Attached files
| file | filename |
|---|---|
| EX-32 - iCoreConnect Inc. | ex32.htm |
| EX-31.1 - iCoreConnect Inc. | ex31-1.htm |
| EX-31.2 - iCoreConnect Inc. | ex31-2.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended December 31, 2010
Commission file number: 000-52765
IMEDICOR, INC.
(Exact Name of Registrant as Specified in Its Charter)
|
Nevada
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95-4696799
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|
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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523 Avalon Gardens Drive, Nanuet, New York 10954
(Address of principal executive offices) (Zip Code)
(845) 371-7380
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ¨
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Accelerated filer ¨
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Non-accelerated filer ¨
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Smaller reporting company x
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No
There were 310,744,847 outstanding shares of the issuer’s Common Stock, $0.001 par value, on February 22, 2011.
IMEDICOR, INC.
FORM 10-Q QUARTERLY REPORT
FOR THE QUARTER ENDED DECEMBER 31, 2010
TABLE OF CONTENTS
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Page
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|||
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Part I Financial Information
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|||
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Item 1.
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3
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||
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3
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|||
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4
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|||
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6
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|||
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7
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|||
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Item 2.
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9
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||
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Item 3.
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12
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||
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Item 4T.
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12
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||
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Part II Other Information
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|||
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Item 2.
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13
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||
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Item 5.
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13
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||
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Item 6.
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13
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14
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|||
PART 1: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IMEDICOR, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
|
Dec 31, 2010
|
June 30, 2010
|
|||||||
|
(unaudited)
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(audited)
|
|||||||
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ASSETS
|
||||||||
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Current assets:
|
||||||||
|
Cash and cash equivalents
|
$
|
1,000
|
$
|
86,644
|
||||
|
Accounts receivable, net of allowance for doubtful accounts of $-0-
at December 31, 2010 and June 30, 2010, respectively
|
344,780
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10,000
|
||||||
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Prepaid Expenses
|
4,691
|
6,001
|
||||||
|
Total Current Assets
|
350,471
|
102,645
|
||||||
|
Property and equipment, net
|
5,028
|
8,291
|
||||||
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Other Assets
|
||||||||
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Technology and Medical Software, net
|
4,022,395
|
4,996,785
|
||||||
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4,022,395
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4,996,785
|
|||||||
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Total Assets
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$
|
4,377,894
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$
|
5,107,721
|
||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
||||||||
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Current liabilities:
|
||||||||
|
Notes payable –– banks
|
$
|
29,939
|
$
|
59,181
|
||||
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Short-term notes payable
|
3,350,421
|
5,487,120
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||||||
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Accounts payable and accrued expenses
|
1,725,981
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1,791,671
|
||||||
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Deferred income
|
59,000
|
60,000
|
||||||
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Total Current Liabilities
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5,165,341
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7,397,972
|
||||||
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Other long-term liabilities
|
||||||||
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Long-term notes payable
|
-
|
1,271,661
|
||||||
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Total Liabilities
|
5,165,341
|
8,669,663
|
||||||
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Stockholders’ Equity (Deficit)
|
||||||||
|
Preferred stock , par value $.001, authorized 200,000,000. Issued and outstanding -39- shares
and -0- shares as of Dec 31, 2010 and June 30, 2010, respectively
|
0
|
0
|
||||||
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Common stock, par value $.001 per share, authorized 600,000,000. Issued and outstanding:
310,744,847 and 229,082,187 shares at Dec 31, 2010 and June 30 2010, respectively
|
310,745
|
229,082
|
||||||
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Additional Paid in Capital
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42,913,455
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37,849,158
|
||||||
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Less: Treasury stock, 368,407 shares at both December 31, 2010 and June 30, 2010
|
(508,195
|
)
|
(508,195
|
)
|
||||
|
Accumulated deficit
|
(43,503,452
|
)
|
(41,131,957
|
)
|
||||
|
Total Stockholders’ Equity (Deficit)
|
(787,447
|
)
|
(3,561,912
|
)
|
||||
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Total Liabilities and Stockholders’ Equity (Deficit)
|
$
|
4,377,894
|
$
|
5,107,721
|
||||
See notes to Condensed Consolidated Financial Statements (unaudited).
