<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q SB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1997
COMMISSION FILE NUMBER 001-12799
__________
INFOCURE CORPORATION
(Exact name of Small Business Issuer as specified in its charter)
Delaware 58-2271614
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
2970 Clairmont Road, Suite 950, Atlanta Georgia 30329
(Address of principal executive offices) (Zip Code)
404/633-0046
(Registrant's telephone number, including area code)
Indicate by check mark whether 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 registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. YES X NO
------- -------
5,656,267 shares, $.001 par value as of September 5, 1997
(Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date)
<PAGE>
INFOCURE CORPORATION
FORM 10-QSB
QUARTER ENDED JULY 31, 1997
TABLE OF CONTENTS
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
July 31, 1997 (unaudited) and January 31, 1997 4
Consolidated Statements of Operation (unaudited)
Three months ended July 31, 1997 and 1996
Six months ended July 31, 1997 and 1996 5
Consolidated Statements of Cash Flows (unaudited)
Three months ended July 31, 1997 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
PART II. OTHER INFORMATION
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
2
<PAGE>
ITEM 1 - FINANCIAL STATEMENTS
The following consolidated financial statements have been prepared in accordance
with the instructions to Form 10-QSB and, therefore, omit or condense certain
footnotes and/or other information normally included in financial statements
prepared in accordance with generally accepted accounting principles. In the
opinion of management, all adjustments necessary for a fair presentation of the
financial information for the interim and year -to-date periods reported have
been made. The current year financial statements include the results of
InfoCure Corporation (INC), and subsidiaries including DR Software, Inc., Rovak,
Inc., Millard Wayne, Inc., and KComp Systems, Inc., all of which were acquired
by INC during the quarter ended July 31, 1997. The acquired entities were
accounted for as purchases at estimated fair value for accounting purposes.
American Medcare Corporation (AMC) was the predecessor to INC, and was merged
into INC concurrently with INC's public offering also completed during the
quarter ended July 31, 1997. Accordingly, the prior year financial statements
reflect the results of AMC and its subsidiaries, International Computer
Solutions, Inc., and Health Care Division, Inc. on an historical basis for the
comparative three month and six month periods ended July 31, 1996.
Operating results for the three month period ended July 31, 1997 are not
necessarily indicative of the results that may be expected for the year ended
January 31, 1998.
The consolidated financial statements are shown on the following pages.
3
<PAGE>
INFOCURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(unaudited)
July 31 January 31
1997 1997
-------------- --------------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 1,822,703 $ 198,735
Accounts and notes receivable, net of allowance of
$44,819 and $35,000. 1,229,593 318,405
Other receivables 121,270 -
Inventory 324,572 -
Prepaid expenses and other current assets 555,952 62,364
----------- -----------
Total current assets 4,054,090 579,504
----------- -----------
Property and equipment, net of depreciation of
$624,539 and $588,205 722,615 94,157
Goodwill, net of amortization of
$124,349 and $21,408 12,024,294 2,015,309
Deferred acquisition costs - 521,871
Capitalized software, net of amortization of
$691,020 and $657,115 1,483,300 41,252
Deferred tax asset 1,203,300 871,000
Other assets 79,141 59,137
----------- -----------
Total assets $19,566,740 $ 4,182,230
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
July 31 January 31
1997 1997
-------------- --------------
Current liabilities:
Accounts payable $ 1,375,625 $ 483,730
Credit line 60,573 -
Accrued expenses 1,761,548 358,671
Deferred revenue 2,205,524 814,383
Current portion of long-term debt 1,042,087 49,529
----------- ------------
Total current liabilities 6,445,357 1,706,313
----------- ------------
Long-term debt, less current portion 454,063 698,252
Note payable to stockholder - 94,500
Note payable -- other - 1,511,533
----------- ------------
Total liabilities 6,899,420 4,010,598
----------- -----------
Shareholders' equity
Common stock, $.001 par value - authorized 15,000,000 shares;
5,656,267 issued and outstanding; see note 4 5,656 54,965
Treasury stock and accrued stock repurchase, at cost - (165,000)
Stock purchase warrant - 80,000
Additional paid-in capital 15,923,251 3,452,453
Accumulated deficit (3,261,587) (3,250,786)
----------- -----------
Total shareholders' equity 12,667,320 171,632
----------- -----------
Total liabilities and shareholders' equity $19,566,740 $ 4,182,230
