SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
FOR QUARTER ENDED MARCH 31, 1999
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 March 31, 1999, there were 6,096,000 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
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ITEM 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1999
(unaudited) and June 30, 1998 (audited) 2
Consolidated Statements of Operations
for the three months and nine months ended
March 31, 1999 & 1998 (unaudited) 3
Consolidated Statements of Cash Flows
for the nine months ended
March 31, 1999 & 1998 (unaudited) 4
Notes to Financial Statements 5
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Year 2000 Compliance 9
Signature Page 14
Exhibit 11
Schedule of Computation of Net Income per Share 15
Exhibit 27
Financial Data Schedule 16
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MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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ASSETS Mar-31 Jun-30
-------- 1999 1998
(unaudited)
------------ -----------
Current assets:
Cash and cash equivalents $ 3,658,000 $ 4,681,000
Accounts receivable, less allowance for doubtful accounts
of $472,000 at March 31, 1999 and $490,000 at June 30, 1998 8,863,000 7,485,000
Inventories 453,000 331,000
Deferred Tax Asset 550,000 550,000
Prepaid expenses and other current assets 712,000 514,000
------------ ------------
Total current assets 14,236,000 13,561,000
Fixed assets, at cost, less accumulated depreciation of $2,431,000
at March 31, 1999 and $2,058,000 at June 30, 1998 1,819,000 1,170,000
Capitalized software costs 3,262,000 2,444,000
Excess of cost over fair value of net assets acquired, net of
accumulated amortization of $1,384,000 at March 31, 1999
and $1,091,000 at June 30, 1998 6,458,000 5,853,000
Purchased technology less accumulated amortization of $35,000 at
March 31, 1999 463,000
Other assets 237,000 719,000
------------ ------------
$26,475,000 $23,747,000
============ ============
LIABILITIES
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Current liabilities:
Accounts payable $ 1,344,000 $ 1,176,000
Notes payable 854,000 4,600,000
Accrued expenses and other current liabilities 2,926,000 2,618,000
Advances from customers 5,916,000 3,132,000
Current portion of capital leases payable 11,000 9,000
------------ ------------
Total current liabilities 11,051,000 11,535,000
Advances from customers - long term 10,000 7,000
Other liabilities - long term 106,000
Capital leases payable, less current portion 10,000 15,000
------------ ------------
Total liabilities 11,177,000 11,557,000
------------ ------------
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; 6,096,000 shares at March 31, 1999
and 5,591,000 shares at June 30, 1998 610,000 559,000
Unearned compensation (21,000) (51,000)
Cumulative foreign currency translation adjustment 20,000 36,000
Additional paid-in capital 21,164,000 16,264,000
(Deficit) (6,475,000) (4,618,000)
------------ ------------
Total stockholders' equity 15,298,000 12,190,000
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$26,475,000 $23,747,000
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MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31, Nine Months Ended March 31,
----------------------------- ---------------------------
(unaudited) (unaudited)
1999 1998 1999 1998
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REVENUES:
System sales $ 3,284,000 $1,985,000 $ 9,246,000 $ 5,046,000
Services 4,015,000 3,197,000 11,117,000 9,503,000
--------------- ----------- ------------- ------------
Total revenues 7,299,000 5,182,000 20,363,000 14,549,000
--------------- ----------- ------------- ------------
COSTS AND EXPENSES:
Cost of systems 1,080,000 670,000 2,897,000 1,701,000
Cost of services 1,031,000 828,000 3,023,000 2,306,000
Purchased research and development 4,553,000
Software development costs 859,000 716,000 2,380,000 1,898,000
Selling, general and administrative 3,174,000 2,188,000 8,837,000 6,193,000
--------------- ----------- ------------- ------------
Total Costs & Expenses 6,144,000 4,402,000 21,690,000 12,098,000
Earnings (Loss) before interest and taxes 1,155,000 780,000 (1,327,000) 2,451,000
Interest and other income 20,000 56,000 90,000 161,000
Interest (expense) (37,000) (152,000) (143,000) (426,000)
--------------- ----------- ------------- ------------
Earnings (Loss) before taxes 1,138,000 684,000 (1,380,000) 2,186,000