IMEDICOR, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
For the three
|
For the three
|
|||||||
|
months ended
|
months ended
|
|||||||
|
December 31, 2010
|
December 31, 2009
|
|||||||
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(unaudited)
|
(unaudited)
|
|||||||
|
Revenues:
|
$
|
296,034
|
$
|
65,832
|
||||
|
Cost of Services
|
296
|
2,439
|
||||||
|
Gross Profit
|
295,738
|
63,143
|
||||||
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Expenses:
|
||||||||
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Stock issued for fees and services
|
254,696
|
-
|
||||||
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Consulting, commissions and travel
|
48,038
|
42,089
|
||||||
|
Operational fees and expenses
|
88,868
|
130,172
|
||||||
|
Professional fees
|
10,895
|
31,040
|
||||||
|
Payroll and related taxes
|
146,973
|
175,427
|
||||||
|
Depreciation and amortization
|
516,537
|
510,187
|
||||||
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Production, advertising, brochures and public relations
|
3,500
|
38,082
|
||||||
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Total Expenses
|
1,069,507
|
926,997
|
||||||
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Loss before other expenses
|
(773,769
|
)
|
(863,854
|
)
|
||||
|
Other Income/(Expenses):
|
||||||||
|
Other Income – Relinquishment of Debt
|
91,511
|
-
|
||||||
|
Redemption Fee Expense
|
(160,646
|
) | ||||||
|
Interest expense
|
(77,352
|
)
|
(101,823
|
)
|
||||
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Total Other Income/(Expenses)
|
14,159
|
(262,469
|
)
|
|||||
|
Net loss available to common stockholders
|
$
|
(759,610
|
)
|
$
|
(863,854
|
)
|
||
|
Net loss per share, available to common stockholders
|
(0.00
|
) |
(0.01
|
) | ||||
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Weighted average number of shares, basic and diluted
|
268,365,569
|
123,044,835
|
||||||
See notes to Condensed Consolidated Financial Statements (unaudited).
IMEDICOR, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
For the six
|
For the six
|
|||||||
|
months ended
|
months ended
|
|||||||
|
December 31, 2010
|
December 31, 2009
|
|||||||
|
(unaudited)
|
(unaudited)
|
|||||||
|
Revenues:
|
$
|
344,631
|
$
|
131,414
|
||||
|
Cost of Services
|
1,508
|
7,937
|
||||||
|
Gross Profit
|
343,123
|
123,447
|
||||||
|
Expenses:
|
||||||||
|
Stock issued for fees and services
|
545,308
|
1,261,393
|
||||||
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Consulting, commissions and travel
|
114,401
|
35,115
|
||||||
|
Operational fees and expenses
|
245,605
|
348,187
|
||||||
|
Professional fees
|
10,895
|
97,415
|
||||||
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Payroll and related taxes
|
327,539
|
448,086
|
||||||
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Depreciation and amortization
|
1,032,653
|
1,013,624
|
||||||
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Production, advertising, brochures and public relations
|
24,425
|
86,208
|
||||||
|
Total Expenses
|
2,300,826
|
3,290,028
|
||||||
|
Loss before other expenses
|
(1,957,703
|
)
|
(3,166,551
|
)
|
||||
|
Other Income/(Expenses):
|
||||||||
|
Other Income – Relinquishment of Debt
|
91,511
|
-
|
||||||
|
Redemption Fee Expense
|
(321,292
|
) | ||||||
|
Interest expense
|
(319,303
|
)
|
(202,044
|
)
|
||||
|
Total Other Income/(Expenses)
|
(227,792
|
) |
(523,336
|
)
|
||||
|
Loss before dividend
|
(2,185,495
|
) | ||||||
|
Dividends Related to Warrants Issued
|
186,000
|
|||||||
|
Net loss available to common stockholders
|
$
|
(2,371,495
|
)
|
$
|
(3,689,887
|
)
|
||
|
Net loss per share, available to common stockholders
|
(0.01
|
) |
(0.03
|
) | ||||
|
Weighted average number of shares, basic and diluted
|
268,365,569
|
125,879,009
|
||||||
See notes to Condensed Consolidated Financial Statements (unaudited).
IMEDICOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
For the six
|
For the six
|
|||||||
|
months ended
|
months ended
|
|||||||
|
December 31, 2010
|
December 31, 2009
|
|||||||
|
(unaudited)
|
(unaudited)
|
|||||||
|
Cash Flows From Operating Activities:
|
||||||||
|
Receipts from customers
|
$
|
8,851
|
$
|
69,794
|
||||
|
Payments to suppliers, salaries
|
(697,241
|
)
|
(941,463
|
)
|
||||
|
Interest paid
|
(191,118
|
) |
(22,078
|
) | ||||
|
Net Cash Used in Operating Activities
|
(879,508
|
)
|
(893,747
|
)
|
||||
|
Cash Flows Used in Investing Activities:
|
||||||||
|
Purchase of Technology & Medical Software
|
(55,000
|
) | ||||||
|
Net Cash Used in Investing Activities
|
(55,000
|
) |
-
|
|||||
|
Cash Flows From Financing Activities:
|
||||||||
|
Payments on notes payable
|
(44,242
|
)
|
(25,000
|
)
|
||||
|
Short term loans proceeds
|
409,106
|
900,500
|
||||||
|
Sale of common stock
|
484,000
|
-
|
||||||
|
Net Cash Provided by Financing Activities
|
848,864
|
875,500
|
||||||
|
Net Increase/(Decrease) in Cash
|
(85,644
|
)
|
(18,247
|
)
|
||||
|
Cash at the Beginning of Period
|
86,644
|
52,615
|
||||||
|
Cash at End of Period
|
$
|
1,000
|
$
|
34,368
|
||||
|
Reconciliation of Net Loss to Net Cash
|
||||||||
|
Used by Operating Activities
|
||||||||
|
Net Loss before dividend
|
$
|
(2,185,198
|
)
|
$
|
(3,689,887
|
)
|
||
|
Adjustments to Reconcile net income/(loss) to net cash
|
||||||||
|
Used by operating activities
|
||||||||
|
Stock issued for fees and services
|
545,308
|
1,261,393
|
||||||
|
Depreciation & Amortization
|
1,032,653
|
1,013,624
|
||||||
|
Relinquishment of debt
|
(91,511
|
) |
-
|
|||||
|
Loan accretion
|
321,292
|
|||||||
|
Changes in:
|
||||||||
|
Trade receivables
|
(334,780
|
)
|
-
|
|||||
|
Prepaid Expenses
|
1,310
|
(2,606
|
) | |||||
|
Accounts payable and accrued expenses
|
25,945
|
84,091
|
||||||
|
Accrued interest payable
|
127,765
|
179,966
|
||||||
|
Deferred income
|
(1,000
|
) |
(61,620
|
) | ||||
|
Net Cash Used in Operating Activities
|
$
|
(879,508
|
)
|
$
|
(893,747
|
)
|
||
See notes to Condensed Consolidated Financial Statements (unaudited).
IMEDICOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 31, 2010
1. BASIS OF PRESENTATION
IMedicor, Inc., formerly Vemics, Inc. (the “Company”), builds portal-based, virtual work and learning environments in healthcare and related industries. Our focus is twofold: iMedicor, our web-based portal which allows Physicians and other healthcare providers to exchange patient specific healthcare information via the internet while maintaining compliance with all Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) regulations, and; recently acquired ClearLobby technology, our web-based portal adjunct which provides for direct communications between pharmaceutical companies and physicians for the dissemination of information on new drugs without the costs related to direct sales forces. Our solutions allow physicians to use the internet in ways previously unavailable to them due to HIPAA restrictions to quickly and cost-effectively exchange and share patient medical information and to interact with pharmaceutical companies and review information on new drugs offered by these companies at a time of their choosing.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted principles in the United States for full year financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal, recurring nature. Operating results for the three month period ended December 31, 2010, are not necessarily indicative of the results that may be expected for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto that are included in the Company’s Form 10-K for the fiscal year ended June 30, 2010.
2. GOING CONCERN
From inception through June 30, 2010, the Company had been devoting substantially all of its efforts to research and development of its technologies, acquisition of equipment and raising capital. The Company has incurred operating losses to date and has an accumulated deficit of approximately $43,503,000 and $41,132,000 at December 31, 2010 and at June 30, 2010, respectively. The Company’s activities have been primarily financed through convertible debentures, private placements of equity securities and capital lease financing. The Company intends to raise additional capital through the issuance of debt or equity securities to fund its operations. The financing may not be available on terms satisfactory to the Company, if at all. However, no formal commitments or arrangements to advance or loan funds to the Company or repay any such advances or loans exist. There is no legal obligation for either management or significant stockholders to provide additional future funding.
