UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended November 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___ to ___
MEDICUS SYSTEMS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-4056769
------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Rotary Center, Suite 1111
Evanston, Illinois 60201 (847) 570-7500
------------------------------ ------------------
(Address of principal (Registrant's
executive offices) telephone No.)
Commission File Number 0-27614
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.
[X] Yes [ ] No
There were 6,477,173 shares of common stock outstanding
as of January 10, 1997.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
MEDICUS SYSTEMS CORPORATION
BALANCE SHEETS
November 30, May 31,
ASSETS 1996 1996
====== ------------ -----------
Current assets (Unaudited)
Cash and cash equivalents $ 824,709 $ 765,312
Short-term investments 5,406,862 7,705,380
Accounts receivable and
unbilled services,
net of allowance for
doubtful accounts
of $1,245,360 and
$1,222,463 12,114,084 9,664,422
Due from Managed Care
Solutions, Inc. 132,047 647,408
Inventories 219,436 235,398
Prepaid and deferred
income taxes 1,581,385 2,423,746
Prepaid expenses and other 991,903 709,394
------------ ------------
21,270,426 22,151,060
------------ ------------
Property and equipment, net
of accumulated
depreciation of
$3,200,102 and
$2,854,135 1,851,923 1,950,581
Software, net of
accumulated
amortization of
$3,272,040
and $2,900,540 3,692,022 3,051,387
Installment accounts
receivable due after
one year, net of
unearned interest
of $122,323
and $147,963 371,253 398,897
Deferred income taxes 108,128 227,635
------------ ------------
$ 27,293,752 $ 27,779,560
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
====================================
Current liabilities
Accounts payable $ 1,560,619 $ 188,777
Accrued compensation 176,476 828,857
Accrued restructuring
charge 881,180 1,527,461
Other accrued
liabilities 1,103,228 1,719,829
Deferred revenue 4,782,013 5,313,399
------------ ------------
8,503,516 9,578,323
------------ ------------
Stockholders' equity
Common stock $.01 par:
Authorized - 10,000,000
shares
Issued - 6,472,246
and 6,456,447 shares 64,722 64,564
Capital in excess of
par value 21,973,370 21,880,994
Treasury stock, at
cost - 7,002 shares (62,418) (62,418)
Unrealized loss on
short-term
investments (25,686) (18,361)
Accumulated deficit (3,159,752) (3,663,542)
------------ ------------
18,790,236 18,201,237
------------ ------------
$ 27,293,752 $ 27,779,560
============ ============
The accompanying notes are an integral
part of these statements.
<PAGE>
MEDICUS SYSTEMS CORPORATION
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
-----------------------
November 30, November 30,
1996 1995
----------- -----------
Revenues
Software products and
services $ 2,246,083 $ 2,934,901
Maintenance and support
services 2,876,744 2,466,937
Contract services 2,579,100 2,759,445
----------- -----------
7,701,927 8,161,283
Costs and expenses
Software products and
services 699,548 951,371
Maintenance and support
services 1,386,150 1,677,022
Contract services 2,424,919 2,591,603
----------- -----------
4,510,617 5,219,996
Marketing, general and
administrative 2,232,201 2,427,313
Research and development 775,640 396,552
----------- -----------
7,518,458 8,043,861
----------- -----------
Operating income 183,469 117,422
Interest and other
income 155,303 161,517
----------- -----------
Income before income taxes 338,772 278,939
Income tax expense 127,198 90,849
----------- -----------
Net income $ 211,574 $ 188,090
=========== ===========
Earnings per share $ 0.03 $ 0.03
=========== ===========
Weighted average
common and common
equivalent shares
outstanding 6,496,990 6,438,275
=========== ===========
The accompanying notes are an integral
part of these statements.
