-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GVgSIrMmm5uUeN3LsdlU1oglG1J1WzGEqBV/qK58gszNp2NI8k2m6Lage7Lfp7pa 8nlSDN6fKVPDaz0sSGmRnQ== 0000939802-04-001230.txt : 20041230 0000939802-04-001230.hdr.sgml : 20041230 20041230153149 ACCESSION NUMBER: 0000939802-04-001230 CONFORMED SUBMISSION TYPE: ARS PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20041230 DATE AS OF CHANGE: 20041230 EFFECTIVENESS DATE: 20041230 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INMEDICA DEVELOPMENT CORP CENTRAL INDEX KEY: 0000726037 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 870397815 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: ARS SEC ACT: 1934 Act SEC FILE NUMBER: 000-12968 FILM NUMBER: 041233977 BUSINESS ADDRESS: STREET 1: 825 N 300 WEST CITY: SALT LAKE CITY STATE: UT ZIP: 84103 BUSINESS PHONE: 8012639190 MAIL ADDRESS: STREET 1: P O BOX 27557 STREET 2: 495 EAST 4500 SOUTH SUITE 230 CITY: SALT LAKE CITY STATE: UT ZIP: 84127 FORMER COMPANY: FORMER CONFORMED NAME: INMED DEVELOPMENT CORP DATE OF NAME CHANGE: 19840815 ARS 1 annualreport123103.txt U.S. SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-KSB/A#1 Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Year Ended December 31, 2003 Commission File No. 0-12968 INMEDICA DEVELOPMENT CORPORATION Utah 87-0397815 ------------------------ ----------------------------- (State of Incorporation) (I.R.S. Employer Identification No.) 825 North 300 West, Suite N132 Salt Lake City, Utah 84103 (801) 521-9300 Securities Registered Pursuant to Section 12(g) of the Act: Name of Each Exchange Title of Each Class on which Registered ------------------- ------------------- Common Stock, $.001 par value None Check whether the issuer (1) filed all reports required to be filed by Section 13 or Section 15(d) of the Exchange Act during the past 12 months, and (2) has been subject to such filing require-ments for the past 90 days. [X] yes [ ] no Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation SB contained in this form, and no disclosures will be con-tained, to the best of registrant's knowledge, in any definitive proxy or information statement incorporated by reference in Part III of this Form 10-KSB or any amendments to this Form 10-KSB [X ] Issuer's revenues for its most recent fiscal year: $ 0. The aggregate market value of voting stock held by non-affiliates of the registrant as of March 12, 2004 was approximately $428,7014. The number of shares outstanding of the issuer's common stock, $.001 par value, as of March 13, 2004 was 15,984,613. DOCUMENTS INCORPORATED BY REFERENCE: None - ------------------- 4 Based on 7,145,022 non-affiliate shares at $.06 per share, the average bid and asked price on that date. 1 PART I ITEM 1. BUSINESS. GENERAL. InMedica Development Corporation ("InMedica") was incorporated as a Utah corporation on June 16, 1983. During the last three fiscal years, InMedica's primary activity has been the operation of the business of MicroCor, Inc. ("MicroCor"), an 80% owned subsidiary. MicroCor was acquired effective December 31, 1985 and has engaged in the development or sale of certain medical technology products. During the last fiscal year, InMedica and MircoCor received no revenues from operations. (See "Results of Operations"). On May 10, 2001 the Company entered into a Stock Purchase Agreement and Development, Licensing and Manufacturing Agreement (the "Agreement") with Chi Lin Technology Co. Ltd. ("Chi Lin") of the Republic of China ("Taiwan"). Pursuant to the Stock Purchase Agreement, the Company issued 5,328,204 shares of its restricted common stock to Chi Lin and caused its subsidiary, MicroCor, Inc. ("MicroCor") to issue 29,420 shares of its restricted common stock to Chi Lin. Following these transactions, Chi Lin owned 33.3% of InMedica and 20% of MicroCor. The Company also issued 125,000 restricted shares of common stock to Ralph Henson in connection with this transaction as payment of a finder's fee and recorded expense of $21,250. In consideration of the stock issuances, Chi Lin gave InMedica its Promissory Notes committing to pay InMedica and MicroCor a total of $500,000 each in a series of payments commencing May 31, 2001 and ending October 1, 2002.. As of December 31, 2002, InMedica and MicroCor had each received payments of $500,000 from Chi Lin. InMedica is now searching for other sources or opportunities to fund operations. The Agreement also granted Chi Lin anti-dilution rights permitting it to purchase additional shares to maintain its one third percentage ownership in the event InMedica issued additional shares. Chi Lin also has the right to receive additional shares to maintain its percentage ownership in the event any outstanding options are exercised. The agreement also provides that Chi Lin has the right to nominate two of five directors on the board of directors. InMedica may not increase the size of the board to more than five without the prior consent of Chi Lin. Effective December 21, 2001 the Company appointed two new directors nominated by Chi Lin pursuant to the above agreement. See "Officers and Directors." The Company also entered into a Development, Licensing and Manufacturing Agreement with Chi Lin pursuant to which InMedica granted Chi Lin a world-wide license to develop and manufacture products based on the hematocrit technology. The primary product to be developed is a device capable of non-invasive hematocrit measurement. The agreement also grants Chi Lin the exclusive license to distribute the products in Australia, New Zealand, and the countries of Asia (excluding Russia and the Middle East). InMedica retained distribution rights in 2 other areas of the world. In January 2004 the Company entered into discussions with a medical company which would allow that company to evaluate the commercial and technical utility of the hematocrit technology for the purpose of pursuing a possible business venture. As a part of this process funds have been advanced to the Company providing the operating overhead during the period of evaluation. NOTE RECEIVABLE. In June 2000, the Company licensed its hematocrit technology to an unrelated entity in exchange for a note receivable of $150,000, due June 19, 2001. On June 19, 2001, the entity defaulted on the note and the entity subsequently granted the Company a secured note receivable for $165,000 (the "Note") that represents the outstanding principle and accrued interest as of December 19, 2001. The Note bears interest at 10% annually and was due on June 19, 2002. The Note is secured by all tangible and intangible assets of the entity. As collection of the Note is uncertain, it has been fully reserved in the consolidated financial statements. As of December 31, 2003, the full amount of the Note plus accrued interest is unpaid and the entity is in default. PRINCIPAL PRODUCTS. During the years 1986 and 1987, MicroCor developed, manufactured and marketed a portable electrocardiograph ("ECG") monitor. About 450 units were manufactured and sold. In July 1989, MicroCor signed a research and development contract with Critikon (a predecessor to Johnson & Johnson Medical, Inc.) to develop a medical instrument which would incorporate and enhance the technologies already developed in the MicroCor portable ECG monitor and combine them with technologies developed by Critikon. The research and development portion of the contract was completed in July 1990, and resulted in the design of a new product line. The product line was successfully marketed by Johnson & Johnson Medical, Inc. during the 1990's, providing royalty income to InMedica. The product line has now been phased out and the royalty income has ceased. PRODUCT DEVELOPMENT. For the past 14 years, the Company has conducted research or engaged in fund raising to support development of a method for measuring hematocrit non-invasively (without drawing blood) and has applied for patents covering this technology. Hematocrit is the percentage of blood volume made up by red blood cells and is a common laboratory test currently performed invasively by drawing a blood sample from the patient. During May 1997, the Company employed Dr. Gail Billings, a bio-medical researcher and, effective August 29, 1997, the Company engaged Medical Physics, Inc., a biomedical research company located in Salt Lake City, Utah to conduct further research and development on the project. The researchers engaged in additional research through 1998. During 1999, the researchers completed production of a