Provision for income taxes 172,000 35,000 477,000 121,000
--------------- ----------- ------------- ------------
NET EARNINGS (LOSS) $ 966,000 $ 649,000 ($1,857,000) $ 2,065,000
=============== =========== ============= ============
Basic earnings (loss) per share $ .16 $ .12 ($.31) $ .38
Diluted earnings (loss) per share $ .14 $ .10 ($.31) $ .31
Weighted average shares outstanding 6,066,000 5,523,000 5,914,000 5,417,000
=============== =========== ============= ============
Average shares outstanding assuming
Dilution 7,095,000 6,708,000 5,914,000 6,565,000
=============== =========== ============= ============
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MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
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March 31 March 31
1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings ($1,857,000) $ 2,065,000
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities: (excluding
Informedics acquisition)
Purchased research and development 4,553,000
Shares issued to directors 50,000
Compensatory stock options issued to consultants 30,000 30,000
Provision for doubtful accounts 15,000 128,000
Depreciation and amortization 1,339,000 1,088,000
Changes in operating assets and liabilities
Accounts receivable (1,067,000) (1,529,000)
Inventory (107,000) (136,000)
Prepaid and other assets (431,000) (801,000)
Accounts payable, accrued expenses and
customer advances 1,769,000 1,837,000
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Net cash provided by operating activities 4,294,000 2,682,000
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of fixed assets (969,000) (639,000)
Cash received from acquisition of Informedics 653,000
Capitalized software costs (1,437,000) (957,000)
-------------- ------------
Net cash (used in) investing activities (1,753,000) (1,596,000)
-------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of options and warrants 201,000 47,000
Proceeds of private placement 2,201,000
Repayment of debt (3,749,000) (1,199,000)
Net cash (used in) provided by financing -------------- ------------
Activities (3,548,000) 1,049,000
-------------- ------------
Effect of exchange rate changes on cash (16,000) (9,000)
NET INCREASE/ (DECREASE) IN CASH AND (1,023,000) 2,126,000
CASH EQUIVALENTS
Cash and cash equivalents, beginning of period 4,681,000 1,935,000
-------------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,658,000 $ 4,061,000
============== ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 106,000 $ 365,000
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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 ("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, 1998 included in the Company's annual
report filed on Form 10-KSB.
The results of operations for the three and nine months ended March 31,
1999 are not necessarily indicative of the results to be expected for the
entire fiscal year.
2. EARNINGS (LOSS) PER SHARE:
-----------------------------
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. In fiscal 1998 and for the three months ended
March 31, 1999, 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 nine months ended March 31, 1999, common
stock equivalents are not included in the calculation of loss per share as the
effect would be anti-dilutive.
3. ACQUISITION:
------------
In September 1998, the Company acquired Informedics, Inc.
("Informedics") in exchange for 439,525 shares of the Company's common stock
on the basis of 1 Company share for each 6.3 Informedics shares. Informedics
is developing a Web-enabled software system technology and also develops,
markets and supports a line of stand-alone computer-based management
information systems for use in the blood bank and clinical departments of
hospitals. The cost of the acquisition, which was accounted for as a
purchase, aggregated $7,100,000, including acquisition costs of $801,000,
assumed liabilities of $1,599,000 and $4,700,000 of common stock issued and
options assumed (based on the market price of the Company's common stock in
December 1997, when the acquisition agreement was entered into). Assets
acquired aggregated $2,547,000 including $917,000 of goodwill, $498,000 of
technology and $653,000 of cash.
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The following unaudited pro forma financial information gives effect to the
merger as if it had occurred at the beginning of fiscal years 1998 and 1999.
