SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Amendment No. 1
to
Form 8-K
on
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
June 17, 1996
MEDIWARE INFORMATION SYSTEMS, INC.
----------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
New York 1 - 10768 11 - 2209324
-------------------- -------------------- --------------------
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
incorporation No.)
1121 Old Walt Whitman Road, Melville, New York 11747
----------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code:
(516) 423 - 7800
No change since last report
----------------------------------------------------------------------
Former Name or Former Address, if Changed Since Last Report
<PAGE>
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
------------------------------------------------------------------
(a) Financial Statements of Businesses Acquired
-------------------------------------------
Balance sheet of Continental Healthcare Systems, Inc. - Pharmakon
Division as of November 30, 1995 and the related statements of
operations and cash flows for the years ended November 30, 1995
and November 30, 1994.
Unaudited balance sheet of Continental Healthcare Systems, Inc. -
Pharmakon Division as of April 30, 1996 and the related statement
of operations for the five-months then ended.
Balance sheet of JAC Computer Services Limited as of November 30,
1995 and November 30, 1994 and the related statements of
operations and retained earnings and cash flows for the years then
ended.
Unaudited balance sheet of JAC Computer Services Limited as of
April 30, 1996 and the related statement of operations for the
five-months then ended.
(b) Pro forma Financial Information
-------------------------------
Unaudited consolidated pro forma balance sheet as at March 31,
1996 and unaudited consolidated pro forma statements of operations
for the nine months ended March 31, 1996 and twelve-months ended
June 30, 1995.
(c) Exhibits
--------
2(a) Asset Purchase Agreement dated June 17, 1996 among
Digimedics Corporation and Continental Healthcare Systems,
Inc. and Information Handling Services Group, Inc.
2(b) Stock Purchase Agreement dated June 17, 1996 among
Digimedics Corporation and Holland America Investment
Corporation and Information Handling Services Group, Inc.
2(c) Secured Promissory Note of Digimedics Corporation dated June
17, 1996 in the principal amount of $6,000,000 to
Continental Healthcare Systems, Inc.
2(d) Pledge Agreement dated June 17, 1996 between Mediware and
Continental Healthcare Systems, Inc.
2(e) Charge dated June 17, 1996 between Digimedics Corporation
and Continental Healthcare Systems, Inc.
2(f) General Security Agreement dated June 17, 1996 between
Digimedics Corporation and Continental Healthcare Systems,
Inc.
2(g) Guaranty dated June 17, 1996 by Mediware in favor of
Continental Healthcare Systems, Inc.
23(a) Consent of Richard A. Eisner & Company, LLP.
23(b) Consent of Price Waterhouse LLP.
99 Press Release of Mediware Information Systems, Inc.,
released June 18, 1996.
<PAGE>
SIGNATURE
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.
MEDIWARE INFORMATION SYSTEMS, INC.
By: /s/ Les Dace
-------------------
President
Date: September 4, 1996
<PAGE>
CONTINENTAL HEALTHCARE SYSTEMS, INC. - PHARMAKON DIVISION
FINANCIAL STATEMENTS
NOVEMBER 30, 1995 AND NOVEMBER 30, 1994
<PAGE>
CONTINENTAL HEALTHCARE SYSTEMS, INC. - PHARMAKON DIVISION
- I N D E X -
-------------
PAGE
NUMBER
------
REPORT OF INDEPENDENT AUDITORS 1
BALANCE SHEET AS AT NOVEMBER 30, 1995 2
STATEMENTS OF OPERATIONS FOR THE
YEARS ENDED NOVEMBER 30, 1995 AND
NOVEMBER 30, 1994 3
STATEMENTS OF CASH FLOWS FOR THE
YEARS ENDED NOVEMBER 30, 1995 AND
NOVEMBER 30, 1994 4
NOTES TO FINANCIAL STATEMENTS 5
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Mediware Information Systems, Inc.
Melville, New York
At your request we have audited the accompanying balance sheet of
Continental Healthcare Systems, Inc. - Pharmakon Division as at November 30,
1995 and the related statements of operations and cash flows for the years ended
November 30, 1995 and November 30, 1994. These financial statements are the
responsibility of the management of Continental Healthcare Systems, Inc.
("Continental"). Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present
fairly, in all material respects, the financial position of Continental
Healthcare Systems, Inc. - Pharmakon Division at November 30, 1995 and the
results of its operations and cash flows for the years ended November 30, 1995
and November 30, 1994 in conformity with generally accepted accounting
principles.
