UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2004
Or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ____________ to _____________
Commission File Number: 000-33187
CareDecision Corporation
(Exact name of small business issuer 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)
(805) 446-1973
(Issuer's telephone number)
_________________________________________________________________
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the 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
Check whether the registrant filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Exchange
Act after the distribution of securities under a plan confirmed
by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity as of the latest practicable date:
197,905,421
/1/
CareDecision Corporation
(a Development Stage Company)
Table of Contents
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Consolidated Balance Sheet June 30, 2004 (unaudited) 4
Consolidated Statements of Operations For the Three and Six 5
Months Ended June 30, 2004 and 2003 (unaudited) and For the
Period July 6, 2000 (Inception) to June 30, 2004 (unaudited)
Consolidated Statements of Cash Flows For the Six Months 6
Ended June 30, 2004 and 2003 (unaudited) and For the Period
July 6, 2000 (Inception) to June 30, 2004 (unaudited)
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan of Operation 10
Item 3. Controls and Procedures 16
PART II - OTHER INFORMATION
Item 6(a). Exhibits 17
Item 6(b). Reports Filed on Form 8-K 17
SIGNATURES 18
/2/
Part I - Financial Information
Item 1. Financial Statements
CareDecision Corporation
(a Development Stage Company)
Consolidated Balance Sheet
as of
June 30, 2004 (unaudited)
and
Consolidated Statements of Operations
for the Three and Six Months Ended
June 30, 2004 (unaudited) and 2003 (unaudited),
and For the Period
July 6, 2000 (Inception) to June 30, 2004 (unaudited)
and
Consolidated Statements of Cash Flows
for the Six Months Ended
June 30, 2004 (unaudited) and 2003 (unaudited),
and For the Period
July 6, 2000 (Inception) to June 30, 2004 (unaudited)
/3/
CareDecision Corporation
(a Development Stage Company)
Consolidated Balance Sheet
(unaudited)
Assets June 30,
2004
------------
Current assets:
Cash and equivalents $ 715,185
Accounts receivable, net 54,237
------------
Total current assets 769,422
------------
Fixed assets, net 333,915
------------
$ 1,103,337
Liabilities and Stockholders' Equity
Current liabilities:
Note payable to shareholder $ 10,497
Notes payable 52,250
------------
Total current liabilities 62,747
------------
Long-term debt 721,088
Convertible notes - related party 531
------------
784,366
------------
Stockholders' equity:
Preferred stock, $0.001 par value, 5,000,000 shares 208
authorized, 207,526 shares issued and outstanding
Common stock, $0.001 par value, 290,000,000 shares
authorized, 197,905,421 shares issued and outstanding 197,906
Additional paid-in capital 8,469,121
(Deficit) accumulated during development stage (8,348,263)
------------
318,971
------------
$ 1,103,337
The accompanying notes are an integral part of these financial statements.
/4/
CareDecision Corporation
(a Development Stage Company)
Consolidated Statements of Operations
(unaudited)
For the For the
three months six months July 6, 2000
ended June 30, ended June 30, (Inception)
------------------- -------------------- to June 30,
2004 2003 2004 2003 2004
--------- -------- ---------- --------- -----------
Revenue $ 57,550 $ 1,350 $ 112,942 $ 1,850 $ 190,755
--------- -------- ---------- --------- -----------
Expenses:
Small computer 20,095 - 20,095 - 20,095
hardware cost
Wireless network 69,698 - 69,698 - 69,698
and infrastructure
computer cost
General and 49,228 45,111 108,310 83,989 354,379
administrative
expenses
Payroll expense 84,405 63,913 164,945 122,794 564,776
Professional fees 55,325 12,658 293,855 43,228 528,129
Stock-based 503,400 125,000 988,519 356,000 4,066,798
compensation
Software development 16,667 2,950 86,308 3,950 276,279
Impairment loss on 166,955 - 278,428 - 1,279,198
operating assets
Depreciation 24,630 80,623 57,945 165,652 235,842
--------- -------- ---------- --------- -----------
Total expenses 990,403 330,255 2,068,103 775,613 7,395,194
--------- -------- ---------- --------- -----------
Net operating (loss) (932,853) (328,905) (1,955,161) (773,763) (7,204,439)
Other income (expense):
(Loss) on debt (60,000) (37,094) (377,136) (37,094) (480,155)
settlement
Interest income 1,004 1 1,004 561 3,795
Financing costs - - (408,255) - (408,255)
Interest (expenses) (44,250) (11,981) (53,301) (22,804) (259,210)
--------- -------- ---------- --------- -----------
Net (loss) $(1,036,099)$(377,979)$(2,792,849)$(833,100) $(8,348,264)
=========================================================
Weighted average
number of
common shares
outstanding -
basic and fully
diluted 194,072,729 84,432,887 166,246,108 83,473,288
=========== ========== =========== ==========
Net (loss) per share
- basic and fully
diluted $ (0.01) $ (0.00) $ (0.02) $ (0.01)
========= ========= ========== =========
The accompanying notes are an integral part of these financial statements.
