UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission file number Z - 24196
MEDPLUS, INC.
(Exact name of registrant as specified in its charter)
Ohio 48-1094982
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8805 Governor's Hill Drive, Suite 100
Cincinnati, OH 45249
(Address of principal executive offices)
(513) 583-0500
(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 report(s), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No_______
As of September 1, 1998, there were 6,175,717 shares of the
registrant's common stock without par value issued and outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
MEDPLUS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
July 31, July 31, July 31, July 31,
1998 1997 1998 1997
_____________ _____________ ______________ _____________
<S> <C> <C> <C> <C>
Revenues:
Systems sales $ 678,463 2,600,699 1,392,921 3,587,399
Support and consulting revenues 1,164,966 448,858 2,383,859 875,247
_____________ _____________ ______________ _____________
Total revenues $ 1,843,429 3,049,527 3,776,780 4,462,646
_____________ _____________ ______________ _____________
Cost of revenues:
Systems sales 602,578 1,358,183 1,028,331 2,015,786
Support and consulting revenues 1,042,964 407,689 2,000,123 823,576
_____________ _____________ ______________ _____________
Total cost of revenues 1,645,542 1,765,872 3,028,454 2,839,362
_____________ _____________ ______________ _____________
Gross profit 197,887 1,283,655 748,326 1,623,284
Operating expenses:
Sales and marketing 1,484,266 1,161,988 3,116,572 2,333,594
Research and development 401,587 118,480 883,620 297,856
General and administrative 1,185,902 727,285 2,079,131 1,454,087
Synergis management expenses 307,292 -- 686,253 --
_____________ _____________ ______________ _____________
Total operating expenses 3,379,047 2,007,753 6,765,576 4,085,537
_____________ _____________ ______________ _____________
Operating loss (3,181,160) (724,098) (6,017,250) (2,462,253)
Other income (expense), net (100,064) (51,653) 25,750 (48,818)
_____________ _____________ ______________ _____________
Loss from continuing operations
before income taxes (3,281,224) (775,751) (5,991,500) (2,511,071)
Income tax benefit (504,364) (224,904) (1,460,223) (346,164)
_____________ _____________ ______________ _____________
Loss from continuing operations (2,776,860) (550,847) (4,531,277) (2,164,907)
Income from discontinued operations 168,856 347,781 177,299 533,453
_____________ _____________ ______________ _____________
Net loss $ (2,608,004) (203,066) (4,353,978) (1,631,454)
_____________ _____________ ______________ _____________
_____________ _____________ ______________ _____________
Earnings (loss) per share -
basic and diluted:
Continuing operations $ (0.45) (0.09) (0.74) (0.37)
Discontinued operations 0.03 0.06 0.03 0.09
_____________ _____________ ______________ _____________
Net loss per share $ (0.42) (0.03) (0.71) (0.28)
_____________ _____________ ______________ _____________
_____________ _____________ ______________ _____________
Weighted average number of shares of
common stock outstanding 6,170,726 5,913,413 6,165,529 5,917,412
_____________ _____________ ______________ _____________
_____________ _____________ ______________ _____________
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
MEDPLUS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<CAPTION>
July 31, January 31,
1998 1998
____________ ____________
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,335,378 13,794,473
Accounts receivable, less allowance for doubtful accounts of
$215,000 at July 31, 1998 and $115,000 at January 31, 1998 3,493,755 4,520,333
Other receivables 63,450 71,728
Income taxes refundable 600,000 -
Inventories 588,391 757,471
Deferred tax asset 304,365 328,497
Prepaid expenses and other current assets 878,986 568,769
____________ ____________
Total current assets 9,264,325 20,041,271
____________ ____________
Capitalized software development costs, net 2,328,970 2,020,613
Fixed assets, net 1,886,567 1,484,875
Excess of cost over fair value of net assets acquired, net 767,864 781,391
Other assets 270,021 328,141
____________ ____________
$14,517,747 24,656,291
____________ ____________
____________ ____________
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of obligations under capital leases $ 215,595 132,206
Borrowings on line of credit - 1,496,353
Accounts payable 1,246,569 2,892,891
Accrued expenses 1,081,716 2,675,996
Accrued income taxes payable - 1,346,869
Deferred revenue 613,531 635,464
Other current liabilities 297,000 297,000
____________ ____________
Total current liabilities 3,454,412 9,476,778
____________ ____________
Obligations under capital leases, excluding current installments 210,232 167,884
Deferred tax liability 510,512 534,644
____________ ____________
Total liabilities 4,175,156 10,179,306
____________ ____________
Shareholders' equity:
Common stock, no par value, authorized 15,000,000 shares; issued and
outstanding 6,175,717 shares at July 31, 1998 and 6,160,712 shares
at January 31, 1998 - -
Additional paid-in capital 17,430,821 17,284,557
Accumulated deficit (6,973,727) (2,619,749)
Unearned stock compensation (114,503) (187,823)
____________ ____________
Total shareholders' equity 10,342,591 14,476,985
____________ ____________
$14,517,747 24,656,291
____________ ____________
____________ ____________
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
MEDPLUS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
<CAPTION>
Six Months Six Months
Ended Ended
July 31, July 31,
1998 1997
____________ ____________
<S> <C> <C>
Cash flows from operating activities:
Loss from continuing operations $ (4,531,277) (2,164,907)
Adjustments to reconcile loss from continuing operations to
net cash used in operating activities:
Synergis acquisition and offering costs 139,143 -
Amortization of capitalized software development costs 229,441 260,763
Depreciation and amortization 235,046 109,397
Amortization of unearned stock compensation costs 108,273 116,425
Amortization of excess of cost over fair value of net assets acquired 33,385 53,019
Deferred income taxes (113,355) (346,164)
Realized (gain) loss on sales of investment securities
and fixed assets 12,633 (9,566)
Provision for loss on doubtful accounts 83,962 44,184
Changes in assets and liabilities:
Accounts receivable 1,011,799 (2,108,179)
Other receivables 36,278 99,531
Inventories 169,080 (180,662)
