SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended April 30, 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 May 31, 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 six months ended April 30, 1998 are not necessarily indicative of results
to be expected for the entire year.
2
<PAGE>
INFORMEDICS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended April 30, Six Months Ended April 30,
----------------------------------------- ---------------------------------------
1998 1997 1998 1997
------------------ ------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
REVENUE:
Product Sales $ 46,175 $ 274,249 $ 208,836 $ 424,010
Customer Service and Support 647,924 640,985 1,289,033 1,336,920
------------------ ------------------- ------------------- -----------------
Total Revenue 694,099 915,234 1,497,869 1,760,930
------------------ ------------------- ------------------ -----------------
COSTS AND EXPENSES:
Cost of Products Sold 15,180 25,450 52,305 53,661
Cost of Customer Service and Support
293,169 471,916 527,444 973,002
Selling & Administrative Expenses 198,386 521,721 473,887 1,006,868
Depreciation & Amortization 20,379 100,627 81,396 202,237
------------------ ------------------- ------------------ -----------------
Total Costs and Expenses 527,114 1,119,714 1,135,032 2,235,768
------------------ ------------------- ------------------ -----------------
Operating Profit 166,985 (204,480) 362,837 (474,838)
(Loss)
------------------ ------------------- ------------------ -----------------
OTHER INCOME (EXPENSE):
Interest Expense --- (686) (832) (4,521)
Interest Income 18,594 11,019 21,919 19,699
Other Income 17,471 6,430 24,751 10,099
------------------ ------------------- ------------------ -----------------
Total Other Income 36,065 16,763 45,838 25,277
------------------ ------------------- ------------------ -----------------
PROFIT (LOSS) BEFORE
INCOME TAXES 203,050 (187,717) 408,675 (449,561)
Income Tax Provision 24,100 --- 41,200 ---
------------------ ------------------- ------------------ -----------------
NET PROFIT (LOSS) AFTER
INCOME $ 178,950 $ (187,717) $ 367,475 $ (449,561)
TAXES
================== =================== ================== =================
BASIC AND DILUTED EARNINGS (LOSS)
PER SHARE $ 0.07 $ (0.07) $ 0.14 $ (0.17)
================== =================== ================== =================
See Notes to Financial Statements.
</TABLE>
3
<PAGE>
INFORMEDICS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
April 30, October 31,
ASSETS 1998 1997
--------------- ---------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 868,758 $ 207,692
Accounts Receivable, Less Allowance for Doubtful
Accounts of $ 16,200 in 1998 and 1997 228,960 445,879
Inventories 14,848 3,304
Prepaid Expenses and Other Current Assets 91,376 55,267
Deferred Income Taxes 59,000 90,500
Current Portion of Long-Term 11,928 11,928
Receivable
--------------- ---------------
Total Current Assets 1,274,870 814,570
--------------- ---------------
FIXED ASSETS:
Furniture and Fixtures 114,171 135,505
Machinery and Equipment 439,205 557,188
Leasehold Improvements 29,583 27,258
Other Fixed Assets 144,004 142,982
--------------- ---------------
726,963 862,933
Less accumulated depreciation and amortization 650,560 737,093
--------------- ---------------
Total Fixed Assets 76,403 125,840
--------------- ---------------
OTHER ASSETS:
Long-Term Account Receivable 24,850 30,814
Software Development Costs,
Less Accumulated Amortization of $ 825,312
in 1998 and $ 787,791 in 1997 174,864 169,540
Covenants Not to Compete,
Less Accumulated Amortization of $ 493,962
in 1998 and $ 493,862 in 1997 83 183
Deferred Income Taxes 818,301 932,901
Tax Valuation Allowance (818,301) (932,901)
Other 39,299 39,799
--------------- ---------------
Total Other Assets 239,096 240,336
--------------- ---------------
TOTAL ASSETS $ 1,590,369 $ 1,180,746
=============== ===============
See Notes to Financial Statements
</TABLE>
4
<PAGE>
INFORMEDICS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
April 30, October 31,
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 1998 1997
----------------- ----------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses:
Trade Accounts $ 63,729 $ 87,917
Customer Deposits 15,810 22,590
Accrued Wages, Payroll Taxes and Employee Benefits 65,960 86,362
Other Accrued Liabilities 15,090 9,445
Deferred Revenue 1,253,725 1,192,368
Current Portion of Deferred Rent 10,861 13,033
----------------- ----------------
Total Current Liabilities 1,425,175 1,411,715
LONG-TERM OBLIGATIONS:
Deferred Rent 13,033 17,378
Deferred Tax Liability 26,400 16,700
----------------- ----------------
Total Current Liabilities and Long-Term Obligations 1,464,608 1,445,793
----------------- ----------------
STOCKHOLDERS' EQUITY (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 (1,820,160) (2,187,635)
----------------- ----------------
Total Stockholders' Equity (Deficit) 125,761 (265,047)
----------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 1,590,369 $ 1,180,746
================= =================
See Notes to Financial Statements.