transportable prototype device for use in demonstrating the technology. See "Business General" for a description of a Development, Licensing and Manufacturing Agreement with Chi Lin Technologies Co. Ltd. entered into during 2001. GOVERNMENT REGULATION. Medical products may be subject to regulation by the Food and Drug Administration (the "FDA") pursuant to the Federal Food, Drug and 3 Cosmetic Act and other federal and state laws regarding the regulation, manufacture and marketing of products in which InMedica may be involved. The laws of foreign nations may also apply to any international marketing of such products. To the extent InMedica has acquired or developed an interest in medical products or the companies manufacturing such products, InMedica's business may be indirectly affected by such regulation. Testing of the Company's non-invasive hematocrit technology is subject to prior approval and supervision of an Internal Review Board of a medical facility overseeing the testing. Marketing of any new product line that might be developed based on the Company's non-invasive hematocrit device would be subject to prior approval by the FDA. PATENTS. As of December 12, 1995, the Company's application for a patent entitled "Method and Apparatus for Non-Invasively Determining Hematocrit," was allowed by the U.S. Patent Office and the Patent issued on June 18, 1996 with a term of 17 years. The Company was also issued an additional patent that claims priority from October 4, 1990, the date of filing of the Company's "Method and Apparatus for Non-Invasively Determining Hematocrit". The patent term runs from October 4, 1990 for a period of 17 years. As of October 3, 2000, the Company was issued a third patent called "System and Method for In-Vivo Hematocrit Measurement Using Impedance and Pressure Plethysmography." The Company filed for a continuation of the third patent in June, 2000 and in December 2003 the Company received a Notice of Allowance of Claim from the U.S. Patent and Trademark office RAW MATERIALS. Materials and electronic components used in the production and development of ECG monitors and like products are components readily available through various suppliers. COMPETITION. InMedica is not presently a significant competitive factor in the medical products industry. The medical products industry is dominated by large and well established corporations with vastly greater financial and personnel resources than those of InMedica. There can be no assurance that the products in which InMedica has an interest will be successfully developed and able to compete profitably in the marketplace. Further, there is no assurance that the Company will be able to complete research, development and marketing of its hematocrit technology in advance of any competitors that may be developing competing technologies. RESEARCH AND DEVELOPMENT COSTS. Research and development costs for the two years ended December 31, 2003 and 2002, were $24,723 and $10,020 respectively. None of the expenses were incurred on customer-sponsored research activities relating to the development of new products. EMPLOYEES. InMedica and MicroCor had one full time and one part time employee as of December 31, 2003. 4 ITEM 2. PROPERTIES The Company presently leases office space on a month to month basis located at 825 North 300 West, Suite N132, in Salt Lake City, Utah. ITEM 3. LEGAL PROCEEDINGS There are no pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS. (a) Price Range of Common Stock. The Common Stock of InMedica is traded in the over-the-counter market and is quoted on the "NASD OTC Bulletin Board". The following table sets forth, for the calendar quarters indicated, the high and low closing bid prices for the InMedica Common Stock as reported by the NASD OTC Bulletin Board. These quotations represent prices between dealers without adjustment for retail markups, markdowns or commissions and may not represent actual transactions. Bid Price Quarter Ended High Low -------- ------- March 31, 2002 $.15 $ .11 June 30, 2002 .15 .08 September 30, 2002 .09 .05 December 31, 2002 .09 .03 March 31, 2003 .07 .06 June 30, 2003 .07 .07 September 30, 2003 .08 .07 December 31, 2003 .10 .03 On March 15, 2004 there were approximately 520 record holders of the InMedica Common Stock. Such record holders do not include individual participants in securities position listings. InMedica has not paid cash dividends on its Common Stock since organization. For the foreseeable future, InMedica expects that 5 earnings, if any, will be retained for use in the business or be used to retire obligations of the Company. Four stockholders own an aggregate of 21,016 shares of the Company's Series A Preferred Stock, which is 8% convertible preferred. There is no public market for the Series A Preferred Stock. Total aggregate annual dividends payable on the outstanding preferred stock for the year 2003 was $18,914 as of December 31, 2003. See Note 5 to the Consolidated Financial Statements. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW. Since 1989, the Company has engaged in research and development of a device to measure hematocrit non-invasively (the "Non-Invasive Hematocrit Technology" and/or the "Technology") and fund raising to finance the payment of research, development and administrative expenses.. Hematocrit is the percentage of red blood cells in a given volume of human blood. Research, development and administrative expenses of the Company relating to the Technology were funded during the 1990's by borrowing and by royalty revenues from the sale of a portable ECG monitor which incorporated Company technology. The monitor was marketed by Critikon, Inc., then a Johnson and Johnson subsidiary. However Critikon discontinued the monitor in 2001 and InMedica has not since had revenues from Operations. During 2001 the Company and its subsidiary, MicroCor, Inc. sold restricted common stock to Chi Lin Technologies, Ltd. of the Republic of China (Taiwan) for $1,000,000 and used the funds to continue funding of research, development and administrative expenses. Chi Lin also signed a development agreement under which it performed or financed the Company's primary research and development effort conducted initially in Taiwan and later in the United States. When payments from the stock sale were expended during 2003, the Company began searching for additional funding and/or a partner to conduct additional research and development. The Company's officers and Chairman also agreed to accrual of their wages and consulting fees pending receipt of funds to pay those obligations. PLAN OF OPERATION. During the 12 months beginning January, 2004, the Company's plan of operation is to demonstrate the Company's portable hematocrit device to large medical technology companies and to smaller companies that have established capability to research, develop and pursue FDA clearance of the technology. In connection with this effort, the Company will require confidentiality agreements from parties to which disclosure is made and will allow such parties to informally evaluate the technology in order to determine their interest. The Company will also seek loans from such companies in order to fund administrative expenses during the evaluation process and without such loans or other funding, will be unable to pay obligations and expenses during 2004. Further, the Company will be unable to pay any research or development expenses during 2004 without loans or additional funding. While the Company has in the past borrowed from affiliates, such borrowing is not expected to be available in the future to meet obligations and fund continued research and 6 development. InMedica continues to look for other funding sources. LIQUIDITY AND CAPITAL RESOURCES. During the years 2003 and 2002, liquidity was generated from the sale of stock by InMedica and its subsidiary MicroCor pursuant to the Stock Purchase Agreement dated May 10, 2001. As of December 31, 2002 InMedica and MicroCor had each received payments of $500,000 from Chi Lin and Chi Lin's stock purchase obligation was satisfied. In January 2004 the Company entered into discussions with a medical company which would allow that company to evaluate the commercial and technical utility of the hematocrit technology for the purpose of pursuing a possible business venture. As a part of this process funds have been advanced to the Company providing a minimal operating overhead for the Company during the period of evaluation. In the event a definitive agreement is reached between the parties, expenses advanced for the year 2004 will be repayable to the medical company. RESULTS OF OPERATIONS. InMedica incurred net losses in 2003 and 2002. The Company had an accumulated deficit of $8,400,761 as of December 31, 2003. No revenues were received in 2003 and 2002. No revenues from operations are expected in the foreseeable future. The net loss for the year ended December 31, 2003 decreased to $169,152 compared to the net loss of $287,458 for 2002. Reduced expenditures in 2003 resulted from significant reductions in accounting/audit fees, insurance expense, payroll and legal fees. During 2003, the Company met its research and development and administrative expenditure requirements from existing cash available from the issuance of stock in 2001. During 2003, research and development expense increased as a result of patent maintenance and filing fees. During 2003, research and development work continued to be funded by Chi Lin. 7 ITEM 7. FINANCIAL STATEMENTS INMEDICA DEVELOPMENT CORPORATION -:- INDEPENDENT AUDITORS' REPORT DECEMBER 31, 2003 AND 2002 CONTENTS