3. NET EARNING (LOSS) PER SHARE
Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period, less shares subject to repurchase. Diluted net loss per share reflects the potential dilution of securities by adding other common stock equivalents, including stock options, shares subject to repurchase, warrants and convertible notes to the weighted-average number of common shares outstanding for a period, if dilutive. All potentially dilutive securities have been excluded from the computation, as their effect is anti-dilutive.
4. WARRANTS
As of December 31, 2010, following warrants were outstanding:
|
No. Shares
|
||||||||||
|
Issuable on Exercise
|
Expiration
|
Exercise Price
|
||||||||
|
1,239,999
|
2011
|
$
|
0.60
|
|||||||
|
1,430,000
|
2011
|
$
|
0.24
|
|||||||
|
1,541,667
|
2011
|
$
|
0.12
|
|||||||
|
4,000,000
|
2013
|
$
|
0.04
|
|||||||
|
13,640,000
|
2013
|
$
|
0.03
|
|||||||
|
16,160,000
|
2013 – 2015
|
$
|
0.05
|
|||||||
Management has not assigned a value to these warrants, as it is not practical to estimate fair value for these financial instruments. It also reserves the rights to redeem the warrants at $.10 per warrant if there is a subsequent initial public offering and market value per share of the company’s common stock reaches certain levels.
5. TECHNOLOGY AND MEDICAL SOFTWARE
The Company has capitalized all acquisition costs associated with the acquisition of NuScribe Inc. In addition, we have elected to capitalize all related development costs associated with completion of the site. The iMedicor product was launched in late October 2007 and we have begun to amortize its cost on a straight line basis over 60 months. Amortization expenses were $514,694 for the three months ended December 31, 2010 and $1,029,391 for the six months ended December 31, 2010.
|
12/31/2010
|
6/30/2010
|
|||||||
|
Technology and medical software
|
$
|
10,293,893
|
$
|
10,238,892
|
||||
|
Less: Accumulated Amortization
|
6,271,498
|
5,242,107
|
||||||
|
$
|
4,022,395
|
$
|
4,996,785
|
|||||
6. SHORT TERM NOTES PAYABLE
|
12/31/10
|
||||
|
Convertible Debentures
|
$
|
3,111,315
|
||
|
Notes Payable
|
239,106
|
|||
|
Total
|
$
|
3,350,421
|
7. ISSUANCE OF PREFERRED AND STOCK IN EXCHANGE FOR DEBT
On December 31, 2010 the holders exchanged short and long-term debt in the aggregate amount of approximately $3,100,000 into 28 shares of Series “A” and 11 shares of Series “B” Preferred Stock of the Company and 24,918,128 shares of Common Stock of the Company to two holders of Notes issued by the Company. Each share of Series “A” and “B” Preferred Stock represents a 1% ownership interest in the Company on a non-dilutive basis and is convertible into shares of the Company’s Common Stock after the 12 month anniversary of the issuance of such share. Each share of Series “A” Preferred Stock carries a cumulative quarterly dividend of 2% of the original purchase price of the stock and each series “B” Preferred Stock also carries a cumulative quarterly dividend of 4.5% of the original purchase price for the first two quarters after the issuance of such share and a 2.5% cumulative quarterly dividend thereafter, payable in the Company’s Common Stock or cash, at the Company’s option. Each share of Series “A” and Series “B” preferred stock has shall be entitled to notice of any stockholders' meeting and to vote upon matters submitted to shareholders for a vote, in the same manner and with the same effect as the holders of shares of Common Stock, voting together with the holders of Common Stock as a single class to the extent permitted by law. Holders of Series B Preferred Stock shall have that number of votes equal to the number of shares of Common Stock into which such Series B Preferred Stock is convertible. Neither the Series “A” or Series “B” Prefered Stock is callable.
8. FORGIVENESS OF ACCRUED INTEREST
As a part of the sale of Series “A” Preferred Stock to in exchange for debt, the Note holder forgave approximately $220,000 in interest accrued on the principal owed.