/5/
CareDecision Corporation
(a Development Stage Company)
Consolidated Statements of Cash Flows
(unaudited)
For the six months ended July 6,2000
June 30, (inception) to
-------------------------- June 30,
2004 2003 2004
------------ ------------ --------------
Cash flows from operating
activities
Net (loss) $ (2,792,849) $ (833,100) $ (8,348,264)
Adjustment to reconcile net (loss)
to net cash (used) by operating
activities:
Shares issued for stock-based 988,519 356,000 4,087,660
compensation
Shares issued for professional fees 293,855 - 293,855
Shares issued for financing costs 423,977 - 423,977
Warrants issued for interest expense - - 112,800
Loss on impairment of operating assets 278,428 - 1,279,198
Loss on debt settlement 377,136 37,094 454,230
Depreciation 57,945 165,652 235,842
Changes in operating
assets/liabilities
(Increase) in accounts receivable (54,237) - (54,237)
Decrease in notes receivable 50,000 5,376 -
Increase in accrued interest - - 47,527
related to long-term debts
(Decrease) in other liabilities (2,180) - -
------------ ------------ --------------
Net cash (used) by operating (379,406) (268,978) (1,467,412)
activities ------------ ------------ --------------
Cash flows from financing
activities
Convertible notes - related party (13,869) 50,000 531
Proceeds from long-term debt 721,088 - 1,246,088
Proceeds from note payable to 35,334 124,790 132,302
shareholder
Payments on note payable to (102,635) (5,000) (117,035)
shareholder
Issuance of common stock 425,400 - 920,711
------------ ------------ --------------
Net cash provided by financing 1,065,318 169,790 2,182,597
activities ------------ ------------ --------------
Net increase in cash 685,912 (99,188) 715,185
Cash - beginning 29,273 111,101 -
Cash - ending $ 715,185 $ 11,913 $ 715,185
============ ============ ==============
Supplemental disclosures:
Interest paid $ - $ - $ -
============ ============ ==============
Income taxes paid $ - $ - $ -
============ ============ ==============
Non-cash transactions:
Number of common shares issued
for stock-based compensation 77,660,500 8,000,000 128,437,985
============ ============ ==============
Number of warrants issued for
interest expense 10,000,000 - 34,000,000
============ ============ ==============
Number of common shares issued
for debt settlement 6,510,000 741,875 8,251,875
============ ============ ==============
Number of common shares issued
to acquire software - 2,500,000 2,500,000
============ ============ ==============
Number of common shares issued
as dividend - - 6,469,161
============ ============ ==============
Number of stock options issued
as compensation - - 19,750,000
============ ============ ==============
Number of common shares issued
for conversion of debt to equity 7,350,000 - 7,350,000
============ ============ ==============
Number of preferred shares
issued for financing costs 207,526 - 207,526
============ ============ ==============
The accompanying notes are an integral part of these financial statements.
/6/
CareDecision 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, 2003 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 - Fixed assets
Depreciation expense totaled $57,945 and $165,652 for the six-
month periods ended June 30, 2004 and 2003, respectively.
Note 3 - Impairment loss on operating assets
On June 30, 2004, the Company determined that it should write
down certain fixed assets acquired with the Medicius, Inc. merger
as an impairment loss after comparing the carrying value of the
assets with the estimated future cash flows expected to result
from the use of the assets. Accordingly, the write down resulted
in the realization of a $278,428 impairment loss on operating
assets recorded on the Statement of Operations for the six months
ended June 30, 2004.