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
INFOCURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Proforma Three Months Ended
31-Jul 31-Jul
--------------------------- ----------------------------
1997 1996 1997 1996
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenues: $ $ $ $
Systems and software sales 948,406 215,940 1,961,000 2,413,750
Maintenance and support 1,316,854 370,129 2,645,000 2,362,750
----------- ------------ ----------- -----------
Total revenues 2,265,260 586,069 4,606,000 4,776,500
Cost of sales 482,499 121,665 1,338,000 1,414,000
----------- ------------ ----------- -----------
Gross margin 1,782,761 464,404 3,268,000 3,362,500
Expenses:
Salaries and operating expenses 1,495,472 548,455 2,334,000 2,507,000
Depreciation and amortization 137,320 19,334 342,000 368,250
----------- ------------ ----------- -----------
1,632,792 567,789 2,676,000 2,875,250
----------- ------------ ----------- -----------
Income from operations 149,969 (103,385) 592,000 487,250
Interest expense (66,569) (24,326) (24,000) (20,750)
Other income, net 6,095 2,212 6,000 10,250
----------- ------------ ----------- -----------
Income (loss) before income taxes 89,495 (125,499) 574,000 476,750
Provision for income taxes 26,000 - 257,000 224,933
----------- ------------ ----------- -----------
Income (loss) $ 63,495 $ (125,499) $ 317,000 $ 251,817
=========== ============ =========== ===========
Earnings per share: $ 0.02 $ 0.06 $ 0.05
=========== =========== ===========
Weighted average number of shares (note 4) 3,581,183 5,486,000 5,486,000
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
INFOCURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended Proforma Six Months Ended
July 31 July 31
------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Systems and software sales $ 1,757,836 $ 426,082 $ 4,164,000 $ 4,827,500
Maintenance and support 1,997,380 758,993 4,781,000 4,725,500
----------- ----------- ----------- -----------
Total revenues 3,755,216 1,185,075 8,945,000 9,553,000
Cost of sales 1,155,771 244,025 2,724,000 2,828,000
----------- ----------- ----------- -----------
Gross margin 2,599,445 941,050 6,221,000 6,725,000
Expenses:
Salaries and operating expenses 2,299,971 1,019,382 4,628,000 5,014,000
Depreciation and amortization 198,342 36,121 672,000 735,500
----------- ----------- ----------- -----------
2,498,313 1,055,503 5,300,000 5,749,500
----------- ----------- ----------- -----------
Income from operations 101,132 (114,453) 921,000 975,500
Interest expense (127,388) (43,500) (47,000) (38,500)
Other income, net 9,455 2,883 15,000 20,500
----------- ----------- ----------- -----------
Income (loss) before income taxes (16,801) (155,070) 889,000 957,500
Provision for income taxes (6,000) - 422,000 451,425
----------- ----------- ----------- -----------
Income (loss) $ (10,801) $ (155,070) $ 467,000 $ 506,075
=========== =========== =========== ===========
Earnings per share: $ 0.00 $ 0.09 $ 0.09
=========== =========== ===========
Weighted average number of shares (note 4) 3,273,871 5,486,000 5,486,000
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
INFOCURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
July 31
1997 1996
----------- ---------
<S> <C> <C>
Cash provided by (used for) operating activities
Net income (loss) $ (10,801) $(155,070)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization 198,342 33,189
Changes in current assets and liabilities, net of
effects of acquisitions
Accounts and notes receivable 28,108 (63,285)
Inventory 57,269 -
Prepaid expenses and other assets (113,386) 9,964
Accounts payable and accrued expenses 84,570 (96,016)
Deferred revenue (117,979) (55,817)
----------- ---------
126,123 (327,035)
----------- ---------
Cash provided by (used for) investing activities
Property and equipment expenditures (6,801) (8,650)
Cash paid for deferred acquisition costs (660,499) -
Other deferred charges - (28,268)
Expenditures for software development costs (51,429) (14,616)
Cash paid for acquistions (2,751,824) -
----------- ---------
(3,470,553) (51,534)
----------- ---------
Cash provided by (used for) financing activities
Proceeds from issuance of common stock - IPO 6,153,607 -
Proceeds from issuance of common stock 280,000 166,505
Net proceeds (repayment) of long term debt (1,390,401) (20,808)
Net increase (decrease) in shareholder loans (74,808) -
----------- ---------
4,968,398 145,697
----------- ---------
Net (decrease) in cash 1,623,968 (232,872)
Beginning, cash and cash equivalents 198,735 249,698
----------- ---------
Ending, cash and cash equivalents $ 1,822,703 $ 16,826
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. BASIS OF PRESENTATION
INC was founded on December 3, 1996 to acquire certain healthcare practice
management systems businesses. In conjunction therewith, INC completed an
initial public offering ("the Offering") of its common stock in July 1997.