A one-time acquisition related charge of $4,553,000 for in-process research
and development which was recorded by the Company on consummation of the
acquisition and the fiscal 1998 reversal of net tax assets on Informedics
financial statements has not been considered in the pro forma results. The
pro forma financial information does not necessarily reflect the results of
operations that would have occurred had the acquisition taken place during
such periods.
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Nine Months Ended March 31,
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1999 1998
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Revenue: $ 20,982,000 $16,814,000
============ ===========
Net earnings $ 2,667,000 $ 2,287,000
============ ===========
Basic earnings per share .44 .39
Diluted earnings per share .38 .33
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4. RECENT ACCOUNTING PRONOUNCEMENTS:
---------------------------------
In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position 97-2, "Software Revenue Recognition" (SOP 97-2).
SOP 97-2 is effective for transactions entered into in fiscal years beginning
after December 15, 1997. Retroactive application of the provisions of SOP
97-2 is prohibited.
Accordingly the Company has adopted SOP 97-2 in its financial statements
in the fiscal year ended June 1999. Such adoption had no effect on the
Company's results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
FORWARD-LOOKING STATEMENTS:
Certain statements made in or incorporating this 10-QSB are
forward-looking statements, such as descriptions of Mediware's intentions to
market new products, extend existing products, acquire or develop new
products, and utilize new channels of distribution. 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 include: (i) Mediware's past operating results, (ii) the wide
variability of Mediware's operating results, (iii) the market's acceptance of
the Company's WORx product, (iv) the intense competition in the hospital
computer software industry (v) the rapid and significant technological
advances in the computer software industry, which renders the obsolescence of
computer programs, including the Company's within a short time, (vi) the
effect of governmental regulation on the Company, (vii) the Company's
dependence upon its key employees, (viii) the Company's ability to manage its
rapid growth and (ix) the risks associated with the Company's international
operations. Amplification of such risks may be found in the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
section herein and in the "Risk Factors" section of Mediware's Prospectus
contained in the Registration Statement on Form S-4, File No. 333-57693,
especially those under the headings "Need for Additional Financing",
"Variability of Operating Results", "Market Acceptance of new WORx Product",
"Competition", "Technological Obsolescence; Continual Need for Successful
Marketing and Acceptance of New Products", "Product Protection", "Dependence
Upon Key Employees", "Management of Growth", "Risks Associated with
International Operations", and "Government Regulation". Mediware does not
intend to update publicly any forward-looking statements.
RESULTS OF OPERATIONS:
During the first quarter the Company acquired Informedics, Inc.
("Informedics"). Informedics develops, markets and supports a line of
stand-alone computer-based management information systems for use in the blood
bank and clinical departments of hospitals. Additionally, Informedics has
been developing a Web-enabled software system technology called IntraMed.net.
This internet/intranet oriented software is intended to provide the ability to
extract data from installed legacy computer systems and then store, download
or manipulate the data. While no assurances can be made, the Company believes
that Informedics' Web-enabling technology, when implemented and sold to future
and existing customers, will expand the reach of the three clinical
departments (Blood Bank, Pharmacy and Surgical Suite) Mediware currently
addresses. The acquisition was completed in September 1998, and was accounted
for as a purchase. The Company's operating results include Informedics from
the date of acquisition, which consisted of revenues of $1,449,000 and
operating expenses of $1,380,000.
Total Company revenues increased by 40.9% or $2,117,000 and 40.0% or
$5,814,000 for the three and nine months ended March 31, 1999 respectively as
compared to the same periods in fiscal 1998. This increase was reflected in
all product lines, but was significantly related to revenue gains in the
Company's Pharmacy Division and the effects of the Informedics acquisition.
System sales increased by 65.4% or $1,299,000 and 83.2% or $4,200,000 for
the three and nine months ended March 31, 1999 respectively as compared to the
same periods in fiscal 1998. For both periods, the increase is primarily due
to increased system sales in the Company's Pharmacy and Blood Bank Divisions.
