UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from
..................................to....................................
Commission file number: 0-22319
PATIENT INFOSYSTEMS, INC.
(Exact name of registrant as specified in its charter)
__________Delaware____________ _________16-1476509______________
(State or other jurisdiction of (I.R.S. EmployerIdentification No.)
incorporation or organization)
46 Prince Street, Rochester, NY 14607
(Address of principal executive offices)
(Zip Code)
(716) 242-7200
(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 last 90 days. Yes __X___ No _____
As of April 30, 1997, 7,971,802 common shares were outstanding.
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements.
PATIENT INFOSYSTEMS, INC.
(A Development Stage Enterprise)
CONDENSED BALANCE SHEETS
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
ASSETS ----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,004,760 $15,666,609
Marketable securities 10,000,340 --
Accounts receivable 196,144 386,215
Accrued interest receivable 37,077 --
Prepaid expenses and other current assets 116,117 170,526
----------- -----------
Total current assets 17,354,438 16,223,350
PROPERTY AND EQUIPMENT, net 902,927 862,037
----------- -----------
TOTAL ASSETS $18,257,365 $17,085,387
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 497,792 $ 196,674
Accrued salaries and wages 223,765 127,029
Accrued expenses 121,993 211,457
Accrued initial public offering costs -- 446,568
Deferred revenue 294,149 582,783
Accrued loss on development contracts 33,303 67,139
----------- -----------
Total current liabilities 1,171,002 1,631,650
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value: shares authorized:
20,000,000; issued and outstanding: March 31,
1997-7,971,802; December 31, 1996 - 7,653,202 79,718 76,532
Additional paid-in capital 21,540,616 19,300,293
Unrealized loss on investments available for sale (22,359) --
Deficit accumulated during the development stage (4,511,612) (3,923,088)
---------- ----------
Total stockholders' equity 17,086,363 15,453,737
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $18,257,365 $17,085,387
=========== ===========
</TABLE>
See notes to condensed financial statements.
<PAGE>
PATIENT INFOSYSTEMS, INC.
(A Development Stage Enterprise)
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Three Period From
Months Months February 22, 1995
Ended Ended (Inception) to
March 31, March 31, March 31,
1997 1996 1997
---- ---- ----
<S> <C> <C> <C>
REVENUES $ 523,477 $ 166,236 $1,481,889
---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales 351,070 163,460 1,211,262
Sales and marketing 389,499 182,960 1,678,430
General and administrative 428,393 388,291 2,867,651
Research and development 160,762 8,629 561,223
------- ----- ------
Total costs and expenses 1,329,724 743,340 6,318,566
--------- ------- ---------
OPERATING LOSS (806,247) (577,104) (4,836,677)
INTEREST INCOME 217,723 8,899 325,065
------- ----- -------
NET LOSS $ (588,524) $ (568,205) $(4,511,612)
=========== =========== ===========
NET LOSS PER COMMON AND
COMMON SHARE
EQUIVALENTS $ (.07) $ (.09) $ (.57)
=========== =========== ===========
WEIGHTED AVERAGE COMMON
AND COMMON SHARE
EQUIVALENTS 7,942,475 6,062,761 7,942,475
========= ========= =========
</TABLE>
See notes to condensed financial statements.
<PAGE>
PATIENT INFOSYSTEMS, INC.
(A Development Stage Enterprise)
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Three Period From
Months Months February 22, 1995
Ended Ended (Inception) to
March 31, March 31, March 31,
1997 1996 1997
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (588,524) $ (568,205) $(4,511,612)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 65,268 38,100 277,791
Amortization of premiums/discounts on
available-for-sale marketable securities (50,420) -- (50,420)
Decrease (increase) in accts receivable 190,071 (480,388) (196,144)
Increase in accrued interest receivable (37,077) -- (37,077)
Decrease (increase) in prepaid expenses 54,409 5,980 (102,909)
Increase (decrease) in accounts payable 301,118 (215,799) 497,792
Increase (decrease) in accrued salaries 96,736 (15,284) 223,765
(Decrease) increase in accrued expenses (89,464) 75,397 121,993
(Decrease) increase in deferred revenue (288,634) 316,945 294,149
(Decrease) increase in accrued loss on
development contracts (33,836) -- 33,303
------- ------- ---------
Net cash used in operating activities (380,353) (843,254) (3,449,369)
------- ------- ---------
INVESTING ACTIVITY:
Property and equipment additions (106,158) (169,353) (1,180,718)
Purchases of available-for-sale
marketable securities (9,972,279) -- (9,972,279)
--------- ------- ---------
Net cash used in investing activities (10,078,437) (169,353) (11,152,997)
---------- ------- ----------
FINANCING ACTIVITIES:
Proceeds from issuance of common and
preferred stock, net 2,243,509 -- 21,607,126
Decrease in accrued initial public
offering costs (446,568) -- --
-------- ------- ----------
Net cash provided by financing activities 1,796,941 -- 21,607,126
--------- ------- ----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (8,661,849) (1,012,607) 7,004,760
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 15,666,609 1,182,080 --
---------- --------- ---------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 7,004,760 $ 169,473 $7,004,760
=========== ========== ==========
</TABLE>
See notes to condensed financial statements.
