SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
For Quarter ended September 30, 1997
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 September 30, 1997, there were 5,483,363 shares of Common Stock, $0.10
par value, of the registrant outstanding.
<PAGE>
MEDIWARE Information Systems, Inc.
Index
Part I. Financial Information Page
ITEM 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1997
(unaudited) and June 30, 1997 (audited)................... 2
Consolidated Statements of Operations
for the three months and nine months ended
September 30, 1997 & 1996 (unaudited)..................... 3
Consolidated Statements of Cash Flows
for the nine months ended
September 30, 1997 & 1996 (unaudited)..................... 4
Notes to Financial Statements............................. 5
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 5
Signature Page.......................................................... 8
Exhibit 11
Schedule of Computation of Net Income per Share......................... 9
Exhibit 27
Financial Data Schedule ................................................ 10
<PAGE>
<TABLE>
<CAPTION>
MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
As at September 30, 1997
(unaudited)
ASSETS Sept-30 Jun-30
1997 1997
-------- --------
<S> <C> <C>
Cash and cash equivalents ........................................................ $ 4,231,000 $ 1,935,000
Accounts receivable, less estimated doubtful accounts of $295,000 at ............. 7,237,000 6,357,000
September 30, 1997 and $282,000 at June 30, 1997
Inventories ...................................................................... 48,000 56,000
Prepaid expenses and other current assets ........................................ 442,000 304,000
------------ ------------
Total current assets ........................................................ 11,958,000 8,652,000
Fixed assets, at cost, less accumulated depreciation of $1,620,000 at September 30, 722,000 752,000
1997 and $1,572,000 at June 30, 1997
Capitalized software costs .......................................................... 1,573,000 1,448,000
Excess of cost over fair value of net assets acquired, net of accumulated ........... 6,338,000 6,419,000
amortization of $813,000 at September 30, 1997 and $732,000 at June 30, 1997
Other assets ........................................................................ 87,000 78,000
------------ ------------
$ 20,678,000 $ 17,349,000
============ ============
LIABILITIES
Current liabilities:
Accounts payable ................................................................. $ 711,000 $ 713,000
Notes payable .................................................................... 600,000 1,212,000
Accrued expenses and other current liabilities ................................... 2,898,000 2,032,000
Advances from customers .......................................................... 2,711,000 2,106,000
Current portion of capital leases payable ........................................ 11,000 102,000
------------ ------------
Total current liabilities ................................................... 6,931,000 6,165,000
Notes payable, less current portion .............................................. 4,450,000 4,600,000
Capital leases payable, less current portion ..................................... 11,000 60,000
------------ ------------
Total liabilities ........................................................... 11,392,000 10,825,000
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock - $.01 par value; authorized 10,000,000 shares; none issued and
outstanding Common stock - $.10 par value; authorized 12,000,000 shares; issued
and outstanding; 5,483,363 shares at September 30, 1997 and 5,056,486 shares at
June 30, 1997 548,000 506,000
Unearned compensation ............................................................... (81,000) (91,000)
Cumulative foreign currency translation adjustment .................................. 20,000 36,000
Additional paid-in capital .......................................................... 15,724,000 13,621,000
(Deficit) ........................................................................... (6,925,000) (7,548,000)
------------ ------------
Total stockholders' equity .................................................. 9,286,000 6,524,000
------------ ------------
$ 20,678,000 $ 17,349,000
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
Three Months Ended September 30,
(unaudited)
--------------------------------
<S> <C> <C>
Revenues:
System sales ............................................ $ 1,863,000 $ 1,818,000
Services ................................................ 3,000,000 2,541,000
----------- -----------
Total revenues ........................................ 4,863,000 4,359,000
Costs and expenses:
Cost of systems ......................................... 665,000 775,000
Cost of services ........................................ 747,000 774,000
Software development costs .............................. 584,000 605,000
Selling, general and administrative ..................... 2,095,000 1,606,000
----------- -----------
4,091,000 3,760,000
Earnings before interest and taxes .......................... 772,000 599,000
Interest income ............................................. 45,000 27,000
Interest (expense) .......................................... (156,000) (161,000)
----------- -----------
Earnings before taxes ....................................... $ 661,000 $ 465,000
Provision for income taxes .................................. 38,000 19,000
NET EARNINGS ................................................ $ 623,000 $ 446,000
=========== ===========
Earnings per share .......................................... $ 0.10 $ 0.08
=========== ===========
Weighted average number of common and common
equivalent shares ........................................... 6,312,378 5,848,764
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated statements of cash flows
Three Months Ended
------------------------
------------------------
Sept-30 Sept-30
1997 1996
------------------------
<S> <C> <C>
(unaudited) (unaudited)
Cash flows from operating activities:
Net earnings ............................................................................ $ 623,000 $ 446,000