Prepaid expenses and other assets (296,278) (20,540)
Accounts payable and accrued expenses (1,355,501) 505,142
Income taxes (1,946,869) -
Deferred revenue (21,933) 133,129
____________ ____________
Net cash used in operating activities (6,206,173) (3,508,427)
____________ ____________
Cash flows from investing activities:
Capitalization of software development costs (537,798) (520,592)
Purchases of fixed assets (441,223) (147,429)
Proceeds from sales of investment securities and fixed assets - 323,114
Synergis acquisition and offering costs (1,446,512) (646,270)
Payments made for acquisitions of businesses (19,858) (2,767)
Other advances and investments (28,000) (744,615)
____________ ____________
Net cash used in investing activities (2,473,391) (1,738,559)
____________ ____________
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs 58,084 48,754
Purchases of treasury stock (164,348) (53,554)
Proceeds from borrowings on line of credit 3,647 3,450,767
Repayments on line of credit (1,500,000) (713,699)
Principal payments on capital lease obligations (82,409) (19,851)
____________ ____________
Net cash provided by (used in) financing activities (1,685,026) 2,712,417
Discontinued operations (94,505) 1,521,549
____________ ____________
Net decrease in cash and cash equivalents (10,459,095) (1,013,020)
Cash and cash equivalents, beginning of period 13,794,473 1,013,020
____________ ____________
Cash and cash equivalents, end of period $ 3,335,378 -
____________ ____________
____________ ____________
Interest paid $ 84,150 29,269
____________ ____________
____________ ____________
Income taxes paid $ 600,000 -
____________ ____________
____________ ____________
See accompanying notes to consolidated financial statements.
</TABLE>
MEDPLUS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
(1) Description of the Business
MedPlus[r], Inc. (the "Company") provides state-of-the-art
information management technology products and consulting services
which focus on various elements of process analysis and redesign,
document imaging and management, workflow, systems integration,
and technology education. Historically, MedPlus' customers have
been predominantly in the healthcare industry. However, as a
result of acquisitions and investments over the past several
years, the Company has begun to operate in other industries. The
Company's healthcare related products presently consist of the
ChartMaxx[tm] Enterprise-wide Patient Record System ("ChartMaxx")
and the OptiMaxx[r] Archival System ("OptiMaxx"). ChartMaxx is
an enterprise-wide electronic patient record system. OptiMaxx is
an optical disk-based archival system. The Company's
FutureCORE[r], Inc. subsidiary ("FutureCORE") provides process
improvement and automation services, primarily in the areas of
patient care and laboratory services. The Company's Universal
Document Management Systems, Inc. subsidiary ("Universal
Document") develops and sells Step2000[r], a workflow, document
management, and application development software product that
enhances the utilization of information on an enterprise-wide
basis, regardless of hardware platform or operating environment.
DiaLogos[tm] Incorporated ("DiaLogos"), a majority-owned
subsidiary, specializes in assisting organizations in the
integration of enterprise-wide business systems with existing
applications and data using distributed object computing,
including CORBA and Java technologies, through education,
consulting and implementation services. DiaLogos is in the
initial phases of developing several products designed to simplify
the effort of legacy system integration. Synergis Acquisition,
Inc. (to be renamed Synergis Technologies, Inc.) ("Synergis"), a
newly-formed subsidiary of the Company, will acquire a number of
value-added resellers in the design automation software field.
(2) Summary of Significant Accounting Policies
(a) Interim Financial Information
The consolidated financial statements and the related
notes thereto are unaudited and have been prepared on the same
basis as the audited consolidated financial statements. In the
opinion of management, such unaudited financial statements include
all adjustments, consisting of only normal recurring adjustments,
necessary to present fairly the information set forth therein.
(b) Significant Accounting Policies
A description of the Company's significant accounting
policies can be found in the footnotes to the Company's annual
consolidated financial statements for the year ended January 31,
1998 included in its Annual Report on Form 10-KSB dated May 1,
1998. The accompanying consolidated financial statements should be
read in conjunction with those footnotes.
(c) Consolidation of DiaLogos Financial Statements
The Company acquired its majority interest in DiaLogos on
January 30, 1998, and it currently owns 56.5% of the outstanding
shares of DiaLogos common stock. The Company consolidates the
financial position and results of operations of DiaLogos based on
DiaLogos' fiscal year which ends on December 31. Therefore,
DiaLogos' financial position and results of operations as of and
for the three month and five month periods ended June 30, 1998 have
been included in the accompanying consolidated financial
statements. The Company has recognized 100% of the results of
operations of DiaLogos for the three month and five month periods
ended June 30, 1998 as the minority interest investment in DiaLogos
has been reduced to zero. Advances by the Company to DiaLogos
during the month of July have been included in other receivables.
(d) Fiscal Year
In December 1997, the Company changed its fiscal year
end from December 31 to January 31. Accordingly, the Company's
current fiscal year commenced on February 1, 1998; its current
fiscal quarter commenced on May 1, 1998 and ended on July 31,
1998. The Company has recast the quarterly financial information
for the fiscal year ended January 31, 1998 and has presented the
comparative financial information for the three month and six
month periods ended July 31, 1997.
(e) Earnings (Loss) Per Share
Basic earnings (loss) per share is based on the
weighted average number of shares of common stock outstanding for
each period excluding any shares related to nonvested employee
stock awards. Dilutive securities have not been included in the
weighted average shares used for the calculation of diluted
earnings per share in periods of losses from continuing operations
because the effect of such securities would be antidilutive.
