SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
For Quarter ended December 31, 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 X No
--- ---
As of December 31, 1996, there were ( 4,945,179 ) 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
(audited) and December 31, 1996 (unaudited)......................2
Consolidated Statements of Operations
for the three months and six months ended
December 31, 1996 & 1995 (unaudited).............................3
Consolidated Statements of Cash Flows
for the six months ended
December 31, 1996 & 1995 (unaudited).............................4
Notes to Financial Statements....................................5
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................6 - 8
Signature Page............................................................9 - 10
EXHIBIT 11
Schedule of Computation of Net income per Share...............................11
Page 1
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MEDIWARE INFORMATIONS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31, 1996
(unaudited)
Dec-31 Jun-30
1996 1996
ASSETS
-------------------------------
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Current assets:
Cash and cash equivalents $1,372,000 $2,504,000
Accounts receivable, less estimated doubtful accounts of
$274,000 at December 31, 1996 and $188,000 at
June 30, 1996 5,587,000 3,509,000
Current portion of contract installment receivable 226,000 252,000
Inventories 155,000 208,000
Prepaid expenses and other current assets 225,000 166,000
------------- ----------------
Total current assets 7,565,000 6,639,000
Long-term contract installments receivable, less current portion 59,000 155,000
Fixed assets, at cost, less accumulated depreciation of
$1,479,000 at December 31, 1996 and $1,364,000 at
June 30, 1996 653,000 576,000
Capitalized software costs 1,104,000 1,012,000
Excess of cost over fair value of net assets acquired, net of
accumulated amortization of $550,000 at December 31,
1996 and $372,000 at June 30, 1996 6,559,000 6,737,000
Other assets 55,000 38,000
============= ================
TOTAL $15,995,000 $15,157,000
============= ================
LIABILITIES
Current liabilities:
Accounts payable $573,000 $483,000
Accrued expenses and other current liabilities 1,557,000 1,775,000
Advances from customers 2,316,000 1,379,000
Current portion of capital leases payable 19,000 15,000
Notes payable 6,094,000 1,451,000
------------- ----------------
Total current liabilities 10,559,000 5,103,000
Notes payable, less current portion 0 5,728,000
Capital leases payable, less current portion 35,000 43,000
------------- ----------------
Total liabilities 10,594,000 10,874,000
STOCKHOLDERS' EQUITY
Common stock - $.10 par value; authorized 12,000,000 shares;
4,945,179 issued and outstanding; shares at Dec. 31, 1996
and 4,931,320 shares at June 30, 1996 495,000 493,000
Additional paid-in capital 13,440,000 13,419,000
Cumulative foreign currency translation adjustment 24,000
(Deficit) (8,558,000) (9,629,000)
------------- ----------------
Total stockholders' equity 5,401,000 4,283,000
------------- ----------------
TOTAL $15,995,000 $15,157,000
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MEDIWARE INFORMATIONS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
Three Months Ended December 31, Six Months Ended December 31,
1996 1995 1996 1995
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Revenues:
System sales $ 1,583,000 $ 1,492,000 $ 3,401,000 $ 3,024,000
Services 3,089,000 5,630,000 1,998,000
1,012,000
----------------------------------------------------------------------
Total revenues 4,672,000 2,504,000 9,031,000 5,022,000
Costs and expenses:
Cost of systems 313,000 330,000 1,088,000 767,000
Cost of services 834,000 443,000 1,608,000 891,000
Software development costs 531,000 416,000 1,136,000 756,000
Selling, general and administrative 2,174,000 1,019,000 3,780,000 1,970,000
----------------------------------------------------------------------
3,852,000 2,208,000 7,612,000 4,384,000
Earnings (loss) before other income,
interest income, interest expense, and
income taxes 820,000 2,208,000 1,419,000 638,000
Other income
- - - -
Interest income 19,000 - 46,000 -
Interest (expense) (193,000) (48,000) (354,000) (108,000)
----------------------------------------------------------------------
Income before income taxes 646,000 248,000 1,111,000 530,000
Income tax (21,000) (40,000) (3,000)
----------------------------------------------------------------------
NET EARNINGS $ 625,000 $ 248,000 $ 1,071,000 $ 527,000
======================================================================
Earnings per share $ 0.11 $ 0.08 $ 0.18 $ 0.16
Weighted average number of common
and common equivalent shares 5,873,000 3,899,000 5,858,000 3,888,000
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MEDIWARE INFORMATIONS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
Six Months Ended
---------------------------------
Dec-31 Dec-31
1996 1995
---------------------------------
(unaudited) (unaudited)
