US SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM _________ TO _________
COMMISSION FILE NO. 0-15936
HEALTH OUTCOMES MANAGEMENT, INC.
(Name of small business issuer in its charter)
MINNESOTA 41-1546471
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2331 UNIVERSITY AVENUE SE
MINNEAPOLIS, MINNESOTA 55414
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER (612) 378-3053
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes _X_ No ___
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding at January 9, 1998, was 8,872,853.
<PAGE>
INDEX
HEALTH OUTCOMES MANAGEMENT, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - November 30, 1997 and
February 28, 1997.
Condensed Consolidated Statements of Operations Three and nine
months ended November 30, 1997 and 1996.
Consolidated Statements of Cash Flows Nine months ended
November 30, 1997 and 1996.
Notes to Consolidated Financial Statements -
November 30, 1997.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
PART II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Securities
Holders.
Item 6 - Exhibits and Reports on Form 8-K.
SIGNATURES
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
<PAGE>
HEALTH OUTCOMES MANAGEMENT, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30,
1997 February 28,
(Unaudited) 1997
----------- ----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 80,623 209,024
Trade receivables, less allowance for doubtful
accounts of $13,000 and $35,000, respectively 83,484 92,402
Inventory 78,936 52,436
Prepaid expenses 24,432 17,366
-------- -------
Total current assets 267,475 371,228
Property and equipment, net of accumulated depreciation 73,169 104,009
Other assets, net of accumulated amortization of
$372,915 and $319,631, respectively 51,817 49,837
-------- -------
Total assets $392,461 525,074
======== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
<CAPTION>
November 30,
1997 February 28,
(Unaudited) 1997
----------- ----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
<S> <C> <C>
Current liabilities:
Notes payable to bank 50,000 --
Notes payable, current portion 6,000 6,904
Current installments of obligation under capital leases 36,785 60,974
Accounts payable 412,149 102,827
Deferred revenue 176,584 313,926
Accrued compensation 46,820 56,547
Accrued payroll taxes 14,724 14,979
Other current liabilities 31,981 25,608
----------- ----------
Total current liabilities 775,043 581,765
----------- ----------
Notes payable, excluding current portion 509 4,289
Obligation under capital leases, excluding
current installments 12,582 25,377
----------- ----------
Total liabilities 788,134 611,431
----------- ----------
Stockholders' deficit:
Series A, convertible preferred stock, $.01 par value:
Authorized - 1,000,000
Issued and outstanding shares - none -- --
Common stock--$.01 par value:
Authorized - 15,000,000
Issued and outstanding shares - 8,511,429 85,114 84,990
Additional paid-in capital 4,727,296 4,724,568
Accumulated deficit (5,208,083) (4,826,415)
Note receivable from officer -- (69,500)
----------- ----------
Total stockholders' deficit (395,673) (86,357)
----------- ----------
Total liabilities and stockholders' deficit $ 392,461 525,074
=========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
HEALTH OUTCOMES MANAGEMENT, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
November 30, November 30,
1997 1996 1997 1996
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 533,228 759,116 1,714,310 1,974,791
Cost of revenues 389,277 353,539 1,267,297 1,183,418
----------- ---------- ---------- ----------
Gross profit 143,951 405,577 447,013 791,373
----------- ---------- ---------- ----------
Operating expenses:
Research and development 40,319 44,982 102,987 187,202
Selling and marketing 33,131 35,585 91,652 139,493
General and administrative 229,096 202,127 620,284 471,862
----------- ---------- ---------- ----------
Total operating expenses 302,546 282,694 814,923 798,557
----------- ---------- ---------- ----------
Income (loss) from operations (158,595) 122,883 (367,910) (7,184)
----------- ---------- ---------- ----------
Other (income) expense
Interest income (589) (1,838) (3,801) (6,117)
Interest expense 6,896 6,295 17,559 17,191
----------- ---------- ---------- ----------
6,307 4,457 13,758 11,074
----------- ---------- ---------- ----------
Net income (loss) $ (164,902) 118,426 (381,668) (18,258)
=========== ========== ========== ==========
Income (loss) per common share $ (.02) .01 (.04) (.00)
=========== ========== ========== ==========
Weighted average number of common and
common equivalent shares outstanding 8,509,516 8,486,162 8,502,499 8,421,214
=========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
