U.S. 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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF
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. Employer Identification 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, 1999, 8,033,002 common shares were outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
PATIENT INFOSYSTEMS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents ..................................... $ 4,425,270 $ 6,316,955
Available-for-sale securities ................................. 1,040,521 1,029,674
Accounts receivable ........................................... 884,072 1,320,626
Prepaid expenses and other current assets ..................... 232,819 219,978
------- -------
Total current assets .................................... 6,582,682 8,887,233
PROPERTY AND EQUIPMENT, net ..................................... 1,373,495 1,182,494
OTHER ASSETS .................................................... 1,023,872 450,000
--------- -------
TOTAL ASSETS .................................................... $ 8,980,049 $ 10,519,727
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .............................................. $ 294,346 $ 304,436
Accrued salaries and wages .................................... 406,261 277,931
Accrued expenses .............................................. 89,941 58,904
Deferred revenue .............................................. 273,125 253,068
------- -------
Total current liabilities ............................... 1,063,673 894,339
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value: shares authorized:
20,000,000; issued and outstanding: March 31,
1999 - 8,033,002; December 31, 1998 - 8,020,042 ............ 80,330 80,200
Additional paid-in capital .................................... 21,565,680 21,561,093
Accumulated Deficit ........................................... (13,729,634) (12,015,905)
----------- -----------
Total stockholders' equity .............................. 7,916,376 9,625,388
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...................... $ 8,980,049 $ 10,519,727
============ ============
</TABLE>
See notes to condensed financial statements.
<PAGE>
PATIENT INFOSYSTEMS, INC.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
REVENUES
Operations Fees ............................................................. $ 833,812 $ 107,263
Licensing Fees .............................................................. -- 162,500
Development Fees ............................................................ -- 20,591
------- -------
Total revenues ......................................................... 833,812 290,354
------- -------
COSTS AND EXPENSES
Cost of sales ............................................................... 1,449,926 712,738
Sales and marketing ......................................................... 570,322 446,887
General and administrative .................................................. 455,283 282,350
Research and development .................................................... 118,419 75,081
------- ------
Total costs and expenses .............................................. 2,593,950 1,517,056
--------- ---------
OPERATING LOSS ................................................................ (1,760,138) (1,226,702)
Investment gain (loss) ........................................................ (34,294) --
Other income .................................................................. 80,705 171,664
------ -------
NET LOSS ...................................................................... $(1,713,727) $(1,055,038)
=========== ===========
NET LOSS PER SHARE - BASIC
AND DILUTED ................................................................ $ (.21) $ (.13)
=========== ===========
WEIGHTED AVERAGE COMMON
AND POTENTIAL COMMON SHARES ................................................. 8,023,423 8,013,631
========= =========
</TABLE>
See notes to condensed financial statements.
<PAGE>
PATIENT INFOSYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ..................................................................... $(1,713,727) $(1,055,038)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ............................................ 115,952 83,231
Amortization of premiums and discounts on available-for-sale securities . -- (44,751)
Compensation expense related to issuance of stock warrants ............... 2,915 2,609
Decrease (increase) in accounts receivable, net .......................... 436,553 (5,997)
(Increase) decrease in prepaid expenses and other current assets ........ (12,841) 50,531
(Decrease) increase in accounts payable .................................. (10,090) 70,425
Increase (decrease) in accrued salaries and wages ........................ 128,330 (112,872)
Increase in accrued expenses ............................................. 31,037 15,076
Increase in deferred revenue ............................................. 20,057 91,614
------ ------
Net cash used in operating activities .............................. (1,001,814) (905,172)
---------- --------
INVESTING ACTIVITY:
Property and equipment additions ............................................. (306,953) (120,122)
Purchases of available-for-sale securities .................................. (10,847) (3,509,164)
Maturities of available-for-sale securities .................................. -- 4,112,000
(Decrease) increase in other assets .......................................... 34,294 (200,000)
Purchase of HealthDesk Intellectual Property, net ............................ (608,166) --
-------- --------
Net cash provided by (used in) investing activities .................. (891,672) 282,714
-------- -------
FINANCING ACTIVITIES:
Proceeds from issuance of common and preferred stock, net .................... 1,801 784
Decrease in accrued initial public offering costs ............................ -- --
-------- -------
Net cash provided by financing activities .......................... 1,801 784
----- ---
DECREASE IN CASH AND CASH EQUIVALENTS ......................................... (1,891,685) (621,674)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD .......................................................... 6,316,955 779,317
--------- -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD ................................................................ $ 4,425,270 $ 157,643
=========== ===========
Supplemental disclosures of cash flow information
Cash paid and received for income taxes, net ................................ $ 20,600 $ 3,081
=========== ===========
</TABLE>
See notes to condensed financial statements.
