SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended January 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934.
For the transition period from________________to________________
Commission file number 2-86360
INFORMEDICS, INC.
(Exact name of small business issuer as specified in its charter)
Oregon 93-0750571
(State of incorporation) (I.R.S. Employer Identification No.)
4000 Kruse Way Place, Bldg 3, Suite 300,
Lake Oswego, OR 97035
(Address of principal executive offices)
Issuer's telephone number: (503) 697-3000
Check whether the issuer (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 issuer was required
to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes /X/ No/ /
Number of shares of Informedics, Inc. $.01 par value common stock
outstanding as of February 28, 1998: 2,674,502.
<PAGE>
INFORMEDICS, INC.
Part I - Financial Information
The information included herein is unaudited. However, such
information reflects all adjustments (consisting solely of normal, recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the results of operations for the interim periods. The interim
financial information and notes thereto should be read in conjunction with the
Company's latest annual report on Form 10-KSB. The results of operations for
the three months ended January 31, 1998 are not necessarily indicative of
results to be expected for the entire year.
<PAGE>
<TABLE>
<CAPTION>
INFORMEDICS, INC.
STATEMENTS OF OPERATIONS
Three Months Ended January 31,
-------------------------------------
1998 1997
----------------- -----------------
<S> <C> <C>
REVENUE:
Product Sales $ 162,661 $ 149,761
Customer Service and Support 641,109 695,935
----------------- ------------------
Total Revenue 803,770 845,696
----------------- ------------------
COSTS AND EXPENSES:
Cost of Products Sold 37,124 28,211
Cost of Customer Service and Support 234,275 501,086
Selling & Administrative Expenses 275,502 485,147
Depreciation & Amortization 61,017 101,610
----------------- ------------------
Total Costs and Expenses 607,918 1,116,054
----------------- ------------------
Operating Profit (Loss) 195,852 (270,358)
----------------- ------------------
OTHER INCOME (EXPENSE):
Interest Expense (832) (3,835)
Interest Income 3,326 8,680
Other Income 7,279 3,669
----------------- ------------------
Total Other Income - Net 9,773 8,514
----------------- ------------------
PROFIT (LOSS) BEFORE INCOME TAXES 205,625 (261,844)
Income Tax 17,100 ---
Provision
----------------- ------------------
NET PROFIT (L0SS) AFTER INCOME $ 188,525 ($ 261,844)
TAXES
================= ==================
Weighted Average Number of Common Shares
Outstanding and Common Stock
Equivalents Outstanding 2,674,502 2,650,307
================= ==================
BASIC EARNINGS (LOSS) PER SHARE $0.07 ($0.10)
================= ==================
DILUTED EARNINGS (LOSS) PER SHARE $0.06 ($0.08)
================= ==================
See Notes to Financial Statements.