<PAGE>
PATIENT INFOSYSTEMS, INC.
(A Development Stage Enterprise)
Notes to Condensed Financial Statements
1. The condensed financial statements for the three month periods ended March
31, 1997 and March 31, 1996 are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion
of management, necessary for a fair presentation of the financial position
and operating results for the interim periods. The condensed financial
statements should be read in conjunction with the financial statements and
notes thereto, together with management's discussion and analysis of
financial condition and results of operations contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996. The results
of operations for the three months ended March 31, 1997 are not necessarily
indicative of the results for the entire fiscal year ending December 31,
1997.
2. In March 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share." This new
standard requires dual presentation of basic and diluted earnings per share
(EPS) on the face of the earnings statement and requires a reconciliation of
the numerators and denominators of basic and diluted EPS calculations. This
statement will be effective for the Company's 1997 fiscal year. The Company
has not performed the calculation for the pro forma financial statement
disclosure of the effect of this standard, however management believes the
results would not materially differ from earnings per share as shown.
3. During the three month period ended March 31, 1997, the Company purchased
marketable investment securities which are considered available for sale and
are recorded at fair value, based on quoted market prices. The net unrealized
holding gain or loss on marketable investment securities is included as a
separate component of stockholders' equity. A decline in the fair value of
any marketable investment security below cost, that is deemed other than
temporary, is charged to earnings resulting in a new cost basis for the
security. Costs of investments sold are determined on the basis of specific
identification.
The cost or amortized cost and estimated market values of investments were
as follows at March 31, 1997:
Cost or Gross Estimated
Amortized Unrealized Market
Cost Losses Value
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies $10,022,699 $(22,359) $10,000,340
----------- -------- -----------
Total $10,022,699 $(22,359) $10,000,340
=========== ======== ===========
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Management's discussion and analysis provides a review of the Company's
operating results for the three month periods ended March 31, 1997 and March 31,
1996, and its financial condition at March 31, 1997. The focus of this review is
on the underlying business reasons for significant changes and trends affecting
the revenues, net earnings and financial condition of the Company. This review
should be read in conjunction with the accompanying condensed financial
statements.
In an effort to give investors a well-rounded view of the Company's
current condition and future opportunities, this Quarterly Report on Form 10-Q
includes forecasts by the Company's management about future performance and
results. Because they are forward-looking, these forecasts involve
uncertainties. These uncertainties include risks of market acceptance of or
preference for the Company's systems and services, competitive forces, the
impact of, and changes in, government regulations, general economic factors in
the healthcare industry and other factors discussed in the Company's filings
with the Securities and Exchange Commission.
Results of Operations
Revenues
The Company generated revenue of $523,477 for the three months ended March
31, 1997, as compared to $166,236 during the three months ended March 31, 1996.
A summary of these revenues by category is as follows:
Three Months Three Months
Ended Ended
Revenues March 31, 1997 March 31, 1996
- -------- -------------- --------------
Program development $406,084 $165,435
Program licensing 87,500 -
Program operations 29,893 801
------ ---
Total revenues $523,477 $166,236
======== ========
Program development revenue represents the amounts that the Company
charges its customers for the development of the capability to deliver services
in its customized programs. The increase in program development revenues from
the first quarter of 1996 to the first quarter of 1997 reflects the increase in
the number of different programs which produced program development revenue from
four during the first quarter of 1996 to fourteen during the quarter ended March
31, 1997. The first quarter of 1997 program development revenues also reflect
the recognition of deferred development revenue of $80,021 related to a weight
management program which was under development pursuant to a Services Agreement
with a customer. The customer has been denied regulatory approval for the use of
their pharmaceutical product for the indication which was the focus of the
program, and, therefore, because the Company believes that no further
development of this program will occur pursuant to this Services Agreement the
remaining deferred development revenue was recognized.