American Medcare Corporation (AMC), the parent of International Computer
Solutions, Inc. (ICS), Millard Wayne, Inc. (Millard Wayne), and Health Care
Division, Inc. (HCD), is considered the predecessor to INC. INC conducted no
significant operations and generated no revenue prior to the closing of the
acquisitions.
The merger of AMC with and into INC occurred on July 10, 1997, contemporaneously
with INC's Offering. Also on that date, INC acquired four additional
businesses, and the six businesses were collectively referred to as the
"Founding Businesses", or the "Company". The Founding Businesses were (i)
International Computer Solutions, Inc. ("ICS"), a subsidiary of AMC, (ii) Health
Care Division, Inc. ("HCD"), a subsidiary of AMC founded in November 1996 to
acquire the net assets of a division of Info Systems of North Carolina, Inc.,
(iii) Millard Wayne, Inc. ("Millard Wayne"), a subsidiary of AMC, (iv) DR
Software, Inc. ("DR Software"), (v) KComp Management Systems, Inc. ("KComp"),
and (vi) Rovak, Inc. ("Rovak").
Immediately prior to the AMC merger with INC, AMC acquired Millard Wayne. Since
AMC was considered the predecessor company, the AMC merger was accounted for as
a combination at historical cost for accounting purposes. The remaining
acquisitions were accounted for as purchases at estimated fair value for
accounting purposes.
The aggregate consideration paid by INC for the Founding Businesses consisted of
$2.9 million in cash, and $4.8 of common stock.
The accompanying historical financial statements include AMC, ICS, and HCD
through July 10, 1997, the date of the acquisition of the Founding Businesses,
and the results of operations for INC, ICS, HCD, Millard Wayne, DR Software,
KComp and Rovak for the period July 11, 1997 through July 31, 1997.
The accompanying Pro Forma Statement of Operations include the results of INC
and the Founding Businesses as if they had been acquired as of February 1, 1996.
The Pro Forma Statement of Operations reflect the results for the combined
Founding Businesses for the three month periods ended July 31, 1997 and 1996,
and the six month periods ended July 31, 1997 and 1996. The statements of
operations were adjusted to include the pro forma impact of general and
administrative expenses, decreased interest expense for retired debt, increased
goodwill amortization expense, and reductions in personnel.
The Pro Forma Statements of Operations may not be indicative of actual results
if the mergers and acquisitions had occurred on the date indicated or which may
be realized in the future. The actual results of INC and the Founding
Businesses for the period from February 1 through July 31, 1997, inclusive of
actual corporate costs and interest income, have been included in the pro forma
results for the three and six months ended July 31, 1997. It is suggested that
these pro forma consolidated statements of operations be read in conjunction
with the pro forma combined financial statements of INC and the Founding
Businesses and the notes thereto included in the Company's Amendment to
Registration Statement ("Registration Statement") on Form SB-2 filed July 7,
1997 (No. 333-18923).
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Goodwill and other intangibles, principally capitalized software development
costs, are being amortized over periods ranging from four to 15 years.
In the opinion of management, the interim financials filed as part of this Form
10-QSB reflect all adjustments, consisting only of normal recurring accruals
necessary for a fair presentation of the financial position and the results of
operations and of cash flows for the interim periods presented.
8
<PAGE>
Note 3. BUSINESS ACQUISITION
In fiscal 1997, AMC initiated an acquisition program to strengthen its market
position and leverage its customer base. AMC targeted similar companies in
various locations throughout the United States and subsequently completed the
acquisitions described below.
