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 July 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 August 31, 1998: 2,674,510.
<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 nine
months ended July 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 July 31, Nine Months Ended
July 31,
------------------------------------------ ----------------------------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
------------------- -------------------- -------------------- ------------------
REVENUE:
Product Sales $ 43,659 $ 99,707 $ 252,495 $ 523,717
Customer Service and Support 601,079 622,438 1,890,111 1,959,358
------------------- -------------------- -------------------- ------------------
Total Revenue 644,738 722,145 2,142,606 2,483,075
------------------- -------------------- ------------------- ------------------
COSTS AND EXPENSES:
Cost of Products Sold 29,628 44,644 81,932 98,305
Cost of Customer Service and Support
281,191 447,932 808,635 1,420,933
Selling & Administrative Expenses 212,719 434,087 686,606 1,440,995
Depreciation & Amortization 17,180 99,095 98,576 301,292
------------------- -------------------- ------------------- ------------------
Total Costs and Expenses 540,718 1,025,758 1,675,749 3,261,525
------------------- -------------------- ------------------- ------------------
Operating Profit 104,020 (303,613) 466,857 (778,450)
(Loss)
------------------- -------------------- ------------------- ------------------
OTHER INCOME (EXPENSE):
Interest Expense --- (237) (831) (4,759)
Interest Income 7,751 7,219 29,670 26,918
Other Income 1 169,777 24,752 179,876
------------------- -------------------- ------------------- ------------------
Total Other Income 7,752 176,759 53,591 202,035
------------------- -------------------- ------------------- ------------------
PROFIT (LOSS) BEFORE
INCOME TAXES 111,772 (126,854) 520,448 (576,415)
Income Tax Provision 24,200 --- 65,400 688,025
------------------- -------------------- ------------------- ------------------
NET PROFIT (LOSS) AFTER
INCOME $ 87,572 $ (814,879) $ 455,048 $ (1,264,440)
TAXES
=================== ==================== =================== ==================
BASIC AND DILUTED EARNINGS (LOSS)
PER SHARE $ 0.03 $ (0.31) $ 0.17 $ (0.48)
=================== ==================== =================== ==================
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
INFORMEDICS, INC.
BALANCE SHEETS
July 31, October 31,
ASSETS 1998 1997
---------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 861,874 $ 207,692
Accounts Receivable, Less Allowance for Doubtful
Accounts of $ 16,200 in 1998 and 1997 360,925 445,879
Inventories 16,186 3,304
Prepaid Expenses and Other Current Assets 108,683 55,267
Deferred Income Taxes 43,200 90,500
Current Portion of Long-Term 11,928 11,928
Receivable
---------------- ------------------
Total Current Assets 1,402,796 814,570
---------------- ------------------
FIXED ASSETS:
Furniture and Fixtures 114,171 135,505
Machinery and Equipment 440,541 557,188
Leasehold Improvements 29,583 27,258
Other Fixed Assets 154,790 142,982
---------------- ------------------
739,085 862,933
Less Accumulated Depreciation and Amortization 667,690 737,093
---------------- ------------------
Total Fixed Assets 71,395 125,840
---------------- ------------------
OTHER ASSETS:
Long-Term Account Receivable 21,868 30,814
Software Development Costs,
Less Accumulated Amortization of $ 825,312
in 1998 and $ 787,791 in 1997 183,108 169,540
Covenants Not to Compete,
Less Accumulated Amortization of $ 494,012
in 1998 and $ 493,862 in 1997 33 183
Deferred Income Taxes 800,801 932,901
Tax Valuation Allowance (800,801) (932,901)
Other 39,399 39,799
---------------- ------------------
Total Other Assets 244,408 240,336
---------------- ------------------
TOTAL ASSETS $ 1,718,599 $ 1,180,746
================ ==================
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
INFORMEDICS, INC.