<PAGE>
MEDICUS SYSTEMS CORPORATION
STATEMENTS OF INCOME
(Unaudited)
Six Months Ended
-----------------------
November 30, November 30,
1996 1995
----------- -----------
Revenues
Software products and
services $ 4,035,044 $ 6,061,468
Maintenance and support
services 5,257,787 4,823,937
Contract services 5,102,692 5,757,087
----------- -----------
14,395,523 16,642,492
Costs and expenses
Software products and
services 1,180,274 2,007,544
Maintenance and support
services 2,240,087 3,178,668
Contract services 4,783,269 5,464,859
----------- -----------
8,203,630 10,651,071
Marketing, general and
administrative 4,263,893 4,560,928
Research and development 1,380,940 921,736
----------- -----------
13,848,463 16,133,735
----------- -----------
Operating income 547,060 508,757
Interest and other
income 275,397 321,570
----------- -----------
Income before income taxes 822,457 830,327
Income tax expense 318,667 302,210
----------- -----------
Net income $ 503,790 $ 528,117
=========== ===========
Earnings per share $ 0.08 $ 0.08
=========== ===========
Weighted average
common and common
equivalent shares
outstanding 6,485,121 6,442,763
=========== ===========
The accompanying notes are an integral
part of these statements.
<PAGE>
MEDICUS SYSTEMS CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
-------------------------
November 30, November 30,
1996 1995
----------- -----------
Cash flows from
operating activities
Net income $ 503,790 $ 528,117
Adjustments to reconcile
to net cash from
operating activities:
Depreciation of
property and
equipment 345,967 339,319
Amortization of
software 371,500 677,133
Deferred income
taxes 119,507 30,322
Accrued restructuring
charge (646,281) --
Changes in certain
current assets
and current liabilities:
Accounts receivable
and unbilled
services (2,436,604) (5,051,590)
Due from Managed
Care Solutions, Inc. 515,361 (814,816)
Prepaid income taxes 842,361 --
Accounts payable 755,241 (520,983)
Accrued compensation (652,381) (257,685)
Deferred revenue (531,386) 3,493,697
Other, net (233,865) 1,248,300
----------- -----------
(1,046,790) (328,186)
----------- -----------
Cash flows from investing activities
Additions to property and
equipment (247,309) (291,863)
Additions to software (1,012,135) (1,033,374)
Proceeds from maturity of
short-term investments 3,594,793 3,733,377
Proceeds from sale of
short-term investments 58,588,023 36,500,000
Purchases of short-term
investments (59,896,661) (39,693,492)
----------- -----------
1,026,711 (785,352)
----------- -----------
Cash flows from financing activities
Sale of common stock 79,476 --
Purchase of treasury stock -- (532,500)
Reissuance of treasury stock -- 541,423
Dividends paid -- (383,579)
----------- -----------
79,476 (374,656)
----------- -----------
Net increase (decrease)
in cash and cash
equivalents 59,397 (1,488,194)
Cash and cash
equivalents, beginning
of period 765,312 2,556,016
Cash and cash ----------- -----------
equivalents, end
of period $ 824,709 $ 1,067,822
=========== ===========
The accompanying notes are an integral
part of these statements.
<PAGE>
MEDICUS SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of presentation
Prior to March 1, 1996, the Company's
predecessor (the "Predecessor Corporation")
operated a software and related services
business and a small managed care business.
In connection with a series of transactions
which occured March 1, 1996, the Predecessor
Corporation formed a new Delaware subsidiary,
Medicus Systems Software, Inc., to which it
transferred all of its assets and liabilities
excluding only the defined assets and
liabilities of its managed care business. In
turn, the stock of this newly-formed
subsidiary was distributed on a share-for-
share basis to the stockholders of the
Predecessor Corporation (the "Distribution"),
the name of the subsidiary was changed to
Medicus Systems Corporation ("the Company"),
and the name of the Predecessor Corporation
was changed to Managed Care Solutions, Inc.
("MCS"). The Company is liable for all
obligations of the Predecessor Corporation
except those specifically related to the
Predecessor Corporation's managed care
business.
Although the Company is, in substance,
the Predecessor Corporation's successor, the
financial statements of the Company for the
quarter and six months ended November 30,
1995 have been prepared as if the Company
had operated as a free-standing entity
for all the periods presented (excluding
certain incremental corporate expenses
that would have been incurred had
it operated on a stand-alone basis).