(f) Supplemental Cash Flow Information
DiaLogos has entered into capital lease obligations for
equipment of $208,188 during the five month period ended June 30,
1998. The Company's discretionary and profit-sharing contributions
to the Company's Retirement Savings and Investment Plan for the
1997 Plan year were funded in March 1998 through the issuance of
32,232 shares of the Company's common stock. The Company also
granted a warrant to purchase 25,000 shares of the Company's
common stock to a consultant to the Company in June 1998. This
warrant has a fair value of $34,953 which is being amortized into
expense over the related service period of one year. As these are
non-cash transactions, they have not been presented in the
Consolidated Statements of Cash Flows.
(3) Acquisition of DiaLogos
The following unaudited pro forma data presents the results
of operations as if the acquisition of DiaLogos had occurred at
the beginning of each period. The information reflects DiaLogos'
results of operations for the six months ended June 30, 1998 and
1997 due to the Company consolidating DiaLogos' results of
operations based on DiaLogos' fiscal year end which ends December
31. The pro forma information for the six months ended July 31,
1998 is provided because the Company's results of operations for
this period as reported include DiaLogos' results of operations
for only the five months ended June 30, 1998 This summary is
provided for information purposes only. It does not necessarily
reflect the actual results that would have occurred had the
acquisition been made as of those dates or of results that may
occur in the future.
Six Months Six Months
Ended Ended
July 31, July 31,
1998 1997
____________ ____________
Revenues $ 3,886,020 4,554,746
Loss from continuing
operations (4,608,330) (2,816,056)
Net loss $(4,431,031) (2,161,342)
____________ ____________
____________ ____________
Earnings (loss) per
share - basic
and diluted:
Continuing operations $ (0.75) (0.48)
Discontinued operations 0.03 0.11
____________ ____________
Net loss $ (0.72) (0.37)
(4) Discontinued Operations
In January 1998, the Company decided to sell the net assets
of the Step2000 segment of Universal Document and began negotiating
with prospective buyers. The Company had expected to complete the
sale by December 1998. However, the Company's efforts to sell the
net assets of Step2000 ended in August 1998 after negotiations with
the prospective buyers were terminated by the Company. After
reviewing the operations of the Step2000 segment and how it might
complement a current business initiative of the Company, the
Company decided to retain the segment and reduce operations to
primarily research and development and customer support while a new
generation of products is being developed.
The Step2000 segment had previously been accounted for as a
discontinued operation. However, as a result of the Company's
decision to retain the Step2000 segment, the results of operations
and financial position of the Step2000 segment have been included
in continuing operations in the Company's consolidated financial
statements as of and for the six months ended July 31, 1998. Prior
years' financial statements have been presented on a comparable
basis. The Step2000 segment had assets of $546,978 and liabilities
of $418,217 as of January 31, 1998. For the year ended January 31,
1998, Step2000 had revenues of $1,186,825 and an operating loss of
$1,620,792. Included in the operating loss were impairment losses
related to the excess of cost over fair value of net assets
acquired and capitalized software development costs of $774,677 and
$466,836, respectively. The Company had also accrued a loss of
$181,000 for the disposal of the net assets of the segment and for
its estimated net operating losses through its expected date of
disposal. The Company reversed $13,841 of the accrual to offset
operating losses for the three months ended April 30, 1998 and
reversed $167,159 of the accrual in July 1998 as a result of its
decision to retain Step2000. These reversals are included in
discontinued operations for the six months ended July 31, 1998.
(5) Bank Agreements
On September 9, 1997, the Company and the Company's Universal
Document Management Systems, Inc. ("Universal Document") subsidiary
entered into a line of credit agreement ("Universal line of
credit") with a bank to fund the costs associated with Universal
Document's acquisitions and initial public offering discussed in
Note 6 and for working capital. The Universal line of credit was
paid in full and canceled on February 10, 1998.
(6) Commitments and Contingency - Synergis Acquisitions and
Initial Public Offering
The Company's Universal Document subsidiary hired a senior
management team and entered into agreements with two consulting
firms in 1997 to assist it in the identification and recruitment of
certain design automation software resellers and integrators
(collectively the "Founding Companies") that Universal Document may
acquire or with which it may combine (the "Acquisitions"), and to
assist Universal Document in an initial public offering of its
common stock. In September and October 1997, Universal Document
entered into definitive merger agreements, which were contingent
upon a successful initial public offering, to acquire nine such
companies. On October 10, 1997, Universal Document filed a
registration statement on Form S-1 with the Securities and Exchange
Commission to offer its common stock to the public. Universal
Document filed subsequent amendments to this registration statement
on December 15, 1997 and January 9, 1998. Under the terms of the
initial public offering as disclosed in the registration statement,
Universal Document and the Company would offer to sell 1,850,000
and 750,000 shares, respectively. Universal Document would use a
portion of its proceeds from the sale of shares in the offering and
the issuance of additional shares to acquire the nine companies
with which it had entered into merger agreements. The Company
would retain a minority interest in Universal Document after the
initial public offering. In connection with its initial public
offering, Universal Document would change its name to Synergis
Technologies, Inc. Due to adverse market conditions for initial
public offerings in January 1998, Universal Document postponed the
initial public offering upon the advice of its underwriters.
Because the reduced business operations of Universal
Document no longer complement the businesses of the Founding
Companies, the Company's Synergis subsidiary was created to serve
as the acquirer in the Acquisitions. As a result, Universal
Document plans to assign to Synergis all agreements entered into
by Universal Document with respect to the Acquisitions, including
but not limited to certain employment agreements, the definitive
merger agreements and non-binding letters of intent (collectively,
the "Acquisition Agreements").
Universal Document (and, subsequently, Synergis) had hoped
to complete an initial public offering of its common stock on or
before December 31, 1998. Due to market conditions, Universal
Document's (subsequently Synergis') plans to conduct an initial
public offering were postponed in August 1998. The Company and
Synergis currently plan to continue to proceed with the
Acquisitions and finance them through a private offering of debt
securities.