<PAGE>
PATIENT INFOSYSTEMS, INC.
Notes to Condensed Financial Statements
1. The condensed financial statements for the three month periods ended March
31, 1999 and March 31, 1998 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, 1998. The results of operations for the three months
ended March 31, 1999 are not necessarily indicative of the results for the
entire year ending December 31, 1999.
2. Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This statement
requires that all items recognized under accounting standards as components of
comprehensive earnings be reported in an annual financial statement that is
displayed with the same prominence as other annual financial statements. This
statement also requires that an entity classify items of other comprehensive
earnings by their nature in an annual financial statement. For example, other
comprehensive earnings may include foreign currency translation adjustments,
minimum pension liability adjustments, and unrealized gains and losses on
marketable securities classified as available-for-sale. Annual financial
statements for prior periods will be reclassified, as required. The Company's
total comprehensive earnings were as follows:
Three Months Ended
March 31,
1999 1998
---- ----
Net losses $(1,713,727) $(1,055,038)
Other comprehensive earnings:
Unrealized losses on available-for-sale
securities - (2,333)
--------- ---------
Comprehensive earnings $(1,713,727) $(1,057,371)
=========== ===========
3. Certain 1998 amounts have been reclassified to conform with 1999
presentations.
4. On February 26, 1999, the Company, through its newly formed, wholly-owned
subsidiary, Patient Infosystems Acquisition Corp., acquired substantially all of
the assets of HealthDesk Corporation, a consumer healthcare software company
primarily engaged in the business of designing and developing Internet based
products in the healthcare, wellness and disease management industries. The
acquired assets include inventory, intellectual property, hardware and software.
The principal consideration paid for the transaction was $761,463. The Company
paid for the acquisition using its available cash.
<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, 1999 and March 31,
1998 and its financial condition at March 31, 1999. 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 $833,812 for the three months ended March
31, 1999, as compared to $290,354 during the three months ended March 31, 1998.
A summary of revenues by category is as follows:
Three Months Ended
March 30,
Revenues 1999 1998
---- ----
Operations Fees $833,812 $107,263
Licensing Fees - 162,500
Development Fees - 20,591
-------- ------
Total Revenues $833,812 $290,354
======== ========
Operations revenues are generated as the Company provides services to its
customers for their disease-specific programs, for demand management programs
and patient surveys. Operations revenues increased 88% from $107,263 for the
first quarter 1998 to $833,812 for the first quarter 1999. Operations revenues
increased significantly in the first quarter 1999, as the Company continues to
increase the membership levels in the Company's disease state management
programs and as a result of increased activities with its demand management
programs and patient surveys.
Licensing revenue represents amounts that the Company charges its
customers, on a one-time fee basis, for the right to enroll patients in or the
right to license other entities certain of its programs, primarily, but not
limited to the Company's standardized asthma and diabetes programs. There were
no license fees in the first quarter 1999 as compared to license fees in the
amount of $162,500 in the first quarter 1998, which were primarily attributed to
the Company's licensing agreement with ReCall Services, Inc., in the amount of
$150,000, for the development and operation of a database service bureau.
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 decrease in program development revenues from the first
quarter of 1998 to the first quarter of 1999 reflects the Company's completion
of the development of its primary disease management programs. The Company has
not entered into new development agreements and does not anticipate that it will
be paid for program development in the future.