Accordingly, the financial statements
include those assets, liabilities,
revenues and expenses directly attributable
to the Company's operations and exclude those
specifically related to the managed care
business. The Company believes this
presentation most fairly represents its
financial condition, results of operations
and changes in stockholders' equity and cash
flows. The financial statements included
herein for periods prior to the Distribution
do not necessarily reflect what the financial
position and results of operations of the
Company would have been had it operated as a
stand-alone entity during the periods
covered, and may not be indicative of future
operations or financial position.
The Company and MCS signed a services
agreement, pursuant to which the Company (i)
will make available to MCS certain services,
including tax, accounting, data processing,
cash management, employee benefits,
monitoring, operational, supervisory,
insurance purchasing and claims
administration consulting services, and (ii)
provide certain financial services to MCS,
including analysis and advice regarding
potential financial transactions (including
but not limited to proposed issuances of debt
or equity securities, proposed merger or
asset acquisition or sale transactions and
dividend, stock split or similar
transactions), assistance in budget and
forecast preparation, relations with
financial analysts, financial press, and
investors, and crisis management and control.
Such services commenced on March 1, 1996, and
shall continue for one year. MCS will pay
the Company $700,000 for such services. In
order to compensate the Company for fixed
costs incurred in making such services
available, MCS will be obligated to pay such
fees whether or not it elects to utilize the
services. MCS will also reimburse the
Company for its out-of-pocket expenses in
connection therewith. The services agreement
also provides that the Company will not be
liable for any losses or damages suffered in
respect of services to be performed
thereunder, other than by reason of its
willful misconduct or gross negligence in
performing such services. Marketing, general
and administrative expenses were reduced by
$175,000 in the quarter and $350,000 in the six
months ended November 30, 1996 as a result of
this agreement.
In management's opinion, the financial
statements of the Company reflect all
adjustments (consisting only of normal
recurring adjustments) considered necessary
for a fair presentation of the operating results
for the quarter and six months ended November 30,
1996. Certain reclassifications have been made in
the prior period financial statements to
conform to the current period presentation.
These reclassifications had no effect on
previously reported total assets, total
liabilities, equity or results of operations.
Operating results for the interim periods
are not necessarily indicative of the results
to be expected for the full year. The
financial information included herein should
be read in conjunction with the financial
statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for
the year ended May 31, 1996.
<PAGE>
MEDICUS SYSTEMS CORPORATION
NOTES TO FINANCIAL STATEMENTS, Continued
(Unaudited)
Note 2 - Earnings per share
Earnings per common share have been
computed by dividing net income by the
weighted average of common stock and common
stock equivalents outstanding during the
period. Common stock equivalents include
shares issuable on the exercise of stock
options and the warrant (when dilutive),
using the treasury method from the date of
grant.
Note 3 - Dividends
The Predecessor Company declared
quarterly dividends of $0.03 in the first
two quarters of fiscal year 1996. The Board of
Directors of the Company has determined not to
pay dividends on the Common Stock in the
foreseeable future.
Note 4 - Accrued restructuring charge
During fiscal 1996, the Company recorded
a charge as a result of efforts to
restructure its businesses to focus on its
core products and services. The components
of the remaining restructuring reserve are as
follows:
November 30, May 31,
1996 1996
----------- -----------
Product line exit costs $ 210,375 $ 410,375
Severance (1 officer and
3 employees) 670,805 1,117,086
----------- -----------
$ 881,180 $ 1,527,461
=========== ===========
During the quarter ending November 30,
1996, the Company reduced its reserve for
future severance obligations by
$124,716, due to favorable settlements with
two of its employees, and paid $134,767 in
severance benefits. During the six months ended
November 30, 1996, the Company reduced its reserve
for continuing operations on product line exit costs
by $200,000, as a result of negotiations with its
customers, paid $321,565 in severance benefits, and
reduced its reserve for future severance obligations
by $124,716.