Service revenues increased by 25.6% or $818,000 and 17.0% or $1,614,000
for the three and nine months ended March 31, 1999 respectively as compared to
the same periods in fiscal 1998. The increase is due to the increased service
revenues in the Company's Pharmacy division and the acquisition of
Informedics. The March quarter represented the second full quarter of the
acquisition's contribution to the Company's' Blood Bank Division.
Cost of systems includes the cost of computer hardware and sublicensed
software purchased from computer and software manufacturers by Mediware as
part of its complete system offering. These costs can vary as the mix of
revenue varies between high margin proprietary software and lower margin
computer hardware and sublicensed software components. Cost of systems were
32.9% of related system sales in the third quarter of fiscal 1999 as compared
to 33.8% of related system sales for the same period in fiscal 1998. For the
first nine months of the current fiscal year, cost of systems were 31.3% of
related system sales in comparison to 33.7% for the same time period in the
previous fiscal year. Cost of systems increased by 61.2% or $410,000 from
$670,000 in the third quarter of fiscal 1998 to $1,080,000 in the same period
in fiscal 1999. For the first nine months, cost of systems increased by 70.3%
or $1,196,000 from $1,701,000 in fiscal 1998 to $2,897,000 in fiscal 1999.
This increase in cost is principally due to the sharp increase in system
sales.
Cost of services includes the salaries of client service personnel and
communications expenses along with the direct expenses. Technical employees
can perform both client services and software development depending on
customer requirements. Thus the costs associated with these technical
employees and the resulting costs of service which are booked will vary from
period to period with customers needs. Cost of services increased by $203,000
from $828,000 in the third quarter of the previous fiscal year to $1,031,000
and by $717,000 from $2,306,000 for the first nine months of fiscal 1998 to
$3,023,000 in the current fiscal year. Cost of services were 25.7% of
related revenue for the three months ended March 31, 1999 vs. 25.9% of related
revenue for the same period a year earlier. Year-to-date, cost of services
were 27.2% of related revenue vs. 24.3% for the same period in fiscal 1998.
This increase in cost primarily reflects an increase in technical field
installation and customer support activities related to the Company's Pharmacy
division.
Software development costs include salaries, consulting, documentation,
office and other expenses incurred in product development along with
amortization of software development cost. In the first quarter, the Company
recorded a one-time acquisition related charge of $4,553,000 for in-process
research and development by Informedics, Inc. and relating to the estimated
fair value of the IntraMed.net technology. Software development costs
increased $143,000 or 20.0% from $716,000 in the third quarter of fiscal 1998
to $859,000 in the same period in fiscal 1999 and $482,000 or 25.4% from
$1,898,000 to $2,380,000 for the first nine months of each fiscal period.
Expenditures (amounts including both capitalized and non-capitalized
expenditures and excluding capitalized software amortization) for software
development for the three months ended March 1999 were approximately
$1,154,000 as compared to $985,000 for same time period ended March 1998. On
a fiscal year to date basis, expenditures for software development were
$3,197,000 for the first nine months of fiscal 1999 as compared to $2,461,000
for the same time period in fiscal 1998. Spending on development has
increased among all company divisions but is principally focused on the
Company's Pharmacy Division's WORx product line. The Company expects to
increase this level of development spending as it expands its development
efforts to the Blood Bank and Operating Room divisions and integrates the
Web-based communications technology.