New York, New York
May 8, 1996
<PAGE>
CONTINENTAL HEALTHCARE SYSTEMS, INC. - PHARMAKON DIVISION
BALANCE SHEET
AS AT NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
A S S E T S
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Current assets:
- --------------------------------------------------------------------------------
Accounts receivable - billed. . . . . . . . . . . . . . . $2,058,000
- --------------------------------------------------------------------------------
Current portion of accounts receivable - unbilled
- --------------------------------------------------------------------------------
(Note A). . . . . . . . . . . . . . . . . . . . . . . . 1,297,000
- --------------------------------------------------------------------------------
Allowance for contractual adjustments . . . . . . . . . . (381,000)
------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2,974,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Current portion of contract installments receivable
- --------------------------------------------------------------------------------
(Note A). . . . . . . . . . . . . . . . . . . . . . . . 131,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Inventories (Note A). . . . . . . . . . . . . . . . . . . 133,000
------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total current assets . . . . . . . . . . . . . . . 3,238,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Long-term accounts receivable - unbilled, less current
- --------------------------------------------------------------------------------
portion (Note A). . . . . . . . . . . . . . . . . . . . . 947,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Long-term contract installments receivable (Note A). . . . . 187,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Fixed assets at cost, less accumulated depreciation of
- --------------------------------------------------------------------------------
$438,000 (Notes A and B). . . . . . . . . . . . . . . . . 118,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capitalized software costs (Notes A and C) . . . . . . . . . 812,000
------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
T O T A L. . . . . . . . . . . . . . . . . . . . . $5,302,000
============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LIABILITIES AND EQUITY
----------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Current liabilities:
- --------------------------------------------------------------------------------
Accounts payable. . . . . . . . . . . . . . . . . . . . . $ 459,000
- --------------------------------------------------------------------------------
Accrued expenses and other current liabilities. . . . . . 214,000
- --------------------------------------------------------------------------------
Advances from customers (Note A). . . . . . . . . . . . . 286,000
------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total current liabilities. . . . . . . . . . . . . 959,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Interdivisional account (Note E) . . . . . . . . . . . . . . 4,343,000
------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
T O T A L. . . . . . . . . . . . . . . . . . . . . $5,302,000
============
================================================================================
The accompanying notes to financial statements
are an integral part hereof.
<PAGE>
CONTINENTAL HEALTHCARE SYSTEMS, INC. - PHARMAKON DIVISION
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
Year Ended November 30,
-----------------------
- --------------------------------------------------------------------------------
1995 1994
---------- ----------
- --------------------------------------------------------------------------------
Revenues:
- --------------------------------------------------------------------------------
System sales (Note A). . . . . . . . . . . . $3,632,000 $4,592,000
- --------------------------------------------------------------------------------
Services . . . . . . . . . . . . . . . . . . 3,298,000 2,897,000
---------- ----------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total revenues. . . . . . . . . . . . 6,930,000 7,489,000
---------- ----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Costs and expenses:
- --------------------------------------------------------------------------------
Cost of systems. . . . . . . . . . . . . . . 1,876,000 2,118,000
- --------------------------------------------------------------------------------
Cost of services . . . . . . . . . . . . . . 964,000 981,000
- --------------------------------------------------------------------------------
Software development costs . . . . . . . . . 1,354,000 1,241,000
- --------------------------------------------------------------------------------
Selling, general and administrative. . . . . 2,147,000 2,542,000
---------- ----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total costs and expenses (Note A) . . 6,341,000 6,882,000
---------- ----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Earnings before provision for income taxes. . . 589,000 607,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Provision for income taxes (Notes A and D). . . 236,000 243,000
---------- ----------
3
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET EARNINGS. . . . . . . . . . . . . . . . . . $ 353,000 $ 364,000
========== ===========
The accompanying notes to financial statements
are an integral part hereof.
<PAGE>
CONTINENTAL HEALTHCARE SYSTEMS, INC. - PHARMAKON DIVISION
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
Year Ended November 30,
- --------------------------------------------------------------------------------
1995 1994
---------- ----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cash flows from operating activities:
- --------------------------------------------------------------------------------
Net income. . . . . . . . . . . . . . . . . . $ 353,000 $ 364,000
- --------------------------------------------------------------------------------
Adjustments to reconcile net income to net
- --------------------------------------------------------------------------------
cash provided by operating activities:
- --------------------------------------------------------------------------------
Depreciation. . . . . . . . . . . . . . . 35,000 31,000
- --------------------------------------------------------------------------------
Amortization of capitalized software
- --------------------------------------------------------------------------------
costs . . . . . . . . . . . . . . . . . 145,000 98,000
- --------------------------------------------------------------------------------
Proceeds from contract installments
- --------------------------------------------------------------------------------
receivable. . . . . . . . . . . . . . . 119,000 64,000
- --------------------------------------------------------------------------------
Changes in operating assets and
- --------------------------------------------------------------------------------
liabilities:
- --------------------------------------------------------------------------------
Decrease in accounts receivable . . . 259,000 68,000
- --------------------------------------------------------------------------------
Decrease (increase) in inventories. . 52,000 (139,000)
- --------------------------------------------------------------------------------
Increase (decrease) in accounts
- --------------------------------------------------------------------------------
payable, accrued expenses and
- --------------------------------------------------------------------------------
other current liabilities . . . . . 130,000 (153,000)
- --------------------------------------------------------------------------------
Increase (decrease) in advances from
- --------------------------------------------------------------------------------
customers . . . . . . . . . . . . . 180,000 (39,000)
---------- ---------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net cash provided by operating
- --------------------------------------------------------------------------------
activities. . . . . . . . . . . 1,273,000 294,000
---------- ---------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cash flows from investing activities:
4
<PAGE>
- --------------------------------------------------------------------------------
Acquisitions of fixed assets. . . . . . . . . (51,000) (58,000)
- --------------------------------------------------------------------------------
Capitalized software costs. . . . . . . . . . (340,000) (204,000)
---------- ---------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net cash (used in) investing
- --------------------------------------------------------------------------------
activities. . . . . . . . . . . (391,000) (262,000)
---------- ---------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cash flows from financing activities:
- --------------------------------------------------------------------------------
(Decrease) in interdivisional account . . . . (882,000) (32,000)
---------- ---------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET INCREASE IN CASH . . . . . . . . . . . . . . $ - 0 - $ - 0 -
=========== =========
The accompanying notes to financial statements
are an integral part hereof.
