UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended MARCH 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _____________________ to _______________________
Commission file number: 0-22052
PROXYMED, INC.
--------------
(Exact name of registrant as specified in its charter)
FLORIDA 65-0202059
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2555 DAVIE ROAD, SUITE 110, FT. LAUDERDALE, FLORIDA 33317
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(954) 473-1001
(Registrant's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
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. [X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
COMMON STOCK, $.001 PAR VALUE
17,867,433 SHARES AS OF MAY 3, 1999
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS.
PROXYMED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1999 1998
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,963,293 $ 4,681,671
Accounts receivable - trade, net 5,902,146 6,383,996
Notes and other receivables 424,987 463,894
Inventory 2,998,942 2,970,210
Other current assets 370,750 254,979
------------ ------------
Total current assets 12,660,118 14,754,750
Property and equipment, net 4,382,449 4,335,944
Goodwill, net 14,957,230 15,539,821
Purchased technology, capitalized software
and other intangible assets, net 12,657,667 13,654,399
Other assets 542,774 551,660
------------ ------------
Total assets $ 45,200,238 $ 48,836,574
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 500,000 $ 498,453
Accounts payable and accrued expenses 5,844,201 6,244,631
Deferred revenue 704,625 447,178
------------ ------------
Total current liabilities 7,048,826 7,190,262
Long-term debt 683,167 667,193
Long-term deferred revenue 649,998 700,000
------------ ------------
Total liabilities 8,381,991 8,557,455
------------ ------------
Stockholders' equity:
Common stock - $.001 par value. Authorized
50,000,000 shares; issued and outstanding
17,833,206 and 17,808,172 shares, respectively 17,833 17,808
Additional paid-in capital 82,656,771 82,427,262
Accumulated deficit (45,596,557) (41,906,151)
Note receivable from stockholder (259,800) (259,800)
------------ ------------
Total stockholders' equity 36,818,247 40,279,119
------------ ------------
Total liabilities and stockholders' equity $ 45,200,238 $ 48,836,574
============ ============
</TABLE>
See accompanying notes.
2
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Revenues:
Services and license fees $ 5,121,541 $ 3,308,681
Computer systems, prescription drugs
and other tangible goods 6,245,769 1,539,235
------------ ------------
11,367,310 4,847,916
------------ ------------
Costs and expenses:
Cost of services and license fees 456,772 550,660
Cost of tangible goods 4,376,877 1,219,194
Selling, general and
administrative expenses 6,973,937 4,148,048
Depreciation and amortization 3,268,896 630,673
------------ ------------
15,076,482 6,548,575
------------ ------------
Operating loss (3,709,172) (1,700,659)
Interest, net 18,766 (11,958)
------------ ------------
Net loss $ (3,690,406) $ (1,712,617)
============ ============
Basic and diluted loss per share
of common stock $ (.21) $ (.14)
============ ============
Weighted average common shares outstanding 17,818,894 11,858,345
============ ============
</TABLE>
See accompanying notes.
3
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,690,406) $(1,712,617)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 3,268,896 630,673
Provision for doubtful accounts 73,091 43,875
Changes in assets and liabilities, net of
effect of acquisitions:
Accounts and other receivables 661,470 (653,290)
Inventory (28,732) 281,729
Accounts payable and accrued expenses (668,936) (1,102,516)
Deferred revenue 207,444 135,898
Other, net (121,735) 92,156
----------- -----------
Net cash used in operating activities (298,908) (2,284,092)
----------- -----------
Cash flows from investing activities:
Acquisition of business, net of cash acquired (1,000,000) --
Capital expenditures (313,923) (238,038)
Capitalized software (150,000) (100,000)
----------- -----------
Net cash used in investing activities (1,463,923) (338,038)
----------- -----------
Cash flows from financing activities:
Net proceeds from sale of common stock -- 3,250,000
Proceeds from exercise of stock options and warrants 52,252 230,790
Payment of note payable (7,799) --
----------- -----------
Net cash provided by financing activities 44,453 3,480,790
----------- -----------
Net increase (decrease) in cash (1,718,378) 858,660
Cash and cash equivalents at beginning of period 4,681,671 2,654,423
----------- -----------
Cash and cash equivalents at end of period $ 2,963,293 $ 3,513,083
=========== ===========
</TABLE>
See accompanying notes.