In addition, AMC agreed to merger terms with INC a newly-formed Delaware
corporation, whereby AMC shareholders would receive approximately 3.4 million
shares of INC Common Stock in exchange for all outstanding shares of AMC common
stock. AMC, together with the acquisitions described below, would be Founding
Businesses of INC upon successful completion of INC's public offering which was
effected in July 1997.
Prior to and as a condition to the consummation of the Offering, AMC, a holding
company and the parent company of ICS and HCD, acquired Millard Wayne and
immediately thereafter merged into INC, with INC as the surviving corporation.
In July 1997, concurrent with the Offering, the Company acquired all of the
outstanding stock of DR Software. In July 1997, concurrent with the Offering, a
subsidiary of the Company, pursuant to a plan of merger, merged into Rovak. In
July 1997, concurrent with the Offering, a subsidiary of the Company, pursuant
to a plan of merger, merged into KComp.
The AMC merger took place at historical cost, and the other purchases were made
at fair value, with consideration comprised of $2.9 million in cash, and $4.8 in
common stock of INC.
The acquired companies' results of operations from July 10, 1997 to July 31,
1997 are included in the accompanying financial statements. The fair values
of the net assets acquired and liabilities assumed were as follows:
<TABLE>
<CAPTION>
<S> <C>
Cash .................................................... $ 234,676
Accounts receivable ..................................... 942,975
Inventory................................................ 381,861
Prepaid expenses......................................... 183,699
Property and equipment .................................. 595,338
Furniture and fixtures................................... 60,044
Capitalized software costs .............................. 1,311,372
Other intangibles ....................................... 517,280
Goodwill................................................. 8,673,142
Leasehold improvements .................................. 41,530
Deferred tax assets ..................................... 332,300
Prepaid royalties ....................................... 196,993
Other assets............... ............................. 16,454
-----------
Total Assets $13,487,664
Deferred revenue ........ .............................. 1,430,182
Accrued expenses ....................................... 946,398
Accounts payable ....................................... 724,938
Bank notes payable ..................................... 1,111,990
Notes payable .......................................... 328,745
Lease payable .......................................... 149,750
Shareholder payables ................................... 324,613
Customer deposits ...................................... 707,672
-----------
Total Liabilities $ 5,724,288
Net Assets $ 7,763,376
</TABLE>
9
<PAGE>
The unaudited pro forma information presents the net sales, net income and
earnings per share of the Company as if the acquisitions had occurred as of
February 1, 1996. The pro forma information is not necessarily indicative of
what would have occurred had the acquisition been made as of February 1, 1996,
nor is it indicative of future results of operations. The pro forma amounts
give effect to appropriate adjustments for the fair value of the net assets
acquired, operating expenses not assumed as part of the acquisition,
amortization of goodwill, interest expense, and income taxes.
<TABLE>
<CAPTION>
(Pro Forma) (Pro Forma) (Pro Forma) (Pro Forma)
Three Months Three Months Six Months Six Months
Ended July 31, Ended July 31, Ended July 31, Ended July 31,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales .................... $4,606,000 $4,776,500 $8,945,000 $9,553,000
Net income ................... 317,000 251,817 467,000 506,075
Earnings per share ........... .06 .05 .09 .09
</TABLE>
NOTE 4. COMMON STOCK AND EARNINGS PER SHARE
Common stock issued and outstanding reflect shares issued in the Offering, and
shares issued to effect the Acquisitions of the Founding Businesses, including
the AMC shareholders. The weighted average outstanding share computations used
in the pro forma earnings per share computation for the respective periods
reflect the respective time periods for which the shares issued were
outstanding. Shares authorized, issued and outstanding and earnings per share
for the predecessor company, AMC, are not considered meaningful, and have not
been presented.
NOTE 5. CASH FLOW STATEMENT
The financial statements for the quarter ended July 31, 1997 reflect the
following significant non-cash transactions:
<TABLE>
<CAPTION>
<S> <C>
Stock issued to liquidate debt $1, 316,938
Stock issued to make acquisitions 4,834,876
Stock issued to pay acquisition related expenses 205,000
</TABLE>
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
For the periods shown herein, AMC functioned with operations in a single
operating subsidiary, International Computer Solutions (ICS) in the prior
period, and with the combined operations of ICS and the Health Care Division
(HCD) in the current period. The Company purchased HCD in December 1996 in an
acqusition transaction accounted for as a purchase. The following discussion
and analysis should be read in conjunction with the accompanying financial
statements.