HEALTH OUTCOMES MANAGEMENT, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended November 30,
1997 1996
--------- -------
Cash flows from operating activities:
Net loss $(381,668) (18,258)
--------- -------
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation 62,940 68,476
Amortization 32,160 24,573
Provision for losses on accounts receivable 10,273 10,317
Recoveries of bad debts 1,767 4,153
Payments in stock 2,852 15,045
Changes in operating assets and liabilities, net of
acquisitions
Increase in trade receivables (3,122) (49,570)
Increase in inventory (26,500) (33,053)
Decrease (increase) in prepaid expenses (7,066) 25,805
Increase in other current assets -- (457)
Increase (decrease) in accounts payable 305,515 (15,690)
Decrease in deferred revenue (137,342) (97,650)
Decrease in accrued compensation (9,727) (17,704)
Decrease in accrued payroll taxes (255) (6,380)
Increase in other current liabilities 6,373 4,243
--------- -------
Total adjustments 237,868 (67,892)
--------- -------
Cash used in operating activities (143,800) (86,150)
--------- -------
Cash flows from investing activities:
Capital expenditures (26,239) (2,569)
Cash paid for acquisitions (36,194) (18,435)
--------- -------
Cash flows used in investing activities (62,433) (21,004)
--------- -------
Cash flows from financing activities:
Principal payments received from note receivable 69,500 22,200
Principal payments under capital lease obligations (36,984) (35,313)
Loans from bank 50,000 25,000
Proceeds from issuance of common stock -- 45,510
Repayment of note payable assumed in the
Edina Pharmacy acquisition (4,684) (2,139)
--------- -------
Cash flows provided by financing activities 77,832 55,258
--------- -------
Decrease in cash and cash equivalents (128,401) (51,896)
Cash and cash equivalents at beginning of period 209,024 68,657
--------- -------
Cash and cash equivalents at end of period $ 80,623 16,761
========= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 10,980 17,191
========= =======
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
HEALTH OUTCOMES MANAGEMENT, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
November 30, 1997
(1) BASIS OF PRESENTATION
The unaudited financial statements presented herein include the accounts of
Health Outcomes Management, Inc. and Subsidiaries after elimination of material
intercompany accounts and transactions. These statements do not include all of
the information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-KSB for the year
ended February 28, 1997. In the opinion of management such financial statements
include all adjustments, consisting of only normal recurring adjustments,
necessary to summarize fairly the Company's financial position and results of
operations. The results of the nine month period ended November 30, 1997, may
not be indicative of the results that may be expected for the year ending
February 28, 1998.
(2) PROPERTY AND EQUIPMENT
Property and equipment, at cost, consist of the following:
Property under capitalized leases $ 310,005
Furniture and equipment 388,901
----------
698,906
Less accumulated depreciation 625,737
----------
Net property and equipment $ 73,169
==========
(3) NOTES PAYABLE
In July 1996, the Company assumed a $14,973 note payable related to the
acquisition of Edina Pharmacy. As of November 30, 1997, the Company had an
outstanding balance of $6,509 on this note payable.
As of November 30, 1997, the Company had borrowed $50,000 on the line of credit
with a bank.
(4) CAPITALIZED COMPUTER SOFTWARE
The Company capitalizes software production costs after technological
feasibility has been established and prior to general release to clients.
(5) MASTER LICENSE AGREEMENT
On April 21, 1995, the Company had signed a twelve month Master License
Agreement with AmeriSource Health Corporation (AmeriSource) of Malvern, PA for
the Company's Assurance Community Pharmaceutical Care SystemTM. Pursuant to the
terms of the agreement, the Company granted to AmeriSource an exclusive license
to market and license the software system to retail pharmacies throughout the
United States directly or through its affiliate, Pharmacy Care Management Group
(PCMG). As consideration for the Company granting these rights to AmeriSource,
the Company received $200,000 cash upon signing the agreement. As further
consideration, AmeriSource agreed to license a minimum specified number of new
retail pharmacies over the term of the agreement in order to maintain the
exclusive status of the Master License Agreement. Additional provisions of the
agreement provided for the payment of monthly license and support fees to the
Company for each retail pharmacy licensing the software.