/7/
CareDecision Corporation
(a Development Stage Company)
Notes
Note 4 - Notes payable
M and E Equities, LLC Renegotiated Note
Based on terms negotiated on March 4, 2002, and after a further
documentation process that was completed on April 23, 2002,
Medicius, Inc., the Company's merger partner in its June 2002
merger, was loaned $475,000 from M and E Equities, LLC (M&E) (as
previously discussed in Note 6). A condition of the loan
stipulated that Medicius, Inc. complete its merger with the
Company and become a fully reporting public company. As of
December 31, 2003, after a partial payment of interest and
principal and a settlement of a legal dispute that arose over
this note and other issues, the remaining value of the note and
accrued interest was $522,527. On March 2, 2004, the Company
renegotiated its debt with M&E. The terms of the agreement are
stipulated as follows:
1. $320,000 is paid to M&E by Wells & Company, Inc., Lima
Capital, Inc., JC Financial, Inc. and Corporate Architects, Inc.
to satisfy a remaining principal amount of $400,000.
2. M&E agreed to transfer 10,000,000 of the Class A Warrants,
formerly issued by Medicius, Inc., with an expiration date of
January 5, 2005 to Empyreon.net Corp. for $30,000, and 2,000,000
Class A Warrants to Mr. Moshe Mendlowitz for $20.00. The Company
incurred interest expense during the six months ended June 30,
2004 totaling $405,700, the deemed value of the Warrants on the
transfer date based on the Black-Scholes Valuation Model.
3. The outstanding note balance of $200,526 was recapitalized
into 207,526 shares of the Company's $0.001 par value Class A
2002 Convertible Preferred Stock and registered in M&E's name.
Each share of Class A 2002 Convertible Preferred Stock is
convertible into 18 shares (3,717,468 total) of the Company's
$0.001 par value common stock at $0.055556 per share. M&E agrees
to hold the Preferred Shares for a minimum of one year, pursuant
to Rule 144, with no conversions allowed during that period of
time. After the one year, M&E may convert and sell only 500,000
shares of the Company's $0.001 par value common stock every 60
days as permissible by Rule 144.
Pinnacle Investment Partners, LP Promissory Note
On March 24, 2004, the Company was loaned $700,000 from Pinnacle
Investment Partners, LP (Pinnacle). The Secured Convertible
Promissory Note bears interest at the rate of 12% per annum,
matures September 25, 2004, except if extended for an additional
six months at the option of the company, and is secured by
14,000,000 shares of the Company's $0.001 par value common stock.
Pinnacle may, at its option, at any time from time to time, elect
to convert some or all of the then-outstanding principal of the
Note into shares of the Company's $0.001 par value common stock
at a conversion price of $0.08 per share, unless such conversion
would result in Pinnacle being deemed the "beneficial owner" of
4.99% or more of the then-outstanding Common Shares within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended. In the event the Company fails to pay any installment
or principal or interest when due, the interest rate will then
accrue at a rate of 24% per annum on the unpaid balance until the
payment default is cured.
The Company recorded interest expense totaling $53,301 and
$22,804 during the six months ended June 30, 2004 and 2003. The
Company also recorded financing costs totaling $408,255 during
the six months ended June 30, 2004.
/8/
CareDecision Corporation
(a Development Stage Company)
Notes
Note 5 - Stockholder's equity
The Company is authorized to issue 5,000,000 shares of $0.001 par
value preferred stock and 290,000,000 shares of $0.001 par value
common stock.
Preferred stock
The Company issued 207,526 of its $0.001 par value preferred
shares for financing costs of $354,800. Each preferred share is
convertible into 18 shares of the Company's $0.001 par value
common stock at $1.00 per share.
Common stock
The Company issued 7,350,000 shares of its $0.001 par value
common stock to various individuals to convert $522,000 in debt
to equity during the six months ended June 30, 2004.
During the six months ended June 30, 2004, the Company issued
77,660,500 shares of its $0.001 par value common stock to various
individuals and entities for consulting services, finders' fees
to two individuals who introduced the company to its proposed
satellite e-broadcast partner, agent's fees associated with the
company's proposed acquisition of MDU Services, Inc., agent's
fees for the introduction and fees associated with the company's
recent agreement with an e-business partner for its hotel sector
product and technical expenses incurred associated with this
agreement, documentation and initiation fees owing to the
Pinnacle Note investment, collectively valued at $988,519 and
professional fees valued at $293,855.
