SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
FOR QUARTER ENDED DECEMBER 31, 1997
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-10768
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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, 1997, there were 5,517,722 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
<S> <C> <C>
<C>
Consolidated Balance Sheets as of December 31, 1997
(unaudited) and June 30, 1997 (audited) 2
Consolidated Statements of Operations
for the three months and six months ended
December 31, 1997 & 1996 (unaudited) 3
Consolidated Statements of Cash Flows
for the six months ended
December 31, 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
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MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31, 1997
(UNAUDITED)
ASSETS Dec-31 Jun-30
- ------------------------------------------------------------------------ ------------
<S> <C> <C>
1997 1997
------------ ------------
Current assets: <C> <C>
Cash and cash equivalents $ 3,314,000 $ 1,935,000
Accounts receivable, less estimated doubtful accounts 7,503,000 6,357,000
of $333,000 at December 31, 1997 and $282,000 at June 30, 1997
Inventories 228,000 56,000
Prepaid expenses and other current assets 450,000 304,000
------------ ------------
Total current assets 11,495,000 8,652,000
Fixed assets, at cost, less accumulated depreciation of $1,731,000 932,000 752,000
at December 31, 1997 and $1,572,000 at June 30, 1997
Capitalized software costs 1,770,000 1,448,000
Excess of cost over fair value of net assets acquired, net of 6,246,000 6,419,000
accumulated amortization of $915,000 at December 31, 1997 and
$732,000 at June 30, 1997
Other assets 372,000 78,000
------------ ------------
$20,815,000 $17,349,000
============ ============
LIABILITIES
- ------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 418,000 $ 713,000
Notes payable 4,900,000 1,212,000
Accrued expenses and other current liabilities 2,318,000 2,032,000
Advances from customers 2,993,000 2,106,000
Current portion of capital leases payable 8,000 102,000
------------ ------------
Total current liabilities 10,637,000 6,165,000
Notes payable, less current portion 0 4,600,000
Capital leases payable, less current portion 20,000 60,000
------------ ------------
Total liabilities 10,657,000 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; 5,517,722 shares at December 31, 1997 and 5,056,486
shares at June 30, 1997 552,000 506,000
Unearned compensation (71,000) (91,000)
Cumulative foreign currency translation adjustment 24,000 36,000
Additional paid-in capital 15,785,000 13,621,000
(Deficit) (6,132,000) (7,548,000)
------------ ------------
Total stockholders' equity 10,158,000 6,524,000
------------ ------------
$20,815,000 $17,349,000
============ ============
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MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended December 31, Six Months Ended December 31,
- ---------------------------------------- -------------------------------
(unaudited)
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
------------------------------- ----------- ----------- -----------
1997 1996 1997 1996
------------------------------- ----------- ----------- -----------
REVENUES:
System sales $ 1,198,000 $1,583,000 $3,061,000 $3,401,000
Services 3,690,000 3,089,000 6,690,000 5,630,000
------------------------------- ----------- ----------- -----------
Total revenues 4,888,000 4,672,000 9,751,000 9,031,000
------------------------------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of systems 366,000 313,000 1,031,000 1,088,000
Cost of services 731,000 834,000 1,478,000 1,608,000
Software development costs 598,000 531,000 1,182,000 1,136,000
Selling, general and administrative 2,294,000 2,174,000 4,389,000 3,780,000
------------------------------- ----------- ----------- -----------
3,989,000 3,852,000 8,080,000 7,612,000
Earnings before interest and taxes 899,000 820,000 1,671,000 1,419,000
Interest income 60,000 19,000 105,000 46,000
Interest (expense) (118,000) (193,000) (274,000) (354,000)
------------------------------- ----------- ----------- -----------
Earnings before taxes 841,000 646,000 1,502,000 1,111,000
Provision for income taxes 48,000 21,000 86,000 40,000
NET EARNINGS $ 793,000 $ 625,000 $1,416,000 $1,071,000
$ 0.14 $ 0.13 $ 0.26 $ 0.22
Basic earnings (loss) per share
Diluted earnings (loss) per share $ 0.12 $ 0.11 $ 0.22 $ 0.18
Weighted average shares outstanding 5,502,809 4,942,000 5,365,746 4,938,000
=============================== =========== =========== ===========
Average shares outstanding assuming 6,716,883 5,873,000 6,510,638 5,858,000
dilution
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MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
Dec-31 Dec-31
1997 1996
------------------ ------------
<S> <C> <C>
<C> <C>
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,416,000 $ 1,071,000
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Compensatory stock options issued to consultants 20,000
Provision for doubtful accounts 38,000 86,000
Depreciation and amortization 555,000 520,000
Changes in operating assets and liabilities
Accounts receivable (1,184,000) (2,042,000)
Inventory (172,000) 53,000
Prepaid and other assets (440,000 (76,000)
Accounts payable, accrued expenses and customer 878,000 805,000
advances
Net cash provided by operating activities 1,111,000 417,000
------------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of fixed assets (339,000) (192,000)
Capitalized software costs (545,000) (320,000)
------------------ ------------
Net cash (used in) investing activities (884,000) (512,000)
------------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of options and warrants 72,000
Proceeds of private placement 2,138,000 23,000
Repayment of debt (1,058,000) (1,060,000)
Net cash (used in) provided by financing
activities 1,152,000 (1,037,000)
------------------ ------------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS 1,379,000 (1,132,000)
Cash and cash equivalents, beginning of period 1,935,000 2,504,000
------------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,314,000 $ 1,372,000
================== ============
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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 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 and six months ended
December 31, 1997 are not necessarily indicative of the results to be expected
for the entire fiscal year.