Selling, general and administrative expenses include marketing and sales
salaries, commissions, travel and advertising expenses. Also included is bad
debt expense; legal, accounting and professional fees; salaries and bonus
expense for corporate, divisional, financial and administrative staff;
utilities, rent, communication and other office expenses; and other related
direct administrative expenses. Selling, general and administrative expenses
increased by $986,000 or 45.1% from $2,188,000 in the third quarter of fiscal
1998 to $3,174,000 in the same period in fiscal 1999 and increased by
$2,644,000 or 42.7% from $6,193,000 to $8,837,000 in the first nine months of
fiscal 1999. This increase in cost is due to higher communications, travel,
administrative, marketing, legal and professional costs. This increase
reflects the cost of managing and growing the Company. Additionally, the
increase reflects the higher commission costs related to increased sales
volume.
Net interest expense decreased $115,000 or 75.7% in the third quarter of
fiscal 1999 vs. the same period a year ago and decreased $283,000 or 66.4% in
the first nine months of fiscal 1999 vs. the same period a year ago. During
the second quarter of fiscal 1999, the Company paid off the outstanding
balance remaining from the acquisition of the Pharmakon and JAC divisions of
Continental Healthcare Systems, Inc. The total principal and interest paid in
the first nine months of fiscal year 1999 was $3,850,000 compared to
$1,199,000 in the previous year.
Net earnings for the quarter increased $317,000 or 49.8% from $649,000 to
$966,000 in the third quarter of fiscal 1999. On a year-to-date basis, net
earnings continue to be directly affected by the $4,553,000 one-time
acquisition related charge taken in the first quarter for in-process research
and development resulting in a net loss of $1,857,000. Excluding this one
time charge, net earnings for the first nine months ended March 31, 1999
increased by 30.6% or $631,000 from $2,065,000 for the first nine months of
fiscal 1998 to $2,696,000 for the same period in fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's cash and cash equivalent position at March 31, 1999 was
$3,658,000, a decrease of $1,023,000 from June 30, 1998. At March 31, 1999
the current ratio was 1.3:1. On November 30, 1998 the Company paid
approximately $3,600,000 owed to Continental Healthcare Systems, Inc.
("Continental") related to the acquisition of the Pharmakon and JAC divisions
of Continental. The balance in notes payable at the end of March 31, 1999 was
owed to two directors and another person. The Company is currently operating
with existing cash balances and will review other financing needs and general
cash requirements on an on-going basis.
YEAR 2000 COMPLIANCE - AS OF MAY 13, 1999
IN GENERAL - The following statements are a "Year 2000 Readiness
Disclosure" within the meaning of the Year 2000 Information and Readiness
Disclosure Act.
Mediware Information Systems, Inc. develops, manufactures, sells and
provides support for management information systems that are used by
hospitals. The Company sells software products in three distinct areas -
pharmacy, blood bank, and operating room. The Company's pharmacy and blood
bank divisions each offer multiple products.
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs or products that have date sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure, loss of data, or miscalculations causing
disruption of operations. The General Manager of each division of the company
has conducted a Year 2000 review of their operations focusing on the company's
products and their use by its clients, the computers, operating systems and
data bases used in conjunction with its products and the company's internal
operations.
The Company is performing Year 2000 date-protocol tests and providing
remedial action, as needed, for all of its products, and is conducting tests
on its internal information technology ("IT") systems and non-information
technology ("Non-IT") systems that contain embedded microchips. The Company
is also investigating the Year 2000 preparedness of third parties with whom it
has material relationships, such as suppliers of hardware, database software,
operating systems, network operating systems and utility programs who provide
components on which the Company's software products are operated. This review
includes the submission of questionnaires on Year 2000 preparedness to such
third parties, whose failure to be Year 2000 compliant could negatively effect
the operation of the Company's products and accordingly have a material
adverse effect on the Company.