</TABLE>
<PAGE>
INFORMEDICS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
January 31, October 31,
ASSETS 1998 1997
--------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 337,637 $ 207,692
Accounts Receivable, Less Allowance for Doubtful
Accounts of $ 16,200 in 1998 and 1997 948,992 445,879
Inventories 2,597 3,304
Prepaid Expenses and Other Current Assets 82,814 55,267
Deferred Income Taxes 74,900 90,500
Current Portion of Long-Term 11,928 11,928
Receivable
--------------- -----------------
Total Current Assets 1,458,868 814,570
--------------- -----------------
FIXED ASSETS:
Furniture and Fixtures 131,608 135,505
Machinery and Equipment 440,203 557,188
Leasehold Improvements 29,583 27,258
Other Fixed Assets 142,982 142,982
--------------- -----------------
744,376 862,933
Less accumulated depreciation and amortization 649,808 737,093
--------------- -----------------
Total Fixed Assets 94,568 125,840
--------------- -----------------
OTHER ASSETS:
Long-Term Account Receivable 27,832 30,814
Software Development Costs,
Less Accumulated Amortization of $ 825,312
in 1998 and $ 787,791 in 1997 164,394 169,540
Covenants Not to Compete,
Less Accumulated Amortization of $ 493,912
in 1998 and $ 493,862 in 1997 133 183
Deferred Income Taxes 871,401 932,901
Tax Valuation Allowance (871,401) (932,901)
Other 39,299 39,799
--------------- -----------------
Total Other Assets 231,658 240,336
--------------- -----------------
TOTAL ASSETS $ 1,785,094 $ 1,180,746
=============== =================
See Notes to Financial Statements
</TABLE>
<PAGE>
INFORMEDICS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
January 31, October 31,
LIABILITIES AND STOCKHOLDERS' DEFICIT 1997 1997
-------------------------------------------------------------------- ----------------- ----------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses:
Trade Accounts $ 147,756 $ 87,917
Customer Deposits 15,810 22,590
Accrued Wages, Payroll Taxes and Employee Benefits 66,836 86,362
Other Accrued Liabilities 8,457 9,445
Deferred Revenue 1,554,072 1,192,368
Current Portion of Deferred Rent 14,119 13,033
----------------- -----------------
Total Current Liabilities 1,807,050 1,411,715
LONG-TERM OBLIGATIONS:
Deferred Rent 13,033 17,378
Deferred Tax Liability 18,200 16,700
----------------- -----------------
Total Current Liabilities and Long-Term Obligations 1,838,283 1,445,793
----------------- -----------------
STOCKHOLDERS' DEFICIT:
Preferred Stock, $ .01 Par Value:
Authorized 5,000,000 Shares;
No Shares Outstanding --- ----
Common Stock, $.01 Par Value:
Authorized 15,000,000 Shares;
Shares Outstanding: 2,674,502 in 1998 and
2,654,708 in 1997 26,745 26,546
Capital in Excess of Par Value 1,941,176 1,918,042
Note Receivable from Stockholder (22,000) (22,000)
Accumulated Deficit (1,999,110) (2,187,635)
----------------- -----------------
Total Stockholders' Deficit (53,189) (265,047)
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $ 1,785,094 $ 1,180,746
================= =================
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INFORMEDICS, INC.
STATEMENTS OF CASH FLOWS
Three Months Ended January 31,
-----------------------------------------
1998 1997
-----------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 188,525 ($ 261,844)
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO NET CASH AND CASH EQUIVALENTS PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Depreciation and Amortization 61,017 101,610
Provision for Write-offs of Accounts Receivable --- 3,023
Deferred Income Taxes 17,100
Gain on Sale of Assets --- (3,567)
Changes in Assets and Liabilities:
Accounts Receivable (503,113) 99,380
Inventories 707 5,407
Prepaid Expenses and Other Current Assets (27,547) (2,552)
Accounts Payable and Accrued Expenses 32,545 (40,334)
Notes Receivable 2,982 9,499
Deferred Revenue 361,704 292,095
Deferred Rent (3,259) (3,258)
------------------ ------------------
Net Cash and Cash Equivalents Provided by
Operating Activities 130,661 199,459
------------------ ------------------
INVESTING ACTIVITIES:
Property Additions (2,325) (4,815)
Capitalized Software Development Costs (32,374) (25,158)
Other 10,650 2,517
------------------ ------------------
Net Cash Used in Investing Activities (24,049) (27,456)
------------------ ------------------
FINANCING ACTIVITIES:
Decrease in Revolving Line of Credit --- (125,000)
Proceeds from Issuance of Common Stock 23,333 ---
------------------ ------------------
Net Cash Provided by (Used In) Financing Activities 23,333 (125,000)
------------------ ------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 129,945 47,003
CASH AND CASH EQUIVALENTS AT BEGINNING
OF QUARTER 207,692 323,217
------------------ ------------------
CASH AND CASH EQUIVALENTS AT END
OF QUARTER $ 337,637 $ 370,220
================== ==================
</TABLE>
<PAGE>
INFORMEDICS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended January 31,
-------------------------------------------
1998 1997
-------------------------------------------
<S> <C> <C>
Supplemental Disclosures of Cash Flow
Information:
Cash paid for:
Interest $ 832 $ 3,835
Income Taxes Paid (Received) --- ---
See Notes to Financial Statements.