<PAGE>
In April 1996, the Company terminated its relationship with AmeriSource in order
to pursue other marketing arrangements. Upon termination of the agreement, the
Company no longer receives payments for license and support fees. Revenues
received under this agreement constituted approximately 4.8% of the Company's
total revenue for the nine months ended November 30, 1996.
(6) LINE OF CREDIT AGREEMENT
On April 4, 1996, the Company entered into a $50,000 line of credit agreement
with a bank. Amounts borrowed under the agreement will be used for working
capital purposes. All outstanding borrowings bore interest at a reference rate
plus 1.5%. The agreement expired April 1, 1997. The agreement was secured by all
accounts receivable, equipment not covered under financing agreements,
inventory, if any, and general intangibles. The agreement also required the
Company to maintain certain financial covenants, including but not limited to,
maintaining a minimum net worth.
On April 1, 1997, the Company renewed its line of credit agreement. All
outstanding borrowings bear interest at the fixed rate of 6.5%. The agreement
expires April 1, 1998. The agreement is secured by selected corporate assets
including a $50,000 certificate of deposit which must remain on deposit at the
bank for the entire loan term. As of November 30, 1997, the Company had an
outstanding balance of $50,000 under this line of credit.
(7) ACQUISITIONS
On April 1, 1997, the Company acquired certain assets of Preserve Rexall Drug, a
community pharmacy located in Eden Prairie, Minnesota from Supplee Enterprises,
Inc. The Company acquired some fixtures and the patient list. The purchase price
was $40,000 of which $10,000 was paid in cash. The remaining balance of $30,000
will be paid by the Company in 11 equal monthly installments.
The transaction was accounted for using the purchase method of accounting. The
accompanying consolidated financial statements include results of operations of
the acquired assets from the date of acquisition. Due to the nature of the
transaction under which the Company purchased only certain assets of Preserve
Rexall Drug, meaningful pro-forma financial information is not available.
On July 19,1996, the Company acquired certain assets of Edina Pharmacy, a
community pharmacy located in Minneapolis, Minnesota. Assets acquired include
inventory, fixtures and equipment, and the patient list. The purchase price was
$47,408, of which $12,000 was paid in cash. A note payable of $14,973 was
assumed. The remaining balance of $20,435 was paid by the Company in 12 equal
monthly installments.
The transaction was accounted for using the purchase method of accounting. The
accompanying consolidated financial statements include results of operations of
the acquired business from the date of acquisition. Due to the nature of the
transaction under which the Company purchased only certain assets of Edina
Pharmacy, owned by an individual reporting financial information on an income
tax basis, meaningful pro-forma financial information is not available.
As of June 27, 1997, this pilot community pharmacy located in Minneapolis,
Minnesota was consolidated into the larger community pharmacy located in Eden
Prairie that the Company acquired certain assets of in April 1997.
(8) MAJOR CLIENT
On January 31, 1997, the marketing agreement between the Company and Option
Care, Inc., one of the Company's major clients, terminated. On October 31, 1996,
the Company and Option Care signed a "transition agreement" which required
Option Care to pay the Company a one-time payment of $159,000 for consulting
services and certain software tools owned by the Company and a payment of
$15,000 for training services. These amounts were included in fiscal 1997
revenue. During fiscal 1997, Option Care accounted for approximately 27% of
total revenue.
<PAGE>
(9) SUBSEQUENT EVENT
On December 1, 1997, the Company announced it had closed its Eden Prairie
pharmacy location. The closing of the pharmacy will give the Company the ability
to concentrate on its core business of software development. While the pharmacy
closing will have a substantial impact on the revenue of the Company, the
closing will not have a significant impact on the Company's ongoing income.