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Provision for doubtful accounts ...................................................... 13,000 42,000
Depreciation and amortization ........................................................ 196,000 230,000
Changes in operating assets and liabilities:
Accounts receivable ............................................................... (867,000) (1,591,000)
Inventory ......................................................................... 8,000 139,000
Prepaid and other assets .......................................................... (147,000) (180,000)
Accounts payable, accrued expenses and customer advances .......................... 1,450,000 919,000
----------- -----------
Net cash provided by operating activities ........................................ 1,276,000 5,000
----------- -----------
Cash flows from investing activities:
Acquisitions of fixed assets ............................................................ (78,000) (47,000)
Capitalized software costs .............................................................. (192,000) (160,000)
----------- -----------
Net cash (used in) investing activities .......................................... (270,000) (207,000)
----------- -----------
Cash flows from financing activities:
Proceeds from exercise of options and warrants .......................................... 32,000 12,000
Proceeds of private placement ........................................................... 2,160,000
Repayment of debt ....................................................................... (902,000)
----------- -----------
Net cash provided by financing activities ........................................ 1,290,000 12,000
----------- -----------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS ................................................ 2,296,000 (190,000)
Cash and cash equivalents, beginning of period ............................................. 1,935,000 2,504,000
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ................................................... $ 4,231,000 $ 2,314,000
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest .............................................................................. $ 197,000 $ 144,000
Income taxes .......................................................................... $ 26,000 $ 9,000
</TABLE>
<PAGE>
MEDIWARE INFORMATION SYSTEMS, INC., & SUBSIDIARIES
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, 1997
included in the Company's annual report filed on Form 10-KSB.
The results of operations for the three months ended September 30, 1997
are not necessarily indicative of the results to be expected for the entire
fiscal year.
2. Earnings Per Share:
Earnings per share is 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 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 .
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
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
results 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."
Results of Operations: Three months ended September 30, 1997 compared to three
months ended September 30, 1996.
Total Company revenues increased by $504,000 or 11.6% from $4,359,000 in
the first quarter of fiscal 1997 to $4,863,000 for the same period in fiscal
1998. This increase is primarily due to the Company's Pharmacy division
comprised of Digimedics and Pharmakon sales.
System sales increased slightly from $1,818,000 for the three month
period ended September 30, 1996 to $1,863,000 for the same period ended
September 30, 1997. For the periods compared, the increase is principally due to
the Pharmacy division's sales increase.
Service revenues increased by $459,000 or 18.1% from $2,541,000 to
$3,000,000 comparing the first quarter of fiscal 1997 and fiscal 1998. The
service revenue increases were due to a combination of increases in the
Company's installed client base along with maintenance rate increases.
Cost of systems includes the cost of computer hardware and sublicensed
software purchased from computer and software manufacturers by Mediware as part
of its application sub-system. Cost of systems was 43% of related system sales
in the first quarter of fiscal 1997 and 36% of system sales in the comparable
period in fiscal 1998. Such costs, as a percentage of revenues, vary as the mix
of revenue varies between high margin proprietary software and lower margin
computer hardware and sublicensed software components. Cost of systems decreased
by $110,000 to $665,000 in the quarter ended September 30, 1997 as compared to
the same period a year ago. The improved margin is due to a favorable higher
margin mix of proprietary software in the first quarter of fiscal 1998 vs. the
first quarter of fiscal 1997.
Cost of services include salaries of client service personnel,
communications expenses, unreimbursed travel and training expenses along with
other direct expenses. Cost of services decreased $27,000 or 3.5 % in the first
three months of fiscal 1998 as compared to the same period in fiscal 1997. The
cost of services tend to be relatively fixed in amount but will vary with
service and support staffing and related expense changes.
Software development cost include salaries, documentation, office and
other expenses incurred in product development along with amortization of
software development costs. Software development cost decreased $21,000 or 3.6%
in the first quarter of fiscal 1998 as compared to the first quarter of fiscal
1997. Capitalized software cost additions were $160,000 and $192,000 for the
first three months of fiscal 1997 and fiscal 1998.
Selling, general and administrative expenses include marketing and sales
salaries, commissions, training and advertising expenses. Also included are bad
debt expense; legal, accounting and professional fees; salaries and bonus
expenses for corporate, divisional, financial and administrative staffs;
utilities, rent, communications and other office expenses; and other related
direct expenses. Selling, general and administrative expense increased $489,000
or 30.4% from $1,606,000 in the three month period ended September 30, 1996 to
$2,095,000 in the same period ended September 30, 1997. The increase reflects
higher communications, travel, bonus, professional fees, and other direct
administrative expenses.