</TABLE>
<PAGE>
INFORMEDICS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Industry Segment
----------------
The Company derives its revenue solely from the sales and servicing of
microcomputer software and related hardware.
Inventories
-----------
Inventories are stated at the lower of cost or market. Specific
identification is used to determine the costs of hardware and software
inventory.
Fixed Assets
------------
Fixed assets are stated at cost, less accumulated depreciation and
amortization. The costs of fixed assets are depreciated over the
estimated useful lives (two to five years) of the assets using the
straight-line method. Leasehold improvements are amortized over the
term of the lease (five years).
Customer Service and Support Revenue
------------------------------------
Customer service and support revenue represents revenue earned from
hardware and software maintenance contracts, training, installation of
new systems, and general software support and programming services
provided to customers. Under renewable maintenance contracts, the
Company provides, for a term of generally not more than one year,
essentially all maintenance and repairs resulting from the normal and
intended use of its products. Deferred revenue on maintenance
contracts is amortized by the straight-line method over the life of
the contracts.
Revenue Recognition
-------------------
Revenue from sales of software and hardware is generally recorded when
the product is shipped. Revenue from custom software products, which
are marketed to customers primarily under perpetual license
arrangements, is recorded at the time the product is installed and
accepted by the customer. Revenue from services other than maintenance
contracts is recognized as performed.
Income Taxes
------------
Income taxes are accounted for using the methodology established by
Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes," which requires an asset and aliability
approach to financial accounting and reporting for income taxes.
Deferred income tax assets and liabilities are computed for
differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in
the future. A valuation allowance is established when necessary
to reduce deferred tax assets to amounts expected to be realized,
based on enacted tax laws and rates applicable to the periods in which
the differences are expected to affect taxable income. Income tax
expense or benefit is the tax payable or refundable for the period,
plus or minus the change during the period in deferred tax assets and
liabilities.
<PAGE>
INFORMEDICS, INC.
NOTES TO FINANCIAL STATEMENTS
Software Development Costs
--------------------------
Certain software development costs are being capitalized and amortized
over the estimated economic life of the software, on a straight-line
method, commencing when each product or enhancement is available for
general release. Amortization using the straight-line method for the
three-month periods ended January 31, 1998 and 1997 was $ 37,521 and $
60,520 respectively.
Covenants Not to Compete
------------------------
Covenants not to compete are stated at the estimated value of the
consideration given for the covenants (including the present value of
any future payments to be made under each agreement), less accumulated
amortization. The costs of the covenants are being amortized over four
or seven years, using the straight-line method. Amortization for the
three-month periods ended January 31, 1998 and 1997 was $50 and $
3,859, respectively.
Earnings Per Share
-------------------
Earnings per share is computed on the basis of weighted average number
of shares outstanding plus common stock equivalents which would arise
from the exercise of stock options and warrants. Common stock
equivalents are excluded from the calculation of net loss per share for
the nine months ended January 31, 1998 and 1997, as they are
antidilutive.
Cash and Cash Equivalents
-------------------------
The Company considers cash on hand, deposits in bank and highly liquid
debt instruments purchased with original maturity dates of three
months or less, as cash.
Accounting Changes
------------------
In October 1995, the Financial Accounting Standards Board (the "FASB")
issued SFAS No. 123, "Accounting for Stock-Based Compensation." This
statement establishes an alternative method of accounting that
requires recognizing as expense the fair value of employee stock
options and other stock-based awards at the grant date. SFAS No. 123
also allows the continuation of the current accounting treatment under
which the Company does not recognize compensation expense for the
stock options it awards to employees. Since the Company is electing to
retain its current method, it is required to present pro forma
disclosures in its annual financial statements as if the fair value
based method had been applied.