Page Independent Auditors' Report (Robison, Hill & Co.)..............................................................F-1 Consolidated Balance Sheet as of December 31, 2003 and 2002.....................................................F-3 Consolidated Statements of Operations for the Years Ended December 31, 2003 and 2002..........................................................................F-4 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2003 and 2002..........................................................................F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 2003 and 2002..........................................................................F-6 Notes to Consolidated Financial Statements......................................................................F-7
Robison, Hill & Co. Certified Public Accountants A PROFESSIONAL CORPORATION Brent M. Davies, CPA David O. Seal, CPA W. Dale Westenskow, CPA Barry D. Loveless, CPA INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of InMedica Development Corporation We have audited the accompanying consolidated balance sheet of InMedica Development Corporation and subsidiary (the "Company") as of December 31, 2003 and 2002, and the related consolidated statements of operations, stockholders' equity, and cash flows for the two years then ended (all expressed in U.S. dollars). 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 auditing standards generally accepted 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 statements. 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, such financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the two years then ended in conformity with accounting principles generally accepted in the United States of America. F - 1 The accompanying consolidated financial statements for the years ended December 31, 2003 and 2002 have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company's recurring losses from operations raise substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Sincerely, /s/ Robison, Hill & Co. Certified Public Accountants Salt Lake City, Utah March 29, 2004 F - 2 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEET
December 31, December 31, 2003 2002 ------------------ ------------------ ASSETS Current Assets Cash & Cash Equivalents $ 1,226 $ 97,431 Securities Available For Sale 1 1 Prepaid Expenses & Other 200 1,450 ------------------ ------------------ Total Current Assets 1,427 98,882 ------------------ ------------------ Equipment & Furniture, at Cost, Less Accumulated Depreciation of $253,299 and $253,122, respectively 575 752 ------------------ ------------------ TOTAL ASSETS $ 2,002 $ 99,634 ================== ================== LIABILITIES & STOCKHOLDER'S EQUITY Current Liabilities Related Party Consulting Fees Payable $ 66,000 $ 42,000 Accounts Payable 24,039 1,704 Accrued Expenses 54,912 - Preferred Stock Dividends Payable 18,914 11,349 ------------------ ------------------ Total Current Liabilities 163,865 55,053 ------------------ ------------------ Minority Interest 104,082 133,808 ------------------ ------------------ Stockholders' Equity Preferred Stock, 10,000,000 shares authorized; Series A cumulative convertible preferred stock, 8% cumulative, $4.50 par value, 1,000,000 shares designated, 21,016 shares outstanding (aggregate liquidation preference of $113,487) 94,573 94,573 Common Stock, $.001 par value: 40,000,000 shares authorized, 15,982,993 share outstanding 15,983 15,983 Additional Paid-in Capital 8,024,260 8,024,260 Accumulated Deficit (8,400,761) (8,224,043) ------------------ ------------------ Total Stockholders' Equity (265,945) (89,227) ------------------ ------------------ TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 2,002 $ 99,634 ================== ==================
The accompanying notes are an integral part of these financial statements. F - 3 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, -------------------------------------- 2003 2002 ------------------ ------------------ ROYALTY REVENUES $ - $ - ------------------ ------------------ OPERATING EXPENSES General & Administrative 174,203 316,874 Research & Development 24,723 10,020 ------------------ ------------------ Total Operating Expense 198,926 326,894 LOSS FROM OPERATIONS (198,926) (326,894) ------------------ ------------------ OTHER INCOME (EXPENSE) Interest Income (Expense) 47 (428) Other Expenses, Net - (2,195) ------------------ ------------------ Total Other Expenses, Net 47 (2,623) ------------------ ------------------ LOSS BEFORE MINORITY INTEREST (198,879) (329,517) MINORITY INTEREST 29,727 42,059 ------------------ ------------------ NET LOSS (169,152) (287,458) PREFERRED STOCK DIVIDENDS (7,566) (7,566) ------------------ ------------------ NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $ (176,718) $ (295,024) ================== ================== NET LOSS PER COMMON SHARE (BASIC & DILUTED) $ (0.01) $ (0.02) ================== ================== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (BASIC & DILUTED) 15,982,993 15,982,993 ================== ==================
The accompanying notes are an integral part of these financial statements. F - 4 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
Stock Additional Preferred Stock Common Stock Subscription Paid-in Accumulated Shares Amount Shares Amount Receivable Capital Deficit ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance, January 1, 2002 ..... 21,016 $ 94,573 15,984,613 $ 15,985 $ (150,000) $ 8,024,258 $(7,929,019) Shares cancelled ............. -- -- (1,620) (2) -- 2 -- Payments on stock subscription receivable ................ -- -- -- -- 150,000 -- -- Preferred stock dividends .... -- -- -- -- -- -- (7,566) Net loss ..................... -- -- -- -- -- -- (287,458) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance, December 31, 2002 ... 21,016 94,573 15,982,993 15,983 -- 8,024,260 (8,224,043) Preferred stock dividends .... -- -- -- -- -- -- (7,566) Net loss ..................... -- -- -- -- -- -- (169,152) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance, December 31, 2003 ... 21,016 $ 94,573 15,982,993 $ 15,983 $ -- $ 8,024,260 $(8,400,761) =========== =========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. F - 5 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, -------------------------------------- 2003 2002 ------------------ ------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (169,152) $ (287,458) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 177 133 Write down of assets - 2,195 Expense related to issuance of common stock and common stock options for services - - Minority interest in losses (29,727) (42,059) Changes in assets and liabilities: Prepaid expenses and other 1,250 18,756 Related party consulting fees payable 24,000 24,000 Accounts payable 22,335 (1,925) Accrued payroll 54,912 (4,292) ------------------ ------------------ Net cash used in operating activities (96,205) (290,650) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment & furniture - (885) ------------------ ------------------ Net cash used in investing activities - (885) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on note payable - (14,000) Proceeds from stock subscription receivable - 150,000 Proceeds from note receivable from Chi Lin - 150,000 Preferred stock dividend - (3,773) ------------------ ------------------ Net cash provided by financing activities - 282,227 NET INCREASE IN CASH (96,205) (9,308) CASH AT BEGINNING OF THE YEAR 97,431 106,739 ------------------ ------------------ CASH AT END OF THE YEAR $ 1,226 $ 97,431 ================== ================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW Cash paid during the year for interest $ - $ 563