4
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION - The accompanying unaudited condensed
consolidated financial statements of ProxyMed, Inc. and subsidiaries
(the "Company") have been prepared in accordance with the instructions
to Form 10-Q and do not include all of the information and disclosures
required by generally accepted accounting principles. However, such
information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of results for the interim periods.
The results of operations for the three months ended March 31, 1999
are not necessarily indicative of the results to be expected for the
full year. Reference is made to the Company's annual report on Form
10-K for the year ended December 31, 1998. Certain prior period
amounts have been reclassified to conform with the current period
presentation.
(b) REVENUE RECOGNITION - EDI transaction fee revenue is recorded in the
period the service is rendered. Revenue from sales of software,
software licenses, computer hardware and manufactured goods is
recognized when persuasive evidence of an arrangement exists, delivery
has occurred, the price is fixed or determinable and collectibility is
probable. The same criteria is applied to each element of multiple
element arrangements after allocating the revenues to individual
elements based on vendor-specific objective evidence of fair value.
Revenue from hardware leases, software rentals and maintenance fees is
recognized ratably over the applicable period. Revenue from the
Company's prescription drug dispensing activities is reported at net
realizable amounts from insurance providers and patients at the time
the individual prescriptions are delivered to the patients.
(c) NET LOSS PER SHARE - Basic loss per share of common stock is computed
by dividing net loss by the weighted average shares of common stock
outstanding during the period. Diluted per share results reflect the
potential dilution from the exercise or conversion of securities into
common stock; however, stock options and warrants totaling 2,777,456
shares and 2,662,526 shares for the three months ended March 31, 1999
and 1998, respectively, were excluded from the calculation of diluted
per share results because their effect was antidilutive.
5
<PAGE>
(2) ACQUISITION OF BUSINESS - In January, 1999, the Company acquired the EDI
business and assets of Specialized Medical Management, Inc. ("SMMI") of
Dallas, Texas, a provider of healthcare financial EDI services primarily
in the Southwestern United States for $1,000,000 in cash. Additionally,
10,000 shares of common stock and warrants to purchase 20,000 shares of
the Company's common stock at $11.44 (together valued at $181,563) were
issued to an unrelated third-party as a finders fee for this transaction.
The acquisition was accounted for as a purchase and the excess of the
consideration paid over the estimated fair value of the net assets
acquired in the amount of $903,571 was recorded as goodwill and is being
amortized over 3 years. Pro forma operating results from inclusion of
this acquisition are not significantly different from historical results
reported.
(3) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Acquisition of business:
Common stock and warrants issued for business acquired $ 181,563 $ --
Other acquisition costs accrued 74,000 --
Details of acquisitions: --
Working capital components, other than cash (206,408) --
Property and equipment (38,546) --
Goodwill (903,571) --
Other intangible assets (107,038) --
----------- -----------
Net cash used in acquisitions $(1,000,000) $ --
=========== ===========
</TABLE>
6
<PAGE>
(4) SEGMENT INFORMATION - The Company operates in the following reportable
segments which are separately managed: healthcare EDI and communication
devices, network integration services, and prescription drug dispensing.
Intersegment sales are not material and there were no foreign sales for
any periods presented.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net revenues:
Healthcare EDI and
communication devices $ 7,525,059 $ 2,878,064
Network integration services 3,354,923 1,626,330
Prescription drug dispensing 487,328 343,522
------------ ------------
$ 11,367,310 $ 4,847,916
============ ============
Operating income (loss):
Healthcare EDI and
communication devices $ (2,483,858) $ (647,015)
Network integration services 135,540 (207,134)
Prescription drug dispensing (21,846) (11,516)
Corporate (1,339,008) (834,994)
------------ ------------
$ (3,709,172) $ (1,700,659)
============ ============
Total assets:
Healthcare EDI and
communication devices $ 35,677,262 $ 12,414,472
Network integration services 3,962,288 2,495,938
Prescription drug dispensing 1,063,082 961,721
Corporate 4,497,606 4,737,035
------------ ------------
$ 45,200,238 $ 20,609,166
============ ============
</TABLE>
(5) CONTINGENCIES - The Company is the defendant in a lawsuit filed April 28,
1999 in the United States District Court, Eastern District of Virginia
(Case No. CA2-99-CV-604-A) by Advanced Health Corporation, alleging
patent infringement. The suit alleges that its PreScribe 2000(TM) product
includes particular operating features covered by Advanced Health's
patents. The Company does not believe the product infringes these
patents, and it intends to vigorously oppose the lawsuit. Further, the
product in question is in development and has not been released. Thus, in
the event any infringement exists, the Company believes any damages
assessed are unlikely to be material. Also, the product may be redesigned
if necessary to reduce its potential for infringement.
