technology, cooperative advertising, instant messaging and fulfillment, and electronic commerce applications that are Internet enhanced, integrated for medical professional use, and hotel management/guest use, both software suites functioning through networks of wireless PDA Internet appliances. The company's applications have been designed to meet the needs of the inpatient and outpatient medical environments, and the hotel management and guest (consumer), and are not just commercially viable but also regulatory standard compliant. Additionally, our software applications were conceived and implemented to offer the management level user, either the medical professional or hotel manager, the ability to manage prospective and retrospective commerce. The company has filed two broad based patent applications and intends to file derivative patent applications covering the processes, use and functionality of its technologies and products. Our software is designed to integrate point of service applications. The medical appliance, the longest available product, monitors treatment protocols and up to the moment patient histories coupled with real-time on-line medical insurance claims submission. Our 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 these objectives resolves a major dilemma for the health care provider; instantaneous communication of vital patient related information at or before the patient encounter. /11/ The Wi-Fi hotel/motel and apartment software makes use of much of the foundation technologies resident in the medical product, however, given the differences in the two markets that the products service, the hotel/motel product is much more cooperative oriented, offering more consumer transactional services with the compliment of advertising. Our medical technologies, the focus of one of the broad based patent applications now in the patent prosecution stage, are grounded in the central need to furnish the doctor with crucial point-of-care patient information rapidly and reliably via a PDA. The technologies utilize the power of the Internet 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 among the first to offer complicated and real-time point of care applications, previously legacy (mainframe or PC network) system applications, on a totally portable (PDA) appliance. Our technologies and products for the hotel/motel marketplace are designed to furnish hotel and motel guests with a menu of food service, office services and other remote service (dry cleaning for instance) choices that can be electronically ordered through the company's PDA-based information appliance for delivery directly to the hotel/motel guest. Employing the latest in commercial Wi-Fi technology, the company wraps the time and volume tested commercial technologies into the company's patent pending PDA communication networking technologies, allowing the company to be the first to offer complex and real- time point of sale applications through a totally wireless (PDA) appliance. Our PDA software operates on any Microsoft Windows CE "Pocket PC" based handheld device, either in a wireless or "wired" mode. The local host for our 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 either a medical network or hotel/motel wide area network, and allows each PDA to become a uniquely identified mobile node on that network, independent of PC linkage, thereby, assisting the professional in the review of relevant histories, transactions, and for the medical related product --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 users simultaneously, which represents approximately 3 years of user encounters in a typical network setting, and allows medical professionals to access payor and health plan business rules, and policy/plan coverage's directly from the plan(s). In May 2003 the company entered into an agreement with PCHertz.com, Inc. of Fargo, ND for the distribution of and servicing of their products and services for the hotel/motel industry. The agreement with PCHertz.com, Inc. has resulted in a series of orders for the company's hotel/motel products and services from five hotel groups, owners of hotels and motels in the states of California, Arizona, Illinois, Iowa, South Dakota, North Dakota, Minnesota, Virginia, and Georgia. Initial placement of product, now in the process of early implementation under these agreements, will total at least 1450 of the company's ResidenceWare units. On September 23, 2003 we signed a Preliminary Agreement to Merge with MDU Services Inc. ("MDUS"), a Texas-based provider of private digital utility services to multiple tenant residential and business building sites, hotels/motels and universities. The Preliminary Agreement to merge specifies how CareDecision and MDUS desire to execute a "triangle" merger agreement whereby CareDecision shall acquire MDUS and then merge MDUS into a subsidiary corporation, MDU Media Corporation (the "Merger Sub"). As of the date of this filing we are working on a definitive agreement. /12/ Results of Operations The following is an itemization of our results of operations for the nine-month period