All of the Company's clients using older versions of its software products
have been notified by "U.S. Mail" (of which several recent mailings were sent
"certified") that they are entitled to upgrade to Year 2000 compatible
versions with no charge for the compatible version software. However, some
clients have elected not to do so for a variety of reasons. The company is
working with clients who wish to upgrade to address Year 2000 issues. These
clients either have been upgraded to compatible versions or are scheduled to
be upgraded to compatible versions of the company's software by the end of the
calendar year. The company is assisting those clients to upgrade using
electronic access from the company's facilities and/or on-site assistance
where appropriate and based on specific arrangements that have been made with
the customer. If the client desires on-site assistance, the company is
assessing its normal charges. These services are being conducted in the
ordinary course of the company's business by its employees, and the costs to
the company are not expected to be material. However, clients have been
notified that they are responsible for ensuring that their hardware, operating
systems, computer BIOS, and networking software are Year 2000 compatible, and
will be compatible with the upgraded software versions provided by the
company, and must cooperate with the company in scheduling installation of the
software upgrades. The failure to successfully meet any or all of these
conditions could result in effected customers being unable to operate their
software systems, the result of which could have a material adverse effect on
the Company's business, financial condition and results of operations.
The incremental costs to the Company in achieving Year 2000 compatibility
cannot be accurately predicted and will depend upon the timely completion of
tasks by both the Company and its customers. Total costs can be substantially
affected by a number of factors, including the availability and cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes, and the extent of the cooperation provided by customers and
other relevant parties. However, the costs incurred to make the Company's
current versions compatible have occurred in the ordinary course of software
development and enhancement and are not expected to be material.
Suppliers of the computers, operating systems and data bases necessary to
operate the current versions of the Company's software products have indicated
to the Company that those products are either currently Year 2000 compatible
or will be by the end of 1999. The Company has conducted tests of such
computers, operating systems and data bases with the Company's products now
being marketed and currently has no reason to believe that the Company's
products are not Year 2000 compatible when operated with such computers,
operating systems and data bases.
Assessment of Year 2000 Issues Effecting the Company's Products. The
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problems of date-protocol compatibility in the Year 2000 are somewhat
different for each of the Company's software information system products. The
following is an analysis of the Year 2000 status of products offered by each
of the Company's divisions.
Pharmacy Division
- ------------------
WORx: WORx has been designed by the Company to meet conditions for Year
2000 readiness from its inception. As a client/server application, several
layers of software manipulate data. This data is stored within an Informix
relational database, which supports dates beyond December 31, 1999. The WORx
client (end-user workstation) runs under Microsoft Windows, uses the Windows
date formats, and will support dates beyond December 31, 1999. The Company's
Pharmacy Division has successfully completed the internal Alpha and external
Beta testing of its WORx software using the most current release, Version 1.3,
for all of its testing scenarios. WORx has been found to be Year 2000
compatible, and all customers have received this most current release.
Certain of the WORx customers have not yet installed version 1.3, and are
running WORx Version 1.1. Although the company has not conducted Y2K
certification testing on Version 1.1, the company has a high degree of
certainty that Version 1.1 operates in the same manner as Version 1.3 with
respect to processing of dates beyond December 31, 1999.
<PAGE>
DIGIMEDICS XA INPATIENT: The Company's Pharmacy Division has successfully
completed the internal alpha and external Beta testing Version 3.0 of its
Digimedics XA Inpatient pharmacy system and is currently making this Year 2000
compatible version available to customers wishing to upgrade their systems.
DIGIMEDICS XA OUTPATIENT: The Company's Pharmacy Division is finalizing
both internal Alpha and external Beta testing Version 3.0 of its Digimedics XA
Outpatient pharmacy system and expects to make this Year 2000 compatible
software available to its customers by the end of May 31, 1999.
PHARMAKON "MINI" (UNIX BASED): The Company's Pharmacy Division has
successfully completed the internal alpha and external Beta testing of version
3.5 of its "Unix based" pharmacy system, known as Mini, and is currently
making this Year 2000 compatible version available to customers wishing to
upgrade their systems.
PHARMAKON "MAINFRAME": The Company's Pharmacy division has successfully
completed the internal Alpha and external Beta testing of Version 5.0 of its
"Mainframe based" pharmacy system, which was determined to be Year 2000
compatible. Version 5.0 of the Mainframe product is currently being made
available to those customers wishing to upgrade their systems.