(10) SUBSEQUENT EVENT
On December 10, 1997, the Company announced that William A. Peter, Jr. had been
removed as President and Chief Executive Officer and that Peter Zugschwert, the
current Chairman of the Board, would serve as interim President and Chief
Executive Officer.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
FOR THE THIRD QUARTER ENDED NOVEMBER 30, 1997, COMPARED WITH THE THIRD QUARTER
ENDED NOVEMBER 30, 1996:
REVENUE. Revenues for the third quarter ended November 30, 1997, decreased
$225,888 to $533,228, a decrease of 29.8% when compared to prior fiscal year
third quarter revenues of $759,116. The Company recorded a third quarter net
loss of $164,902, compared to net income of $118,426, in the prior fiscal year
period, a decrease of $283,328 or 239.2%. The loss resulted primarily from a
decrease in revenue combined with an increase in total costs and operating
expenses.
Revenues for the current fiscal period were primarily generated by continuing
client support fees from the Company's software systems products and by
prescription and over-the-counter drug sales at the Company's community
pharmacy. Revenue from prescription and over-the-counter drugs sales at the
community pharmacy increased by 217.3%. Revenue from client support fees
decreased by 23.3%, license fee revenue decreased by 58.2% and software training
fee revenue decreased by 75.4%. Other revenue decreased by 100% because in the
prior fiscal year third quarter, the Company had received a one-time payment of
$159,000 from a "termination agreement" with Option Care, Inc. Approximately all
of the decrease in client support fee revenue and approximately 26.2% of the
decrease in license fee revenue resulted from the termination in January 1997 of
a marketing agreement with Option Care, Inc.
Revenues received from the Company's Pharmaceutical Care systems increased by
approximately 2.3% when compared to the third quarter of the prior fiscal year.
Client support fee revenue generated by the Company's Long-term Care products
remained stable when compared to the prior fiscal year period. License fee
revenue from the Assurance Long-Term Care System(TM) decreased approximately
$31,000, primarily the result of a weak market caused by delays in the
implementation schedules of Federal regulations. Revenues from the Company's
Homecare products declined approximately $97,000, or 96.3% when compared to the
prior fiscal period. This decline is due to the termination of a marketing
agreement with Option Care.
The effects of inflation on the Company's revenue and operating results were not
significant.
COSTS AND EXPENSES. Total costs and expenses incurred during the quarter ended
November 30, 1997, including interest, depreciation and amortization expense,
increased by $57,440 or 9.0% to $698,130 when compared to prior fiscal year
expenses of $640,690. Compensation, benefits and payroll taxes decreased by
approximately $24,000 or 8.1% when compared to the prior year period. The
decrease in payroll expenses is primarily due to staff reductions which are the
result of staff attrition and involuntary terminations during fiscal 1997.
<PAGE>
Administrative expenses such as telephone expense, supplies, postage,
accounting, legal and equipment maintenance decreased by approximately 9.6% when
compared to the prior fiscal year period. Administrative expenses have declined
as the Company has implemented expense reductions in an attempt to offset
reductions in revenue. Commissions paid to commissioned sales representatives
decreased by approximately 62.6%, primarily due to the decrease in
commissionable software license fees. Expenses associated with advertising,
marketing and trade shows decreased approximately 33.9%. The Company has reduced
trade journal advertising during the third quarter as part of its effort to
reduce costs during a period of reduced revenues. Fees paid to outside
consultants increased by approximately 54.1% when compared to the prior year
period. Rent and occupancy expenses have increased approximately 6.9% due to the
acquisition of the Eden Prairie community pharmacy. Filing fees, printing and
other expenses associated with the issuance of the fiscal year 1997 Proxy
statement and the subsequent proxy battle increased these expenses by
approximately $30,000 when compared to the prior fiscal year third quarter.
Depreciation and amortization expense, including amortization of a covenant and
a client list, increased by approximately 1.7% to $31,234 from $30,724. This
increase was primarily due to the amortization of the Eden Prairie pharmacy
client list acquired in April 1997.