ended September 30, 2003 in comparison to our results of operations for the period ended September 30, 2002. REVENUES. Total revenues for the nine-month period ended September 30, 2003 were $24,698 as compared to total revenues of $1,555 for the nine-month period ended September 30, 2002. As a development stage company we have yet to generate significant revenues and we cannot guarantee with certainty when we will begin to generate significant revenues. Our future revenues will be reliant on the acceptance of our software systems, communication tools and suite of software applications. GENERAL AND ADMINISTRATIVE. General and Administrative expenses relate to the operation and leasing costs of our corporate office. General and administrative expenses for the nine-month period ended September 30, 2003 were $119,545 compared to $751,323 for the nine-month period ended September 30, 2002. General and Administrative expenses decreased by approximately 84% from the comparable period as the Company consolidated operations after its merger in 2002. The company, in anticipation of its merger made purchases of equipment and other office related supplies in conjunction with the start of initial business operations in the nine-month period ended September 30, 2002. PAYROLL. Payroll expense consists primarily of management and employee salaries. Total payroll expense for the nine-month period ended September 30, 2003 was $171,209. The Company incurred no payroll expense for the nine-month period ended September 30, 2002. PROFESSIONAL FEES. Professional fees include fees paid to our accountants and attorneys. Our professional fees were $54,693 for the nine-month period ended September 30, 2003. The Company incurred no professional fees for the nine-month period ended September 30, 2002. CONSULTING. Consulting expense includes fees paid to consultants in relation to the preparation of required SEC filings, and to individuals engaged to assist management in the furtherance of our business plan. Consulting expenses for the nine-month period ended September 30, 2003 were $508,750 compared to $276,056 for the nine-month period ended September 30, 2002. Consulting expense increased by approximately 84% from the comparable period as the Company has engaged the services of additional consultants to assist in the furtherance of our business model. SOFTWARE DEVELOPMENT. Software Development expense was minimal as our software systems; communication tools and suite of software applications are complete. Software Development expense for the nine-month period ended September 30, 2003 was $3,950. The Company incurred no software development expense for the nine- month period ended September 30, 2002. DEPRECIATION. Depreciation was $246,274 for the nine-month period ended September 30, 2003 compared to $80,383 for the nine-month period ended September 30, 2002. This represents depreciation on the assets of the Company. Depreciation expense has increased significantly from the comparable period due to the assets purchased in the nine-month period ended September 30, 2002, which are now on depreciation schedules. TOTAL OPERATING EXPENSES. Total operating expenses for the nine- month period ended September 30, 2003 were $1,104,421 compared to $1,107,762 for the nine-month period ended September 30, 2002. Total operating expenses were almost unchanged from the previous period due mainly to an increase in consulting expense and depreciation offset by a decrease in general and administrative expenses. Our most significant operating expenses are consulting and depreciation expenses. /13/ LOSS ON DEBT SETTLEMENT. In the nine-month period ended September 30, 2003 the Company retired past debts valued at $62,094 as compared to retired past debts of $68,363 for the nine-month period ended September 30, 2002. We will continue to retire our outstanding debt as revenue allows. INTEREST INCOME. Interest income was $561 for the nine-month period ended September 30, 2003 compared to $2,852 for the nine- month period ended September 30, 2002. INTEREST EXPENSE. Interest expense was $35,558 for the nine-month period ended September 30, 2003 compared to $22,650 for the nine- month period ended September 30, 2002. Interest expense increased by approximately 57% as a result of the receipt of loans totaling $130,606 in the nine-month period ended September 30, 2003 that bear an interest rate of 9%. LOSS FROM OPERATIONS/NET LOSS. Our loss from operations was $1,176,814 for the nine-month period ended March 31, 2003 compared to $1,194,368 for the nine-month period ended September 30, 2002. It should be expected that we will continue to incur losses from operations until such time as revenues can be generated to cover such costs. Future Business The elements of our future 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, particularly for the company's hotel/motel and apartment products; 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 our 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- healthcare products and services, and to establish relationships with large hotel and/or motel chains for our hotel/motel products. Liquidity and Capital Resources Management believes our cash on hand of $44,347 will not be sufficient to fund ongoing fiscal 2003 and 2004 operations and provide for our working capital needs given we have negative working capital of $552,260. Thus we will from time to time need to raise additional funds through capital markets. 