SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
For Quarter ended September 30, 1996
Quarterly Report pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934
Commission File Number 1-10768
MEDIWARE INFORMATION SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
New York 11-2209324
(State of other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1121 Old Walt Whitman Road
Melville, New York 11747-3005
(Address of Principal Executive Officer) (Zip Code)
(516) 423-7800
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (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 registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes XX No
As of September 30, 1996, there were ( 4,939,344 ) shares of Common Stock, $0.10
par value, of the registrant outstanding.
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Mediware Information Systems, Inc.
Index
Part I. Financial Information Page
ITEM 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1996 and
September 30, 1996 (unaudited).............................2
Consolidated Statements of Operations (unaudited) for the
three months ended September 30, 1996 & 1995...............3
Consolidated Statements of Cash Flows (unaudited) for the
three months ended September 30, 1996 & 1995...............4
Notes to Financial Statements..............................5
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................5 - 7
Signature Page.............................................8 - 9
EXHIBIT 11
Schedule of Computation of Net income per Share.............10
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MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS AT SEPTEMBER 30, 1996
(unaudited)
---------------------------------
ASSETS Sep-30 Jun-30
1996 1996
---------------------------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $2,314,000 $2,504,000
Accounts receivable, less estimated doubtful accounts of $230,000 at
September 30, 1996 and $188,000 at June 30, 1996 5,121,000 3,509,000
Current portion of contract installment receivable 243,000 252,000
Inventories 69,000 208,000
Prepaid expenses and other current assets 220,000 166,000
---------------- ----------------
Total current assets 7,967,000 6,639,000
Long-term contract installments receivable, less current portion 101,000 155,000
Fixed assets, at cost, less accumulated depreciation of $1,384,000 at 603,000 576,000
September 30, 1996 and $1,364,000 at June 30, 1996
Capitalized software costs 1,060,000 1,012,000
Excess of cost over fair value of net assets acquired, net of accumulated amorti-
zation of $470,000 at September 30, 1996 and $372,000 at June 30, 1996 6,639,000 6,737,000
Other assets 164,000 38,000
---------------- ----------------
TOTAL $16,534,000 $15,157,000
================ ================
LIABILITIES
Current liabilities:
Accounts payable $520,000 $483,000
Accrued expenses and other current liabilities 2,458,000 1,775,000
Advances from customers 1,579,000 1,379,000
Current portion of capital leases payable 20,000 15,000
Notes payable 7,179,000 1,451,000
---------------------------------
Total current liabilities 11,756,000 $5,103,000
Notes payable, less current portion 5,728,000
Capital leases payable, less current portion 37,000 43,000
---------------- ----------------
Total liabilities 11,793,000 $10,874,000
---------------- ----------------
STOCKHOLDERS' EQUITY
Common stock - $.10 par value; authorized 12,000,000 shares; issued and out-
standing 4,939,344 shares at Sept.30, 1996 and 4,931,320 shares at June 30, 1996 494,000 493,000
Additional paid-in capital 13,430,000 13,419,000
Accumulated Deficit (9,183,000) (9,629,000)
---------------------------------
Total stockholders' equity 4,741,000 4,283,000
---------------- ----------------
TOTAL $16,534,000 $15,157,000
================ ================
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MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended September 30,
------------------------------------------
(unaudited)
1996 1995
------------------------------------------
Revenues:
<S> <C> <C>
System sales $1,818,000 $1,532,000
Services 2,541,000 986,000
------------------------------------------
Total revenues 4,359,000 2,518,000
------------------------------------------
Costs and expenses:
Cost of systems 775,000 437,000
Cost of services 774,000 448,000
Software development costs 605,000 341,000
Selling, general and administrative 1,606,000 954,000
------------------------------------------
3,760,000 2,180,000
Earnings before interest and taxes
599,000 338,000
Interest income 27,000 -
Interest (expense) (161,000) (60,000)
------------------------------------------
Earnings before Taxes $465,000 $278,000
Provision for Income Taxes 19,000 -
------------------------------------------
NET EARNINGS $446,000 $278,000
==========================================
Earnings per share $0.08 $0.08
==========================================
Weighted average number of common
and common equivalent shares 5,848,764 3,933,200
==========================================
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MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
-------------------------------
Sep-30 Sep-30
1996 1995
-------------------------------
(unaudited) (unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net earnings $446,000 $278,000
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Provision for doubtful accounts 42,000 15,000
Depreciation and amortization 230,000 203,000
Contract installment sales