The quarter ended July 31, 1997 includes the completion of the Offering on July
10, 1997 and the Acquisitions made concurrent therewith. The acquisitions of
Millard Wayne, DR Software, Rovak and KComp were made using purchase accounting.
These entities were acquired by the parent company, INC and combined with the
existing operations of ICS, and HCD. In accordance with accounting standards
for purchase accounting, the results of operations for these acquired entities
is included from July 10, 1997 through July 31, 1997. Accordingly, the Company
showed results of the combined entities on an historical basis as described in
the following sections.
HISTORICAL CONSOLIDATED RESULTS OF OPERATIONS
REVENUES
The following table summarizes consolidated revenues (in thousands) and changes
therein:
<TABLE>
<CAPTION>
3 months ended July 31 $ % 6 months ended July 31 $ %
1997 1996 Chg Chg 1997 1996 Chg Chg
---------------------- ------ ------ ----------------------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
System hardware,software sales 948 216 732 338% 1,757 426 1,331 312%
Maintenance and support 1,317 370 947 256% 1,998 759 1,239 163%
Total revenues 2,265 586 1,679 286% 3,755 1,185 2,570 217%
</TABLE>
The increase in system hardware and software sales for the 3 months ended July
31, 1997 was due to sales from acquired companies totaling $874,000, and a
decrease of $142,000 from ICS. The decrease of $142,000 at ICS was due to
decreased hardware sales during the quarter compared with the prior year, and
reflects the Company's efforts to shift from low margin hardware revenues to
higher margin services and transaction fee revenue. For the 6 month period, the
increase in system hardware and software sales was due to $1,587,000 from the
acquisitions, and a decrease of $256,000 from ICS.
The increase in maintenance and support revenue for the 3 months ended July 31,
1997 was due to $914,000 from the acquired companies, and $33,000 from ICS. The
increase in maintenance and support revenue for the 6 month period was due to
$1,326,000 from the acquisitions, and a decrease of $88,000 from ICS.
The increase in total revenues for the 3 months ended July 31, 1997 was due to
revenues from the acquisitions totalling $1,788,000, and a decrease of $109,000
from ICS. The increase in total revenues for the 6 months ended July 31, 1997
was due to revenues from the acquisitions totaling $2,914,000, and a decrease of
$344,000 from ICS.
Gross margin for the current quarter increased by $1,318,357 or 283.9%, to
$1,782,761 for the three months ended July 31, 1997 from $464,404 for the three
months ended July 31, 1996. The gross margins from the acquisitions totalled
$1,409,420, and $373,341 for ICS. The three month increase was due to
acquisition gross margins which totalled $1,839,744, and $759,701 for ICS. The
decrease in gross margins at ICS of $91,063 was due to a
11
<PAGE>
redirection of the sales focus away from hardware sales to new product, services
and transactional services lines, and also to a significant hardware sale in the
prior year.
Gross margins for the six months ended July 31, 1997 increased by $1,658,395 or
176.2%, to $2,599,445 from $941,050 for the six months ended July 31, 1996. The
gross margins for the acquisitions totaled $1,193,991 and for ICS totaled
$464,404.
OPERATING EXPENSES AND NON OPERATING ITEMS
Operating expenses increased by $947,017 or 172.7%, to $1,495,472 for the three
months ended July 31, 1997 from $548,455 for the three months ended July 31,
1996. The increased operating expenses relating to the acquisitions totaled
$899,474, and AMC and ICS totaled $595,998. The increased operating expenses at
AMC related to personnel, leasing, travel and administrative expenses associated
with developing and executing the Offering and Acquisition strategy.
For the six month period, operating expenses increased by $1,280,589 or 86% to
$2,299,971 from $1,019,382 for the six months ended July 31, 1996. The
increased operating expenses relating to the acquisitions totaled $1,130,335,
and AMC and ICS totaled $1,169,637. The increased operating expenses at AMC
related to costs of the Offering and Acquisition strategy.