As of September 4, 1998, Universal Document had entered into
definitive merger agreements with eight of the Founding Companies
and had entered into non-binding letters of intent to acquire three
other design automation software resellers and integrators. Six of
the definitive merger agreements and all of the letters of intent
are contingent upon a successful initial public offering occurring
before December 31, 1998. Two of the Founding Companies had the
option to terminate their agreements if an initial public offering
had not occurred prior to March 31, 1998, but have not exercised
that option. Synergis and MedPlus are currently working with the
Founding Companies to assign the Acquisition Agreements to
Synergis and amend the Acquisition Agreements to provide that the
closing of the Acquisitions is subject to the completion of the
private offering of debt securities.
The Company and Universal Document had entered into a variety
of agreements related to the Acquisitions and initial public
offering in addition to the Acquisition Agreements. These
agreements include consulting agreements, employment agreements, an
amendment of the HWB purchase agreement, and stock incentive
agreements associated with Universal Document common stock. The
significant financial terms of these agreements were contingent
upon the successful completion of an initial public offering of
Universal Document's common stock. As a result of the events
discussed in the preceding paragraphs, many, if not all, of the
agreements referred to above may either be terminated or
significantly amended and assigned to Synergis.
Universal Document had capitalized direct, incremental costs
during the year ended January 31, 1998 related to the potential
acquisitions and initial public offering for accountants',
attorneys', and consultants' fees ("acquisition and offering
costs") that were to become a cost of the acquired companies or
costs of the initial public offering upon the completion of the
transactions. As a result of its decision to postpone its initial
public offering, Universal Document expensed in January 1998 all
such costs capitalized during the fiscal year ended January 31,
1998.
During the six months ended July 31, 1998, Universal
Document expensed $139,143 of acquisition and offering costs due to
the second postponement of its initial public offering. Synergis
will incur additional acquisition and debt financing costs in the
third and fourth quarters of the current year, some of which may be
capitalized upon successful completion of the acquisitions and
offering. The Company also incurred and expensed $686,253 of
operating costs during the six months ended July 31, 1998
associated with the senior management team hired to manage the
acquisitions, offering and integration of the Founding Companies.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
_____________________
Fiscal Year
In December 1997, the Company changed its fiscal year end from
December 31 to January 31. Accordingly, the Company's current
fiscal year commenced on February 1, 1998; its current fiscal
quarter commenced on May 1, 1998 and ended on July 31, 1998. The
Company has recast the quarterly financial information for the
fiscal year ended January 31, 1998 and has presented the
comparative financial information for the three month and six
month periods ended July 31, 1997.
DiaLogos Acquisition
The Company acquired its majority interest in DiaLogos on January
30, 1998, and it currently owns 56.5% of the outstanding shares of
DiaLogos common stock. The Company consolidates the financial
position and results of operations of DiaLogos based on DiaLogos'
fiscal year which ends on December 31. Therefore, DiaLogos'
financial position and results of operations as of and for the
three month and five month periods ended June 30, 1998 have been
included in the accompanying consolidated financial statements. The
Company has recognized 100% of the results of operations of
DiaLogos for the three month and five month periods ended June 30,
1998 as the minority interest investment in DiaLogos has been
reduced to zero.
Discontinued Operations
In January 1998, the Company decided to sell the net assets of the
Step2000 segment of Universal Document and began negotiating with
prospective buyers. The Company had expected to complete the sale
by December 1998. However, the Company's efforts to sell the net
assets of Step2000 ended in August 1998 after negotiations with the
prospective buyers were terminated by the Company. After reviewing
the operations of the Step2000 segment and how it might complement
a current business initiative of the Company, the Company decided
to retain the segment and reduce operations to primarily research
and development and customer support while a new generation of
products is being developed.
The Step2000 segment had previously been accounted for as a
discontinued operation. However, as a result of the Company's
decision to retain the Step2000 segment, the results of operations
and financial position of the Step2000 segment have been included
in continuing operations in the Company's consolidated financial
statements as of and for the six months ended July 31, 1998. Prior
years' financial statements have been presented on a comparable
basis. The Step2000 segment had assets of $546,978 and liabilities
of $418,217 as of January 31, 1998. For the year ended January 31,
1998, Step2000 had revenues of $1,186,825 and an operating loss of
$1,620,792. Included in the operating loss were impairment losses
related to the excess of cost over fair value of net assets
acquired and capitalized software development costs of $774,677 and
$466,836, respectively. The Company had also accrued a loss of
$181,000 for the disposal of the net assets of the segment and for
its estimated net operating losses through its expected date of
disposal. The Company reversed $13,841 of the accrual to offset
operating losses for the three months ended April 30, 1998 and
reversed $167,159 of the accrual in July 1998 as a result of its
decision to retain Step2000. These reversals are included in
discontinued operations for the six months ended July 31, 1998.
Three Months Ended July 31, 1998 and July 31, 1997
Revenues for the three months ended July 31, 1998 (or "second
quarter of fiscal 1999") were $1,843,429 as compared to $3,049,527
for the three months ended July 31, 1997 (or "second quarter of
fiscal 1998"). Systems sales decreased $1,922,206 from the three
months ended July 31, 1997 primarily as a result of a decrease in
the number and relative size of ChartMaxx and OptiMaxx systems
sold. Support and consulting revenues increased $716,108 or 160%
from the three months ended July 31, 1997 due to the addition of
consulting and education revenues from DiaLogos and increased
support and consulting revenues from the Company's ChartMaxx and
OptiMaxx product lines as the number of installed sites of these
products continues to increase.
Gross profit for the three months ended July 31, 1998 was $197,887,
or 11% of revenues, compared to $1,283,655, or 42% of revenues, for
the three months ended July 31, 1997. The gross profit percentage
on systems sales decreased from 48% in the second quarter of fiscal
1998 to 11% in the second quarter of fiscal 1999 due to a higher
proportion of lower margin third party hardware and software
relative to proprietary software included in sales during the
second quarter of fiscal 1999. The gross profit percentage on
support and consulting revenues increased from 9% in the second
quarter of fiscal 1998 to 10% in the second quarter of fiscal 1999.