Note 5 - Subsequent Event
On January 3, 1997, the Company announced that its
Board of Directors approved the repurchase of 1,000,000
shares of Common Stock and 500 shares of Voting Preferred
Stock from its founder, Richard C. Jelinek. The Company
will pay Mr. Jelinek $4,500,000 in cash and $2,000,000
in 8% two-year promissory notes, and will issue to Mr.
Jelinek 400,000 warrants to purchase Common Stock at
$8.00 per share. The repurchase is subject to approval
of the Company's stockholders at the Annual Meeting of
Stockholders in March, 1997.
<PAGE>
Item 2. Managment's Discussion and Analysis of
Financial Condition and Results of Operations
MEDICUS SYSTEMS CORPORATION
RESULTS OF OPERATIONS
The Company's quarterly operating results
historically have varied depending upon such
factors as the timing of significant sales
and the timing of new product introductions.
Consequently, the results for any one quarter
may not be indicative of future operating
results.
The following table sets forth for the
periods indicated (i) the percent of revenues
represented by certain line items in the
Company's Statements of Income and (ii) the
percentage change in each line item from the
prior year period.
Percent of Revenues
-------------------
Three Months Ended Percentage
------------------- Increase
Nov. 30, Nov. 30, (Decrease)
1996 1995 1995 to 1996
---- ---- ------------
Revenues
Software products and
services 29% 36% (23%)
Maintenance and support
services 37 30 17
Contract services 34 34 (7)
---- ----
100 100 (6)
---- ----
Costs and expenses
Software products and
services (1) 31 32 (26)
Maintenance and support
services (1) 48 68 (17)
Contract services (1) 94 94 (6)
---- ----
59 64 (14)
Marketing, general and
administrative 29 30 (8)
Research and
development 10 5 96
---- ----
98 99 (7)
---- ----
Operating income 2 1 56
Interest and other
income 2 2 (4)
---- ----
Income before income taxes 4 3 21
Income taxes 1 1 40
---- ----
Net income 3% 2% 12
==== ====
_____________
(1) Shown as a percent of related revenues.
The Company's revenues are derived from
three sources: (1) license fees and the
related services for licensing the Company's
proprietary software products; (2)
maintenance and support services related to
such software products; and (3) contract
services.
Percent of Revenues
-------------------
Six Months Ended Percentage
------------------- Increase
Nov. 30, Nov. 30, (Decrease)
1996 1995 1995 to 1996
---- ---- ------------
Revenues
Software products and
services 28% 36% (33%)
Maintenance and support
services 37 29 9
Contract services 35 35 (11)
---- ----
100 100 (14)
---- ----
Costs and expenses
Software products and
services (1) 29 33 (41)
Maintenance and support
services (1) 43 66 (30)
Contract services (1) 94 95 (12)
---- ----
57 64 (23)
Marketing, general and
administrative 30 27 (7)
Research and
development 9 6 50
---- ----
96 97 (14)
---- ----
Operating income 4 3 8
Interest and other
income 2 2 (14)
---- ----
Income before income taxes 6 5 (1)
Income taxes 2 2 5
---- ----
Net income 4% 3% (5)
==== ====
_____________
(1) Shown as a percent of related revenues.
The Company's revenues are derived from
three sources: (1) license fees and the
related services for licensing the Company's
proprietary software products; (2)
maintenance and support services related to
such software products; and (3) contract
services.
<PAGE>
MEDICUS SYSTEMS CORPORATION
RESULTS OF OPERATIONS, Continued
Software products and services
Revenues decreased 23% to $2.2 million
for the quarter and 33% to $4.0 million
for the six months, primarily due to the
continued weakness in the Company's
primary markets and product lines.