</TABLE>
5
<PAGE>
INFORMEDICS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended April 30,
-----------------------------------------
1998 1997
-----------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 367,475 $ (449,561)
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO NET CASH AND CASH EQUIVALENTS PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Depreciation and Amortization 86,254 202,237
Provision for Write-offs of Accounts Receivable --- 32,561
Deferred Income Taxes 41,200 ---
Gain on Sale of Assets --- (8,917)
Changes in Assets and Liabilities:
Accounts Receivable 216,919 162,308
Inventories (11,544) 8,957
Prepaid Expenses and Other Current Assets (36,109) 4,814
Accounts Payable and Accrued Expenses (45,725) (37,701)
Notes Receivable 5,964 24,023
Deferred Revenue 61,357 14,850
Deferred Rent (6,517) (6,517)
------------------ ------------------
Net Cash and Cash Equivalents Provided by
(Used in) Operating Activities 679,274 (52,946)
------------------ ------------------
INVESTING ACTIVITIES:
Property Additions (6,830) (23,238)
Capitalized Software Development Costs (42,844) (57,823)
Other 8,133 1,942
------------------ ------------------
Net Cash Used in Investing Activities (41,541) (79,119)
------------------ ------------------
FINANCING ACTIVITIES:
Decrease in Revolving Line of Credit --- (25,000)
Proceeds from Issuance of Common Stock 23,333 ---
------------------ ------------------
Net Cash Provided by (Used In) Financing Activities 23,333 (25,000)
------------------ ------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 661,066 (157,065)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 207,692 323,217
------------------ ------------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 868,758 $ 166,152
================== ==================
</TABLE>
6
<PAGE>
INFORMEDICS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended April 30,
-----------------------------------------
1998 1997
-----------------------------------------
<S> <C> <C>
Supplemental Disclosures of Cash Flow
Information:
Cash paid for:
Interest $ 832 $ 4,521
See Notes to Financial Statements.
</TABLE>
7
<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 a liability 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.
8
<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 six-month
periods ended April 30, 1998 and 1997 was $ 37,521 and $ 121,040
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 six-month
periods ended April 30, 1998 and 1997 was $ 100 and $ 7,718, respectively.
Earnings Per Share
------------------
In February 1997, the Financial Accounting Standards Board (the "FASB")
issued SFAS No. 128, "Earnings Per Share," which established new standards
for computing and presenting earnings per share ("EPS) to entities having
publicly held common stock and potential common stock. SFAS No. 128
replaces the presentation of primary EPS with the dual presentation of a
basic EPS and diluted EPS on the Company's statements of operations. The
Company computes basic EPS by dividing net income by the weighted-average
number of common shares outstanding and diluted EPS by dividing net income
by the sum of the weighted-average number of common shares outstanding and
the dilutive effect of stock options outstanding as if such options were
exercised or converted into common shares. The Company's computation of
diluted EPS is essentially the same as the computation of primary EPS,
which was presented prior to the adoption of SFAS No. 128.
There were no adjustments to net income in computing diluted earnings per
share for the periods ended April 30, 1998 and 1997. The Company uses the
treasury stock method to compute the number of shares used in the diluted
EPS calculation and, as such, in 1997, no shares are included for
outstanding stock options as they would be antidilutive. A reconciliation
of the common shares used in the denominator for computing basic and
diluted EPS for the periods ended April 30, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
Three Months Ended April 30, Six Months Ended April 30,
------------------------------ ------------------------------
1998 1997 1998 1997
------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Weighted-average shares
outstanding, used in computing
basic EPS 2,674,502 2,650,307 2,674,502 2,650,307
Effect of dilutive stock 19,900 19,900
options ------------- ------------- ------------ -------------
Weighted-average shares
outstanding and the effect of
dilutive stock options used in
computing diluted EPS 2,694,402 2,650,307 2,694,402 2,650,307
============= ============= ============ =============
</TABLE>
9
<PAGE>
INFORMEDICS, INC.
NOTES TO FINANCIAL STATEMENTS
Cash and Cash Equivalents
-------------------------
The Company considers cash on hand, deposits in bank and highly liquid debt
instruments purchased with original maturity dates of six months or less,
as cash.
Accounting Changes
------------------
In October 1995, 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 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 statements
for comparative purposes is required. The impact on the Company's financial
statements is not 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 has no credit line with a bank at this time.