9. REVENUE
The Company has booked revenue in the quarter ended December 31, 2010 of $260,000 based on a legacy contract which is still in force, however, the amount is being disputed by the customer and to date no funds have been received. There can be no assurance that the full amount of the revenue booked will be received.
10. SUBSEQUENT EVENTS
On February 1, 2011 the Company receive a signed subscription agreement from an accredited investor for an aggregate investment of $2,000,000 in exchange for 16 Series “B” preferred shares. The amounts are payable in 2 tranches, with the first tranche due on or before February 22, 2011, with a five day grace period post the due date and the second tranche due on or before April 1, 2011. Each share of Series “B” Preferred Stock represents a 1% ownership interest in the Company on a non-dilutive basis and is convertible into shares of the Company’s Common Stock after the 12 month anniversary of the issuance of such share. Each share of Series “B” Preferred Stock also carries a cumulative quarterly dividend of 4.5% of the original purchase price for the first two quarters after the issuance of such share and a cumulative 2.5% quarterly dividend thereafter, payable in the Company’s Common Stock or cash, at the Company’s option.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Statements made in this Quarterly Report on Form 10-Q, including without limitation this Management's Discussion and Analysis of Financial Condition and Operations, other than statements of historical information, are forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements may sometimes be identified by such words as "may," "will," "expect," "anticipate," "believe," "estimate" and "continue" or similar words.
We believe that it is important to communicate our future expectations to investors. However, these forward-looking statements involve many risks and uncertainties, including the risk factors disclosed under the heading “Risk Factors” included in the Company's Form 10-K filed with the Securities and Exchange Commission (“SEC”) on October 14, 2010. Our actual results could differ materially from those indicated in such forward-looking statements as a result of certain factors. We are under no duty to update any of the forward-looking statements after the date of this Report on Form 10-Q to conform these statements to actual results.
Overview
The Company has built a portal-based, virtual work, learning and communication/collaboration environment for healthcare and related industries called iMedicor. Our primary focus shifted with our development of iMedicor, which we acquired in connection with the acquisition of NuScribe, Inc. on October 17, 2006. Currently, our efforts are concentrated on providing secure, on-line communications, collaboration, learning and productivity solutions to healthcare and related markets, and facilitating cost-effective communications between physicians and other healthcare related workers and pharmaceutical, medical device and medical insurance companies.
iMedicor was initially launched in October of 2007 with early registration far exceeding our pre-launch estimates by over 200% . In February of 2009 we re-launched iMedicor as version 2.0 with completely redesigned functionality and security. During the redesign phase we focused less on increasing membership and more on working with a core group of physician members to address functionality within the site and make recommended changes for the launch of the 2.0 version. Late this fiscal quarter the subscription model for iMedicor switched from a free service for all users to a $24.95 per month subscription service per physician user, with reduced rates for administrative staff within a physician’s office. As part of the shift we offered all existing members as well as new members a sixty-day trial period at no cost. The adoption rate from free service to paying was not what we had hoped at less than 10%, therefore we are currently revamping the cost structure of the portal, with a free layer available to all users with limited functionality. We contemplate allowing up to a certain amount of data to be transferred for free on a monthly basis, and any member exceeding that layer will have to pay the monthly fee. Additionally, we have development plans to expand out Electronic Medical Record interoperability capabilities within the Portal and any member wishing to use this feature would be required to pay the monthly fee. We still expect to generate significant revenues through the growth of a paying membership base within the Portal, however our initial projections have been tempered to allow for the widespread adoption of EMR’s into physician practices, which is expected to begin to accelerate towards the end of this year as federal funds incentive dollars become available to early physician adopters of EMR’s.
Currently multiple partnerships give us direct access to a user-base of over 530,000 physicians in the United States. If the company enrolls only 5% of this base as paying subscribers into iMedicor, that would equal approximately $660,000 per month in top-line revenue, or more than three times our current monthly cash needs. As we build this paying customer base over time, the Company has begun to generate revenue through the delivery of drug information on Mugard™ being offered through ClearLobby. We expect these revenues to accelerate significantly over the next 6 – 9 months as the full marketing effort for the drug is deployed and additional insurance companies approve the drug for reimbursement to their patients. We have several new ClearLobby programs scheduled to launch designed around pharmaceutical marketing to physicians which we expect to generate significant revenue for the Company, however the exact timing of these launches is unknown at the moment.