BALANCE SHEETS
July 31, October 31,
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 1998 1997
------------------ -----------------
CURRENT LIABILITIES:
<S> <C> <C>
Accounts Payable and Accrued Expenses:
Trade Accounts $ 71,243 $ 87,917
Customer Deposits 15,810 22,590
Accrued Wages, Payroll Taxes and Employee Benefits 60,054 86,362
Other Accrued Liabilities 15,391 9,445
Deferred Revenue 1,287,332 1,192,368
Current Portion of Deferred Rent 7,602 13,033
------------------ ------------------
Total Current Liabilities 1,457,432 1,411,715
LONG-TERM OBLIGATIONS:
Deferred Rent 13,033 17,378
Deferred Tax Liability 34,800 16,700
------------------ ------------------
Total Current Liabilities and Long-Term Obligations 1,505,265 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: 2,674,510 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 (1,732,587) (2,187,635)
------------------ ------------------
Total Stockholders' Equity (Deficit) 213,334 (265,047)
------------------ ------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 1,718,599 $ 1,180,746
================== ==================
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
INFORMEDICS, INC.
STATEMENTS OF CASH FLOWS
Nine Months Ended July 31,
------------------------------------------
1998 1997
------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income (Loss) $ 455,048 $ (1,264,450)
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO NET CASH AND CASH EQUIVALENTS PROVIDED BY OPERATING
ACTIVITIES:
Depreciation and Amortization 103,434 301,292
Provision for Write-offs of Accounts Receivable --- (5,712)
Deferred Income Taxes 65,400 606,813
Gain on Sale of Assets --- (106,990)
Changes in Assets and Liabilities:
Accounts Receivable 84,954 309,700
Income Taxes Receivable 81,212
Inventories (12,882) 3,812
Prepaid Expenses and Other Current Assets (53,416) (9,208)
Accounts Payable and Accrued Expenses (43,816) (68,740)
Notes Receivable 8,946 359,197
Deferred Revenue 94,964 (21,900)
Deferred Rent (9,776) (9,775)
------------------- -------------------
Net Cash and Cash Equivalents Provided by
Operating Activities 692,856 175,251
------------------- -------------------
INVESTING ACTIVITIES:
Property Additions (18,952) (40,019)
Capitalized Software Development Costs (51,088) (86,884)
Other 8,033 12,589
------------------- -------------------
Net Cash Used in Investing Activities (62,007) (114,314)
------------------- -------------------
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 (DECREASE) IN CASH AND CASH
EQUIVALENTS 654,182 (64,063)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 207,692 323,217
------------------- -------------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 861,874 $ 259,154
=================== ===================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INFORMEDICS, INC.
STATEMENTS OF CASH FLOWS
Nine Months Ended July 31,
--------------------------------------------
1998 1997
--------------------------------------------
<S> <C> <C>
Supplemental Disclosures of Cash Flow
Information:
Cash paid for:
Interest $ 832 $ 4,759
</TABLE>
See Notes to Financial Statements.
<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.
<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 nine-month periods ended July 31, 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 nine-month periods ended July 31, 1998 and 1997 was
$ 150 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 July 31, 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 anitdilutive. A reconciliation of the common shares
used in the denominator for computing basic and diluted EPS for the periods
ended July 31, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
Three Months Ended July 31, Nine Months Ended July 31,
-------------------------------- -----------------------------
1998 1997 1998 1997
--------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Weighted-average shares
outstanding, used in computing
basic EPS 2,671,638 2,650,307 2,671,638 2,650,307
Effect of dilutive stock 28,258 28,258
options
--------------- --------------- ------------- -------------
Weighted-average shares
outstanding and the effect of
dilutive stock options used in
computing diluted EPS 2,699,896 2,650,307 2,699,896 2,650,307
=============== =============== ============= =============
</TABLE>
<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.
3. PENDING MERGER
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 the approval of the Company's shareholders which is
scheduled for September 23, 1998.
<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 the approval of the Company's shareholders which is
scheduled for September 23, 1998.
The Company continued improved operating results for the third quarter and the
first nine months of fiscal 1998 when compared to the same periods in 1997. The
Company recorded a pre-tax profit of $111,772 for the third quarter of 1998
compared to a third quarter loss of $126,854 in 1997 and a pre-tax profit of
$520,448 for the first nine months of 1998 compared to a loss of $576,415 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.