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 raise additional capital and 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 an issuance of common stock and through the issuance of notes. During the nine months ended September 30, 2003, we received loans totaling $130,606 from a Company shareholder and director. During our normal course of business, we will experience net negative cash flows from operations, pending receipt of revenues. Further, we will be obtaining financing to fund operations through additional common stock offerings, note issuances and bank borrowings, to the extent available, or to obtain additional financing to the extent necessary to augment our available cash on hand. All investor inquiries should be directed via mail to Mr. Robert Cox, President, CareDecision Corporation, 2660 Townsgate Road, Suite 300, Westlake Village, California 91361. /14/ PART II - OTHER INFORMATION Item 1 - Legal Proceedings In January 2003 M&E Equities, LLC ("M&E") and Blimie Mendlowitz (the "plaintiffs") filed a complaint against CareDecision Corporation, Medicius, Inc., Keith Berman, and William Lyons (the "defendants") for failure to repay note principal and interest and failure to deliver common stock warrants pursuant to the terms of a Senior Convertible Note Subscription Agreement and a Senior Convertible Promissory Note Agreement issued to the plaintiffs. Specifics regarding the case are as follows: Case Name: M&E Equities, LLC, and Blimie Mendlowitz, against CareDecision Corporation, Medicius, Inc., Keith Berman, and William Lyons. Court: Supreme Court of The State of New York County of New York. Case Number: 600092-03 In June 2003 all parties executed a Settlement Agreement. The Company believes that the terms of the settlement have been fully satisfied, and has been notified by Plaintiffs that the litigation has ended, but as of November 10, 2003 had not received a court executed dismissal. Item 6(a) - Exhibits Exhibit Name and/or Identification of Exhibit Number 3.1 Articles of Incorporation & By-Laws (a) Articles of Incorporation of the Company filed March 2, 2001. Incorporated by reference to the exhibits to the Company's General Form For Registration Of Securities Of Small Business Issuers on Form 10-SB, previously filed with the Commission. (b) Certificate of Amendment to the Articles of Incorporation of the Company filed May 9, 2001. Incorporated by reference to the exhibits to the Company's General Form For Registration Of Securities Of Small Business Issuers on Form 10- SB, previously filed with the Commission. (c) Certificate of Amendment to the Articles of Incorporation of the Company filed August 2, 2002. Incorporated by reference to the exhibits to the Company's June 30, 2002 Quarterly Report on Form 10-QSB, previously filed with the Commission. 3.2 By-Laws of the Company adopted March 16, 2001. Incorporated by reference to the exhibits to the Company's General Form For Registration Of Securities Of Small Business Issuers on Form 10-SB, previously filed with the Commission. 31 Rule 13a-14(a)/15d-14(a) Certification 32 Certification under Section 906 of the Sarbanes- Oxley Act (SECTION 1350) /15/ Item 6(b) - Reports Filed on Form 8-K For the quarter ended September 30, 2003 the Company filed a report on Form 8-K with the Securities and Exchange Commission on July 11, 2003. The Company announced, under Item 5. Other Events, an eight percent (8%) dividend payable in common stock. The shares, which are restricted securities, were distributed on or before October 15, 2003, to shareholders of record as of July 21, 2003. In the computation of the eight percent (8%) restricted common stock dividend, any fractional remainder was rounded up to the nearest whole share. The Company requested that each shareholder turn in their certificate(s) in exchange for a new certificate(s) on or prior to September 30, 2003 to receive the dividend, although this was not mandatory to receive the dividend. Further, on July 1, 2003, the Company changed its address. The Company's new address is 2660 Townsgate Road, Suite 300, Westlake Village, CA 91361. The Company's new phone number is (805) 446-1973 and new fax number is (805) 446-1983. No financial statements were included in this report. [balance of this page intentionally left blank] /16/ SIGNATURES Pursuant to the requirements of the Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CareDecision Corporation ----------------------------------------------------------------- (Registrant) Date: November 12, 2003 ----------------- By: /s/ Robert Cox -------------- Robert Cox President and CEO Date: November 12, 2003 ----------------- By: /s/ Keith Berman ---------------- Keith Berman Secretary and Treasurer/CFO /17/