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Cash flows from operating activities:
Net earnings $1,071,000 $527,000
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Provision for doubtful accounts 86,000 30,000
Depreciation and amortization 520,000 325,000
Proceeds from contract installments receivable 122,000 3,000
Changes in operating assets and liabilities:
(Increase) in accounts receivable (2,164,000) (526,000)
Decrease (Increase) in inventory 53,000 (4,000)
(Increase) in prepaid and other assets (76,000) (150,000)
Increase in accounts payable, accrued expenses and
customer advances 805,000 328,000
------------------------------------
Net cash (used in) provided by operating activities 417,000 533,000
Cash flows from investing activities:
Acquisitions of fixed assets (192,000) (94,000)
Capitalized software costs (320,000) (208,000)
------------------------------------
Net cash (used in) investing activities (512,000) (302,000)
Cash flows from financing activities:
Common stock issued 23,000 64,000
Cumulative foreign currency translation adjustment 24,000
Repayment of long-term debt (1,084,000) (100,000)
------------------------------------
Net cash provided by (used in) financing activities (1,037,000) (36,000)
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (1,132,000) 195,000
Cash and cash equivalents, beginning of period 2,504,000 509,000
------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $1,372,000 $704,000
====================================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $283,000 $22,000
Income taxes $8,000 $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 six months ended December 31, 1996 are
not necessarily indicative of the results to be expected for the entire fiscal
year.
2. Earnings (Loss) 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 issuable upon exercise of stock options and warrants and 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.
Page 5
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ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations: 1997 vs. 1996:
System Sales Revenue increased by $91,000 or 6% to $1,583,000 for the
three months ended December 31, 1996 compared to $1,492,000 for the comparable
period a year earlier. System Sales increased $377,000 or 12% for the six months
ended December 31, 1996 to $3,401,000 compared to $3,024,000 for the comparable
period a year earlier. For the three months ended December 31, 1996 System Sales
Revenue for Pharmakon and JAC were $280,000.
Service Revenues increased by $2,077,000 or 205% to $3,088,000 for the
three months ended December 31, 1996 compared to $1,012,000 for the comparable
period in 1995. Service revenues increased by $3,632,000 or 182% to $5,630,000
for the six months ended December 31, 1996 compared to $1,998,000 for the
comparable period last year. For the quarter ended December 31, 1996, 82% of the
increase is a result of Service Revenues contributed by Pharmakon and JAC, while
the Hemocare product center contributed the remaining revenue from increased
software maintenance from new system implementations for the quarter.
Cost of Systems decreased by $17,000 or 5% to $313,000 for the three
months ended December 31, 1996 compared to $330,000 for the same period last
year. Cost of Systems increased by $321,000 to $1,088,000 or 42% for the six
months ended December 31, 1996 compared to $767,000 for the comparable period
last year. The decrease for the quarter was due to a larger number of software
only sales, software upgrades, and installation of interfaces.
Costs of Services increased by $391,000 or 88% to $834,000 for the three
months ended December 31, 1996 compared to $443,000 for the same period last
year. Cost of services increased by $717,000 to $1,608,000 or 80% for the six
months ended December 31, 1996 compared to $891,000 for the same period last
year. The increase for the quarter was substantially due to service costs from
the Pharmakon and JAC product centers.
Software Development costs increased by $115,000 or 28% to $531,000 for
the three months ended December 31, 1996 compared to $416,000 for the same
period last year. Software Development costs increased by $380,000 or 50% to
$1,136,000 for the six months ended December 31, 1996 as compared to the
comparable period last year. The Pharmakon product center was responsible for
the increase in Software Development costs for the quarter.
Selling, General and Administrative costs increased by $1,155,000 or
113% to $2,174,000 for the three months ended December 31, 1996 compared to
$1,019,000 for the same period last year. Selling, General and Administrative
costs increased by $1,810,000 or 92% to $3,780,000 as compared to $1,970,000 for
the same period last year. Pharmakon and JAC were responsible for 59% of the
increase in the quarter, while Hemocare was substantially responsible for the
remaining increase during the quarter.
Page 6
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Interest Expense increased by $145,000 to $193,000 for the three months
ended December 31, 1996 compared to $48,000 for the same period last year.