10
<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 a
subsidiary of 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 the Mediware subsidiary 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 continued improved operating results for the second quarter and the
first six months of fiscal 1998 when compared to the same periods in 1997. The
Company recorded a pre-tax profit of $203,050 for the second quarter of 1998
compared to a second quarter loss of $187,717 in 1997 and a pre-tax profit of
$408,675 for the first six months of 1998 compared to a loss of $449,564 for the
same period in 1997. The improvement was primarily the result of cost-cutting
measures fully realized in fiscal 1998 offset in part by reduced new system
sales.
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 for its LifeLine product. 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. Management believes that it adequately responded to the FDA's
request on March 26, 1998. If the response contains insufficient information,
the Company's ability to market the LifeLine product may be adversely affected.
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 functional improvements.
The Company has evaluated its anticipated costs associated with this release
(expected in the fourth quarter of fiscal 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 and other Year 2000 issues.
In 1997, the Company established a valuation reserve against its deferred income
taxes which offset the income tax benefit for the first two quarters 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
was not likely to be realized. The Company was able to utilize some of these net
operating loss carryforwards in the second quarter of 1998 to reduce the current
tax provision.
Results of Operations - Material Changes
New system product sales were $228,074 lower in second quarter and $215,174
lower for the first six months of 1998 when compared to the same periods in
1997. The decrease for the six months was due to fewer sales in all product
lines, including IntraMed.net - $57,000; StarPath - $29,765; and LifeLine -
$11,580. Discontinued products Entree' and ClinicManager accounted for the
remaining product sales shortfall of $116,829.
Customer service and support revenue was $6,939 higher in second quarter and
$47,887 lower for the first six months of 1998, when compared to the same
periods in 1997. The 1997 results included one-time programming service revenue
associated with LifeLine and ClinicManager product lines. Hardware support
revenue decreased 33% in the first six months of 1998 when compared to the first
11
<PAGE>
six months of 1997, but the decline was more than offset by a new technical
support service which was 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 decreased $15,238 and $9,202 for the second quarter and the first
six months of 1998, respectively, as compared to the same periods in 1997. The
cost of products sold in the second quarter was $10,270 lower and $1,356 lower
in the first six months of 1998 when compared to the same periods in 1997.
The cost of customer service and support decreased $178,747 and $445,558 for the
second quarter and the first six months of 1998, respectively, as compared to
the same periods in 1997. Likewise, selling and administrative expenses
decreased in 1998 when compared to the same periods in 1997. These costs were
lower by $323,335 for the second quarter and $532,981 in the first six months of
1998. The 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.
Liquidity - Capital Resources
The Company's cash position grew from $207,692 on October 31, 1997 to $868,758
on April 30, 1998, as the Company added $679,274 of cash as a result of
operating activities, used $41,541 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 six months of 1998, the Company
experienced an improvement of $446,840 in working capital. The Company had a
negative working capital of $150,305 on April 30, 1998 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 April 30, 1998
was $1,103,420, compared to $595,223 on October 31, 1997.
Capital expenditures for property additions were $6,830 in the first six months
of 1998 compared to $23,238 in the first six months of 1997. Management
anticipates that capital expenditures for property additions for the balance of
1998 will remain low.
Capitalized software development costs were $42,844 and $57,823 for the first
six months of 1998 and 1997, respectively. Management anticipates that
capitalized software development costs for the remainder of 1998 will remain
low.
The Company has no credit line with a bank at this time.
12
<PAGE>
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
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.
INFORMEDICS, INC.
(Registrant)
Date June 17, 1998 By /s/ John Tortorici
-------------- -------------------------
John Tortorici, Chairman, President,
Chief Executive Officer and
Chief Financial Officer
14
<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 APRIL 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> APR-30-1998
<CASH> 868,758
<SECURITIES> 0
<RECEIVABLES> 245,160
<ALLOWANCES> 16,200
<INVENTORY> 14,848
<CURRENT-ASSETS> 1,274,870
<PP&E> 726,963
<DEPRECIATION> 650,560
<TOTAL-ASSETS> 1,590,369
<CURRENT-LIABILITIES> 1,425,175
<BONDS> 0
0
0
<COMMON> 26,745
<OTHER-SE> 99,016
<TOTAL-LIABILITY-AND-EQUITY> 1,590,369
<SALES> 208,836
<TOTAL-REVENUES> 1,497,869
<CGS> 52,305
<TOTAL-COSTS> 608,840
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 832
<INCOME-PRETAX> 408,675
<INCOME-TAX> (41,200)
<INCOME-CONTINUING> 367,475
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 367,475
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
</TABLE>