The increase in this percentage was primarily a result of the
addition of the gross profit on DiaLogos' consulting and education
revenues and the increased support revenues noted above. These
items were partly offset by an increase in customer support,
installation, and consulting personnel in advance of related
revenues and lower than expected utilization rates of those
personnel. Future gross profit margins for support and consulting
services may continue to be depressed in the near term as a result
of the timing of systems sales, unforeseen delays in
implementation schedules, the number and timing of additions to
the implementation and consulting staff relative to when they
become billable to customers, or the need to use independent
consultants while the Company is further developing its
implementation and consulting staff.
Operating expenses for the second quarter of fiscal 1999 were
$3,379,047 compared to $2,007,753 for the second quarter of fiscal
1998, an increase of 68%. Excluding $307,292 of Synergis management
expenses, operating expenses increased $1,064,002 or 53% over the
comparable period of fiscal 1998. The Company has continued to
increase its investment in its sales and marketing efforts for the
ChartMaxx product line and DiaLogos. The principal areas of
investment have been direct sales, channel partner programs,
national accounts and general marketing activities as evidenced by
the 28% increase in sales and marketing expenditures over the
second quarter of fiscal 1998. The increase in operating expenses
is also a result of the inclusion of the operating expenses of
DiaLogos and an increase in personnel in the area of product
development. Synergis management expenses represent personnel and
other costs associated with Synergis' senior management team which
has been hired to manage Synergis' initial public offering,
acquisitions and operations after the offering.
Other expense, net, consists primarily of interest income, interest
expense, and accounting and legal costs associated with the
Synergis acquisition and offering efforts. Other expense, net,
increased to $100,064 in the second quarter of fiscal 1999 from
$51,653 in the comparable quarter of fiscal 1998. This increase is
a result of the write-off of $139,143 of accounting and legal costs
associated with the Synergis acquisition and offering efforts
offset by higher interest income. The increase in interest income
resulted from an increase in the Company's cash and cash
equivalents balances from fiscal 1998 due to cash received from the
sale of the Company's IntelliCode division and shares of the
Company's common stock to Becton, Dickinson and Company in January
1998.
The Company's income tax benefit increased from $224,904 in the
second quarter of fiscal 1998 to $504,364 in the second quarter of
fiscal 1999. The Company recognized a portion of the benefit of its
net operating loss for income tax purposes from the second quarter
of fiscal 1999 through the carryback of this loss against taxable
income in fiscal 1998 generated by the sale of the IntelliCode
division. The Company's ability to recognize the full benefit of
its net operating loss for the second quarter of fiscal 1998 was
limited by the Company's establishment of a valuation allowance
against that net operating loss carryforward. The Company's ability
to recognize the full benefit of its net operating loss for the
second quarter of fiscal 1999 and any similar losses in future
periods will be dependent upon the generation of future taxable
income.
Discontinued operations in the second quarter of fiscal 1998
represent the results of operations of the Company's IntelliCode
division. Discontinued operations in the second quarter of fiscal
1999 represent the reversal of the accrued loss related to the
Step2000 segment which the Company decided to retain in August 1998
and the reversal of certain reserves related to the sale of the
IntelliCode division.
The Company's net loss for the second quarter of fiscal 1999 was
$2,608,004 compared to a net loss in the second quarter of fiscal
1998 of $203,066. The increase in the net loss is a result of lower
revenues, lower gross profit and increased operating expenses
partially offset by increased interest income and the increase in
the income tax benefit.
Six Months Ended July 31, 1998 and July 31, 1997
Revenues for the six months ended July 31, 1998 were $3,776,780 as
compared to $4,462,646 for the comparable period in fiscal 1998.
Systems sales decreased $2,194,478 from the six months ended July
31, 1997 primarily as a result of a decrease in the number and
relative size of ChartMaxx and OptiMaxx systems sold. Support and
consulting revenues increased $1,508,611 or 172% from the six
months ended July 31, 1997 due to the addition of consulting and
education revenues from DiaLogos and increased support and
consulting revenues from the Company's ChartMaxx and OptiMaxx
product lines as the number of installed sites of these products
continues to increase.
Gross profit for the six months ended July 31, 1998 was $748,326 or
20% of revenues, compared to $1,623,284, or 36% of revenues for the
comparable period of fiscal 1998. The gross profit percentage on
systems sales decreased from 44% for the six months ended July 31,
1997 to 26% for the six months ended July 31, 1998 due to a higher
proportion of lower margin third party hardware and software
relative to proprietary software included in sales during fiscal
1999. The gross profit percentage on support and consulting
revenues increased from 6% for the six months ended July 31, 1997
to 16% for the six months ended July 31, 1998. The increase in this
percentage was primarily a result of the addition of the gross
profit on DiaLogos' consulting and education revenues and the
increased support revenues noted above. These items were partly
offset by an increase in customer support, installation, and
consulting personnel in advance of related revenues and lower than
expected utilization rates of those personnel.
Operating expenses for the six months ended July 31, 1998 were
$6,765,576 compared to $4,085,537 for the comparable period of
1997, an increase of 66%. Excluding $686,253 of Synergis management
expenses, operating expenses increased $1,993,786 or 49% over the
comparable period of fiscal 1998. The Company has continued to
increase its investment in its sales and marketing efforts for the
ChartMaxx product line and DiaLogos. The principal areas of
investment have been direct sales, channel partner programs,
national accounts and general marketing activities as evidenced by
the 34% increase in sales and marketing expenditures over the
second quarter of fiscal 1998. The increase in operating expenses
is also a result of the inclusion of the operating expenses of
DiaLogos and an increase in personnel in the area of product
development. Synergis management expenses represent personnel and
other costs associated with Synergis' senior management team which
has been hired to manage Synergis' initial public offering,
acquisitions and operations after the offering.