Issuance of common stock as consideration of common stock to
directors 64,000
Proceeds from contract installments receivable 63,000
Changes in operating assets and liabilities:
(Increase) in accounts receivable (1,654,000) (535,000)
Decrease (Increase) in inventory 139,000 (63,000)
(Increase) in prepaid and other assets (180,000) (35,000)
Increase in accounts payable, accrued expenses and
customer advances 919,000 399,000
-------------------------------
Net cash (used in) provided by operating activities 5,000 326,000
-------------------------------
Cash flows from investing activities:
Acquisitions of fixed assets (47,000) (100,000)
Capitalized software costs (160,000) (92,000)
-------------------------------
Net cash (used in) investing activities (207,000) (192,000)
-------------------------------
Cash flows from financing activities:
Common stock issued 12,000
Proceeds of note payable
Repayment of long-term debt (1,000)
-------------------------------
Net cash provided by (used in) financing activities 12,000 (1,000)
-------------------------------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (190,000) 133,000
Cash and cash equivalents, beginning of period 2,504,000 509,000
-------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $2,314,000 $642,000
===============================
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest $144,000 $21,000
Income taxes $9,000 $3,000
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Mediware Information Systems, Inc., & Subsidiary
Notes to Unaudited Financial Statements
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 Company's audited financial statements for the year ended June 30, 1996
included in the Company's annual report filed on Form 10-KSB.
The results of operations for the three months ended September 30, 1996
are not necessarily indicative of the results to be expected for the entire
fiscal year.
2. Earnings Per Share:
Earnings per share are computed on the basis of the weighted average
number of common shares outstanding during each period. Common share equivalents
relating to shares which may be issued upon exercise of stock options and
warrants are included in the computation when the results are dilutive.
3. Income Taxes:
The tax expense is minimal due to the carry forward benefit from the net
operating loss.
4. Related Party Transactions:
During the three months ended September 30, 1996 the Company incurred
legal fees of approximately $57,000 with a firm of which a director of the
Company is counsel, primarily relating to the acquisition described below. In
the same period the Company incurred $21,132 of interest expense on notes held
by a director.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
This discussion and analysis contains forward looking statements within
the meaning of the Securities Act of 1933, as amended, and Section 21E of the
Securities Act of 1934, as amended, which are not historic facts, and involve
risks and uncertainties that could cause actual results to differ from those
expected and projected.
Results of Operations: 1997 vs. 1996:
System Sales Revenue increased by $286,000 or 19% to $1,818,000 for the
first three months of fiscal 1997 ended September 30, 1996 compared to
$1,532,000 for the comparable period a year earlier. The increase was due to
continued strong performance from the Hemocare product center, as well as system
sales produced by the Pharmakon and JAC divisions of Mediware.
Service Revenues increased by $1,555,000 or 157% to $2,541,000 for the
three months ended September 30, 1996 versus $986,000 for the comparable period
in 1995. This increase is due primarily to the revenues realized from the
addition of the Pharmakon and JAC divisions, fulfilling Pharmakon's obligation
to provide services to customers, new systems installed in the first quarter and
increases in annual support revenues from the installed base. In connection with
the acquisition described below, the Company entered into an agreement with
Continental Healthcare Systems, Inc. to perform certain of Continental's
obligations to provide services for customers of Continental, including the
installation of systems, customizing systems, and providing hardware. The
agreement also provides for the company to assist Continental in the collection
of certain billed and unbilled accounts receivable, principally due from the
customers who will receive the above mentioned services. For performing these
services, the Company is to be paid approximately $1,237,000 plus 30% of the
amounts collected. In the fiscal quarter ended September 30, 1996 the Company
recognized $215,000 of such service income.
Cost of Systems increased by $338,000 or 77% to $775,000 for the three
months ended September 30, 1996 compared to $437,000 for the same period last
year. This increase is due to additional system installations performed by the
Pharmakon and JAC divisions, and a significant number of hardware installations
from the Hemocare product center, which resulted in higher cost of sales as a
percentage of sales.
Costs of Services increased by $326,000 or 72% to $774,000 for the three
months ended September 30, 1996 compared to $448,000 for the same period last
year. This increase was due primarily to the addition of the Pharmakon and JAC
divisions.
Software Development costs increased by $264,000 or 77% to $605,000 for
the three months ended September 30, 1996 compared to $341,000 for the same
period last year. The increase was due to the additional costs of development
from the Pharmakon division.