Depreciation and amortization increased by $117,986 or 610.3%, to $137,320 for
the three months ended July 31, 1997 from $19,334 for the three months ended
July 31, 1996. This increase was due a significant increase in goodwill due to
the acquisition of HCD in December 1996, and the acquisitions of DR Software,
Millard Wayne, Rovak and KComp on July 10, 1997. Depreciation and amortization
related to the acquisitions totaled $79,586 and $57,734 for ICS and AMC. For
the six month period, depreciation and amortization totaled $119,169 for the
acquisitions, and $79,172 for ICS and AMC.
Income from operations increased by $253,354 to $149,969 for the three months
ended July 31, 1997 from a loss of $103,385 for the three months ended July 31,
1996. Income from operations for the six months ended July 31, 1997 increased
by $215,585 from a loss of $114,453 for the six months ended July 31, 1996.
Interest expense increased by $42,243 or 173.7% to $66,569 for the three months
ended July 31, 1997 from $24,326 for the three months ended July 31, 1996. This
interest was related to increased debt in the acquired entities. Interest
expense for the six months ended July 31, 1997 increased by $83,889 or 192.8% to
$127,389 from $43,500 for the six months ended July 31, 1996.
The Company's provision for income taxes increased to $26,000 for the quarter
ended July 31, 1997, compared with no tax provision due to the net loss for the
quarter ended July 3, 1996.
LIQUIDITY AND CAPITAL RESOURCES
INC had net income of $63,495 for the three months ended July 31, 1997, compared
with a loss of $125,499 for the three months ended July 31, 1996. For the six
months ended July 31, 1997, the Company had a net loss of $10,801 compared with
a loss of $155,070 for the six months ended July 31, 1996.
Cash provided by operations totaled $126,123, due primarily to decreased prepaid
expenses of $113,386, decreased deferred revenues of $117,979, increased
payables and accrued expenses of $84,570, decreased inventory of $57,269, and
decreased accounts receivable of $28,108.
Cash used for investing activities totaled $3,470,553, due primarily to deferred
acquisition costs of $660,499 and cash paid for acquisitions totaling
$2,751,824. Cash provided by financing activities was $1,623,968, due
primarily to proceeds from the issuance of common stock of $6,433,607, repayment
of long term debt of $1,390,400 and repayment of shareholder loans of $74,808.
12
<PAGE>
On July 10, 1997, the Company completed the Offering of 1.4 million shares of
common stock, resulting in net proceeds of approximately $6.9 million, less
costs related to the offering of approximately $.8 million. Approximately $2.9
million were used to pay the cash portion of the purchase price for the acquired
companies.
Two of the acquired companies have bank credit lines, with available credit of
up to $90,000. The Company is negotiating a line of credit of $10 million with
FINOVA Capital to be used for working capital and acquisition purposes. There
can be no assurance that a line of credit will be obtained or that, if obtained,
it will be at rates favorable to the Company. As the acquired companies are
assimilated into the overall InfoCure Corporation, additional savings and
efficiencies are planned for, and anticipated, including consolidated office
space, and consolidated benefit plans. The Company belives that funds
generated from operations, together with the net proceeds of the Offering, will
be sufficient to finance its current operations, potential obligations relating
to the Acquisitions, and planned capital expenditure requirements at least
through the next 18 months. In the longer term, the Company may require
additional sources of capital to fund future growth and acquisitions. Such
sources of capital may include additional equity or debt financings.
PRO FORMA CONSOLIDATED RESULTS OF OPERATIONS
REVENUES
The following table presents selected pro forma consolidation operations (in
thousands):
<TABLE>
<CAPTION>
3 months ended July 31 $ % 6 months ended July 31 $ %
1997 1996 Chg Chg 1997 1996 Chg Chg
---------------------- --- --- ---------------------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
System hardware, software sales 1,961 2,413 (452) (18.7)% 4,164 4,827 (663) (13.7)%
Maintenance and support 2,645 2,363 282 11.9% 4,781 4,725 56 1.2%
Total revenues 4,606 4,776 (170) ( 3.5)% 8,945 9,553 (608) (6.4)%
</TABLE>
The decrease in system hardware and software sales for the 3 months ended July
31, 1997 was due to decreased hardware associated with sales of new systems
compared with prior year periods. The increase in maintenance and hardware
reflects the transition of the acquired companies towards the recurring revenue
bases of services, training and electronic transaction service lines.