Net interest expense increased 41.5% to $6,307 from $4,457, primarily due to
increased borrowing needs.
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1997, COMPARED WITH THE NINE MONTHS ENDED
NOVEMBER 30, 1996:
REVENUE. Revenues for the nine months ended November 30, 1997, decreased
$260,481 to $1,714,310, a decrease of 13.2% when compared to prior fiscal year
nine month period revenues of $1,974,791. Net loss for the nine month period was
$381,668, compared to a net loss of $18,258, in the prior fiscal year period, an
increase of $363,410 or 1990.4%. The loss resulted from a decrease in revenue
combined with an increase in total costs and operating expenses.
Revenues for the current fiscal period were primarily generated by prescription
and over-the-counter drug sales at the Company's community pharmacies and by
continuing client support fees from the Company's software systems products.
Revenue from prescription and over-the-counter drug sales at the community
pharmacies increased by approximately $722,000 when compared to the prior fiscal
year period. Revenue from license fees decreased by 85.3%, support fee revenue
decreased by 26.7% and software training fee revenue decreased by 78.3% when
compared to the prior fiscal period. Approximately 84.8% of the decrease in
client support fee revenue and approximately 50.9% of the decrease in license
fee revenue resulted from the termination in January 1997 of a marketing
agreement with Option Care, Inc. Decreased revenue from the Assurance Community
Pharmaceutical Care System(TM) accounted for approximately 10.7% of the decline
in license fees and approximately 12.5% of the decline in support fees,
primarily the result of the company terminating its relationship with
AmeriSource Health Corporation(AmeriSource).
Client support fee revenue generated by the Company's Long-term Care products
remained stable when compared to the prior fiscal year period. License fee
revenue from the Assurance Long-Term Care System(TM) decreased approximately
$136,000 or 84.7%, primarily the result of a weak market caused by delays in the
implementation schedules of Federal regulations. Revenues from the Company's
Homecare products decreased by approximately $431,000, or 97.5% when compared to
the prior fiscal period. This decline is due to the termination of a marketing
agreement with Option Care. When compared to the prior fiscal period, revenue
from the Company's Pharmaceutical Care systems decreased by approximately
$80,000, or 46.8%. The Company's termination of its marketing agreement with
AmeriSource caused the decline in the Pharmaceutical Care systems revenue.
The effects of inflation on the Company's revenue and operating results were not
significant.
COSTS AND EXPENSES. Total costs and expenses incurred during the nine month
period ended November 30, 1997, including interest, depreciation and
amortization expense, increased by $102,929 or 5.2% to $2,095,978 when compared
to prior fiscal year expenses of $1,993,049. Compensation, benefits and payroll
taxes
<PAGE>
decreased by approximately $179,000 or 17.9% when compared to the prior year
period. The decrease in payroll expenses is primarily due to staff reductions
which are the result of staff attrition and involuntary terminations during
fiscal 1997.
Administrative expenses such as telephone expense, supplies, postage,
accounting, legal and equipment maintenance decreased by approximately 14.9%
when compared to the prior fiscal year period. Administrative expenses have
declined as the Company has implemented expense reductions in an attempt to
offset reductions in revenue. Commissions paid to commissioned sales
representatives decreased by approximately 74.5%, primarily due to the decrease
in commissionable software license fees. Expenses associated with advertising,
marketing and trade shows decreased approximately $44,000, or 46.9%. The Company
has reduced trade journal advertising and cut back on the creation of new
marketing literature during the current nine month period as part of its effort
to reduce costs during a period of reduced revenues. Fees paid to outside
consultants decreased by approximately 15.4% when compared to the prior year
period. Rent and occupancy expenses have increased approximately 18.3% due to
the acquisitions of the community pharmacies. Depreciation and amortization
expense, including amortization of a covenant and a client list, increased by
approximately 1.2% to $92,107 from $90,976. This increase was primarily due to
the amortization of the Eden Prairie pharmacy client list acquired in April 1997
offset by the completion of depreciation periods on various capitalized office
equipment.