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING & FINANCING ACTIVITIES None. The accompanying notes are an integral part of these financial statements. F - 6 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDING DECEMBER 31, 2003 AND 2002 NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES Nature of Operations InMedica Development Corporation ("InMedica") and its majority-owned subsidiary, MicroCor, Inc. ("MicroCor") (collectively referred to as the "Company"), historically have engaged in the research, development and sale of medical technology and fund raising to support such activities. During the years 1986 and 1987, MicroCor developed and marketed a portable electrocardiograph ("ECG") monitor and manufactured and sold about 450 units. In July 1989, MicroCor signed a research and development contract with Johnson and Johnson Medical, Inc. ("Johnson and Johnson") for further development of the ECG technology. As a result of the agreement, Johnson and Johnson manufactured and marketed a product line under the name of Dinamap PlusTM which incorporated the Company's ECG technology. Royalties received from Johnson and Johnson were the Company's sole source of revenue through the year 2000. In 2001, Johnson and Johnson stopped manufacturing and marketing the Dinamap PlusTM product line; therefore, MicroCor no longer receives royalties from Johnson and Johnson. Since 1989, the Company has engaged in research and development of a device to measure hematocrit non-invasively (the "Non-Invasive Hematocrit Technology" and/or the "Technology"). Hematocrit is the percentage of red blood cells in a given volume of blood. At the present time, the test for hematocrit is performed invasively by drawing blood from the patient and testing the blood sample in the laboratory. Commercialization of the Non-Invasive Hematocrit Technology is dependent upon favorable testing, Food and Drug Administration ("FDA") approval, financing of further research and development and, if warranted, financing of manufacturing and marketing activities. During 1999, the Company produced a transportable prototype device for use in demonstrating the technology. During 2002 and 2003, the Company continued to pursue further development of the technology. In May 2001, the Company entered into an agreement with Chi Lin Technology Co. Ltd. ("Chi Lin"), a subsidiary of Chi Mei Group, Taiwan, R.O.C., to further develop, produce, and market the Technology (see Note 3). Under the agreement, Chi Lin also acquired stock in InMedica and stock in InMedica's subsidiary, MicroCor. Basis of Presentation The Company's consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustment relating to recoverability and classification of recorded amounts of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. The Company generated net losses F - 7 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDING DECEMBER 31, 2003 AND 2002 NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued) Basis of Presentation (Continued) of $169,152 and $287,458 in 2003 and 2002, respectively, and negative cash flows from operations of $96,205 and $290,650 in 2003 and 2002, respectively. As of December 31, 2003 and 2002, the Company had an accumulated deficit of $8,400,761 and $8,224,043, respectively. At December 31, 2003 and 2002, the Company had stockholders' equity (deficit) of ($265,945) and ($89,227), respectively. These conditions raise substantial doubt as to the Company's ability to continue as a going concern. The Company's continued existence is dependent upon its ability to execute its operating plan and to obtain additional debt or equity financing. There can be no assurance the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company. Management's operating plan includes pursuing additional strategic alliances and licensing agreements as well as preparation for the clinical trials that will be required for FDA approval for the medical products that are currently under development, pursuant to the Chi Lin development agreement, utilizing the Non-Invasive Hematocrit Technology. Patents The Company has three patents covering various aspects of its Technology which expire from 2010 to 2013. Principles of Consolidation The consolidated financial statements include the accounts of InMedica and MicroCor. All material inter-company accounts and transactions have been eliminated. Revenue Recognition Royalty revenues are recognized as sales information is received from Johnson and Johnson and cash receipts are assured. In early 2001, Johnson & Johnson stopped manufacturing and marketing the Dinamap PlusTM product line and the Company no longer receives royalties from Johnson and Johnson. Income Taxes The Company accounts for income taxes using the asset and liability method. Deferred income taxes are determined based on the estimated future tax effects of differences between the financial reporting and tax reporting bases of assets and liabilities given the provisions of currently enacted tax laws. A valuation allowance is provided when it is more likely than not that all or some portion of the deferred income tax assets will not be realized. F - 8 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDING DECEMBER 31, 2003 AND 2002 NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued) Equipment and Furniture Equipment and furniture are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets which range from three to five years. Equipment and furniture consisted of the following at December 31, 2003 and 2002:
Equipment $ 242,686 $ 242,686 Furniture 11,188 11,188 ----------------- ----------------- 253,874 253,874 ----------------- ----------------- Less accumulated depreciation (253,299) (253,122) ----------------- ----------------- Total $ 575 $ 752 ================= =================
Research and Development Research and development costs are expensed as incurred. Net Loss Per Common Share Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the year. Diluted net loss per common share ("Diluted EPS") reflects the potential dilution that could occur if stock options or other common stock equivalents were exercised or converted into common stock. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an antidilutive effect on net loss per common share. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. Comprehensive Income There are no components of comprehensive income other than the net loss. F - 9 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDING DECEMBER 31, 2003 AND 2002 NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (Continued) Stock Options The Company accounts for its options issued to employees and directors under the stock incentive plan, formula stock option plan and certain options granted outside the plans issued to employees and directors under Accounting Principles Board Opinion No. 25. The Stock incentive plan and the formula stock option plan expired in 2001 and all options outstanding under the plans expired during 2002 Derivative and Hedging Activities Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, requires that all derivative instruments be recognized as either assets or liabilities at fair market value. The adoption of this statement on January 1, 2001 had no impact on the Company. Cash Equivalents For the purpose of reporting cash flows, the Company considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. NOTE 2 - INCOME TAXES As of December 31, 2003, deferred income tax assets consisted of the following:
Net operating loss carryforwards $ 1,215,091 Future deductions temporary differences related to compensation, reserves, and accruals 34,076 Less valuation allowance (1,249,167) ------------------ Deferred income tax assets $ - ==================