<PAGE>
CONTINENTAL HEALTHCARE SYSTEMS, INC. - PHARMAKON DIVISION
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - The Company and its Significant Accounting Policies:
- --------------------------------------------------------------
Continental Healthcare Systems, Inc. - Pharmakon Division
("Pharmakon"), a division of Continental Healthcare Systems ("Continental"),
develops, installs and maintains computerized information systems for hospital
pharmacies.
Pharmakon is dependent upon Continental for financial support in the
conduct of its operations. The financial statements may not necessarily be
indicative of the financial condition or results of operations had Pharmakon
operated without the financial support of Continental.
Certain costs and expenses which are common to Pharmakon and the other
operations of Continental have been recorded in the financial statements of
Pharmakon based upon either the proportionate share of revenue or the
proportionate number of employees, as determined by management. Such costs and
expenses allocated to Pharmakon aggregated $1,438,000 and $1,767,000 for the
years ended November 30, 1995 and November 30, 1994, respectively.
Interest expense on interdivisional advances has been excluded.
Continental also sells Pharmakon software in the United Kingdom through
its affiliate, JAC Computer Services Limited ("JAC"). Sales of Pharmakon
software to JAC amounted to $26,000 and $7,000 for the years ended November 30,
1995 and November 30, 1994, respectively.
In May 1996 Continental and a wholly owned subsidiary of Mediware
Information Systems, Inc. ("Mediware") signed a letter of intent whereby
substantially all operating assets of Pharmakon excluding accounts receivable
will be sold to Mediware.
[1] Revenue recognition:
-------------------
Revenue from the sale of software systems is recognized upon
delivery. Installation, training and other systems sales revenues are recognized
over the duration of the related effort. Service revenue is recognized ratably
over the term of related service agreements.
Unbilled accounts receivable represent revenues which have
been recognized, on delivery of the product and on completion of other
contractual obligations, and will become billable at future dates in accordance
with contract provisions. Long-term accounts receivable - unbilled are
discounted to present value at a rate of 6%.
(continued)
5
<PAGE>
CONTINENTAL HEALTHCARE SYSTEMS, INC. - PHARMAKON DIVISION
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - The Company and its Significant Accounting Policies:
- --------------------------------------------------------------
(continued)
[2] Long-term contract installments receivable:
------------------------------------------
Contract installments receivable arising from sales of systems
with extended payment terms, bear interest at rates varying from 7% to 10% and
are due in monthly installments through 1999.
[3] Inventories:
-----------
Inventories, which consist of equipment purchased for resale,
are valued at the lower of cost or market. Cost is determined by the specific
identification method.
[4] Fixed assets:
------------
Furniture and equipment are depreciated by the straight-line
method over their estimated useful lives.
[5] Software development costs:
--------------------------
In accordance with Statement of Financial Accounting Standards
No. 86, Pharmakon capitalizes certain costs associated with the development of
computer software. Such costs, in addition to costs of purchased software, are
amortized over the software's estimated useful life of five years. Management
periodically evaluates the recoverability of capitalized software development
costs and write-downs are taken if required. Costs to maintain developed
programs and other development costs incurred prior to achievement of technical
feasibility are expensed as incurred. Such costs were $1,209,000 and $1,143,000
for the years ended November 30, 1995 and November 30, 1994, respectively.
Software development costs on the statement of operations include amortization
(Note C).
[6] Advances from customers:
-----------------------
Advances from customers represent contractual payments
received by Pharmakon. Such amounts are recorded as income upon delivery of the
system.
[7] Income taxes:
------------
Pharmakon's operations have historically been included in the
consolidated income tax returns filed by Continental's parent company. Income
tax expense in the accompanying financial statements has been computed on a
stand-alone basis with the related taxes payable reflected as an adjustment to
the interdivisional account.
(continued)
6
<PAGE>
CONTINENTAL HEALTHCARE SYSTEMS, INC. - PHARMAKON DIVISION
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - The Company and its Significant Accounting Policies:
- --------------------------------------------------------------
(continued)
[8] Use of estimates:
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(NOTE B) - Fixed Assets:
- -----------------------
Fixed assets consist of the following as at November 30, 1995:
Computer and office equipment . . . . . . $548,000
Furniture . . . . . . . . . . . . . . . . 8,000
--------
T o t a l . . . . . . . . . . . 556,000
Less accumulated depreciation . . . . . . 438,000
--------
B a l a n c e . . . . . . . . . $118,000
========
(NOTE C) - Capitalized Software Costs:
- -------------------------------------
November 30,
---------------------
1995 1994
---------- ---------
Balance, beginning of year (net
of accumulated amortization). . $ 617,000 $511,000
Additions. . . . . . . . . . . . . 340,000 204,000
Amortization . . . . . . . . . . . (145,000) (98,000)
Balance, end of year (net of
accumulated amortization) . . . $ 812,000 $617,000
========== ========
(continued)
7
<PAGE>
CONTINENTAL HEALTHCARE SYSTEMS, INC. - PHARMAKON DIVISION
NOTES TO FINANCIAL STATEMENTS
(NOTE D) - Income Taxes:
- -----------------------
The provision for income taxes on a stand-alone basis consists of the
following:
Year Ended
