SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
AMENDMENT NO. 1 TO FORM 10-QSB ON FORM 10-QSB/A
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
-------
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.
<PAGE>
THE REGISTRANT HEREBY AMENDS PART 1 OF 10-QSB AND EXHIBIT 11.
<TABLE>
<CAPTION>
MEDIWARE INFORMATION SYSTEMS, INC.
INDEX
Part I. Financial Information Page
----
<S> <C> <C>
<C>
ITEM 1. Financial Statements
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)
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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31, 1997
(UNAUDITED)
ASSETS Dec-31 Jun-30
1997 1997
------------ ------------
<S> <C> <C>
<C> <C>
Current assets:
Cash and cash equivalents $ 3,314,000 $ 1,935,000
Accounts receivable, less estimated 7,503,000 6,357,000
doubtful accounts of $333,000 at
December 31, 1997 and $666,000 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 932,000 752,000
depreciation of $1,731,000 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 6,246,000 6,419,000
assets acquired, net of 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
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
December 31, December 31,
(unaudited)
1997 1996 1997 1996
------------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
REVENUES:
System sales $ 1,198,000 $1,583,000 $3,061,000 $3,401,000
Services
3,210,000 3,217,000 6,306,000 5,878,000
------------------ ----------- ----------- -----------
Total revenues
4,408,000 4,800,000 9,367,000 9,279,000
------------------ ----------- ----------- -----------
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
1,814,000 2,275,000 4,005,000 3,981,000
------------------ ----------- ----------- -----------
3,509,000 3,953,000 7,696,000 7,813,000
Earnings before interest and taxes
899,000 847,000 1,671,000 1,466,000
Interest income 60,000 19,000 105,000 46,000
Interest (expense) (118,000) (193,000) (274,000) (354,000)
------------------ ----------- ----------- -----------
Earnings before taxes 841,000 673,000 1,502,000 1,158,000
Provision for income taxes 48,000 21,000 86,000 40,000
NET EARNINGS $ 793,000 $ 652,000 $1,416,000 $1,118,000
$ 0.14 $ 0.13 $ 0.26 $ 0.23
Basic earnings (loss) per share
Diluted earnings (loss) per share $0.12 $ 0.11 $ 0.22 $ 0.19
Weighted average shares outstanding
5,502,809 4,942,000 5,365,746 4,938,000
================== =========== =========== ===========
Average shares outstanding assuming
dilution 6,716,883 5,873,000 6,510,638 5,858,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
Dec-31 Dec-31
1997 1996
------------------ ------------
(unaudited) (unaudited)
<S> <C> <C>
<C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,416,000 $ 1,118,000
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
(442,000) 278,000
Depreciation and amortization 555,000 520,000
Changes in operating assets and liabilities
Accounts receivable
(704,000) (2,290,000)
Inventory (172,000) 53,000
Prepaid and other assets (440,000) (76,000)
Accounts payable, accrued expenses and customer 878,000 814,000
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
================== ============
</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 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 ("SEC") 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, Amendment No. 1.
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 10 QSB.
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 REVENUE
-----------------------------
Subsequent to a June 1996 acquisition, the Company recorded maintenance
revenue on contracts with the acquired company's customers in a manner that
was consistent with the policies followed prior to the acquisition.
Subsequent to the acquisition, the Company's management discovered that the
prior owners had not consistently billed certain contractual software
maintenance revenues. Pending an evaluation of the collectibility of such
contracts, the company conservatively elected to continue to follow that
policy. For the quarter ended December 31, 1997 the Company obtained
satisfactory indications (i.e., it had established a sufficiently credible
reputation for service with the customers who had not previously been billed,
had developed new and additional products upon which these customers now
relied, and had specifically discussed collection schedules for the billings
with the customers) that such revenue was, in fact collectible, and
accordingly, it recognized in that quarter the cumulative effects of the
economic event. After discussions with the accounting staff of the SEC on
April 29, 1998, the Company has now elected to restate (1) the financial
statements of prior quarters to record the revenues and corresponding
provisions for doubtful accounts in the quarters in which the services were
provided and (2) the financial statements for the quarter ended December 31,
1997. Accordingly, the Company has decreased both revenues and selling,
general and administrative expenses, (the latter representing a reversal of
the allowance for doubtful accounts) from amounts previously reported by
$480,000 for the three months ended December 31, 1997 and by $384,000 for the
six months ended December 31, 1997. These adjustments had no effect on net
income previously reported for such periods. In addition, revenue and net
income were respectively increased by $128,000 and $27,000 for the three
months ended December 31, 1996 and by $248,000 and $47,000 for the six months
ended December 31, 1996 from amounts previously reported to reflect the above
and other adjustments described in Note O to the Company's amended form 10
KSB. Such adjustment increased basic and diluted earnings per share by $.01
from the per share amounts previously reported for the six month period ended
December 31, 1996.