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 disease state management programs, as well as the operation of its
demand management programs and the conduct of patient surveys. Cost of sales for
the three months ended March 31, 1999 consisting of costs associated with the
operation of the Company's programs were $1,449,926, as compared to $712,738 for
the three month period ended March 31, 1998. The increase in these costs
primarily 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 consist primarily of salaries, related
benefits, travel costs, sales materials and other marketing related expenses
Sales and marketing expenses for the three months ended March 31, 1999 were
$570,322 as compared to $446,887 for the three month period ended March 31,
1998. Spending in this area has increased due to expansion of the Company's
sales and marketing staff. It is anticipated that the Company will continue to
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, 1999 were $455,283, as compared to $282,350 for the three
month period ended March 31, 1998. These expenditures have been incurred to
maintain the corporate infrastructure necessary to support anticipated program
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 allocated to 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, 1999 were $118,419, as compared to
$75,081 for the three months ended March 31, 1998. The increase in research and
development expenses from the first quarter of 1998 to the first quarter of 1999
reflects the Company's development of its primary disease management programs
and Internet based products. The Company uses the core technologies associated
with these products to support the Company's other programs which include
disease management, case management, demand management, patient surveys and
clinical studies.
The Company generates net investment income from cash balances and
investments. Investment income decreased to $46,411 for the three months ended
March 31, 1999, as compared to $171,664 for the three month period ended March
31, 1998. The decrease in net investment income reflects the use by the Company
of its available cash and the reduction of proceeds that can earn interest.
Included in the net investment income is the investment loss for the first
quarter 1999 associated with the Company's investment in Patient Infosystems
Canada, Inc., which is engaged in the sale, marketing and service of the
Company's products and services in Canada. The first quarter 1999 loss includes
expenses attributable to sales and marketing and related administrative expense.
The Company had a net loss of $1,713,727 for the three months ended March
31, 1999, and a net loss of $1,055,038 for the three months ended March 31,
1998. This represents a net loss per share of $.21 for the first quarter of
1999, as compared to a net loss of $.13 per share in the first quarter of 1998.
Liquidity and Capital Resources
At March 31, 1999 the Company had working capital of $5,519,009 as compared
to working capital of $7,992,894 at December 31, 1998. Since its inception the
Company has primarily funded its operations, working capital needs and capital
expenditures from the sale of equity securities. 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 has
continued to expend increasing amounts to expand its operational capabilities
including increasing its administrative and technical costs. To the extent that
revenues do not increase, the Company's losses will increase, creating an
increased burden on the Company's available capital. If the Company is not able
to operate profitably or to reduce its losses significantly, it will be required
to seek additional capital or reduce its operations. No assurance can be given
that any additional capital will be available on terms that are acceptable to
the Company, if at all.
Inflation
Inflation did not have a significant impact on the Company's costs during
either the first quarter of 1999 or the first quarter of 1998. The Company
continues to monitor the impact of inflation in order to minimize its effects
through pricing strategies, productivity improvements and cost reductions.
Year 2000 Issues
The Year 2000 issue refers to the inability of computerized systems and
technologies to recognize and process dates beyond December 31, 1999. The
Company has reviewed the Company's information technology systems, cable network
equipment and other embedded technologies. A significant portion of the
Company's computerized systems and technologies have been developed, installed
or upgraded in recent years and are generally more likely to be Year 2000 ready.
The Company is also evaluating the potential impact as a result of its reliance
on third-party systems that may have year 2000 issues.
Computerized business applications that could be adversely affected by the year
2000 issue include:
* information processing and financial reporting systems,
* customer billing systems,
* customer service systems,
* telecommunication transmission and reception systems, and
* facility systems.
System failure or miscalculation could result in an inability to process
transactions, send invoices, accept customer orders or provide customers with
products and services. Customers could also experience a temporary inability to
receive or use the Company's products and services.
The Company has developed a program to assess and address the year 2000
issue. This program consists of the following phases:
* inventorying and assessing the impact on affected technology and systems,
* developing solutions for affected technology and systems,
* modifying or replacing affected technology and systems
* testing and verifying solutions
* implementing solutions, and * developing contingency plans.
The Company has substantially completed inventorying and assessing the
affected computerized systems and technologies. The Company is in various stages
of its year 2000 compliance program with respect to the remaining phases as it
relates to the affected systems and technologies. The Company has completed
adaptation of all internally created systems and has begun surveying its
customers and suppliers regarding their readiness for the year 2000. Final
testing to independently validate readiness will begin when the Company has
received all third party hardware and software promised to date.