November 30,
-------------------
1995 1994
--------- --------
Federal. . . . . . . . . . . . . . . $194,000 $199,000
State. . . . . . . . . . . . . . . . 42,000 44,000
-------- --------
T o t a l. . . . . . . . . . . $236,000 $243,000
======== ========
(NOTE E) - Interdivisional Account:
- ----------------------------------
A summary of the interdivisional account is as follows:
Year Ended
November 30,
-----------------------
1995 1994
---------- ---------
Balance, beginning of year. . . . $4,872,000 $4,540,000
Net income. . . . . . . . . . . . 353,000 364,000
Net decrease. . . . . . . . . . . (882,000) (32,000)
----------- -----------
$4,343,000 $4,872,000
=========== ===========
(continued)
8
<PAGE>
CONTINENTAL HEALTHCARE SYSTEMS, INC. - PHARMAKON DIVISION
BALANCE SHEET
APRIL 30, 1996
(unaudited)
ASSETS
------
Current assets:
Cash and cash equivalents -
Accounts receivable - billed 1,900,000
Current portion of accounts receivable - unbilled 339,000
Allowance for doubtfull accounts and contractual adjustments (381,000)
Current portion of contract installments receivable 205,000
Inventories 44,000
Prepaid expenses and other current assets
-----------
Total current assets 2,107,000
Long-term accounts receivable - unbilled 947,000
Long-term contract installment receivable 189,000
Fixed assets, at cost, net of accumulated depreciation 154,000
Capitalized software costs 758,000
Excess of cost over fair value of net assets acquired less
accumulated amortization
Other assets
-----------
TOTAL $ 4,155,000
===========
LIABILITIES AND EQUITY
----------------------
Current liabilities:
Accounts payable 167,000
Notes payable
Accrued expenses and other current liabilities 213,000
Income taxes payable
Advances from customers 146,000
Current portion of capital leases payable
-----------
Total current liabilities 526,000
Capital leases payable, less current portion
-----------
Total liabilities 526,000
STOCKHOLDERS' EQUITY
--------------------
Common stock
Additional paid-in capital
Interdivisional account 3,629,000
Earnings (Deficit)
Cumulative foreign currency translation adjustment
-----------
Total stockholders' equity 3,629,000
-----------
TOTAL $ 4,155,000
===========
<PAGE>
CONTINENTAL HEALTHCARE SYSTEMS, INC. - PHARMAKON DIVISION
STATEMENT OF OPERATIONS
FOR THE FIVE MONTHS ENDED APRIL 30, 1996
(unaudited)
Revenues:
System sales $ 899,000
Services 1,480,000
------------
Total revenues 2,379,000
------------
Costs and expenses:
Cost of systems 532,000
Cost of services 395,000
Software development costs 616,000
Selling, general and administrative 835,000
------------
2,378,000
------------
Earnings before provision for income taxes 1,000
Provision for income taxes -
------------
NET EARNINGS $ 1,000
============
2
<PAGE>
1. Financial Statements:
--------------------
In the opinion of management, the accompanying unaudited, consolidated,
condensed financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial position
of the Company and its results of operations and cash flows for the interim
periods presented. Such financial statements have been condensed in accordance
with the applicable regulations of the Securities and Exchange Commission and
therefore, do not include all disclosures required by generally accepted
accounting principles. These financial statements should be read in conjunction
with the audited financial statements of Continental Healthcare Systems, Inc. -
Pharmakon Division and notes thereto contained elsewhere herein. The results of
the interim period are not necessarily indicative of the results for the full
fiscal year.
3
<PAGE>
JAC Computer
Services Limited
Report and Financial Statements
November 30, 1995 and 1994
<PAGE>
Report of Independent Accountants
To the Board of Directors of
JAC Computer Services Limited
In our opinion, the accompanying balance sheet and the related statements of
operations and retained earnings and of cash flows present fairly, in all
material respects, the financial position of JAC Computer Services Limited at
November 30, 1995 and 1994, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Kansas City, MO
June 17, 1996
<PAGE>
JAC Computer Services Limited
Balance Sheet
November 30, 1995 and 1994
(Dollars in 000's)
1995 1994
Assets
Current assets:
Cash and cash equivalents $ 515 $ 558
Accounts receivable 223 267
Inventories 43 34
Prepaids and other current assets 78 83
Income taxes recoverable 33
------- --------
Total current assets 892 942
Properties, net (Note 2) 52 77
Intangibles 151 8
Goodwill, net (Note 1) 817 897
------- --------
Total assets $ 1,912 $ 1,924
======= ========
Labilities and stockholder's equity
Current liabilities:
Accounts payable $ 129 $ 123
Accrued expenses and other
current liabilities 124 143
Deferred revenue 505 426
Income taxes payable 72
Deferred income taxes 49
------- --------
Total current liabilities 807 764
------- --------
Stockholder's equity:
Common stock; par value (pound)
1,000,000 shares authorized,
30,000 shares issued and outstanding 47 47
Additional paid-in capital 1,054 1,054
Retained earnings 26 63
Cumulative foreign currency translation
adjustment (22) (4)
------- --------
Total stockholder's equity 1,105 1,160
------- --------
Commitment (Note 3)
Total liabilities and stockholder's ------- -------
equity $ 1,912 $ 1,924
======= =======
See accompanying notes to financial statements.
<PAGE>
JAC Computer Services Limited
Statement of Operations and Retained Earnings
November 30, 1995 and 1994
(Dollars in 000's)
1995 1994
Sales $ 1,444 $ 1,593
Cost of goods sold 880 947
------- --------
Gross profit 564 646
Selling, general and administrative
expenses 608 516
------- --------
Income (loss) from operations (44) 130
Other income, net 24 9
------- --------
Income (loss) before income taxes (20) 139
------- --------
Provision for income taxes 17 82
------- --------
Net income (loss) (37) 57
Retained earnings, beginning of year 63 6
------- --------
Retained earnings, end of year $ 26 $ 63
======= ========
See accompanying notes to financial statements.