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:
During the year ended June 30, 1997, because of billing errors that were
undetected by supervisors, the Company did not timely invoice certain service
revenues that it was legally entitled to bill. The error was detected by an
internal management analysis of sales, and confirmed a thorough review of
contract administration files. As a result, $181,935 of revenues that had not
been recorded in the fiscal quarters in which they had been earned, were
originally recorded in the 4th quarter. The company has restated the amounts
originally reported to reflect the revenue in each of the quarters of the year
ended June 30, 1997 (see Note O to the financial statements in the June 1997
Form 10-KSB/A). These adjustments had no impact on net earnings for the year
ended June 30, 1997. The Company has also taken appropriate action to assure
that it has not failed to record other billings and that it will not similarly
experience this problem in the future.
In addition, the Company, having acquired an entity in June 1996, discovered
that the prior owners had not billed certain contractual software maintenance
revenues to some of its customers. While the Company continued to provide the
contracted maintenance support to these customers, it chose not to bill such
revenues on a going forward basis until it had established that such billing
would be collectible. However, the Company actively began a program to support
its ability to bill and collect the revenue for those maintenance contracts,
and during the quarter ended December 31, 1997, it achieved satisfactory
indications (i.e., it had established a sufficiently credible reputation for
service with the customers, had developed new and additional products upon
which these customers now relied, and had specifically discussed and agreed
collection schedules for the billings with the customers) that revenue was now,
in fact, collectible. Accordingly, it recognized in that quarter the cumulative
effects of those events. It has now revised its prior quarterly information to
record the contract revenues (net of an appropriate reserve for
uncollectibility) into the fiscal quarters in which they should have been
earned, and by reversing the reserve in the quarter ended December 31, 1997,
has recognized the income effect of that event in that quarter (See Note N to
the financial statements in the June 1997 Form 10-KSB/A. These adjustments had
no impact on net earnings previously reported.
Total Company revenues increased slightly by 1.0% or $88,000 for the
first half of fiscal 1998 as compared to the first six months of fiscal 1997.
Company revenue for the three month period ending December 31, 1997 decreased
by 8.0% or $392,000 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 $428,000 or 7.3% from $5,878,000 in the
first half of fiscal 1997 to $6,306,000 in the first six months of fiscal
1998. This increase is principally due to the Company's Hemocare division.
Service revenues decreased slightly by $7,000 for the three-month period ended
December 31, 1997 as compared to the same period a year ago.
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 1998 and 1997 respectively. 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 $24,000 or 0.6%
from $3,981,000 to $4,005,000 in comparing the first halves of fiscal 1997 and
1998. For the three month period ended December 31, 1997 selling, general and
administrative expenses decreased $461,000 or 20.3% from the same period in
the prior year. The fiscal 1998 change for both compared periods reflects a
reversal of allowance for doubtful accounts of $480,000 for the three months
ended December 31, 1997 and $384,000 for the six months ended December 31,
1997 (see Note 3). 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 has 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 $298,000 or 27% from $1,118,000 in the first
six months of fiscal 1997 to $1,416,000 for the first half of fiscal 1998.
Net earnings increased by 141,000 or 22% 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 $1,111,000
in cash provided by operations, the current working capital position was
improved by an August 1997 private placement providing approximately
$2,138,000, 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.
<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)
May 20, 1997 By: George J. Barry /s/
------------------- -----------------------
(Date) George J. Barry, CFO
<TABLE>
<CAPTION>
MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
EXHIBIT 11
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
Three months Three months Six months Six months
ended ended 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 $ 652,000 $ 1,416,000 $1,118,000
------------- ------------- ------------- ----------
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 $ 0.23
Diluted earnings per
share $ 0.12 $ 0.11 $ 0.22 $ 0.19
</TABLE>
[ARTICLE] 5
<TABLE>
<S> <C>
[MULTIPLIER]1000
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] JUN-30-1998
[PERIOD-END] DEC-31-1997
[CASH] 3314
[SECURITIES] 0
[RECEIVABLES] 7503
[ALLOWANCES] 333
[INVENTORY] 228
[CURRENT-ASSETS] 11495
[PP&E] 2663
[DEPRECIATION] 1731
[TOTAL-ASSETS] 20815
[CURRENT-LIABILITIES] 10637
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 552
[OTHER-SE] 9606
[TOTAL-LIABILITY-AND-EQUITY] 20815
[SALES] 9367
[TOTAL-REVENUES] 9367
[CGS] 2509
[TOTAL-COSTS] 7696
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 274
[INCOME-PRETAX] 1502
[INCOME-TAX] 86
[INCOME-CONTINUING] 1416
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 0
[EPS-PRIMARY] .26
[EPS-DILUTED] .22
</TABLE>