Program licensing revenue represents amounts that the Company charges its
customers for the right to enroll patients in or the right to market to other
entities certain of its programs, primarily the Company's standardized asthma
and diabetes programs. The Company did not have any of its programs available
for licensing during the first quarter of 1996, therefore no revenue was
generated during that period.
Program operational revenues are the revenues generated as a result of
providing services to the Company's customers. These revenues increased
significantly from the first quarter of 1996 to the first quarter of 1997,
primarily due to the fact that initial patient enrollments in the Company's
disease state management programs did not occur until the fourth quarter of
1996.
The Company anticipates that it will begin to provide other services to
customers in the healthcare industry during 1997 which involve new applications
of its information capture and delivery system. These services include patient
surveys, health risk assessments, nursing support lines, physician education
programs and marketing support functions.
Costs and Expenses
Cost of sales include salaries and related benefits, services provided by
third parties, and other expenses associated with the development of the
Company's customized disease state management programs, as well as the operation
of each of its disease state management programs. In addition, cost of sales
includes accrued losses on program development in accordance with the Company's
policy of recognizing such losses, if any, in full as identified. Cost of sales
was $351,070 for the three months ended March 31, 1997, and $163,460 for the
three months ended March 31, 1996. The increase in these costs reflects an
increased level of program development and operational activities, as well as
the Company's creation of the capacity necessary to handle anticipated increases
in the number of individuals to whom the Company provides services.
Sales and marketing expenses for the three months ended March 31, 1997
were $389,499, as compared to $182,960 for the three month period ended March
31, 1996. These costs consist primarily of salaries, related benefits, travel
costs, sales materials and other marketing related expenses. Spending in this
area has increased due to significant expansion of the Company's sales and
marketing staff. It is anticipated that the Company will continue to
significantly invest in the sales and marketing process, and that such expenses
will increase in future periods.
General and administrative expenses include the costs of corporate
operations, finance and accounting, human resources and other general operating
expenses of the Company. General and administrative expenses for the three
months ended March 31, 1997 were $428,393, as compared to $388,291 for the three
month period ended March 31, 1996. These expenditures have been incurred to
maintain the corporate infrastructure necessary to support anticipated program
development and operations. The increase in these costs was caused by an
increase in the Company's level of business activity, and the addition of
required administrative personnel. The Company expects that general and
administrative expenses will increase in future periods.
Research and development expenses consist primarily of salaries and related
benefits and administrative costs directly associated with the Company's
research and development personnel for development of certain components of its
integrated information capture and delivery system, as well as development of
the Company's standardized disease state management programs. Research and
development expenses for the three months ended March 31, 1997 were $160,762,
and were $8,629 for the three months ended March 31, 1996. The increase in these
costs reflects the development activities related to the Company's standardized
disease state management programs for patients suffering from asthma and
diabetes. The Company anticipates that research and development expenses will
continue at the current level, or increase slightly in future periods, as the
Company continues to expand the number of programs made available to its
customers on a standardized basis.
Interest income was $217,723 for the three months ended March 31, 1997, as
compared to $8,899 for the three month period ended March 31, 1996. The increase
in interest income reflects the additional funds available to the Company for
investment as a result of its initial public offering on December 19, 1996.
The Company had a net loss of $588,524 for the three months ended March
31, 1997, and a net loss of $568,205 for the three months ended March 31, 1996.
This represents a net loss per share of $.07 for the first quarter of 1997, as
compared to a net loss of $.09 per share in the first quarter of 1996.
Liquidity and Capital Resources
At March 31, 1997 the Company had working capital of $16,183,436, as
compared to working capital of $14,591,700 at December 31, 1996. Since its
inception the Company has primarily funded its operations, working capital needs
and capital expenditures from the sale of equity securities. The Company's
initial capitalization of $500,000 was completed in February 1995. The Company
received $1,800,000 from the sale of equity securities in a private placement
during the third quarter of 1995, and $3,000,000 from the sale of additional
equity securities in a private placement during the second quarter of 1996. On
December 19, 1996 the Company completed an initial public offering of its common
stock which generated net proceeds to the Company of $14,082,048. The
underwriters of the Company's initial public offering exercised their
over-allotment option on January 8, 1997 resulting in net proceeds to the
Company of $2,232,000. The Company's net loss of $588,524 for the first quarter
of 1997 was offset by the receipt of the proceeds of the sale of additional
securities upon the closing of the over-allotment option, however it is
anticipated that the Company's continuing losses will result in a reduction of
working capital.