<PAGE>
JAC Computer Services Limited
Statement of Operations and Retained Earnings
November 30, 1995 and 1994
(Dollars in 000's)
1995 1994
Cash flows - operating activities:
Net income (loss) $ (37) $ 57
Adjustment to reconcile net income
(loss) to net cash provided
by operating activities:
Depreciation and amortization 114 122
Changes in assets and liabilities:
Accounts receivable 41 24
Inventories (9) 5
Prepaids and other current assets 1 2
Accounts payable 8 70
Accrued expenses and other
liabilities (16) 37
Deferred revenue 87 6
Deferred income taxes/income
taxes payable (54) 66
-------- --------
Net cash provided by
operating activities 135 389
-------- --------
Cash flows - investing activities:
Purchases of property and equipment (22) (49)
Increase in intangible assets (147)
-------- --------
Net cash used in investing
activities (169) (49)
-------- --------
Effect of exchange rate changes on
cash and cash equivalents (9) 18
-------- --------
Net increase (decrease) in cash
and equivalents (43) 358
-------- --------
Cash and cash equivalents at beginning
of year 558 200
-------- --------
Cash and cash equivalents at end
of year $ 515 $ 558
======== ========
See accompanying notes to financial statements.
<PAGE>
JAC Computer Services Limited
Notes to Financial Statements
November 30, 1995 and 1994
(Dollars in 000's)
1. The Company and significant accounting policies
JAC Computer Services Limited (JAC) is a hospital pharmacy software
vendor which conducts business primarily in the United Kingdom. JAC is
an indirect, wholly-owned subsidiary of TBG Holdings NV (TBG).
JAC is headquartered in the United Kingdom and transacts its business
and maintains its accounting records in pounds sterling. The
accompanying financial statements have been presented in United States
dollars as translated as described below for reporting its results to
its United States parent which is also wholly-owned by TBG.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Cash and cash equivalents
Cash and cash equivalents include all cash balances and highly liquid
investments with an original maturity of three months or less.
Properties, net
Depreciation and amortization are computed using the straight-line
method over the estimated useful lives of the respective assets ranging
from three to five years.
Inventories
Inventories, which consist of components and various computer parts,
are recorded at the lower of cost or market. Cost is determined using a
first-in, first-out (FIFO) method.
Intangibles
Intangibles consist of unamortized capitalized software development
costs. Software development costs are capitalized in accordance with
Statement of Financial Accounting Standards No. 86, "Accounting for
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed."
Software development costs will be amortized on a straight-line basis
over their estimated economic life, commencing when each product is
available for general release.
<PAGE>
Goodwill
Goodwill represents the excess of consideration paid for JAC in May
1993 over the fair value of net assets acquired. Goodwill amortization
is computed over the estimated benefit life which is 15 years.
Accumulated amortization of goodwill was $165 and $100 at November 30,
1995 and 1994, respectively.
Translation of foreign currency
Assets and liabilities of the Company are translated into U.S. dollars
at the exchange rates in effect at the end of the period. Revenue and
expense accounts are translated at a weighted average of exchange rates
which were in effect during the year. Translation adjustments that
arise from translating assets and liabilities from local currency to
U.S. dollars are accumulated in a separate component of stockholder's
equity. Transaction gains and losses that arise from exchange rate
changes on transactions denominated in a currency other than local
currency are included in results of operations as incurred.
Revenue recognition
Revenue is recognized when the software products are shipped to the
customer. Revenue from postcontract support (PCS) arrangements is
deferred and recognized over the period of the PCS.
Income taxes
The Company utilizes the liability method of accounting for income
taxes. Under the liability method, deferred taxes are determined based
on the difference between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse. The Company's only
significant temporary difference is the intangible assets recorded
related to capitalized software. The primary difference between the
Company's effective tax rate and the foreign statutory tax rate (33%)
is the effect of goodwill amortization of $68. The Company paid income
taxes of $74 and $11 during the years ended November 30, 1995 and 1994,
respectively.
<PAGE>
JAC Computer Services Limited
Notes to Financial Statements
November 30, 1995 and 1994
(Dollars in 000's)
2. Properties, net
Property and equipment consist of the following at December 31:
1995 1994
Computer equipment $ 123 $ 117
Office equipment 43 30
Motor vehicles 19 19
------- --------
185 166
Less accumulated depreciation
and amortization 133 89
------- --------
$ 52 $ 77
======= ========
3. Lease commitments
JAC leases its office space under an operating lease agreement which
expires in 2004. Annual lease rental expense under this lease is $32
per year.
4. Subsequent event
A dividend of $249 was paid on April 11, 1996.