7
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
ProxyMed is a healthcare information services company providing
financial and clinical EDI transaction processing services and healthcare
technology software products to physicians and other healthcare providers such
as nursing homes, pharmacies, commercial and hospital laboratories, insurance
companies and managed care organizations. In addition, we derive revenues from
network integration services and related computer hardware sales principally to
state government agencies, sales and leasing of computer peripheral equipment to
various healthcare and non-healthcare customers, contract manufacturing of
circuit boards to non-healthcare customers, and the dispensing of prescription
drugs to patients who are residing in long-term care facilities. Our products
and services are provided from our four principal operating facilities located
in Fort Lauderdale and Tallahassee, Florida; Santa Ana, California; and New
Albany, Indiana.
We operate in the following reportable segments which are separately
managed: healthcare EDI and communication devices, network integration services,
and prescription drug dispensing. Business combinations were consummated during
the periods presented and are included in the financial statements after their
respective dates of acquisition. Specialized Medical Management, Inc. ("SMMI")
was acquired by us in January 1999; Key Communications Service, Inc. ("Key")
merged with us in December 1998 (accounts of Key are included as of May 1,
1998); and Integrated Medical Systems ("IMS") was acquired in May 1998. These
entities are reportable under the healthcare EDI and communication devices
segment.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
NET REVENUES. Consolidated net revenues for the three months ended
March 31, 1999 increased by $6,519,394, or 134%, to $11,367,310 from
consolidated net revenue of $4,847,916 for the three months ended March 31,
1998. Of this increase, revenues from our healthcare EDI and communication
devices segment increased by $4,647,000 over the 1998 period due to the net
effect of: (i) revenue increases from our acquisitions of Key, SMMI and IMS,
which were all consummated subsequent to the 1998 period; less (ii) revenue in
the 1998 period from a sale of a non-exclusive source code software license for
ClinScan(TM), our laboratory ordering and results reporting software system.
Additionally, due to increases in sales volume, both our network integration
services segment revenues increased by approximately $1,728,000, and our drug
dispensing segment revenue increased by $144,000, over the 1998 period.
COST OF SALES AND GROSS PROFIT MARGIN. Cost of services and license
fees includes labor and travel costs, third-party support arrangements,
third-party EDI transaction processing costs and Internet related communication
fees. Cost of sales for our computer
8
<PAGE>
systems, prescription drugs and other tangible goods includes hardware,
third-party software, prescription and non-prescription drugs, manufactured
goods and direct labor and consumable materials used in contract manufacturing.
Consolidated gross profit margin for the three months ended March 31,
1999 was 57% compared to 63% for the three months ended March 31, 1998. This
decrease is primarily due to the favorable impact in the 1998 period from the
sale of our non-exclusive source code software license for ClinScan in our
healthcare EDI and communication devices segment. The gross margin for this
segment was 73% in the 1999 period compared to 84% in the 1998 period. The gross
profit margin in our network integration services segment was 27% in the 1999
period compared to 33% in the 1998 period; this decrease was primarily due to
lower margins on increased computer hardware sales. The gross profit margin in
our drug dispensing segment was 32% in the 1999 period and was comparable to 34%
in the 1998 period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Consolidated selling,
general and administrative expenses for the three months ended March 31, 1999
increased by $2,825,889, or 68%, to $6,973,937 from consolidated SG&A expenses
of $4,148,048 for the three months ended March 31, 1998. This increase was
primarily due to the following: (i) increases in our healthcare EDI and
communication devices segment SG&A expenses from our acquisitions of Key, SMMI
and IMS ($3,136,000), net of decreases of $807,000 from existing segment
operations in payroll, facility and telecommunication costs due to consolidation
of our operations; and (ii) an increase in our corporate SG&A expenses primarily
in payroll, marketing, and facility and telecommunication costs ($487,000) to
support our growth. SG&A expenses in our network integration and drug dispensing
segments remained at levels comparable to the prior period.