Also contributing to the decline were
delays in the release of certain Windows-
based products and continued competition in
many markets. Costs and expenses for the
quarter and six months decreased 26% and
41%, respectively, compared to the corresponding
prior year periods, and as a percentage of related
revenues, decreased to 31% from 32% for the quarter
and to 29% from 33% for the six months. The
decrease resulted primarily from lower
personnel and service-related expenses
associated with product lines discontinued
during the latter part of fiscal 1996 and
lower labor costs resulting from a reduction
in service-related personnel for continuing
product lines. Additionally, costs and
expenses for the quarter include the effect
of the Company's decision to reduce its
reserve for future severance obligations by
$25,000, due to a favorable settlement with
one of its employees, and for the six months,
include the effect of the Company's decision
to reduce its reserve for continuing obligations
on product line exit costs by $200,000,
as a result of favorable negotiations with
its customers.
Maintenance and support services
Revenues increased 17% to $2.9 for the quarter
and 9% to $5.3 million for the six months,
primarily due to the larger base of licensed
products and modest price increases,
partially offset by the loss of maintenance
revenue from product lines which were
discontinued during the latter part of fiscal
1996. Costs and expenses for the quarter and
six months decreased 17% and 30%, respectively,
compared to the corresponding prior year
periods, and as a percentage of related
revenues, decreased to 48% from 68% for the quarter,
and to 43% from 66% for the six months.
The decrease resluted primarily from lower
labor and operating costs associated
with product lines that were discontinued
in the third and fourth quarters of
fiscal 1996. Also, the decrease reflected
lower labor costs resulting from personnel
shifts to development activities from
maintenance and support services.
Contract services
Revenues decreased 7% to $2.6 million for
the quarter and 11% to $5.1 million for the six
months, primarily due to lower revenues
from the contract to manage the information systems
functions at Bethesda, Inc. in Cincinnati,
Ohio. Additionally, the prior year period
includes revenues from the Drake Center
contract, which expired in February, 1996.
Costs and expenses for the quarter and six months
decreased 6% and 12%, respectively, compared
to the corresponding prior year periods, and as a
percentage of related revenues, remained consistent
at 94% for the quarter and decreased to 94% from 95%
for the six months, primarily reflecting the
decreased expenses associated with the
Bethesda, Inc. contract and the elimination
of expenses associated with the Drake Center
contract.
Marketing, general and administrative
Expenses decreased 8% to $2.2 million for the
quarter and 7% to $4.3 million for the six months.
Costs and expenses in for the quarter and six
months ended November 30, 1996 include the effect of
$175,000 and $350,000, respectively, in administrative
fees the Company received as a result of the services
agreement with MCS. Additionally, cost and expenses
for the quarter include the effect of the Company's
decision to reduce its reserve for future severance
obligations by $100,000, due to favorable settlements
with two of its employees.
<PAGE>
MEDICUS SYSTEMS CORPORATION
RESULTS OF OPERATIONS, Continued
Research and development
Actual research and development expenses
increased 22% to $1.2 million for the quarter
and 8% to $2.3 million for the six months.
Research and development costs presented in
the accompanying financial statements for the
quarter and six months were $776,000 and $1,381,000,
respectively, compared to $397,000 and $922,000 in
the corresponding prior year periods. The Company
did not obtain funding from clients under
development service agreements during the
quarter and six months ended November 30, 1996,
compared to $139,000 and $311,000 obtained
in the corresponding prior year periods,
for its research and development
efforts. These development service
agreements provide for retention of ownership of
the products developed by the Company and for
payment of royalties of up to 5% of future
license fees to the clients. The Company also
capitalized software development costs of
$476,000 and $947,000 during the quarter and
six months, respectively, compared to $487,000 and
$928,000 in the corresponding prior year periods,
reflecting increased investment in the development of
new products and significantly enhanced
functionality of current products. Actual
research and development expenditures were
56% and 58% of software products and services
revenues for the quarter and six months,
respectively, compared to 35% and 36% in
the corresponding prior year periods.
During the first six months of fiscal 1997, the
Company's development efforts were focused on
the Resource Case Management System, and the
Clinical Data Systems and the Decision
Support Systems product lines. During
the first six months of fiscal 1996,
the Company was engaged in several
development projects, including the Resource
Case Management System, Medicus
Architecture (MACH 1) and the Decision Support
Systems product lines.