<PAGE>
JAC COMPUTER SERVICES LIMITED
BALANCE SHEET
APRIL 30, 1996
(Dollars in 000's)
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 648
Accounts receivable - billed 383
Inventories 68
Prepaids and other current assets 118
-------
Total current assets 1,217
Properties, net 50
Intangibles 141
Goodwill, net 790
-------
Total assets $ 2,198
=======
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable 426
Accrued expenses and other current liabilities 814
Deferred Revenue 91
Income taxes payable 13
-------
Total current liabilities 1,344
STOCKHOLDERS' EQUITY
Common stock; 100,000 shares authorized, 30,000 shares
issued and outstanding 47
Additional paid-in capital 832
Retained earnings 0
Cumulative foreign currency translation adjustment (25)
-------
Total stockholders' equity 854
-------
Total liabilities and stockholders' equity $ 2,198
=======
<PAGE>
JAC COMPUTER SERVICES LIMITED
STATEMENT OF OPERATIONS
FOR THE FIVE MONTHS ENDED APRIL 30, 1996
(Dollars in 000's)
(unaudited)
Sales $ 719
Cost of goods sold 452
-------
Gross profit 267
-------
Selling, general and administrative 261
-------
Income (loss) from operations 6
Other income, net 8
-------
Income (loss) before taxes 14
Provision for income taxes 13
-------
Net income (loss) $ 1
=======
<PAGE>
1. Financial Statements:
--------------------
In the opinion of management, the accompanying unaudited, consolidated,
condensed financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial position
of the Company and its results of operations and cash flows for the interim
periods presented. Such financial statements have been condensed in accordance
with the applicable regulations of the Securities and Exchange Commission and
therefore, do not include all disclosures required by generally accepted
accounting principles. These financial statements should be read in conjunction
with the audited financial statements of JAC Computer Services Limited and notes
thereto contained elsewhere herein. The results of the interim period are not
necessarily indicative of the results for the full fiscal year.
<PAGE>
CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
(unaudited)
The following pro forma financial information gives effect to the
acquisition of Continental Healthcare Systems, Inc. - Pharmakon Division
(Pharmakon) and JAC Computer Services Limited (JAC). The consolidated pro forma
balance sheet combines the unaudited consolidated balance sheet of Mediware
Information Systems, Inc. (Mediware) as of March 31, 1996 with the unaudited
balance sheets of Pharmakon and JAC as of April 30, 1996 as if the acquisitions
and the private placement by Mediware of 1,692,308 shares of its common stock
had occurred on March 31, 1996. The consolidated pro forma statement of
operations for the nine-month period ended March 31, 1996 combines the unaudited
consolidated statement of operations of Mediware for the nine-month period ended
March 31, 1996 with the unaudited statements of operations of Pharmakon and JAC
for the nine-month period ended April 30, 1996 as if the acquisitions and the
private placement by Mediware had occurred on July 1, 1995. The consolidated pro
forma statement of operations for the twelve-months ended June 30, 1995 combines
the audited consolidated statement of operations of Mediware for the fiscal year
ended June 30, 1995 with the unaudited statements of operations of Pharmakon and
JAC for the twelve-month period ended June 30, 1995 as if the acquisitions and
the private placement referred to above occurred on July 1, 1994. The
transactions have been accounted for as a purchase in accordance with Accounting
Principles Board Opinion No. 16.
The consolidated pro forma balance sheet and statements of
operations should be read in conjunction with the notes thereto and the audited
and unaudited financial statements of Pharmakon and JAC and notes thereto
contained elsewhere herein. The consolidated pro forma balance sheet and
statements of operations are not necessarily indicative of what the financial
position and results of operations would have been had the transaction occurred
earlier, nor do they purport to represent the future financial position or
results of operations of Mediware. These financial statements should be read in
conjunction with the audited financial statements of Mediware Information
Systems, Inc. and notes thereto contained elsewhere herein.
<PAGE>
<TABLE>
<CAPTION>
MEDIWARE INFORMATION SYSTEMS, INC. & Subsidiaries
CONSOLIDATED PRO FORMA BALANCE SHEET
----------- ----------- ----------- ----------- ------------
31-Mar-96 30-Apr-96 30-Apr-96 Pro Forma Pro Forma
----------- ----------- ----------- ----------- ------------
Mediware Pharmakon JAC Adjustments Consolidated
----------- ----------- ----------- ----------- ------------
(unaudited) (unaudited) (unaudited) (unaudited)
----------- ----------- ----------- ----------- ------------
ASSETS
------
Current assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 699,000 - 648,000 1,100,000 (a,b) 2,447,000
Accounts receivable - billed 3,522,000 1,900,000 383,000 (1,900,000)(c) 3,905,000
Current portion of accounts receivable - 339,000 (339,000)(c) -
unbilled
Allowance for doubtfull accounts and (190,000) (381,000) 381,000 (c) (190,000)
contractual adjustments
Current portion of contract installments 14,000 205,000 (205,000)(c) 14,000
receivable
Inventories 160,000 44,000 68,000 272,000
Prepaid expenses and other current assets 147,000 118,000 265,000
------------ ------------ ------------ ------------ -------------
Total current assets 4,352,000 2,107,000 1,217,000 (963,000) 6,713,000
Long-term accounts receivable - unbilled 947,000 (947,000)(c) -
Long-term contract installment receivable 6,000 189,000 (189,000)(c) 6,000
Fixed assets, at cost, net of accumulated 309,000 154,000 50,000 513,000
depreciation
Capitalized software costs 1,024,000 758,000 (758,000)(d) 1,024,000
