SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM 10-QSB
ON
FORM 10-QSB/A
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 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................2 - 4
Signature Page..............................................5
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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. Reference is made to the section entitled "Risk Factors"
in the Registration Statement on Form SB-2, File No. 333-18277, for a discussion
of such material risks and uncertainties.
Results of Operations: 1997 vs. 1996:
System Sales Revenue increased overall 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. $421,000 of
this increase was due to system sales of the Pharmakon and JAC product centers.
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. Substantially all of this increase is due to the revenues realized from
the addition of the Pharmakon and JAC divisions. The remainder is due to 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 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 for Continental. In the fiscal quarter ended
September 30, 1996 the Company recognized $215,000 of such service income based
on the percentage of completion method.
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. Approximately 56% of this increase was due to increased systems costs of
Pharmakon and JAC. The balance of the increase was due to a significant number
of hardware installations in this quarter at the Hemocare product center,
resulting 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. All of this increase was due to service costs resulting from the
addition of Pharmakon.
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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. All of this increase was due to software development costs of
JAC and Pharmakon.
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 caused by the addition of the Pharmakon and JAC divisions,
accounting for approximately 80% of the total. The remainder reflects increased
commissions and employee incentive bonus expenses from Hemocare and Digimedics.
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, reflecting interest on the note to Continental.
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 net earnings are due to profits produced by the Pharmakon
and JAC divisions of Mediware.
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. 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 $1,237,000). At September 30, 1996, the outstanding
balance of this liability, $6.0 million (before 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 $3,789,000 at September
30, 1996 reflecting the purchase money note due in August 1997 issued in June
1996 to Continental in partial payment for the Acquisition.
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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. As noted in the
third preceding paragraph, 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.
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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)
January 31, 1997 By: /s/ Les N. Dace
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(Date) Les N. Dace, President CEO
January 31, 1997 By: /s/ Les N. Dace
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(Date) Les N. Dace, CFO
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