Interest and other income
Interest and other income decreased 4%
to $155,000 for the quarter and 14% to $275,000
for the six months, primarily due to lower average
cash balances.
Income taxes
The Company's effective tax rate was
37.5% for the quarter and 38.7% for the
six months, compared to 32.6% and 36.4% for
the corresponding prior periods. The Company
plans to utilize net tax operating losses carried
forward from the prior year to offset taxable
income in the current year to the fullest extent
possible.
FINANCIAL CONDITION
Working capital generated by operations
increased $194,000 during the first six months
of fiscal 1997. The Company currently has no
long-term debt, and, as of November 30, 1996,
the Company held approximately $825,000 in cash
and cash equivalents and $5.4 million in short-term
investments.
During the quarter, the Company billed its clients
in advance for the year's maintenance and support
services provided on its software products. This
resulted in an increase in the accounts receivable
balance during the period and will cause an increase
in cash balances in subsequent months as the related
accounts receivable are collected.
The Company announced that its Board of Directors
approved the repurchase of 1,000,000 shares of
Common Stock and 500 shares of Voting Preferred
Stock from its founder, Richard C. Jelinek. The Company
will pay Mr. Jelinek $4,500,000 in cash and $2,000,000
in 8% two-year promissory notes, and will issue to
Mr. Jelinek 400,000 warrants to purchase Common Stock
at $8.00 per share. The repurchase is subject to
approval of the Company's stockholders at the
Annual Meeting of Stockholders in March, 1997.
As a result of the management's commitment to expand
its products and services, the Company continually
evaluates for acquisition various businesses and products
complementary to its current operations. The Company
expects to finance any such investments through cash on
hand, cash generated from operations and the issuance
of additional shares of Common Stock.
The Company's current commitments consist primarily
of lease obligations for office space. The Company
believes that it has sufficient financial resources,
including cash on hand generated from operations, to
meet ordinary capital needs for the foreseeable future
as well as to fund the acquisition of Richard C. Jelinek's
Common and Voting Preferred Stock.
<PAGE>
PART II - OTHER INFORMATION
Item 5. Other Information
On January 3, 1997, the Company announced that its
Board of Directors approved the repurchase of 1,000,000
shares of Common Stock and 500 shares of Voting Preferred
Stock from its founder, Richard C. Jelinek. In addition,
the Company announced the Mr. Jelinek will step down as
Chairman of the Company, but will remain a director, and
that John P. Kunz will join the Board of Directors.
A copy of the announcement is filed as an exhibit and
listed in the Exhibit Index below.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
Exhibit 99 - Press Release Announcing
Stock Repurchase From Founder
and Board Changes
(b) Reports on Form 8-K
The Company did not file any reports
on Form 8-K during the quarter.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
MEDICUS SYSTEMS CORPORATION
---------------------------
(Registrant)
January 14, 1997 /s/ Patrick C. Sommers
- ---------------- -----------------------
Patrick C. Sommers
President
(Chief Executive Officer)
January 14, 1997 /s/ William W. Cowan
- ---------------- ---------------------
William W. Cowan
Vice President
(Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from the Company's Form 10-Q for the quarterly
period ended November 30, 1996, and is qualified in its
entirety by reference to such document.