We recently announced the enrollment of our first Independent Physician Association (IPA) into our subscription model. Indications through our marketing efforts point to wide spread adoption of our newly launched “National Healthcare Communications Network (NHCN)”. We are seeing significant progress with this IPA, and they have begun to use the Portal to communicate with one of the large national health insurance carriers to transmit patient specific information, which opens a merger larger spectrum for usage of the Portal than we had first envisioned.
Our revenue has increased due largely to a legacy contract which is still in place, however we continue to be encouraged by the increase in revenue being generated by the new programs which have just come into effect and are generated directly from the efforts of the portal and Clearlobby, the portal’s pharmaceutical marketing adjunct.
As of December 31, 2010, we require approximately $180,000 per month to fund our operations. This amount will increase as we expand our sales and marketing efforts and continue to develop new products and services; however we do not have the funds available to increase our operations at this time. As of the date of this filing the Company has reduced operations to a bare minimum to conserve what cash is available and costs have been further reduced from the $180,000 per month needed as of December 31, 2010. In anticipation of the investment funds expected
We are currently seeking up to $5,000,000 in capital through a private placement of preferred stock, and have received a signed subscription agreement from and accredited investor for $2,000,000, payable in two tranches of $1,000,000 with the first tranche due on or before February 22, 2011, and the final tranche due on or before April 1, 2011. While we are seeking this funding, if revenue increases to a point where we are able to sustain ourselves and increase our budget to match our growth needs, we may significantly reduce the amount of investment capital we are seeking. The exact amount of funds raised and revenue generated, if any, will determine how aggressively we can grow and what additional projects we will be able to undertake.
Critical Accounting Policies and Estimates
Our discussion and analysis of financial condition and results of operations are based upon the condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles as recognized in the U.S. The preparation of these financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities. Our estimates include those related to revenue recognition, the valuation of inventory, and valuation of deferred tax assets and liabilities, useful lives of intangible assets and accruals. We base our estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Results of Operations
Three months ended December 31, 2010 Compared to Three Months Ended December 31, 2009
The following table sets forth for the periods indicated the percentage of total revenues represented by certain items reflected in our statements of operations:
|
Three Months Ended December 31
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||||||||
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(unaudited)
|
||||||||
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2010
|
2009
|
|||||||
|
Net Sales and Revenues
|
$
|
296,034
|
$
|
65,832
|
||||
|
Cost of Services
|
296
|
2,439
|
||||||
|
Gross Profit
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295,738
|
63,143
|
||||||
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Operational General and Administrative Expenses
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298,001
|
416,810
|
||||||
|
Depreciation and amortization
|
516,537
|
510,187
|
||||||
|
Stock issued for fees and services
|
254,969
|
-
|
||||||
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Total Expenses
|
1,069,507
|
926,997
|
||||||
|
Loss before other income (expense)
|
$
|
(773,769)
|
$
|
(863,854
|
)
|
|||
Revenues
The Company's revenues for the three months ended December 31, 2010 increased by 350% to $296,034 from $65,832 in the three months ended December 31, 2009. The increase in revenue is due largely to a legacy contract still in force which requires a payment of approximately $260,000 in 2010. The Company generated approximately $36,000 in revenue based on the Company’s new lines of business during this period, which is slightly down from the previous quarter. While we had anticipated generating more revenue attributable to new lines of business in the quarter, delays in sales of Mugard by access Pharmaceuticals attributed to delays in Insurance Companies’ approvals for reimbursement to patients of the drug have delayed our ability to collect on the sales royalty due to iMedicor.
Cost of Services
Cost of services as a percentage of revenues was less than 1% for the quarter ended December 31, 2010 as compared to 3.7% for the quarter ended December 31, 2009. The decrease is due to the reduced revenue sharing associated with our current revenue streams: however we expect the cost of goods to increase in the future as we retain outside sales and marketing representatives to generate new business for the Company on a commission basis.