The Company issued 6,510,000 shares of its $0.001 par value
common stock in order to settle the dispute with investors and
agents, which arose over the M&E Note, and which allowed the M&E
Note to be settled and converted. The value of the shares was
$377,136 and is recorded as a loss on debt settlement during the
six months ended June 30, 2004.
There have been no other issuances of preferred or common stock.
Note 6 - Subsequent events
On July 31, 2004, a note holder elected to convert its $50,000
face value loan into 2,000,000 shares of the Company's $0.001 par
value common stock in full satisfaction of the loan plus accrued
interest.
On August 4, 2004 the Company received proposal for a possible
merger with a division or divisions of a $100-plus million
company with interests in several areas related to the company's
businesses. The Company's Board of Directors is considering this
proposal.
/9/
Item 2. Management's Discussion and Analysis or 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
Although we are still considered to be in the development
stage, we have begun commercial delivery of our products and
services. For the six-months ended June 30, 2004 we booked
revenues of $112,942 for our proprietary technologies and
products directed toward the lodging sector, these revenues
having resulted from commercial sales rather than a converted pre-
commercial arrangement. Additional commercial sales orders have
been received for our lodging sector products and services and
additional deliveries have subsequently occurred and are
increasing. In the current quarter we have expanded our services
offered to the lodging sector by developing additional
proprietary technology and executing a broad-based agreement with
a large worldwide e-business reservation service. Management
believes that this expanded service delivery coupled with the
agreement with the e-business reservation service will greatly
increase the commercial usage and viability of our products and
services directed toward the lodging sector.
We have come to terms with a second company for the
provision of commercial development, field implementation, field
management and field support of our e-health products and
services. This arrangement involves the delivery of our MD@Rx
PDA-based products and services for electronic medication
prescription fulfillment. Commercial delivery of the MD@Rx
products as well as on-going development of same to better
service the Medicaid and uninsured patients markets have begun in
this quarter. We have also executed an agreement with a
nationwide medical IT services company to license and provide
services related to our proprietary medical technologies in
return for a significant equity stake. This agreement also
contemplates the integration of some of our proprietary
technologies into the products and services of our new partner.
On August 4, 2004 we received a proposal for a possible
merger with a division or divisions of a $100-plus million
company with interests in several areas related to our
businesses. Our Board of Directors is considering this proposal.
/10/
Our proprietary products and services directed toward the
satellite re-broadcast sector remain in the pre-commercial stage
although the company is in later-stage discussions with a major
marketer of satellite re-broadcast services that could conclude
and thus lead to a commercial delivery or adoption of this third
business line.
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
and a handheld wireless information appliance for the satellite
media market. We have 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 us. In addition, we are in the process of
applying for marks associated with our ResidenceWare hotel/motel
products and technologies and our wireless SateLink products and
technologies for the satellite media market.
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.
Our 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. Our satellite
media applications leverage information obtained from a
communications satellite. 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.
We have filed two broad based patent applications and intend
to file derivative patent applications covering the processes,
use and functionality of our technologies and products. Our
satellite media product is designed for use by installation and
customer support technicians and offers instant and secure
communication between the individual subscriber and the satellite
broadcast service.
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.
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.
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.
/11/
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 our PDA-based information appliance for delivery
directly to the hotel/motel guest. Employing the latest in
commercial Wi-Fi technology, we wrapped the time and volume
tested commercial technologies into our patent pending PDA
communication networking technologies, allowing us to be the
first to offer complex and real-time point of sale applications
through a totally wireless (PDA) appliance.
The satellite broadcast industry product also 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 satellite broadcast product is much
more security and customer service oriented, offering the
satellite broadcast company the ability to better configure their
services for the subscriber. This product also allows the office
bound sales agent to be able to concentrate on the sale of
additional services to subscribers.
Our technologies and products for the satellite broadcast
marketplace are designed to allow the on-site technician the
ability to configure a subscriber system in seconds while also
allowing the satellite broadcast company to control the on-site
technician, a person who is typically not employed by the
satellite broadcast concern, thereby cutting down on fraud and
waste inherent to their business models. Our product employs
their proprietary technologies coupled with the latest off-the-
shelf wireless communication devices into their patent pending
PDA communication networking technologies, allowing us to be the
first to offer complex and real-time point of sale applications
through a wireless (PDA) appliance that communicates with a
satellite.