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share."
SFAS No. 128 requires all companies whose capital structures include
convertible securities and options to make a dual presentation of
basic and diluted earnings per share ("EPS") in the statement of
operations and requires additional disclosures regarding the
computation of EPS. The new standard is effective for interim
statements issued after December 15, 1997. The effect on earnings per
share for all periods reported is immaterial.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No.130 establishes requirements for disclosure of
comprehensive income and becomes effective for the Company's fiscal
year ending October 31, 1999. Reclassification of earlier financial
<PAGE>
INFORMEDICS, INC.
NOTES TO FINANCIAL STATEMENTS
statements for comparative purposes is required. The impact on the
Company's financial statements is not expected to be material.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information." SFAS No. 131 establishes
standards for disclosure about operating segments in annual financial
statements and selected information in interim financial reports. It
also establishes standards for related disclosures about products and
services, geographic areas, and major customers. This statement
supersedes SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise." The new standard becomes effective for the
Company's fiscal year ending October 31, 1999, and requires that
comparative information from earlier years be restated to conform to
the requirements of this standard.
2. CREDIT AGREEMENTS
The Company's credit line agreement expired December 31, 1997 and
the Company does not plan to pursue a credit line at this time.
<PAGE>
INFORMEDICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The following discussion includes certain forward-looking statements. Those
statements involve a number of risks and uncertainties, which could cause actual
results to differ materially from the expectation stated, including the
following: slower than expected sales of Informedics' products, deterioration of
business conditions generally or specifically in the health-care industry,
regulatory changes involving health care or medical devices, competitive
factors, price pressures and higher than expected turnover in key personnel.
Highlights
On July 29, 1997, the Company signed a letter of intent to merge into Mediware
Systems, Inc. ("Mediware") of Melville, NY. The Company announced on December
19, 1997 the signing of an Agreement and Plan of Merger to merge into Mediware
in a stock exchange whereby one share of Mediware stock would be exchanged for
every 6.3 shares of the Company's stock. The merger is subject to Securities and
Exchange Commission review and the approval of the Company's shareholders.
The Company's operating results continued to improve and it realized an
after-tax profit of $188,525 in the first quarter of 1998 or an improvement of
$450,369 over the same period in 1997. The improvement was primarily the result
of cost-cutting measures which were fully realized in the first quarter of 1998.
Although the Company's total revenue of $803,770 for the first quarter of 1998
was $41,926 less than the first quarter of 1997, new sales of its main product
LifeLine was $108,503 better than the prior year's quarter.
In December 1997, the Company received a request from the Food and Drug
Administration ("FDA") for additional information and clarifications regarding
its Section 510(k) submission. The FDA requested the Company identify additional
safety critical functions, clarify the hardware platform on which its Lifeline
product is used, and expand its beta test information. The Company is actively
addressing each of these areas and is confident that it will meet the FDA's
response date of April 5, 1998.
The Company is currently developing a new software release for the LifeLine
product, which addresses the Year 2000 issue, expanded bar code labeling to meet
anticipated FDA requirements, and customer-recommended enhancements. The Company
has evaluated its anticipated costs associated with this release (expected in
late summer 1998), including staffing levels, distribution costs, installation
requirements and training. The Company's management believes that it may incur
as much as $300,000 in costs associated with this release. The Company will
account for these costs in accordance with its normal software accounting
policies as discussed in its most recent 10-KSB filing.
In 1997, the Company established a valuation reserve against its deferred income
taxes which offset the income tax benefit for the first quarter of 1997. In the
third quarter of 1997, this reserve was increased as the Company's management
determined that the benefit of the net operating loss carryforwards were not
likely to be realized. The Company was able to utilize some of these net
operating loss carryforwards in the current quarter to reduce the current tax
provision.