Other income (expense) increased to $25,750 of income for the six
months ended July 31, 1998 from expense of $48,818 for the six
months ended July 31, 1997. The increase is primarily due to an
increase in interest income as a result of an increase in the
Company's cash and cash equivalents balances from fiscal 1998 due
to cash received from the sale of the Company's IntelliCode
division and shares of the Company's common stock to Becton,
Dickinson and Company in January 1998. The increase in interest
income was partially offset by the write-off of $139,143 of
accounting and legal costs associated with the Synergis acquisition
and offering efforts.
The Company's income tax benefit increased from $346,164 in the
second quarter of fiscal 1998 to $1,460,223 in the second quarter
of fiscal 1999. The Company recognized a portion of the benefit of
its net operating loss for income tax purposes for the six months
ended July 31, 1998 through the carryback of this loss against
taxable income in fiscal 1998 generated by the sale of the
IntelliCode division. The Company's ability to recognize the full
benefit of its net operating loss for the six months ended July 31,
1997 was limited by the Company's establishment of a valuation
allowance against that net operating loss carryforward. The
Company's ability to recognize the full benefit of its net
operating loss for the second quarter of fiscal 1999 and any
similar losses in future periods will be dependent upon the
generation of future taxable income.
Discontinued operations for the six months ended July 31, 1997
represent the results of operations of the Company's IntelliCode
division. Discontinued operations for the six months ended July
31, 1998 represent the reversal of the accrued loss related to the
Step2000 segment which the Company decided to retain in August 1998
and the reversal of certain reserves related to the sale of the
IntelliCode division.
The Company's net loss for the second quarter of fiscal 1999 was
$4,353,978 compared to a net loss in the second quarter of fiscal
1998 of $1,631,454. The increase in the net loss is a result of
lower revenues, lower gross profit margins and increased operating
expenses partially offset by increased interest income and the
increase in the income tax benefit.
Synergis Acquisitions and Initial Public Offering
_________________________________________________
The Company's Universal Document subsidiary hired a senior
management team and entered into agreements with two consulting
firms in 1997 to assist it in the identification and recruitment of
certain design automation software resellers and integrators
(collectively the "Founding Companies") that Universal Document may
acquire or with which it may combine (the "Acquisitions"), and to
assist Universal Document in an initial public offering of its
common stock. In September and October 1997, Universal Document
entered into definitive merger agreements, which were contingent
upon a successful initial public offering, to acquire nine such
companies. On October 10, 1997, Universal Document filed a
registration statement on Form S-1 with the Securities and Exchange
Commission to offer its common stock to the public. Universal
Document filed subsequent amendments to this registration statement
on December 15, 1997 and January 9, 1998. Under the terms of the
initial public offering as disclosed in the registration statement,
Universal Document and the Company would offer to sell 1,850,000
and 750,000 shares, respectively. Universal Document would use a
portion of its proceeds from the sale of shares in the offering and
the issuance of additional shares to acquire the nine companies
with which it had entered into merger agreements. The Company
would retain a minority interest in Universal Document after the
initial public offering. In connection with its initial public
offering, Universal Document would change its name to Synergis
Technologies, Inc. Due to adverse market conditions for initial
public offerings in January 1998, Universal Document postponed the
initial public offering upon the advice of its underwriters.
Because the reduced business operations of Universal Document no
longer complement the businesses of the Founding Companies, the
Company's Synergis subsidiary was created to serve as the acquirer
in the Acquisitions. As a result, Universal Document plans to
assign to Synergis all agreements entered into by Universal
Document with respect to the Acquisitions, including but not
limited to certain employment agreements, the definitive merger
agreements and non-binding letters of intent (collectively, the
"Acquisition Agreements").
Universal Document (and, subsequently, Synergis) had hoped to
complete an initial public offering of its common stock on or
before December 31, 1998. Due to market conditions, Universal
Document's (subsequently Synergis') plans to conduct an initial
public offering were postponed in August 1998. The Company and
Synergis currently plan to continue to proceed with the
Acquisitions and finance them through a private offering of debt
securities.
As of September 4, 1998, Universal Document had entered into
definitive merger agreements with eight of the Founding Companies
and had entered into non-binding letters of intent to acquire three
other design automation software resellers and integrators. Six of
the definitive merger agreements and all of the letters of intent
are contingent upon a successful initial public offering occurring
before December 31, 1998. Two of the Founding Companies had the
option to terminate their agreements if an initial public offering
had not occurred prior to March 31, 1998, but have not exercised
that option. Synergis and MedPlus are currently working with the
Founding Companies to assign the Acquisition Agreements to
Synergis and amend the Acquisition Agreements to provide that the
closing of the Acquisitions is subject to the completion of the
private offering of debt securities.
The Company and Universal Document had entered into a variety of
agreements related to the Acquisitions and initial public offering
in addition to the Acquisition Agreements. These agreements
include consulting agreements, employment agreements, an amendment
of the HWB purchase agreement, and stock incentive agreements
associated with Universal Document common stock. The significant
financial terms of these agreements were contingent upon the
successful completion of an initial public offering of Universal
Document's common stock. As a result of the events discussed in
the preceding paragraphs, many, if not all, of the agreements
referred to above may either be terminated or significantly amended
and assigned to Synergis.
Universal Document had capitalized direct, incremental costs during
the year ended January 31, 1998 related to the potential
acquisitions and initial public offering for accountants',
attorneys', and consultants' fees ("acquisition and offering
costs") that were to become a cost of the acquired companies or
costs of the initial public offering upon the completion of the
transactions. As a result of its decision to postpone its initial
public offering, Universal Document expensed in January 1998 all
such costs capitalized during the fiscal year ended January 31,
1998.
During the six months ended July 31, 1998, Universal Document
expensed $139,143 of acquisition and offering costs due to the
second postponement of its initial public offering. Synergis will
incur additional acquisition and debt financing costs in the third
and fourth quarters of the current year, some of which may be
capitalized upon successful completion of the acquisitions and
offering. The Company also incurred and expensed $686,253 of
operating costs during the six months ended July 31, 1998
associated with the senior management team hired to manage the
acquisitions, offering and integration of the Founding Companies.