The Company released the Windows NT-based WISDOM product in May 1997, and began
to show strong customer demand and a strong installation backlog. In addition,
the DR Dictation product continued to show strong demand in the market, with 6
and 15 installations, respectively, in the first and second quarters.
The Company showed strong new sales of the Optical Mark System (OMS), where 6
and 11 new installations were made in the first and second quarters,
respectively. Installations of the Optical Mark System have increased by 30%
over the same period in 1996. In addition, the Digital Record Keeping System
(DRK) continued to show strong demand for installation of digital images and
record-keeping products, with installations increasing by 25% over the same
period in 1996.
OPERATING EXPENSES AND NON OPERATING ITEMS
Operating expenses decreased by $173,000 or 6.9% to $2,334,000 for the 3 months
ended July 31, 1997 from $855,500 for the 3 months ended July 31, 1996. The
decrease was due to a reduction in personnel, and reductions in rent and lease
expenses. Operating expenses dropped as a percentage of revenue from 52% to 51%
on these reductions.
Operating expenses decreased by $386,000 or 7.7% to $4,628,000 for the 3 months
ended July 31, 1997 from $5,014,000 for the 3 months ended July 31, 1996. This
decrease was due primarily to personnel reductions and
13
<PAGE>
reductions in lease and other operating expenses. As a percentage of revenues,
operating expenses for the 6 month period remained steady at 52%.
Depreciation and amortization decreased by $26,250 or 7.1% to $342,000 for the 3
months ended July 31, 1997 from $368,250 for the 3 month period ended July 31,
1996. These expenses decreased as a percentage of revenue from 7.7% to 7.4%.
These expenses decreased by $63,500 or 8.6% to 672,000 for the 6 months ended
July 31, 1997 from $735,500 for the 6 months ended July 31, 1996.
Income from operations increased by $104,750 or 21.5% to $592,000 for the 3
months ended July 31, 1997 from $487,250 for the 3 months ended July 31, 1996.
This increase was due to higher margin sales revenue and decreased operating
expenses. For the 6 months ended July 31, 1997, income from operations
decreased by $54,500 or 5.6% to $921,000 from $975,500 for the 6 months ended
July 31, 1996. This decrease was primarily due to a decrease in lower margin
hardware sales in the prior year. As a percentage of revenue, operating income
increased from 10.2% to 12.9% for the 3 month period, and from 10.2% to 10.3%
for the 6 month period.
Interest expense increased by $3,250 and $8,500 for the 3 month and 6 month
periods ended July 31, 1997. These increases were due to an increase in
combined debt.
Income increased by $65,183 or 25.9% to $317,000 for the 3 months ended July 31,
1997 from $251,817 for the 3 months ended July 31, 1996. This increase was
attributed to higher margin revenues, decreased hardware sales, and operating
and personnel expense reductions. Income for the 6 months ended July 31, 1997
decreased by $39,075 or 7.7% to $467,000 from $506,075 for the 6 months ended
July 31, 1996. This decrease was primarily due to a decrease in lower margin
hardware sales in the prior year.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
The Company continues to consider acquisitions and is in various stages of
discussions with potential acquisition candidates in the healthcare practice
management systems industry. As of July 31, 1997 the Company has reached
agreements in principle to acquire two privately-held practice management system
vendors. There can be no assurance that INC will be able to obtain the required
financing to purchase these businesses or that the terms of such agreements
will not be modified hereafter.
In June, 1996 the Company contracted with an investment banking financial
advisor to assist in the financial analysis of the target companies, and
development of a consolidation business plan. The advisors are also assisting
the Company in identifying financing alternatives. The Company has agreed to
pay the advisor a fee based upon the amount of funds raised.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Reports on Form 8-K:
Date Description
- ---- -----------
July 16, 1997 Announcement of Consummation of Initial Public Offering
August 14, 1997 Announcement of Agreements in Principle to acquire two
practice management system vendors
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, The
Registrant has duly caused this Quarterly Report to be signed on its behalf by
the undersigned, there unto duly authorized.
INFOCURE CORPORATION
(REGISTRANT)
September 15, 1997 BY: /s/ Frederick L. Fine
--------------------------
Frederick L. Fine
Chairman, President and CEO
September 15, 1997 BY: /s/ Michael Warren
--------------------------
Michael Warren
Chief Financial Officer, Director
15
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JULY 31,
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STATEMENTS.
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