Intangibles - U.K 141,000 (141,000)(d) -
Excess of cost over fair value of net assets 885,000 790,000 5,755,000 (a) 7,430,000
acquired less accumulated amortization
Other assets 38,000 38,000
------------ ------------ ------------ ------------ -------------
TOTAL $ 6,614,000 $ 4,155,000 $ 2,198,000 $ 2,757,000 $ 15,724,000
============ ============ ============ ============ ==============
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 599,000 167,000 426,000 (167,000)(c) 1,025,000
Notes payable 1,179,000 6,000,000 (a) 7,179,000
Accrued expenses and other current liabilities 1,011,000 213,000 814,000 (193,000)(c) 1,845,000
Income taxes payable 13,000 13,000
Advances from customers 891,000 146,000 91,000 1,128,000
Current portion of capital leases payable 7,000 7,000
------------ ------------ ------------ ------------ ---------------
Total current liabilities 3,687,000 526,000 1,344,000 5,640,000 11,197,000
Capital leases payable, less current portion 15,000 15,000
------------ ------------ ------------ ------------ ---------------
Total liabilities 3,702,000 526,000 1,344,000 5,640,000 11,212,000
STOCKHOLDERS' EQUITY
Common stock 265,000 47,000 128,000 (a,b) 440,000
Additional paid-in capital 8,205,000 832,000 4,093,000 (a,b) 13,130,000
Interdivisional account 3,629,000 (3,629,000)(a) -
Earnings (Deficit) (5,558,000) (3,500,000)(e) (9,058,000)
Cumulative foreign currency translation (25,000) 25,000 (a) -
adjustment
------------ ------------ ------------ ------------ ---------------
Total stockholders' equity 2,912,000 3,629,000 854,000 (2,883,000) 4,512,000
------------ ------------ ------------ ------------ --------------
TOTAL $ 6,614,000 $ 4,155,000 $ 2,198,000 $ 2,757,000 $ 15,724,000
============ ============ ============ ============ ===============
</TABLE>
<PAGE>
(1) On June 17,1996, Mediware completed the acquisition of Pharmakon and JAC for
a purchase price of approximately $9.7 million before expenses and completed a
private placement of 1,692,308 shares of its Common Stock, par value $.10 per
share, at a price of $3.25 per share, for a total amount of $5,500,000. Of the
purchase price, approximately $3.7 million was paid in cash and $6 million was
paid pursuant to a secured promissory note. The purchase price allocation
includes an estimate of approximately $3.5 million of acquired in-process
technology. The allocation of the purchase price represents an estimate of the
fair values of assets acquired and liabilities assumed including estimated
professional fees and other acquisition expenses expected to be incurred. The
allocation is subject to change and is not necessarily indicative of the
ultimate purchase allocation. The acquired in-process technology of
approximately $3.5 million is not reflected in the consolidated pro forma
balance sheet as of March 31, 1996. Such amount will be a charge to earnings in
the period of acquisition. The consolidated pro forma balance sheet excludes
approximately $3.2 million of assets not purchased and $400,000 of liabilities
not assumed.
(2) The consolidated pro forma balance sheet is based on the following
assumptions and adjustments:
(a) To reflect the acquisition of Pharmakon and JAC, as discussed above,
including related fees and expenses of $300,000, of which $200,000 was paid
in cash and $100,000 by the issuance of common stock.
(b) To reflect the issuance of $5.5 million in common stock, before
$500,000 in related fees and expenses and the application of $3.8 million
for the acquisitions.
(c) To adjust for assets not acquired and liabilities not assumed.
(d) The Company does not anticipate that it will continue to actively
market Pharmakon software, thus no value has been assigned to this asset.
(e) The Company has estimated that it has acquired $3.5 million of in
process technology which is shown as a charge against retained earnings in
the pro forma balance sheet as such amount will be charged to operations
after the acquisitions. All other assets are assumed to have a fair value
equal to their carrying value and the excess of cost over fair value
acquired equals approximately $6.5 million.
<PAGE>
<TABLE>
<CAPTION>
MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED)
Nine months ended
---------------------------------------------------------------------------------
Mediware Pharmakon JAC Pro Forma Pro Forma
3/31/96 4/30/96 4/30/96 Adjustments Consolidated
---------------------------------------------------------------------------------
Revenues:
<S> <C> <C> <C>
System sales 4,519,000 2,731,000 $ 7,250,000
Services 3,214,000 2,638,000 5,852,000
Sales - U.K. 1,204,000 1,204,000
---------------------------------------------------------------------------------
Total revenues 7,733,000 5,369,000 1,204,000 - 14,306,000
---------------------------------------------------------------------------------
Costs and expenses:
Cost of systems 1,375,000 1,472,000 2,847,000
Cost of services 1,350,000 717,000 2,067,000
Cost of goods sold - U.K. 754,000 754,000
Software development costs 1,185,000 1,182,000 2,367,000
Selling, general and administrative 3,093,000 1,725,000 485,000 147,000 (a,b) 5,450,000
---------------------------------------------------------------------------------
7,003,000 5,096,000 1,239,000 147,000 13,485,000
---------------------------------------------------------------------------------
Balance 730,000 273,000 (35,000) (147,000) 821,000
Interest income 3,000 - 17,000 20,000
Interest expense (150,000) - - (371,000)(c) (521,000)
--------------------------------------------------------------------------------------
Earnings before provision for income taxes 583,000 273,000 (18,000) (518,000) 320,000
Provision for income taxes 3,000 109,000 10,000 (90,000)(d) 32,000
--------------------------------------------------------------------------------------
NET EARNINGS $ 580,000 $ 164,000 $ (28,000) $ (428,000) $ 288,000
======================================================================================