The valuation allowance increased $52,346 in 2003 and decreased $127,848 in 2002, respectively. At December 31, 2003, the Company has consolidated net operating loss carryforwards for federal income tax purposes of $3,563,707. These net operating loss carryforwards expire at various dates beginning in 2005 through 2023. Due to the uncertainty with respect to ultimate realization, the Company has established a valuation allowance for all deferred income tax assets. F - 10 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDING DECEMBER 31, 2003 AND 2002 NOTE 3 - COMMON STOCK TRANSACTIONS On December 16, 2002, at the annual meeting of shareholders, the shareholders approved an increase in the authorized shares from 20,000,000 to 40,000,000. On December 19, 2002, the Company filed amended articles of incorporation with the state of Utah authorizing 40,000,000 shares of common stock. NOTE 4 - STOCK OPTIONS Stock Incentive Plan The Company had in place an incentive stock option plan (the "Stock Incentive Plan") for eligible directors and key employees of the Company, covering 1,350,000 shares of the Company's common stock. Under the terms of the Stock Incentive Plan, the options granted were either incentive stock options as defined in the Internal Revenue Code or non-qualified stock options. A committee composed of disinterested members of the Board of Directors had authority to determine, among other matters, which eligible key employees and directors were to receive options, the price at which the non-qualified options would be granted, the period in which the options were exercisable and the type of options granted. The exercise price for the incentive stock options could not be less than 100 percent of the fair market value of the common stock on the date of the grant. The Stock Incentive Plan contained anti-dilution provisions which provided for adjustments to option prices or quantities in the event of certain changes in the number of outstanding shares of common stock or the capitalization of the Company. Under the stock incentive plan at December 31, 2001, 31,500 fully vested shares were under option with exercise prices of $0.60 per share and remaining contractual lives of less than one year. There were no options granted, exercised, or forfeited during the years ended December 31, 2001 and 2000. During 2001, the Stock Incentive Plan expired. As of December 31, 2003 there are no outstanding options under the plan. Formula Stock Option Plan The Company had in place a formula stock option plan (the "Formula Plan") for eligible directors of the Company, covering 100,000 shares of common stock. A committee of the Board of Directors had the authority to determine, among other matters, the term of the options and the period during which the options were exercisable. Under the terms of the Formula Plan, each member of the committee which administered the Stock Incentive Plan was eligible to receive non-qualified stock options pursuant to a formula set forth in the Formula Plan. The exercise price for options granted were 30 percent of the fair market value of the common stock on the date of the grant. The Formula Plan contained anti-dilution provisions which provided for adjustments to option prices or quantities in the event of certain changes in the number of outstanding shares of common stock or the capitalization of the Company. F - 11 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDING DECEMBER 31, 2003 AND 2002 NOTE 4 - STOCK OPTIONS (Continued) - ---------------------- At December 31, 2003 and 2002, there were no shares under option under the Formula Plan. Prior to 2000, 4,500 options were issued to and exercised by directors of the Company. During 2001, the Formula Plan expired. Other Stock Options During 1995 through 2000, non-qualified options were issued to employees and consultants for services. All options are exercisable upon granting. A summary of this stock option activity for 2003 and 2002 was as follows:
Weighted Average Option Exercise Shares Price ------------------ ------------------ Outstanding at January 1, 2002 $ 430,000 $ 0.48 Granted - - Forfeited or expired - - ------------------ ------------------ Outstanding at December 31, 2002 430,000 0.48 Granted - - Forfeited or expired (54,000) 0.73 ------------------ ------------------ Outstanding at December 31, 2003 $ 376,000 $ 0.44 ================== ==================
The following table summarizes information about stock options issued to employees outstanding at December 31, 2003:
Options Outstanding Options Exercisable - ----------------------------------------------------------------------------- -------------------------------------- Weighted Average Weighted Weighted Range of Contractual Average Average Exercise Number Life Exercise Number Exercise Prices Outstanding (in years) Price Exercisable Price - ------------------ ------------------ ------------------ ----------------- ------------------ ------------------ $0.30 75,000 1.8 $0.30 75,000 $0.30 ================== ================== ================== ================= ================== ==================
F - 12 INMEDICA DEVELOPMENT CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDING DECEMBER 31, 2003 AND 2002 NOTE 4 - STOCK OPTIONS (Continued) - ---------------------- The following table summarizes information about stock options issued to non-employees outstanding at December 31, 2003:
Options Outstanding Options Exercisable - ----------------------------------------------------------------------------- -------------------------------------- Weighted Average Weighted Weighted Range of Contractual Average Average Exercise Number Life Exercise Number Exercise Prices Outstanding (in years) Price Exercisable Price - ------------------ ------------------ ------------------ ----------------- ------------------ ------------------ $0.30 - $0.39 263,500 1.9 $0.36 263,500 $0.36 $1.22 37,500 2.3 $1.22 37,500 $1.22 - ------------------ ------------------ ------------------ ----------------- ------------------ ------------------ $0.30 - $1.22 301,000 2.0 $0.47 301,000 $0.47 ================== ================== ================== ================= ================== ==================
NOTE 5 - PREFERRED STOCK The Company is authorized to issue 10,000,000 shares of preferred stock. The Company's board of directors designated 1,000,000 shares of this preferred stock as Series A Cumulative Convertible Preferred Stock ("Series A Preferred") with a par value of $4.50 per share. Holders of the Series A Preferred receive annual cumulative dividends of eight percent, payable quarterly, which dividends are required to be fully paid or set aside before any other dividend on any class or series of stock of the Company is paid. As of December 31, 2003, preferred stock dividends payable in the amount of $18,914, or $0.90 per share are due and payable. Holders of the Series A Preferred receive no voting rights but do receive a liquidation preference of $4.50 per share, plus accrued and unpaid dividends. Series A Preferred stockholders have the right to convert each share of Series A Preferred to the Company's common stock at a rate of 1.5 common shares to 1 preferred share. NOTE 7 - RELATED PARTY TRANSACTIONS The Company has a consulting arrangement with an entity owned by the Company's chairman whereby the Company agreed to pay $2,000 per month for 2001 and 2002. Either party can terminate the arrangement at any time upon 30 days prior notice. During 2000 and through May 31, 2001, unpaid amounts accrued interest at 10%. Beginning April 1, 2001, the agreement was modified to eliminate any future accrual of interest. As of December 31, 2003, $66,000 was owed under the arrangement. F - 13 ITEM 8. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES. During the registrant's two most recent fiscal years and any subsequent interim period there were no disagreements with accountants on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreement(s) if not resolved to the satisfaction of the former accountants would have caused them to make reference to the subject matter of the disagreement(s) in connection with their reports. The former accountants' reports for the period of their engagement did not contain an adverse opinion or disclaimer of opinion. However the former accountants' reports were each modified for uncertainty as to whether the registrant would continue as a going concern. There was no qualification or modification as to audit scope or accounting principles ITEM 8A. CONTROLS AND PROCEDURES. The Company's Chief Executive Officer and Chief Financial Officer have concluded, based on an evaluation required by paragraph (b) of Section 240.13a-15 or 240.15d-15 of the Rules of the Securities Exchange Act of 1934, conducted as of the end of the period covered by this Annual Report on Form 10-KSB, that the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a - 15(e) or 240.15d-15(e)) have functioned effectively. For purposes of this Item, the term DISCLOSURE CONTROLS AND PROCEDURES means controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act (15 U.S.C. 78a ET SEQ.) is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There have been no changes in the Company's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Section 240.13a-15 or 240.15d-15 of the Rules of the Securities Exchange Act of 1934, that occurred during the Company's last fiscal quarter (the Company's fourth fiscal quarter in the case of an annual report) that have materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 8 PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. DIRECTORS AND EXECUTIVE OFFICERS OF INMEDICA. The following table furnishes information concerning the executive officers and directors of InMedica and their business backgrounds for at least the last five years. Name Age Director Since Larry E. Clark 82 1995 Ralph Henson 59 1999 Richard Bruggeman 49 1995 Sheng Jung Chiang 58 2001 Mao-Song Lee 55 2002 LARRY E. CLARK - Chairman of the Board since April, 1995. Mr. Clark was president of Clark-Knoll & Associates, Inc., a Denver, Colorado management consulting firm specializing in mergers and acquisitions from 1963 to 1969. He served as president of Petro-Silver, Inc., a small public company based in Salt Lake City, Utah, which engaged in the oil and gas business from 1970 to 1975. Beginning in 1975 and continuing until December, 2003, Mr. Clark was president of Larry Clark & Associates, a private company engaged in corporate mergers and acquisitions or business consulting. In 1981, Mr. Clark formed Hingeline-Overthrust Oil & Gas, Inc., a Utah public company, which merged with Whiting Petroleum Corporation of Denver, Colorado in December 1983. Mr. Clark served as a director of Whiting Petroleum from 1983 until 1992 when Whiting Petroleum merged with IES Industries and Mr. Clark returned to full time employment as president of Larry Clark & Associates. Mr. Clark was President of InMedica from April, 1995 until December, 1999. Since that time he has been semi-retired but continues to engage in business consulting as well as his service as Chairman of the Company's board of directors. Mr. Clark graduated from the U.S. Merchant Marine Academy with a BS degree in Naval Science in 1943 and received a degree in Business Administration from the University of Wyoming in 1948. RALPH HENSON - Director, President and Chief Executive Officer of the Company since December, 1999. Prior to his employment with InMedica, Mr. Henson worked from 1986 until 1999 as Director of Sales and acting Director of Clinical Programs of In-line Diagnostics of Farmington, Utah. He was also employed from 1987 to 1994 with Mallinckrodt Medical in sales and marketing, including service as Export Sales and Marketing Manager for Mallinckrodt Sensor Systems of Hannef, Germany. From 1994 to 1995 he was national sales manager with HemoCue, Inc. of Mission Viejo, California. 9 RICHARD BRUGGEMAN - Director, Secretary/Treasurer, part time employee and Chief Financial Officer of the Company since April, 1995 and full time employee of the Company during 2002. Since 2003, Mr. Bruggeman has been employed part time with Kitchen Resource, Inc., a Utah based firm distributing kitchen appliances. He was employed part or full time as Controller of Kitchen Specialties, Inc., from 1993 - December, 2001, a Salt Lake City firm distributing kitchen appliances in the United States and Canada. From 1986 until 1993 he was employed by the Company's subsidiary, MicroCor, Inc. as financial manager. During the period 1983-1985, he was a sole practitioner in accounting and from 1981-1983 he was employed by the Salt Lake City public accounting firm of Robison Hill & Co. but has had no further affiliation with Robison Hill & Co. since that time. He graduated from the University of Utah in 1981 with a B.S. degree in accounting. SHENG JUNG (ROBERT S.) CHIANG - Director of the Company since May, 2001. Mr. Chiang was vice president and secretary general of Onking Chain Store Co. Ltd. a company organized in the Republic of China ("Taiwan") from November, 1988 through June, 2000 when he became the part time Vice President of Chi Lin Technology Co. Ltd, a Taiwanese company. He has been employed full time with Chi Lin Technology since February 1, 2001. Mr. Chiang has a BA from the National Chen Chi University and an MBA from the National Taiwan University. MAO-SONG LEE - Director of the Company since December, 2002. Since February, 2001 he has been employed full time by Chi Lin Technology Co., Ltd., as Technical Vice President. From August,1998 until January, 2001 he was General Manager, Pilot Plants for Union Chemical Laboratories, Industrial Technology Research Institute of the Republic of China (Taiwan). During the period 1994-1997 he was Director of the Engineering Plastics Division for Union Chemical Laboratories, Industrial Technology Research Institute. From 1983 until 1991 he was Director of the Polymer Division, Union Chemical Laboratories, Industrial Technology Research Institute. He received a B.S. and M.S. from the National Cheng Kung University of Taiwan in 1970 and 1972, respectively. He also received a Ph.D. and an M.B.A. from the National Tsing Hua University of Taiwan in 1987 and from the National Cheng Chi University in 1994, respectively. Each director serves until the next annual meeting of shareholders or until a successor is elected and qualified. Officers serve at the pleasure of the board of directors. Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers, and persons who own more than ten percent of a registered class of the Company's equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of equity securities of the Company. Officers, directors and shareholders holding greater than ten percent are required to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on review of the copies of any such reports furnished to the Company, during the fiscal year ended December 31, 2003 all Section 16(a) 10 filing requirements applicable to officers, directors and shareholders holding greater than ten percent were complied with. BOARD OF DIRECTORS MEETINGS AND ATTENDANCE AT SHAREHOLDER MEETINGS The Company does not have nominating or audit committees of the Board. The full board conducts the function of an audit committee. There was one meeting of the Board of Directors held during the fiscal year ended December 31, 2003 and there have been two meeting of the board of directors during 2004. Messrs. Chiang and Lee were unable to attend one of the board meetings. All directors attended the last annual shareholder meeting of the Company. The Company expects all directors to be in attendance at shareholder meetings and attempts to schedule meetings at a time when all directors will be able to attend, however conflicting schedules, particularly with the two directors from Taiwan may on occasion preclude their attendance at shareholder meetings which are held in the United States. AUDIT COMMITTEE FINANCIAL EXPERT The Company's board of directors does not have an "audit committee financial expert," within the meaning of such phrase under applicable regulations of the Securities and Exchange Commission, serving on its audit committee. The board of directors believes that all members of its audit committee are financially literate and experienced in business matters, and that one or more members of the audit committee are capable of (i) understanding generally accepted accounting principles ("GAAP") and financial statements, (ii) assessing the general application of GAAP principles in connection with our accounting for estimates, accruals and reserves, (iii) analyzing and evaluating our financial statements, (iv) understanding our internal controls and procedures for financial reporting; and (v) understanding audit committee functions, all of which are attributes of an audit committee financial expert. However, the board of directors believes that there is not any audit committee member who has obtained these attributes through the experience specified in the SEC's definition of "audit committee financial expert." Further, like many small companies, it is difficult for the Company to attract and retain board members who qualify as "audit committee financial experts," and competition for these individuals is significant. The board believes