Liquidity and Capital Resources
_______________________________
The Company's business requires significant amounts of working
capital to finance new product research and development, the
expansion of its sales and marketing organization, anticipated
revenue growth, capital expenditures and strategic investments.
The Company has financed its operations, working capital needs,
and investments through the sale of common stock, bank borrowings,
capital lease financing agreements and, recently, the sale of the
assets of its IntelliCode division. The Company's principal uses
of cash since inception have been for funding operations, capital
expenditures, research and development activities, investments in
and advances to companies which are deemed to have strategic value
to the Company and funding costs associated with the Synergis
acquisitions and initial public offering.
The Company's revolving line of credit agreement ("MedPlus line of
credit") with a bank permits the Company to borrow a maximum of
$10,000,000 subject to a defined net worth formula. The term of
the MedPlus line of credit extends through December 31, 1998, and
the MedPlus line of credit is secured by substantially all of the
Company's assets. At July 31, 1998, the maximum amount available
under the MedPlus line of credit was approximately $7,570,000. No
amounts were outstanding under the MedPlus line of credit at July
31, 1998 and January 31, 1998.
On September 9, 1997, the Company and Universal Document entered
into a line of credit agreement ("Universal line of credit") with
a bank to fund the costs associated with Universal Document's
acquisitions and initial public offering discussed in Note 5 of
the consolidated financial statements and for working capital.
The amount outstanding under the Universal line of credit at
January 31, 1998 was $1,496,353. The Universal line of credit was
paid in full and canceled on February 10, 1998.
The Company has continued to incur operating losses from continuing
operations. During this period, the Company has made significant
cash expenditures in the areas of research and development, sales
and marketing, customer support and implementation consulting in
anticipation of higher revenues. However, revenues have been lower
than expected during the period of the operating losses.
Management has begun to review the Company's current operations to
identify areas to reduce or maintain current levels of expenses
until revenues increase sufficiently to justify increased
investments in certain areas. Such areas include, but may not be
limited to, the Company's Universal Document and FutureCORE
subsidiaries and certain corporate marketing activities. In
addition to expense reductions, increased revenues will also be
needed to improve operating cash flow. Management believes that
the Company's current pipeline for its ChartMaxx product, its
relationship with Quorum Health Resources, Inc., its recent
contract for an imaging and workflow solution for Quest Diagnostics
Incorporated and the marketing of this solution to other reference
laboratories will result in significant opportunities to increase
revenues over the next twelve to eighteen months.
The Company believes that improvements in operating cash flow from
the expense reductions and increased revenues noted above combined
with its cash and cash equivalents and available line of credit
will be sufficient to finance its expected growth and cash
requirements. The Company also believes that it has the ability to
renegotiate or extend its existing line of credit, secure other
debt or equity financings, or sell assets to provide additional
cash if needed. The Company does plan to renegotiate or extend its
existing line of credit in fiscal 1999. In addition, in the event
that Synergis executes a private offering of debt securities in
fiscal 1999, the Company expects this would provide additional cash
to the Company through the reimbursement of a portion of Synergis'
management, acquisition, and offering costs funded by the Company
as well as providing a source of positive operating cash flow to
cover the ongoing Synergis management expenses. There can be no
assurance, however, as to the extent or timing of the Company's
success in increasing revenues, that additional sources of
financing will be available on a timely basis or on terms
satisfactory to the Company, or that Synergis will successfully
complete a private offering of debt securities and its acquisitions
in fiscal 1999.
Year 2000 Compliance
____________________
Some existing computer programs use only the last two digits to
refer to a year. Because these programs may not properly
recognize a year that begins with "20" rather than "19" and thus
may fail or create errors in the year 2000, they are not
considered "year 2000 compliant." The Company has been reviewing,
and continues to review, all potential year 2000 compliance issues
which may have a material effect on the Company's business,
results of operations or financial condition.
Specifically, the most recent releases of the Company's ChartMaxx
and OptiMaxx products have both been developed using four digit
date fields and, as such, are year 2000 compliant. The Company's
standard license agreements for the most recent releases of each
of these products now include a year 2000 compliance warranty.
Although the Company has not similarly warranted earlier versions
of these products, the Company is not aware of any features in
earlier versions which would cause the products not to be year
2000 compliant. Customers who have earlier versions of these
products may upgrade to the versions warranted by the Company as
year 2000 compliant under the terms of their license agreements
with the Company or the Company's standard maintenance and
support agreements, as the case may be.
Although the most recent releases of the Company's ChartMaxx and
OptiMaxx products are year 2000 compliant, the Company is also
working to ensure that its Customers do not experience problems
where data entered into a ChartMaxx or OptiMaxx system includes
two digit date fields. Currently, if a two digit date field is
passed from another system to ChartMaxx or OptiMaxx, the product's
four digit date field is automatically populated with the first
two digits of the current ChartMaxx or OptiMaxx system date. The
Company has developed a year 2000 test plan for these systems and
will complete final testing of these systems prior to November 30,
1998.
In addition, both systems incorporate third party software and
hardware. While the Company's year 2000 compliance warranty
covers the components of third party products which are
incorporated into the ChartMaxx or OptiMaxx application, the
Company does not independently warrant any third party product.
The Company has received certifications from many of its third
party vendors that their products are year 2000 compliant and is
currently reviewing the remaining third party products, and
working with those vendors, to determine what steps, if any, are
required to ensure compliance. At this time, the Company knows of
no third party product which is not year 2000 compliant and which
affects the year 2000 compliance of the ChartMaxx or OptiMaxx
product.