Costs incurred to date directly related to addressing the year 2000 are
approximately $50,000. The Company currently estimates the total cost of its
year 2000 remediation program to be approximately $60,000. Although the Company
will continue to incur substantial capital expenditures in the ordinary course
of meeting its telecommunications system upgrade program through the year 2000,
it will not specifically accelerate its expenditures to facilitate year 2000
readiness, and accordingly such expenditures are not included in the above
estimate.
The Company has begun communicating with others with whom it does
significant business to determine their year 2000 readiness and to determine the
extent to which the Company is vulnerable to year 2000 issues related to those
third parties. The Company purchases much of its technology from third parties.
There can be no assurance that the systems of other companies on which the
Company's systems rely will be year 2000 ready or timely converted into systems
compatible with the Company's systems. The Company's failure or a third party's
failure to become year 2000 ready or the Company's inability to become
compatible with third parties with which the Company has a material
relationship, may have a material adverse effect on the Company, including
significant service interruption or outages, however, the Company cannot
currently estimate the extent of any such adverse effects.
The Company is in the process of identifying secondary sources to supply
its systems or services in the event it becomes probable that any of its systems
will not be year 2000 ready prior to the end of 1999. The Company is also in the
process of identifying secondary vendors and service providers to replace those
vendors and service providers whose failure to be year 2000 ready could lead to
a significant delay in the Company's ability to provide its service to its
customers.
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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to changes in interest rates primarily in its cash
transactions. The Company does not believe it is exposed to changes in foreign
currently exchange rates because it does not currently invest in foreign
currency instruments. A discussion of the Company's accounting policies for
financial instruments is included in the Summary of Significant Accounting
Policies in the Notes to the Financial Statements. The Company currently does
not have any international operations nor does invest its cash in foreign
currency instruments. The balances the Company has in cash or cash equivalents
are generally available without legal restrictions to fund ordinary business
operations. The Company regularly invests excess operating cash in certificates
of deposit and U.S. government bonds and other bonds that are subject to changes
in short-term interest rates. Accordingly, the Company believes that the market
risk arising from its holding of these financial instruments is minimal. The
Company made purchases of available-for-sale securities in the amounts of
$10,847 for the three months ended March 31, 1999 and $3,509,164 for the three
months ended March 31, 1998.
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Use of Proceeds
The Company has used and continues to use the proceeds from its initial
public offering of Common Stock on December 23, 1996 (File No. 333-07643) for
capital improvements and expansion of its telephone and computer capabilities
for sales and marketing and for general corporate purposes more fully discussed
in the financial statements and the notes thereto appearing elsewhere herein.
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31, 1999
Exhibits:
(11) Statements of Computation of Per Share Earnings
See Page 11 of this Quarterly Report on Form 10-Q.
(27) Financial Data Schedule
Filed electronically
Exhibit 11. Statement of Computation of Per Share Earnings
PATIENT INFOSYSTEMS, INC.
Three Months Three Months
Ended Ended
March 31, 1999 March 31, 1998
Net Loss $ (1,713,727) $ (1,055,038)
------------ ------------
Weighted average common and
potential common shares 8,023,423 8,013,631
--------- ---------
Net Loss per share - Basic and Diluted $ (.21) $ (.13)
============ ============
<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.
Dated: May 17, 1999
PATIENT INFSYSTEMS, INC.
(Registrant)
/s/ Donald A. Carlberg May 17, 1999
- ---------------------- ------------
Donald A. Carlberg Date
Director, President and Chief Executive Officer
/s/ John V. Crisan May 17, 1999
- ------------------ ------------
John V. Crisan Date
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 4,425,270
<SECURITIES> 1,040,521
<RECEIVABLES> 888,202
<ALLOWANCES> 4,130
<INVENTORY> 0
<CURRENT-ASSETS> 6,582,682
<PP&E> 2,350,120
<DEPRECIATION> 976,625
<TOTAL-ASSETS> 8,980,049
<CURRENT-LIABILITIES> 1,063,673
<BONDS> 0
0
0
<COMMON> 80,330
<OTHER-SE> 7,836,046
<TOTAL-LIABILITY-AND-EQUITY> 7,916,376
<SALES> 833,812
<TOTAL-REVENUES> 833,812
<CGS> 1,449,926
<TOTAL-COSTS> 2,593,950
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,713,727)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,713,727)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,713,727)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
</TABLE>