Results of Operations - Material Changes
Total product sales of $162,661 for the first quarter 1998 was $12,900 more when
compared to the first quarter 1997. The increase was due to increased sales of
LifeLine, offset by decreased sales of other products.
Customer service and support revenue decreased $54,826 for the first quarter of
1998, when compared to the same period in 1997. However, 1997 results included
one-time programming service revenue associated with LifeLine and ClinicManager
product lines. Hardware support revenue decreased 45% in the first quarter of
1998 when compared to first quarter of 1997, but the decline was mostly offset
by a new technical support service which is intended to replace the hardware
support service revenue. The Company began marketing the new technical support
service in the second quarter of 1997.
Hardware sales in the amount of $48,158 and associated cost of products sold in
the first quarter of 1998 were comparable to the same period in 1997.
The cost of customer service and support decreased $266,811, while selling and
administrative expenses decreased $209,645 in the first quarter of 1998 when
compared to the first quarter of 1997. These cost improvements resulted from a
reduction in staff and other overhead costs. Management anticipates that these
costs will remain relatively stable over the remainder of fiscal 1998.
<PAGE>
Liquidity - Capital Resources
The Company's cash position grew from $207,692 on October 31, 1997 to $337,637
on January 31, 1998, as the Company added $130,661 of cash as a result of
operating activities, used $24,049 for investing activities, and added $23,333
from financing activities. Based upon the anticipation of continued steady
product sales and reduced operating expenses, management believes that the
Company's current cash position will be sufficient to fund its operating and
investment activities for the remainder of fiscal 1998.
As a result of the operating profit in the first quarter of 1998, the Company
experienced an improvement of $248,960 in working capital. The Company had a
negative working capital on January 31, 1998 of $348,185, as compared to a
negative $597,145 on October 31, 1997. Excluding the deferred revenue liability,
which is a liability for future services, the Company's working capital on
January 31, 1998 was $1,205,890, compared to $595,223 on October 31, 1997.
Capital expenditures for property additions were $2,325 in the first quarter of
1998 compared to $4,815 for the first quarter of 1997. Management anticipates
that capital expenditures for property additions for the balance of 1998 will
remain low.
Capitalized software development costs were $32,374 and $25,158 for the first
quarter of 1998 and 1997, respectively. Management anticipates that capitalized
software development cost for the remainder of 1998 will accelerate, then
stabilize, as the date of the next LifeLine product release approaches in late
summer, 1998.
The Company's credit line agreement expired December 31, 1997 and the Company
does not plan to pursue a credit line at this time.
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit.
27 Financial Data Schedule
(b) Reports on Form 8-K
None
<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.
INFORMEDICS, INC.
(Registrant)
Date March 13, 1998 By /s/ John Tortorici
- ------------------- ----------------------
John Tortorici, Chairman, President,
Chief Executive Officer and
Chief Financial Officer
<PAGE>
FORM 10-QSB
Exhibit Index
Exhibit
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INFORMEDICS,
INC.'S FINANCIAL STATEMENTS CONTAINED IN ITS QUARTERLY REPORT ON FORM 10-QSB
FOR THE PERIOD ENDED JANUARY 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 337,637
<SECURITIES> 0
<RECEIVABLES> 965,192
<ALLOWANCES> 16,200
<INVENTORY> 2,597
<CURRENT-ASSETS> 1,458,868
<PP&E> 744,376
<DEPRECIATION> 649,808
<TOTAL-ASSETS> 1,785,094
<CURRENT-LIABILITIES> 1,807,050
<BONDS> 0
0
0
<COMMON> 26,745
<OTHER-SE> (79,934)
<TOTAL-LIABILITY-AND-EQUITY> 1,785,094
<SALES> 162,661
<TOTAL-REVENUES> 803,770
<CGS> 37,124
<TOTAL-COSTS> 295,292
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 832
<INCOME-PRETAX> 205,625
<INCOME-TAX> (17,100)
<INCOME-CONTINUING> 188,525
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 188,525
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.06
</TABLE>