The new versions of Digimedics XA, Pharmakon "Mini", and Pharmakon
"Mainframe" discussed above incorporate upgrades of the Company's application
software systems necessary for Year 2000 compatibility. These releases will
be distributed to customers under the Company's normal software support
contract procedures without cost. However, depending upon the configuration
of their current information systems, some customers may incur other costs
associated with the acquisition of new hardware, third party data bases and/or
operating systems that are needed in order for the Company's upgrade to be
installed. Furthermore, the computer and operating system platforms of a
number of hospitals will not accommodate the Year 2000 compatible software
revisions distributed by the Company, and these hospitals must acquire and
bear the cost of new computer hardware and associated operating systems and
third party data bases if they desire to install the Company's software
upgrades.
JAC
- ---
The Company's United Kingdom subsidiary, JAC, sells and distributes
information systems for hospital pharmacies in the United Kingdom. In early
1998, JAC commenced notifying its clients of the appropriate steps they must
take to ensure their entire computer system meets all aspects of the National
Health Service ("NHS") directive for Year 2000 compatibility. The NHS
directive required each Trust (hospital) to have either upgraded their
operating systems to be Year 2000 compatible, have a plan to upgrade, or have
contingency plans ready by December 31, 1998. Although the JAC stock control
pharmacy system has been internally and externally certified as being Year
2000 compatible, JAC is aware that some of its clients may have to upgrade
certain components of their computer hardware and associated operating systems
and pharmacy data bases to ensure full compatibility. In this respect, JAC
has commenced notifying all of its clients of this issue in writing, by
telephone, and through articles in its newsletter, and has raised the issue at
its National and Local User Group meetings.
Operating Room Division
- -------------------------
The Operating Room Division has successfully completed testing of the
Surgiware product and has determined that it is Year 2000 compatible. A new
Year 2000 compatible revision, release 5.2, is now being offered to hospitals
as part of the normal support procedures of the Company. However, the
computer platforms of a number of hospitals will not accommodate the updates
necessary to become Year 2000 ready, and these hospitals must bear the cost of
new computer hardware and associated operating systems and operating room data
bases.
Blood Bank Division
- ---------------------
HEMOCARE: The Company's Blood Bank Division has successfully completed
testing of Version 5.2.1 of its "Unix based" Hemocare blood bank system, which
was determined to be Year 2000 compatible. Version 5.2.1 of the Hemocare
product will be made available to the Company's installed client base by May
31, 1999 as part of the Company's normal software support procedures.
INFORMEDICS LIFELINE: The Company's Blood Bank Division has successfully
completed testing of Version 4.3 of its Lifeline blood bank system, which was
determined to be Year 2000 compatible. Version 4.3 of the Lifeline product is
currently being made available to the Company's installed client base as part
of the Company's normal software support procedures
INFORMEDICS STARPATH: The Company's Blood Bank Division has completed its
own internal testing of Version 6.4C of its StarPath pathology product, and
will finalize external Beta testing by the end of May, 99. Assuming Beta
testing is successful, this product will be made available to all StarPath
customers starting June 1999, as part of the company's normal software support
procedures.
The new versions of Hemocare, Informedics Lifeline and Informedics
StarPath discussed above incorporate upgrades of the Company's application
software systems necessary for Year 2000 compatibility. These releases will
be distributed to customers under the Company's normal software support
contract procedures without cost. However, depending upon the configuration
of their current information systems, some customers may incur other costs
associated with the acquisition of new hardware, third party data bases and/or
operating systems that are needed in order for the Company's upgrade to be
installed. Furthermore, the computer and operating system platforms of a
number of hospitals will not accommodate the Year 2000 compatible software
revisions distributed by the Company, and these hospitals must acquire and
bear the cost of new computer hardware and associated operating systems and
pharmacy data bases if they desire to install the Company's software upgrades.