Operational, General and Administrative Expenses
Operational, general and administrative expenses for the quarter ending December 31, 2010 decreased to $298,001 from $416,810, for the quarter ending December 31, 2009 or 29%. This decrease reflects the Company’s continued effort to consolidate operations until such time that it can sustain growth through revenue generation.
Depreciation and Amortization
Depreciation and Amortization expenses increased 1% for the quarter ended December 31, 2010 to $516,537 from $510,187, for the quarter ending December 31, 2009, representing no material difference.
Loss from Operations
Income (loss) from operations for the quarter ended December 31, 2010 totaled ($773,769) compared to ($863,854) for the quarter ended December 31, 2009 or a decrease of 10%. The decrease in loss from operations for the quarter ended December 31, 2010 was due to the Company’s election to slow operations and the legacy contract still in place for 2010, however was offset by the issuance of stock for fees in the quarter.
Results of Operations
Six months ended December 31, 2010 Compared to Six Months Ended December 31, 2009
The following table sets forth for the periods indicated the percentage of total revenues represented by certain items reflected in our statements of operations:
|
Six Months Ended December 31
|
||||||||
|
(unaudited)
|
||||||||
|
2010
|
2009
|
|||||||
|
Net Sales and Revenues
|
$
|
344,631
|
$
|
131,414
|
||||
|
Cost of Services
|
1,508
|
7,937
|
||||||
|
Gross Profit
|
343,123
|
123,447
|
||||||
|
Operational General and Administrative Expenses
|
732,090
|
1,015,011
|
||||||
|
Depreciation and amortization
|
1,032,473
|
1,013,624
|
||||||
|
Stock issued for fees and services
|
515,581
|
1,261,393
|
||||||
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Total Expenses
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2,280,144
|
3,290,028
|
||||||
|
Loss before other income (expense)
|
$
|
(1,957,703)
|
$
|
(3,166,551
|
)
|
|||
Revenues
The Company's revenues for the six months ended December 31, 2010 increased by 255% to $344,631 from $131,414 in the six months ended December 31, 2009. The increase in revenue is due in part to a legacy contract still in force which requires a payment of approximately $260,000 in 2010, however the same contract accounted for $125,000 of revenue for the same period in 2009. The Company generated approximately $85,000 in revenue based on the Company’s new lines of business during this period, which is a significant increase from the same period in 2009, when no revenue at all was generated from any new lines of business.
Cost of Services
Cost of services as a percentage of revenues was less than 1% for the six months ended December 31, 2010 as compared to approximately 8% for the six months ended December 31, 2009. The decrease is due to the reduced revenue sharing associated with our current revenue streams: however we expect the cost of goods to increase in the future as we retain outside sales and marketing representatives to generate new business for the Company on a commission basis.
Operational, General and Administrative Expenses
Operational, general and administrative expenses for the six months ending December 31, 2010 decreased to $732,090, from $1,015,011 for the six months ending December 31, 2009 or 30%. This decrease reflects the Company’s continued effort to consolidate operations until such time that it can sustain growth through revenue generation.
Depreciation and Amortization
Depreciation and Amortization expenses increased 2% for the six months ended December 31, 2010 to $1,032,653 from $1,013,624, for the six months ending December 31, 2009, representing no material difference.
Loss from Operations
Income (loss) from operations for the six months ended December 31, 2010 totaled ($1,957,703) compared to ($3,166,551) for the six months ended December 31, 2009 or a decrease of 38%. The decrease in loss from operations for the six months ended December 31, 2010 was due to a combination of the Company’s election to significantly slow operations to conserve cash in 2010, and a reduction in shares issued for fees.
Liquidity and Capital Resources
Cash and cash equivalents were $1,000 at December 31, 2010 compared to $86,644 at June 30, 2010.
Net cash used by operating activities was $879,508 for the six months ended December 31, 2010 as compared to $893,747 for the six months ended December 31, 2009, representing no material difference.
Net cash used by investing activities was $55,000 for the six months ended December 31, 2010 as compared to cash used by investing activities of $-0- for the six months ended December 31, 2009. The difference is due to increased development of the iMedicor portal.
Net cash provided by financing activities was $848,864 for the six months ended December 31, 2010 as compared to net cash used by financing activities of $895,500 for the six months ended December 31, 2009, representing no material difference.