2. EARNINGS PER SHARE:
--------------------
The Company adopted the provisions of the Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share" in the preparation
of the financial statements included in this Quarterly Report on Form 10QSB.
In accordance with the provisions of SFAS No. 128, the Company is required to
report both "basic" and "diluted" earnings per share and to restate previously
reported earnings per share amounts to conform to the provisions of SFAS 128.
Basic earnings per share have been computed using the weighted average number
of shares of common stock of the Company ("Common Stock") outstanding for each
period presented. The dilutive effect of stock options and other common stock
equivalents is included in the calculation of diluted earnings per share using
the treasury stock method. For the periods presented, the diluted earnings
per share amounts are the same as the earnings per share amounts previously
reported by the Company.
3. SERVICE MAINTENANCE POLICY
----------------------------
During the December 31, 1997 quarter, the Company changed its policy
regarding Pharmakon service maintenance billings under maintenance service
agreements. The policy change, which resulted in the increase of service
revenues from the same quarter last year, is expected to result in increased
revenues in the future. This policy change resulted in invoicing to customers
for amounts previously unbilled under terms of the maintenance contracts.
4. 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:
Total Company revenues increased by 8.0% or $720,000 for the first half
of fiscal 1998 as compared to the first six months of fiscal 1997. This
increase is principally due to service revenue increases from the Company's
Hemocare and Pharmacy divisions. Company revenue for the three month period
ending December 31, 1997 increased by 4.6% or $216,000 from the comparable
period a year earlier.
System sales decreased by 10.0% or $340,000 for the first six months of
fiscal 1998 as compared to the six month period ended December 31, 1996. This
decrease primarily is due to the Company's JAC and Hemocare divisions. System
sales for the quarter ended December 31, 1997 decreased $385,000 or 24.3% from
the same quarter in fiscal 1997. This decrease is primarily due to the same
divisions as noted in the six month comparison.
Service revenues increased by $1,060,000 or 18.8% from $5,630,000 in the
first half of fiscal 1997 to $6,690,000 in the first six months of fiscal
1998. This increase is principally due to the Company's Hemocare and Pharmacy
division. Service revenues increased by $601,000 or 19.5% for the three month
period ended December 31, 1997 as compared to the same period a year ago. The
December 31, 1997 quarter increase is due to a change in Pharmakon service
maintenance policy as to billings under maintenance service agreements. The
policy change, which is expected to result in increased revenue in the future,
resulted in invoicing to customers for amounts previously unbilled under the
terms of the maintenance contracts. In the opinion of management, the reserve
for the accounts receivable due to said billing, is adequate.
Cost of systems decreased $57,000 or 5.2% from $1,088,000 for the first
half of fiscal 1997 to $1,031,000 for the first two quarters of fiscal 1998.
As a percentage of system sales, cost of systems increased 1.7% from 32% to
33.7% comparing the first half of fiscal 1997 to the same period in fiscal
1998. Cost of systems increased $53,000 or 16.9% from $313,000 for the
quarter ended December 31, 1997 to $366,000 for the same period in fiscal
1998. For both periods compared, the change in cost of systems is primarily
due to the period sales mix between computer hardware, sublicensed software
and company licensed software.
Cost of services decreased $130,000 or 8.1% from $1,608,000 in the first
half of fiscal 1997 to $1,478,000 for the same period in fiscal 1998. For the
three month period ended December 31, 1997, cost of services decreased by
$103,000 or 12.3% from the same period in the prior year. For both periods,
the change in cost of service is primarily due to technical employee activity
change to increased software development and product training from direct
service support.