Consolidated SG&A expenses as a percentage of our consolidated net
sales decreased to 61% in the 1999 period, from 86% in the 1998 period, as we
established a higher revenue base principally through our acquisitions and
revenue growth.
DEPRECIATION AND AMORTIZATION. Consolidated depreciation and
amortization expense increased $2,638,223, or 418%, to $3,268,896 for the three
months ended March 31, 1999 from $630,673 for the three months ended March 31,
1998. This increase was due to the following factors: (i) amortization charges
for goodwill and other intangible assets associated with our recent acquisitions
($2,431,000); and (ii) depreciation and amortization charges associated with
capitalized software products, internal systems and fixed assets
($207,000).
INTEREST, NET. We earned net interest income for the three months ended
March 31, 1999 of $18,766, whereas we incurred net interest expense for the
three months ended March 31, 1998 of $11,958. The 1999 amount reflects greater
interest earned on invested funds due to higher average cash balances primarily
due to cash balances at Key and lower interest expense on the debt issued for
the acquisition of Clinical MicroSystems, Inc. ("CMS").
9
<PAGE>
NET LOSS. As a result of the foregoing, we recorded a net loss of
$3,690,406 for the three months ended March 31, 1999, as compared to a net loss
of $1,712,617 for the three months ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
In the three month period ended March 31, 1999, cash used in operating
activities totaled $298,908. This was primarily due to our net loss partially
offset by depreciation and amortization charges. In January 1999, we purchased
the healthcare EDI assets of SMMI for $1,000,000 in cash. Additionally, we spent
approximately $464,000 for fixed assets and capitalized software development
costs and paid $7,800 to retire a note payable acquired in the Key acquisition.
These activities were financed through available cash resources and proceeds
from the exercise of stock options and warrants. After these expenditures, we
had cash and cash equivalents totaling $2,963,293 as of March 31, 1999.
These available funds continue to be used for operations, the further
development and marketing of our products and services, equipment and other
general corporate purposes. As a result of the acquisitions of CMS, Hayes
Computer Systems, Inc. ("HCS") and PreScribe in 1997, we are obligated to make
certain payments in the next 12 months. These payments are as follows: $500,000
for CMS, $1,000,000 for HCS, and $500,000 for PreScribe. The CMS and HCS
payments may be made at least 50% in cash and the balance, if any, in common
stock. In April 1999, we paid off the CMS obligation by disbursing $250,000 in
cash and issuing 25,000 shares of common stock. In addition, we are continuously
evaluating acquisition opportunities and other strategic alternatives that add
synergies to our product offerings and business strategy.
We have a revolving bank line of credit of up to $5,000,000, subject to
availability of suitable collateral, which was renewed in August 1998.
Borrowings, if any, are due on demand, collateralized by certificates of deposit
and U.S. Treasury Notes, and bear interest at the prime rate less 3/4%. There
were no outstanding borrowings on this line of credit as of March 31, 1999.
We do not have any material commitments for capital expenditures.
The ratio of current assets to current liabilities was 1.8 times at
March 31, 1999 and 2.1 times at December 31, 1998. This decrease is primarily
due to our use of cash for operations, the acquisition of SMMI and capital
expenditures as described above. For the periods ended March 31, 1999 and 1998,
accounts receivable turnover for us was 6.7 times in the 1999 period and is
comparable to 6.6 times in the 1998 period. Our inventory turnover was 6.2 times
in the 1999 period compared to 5.6 times in the 1998 period and is attributable
to higher inventory turnover at Key.
We expect to continue to incur negative net cash flow from operations
until we begin receiving higher levels of revenues from our healthcare EDI and
communication devices segment and/or from cash generated by our network
integration services segment. Management is committed to the strategy of
investing funds in further marketing and
10
<PAGE>
development of our products and services and may pursue additional acquisitions
which are deemed to be in accordance with our business strategy, both of which
may require additional equity or debt financing. However, there can be no
assurances that such financing will be available under terms and conditions
acceptable to us.