On July 1, 1998, the Company received 510(k) clearance from the Food and Drug
Administration ("FDA") to market its LifeLine blood bank data management system,
release 4.2. By receipt of the 510(k) clearance, the Company demonstrated that
its LifeLine product meets the safety and efficacy requirements of the FDA. The
510(k) clearance is a major regulatory achievement for the Company.
The Company is currently developing new software releases for the LifeLine and
StarPath products, which address 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
these releases (expected in the fourth quarter of fiscal 1998 and the second
quarter of fiscal 1999, respectively), including staffing levels, distribution
costs, installation requirements and training. The Company's management believes
that it may incur as much as $300,000, including amounts spent to date, in costs
associated with these releases 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 this net
operating loss carryforwards in the third quarter of 1998 to reduce the current
tax provision.
Results of Operations - Material Changes
New system product sales were $56,048 lower in third quarter and $271,222 lower
for the first nine months of 1998 when compared to the same periods in 1997. The
decrease for the nine months was due to fewer sales in all product lines,
including IntraMed.net - $13,000; StarPath - $29,765; and LifeLine - $123,785.
Discontinued products Entree' and ClinicManager accounted for the remaining
product sales shortfall of $104,672.
Customer service and support revenue was $21,359 lower in third quarter and
$69,247 lower for the first nine 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 40% in the first nine months of 1998 when compared to the
<PAGE>
first nine 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 third quarter of 1997.
Hardware sales decreased $23,238 and $32,440 for the third quarter and the first
nine months of 1998, respectively, as compared to the same periods in 1997. The
cost of products sold in the third quarter was $15,016 lower and $16,373 lower
in the first nine months of 1998 when compared to the same periods in 1997.
The cost of customer service and support decreased $166,741 and $612,298 for the
third quarter and the first nine 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 $221,368 for the third quarter and $754,389 in the first nine 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 $861,874
on July 31, 1998, as the Company added $692,856 of cash as a result of operating
activities, used $62,007 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 nine months of 1998, the
Company experienced an improvement of $542,509 in working capital. The Company
had a negative working capital of $54,636 on July 31, 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 July
31, 1998 was $1,232,696 compared to $595,223 on October 31, 1997.
Capital expenditures for property additions were $18,952 in the first nine
months of 1998 compared to $40,019 in the first nine months of 1997. Management
anticipates that capital expenditures for property additions for the balance of
1998 will remain low.
Capitalized software development costs were $51,088 and $86,884 for the first
nine 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.
Year 2000 Compliance
The Year 2000 problem is the result of computer programs that rely on two-digit
date codes, instead of four-digit date codes, to indicate the year. Such
computer programs, which are unable to interpret the date code "00" as the year
2000, may not be able to perform computations and decision-making functions and
could cause computer systems to malfunction. Informedics has developed a
multi-phase program for Year 2000 information systems compliance that consists
of (i) assessment, remediation and testing of Informedics' software products to
make them Year 2000 compliant, (ii) assessment of the corporate systems and
operations of Informedics that could be affected by the Year 2000 problem, (ii)
remediation of non-compliant systems and components, and (iv) testing of systems
and components following remediation. Informedics has focused its Year 2000
review on three areas: (A) Informedics' products, (B) information technology
(IT) system applications, (C) non-IT systems, including telephone and voice mail
systems, and (D) relationships with third parties.
Informedics has determined that certain portions of its LifeLine blood bank
software and StarPath pathology data management system software do not currently
meet the conditions for date protocol compliance in the Year 2000. Informedics
is currently testing a new version of the LifeLine product which Informedics
expects will meet FDA and industry standards for Year 2000 compliance.
Informedics will begin developing a new version of the StarPath product during
<PAGE>
the first quarter of 1999. Informedics expects to release the new versions of
the LifeLine and StarPath products in the fall of 1998 and spring of 1999,
respectively. All other current Informedics' software products are Year 2000
compliant. However, prior versions of Informedics' products were not Year 2000
compliant. Informedics' customers who have support agreements with Informedics
will receive free updated Year 2000 compliant software. During the fourth
quarter of 1998 and the first quarter of 1999, Informedics plans to contact all
customers of unsupported versions of its products to inform them of the Year
2000 issue.