Software development costs increased $46,000 or 4.0% from $1,136,000 in
the six month period ended December 31, 1996 to $1,182,000 for the same period
ended December 31, 1997. Software development costs increased $67,000 or
12.6% the quarter ended December 31, 1997 as compared to the same quarter in
fiscal 1997. Capitalized software additions were $545,000 and $320,000 for
the first six months of fiscal 1997 and 1998. The higher level of fiscal 1998
spending includes approximately $150,000 in outside contracted software
development activity principally expended on the Company's WORx product line.
Selling, general and administrative expenses increased $609,000 or 16.1%
from $3,780,000 to $4,389,000 in comparing the first halves of fiscal 1997 and
1998. For the three month period ended December 31, 1997 selling, general and
administrative expenses increased $120,000 or 5.5% from the same period in the
prior year. The fiscal 1998 increases for both compared periods reflects
higher communications, travel, bonus, professional fees, and other direct
administrative expense. Additionally, the Company expensed in the second
quarter of fiscal 1998 approximately $167,000 in litigation settlement payment
accruing to claims against the Company made by Cedars-Sinai Medical Center.
The Company along with the other named party in the suit have reserved their
rights to pursue indemnification from each other. Legal fees related to the
claim have been expensed as incurred.
Net interest expense decreased by $139,000 from $308,000 to $169,000 in
the first six months of fiscal 1997 as compared to the same period in fiscal
1998. Net interest expense decreased $116,000 or 66.7% in the quarter ended
December 31, 1997 as compared to the same quarter a year ago. This change in
fiscal 1998 from fiscal 1997 is due to the reduction of notes payable and
higher cash balances (see Liquidity and Capital Resources).
Net earnings increased by $345,000 or 32.2% from $1,071,000 in the first
six months of fiscal 1997 to $1,416,000 for the first half of fiscal 1998.
Net earnings increased by 168,000 or 27% in the quarter ended December 31,
1997 as compared to the prior years.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's cash and cash equivalent position as December 31, 1997 was
$3,314,000 an increase of $1,379,000 from $1,935,000 at June 30, 1997. At
December 31, 1997 the current ratio was 1.1 to 1. In addition to $1,416,000
in cash provided by operations, the current working capital position was
improved by an August 1997 private placement providing approximately
$2,100,000, 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 registered the shares sold and warrants issued in the private
placement with the Securities and Exchange Commission.
During the first half of fiscal 1998, the Company paid down $325,000 in
principle on its promissory notes held by private investors. The $854,000
December 31, 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%.
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 December 31, 1997 was $4,046,000
which is due on a quarterly basis 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 required additional sources of
liquidity to fund the payment of this promissory note along with other
financing needs including potential acquisitions.
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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 17, 1997 By: /s/
------------------- ---
(Date) Les N. Dace, President CEO
February 17, 1997 By: /s/
------------------- ---
(Date) George J. Barry, CFO
9
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MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
EXHIBIT 11
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
Three months Three months ended Six months ended Six months ended
ended December 31, December 31, December 31,
December 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
------------------- ----------------- ----------------- ----------
Net Income $ 793,000 $ 625,000 $ 1,416,000 $1,071,000
------------------- ----------------- ----------------- ----------
Weighted Average Share
Outstanding 5,502,809 4,942,000 5,365,746 4,938,000
Effect of Dilutive
Securities: Common
Stock Equivalents
(Options & Warrants) 1,214,074 931,000 1,144,892 920,000
Average shares
Outstanding assuming
dilution 6,716,883 5,873,000 6,510,638 5,858,000
------------------- ----------------- ----------------- ----------
Basic earnings per share
$ 0.14 $ 0.13 $ 0.26 $ 0.22
Diluted earnings per
share $ 0.12 $ 0.11 $ 0.22 $ 0.18
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<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 3314
<SECURITIES> 0
<RECEIVABLES> 7836
<ALLOWANCES> 333
<INVENTORY> 228
<CURRENT-ASSETS> 11,495
<PP&E> 2,663
<DEPRECIATION> 1,731
<TOTAL-ASSETS> 20,815
<CURRENT-LIABILITIES> 10,637
<BONDS> 0
0
0
<COMMON> 552
<OTHER-SE> 9,606
<TOTAL-LIABILITY-AND-EQUITY> 20,815
<SALES> 9,751
<TOTAL-REVENUES> 9,751
<CGS> 2,509
<TOTAL-COSTS> 8,080
<OTHER-EXPENSES> 389
<LOSS-PROVISION> 38
<INTEREST-EXPENSE> 274
<INCOME-PRETAX> 1,502
<INCOME-TAX> 86
<INCOME-CONTINUING> 1,416
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,416
<EPS-PRIMARY> 0
<EPS-DILUTED> .22
</TABLE>