</LEGEND>
<S> <C>
<CURRENCY> U.S. DOLLARS
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> NOV-30-1996
<EXCHANGE-RATE> 1
<CASH> 824,709
<SECURITIES> 5,406,862
<RECEIVABLES> 13,359,444
<ALLOWANCES> 1,245,360
<INVENTORY> 219,436
<CURRENT-ASSETS> 21,270,426
<PP&E> 5,052,025
<DEPRECIATION> 3,200,102
<TOTAL-ASSETS> 27,293,752
<CURRENT-LIABILITIES> 8,503,516
<BONDS> 0
0
0
<COMMON> 64,772
<OTHER-SE> 18,790,236
<TOTAL-LIABILITY-AND-EQUITY> 27,293,752
<SALES> 7,701,927
<TOTAL-REVENUES> 7,701,927
<CGS> 0
<TOTAL-COSTS> 4,510,617
<OTHER-EXPENSES> 775,640
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 338,772
<INCOME-TAX> 127,198
<INCOME-CONTINUING> 211,574
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 211,574
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
Press Release - Medicus Systems Corporation
Contact: Ralph Keiser
Medicus Systems Corporation
(512) 261-7715
MEDICUS SYSTEMS CORPORATION ANNOUNCES STOCK
REPURCHASE FROM FOUNDER AND BOARD CHANGES
EVANSTON, Ill., January 3, 1997 -- Medicus Systems
Corporation (NASDAQ:MECS), a leading provider of
healthcare decision support systems and related services,
today announced that its Board of Directors has approved
the repurchase of one million shares of Common Stock and
500 shares of Voting Preferred Stock from its founder,
Richard C. Jelinek, Ph.D. Dr. Jelinek also will step down
as Chairman of the Company, but will remain a director.
In addition, John P. Kunz, formerly the President and CEO
of Dun and Bradstreet Business Information Services, has
joined the Board of Directors.
The repurchase will be subject to final approval of the
Company's shareholders at the Annual Meeting of Stockholders
in March as well as a fairness opinion regarding the
transaction to be issued by the investment banking firm of
Punk, Ziegel and Knoell, which has been retained as
independent financial advisors for the Board of Directors.
The repurchased stock, including approximately 15.6% of the
outstanding common shares and 100% of the authorized Voting
Preferred, will be retired. The Company will pay
Dr. Jelinek an aggregate purchase price of $4,500,000 in
cash, $2,000,000 in two year notes, and 400,000 warrants to
purchase common stock exercisable at $8.00 per share. The
Company expects the action to have a positive impact on
future earnings per share. This transaction will allow the
Company to continue with its newly-revised strategic plans
and to eliminate Dr. Jelinek's "super vote."
Commenting on the repurchase decision, Medicus President
and CEO Patrick C. Sommers said, "The Board of Directors and
I felt that this decision was in the best interest of
Medicus going forward and was essential in order to grow the
Company as we have planned. Dr. Jelinek has made
significant contributions to Medicus since founding the
Company over 27 years ago, but his interests have changed
over the past several years as have Medicus' focus and
future direction. Richard is very much in favor of this
decision, which will allow him to continue to participate
at the Board level while at the same time provide him with
the option of pursuing other interests."
Sommers stated further, "I am very excited about the
positive impact these changes will have on Medicus' future
- - the execution of our core strategy will continue as
planned and we are positioned to increase the value of
the Company for our investors, shareholders and employees.
The appointment of Mr. Kunz to Medicus' Board will be of
significant value given his 25 years of experience at the
Dun and Bradstreet Corporation, and I feel his experience
in the information management business will be invaluable
as Medicus pursues new opportunities in that area. Since
completing his tenure at D&B, Mr. Kunz has been active for
the past seven years as a consultant to senior management
teams in the U.S. and internationally on acquisitions,
marketing, profit and growth strategies and strategic
planning. Mr. Kunz has played an active role in the
formulation of business and marketing strategy while
serving on and advising a number of company boards,
including Dun and Bradstreet International, American
Credit Indemnity Company, Intervest, Advance-Peterholm
Group, Ltd. and Automated Communications, Inc."
"Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995: Statements contained in
this release that are not based on historical facts are
forward-looking statements subject to uncertainties and
risks including, but not limited to: product and service
demand and acceptance; economic conditions; the impact of
competition and pricing; capacity and supply constraints
or difficulties; results of financing efforts; and other
risks detailed in the Company's Securities and Exchange
Commission filings.
Medicus Systems Corporation provides its customers
with software and services to capture, structure and
analyze information, enabling them to measure and manage
organizational performance to optimize outcomes. For
further information about Medicus Systems Corporation,
contact Ralph Keiser at (512) 261-7715.