Informedics has conducted an initial assessment of the Year 2000 problem on its
IT systems. Informedics believes that its enterprise-wide software system is
Year 2000 compliant. Such belief is based significantly on discussions with and
representations by the vendor of such software. Informedics has been, and will
continue to be, in contact with such vendor in order to obtain any additional
revisions or upgrades issued by the vendor to ensure that such enterprise-wide
software remains Year 2000 compliant. Informedics also is taking an independent
inventory of and assessing all informational systems that could be affected by
the Year 2000 problem. Remediation of non-compliant systems is being conducted
as the assessment phase nears completion. Informedics expects to complete these
phases during the third quarter of 1998.
Informedics also is in the process of conducting an initial assessment of the
Year 2000 problem on its non-IT systems, including telephone and voice mail
systems. Informedics expects to complete its initial assessment of such areas
during the fourth quarter of 1998. Following such initial assessment,
Informedics will undertake Year 2000 remediation and testing of these
applications. Informedics cannot determine, at this time, the number or type of
non-IT systems that will require remediation; however, Informedics does not
expect this area to pose material Year 2000 problems.
Finally, Informedics is examining its relationships with third parties,
including suppliers of hardware, network operating systems and utility programs,
whose Year 2000 compliance could have material effect on Informedics.
Informedics considers these third party suppliers to pose the greatest Year 2000
risk to Informedics because their failure to become Year 2000 compliant could
result in Informedics' inability to obtain components in a timely manner, delays
or cancellations of customer orders or delay in payments by customers for
products shipped. In addition, conversions by third parties to become Year 2000
compliant might not be compatible with Informedics' systems. Any or all of these
events could have a material adverse effect on Informedics' business, financial
condition and results of operations.
Informedics has requested information from all of its significant vendors with
respect to Year 2000 compliance status. Informedics has received assurance that
all such suppliers are offering Year 2000 compliant products. Informedics is in
the process of testing all such products with its new release of the LifeLine
product.
Because of the assurances obtained and testing that is underway, Informedics has
not yet developed a contingency plan to address the effects of the failure of
Informedics or any of its principal suppliers to become Year 2000 compliant, nor
does Informedics have a timetable for preparing such a plan. In what Informedics
believes to be the most likely worst case scenario, Informedics would change
hardware and operating system suppliers to Year 2000 compliant manufacturers.
Informedics' management estimates that Informedics may incur costs of as much as
$300,000 associated with the releases of the new versions of the LifeLine and
StarPath products. However, there can be no assurance that actual costs will not
exceed management's expectations, that the new versions of software for the
LifeLine and StarPath products will timely resolve Informedics' Year 2000
compliance issues, or that the financial condition or results of operations of
Informedics will not be substantially adversely affected. Informedics' current
estimates of the impact of the Year 2000 problem on its operations and financial
results do not include costs and time that may be incurred as a result of any
vendors' or customers' failures to become Year 2000 compliant on a timely basis.
The foregoing beliefs and expectations are forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act, and are based in large part on certain statements and representations made
by persons outside Informedics, any of which statements or representations
ultimately could prove to be inaccurate.
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit.
27 Financial Data Schedule
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: September 15, 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 JULY 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JUL-31-1998
<CASH> 861,874
<SECURITIES> 0
<RECEIVABLES> 374,125
<ALLOWANCES> 16,200
<INVENTORY> 16,186
<CURRENT-ASSETS> 1,402,796
<PP&E> 739,085
<DEPRECIATION> 667,690
<TOTAL-ASSETS> 1,718,599
<CURRENT-LIABILITIES> 1,457,432
<BONDS> 0
0
0
<COMMON> 26,745
<OTHER-SE> 186,589
<TOTAL-LIABILITY-AND-EQUITY> 1,718,599
<SALES> 252,495
<TOTAL-REVENUES> 2,142,606
<CGS> 81,932
<TOTAL-COSTS> 907,211
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 831
<INCOME-PRETAX> 520,448
<INCOME-TAX> (65,400)
<INCOME-CONTINUING> 455,048
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 455,048
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