Net interest expense decreased by $23,000 or 17.2% from $134,000 to
$111,000 in comparing the first three months of fiscal 1998 to the same period
in fiscal 1997. This decrease primarily reflects a decrease in promissory note
principle from approximately $7.2 million at September 30, 1996 to approximately
$5.0 million at September 30, 1997.
Net earnings increased 39.7% or $177,000 from $446,000 in the first
three months of fiscal 1997 to $623,000 for the same period in fiscal 1998.
Earnings per share increased to $.10 per share for the quarter ended September
30, 1997 from $.08 per share reported for the quarter ended September 30, 1996.
Liquidity and Capital Resources:
The Company's cash and cash equivalent position at September 30, 1997
was $4,231,000 an increase of $2,296,000 from $1,935,000 at June 30, 1997. At
September 30, 1997 the current ratio was 1.7 to 1. In addition to $1,276,000 in
cash provided by operations, the current working capital position was improved
by an August, 1997 private placement providing $2,090,000, net of expenses.
In this August, 1997 private placement, the Company sold 400,000 shares
of its Common Stock for $6.00 per share and issued warrants to purchase 40,000
shares of Common Stock at $6.00 per share (as part of its placement fee). The
Company has agreed to register the shares sold in the private placement with the
Securities and Exchange Commission.
During the quarter ended September 30, 1997, the Company paid down $325,000
in principle on its promissory notes held by private investors. The $854,000
September 30, 1997 balance on these promissory notes are held by two directors
and another person. Effective September 15, 1997 these remaining note holders
agreed to reduce the interest on this unpaid amount from 12% to 9% annually.
Additionally, the Company amended its promissory note held by Continental
Healthcare Systems, Inc. ("Continental") in July, 1997. This amendment included
a $437,000 reduction in note principle through the application of the amount
owing from Continental to the Company for completed services. This application
is in accordance with the Company's service contract covering collection of
Continental accounts receivables along with other activities related to
fulfilling post-acquisition Continental obligations. The principle balance on
the Continental promissory note at September 30, 1997 was $4,196,000 which is
due in quarterly installments commencing October 31, 1997 with the remaining
balance due November 30, 1998 or earlier based upon a change in control or
refinancing by the Company. The Company will review the financing needs of this
promissory note and general cash requirements on an ongoing basis. It is
expected that the Company will require additional sources of liquidity to fund
the payment of this promissory note along with other financing needs including
potential acquisitions.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MEDIWARE Information Systems, Inc.
----------------------------------
(Registrant)
November 18, 1997 By: /s/ Les N. Dace
- ------------------------------------ --------------------------------
(Date) Les N. Dace, President CEO
November 18, 1997 By: /s/ George J. Barry
- ------------------------------------ --------------------------------
(Date) George J. Barry, CFO
<PAGE>
<TABLE>
<CAPTION>
MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
EXHIBIT 11
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
Three months ended Three months ended
September 30, 1997 September 30, 1996
------------------ ------------------
Primary Primary
---------- ----------
<S> <C> <C>
Modified treasury stock method adjustment to net income:
Net income .................................................................................. $ 623,000 $ 446,000
---------- ----------
$ 623,000 $ 446,000
Modified treasury stock method adjustment
to common stock:
Weighted average shares outstanding ......................................................... 5,228,682 4,933,315
Add:
Net shares from exercise of options/warrants:
Assumed exercise of options ......................................................... 1,529,309 1,283,007
Assumed repurchase of shares ........................................................ 445,613 367,558
---------- ----------
Incremental shares .................................................................. 1,083,696 915,449
========== ==========
Adjusted shares ............................................................................. 6,312,378 5,848,764
========== ==========
EARNINGS PER SHARE .......................................................................... $ .10 $ .08
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 4,231
<SECURITIES> 0
<RECEIVABLES> 7,532
<ALLOWANCES> 295
<INVENTORY> 48
<CURRENT-ASSETS> 11,958
<PP&E> 2,342
<DEPRECIATION> 1,620
<TOTAL-ASSETS> 20,678
<CURRENT-LIABILITIES> 6,931
<BONDS> 0
0
0
<COMMON> 548
<OTHER-SE> 8,738
<TOTAL-LIABILITY-AND-EQUITY> 20,678
<SALES> 4,863
<TOTAL-REVENUES> 4,863
<CGS> 1,412
<TOTAL-COSTS> 4,091
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 13
<INTEREST-EXPENSE> 156
<INCOME-PRETAX> 661
<INCOME-TAX> 38
<INCOME-CONTINUING> 623
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 623
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