FUTURE OUTLOOK
We continue to grow through strategic acquisitions and concentration on
our core healthcare EDI and communication devices segment, our strategic
relationships and other plans to increase the usage of our healthcare
information technology products and services to achieve requisite economies of
scale. We have successfully reduced our operating losses before non-cash
charges. Such non-cash charges are significant and result primarily from
amortization expenses related to our acquisitions. However, we anticipate that
we will continue to incur operating losses until we generate sufficient
recurring revenues from our products and services to cover the total of our cash
and non-cash expenses. There can be no assurance that we will realize an
adequate level of recurring revenues from the sale of our products and services,
or that revenues from its operations or those of our recently acquired
businesses and any future acquisitions will ultimately result in achievement of
profitability.
YEAR 2000 COMPLIANCE
GENERAL. Many currently installed computer systems and software
products are coded to accept only two digit dates. Such systems may not be able
to distinguish 20th century dates from 21st century dates. To address these and
any other Year 2000 operational issues which may affect us, in September 1998 we
appointed a Year 2000 Committee and hired a Year 2000 project manager to review
our internal computer systems and our products and services as well as review
the progress of our principal customers, vendors and resellers.
The Committee has developed a priority order list of our products and
services and has commenced the Year 2000 project plan in accordance with this
list. Our Year 2000 project plan consists of four phases: assessment,
remediation, validation and distribution.
The primary purpose of the assessment phase is to list and analyze the
inventory of our products sold and supported. The major issues encountered
during this phase are the identification of language the software is written in,
the source code and any third-party libraries in a product. The remediation
phase is where changes to the programs and codes are actually made. The
validation phase is where the remediated products are tested and then submitted
for independent verification and validation. The distribution phase,
specifically for proprietary products, is where the remediated products are
provided to our customers.
PRODUCTS AND SERVICES. With respect to our products and services, our
laboratory software applications have been distributed to our current customers;
our financial claims
11
<PAGE>
software applications are in various stages of remediation and distribution; and
our prescription software applications are in various stages of validation and
distribution. We expect that all of our software products and our clinical and
financial transaction processing networks will be Year 2000 ready by July 1999.
For Key's products and services, the assessment phase is substantially complete
and any remediation, validation and distribution will be completed by July 1999.
All new software application releases are being prepared in accordance with our
Year 2000 readiness standards.
Regarding our acquisition of SMMI, we have identified three potential
Year 2000 issues. First, all of SMMI's customers require a software upgrade. We
are in the process of replacing their software with our Year 2000-ready products
and expect that this will be completed by July 1999. Second, SMMI's financial
transactions network is being combined with our existing financial transactions
network, which is Year 2000 compliant, and we expect that this will be completed
by September 1999. Third, certain financial transaction services currently
provided to a certain payer will either be remediated or we will purchase a
replacement.
Concurrently, we have contacted all third party vendors whose
proprietary tools and library products are incorporated into our products in
order to determine their respective Year 2000 readiness status. Certain of those
third parties have required actions to be taken by us. Such actions have been
performed in accordance with instructions provided by the vendor. If for any
reason, certain of these vendors will not be Year 2000 Ready in accordance with
our needs, we will address these issues in our Contingency Plan.
Finally, we have contacted our customers to inform them of our Year
2000 readiness status. Updates to that information are posted on our website
when necessary. Our website address is www.proxymed.com.
INTERNAL SYSTEMS, VENDORS AND SUPPLIERS. We are continuing with the
assessment phase with respect to our internal administrative systems and have
completed the assessment phase for our vendors and suppliers. Both are in
various stages of remediation. We plan to complete the Year 2000 compliance for
these areas by the end of the third quarter of 1999. We have contacted all of
our significant clinical and financial transaction processing partners in order
to assess their Year 2000 readiness status. Again, if for any reason, certain of
these vendors will not be Year 2000 Ready in accordance with our needs, we will
address these issues in our Contingency Plan.
COSTS. Since the formation of the Year 2000 Committee in September
1998, we have spent $64,000 through April 30, 1999 primarily for personnel
costs. The total estimated budget for expenditures directly related to our Year
2000 effort is approximately $500,000. The budget includes staffing costs for
employees hired specifically to address Year 2000 issues; however, it does not
include the internal staff costs incurred or to be incurred as these costs are
considered part of the normal release structure of our products. The estimated
budget also includes hardware upgrade costs much of which would have been
incurred in our normal equipment replacement plans. As such, anticipated total
spending for the Year 2000 effort is not expected to have a significant impact
on our ongoing results of operations.