Due to our serious cash position and the lack of adequate sales revenue as the Portal is just beginning to generate sales, the Company has continued to reduce costs where possible, including eliminating non-essential staff positions and eliminating non-essential operating costs as well as reducing salaries of current employees.
The Company continues to operate at a loss and is projected to do so until the third or fourth quarter of this fiscal year. The Company is reliant, therefore, on raising capital through equity investments and/or debt instruments to maintain operations. The Company is actively engaging in fundraising efforts to increase its current level of operations.
Off-Balance Sheet Arrangements
The Company does not have any off-Balance Sheet Arrangements that are likely to have a current or future affect on our financial condition, revenues, results of operations, liquidity, or future effect on capital expenditures.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
N/A.
ITEM 4T. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Exchange Act, reports are recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management (with the participation of our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer) evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2010, the period covered by this Form 10-Q.
Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.
(b) Changes in Internal Controls over Financial Reporting
There were no changes in our internal controls over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the three-months ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On December 31, 2010 the Company sold, in a private placement made in reliance upon the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), to certain accredited investors (the “Investors”) 28 shares of Series “A” Preferred Stock in the Company to accredited investors (the “Investors”), pursuant to the Modification Agreement with Sonoran Pacific Resources dated December 31, 2010. The purchase price was $64,285.71 for one share of Series “A” Preferred Stock, or a total aggregate investment by the Investors of $1,800,000.
Each share of Series “A” Preferred Stock represents a 1% ownership interest in the Company on a non-dilutive basis and is convertible into shares of the Company’s common stock after the 12 month anniversary of the issuance of such share of Series “A” Preferred Stock. Each share of Series “A” Preferred Stock also carries a cumulative quarterly dividend of 2% of the original purchase price payable in the Company’s Common Stock or cash, at the Company’s option.
On December 31, 2010 the Company sold, in a private placement made in reliance upon the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), to an accredited investors (the “Investor”) 11 shares of Series “B” Preferred Stock of the Company and 24,918,128 shares of Common Stock of the Company in exchange for a Unsecured Promissory Note, dated June 30, 2008, issued by the Company to the investor with an aggregate value of $2,096,725.14 which includes the original principal amount of the Note and accrued Interest from the date of issuance of the Note. The purchase price was $100,000 for one share of Series “B” Preferred Stock and $0.04 for one share of common stock. The total reduction in debt to the company is $2,096,725.14
Each share of Series “B” Preferred Stock represents a 1% ownership interest in the Company on a non-dilutive basis and is convertible into shares of the Company’s Common Stock after the 12 month anniversary of the issuance of such share of Series “B” Preferred Stock. Each share of Series “B” Preferred Stock also carries a cumulative quarterly dividend of 4.5% of the original purchase price for the first two quarters after the issuance of such share and a cumulative 2.5% quarterly dividend thereafter, payable in the Company’s Common Stock or cash, at the Company’s option.
ITEM 5. OTHER INFORMATION
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4.1
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Secured Convertible Promissory Note of the Company dated April 18, 2009*
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|
|
4.2
|
|
Modification Agreement dated December 31, 2010**
|
|
4.3
|
Secured Convertible Promissory Note dated December 31, 2010**
|
|
|
4.4
|
Series “A” Preferred Stock Description**
|
|
| 4.5 |
Series "B" Preferred Stock Subscription Agreement**
|
|
| 4.6 | Series “B” Preferred Stock Description** | |
| 31.1 | Certification of the President and Chief Executive Officer pursuant to Rule 13a-14(a). | |
| 31.2 | Certification of the Chief Financial Officer and Treasurer pursuant to Rule 13a-14(a). | |
| 32 | Certification of the President and Chief Executive Officer and Chief Financial Officer and Treasurer pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002. |
* Incorporated by reference to the Company’s 8-K filing dated May 5, 2009
** Incorporated by reference to the Company’s 8-K filing dated January 18, 2011
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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IMedicor, Inc.
(Registrant)
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|
Date: February 22, 2011
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By:
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/s/ Fred Zolla
|
|
|
Fred Zolla
|
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|
President and Chief Executive Officer
(Principal Executive Officer)
|
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|
Date: February 22, 2011
|
By:
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/s/ Craig Stout
|
|
|
Craig Stout
|
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|
Interim Chief Financial Officer
(Principal Accounting Officer)
|
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