that its current audit committee is able to fulfill its role under SEC regulations despite not having a designated "audit committee financial expert." NOMINATING COMMITTEE The full board of directors of the Company functions as a nominating committee to select potential additional directors of the Company. The board has not specifically designated a separate nominating committee because all five members of the board of directors desire to be involved in the selection of any new 11 director. The board does not have a specific charter to govern its actions as a nominating committee, nor are any members of the board "independent" . Due to the relatively small size of the Company, the risks associated with service on the board of a public company and the limited or negligible compensation available to such directors, the Company considers it unlikely that a qualified person would serve on the board who was truly independent. However, the board's unwritten policy for consideration of potential members of the board nominated by shareholders is to seriously consider any potential board member that has personal relationships and/or expertise that might be beneficial to the Company's business. The Company has in the past and expects to continue in the future to be interested in discussions with persons interested in the Company's business and able to make a significant contribution to the success of the Company's technology. Shareholders that desire to introduce persons to the Company's board of directors should contact Larry E. Clark, Chairman of the Board or Ralph Henson, Chief Executive Officer of the Company with any suggestions or recommendations for director. These persons may be reached through the Company's office telephone 801-521-9300 during regular business hours. A copy of the resume of any candidates should be submitted with the inquiry. At the present time, the Company is not actively searching for additional board members, however members of the board are interested in meeting qualified persons. Qualified persons normally would be persons that have at least a college education and professional or technical experience in the medical products industry. The Company is especially interested in persons with fund raising contacts or technology development contracts. Generally shareholder nominees would be evaluated in the same manner as any other nominee. The nominees identified on the Company's current proposal for election of directors were each originally nominated by the Company's chief executive officer or by Chi Lin Technologies, Co. Ltd, which has the contractual right to nominate two directors. Specifically, Larry E. Clark became a director upon the nomination of Alan Kaminsky who was then CEO and a 5% plus shareholder. Messrs Henson and Bruggeman were each nominated by Mr. Clark while Mr. Clark was serving as CEO and while Mr. Clark was a 10% plus shareholder. Messrs.Chiang and Lee were nominated by Chi Lin, a principal shareholder and control person of the Company, owning approximately 33 1/3% of the stock of the Company. SECURITY HOLDER COMMUNICATIONS Shareholders of the Company may communicate directly with the board of directors by contacting the Company's offices during regular business hours. The Company's telephone number is 801-521-9300. Communications to individual directors may be made by mail addressed to the director care of InMedica Development Corporation at the Company's offices 825 North 300 West, Suite N132, Salt Lake City, Utah 84103. 12 ITEM 10. EXECUTIVE COMPENSATION. EXECUTIVE COMPENSATION. The table below discloses the compensation of the chief executive officer of the Company during the three fiscal years ended December 31, 2003:
Annual Compensation Restricted Stock Long Term Comp. Awards Common Stock Name Year Salary Bonus Underlying Options Other Ralph Henson (CEO) 2003 $ 24,000 - - - - Ralph Henson (CEO) 2002 $ 96,000 - - - - Ralph Henson (CEO) 2001 $ 86,333 - - - $15,000 5
5 See "Certain Relationships and Related Transactions". DIRECTOR COMPENSATION. Directors may be compensated at the rate of $100 for attendance at each board meeting, but did not receive compensation for meetings in 2003 and 2002. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Compensation of officers and employees is determined by the Board of Directors. Officers, Ralph Henson and Richard Bruggeman are also members of the Board of Directors. OPTIONS GRANTED IN THE LAST FISCAL YEAR 6 % of Total Options Granted to Exercise Options Employees in Price Expiration Name Granted FY 2001 ($/Share) Date ------------------------------------------------------------ None 6 To persons in the executive compensation table. AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Value of Unexercised Number of In-The-Money Unexercised Options Options at Fiscal Shares at Fiscal Year End Year End Acquired Value Exercisable/ Exercisable/ Name on Exercise Realized Unexercisable Unexercisable None
13 The Company presently has no plan for the payment of any annuity or pension retirement benefits to any of its officers or directors, and no other remuneration payments, contingent or otherwise, are proposed to be paid in the future to any officer or director, directly or indirectly. The Company's 1991 Stock Incentive Plan and 1991 Formula Stock Option Plan expired during the year 2001. At December 31, 2001 there remained 31,500 fully vested options exercisable under the Stock Incentive Plan at $.60 per share which options expired during 2002. At December 31, 2003 there were no fully vested options exercisable under the Stock Incentive Plan. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The following table furnishes information concerning the common stock ownership of directors, officers, and principal shareholders as of March 18, 2003: Nature of Number of Name and Position Ownership Shares Owned Percent -------------------------------------------------------------------------------------------- Chi Lin Technologies Direct 5,328,204 33.3% 717 No. 71, Te Lun RD Jen Te Hsian Tainan County, Taiwan Principal Shareholder Larry E. Clark Direct 978,000 Chairman Indirect 1,219,025 7 ---------- ---------- ---------- Total 2,197,025 13.7% Ralph Henson Direct 225,000 1.4% President, Director Chief Executive Officer Richard Bruggeman Direct and 174,387 8 1.1% Director, Chief Indirect 464,975 9 2.9% Financial Officer Options 75,000 0.5% ---------- ---------- ---------- Total 714,362 4.5% Sheng Jung (Robert S.) Chiang Indirect * 10 Director Mao-Song Lee Indirect * 11 Director All Executive Officers Direct and and Directors as a Indirect 8,389,591 52.5% group (5 persons) Options 75,000 0.5% ---------- ---------- ---------- Total 8,464,591 53.0%
7 Shares held by Larry Clark and Jacquelyn Clark as Trustees of the Larry and Jacquelyn Clark Family Trust. 8 Includes 400 shares held in individual retirement accounts and 4,620 shares held in a family trust of which Mr. Bruggeman is Trustee. 9 Shares held by Mr. Bruggeman's wife. 10 Mr. Chiang is vice president of Chi Lin Technologies Co. Ltd. which holds 5,328,204 shares. 11 Dr. Lee is director of biomedical research of Chi Lin Technologies Co. Ltd. which holds 5,328,204 shares. 14 Shares shown in the forgoing table as directly owned are owned beneficially and of record, and such record shareholder has sole voting, investment, and dispositive power. Calculations of the percentage of ownership of shares outstanding in the foregoing table are based on 15,984,613 shares outstanding and assume the exercise of options, to which the percentage relates. Rounding causes differences in totals from percentage ownership shown. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. InMedica executed employment contracts with its Chief Executive Officer, Ralph Henson, and its Chief Financial Officer, Richard Bruggeman, on April 25, 2001. Mr. Henson's contract reaffirmed the provisions of his prior contract (See 8-K of the Registrant dated December 1, 1999) except paragraphs one and two thereof which are amended and restated in their entirety to provide for his full time employment for the period April 1, 2001 until March 31, 2003. Compensation payable for his services during the period was $7,000 per month during the remainder of 2001 and $8,000 per month for the balance of the term of the contract which expired on March 31, 2003. Mr. Henson also continued to be a member of the Board of Directors of InMedica. Mr. Henson was also separately granted the right to earn a finders fee for raising up to $1,000,000 for the Company and its subsidiary. The fee was paid by issuing Mr. Henson 125,000 restricted shares of common stock of the Company valued at $21,250. See "Business General." Mr. Bruggeman's contract provided for his part time employment as the Chief Financial Officer of the Company from April 1, 2001 until March 31, 2003. He had the option to increase the employment to full time if warranted by the Company's business, at a compensation to be negotiated. Compensation under the contract was $3,500 per month beginning April 1, 2001 for the balance of the year 2001 and thereafter $4,000 per month for the remaining term of the contract which expired on March 31, 2003. The Company entered into a consulting contract with Larry E. Clark, its Chairman, effective April 1, 2001, pursuant to which the Company pays the Chairman $2,000 per month in consulting fees. Fees under the contract are presently being accrued and are to be disbursed based on the cash availability of the Company. 15 PART IV ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits Exhibit No. S-K No. Description (3) Articles of Incorporation and Bylaws incorporated by reference to the exhibits to Form 10-K for the year ended December 31, 1983 (3) Articles of Amendment to the Articles of Incorporation of the Company changing the Company's name to "InMedica Development Corporation" incorporated by reference to Exhibit 1 to Form 10-K for the year ended December 31, 1984 (3) Articles of Amendment, dated June 16, 1995 to the Articles of Incorporation of the Company adopting a class of Preferred Stock, incorporated by reference to Exhibit 1 to Form 10-QSB for the period ended September 30, 1995 (3) Articles of Amendment, dated September 25, 1995 to the Articles of Incorporation of the Company adopting a Series A Preferred Stock, incorporated by reference to Exhibit 2 to Form 10-QSB for the period ended September 30, 1995 (3) Articles of Amendment, dated December 18, 2002 to Articles of Incorporation of the Company increasing the authorized shares of common stock from 20,000,000 to 40,000,000. (10) Consulting agreement with Larry E. Clark dated April 1, 2001, incorporated by reference to the Exhibits to Form 10KSB for the year 2002. (10) Stock Purchase Agreement between InMedica Development Corporation and Chi Lin Technology Co. Ltd. dated May 10, 2001 incorporated by reference to Form 10QSB for the period ended 3/31/2001. 16 (10) Development, Licensing and Manufacturing Agreement between InMedica Development Corporation and Chi Lin Technology Co. Ltd. dated May 10, 2001 incorporated by reference to Form 10QSB for the period ended 3/31/2001. (10) Hematocrit Development and Option Agreement between InMedica Development Corporation and Medical Physics, dated August 29, 1997 incorporated by reference to Exhibits of Form 10QSB for the Quarter ended September 30, 1997. (10) First Amendment to the Hematocrit Development and Option Agreement between InMedica Development Corporation and Medical Physics, dated March 1, 1998. (10) Employment Agreement, effective as of December 1, 1999 between Ralph Henson and the Registrant and Investment letter of Ralph Henson, incorporated by reference to the 8-K of the Registrant dated December 1, 1999. (16) The letter of Arthur Andersen LLP to the Commission dated January 15, 2002 is incorporated by reference to the Form 8K/A1 filed by the Company on January 18, 2002. (16) The Letter of Deloitte & Touche LLP to the Commission dated October 18, 2002 is incorporated by reference to the Form 8K filed by the Company on October 22, 2002. (21) Subsidiaries of the Company (MicroCor, Inc., a Utah corporation) (31.1) Sarbanes-Oxley Section 302 Certification - Ralph Henson 17 (31.2) Sarbanes- Oxley Section 302 Certification- Richard Bruggeman (32.1) Sarbanes-Oxley Section 906 Certification (b) Reports on Form 8-K. None ITEM 14. Principal Accountant Fees and Services The following is a summary of the fees billed to us by Robison, Hill & Company for professional services rendered for the years ended December 31, 2003 and 2002: Service 2003 2002 - ------------------------------ ------------------ ------------------ Audit Fees $ 12,100 $ 9,890 Audit-Related Fees - - Tax Fees 300 575 All Other Fees - - ------------------ ------------------ Total $ 12,400 $ 10,465 ================== ================== AUDIT FEES. Consists of fees billed for professional services rendered for the audits of our consolidated financial statements, reviews of our interim consolidated financial statements included in quarterly reports, services performed in connection with filings with the Securities & Exchange Commission and related comfort letters and other services that are normally provided by Robison, Hill & Company in connection with statutory and regulatory filings or engagements. TAX FEES. Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions and acquisitions. Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors The Audit Committee, is to pre-approve all audit and non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services as allowed by law or regulation. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specifically approved amount. The independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditors 18 in accordance with this pre-approval and the fees incurred to date. The Audit Committee may also pre-approve particular services on a case-by-case basis. The Audit Committee pre-approved 100% of the Company's 2003 audit fees, audit-related fees, tax fees, and all other fees to the extent the services occurred after May 6, 2003, the effective date of the Securities and Exchange Commission's final pre-approval rules. 19 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INMEDICA DEVELOPMENT CORPORATION Date: December 27, 2004 By /s/ Ralph Henson RALPH HENSON, President & Chief Executive Officer By /s/ Richard Bruggeman RICHARD BRUGGEMAN Chief Financial Officer In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Larry E. Clark DATE: December 27, 2004 LARRY E. CLARK, Director /s/ Richard Bruggeman DATE: December 27, 2004 RICHARD BRUGGEMAN, Director /s/ Ralph Henson DATE: December 27,2004 RALPH HENSON, Director 20 EXHIBIT INDEX - INMEDICA DEVELOPMENT CORPORATION FORM 10KSB/A#1 - FOR THE YEAR ENDED DECEMBER 31, 2003 Exhibit 31.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - Ralph Henson Exhibit 31.2 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - Richard Bruggeman Exhibit 32.1 CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 21 EX-31 2 annualreport123103ex31-1.txt Exhibit 31.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Ralph Henson, certify that: 1. I have reviewed this annual report on Form 10-KSB/A#1 of InMedica Development Corporation. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report. 4. The small business issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the small business issuer and have: a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over the financial reporting; and 5. The small business issuer's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: December 27 2004 /s/ Ralph Henson Ralph Henson, President EX-31 3 annualreport123103ex31-2.txt Exhibit 31.2 CERTIFICATE PURSUANT TO SECTION 302 OF THE SABANES-OXLEY ACT OF 2002 I, Richard Bruggeman, certify that: 1. I have reviewed this annual report on Form 10-KSB/A#1 of InMedica Development Corporation. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report. 4. The small business issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the small business issuer and have: a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over the financial reporting; and 5. The small business issuer's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: December 27, 2004 /s/ Richard Bruggeman Richard Bruggeman, CFO EX-32 4 annualreport123103ex32.txt Exhibit 32.1 CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Each of the undersigned hereby certifies in his capacity as an officer of InMedica Development Corporation (the Company) that the Annual Report of the Company on Form 10KSB for the year ended December 31, 2003 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition of the Company at the end of such periods and the results of operations of the Company for such periods. /s/ Ralph Henson Ralph Henson, Chief Executive Officer DATE: December 27, 2004 /s/ Richard Bruggeman Richard Bruggeman, Chief Financial Officer DATE: December 27, 2004 -----END PRIVACY-ENHANCED MESSAGE-----