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<PAGE>
CONTINGENCY PLAN. While some "worst case scenarios" are associated with
risks outside our control (including power and communications), we have started
assessing those scenarios within our control. The Year 2000 Committee identified
the major areas of concern to be the handling of data formatting and
transmitting compliant data and our customers' usage of our software products.
To deal with some of these concerns, we have informed our financial network
users of the availability of an algorithm to allow those with non-compliant
formats to continue transmitting to payers in a Year 2000 compatible format.
During the second quarter of 1999, we will be formulating documented scenarios
for our customer service representatives to assist our hardware and software
users if they have Year 2000 related issues.
We expect that by the fourth quarter 1999 we will have a documented
business continuity plan to cover all aspects of our customer and internal
concerns, including our products and services, alternative vendors/suppliers,
backup power sources and staffing issues to assure coverage immediately before
and after the millennium. However, due to the general uncertainty inherent in
the Year 2000 issue, there can be no assurance that all Year 2000 problems will
be foreseen and corrected on a timely basis.
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This document contains "forward-looking statements" within the meaning
of the federal securities laws. These forward-looking statements include
assumptions, beliefs and opinions relating to our growth strategy based upon our
interpretation and analysis of healthcare industry trends and management's
ability to successfully develop, implement, market and sell our secure network
transaction processing services, software programs, clinical databases and
financial transaction services to physicians and other healthcare providers.
This strategy assumes that physicians will prefer "one-stop shopping" for our
products and services and that we will be able to successfully develop, acquire,
maintain and upgrade competitive clinical and financial transaction sets and
successfully integrate them with our existing products and services. This
strategy also assumes that we will be able to successfully develop and execute
our strategic relationships, especially with the providers of information
systems to physicians under our electronic partnership program and with medical
laboratories, pharmacy chains, independent pharmacy owners and pharmacy
information system vendors. Many known and unknown risks, uncertainties and
other factors, including general economic conditions, healthcare reform
initiatives, millennium compliance issues that may arise, and risk factors
detailed from time to time in our Securities and Exchange Commission filings,
may cause these forward-looking statements to be incorrect, and may cause actual
results to be materially different from any future results expressed or implied
by these assumptions, opinions and beliefs. We expressly disclaim any intent or
obligation to update any forward-looking statements.
13
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PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
ProxyMed is the defendant in a lawsuit filed April 28, 1999 in the
United States District Court, Eastern District of Virginia (Case No.
CA2-99-CV-604-A) by Advanced Health Corporation, alleging patent
infringement. The suit alleges that our PreScribe 2000(TM) product
includes particular operating features covered by Advanced Health's
patents. We do not believe the product infringes these patents, and we
intend to vigorously oppose the lawsuit. Further, the product in
question is in development and has not been released. Thus, in the
event any infringement exists, we believe any damages assessed are
unlikely to be material. Also, the product may be redesigned if
necessary to reduce its potential for infringement.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended
March 31, 1999.
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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.
PROXYMED, INC.
(Registrant)
MAY 7, 1999 /S/ BENNETT MARKS
- ----------- ---------------------------
(Date) Bennett Marks
Co-President, Chief Financial
Officer and Principal Accounting
Officer
15
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,963,293
<SECURITIES> 0
<RECEIVABLES> 6,542,420
<ALLOWANCES> (640,274)
<INVENTORY> 2,998,942
<CURRENT-ASSETS> 12,660,118
<PP&E> 6,137,356
<DEPRECIATION> (1,754,907)
<TOTAL-ASSETS> 45,200,238
<CURRENT-LIABILITIES> 7,048,826
<BONDS> 0
0
0
<COMMON> 17,833
<OTHER-SE> 82,656,771
<TOTAL-LIABILITY-AND-EQUITY> 36,818,247
<SALES> 6,245,769
<TOTAL-REVENUES> 11,367,310
<CGS> 4,376,877
<TOTAL-COSTS> 4,833,649
<OTHER-EXPENSES> 10,242,833
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (18,766)
<INCOME-PRETAX> (3,690,406)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,690,406)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,690,406)
<EPS-PRIMARY> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