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, XP or later) based PC, 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, or help-desk network,
and allows each PDA to become a uniquely identified mobile node
on that network, independent of PC linkage, thereby, assisting
the professional, whether he be a doctor, hotel owner, hotel
guest or satellite broadcast technician.
Our 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
the user to access financial and technical data and/or rules,
coverages and policies.
Critical Accounting Policy and Estimates
Our Management's Discussion and Analysis or Plan of
Operation section discusses our financial statements, which have
been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of
these financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period.
On an on-going basis, management evaluates its estimates and
judgments, including those related to accrued expenses, financing
operations, and contingencies and litigation. Management bases
its estimates and judgments on historical experience and on
various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that
are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or
conditions.
/12/
The most significant accounting estimates inherent in the
preparation of our financial statements include estimates as to
the appropriate carrying value of certain assets and liabilities
which are not readily apparent from other sources. These
accounting policies are described at relevant sections in this
discussion and analysis and in the notes to the financial
statements included in this Quarterly Report on Form 10-QSB for
the period ended June 30, 2004.
Results of Operations
The following is an itemization of our results of operations
for the six-month period ended June 30, 2004 in comparison to our
results of operations for the same period ended June 30, 2003.
REVENUES. Total revenues for the six-month period ended June 30,
2004 were $112,942 as compared to total revenues of $1,850 for
the six-month period ended June 30, 2003. 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.
SMALL COMPUTER HARDWARE COST. Small computer hardware cost for
the six-month period ended June 30, 2004 was $20,095. The
Company incurred no such expense for the six-month period ended
June 30, 2003.
WIRELESS NETWORK AND INFRASTRUCTURE COMPUTER COST. Wireless
network and infrastructure computer cost for the six-month period
ended June 30, 2004 was $69,698. The Company incurred no such
expense for the six-month period ended June 30, 2003.
GENERAL AND ADMINISTRATIVE EXPENSES. General and Administrative
expenses relate to the operation and leasing costs of our
corporate office. General and administrative expenses for the
six-month period ended June 30, 2004 were $108,310 compared to
$83,989 for the six-month period ended June 30, 2003. We
anticipate purchases of equipment and other office related
supplies in conjunction with the generation of revenues from
business operations.
PAYROLL EXPENSE. Payroll expense consists primarily of management
and employee salaries. Total payroll expense for the six-month
period ended June 30, 2004 was $164,945. The Company incurred
payroll expense for the six-month period ended June 30, 2003 of
$122,794.
PROFESSIONAL FEES. Professional fees include fees paid to our
accountants, attorneys and investment bankers. Our professional
fees were $293,855 for the six-month period ended June 30, 2004.
The Company incurred professional fees for the six-month period
ended June 30, 2003 of $43,228.
STOCK-BASED COMPENSATION. Stock-based compensation expense
represents stock paid to our executive officers in lieu of cash.
Stock-based compensation expense for the six-month period ended
June 30, 2004 was $988,519 compared to $356,000 for the six-month
period ended June 30, 2003. Stock-based compensation is used to
preserve cash for business operations.
SOFTWARE DEVELOPMENT. Software Development expense increased in
the first half of 2004 as management focused on integrating our
software systems; communication tools and suite of software
applications with those of our partners. Software Development
expense for the six-month period ended June 30, 2004 was $86,308.
The Company incurred software development expense for the six-
month period ended June 30, 2003 of $3,950.
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IMPAIRMENT LOSS ON OPERATING ASSETS. On June 30, 2004,
management determined that we should write down certain fixed
assets acquired with the Medicius, Inc. merger as an impairment
loss after comparing the carrying value of the assets with the
estimated future cash flows expected to result from the use of
the assets. Accordingly, the write down resulted in the
realization of a $278,428 impairment loss on operating assets
recorded on the Statement of Operations for the six months ended
June 30, 2004. The Company incurred no such expense for the six-
month period ended June 30, 2003.
DEPRECIATION. Depreciation was $57,945 for the six-month period
ended June 30, 2004 compared to $165,652 for the six-month period
ended June 30, 2003. This represents depreciation on the assets
of the Company.