Selling, General and Administrative (S.G.A.) costs increased by $652,000
or 68% to $1,606,000 for the three months ended September 30, 1996 compared to
$954,000 for the same period last year. This reflects the increased S.G.A.
expenses of the Pharmakon and JAC divisions, as well as increased commissions
and employee incentive bonus expenses.
Interest Expense increased by $101,000 or 168% to $161,000 for the three
months ended September 30, 1996 compared to $60,000 for the same period last
year. This increased interest is due primarily to interest paid to "Continental"
pertaining to the sellers note for the purchase of the Pharmakon and JAC
divisions.
Net Earnings increased by $168,000 or 60% to $446,000 for the three
months ended September 30, 1996 compared to $278,000 for the like period last
year. The increased earnings are due to continued strong earnings from the
Hemocare product center, as well as profits produced by the Pharmakon and JAC
divisions of Mediware including fulfilling Pharmakon's obligation to provide
services to customers.
Liquidity and Capital Resources:
In June of 1996, Digimedics Corporation, a wholly owned subsidiary of
the Company, purchased the Pharmakon division and JAC, a U.K. affiliate, from
Continental Healthcare Systems, Inc., ("Continental"). The total purchase price,
net of acquisition costs, was approximately $9.7 million, $3.7 million of which
was paid in cash and the remaining $6.0 million of which was paid pursuant to a
promissory note issued to "Continental" due November 30, 1996. On October 28,
1996, the promissory note was amended to provide for an extension of the due
date to August 1, 1997. The amendment provides for an immediate payment of $1.0
million and monthly payments of $100,000 for principal and interest and an
increase in the interest rate to 15% on approximately $3,763,000 of the note
(with the original rate remaining on $1,237,000). The amount of $4,549,000 of
this liability is classified as current at September 30, 1996. The Company will
require additional sources of liquidity to fund the $4,549,000 debt payment due
August 1, 1997.
To finance the cash portion of the acquisition, the Company made a
private placement of 1,692,308 shares of its Common Stock in June of 1996, at a
price of $3.25 per share, for total proceeds before expenses of $5,500,002.
The Company's working capital was negative $3,789,000 at September 30,
1996 reflecting the purchase money note due in August 1997 issued in June 1996
to Continental in part payment for the acquisition.
In order to cover its cash needs during fiscal years 1994 and 1995, the
Company carried out financing programs under which it borrowed an aggregate of
$1,299,000 from investors, including Company directors. As part of the financing
package, such investors received 1,040,025 warrants at $0.50 per share and
129,695 warrants at $1.25 per share. During fiscal year 1996 the Company repaid
$120,000, leaving a balance of $1,179,000 due August 1, 1997. The Company will
require additional sources of liquidity to fund this balance due. In May of 1996
some of the investors exercised 495,025 of the $0.50 warrants for a total of
$247,512. A portion of these funds was used by the Company for acquisition
expenses.
The Company has acquired a credit facility of $75,000 from its bank in
New York. As of September 30, 1996, the facility has $75,000 available. The
Company currently is seeking additional sources of credit and equity in order to
fund the reduction of its obligations under the above mentioned note. However,
it cannot be assured at this time that it will be successful.
The Company's cash and cash equivalent position at September 30, 1996
was $2,314,000 an increase of $ 1,672,000 from the same period of 1995.
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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.
MEDIWARE Information Systems, Inc.
(Registrant)
November 13, 1996 By: /s/ Les N. Dace
- ----------------- --------------------------------
(Date) Les N. Dace, President CEO
November 13, 1996 By: /s/ Les N. Dace
- ----------------- --------------------------------
(Date) Les N. Dace, CFO
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Mediware Information Systems, Inc. and Subsidiary
EXHIBIT 11
Schedule of Computation of Net Income Per Share
Three months ended Three months ended
30-Sep-96 30-Sep-95
---------------------- ----------------------
Primary Primary
Modified treasury stock method adjustment to net income:
<S> <C> <C>
Net income $446,000 $278,000
Reduction in interest expense from retiring debt $53,000
---------------------- ----------------------
$446,000 $331,000
Modified treasury stock method adjustment to common stock:
Weighted average shares outstanding $4,933,315 $2,633,999
Add:
Net shares from exercise of options/warrants:
Assumed exercise of options $1,283,007 $1,830,191
Assumed repurchase of shares $367,558 $530,990
----------------------
----------------------
Incremental shares $915,449 $1,299,201
---------------------- ----------------------
Adjusted shares $5,848,764 $3,933,200
====================== ======================
EARNINGS PER SHARE $0.08 $0.08
====================== ======================
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