Pro forma weighted average number of
common stock and common stock
equivalents (e) 5,238,000
Pro forma net income per share of common
stock and common stock equivalents (e) $ 0.05
See accompanying notes to unaudited pro forma condensed consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED)
Twelve Months Ended
--------------------------------------------------------------------------------------
Mediware Pharmakon JAC Pro Forma Pro Forma
6/30/95 6/30/95 6/30/95 Adjustments Consolidated
--------------------------------------------------------------------------------------
Revenues:
<S> <C> <C> <C>
System sales $ 3,824,000 $ 4,764,000 $ 8,588,000
Services 4,255,000 3,106,000 7,361,000
Sales - U.K. $ 1,577,000 1,577,000
--------------------------------------------------------------------------------------
Total revenues 8,079,000 7,870,000 1,577,000 - 17,526,000
--------------------------------------------------------------------------------------
Costs and expenses:
Cost of systems 1,236,000 2,271,000 - 3,507,000
Cost of services 1,240,000 978,000 - 2,218,000
Cost of goods sold - U.K. 954,000 954,000
Software development costs 1,387,000 1,405,000 - 2,792,000
Selling, general and administrative 3,928,000 2,577,000 546,000 197,000 (a,b) 7,248,000
--------------------------------------------------------------------------------------
7,791,000 7,231,000 1,500,000 197,000 16,719,000
Balance 288,000 639,000 77,000 (197,000) 807,000
Interest income 51,000 - 19,000 70,000
Interest expense (249,000) - - (495,000)(c) (744,000)
--------------------------------------------------------------------------------------------
Earnings before provision for 90,000 639,000 96,000 (692,000) 133,000
income taxes
Provision for income taxes - 256,000 51,000 (211,000)(d) 96,000
--------------------------------------------------------------------------------------
NET EARNINGS $ 90,000 $ 383,000 $ 45,000 $ (481,000) $ 37,000
======================================================================================
Pro forma weighted average number of
common stock and common stock
equivalents (e) 3,923,000
Pro forma net income per share of common
stock and common stock equivalents (e) $ 0.01
See accompanying notes to unaudited pro forma condensed consolidated financial statements
</TABLE>
<PAGE>
(1) The pro forma statements of operations for Pharmakon include estimates for
certain costs and expenses which were extrapolated from the historical financial
statements.
(2) The consolidated pro forma statement of operations includes the historical
results of Pharmakon and JAC which have been recast for the fiscal year ended
June 30, 1995 and for the nine months of operations from August 1, 1995 through
April 30, 1996, and is based on the following assumptions and adjustments:
(a) To record the amortization of goodwill over a 25 year life.
(b) To add back amortization of goodwill already recorded in JAC's
statements of operations.
(c) To record interest expense on the $6 million promissory note at 8.25%.
As the promissory note is due in November 1996, it has been assumed for
purposes of this pro forma that the note will be refinanced at the same
interest rate. Mediware has not determined what actions it may take upon
the maturity of the note, nor has it investigated whether there are lenders
willing to extend credit and on what terms.
(d) To offset U.S. Federal Income tax expense for Pharmakon against net
operating loss carryforwards of Mediware. No additional tax benefit has
been provided for the effects of the proforma adjustments since further
utilization of net operating loss carry forwards of Mediware is uncertain.
The remaining tax expense consists of foreign, state and local taxes.
(e) To increase weighted average shares by 1,354,000 for shares issued to
raise funds for the acquisition.
<PAGE>
EXHIBIT INDEX
2(a)* Asset Purchase Agreement dated June 17, 1996 among
Digimedics Corporation and Continental Healthcare
Systems, Inc. and Information Handling Services
Group, Inc.
2(b)* Stock Purchase Agreement dated June 17, 1996 among
Digimedics Corporation and Holland America
Investment Corporation and Information Handling
Services Group, Inc.
2(c)* Secured Promissory Note of Digimedics Corporation
dated June 17, 1996 in the principal amount of
$6,000,000 to Continental Healthcare Systems, Inc.
2(d)* Pledge Agreement dated June 17, 1996 between
Mediware and Continental Healthcare Systems, Inc.
2(e)* Charge dated June 17, 1996 between Digimedics
Corporation and Continental Healthcare Systems,
Inc.
2(f)* General Security Agreement dated June 17, 1996
between Digimedics Corporation and Continental
Healthcare Systems, Inc.
2(g)* Guaranty dated June 17, 1996 by Mediware in favor
of Continental Healthcare Systems, Inc.
23(a) Consent of Richard A. Eisner & Company, LLP.
23(b) Consent of Price Waterhouse LLP.
99* Press Release of Mediware Information Systems,
Inc., released June 18, 1996.
- -----------------------------
* Previously filed on the Registrant's Current Report on
Form 8-K dated June 17, 1996.
<PAGE>
EXHIBIT 23(a)
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the
Registration Statement on Form S-8 No. 333-7591 of Mediware Information Systems,
Inc. of our report dated May 8, 1996 relating to the financial statements of
Continental Healthcare Systems, Inc. -- Pharmakon Division which appears in this
Current Report on Form 8-K/A of Mediware Information Systems, Inc.
Richard A. Eisner & Company, LLP
New York, New York
September 11, 1996
<PAGE>
Exhibit 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-7591) of Mediware Information Systems, Inc. of
our report dated June 17, 1996 relating to the financial statements of JAC
Computer Services Limited which appears in this Current Report on Form 8-K/A of
Mediware Information Systems, Inc.
PRICE WATERHOUSE LLP
Kansas City, Missouri
September 12, 1996
<PAGE>