TOTAL OPERATING EXPENSES. Total operating expenses for the six-
month period ended June 30, 2004 were $2,068,103 compared to
$775,613 for the six-month period ended June 30, 2003. The
increase in total operating expenses was mainly a result of an
increase in professional fees, stock-based compensation, software
development expense and the impairment loss on operating assets.
LOSS ON DEBT SETTLEMENT. Loss on debt settlement for the six-
month period ended June 30, 2004 was $377,136 compared to $37,094
for the six-month period ended June 30, 2003. We will continue
to retire our outstanding debt as our cash position allows.
INTEREST INCOME. The Company recorded $1,004 in interest income
for the six-month period ended June 30, 2004 compared to $561 for
the six-month period ended June 30, 2003.
FINANCING COSTS. In the six-month period ended June 30, 2004 the
Company incurred financing costs of $408,255. The Company
incurred no such expense for the six-month period ended June 30,
2003.
INTEREST EXPENSE. Interest expense was $53,301 for the six-month
period ended June 30, 2004 compared to $22,804 for the six-month
period ended June 30, 2003.
NET LOSS. Our net loss was $2,792,849 for the six-month period
ended June 30, 2004 compared to $833,100 for the six-month period
ended June 30, 2003. 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 our
hotel/motel and satellite 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. In the six-month period ending June
30, 2004 the company expanded by opening regional offices for
service in North Dakota and sales in Florida.
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Liquidity and Capital Resources
Management believes our cash and equivalents on hand of
$715,185 will be sufficient to fund ongoing fiscal 2004 and 2005
operations and provide for our working capital needs given we
have positive working capital of $706,675. However, we may 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
revenues generated from operations, an issuance of common stock
and through the issuance of notes. During the three months ended
June 30, 2004, we received a loan totaling $700,000 at an
interest rate of 12% maturing September 25, 2004.
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.
Keith Berman, Secretary, CareDecision Corporation, 2660 Townsgate
Road, Suite 300, Westlake Village, California 91361.
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Item 3. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. We
maintain controls and procedures designed to ensure that
information required to be disclosed in the reports that we file
or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange
Commission. Based upon their evaluation of those controls and
procedures performed as of June 30, 2004, our chief executive
officer and the principal financial officer concluded that our
disclosure controls and procedures were adequate.
(b) Changes in internal controls. There were no significant
changes in our internal controls or in other factors that
could significantly affect these controls subsequent to the
date of the evaluation of those controls by the chief
executive officer and principal financial officer.
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PART II - OTHER INFORMATION
Item 6(a) - Exhibits
Exhibit Name and/or Identification of Exhibi
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)
Item 6(b) - Reports Filed on Form 8-K
For the quarter ended June 30, 2004 the Company filed the
following reports on Form 8-K with the Securities and Exchange
Commission:
On April 7, 2004, the Company announced, under Item 9.
Regulation FD Disclosure that on March 30, 2004 we received
primary institutional funding in the amount of $700,000 from
Pinnacle Investment Partners, LP ("Pinnacle"). The primary
funding is to be used for the nationwide rollout of our
ResidenceWare Wi-Fi products and for other business development
purposes.
On April 20, 2004, the Company announced, under Item 9.
Regulation FD Disclosure, new developments to our previously
announced strategic partnership with DataFuzion Inc. ("Fuzion").
According to terms of the enhanced partnership, Fuzion is granted
new licenses for use of our MD@Desktop and patent-pending
MD@Practice-Probe medical technologies. In return for the
additional technology sharing, valued by the two firms at $2.8
million, CareDecision will receive a larger equity stake in
Fuzion, a majority of this stake is expected to be distributed to
our shareholders as a dividend.
On April 26, 2004, the Company announced, under Item 9.
Regulation FD Disclosure that we are in the latter stages of
negotiation with CareGeneration, Inc., a leading distributor of
pharmaceutical products and a division of Kelly Co. World Group,
Inc., for the implementation and on-going support of our patent
pending MD@Rx, MD@Desktop, MD@Practice-Probe and MD@Server
products and technologies, to be used in a nationwide e-health
initiative.
/17/
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
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(Registrant)
Date: August 13, 2004
By: /s/ Robert Cox
--------------
Robert Cox
President and CEO
Date: August 13, 2004
By: /s/ Keith Berman
----------------
Keith Berman
Secretary and Treasurer/CFO
/18/