The Company's development contracts generally require that payments be
made by the customer at the time of contract execution and at the achievement of
certain milestones in the development process. These payments are normally
received in advance of the Company's recognition of the associated revenue. The
timing of customer payments for program operation services varies by contract,
but typically occurs prior to the associated services being provided. The
Company recognizes deferred revenue for amounts billed for these services in
advance of the rendering of the services. The advance payments have been a
source of liquidity for the Company. The Company anticipates that its billing
practices are likely to continue in this manner in the forseeable future.
The Company has been substantially dependent upon the public and private
sale of securities to fund its research and development activities and working
capital requirements. In order to implement programs using the Company's
integrated information capture and delivery system, the Company will be required
to devote substantial additional assets to the development of technology, the
construction of physical facilities and the acquisition of telephone and
computer equipment. The Company will also be required to retain the services of
employees in advance of obtaining contracts to provide services.
Inflation
Inflation did not have a significant impact on the Company's costs during
either the first quarter of 1997 or the first quarter of 1996. The Company
continues to monitor the impact of inflation in order to minimize its effects
through pricing strategies, productivity improvements and cost reductions.
Recent Accounting Pronouncements
In March 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share," which will
be effective during the fourth quarter of 1997. SFAS No. 128 will require the
Company in its fourth quarter and in its annual report to restate all previously
reported earnings per share information to conform with the new pronouncement's
requirements.
Forward Looking Statements
When used in this and in future filings by the Company with the Securities
and Exchange Commission, in the Company's press releases and in oral statements
made with the approval of an authorized executive officer of the Company, the
words or phrases "will likely result," "expects," "plans," "will continue," "is
anticipated," "estimated," "project," or "outlook" or similar expressions
(including confirmations by an authorized executive officer of the Company of
any such expressions made by a third party with respect to the Company) are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements, each
of which speak only as of the date made. Such statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical earnings and those presently anticipated or projected. These
uncertainties include risks of market acceptance of or preference for the
Company's systems and services, competitive forces, the impact of, and changes
in, government regulations, general economic factors in the healthcare industry
and other factors discussed in the Company's filings with the Securities and
Exchange Commission. The Company has no obligation to publicly release the
result of any revisions which may be made to any forward-looking statements to
reflect anticipated or unanticipated events or circumstances occurring after the
date of such statements.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31, 1997.
Exhibits:
(11) Statements of Computation of Per Share Earnings
See Page 10 of this Quarter Report on Form 10-Q.
(27) Financial Data Scheudle
Filed electronically
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.
Dated: May 15, 1997
PATIENT INFOSYSTEMS, INC.
(Registrant)
/s/ Donald A. Carlberg
- ----------------------
Donald A. Carlberg
Director, President and Chief Executive Officer
/s/ Gregory D. Brown
- --------------------
Gregory D. Brown
Senior Vice President, Chief Financial Officer,
Secretary and Treasurer
Exhibit 11. Statement of Computation of Per Share Earnings
PATIENT INFOSYSTEMS, INC.
(A Development State Enterprise)
<TABLE>
<CAPTION>
Three Three Period From
Months Months February 22, 1995
Ended Ended (Inception) to
March 31, March 31, March 31,
1997 1996 1997
---- ---- ----
<S> <C> <C> <C>
Net Loss $(588,524) $(568,205) $(4,511,612)
========= ========= ===========
Weighted average Common Stock
Outstanding 7,942,475 3,602,880 7,942,475
Weighted average Series A Convertible
Preferred Stock outstanding -- 1,296,000 --
Staff Accounting Bulletin Common Stock
equivalents:
Series B Convertible Preferred Stock
issued May and June 1996, calculated
using the treasury stock method -- 375,000 --
Dilutive effect of stock options granted in
the preceding twelve months, calculated
using the treasury stock method -- 788,881 --
--------- --------- ---------
Number of shares to be used in
calculation 7,942,475 6,062,761 7,942,475
========= ========= =========
Loss per common share $ (0.07) $ (0.09) $ (0.57)
========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 7,004,760
<SECURITIES> 10,000,340
<RECEIVABLES> 196,144
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 153,194
<PP&E> 1,180,667
<DEPRECIATION> 277,740
<TOTAL-ASSETS> 18,257,365
<CURRENT-LIABILITIES> 1,171,002
<BONDS> 0
0
0
<COMMON> 79,718
<OTHER-SE> 17,006,645
<TOTAL-LIABILITY-AND-EQUITY> 18,257,365
<SALES> 523,477
<TOTAL-REVENUES> 523,477
<CGS> 351,070
<TOTAL-COSTS> 1,329,724
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (588,524)
<INCOME-TAX> 0
<INCOME-CONTINUING> (588,524)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (588,524)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