Interfaces to Other Applications
- -----------------------------------
The Company's software products interchange data with many third party
systems through interfaces that may be unique to the client or the third party
system. Such interfaces or data interchanged may contain inaccuracies or such
data may not be in a format that allows the company's system to correctly
identify the data. There can be no assurance that the company will not be
subject to claims that result from the failure of such third party systems or
their related interfaces to be year 2000 compliant. These claims, even if not
meritorious, could be expensive to defend. Although the Company believes its
Year 2000 review and the actions it has taken and plans to take in response to
the review are appropriate, there can be no assurance that the review
identified all possible issues or that all identified issues will be
satisfactorily resolved. A material failure of the Company's internal system
to be Year 2000 compliant, a material failure in suppliers of the computers,
operating systems and databases used in conjunction with the company's
products to be Year 2000 compliant or a material delay in client projects
related to Year 2000 issues could have a material adverse effect on the
company's business, results of operations or financial condition.
Internal Assessment of Year 2000 Readiness
- -----------------------------------------------
The Company has assigned a project team to examine relationships with all
of its vendors, including suppliers of both IT and Non-IT Systems regarding
Year 2000 readiness. All vendors that supply the Company with information or
critical services, process information for the Company, or provide internal IT
or Non-IT Systems using a microprocessor will be queried as to their Year 2000
readiness and the Year 2000 compliance status of products they have provided
to the Company.
The Company has completed its initial assessment of such areas and has
found no material Year 2000 problems with respect to its IT and Non-IT Systems.
However, the Company intends to make a second and final inspection of these
systems by the end of September 1999.
<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 19, 1999 By:
- --------------------- --------------------------
(Date) John Esposito
President and CEO
May 19, 1999 By:
- --------------------- --------------------------
(Date) Charles A. Merola
Chief Financial Officer
<PAGE>
<TABLE>
<CAPTION>
MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
EXHIBIT 11
SCHEDULE OF COMPUTATION OF NET INCOME (LOSS) PER SHARE
Three months Three months Nine months Nine months
Ended ended ended ended
March 31, March 31, March 31, March 31,
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
1999 1998 1999 1998
Net Income (Loss) $ 966,000 $ 649,000 ($1,857,000) $2,065,000
------------- ------------ ------------- ----------
Weighted Average Share
Outstanding 6,066,000 5,523,000 5,914,000 5,417,000
Effect of Dilutive
Securities: Common
Stock Equivalents
(Options & Warrants) 1,029,000 1,185,000 -- 1,148,000
------------- ------------ ------------- ----------
Average shares
outstanding assuming
dilution 7,095,000 6,708,000 5,914,000 6,565,000
------------- ------------ ------------- ----------
Basic earnings per share $ .16 $ .12 ($.31) $ .38
Diluted earnings per
share $ .14 $ .10 ($.31) $ .31
--------------- ------------ ------------- ----------
</TABLE>
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] JUN-30-1999
[PERIOD-END] MAR-31-1999
[CASH] 3658
[SECURITIES] 0
[RECEIVABLES] 9335
[ALLOWANCES] 472
[INVENTORY] 453
[CURRENT-ASSETS] 14236
[PP&E] 4250
[DEPRECIATION] 2431
[TOTAL-ASSETS] 26475
[CURRENT-LIABILITIES] 11051
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 610
[OTHER-SE] 21164
[TOTAL-LIABILITY-AND-EQUITY] 26475
[SALES] 20363
[TOTAL-REVENUES] 20363
[CGS] 5920
[TOTAL-COSTS] 21690
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 143
<LOSS-PRETAX> 1380
[INCOME-TAX] 477
<LOSS-CONTINUING> 1857
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
<NET-LOSS> 1857
[EPS-PRIMARY] .31
[EPS-DILUTED] .31
</TABLE>