Interest Expense increased by $246,000 to $354,000 for the six months ended
December 31, 1996 as compared to $108,000 for the same period the year before.
This increased interest in the quarter was due to interest paid against the
outstanding note in the acquisition of Pharmakon and JAC from Continental
Healthcare Systems.
Net Earnings increased by $377,000 or 152% to $625,000 for the three
months ended December 31, 1996 compared to $248,000 for the like period last
year. Net earnings for the six months ended December 31, 1996 were $1,071,000
compared to $527,000 for the comparable period last year. The increased earnings
for the quarter were produced by the Pharmakon and JAC product centers.
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. 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 in the form of a promissory
note issued to Continental bearing interest at Citibank N.A.'s base rate 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 a payment of $1.0 million for principal reduction and monthly
payments thereafter 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 $l,237,000). At December 31, 1996, the outstanding
balance of this liability, $4.9 million (after the $1.0 million payment), is
classified as current. In October 1996 the Company paid to Continental the $1.0
million payment to reduce outstanding principal and made the monthly payments of
$100,000 on November 30 and December 31, 1996. The Company will require
additional sources of liquidity to fund a net balance of up to $4.6 million of
debt 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 had a working capital deficiency of $2,994,000 at December
31, 1996 reflecting the purchase money note due in August 1997 issued in June
1996 to Continental in partial payment for the Acquisition.
During fiscal year 1996 the Company repaid $120,000 of outstanding
bridge loans, leaving a balance of $1,179,000 due August 1, 1997. As noted in
the third preceding paragraph the Company will require additional sources of
liquidity to fund this balance due. In May of 1996 certain holders exercised
warrants for 495,025 shares for a total of $247,512.
The Company has acquired a credit facility of $75,000 from its bank in
New York. As of December 31, 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.
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Forward-Looking Statements:
Certain statements made in this Report are or imply forward-looking
statements. Such forward looking statements are not guarantees of future
performance and are subject to risks and uncertainties that could cause actual
resu1ts to differ materially from those expressed or implied in the
forward-looking statements. These risks and uncertainties are expressed in the
Risk Factors discussed in the Prospectus included in the Registration Statement
on Form SB-2, File No. 333-18277, especially those under the headings "Working
Capital Deficiency; Restrictive Covenants", "Variability of Operating Results",
"Hospital Purchase Procedures", "Acquisition", "Competition", "Technological
Obsolescence; Marketing and Acceptance of New Products", "Product Protection"
and "Government Regulation".
Page 8
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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)
February 12, 1996 By: /s/ Les N. Dace
- ------------------------ --------------------------------
(Date) Les N. Dace, President CEO
February 12, 1996 By: /s/ Les N. Dace
- ------------------------ --------------------------------
(Date) Les N. Dace, CFO
Page 9
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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)
February 12, 1996 By: /s/ Les N. Dace
- ------------------------ --------------------------------
(Date) Les N. Dace, President CEO
February 12, 1996 By: /s/ Les N. Dace
- ------------------------ --------------------------------
(Date) Les N. Dace, CFO
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MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTAT8ION OF NET INCOME PER SHARE
EXHIBIT 11
Three months Three months Six months Six months
ended ended ended ended
31-Dec-96 31-Dec-95 31-Dec-96 31-Dec-95
Primary Primary Primary Primary
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MODIFIED TREASURY STOCK METHOD
ADJUSTMENT TO NET INCOME:
Net income $625,000 $248,000 $1,071,000 $527,000
Reduction in interest expense from retiring debt 45,000 104,000
-------------------------------------------------------------------
$625,000 $293,000 $1,071,000 $631,000
MODIFIED TREASURY STOCK METHOD
ADJUSTMENT TO COMMON STOCK:
Weighted average shares outstanding 4,942,000 2,655,000 4,938,000 2,644,000
Add: Net shares from exercise of options/warrants:
Assumed exercise of options 1,273,000 1,775,000 1,273,000 1,775,000
Assumed repurchase of shares 342,000 531,000 353,000 531,000
-------------------------------------------------------------------
Incremental shares 931,000 1,244,000 920,000 1,244,000
-------------------------------------------------------------------
Adjusted shares 5,873,000 3,899,000 5,858,000 3,888,000
===================================================================
EARNINGS PER SHARE $0.11 $0.08 $0.18 $0.16
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