Net interest expense increased 24.2% to $13,758 from $11,074, primarily due to
increased borrowing needs.
LIQUIDITY AND FINANCIAL CONDITION
WORKING CAPITAL. The Company had a working capital deficit of ($507,568) at
November 30, 1997, compared to a deficit of ($210,537) at February 28, 1997; an
increase of $297,031. The increase in working capital deficit is primarily due
to the net loss for the year, capital lease obligation payments and payments
made for the April 1997 acquisition of certain assets and a client list of
Preserve Rexall Drug. These decreases were partially offset by payments received
on a note receivable.
Improved capital availability will ultimately depend on improved sales
performance and containment of all operational costs. There can be no assurance
that sales results will improve and that the Company will experience profitable
operations. The financial statements do not include any adjustments that might
result should the Company be unable to continue as a going concern.
ADDITIONAL CAPITAL REQUIREMENTS. The Company believes that it will have
short-term cash needs. The Company plans to continue operating expense
reductions currently underway. If revenue continues to fall short of Company
needs and the Company is unable to generate sufficient cash flow from operations
the Company will need to explore raising additional capital, or selling its
stock or selling some or all of its assets.
<PAGE>
PART II
Item 4 - Submission of Matters to a Vote of Securities Holders
See Form 10-QSB for the quarterly period ended August 31, 1997, filed October
14, 1997, relating to the election of the Board of Directors by the
shareholders.
No other matters were submitted to a vote of the security holders.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
11 Schedule showing calculation of earnings per share.
27 Financial Data Schedule
(b) Reports on Form 8-K
See Form 8-K filed September 29, 1997, related to the election of new
directors to the Board of Directors.
<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.
Health Outcomes Management, Inc.
(registrant)
Date: January 14, 1998 By: /s/ Peter J. Zugschwert
---------------------- ----------------------------
Peter J. Zugschwert
President, CEO
Date: January 14, 1998 By: /s/ Rosemary Salzwedel
------------------ ---------------------------
Rosemary Salzwedel
Controller and Principal Accounting
Officer
Index to Exhibits
Exhibit
11 Schedule showing calculation of earnings per share.
27 Financial Data Schedule
HEALTH OUTCOMES MANAGEMENT, INC. & SUBSIDIARIES
Calculation of Earnings Per Share (1)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
November 30, November 30,
1997 1996 1997 1996
----------- --------- ---------- ----------
Earnings used in calculations:
<S> <C> <C> <C> <C>
Net loss used in per
share calculation $ (164,902) 118,426 (381,668) (18,258)
=========== ========= ========== ==========
Shares used in calculation:
Average number of shares outstanding 8,504,207 8,477,867 8,500,742 8,412,795
Additional shares issuable assuming
exercise of outstanding stock options 5,309 5,769 1,757 5,893
Additional shares issuable assuming
exercise of outstanding warrants -- 2,526 -- 2,526
----------- --------- ---------- ----------
Weighted average number of common and
common equivalent shares outstanding 8,509,516 8,486,162 8,502,499 8,421,214
=========== ========= ========== ==========
Loss per common share $ (.02) .01 (.04) (.00)
=========== ========= ========== ==========
</TABLE>
(1) Earnings per share assuming full dilution are not different from primary
earnings per share.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 80,623
<SECURITIES> 0
<RECEIVABLES> 96,484
<ALLOWANCES> 13,000
<INVENTORY> 78,936
<CURRENT-ASSETS> 267,475
<PP&E> 698,906
<DEPRECIATION> 625,737
<TOTAL-ASSETS> 392,461
<CURRENT-LIABILITIES> 775,043
<BONDS> 13,091
0
0
<COMMON> 85,114
<OTHER-SE> (480,787)
<TOTAL-LIABILITY-AND-EQUITY> 392,461
<SALES> 1,714,310
<TOTAL-REVENUES> 1,714,310
<CGS> 1,267,297
<TOTAL-COSTS> 814,923
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,758
<INCOME-PRETAX> (381,668)
<INCOME-TAX> 0
<INCOME-CONTINUING> (381,668)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (381,668)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