Furthermore, the ChartMaxx and OptiMaxx products operate in
conjunction with each customer's operating system (e.g., Novell or
Windows NT) which has not been provided or modified by the
Company. The Company plans to remind its customers to contact
their operating systems vendors in order to upgrade these systems
to the year 2000 compliant versions. Where possible, the Company
will provide its customers with specific information regarding how
they may obtain upgrades to their operating system software via
the Internet or other means.
The Company's Universal Document subsidiary has completed its
testing of the Step2000 software product and verified that it is
year 2000 compliant. Step2000, however, may be used by a customer
to develop other software applications ("developed applications").
The customer is responsible for ensuring that the developed
applications are also year 2000 compliant. Universal Document has
provided a year 2000 compliance warranty to its customers, but the
warranty excludes developed applications from coverage.
The Company's internal software systems are either already
compliant or will be upgraded to available year 2000 compliant
versions.
The Company has to date, and will in the foreseeable future use,
internal resources to review and test its products for year 2000
compliance. If modifications to any of the Company's products are
required to ensure year 2000 compliance, the Company plans to use
internal resources for those modifications. The total cost of the
year 2000 compliance effort has not yet been determined, however,
the Company does not anticipate it to be material based on the
results of its review and testing to date. The cost of the year
2000 effort will be funded by cash on hand and cash from
operations. The Company does not anticipate, based on its current
understanding of the year 2000 issue and the results of its review
and testing to date, that the year 2000 issue will have a material
effect on the Company's results of operations or result in
significant operational problems for the Company.
PART II. OTHER INFORMATION
Items 1-3. None.
Item 4.
a. The Company held its annual meeting of shareholders on June
25, 1998.
b. Richard A. Mahoney, Robert E. Kenny III, Paul J. Stein, Jay
Hilnbrand, Paul A. Martin, and Philip S. Present II were reelected
as members of the board of directors at the annual shareholders'
meeting. Directors are elected annually and serve one year terms.
c. The following matters were voted upon at the annual
shareholders' meeting held on June 25, 1998:
(i) The following individuals were each reelected as
members of the board of directors:
Votes Votes
Nominee For Against Abstentions
___________________ ___________ ___________ ____________
Richard A. Mahoney 5,613,611 - 267,700
Robert E. Kenny III 5,613,811 - 267,500
Paul J. Stein 5,619,811 - 261,500
Jay Hilnbrand 5,609,466 - 271,845
Paul Martin 5,613,411 - 267,900
Philip S. Present II 5,619,766 - 261,545
(ii) An amendment to the Company's 1994 Long-Term Stock
Incentive Plan was proposed to increase the total number of shares
of the Company's Common Stock subject to grants thereunder from 1
million shares to 2 million shares. This amendment was passed with
3,610,198 votes for, 335,912 votes against, 31,751 abstentions, and
1,903,450 broker non-votes. Further information regarding this
amendment may be found in the Company's Proxy Statement dated May
22, 1998 which is herein incorporated by reference.
(iii) The approval of the 1998 MedPlus, Inc. Employee Stock
Purchase Plan ("Plan") was requested. This proposal was passed with
3,892,173 votes for, 60,190 votes against, 25,498 abstentions, and
1,903,450 broker non-votes. Further information regarding the Plan
may be found in the Company's Proxy Statement dated May 22, 1998
which is herein incorporated by reference.
Item 5. Other Information
The Securities and Exchange Commission has recently amended
Rule 14a-4 to provide that with respect to a shareholder proposal
to be presented at an annual shareholders' meeting other than
pursuant to Rule 14a-8 (i.e., which is not to be included in the
registrant's proxy statement), the registrant's management may
exercise discretionary voting authority under proxies solicited by
it for the meeting if it receives notice of the proposed non-Rule
14a-8 shareholder action less than 45 days prior to the calendar
date its proxy materials were mailed for the prior year's annual
meeting.
As this new provision applies to the Company, in the event
notice of a non-Rule 14a-8 shareholder proposal to be presented at
the Company's 1999 Annual Meeting of Shareholders is received by
the Company after April 16, 1999, the Company will be permitted to
exercise discretionary voting authority under proxies solicited by
it with respect to the 1999 Annual Meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are hereby filed as part of this Form
10-QSB:
Exhibit Sequentially
Number Description of Exhibits Numbered Page
________ ________________________ _____________
27.1 Financial Data Schedule for six
months ended July 31, 1998
27.2 Restated Financial Data Schedule for
three months ended April 30, 1998
27.3 Restated Financial Data Schedule for
twelve months ended January 31, 1998
27.4 Restated Financial Data Schedule for
six months ended July 31, 1997
27.5 Restated Financial Data Schedule for
three months ended April 30, 1997
27.6 Restated Financial Data Schedule for
one month ended January 31, 1997
27.7 Restated Financial Data Schedule for
twelve months ended December 31, 1996
27.8 Restated Financial Data Schedule for
six months ended June 30, 1996
27.9 Restated Financial Data Schedule for
three months ended March 31, 1996
27.10 Restated Financial Data Schedule for
nine months ended October 31, 1997
27.11 Restated Financial Data Schedule for
nine months ended September 30, 1996
(b) No reports on Form 8-K were filed during the three month period
ended July 31, 1998.
SIGNATURE
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.
MedPlus, Inc.
Date: 9/14/98 By: /s/ Daniel A. Silber
Daniel A. Silber
Vice President and
Chief Financial Officer
* Pursuant to the last sentence of General Instruction G to Form
10-QSB, Mr. Daniel A. Silber has executed this Quarterly report on
Form 10-QSB both on behalf of the registrant and in his capacity as
its principal financial and accounting officer.
17
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THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
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<CASH> 3,335,378
<SECURITIES> 0
<RECEIVABLES> 3,708,755
<ALLOWANCES> 215,000
<INVENTORY> 588,391
<CURRENT-ASSETS> 9,264,325
<PP&E> 2,794,288
<DEPRECIATION> 907,721
<TOTAL-ASSETS> 14,517,747
<CURRENT-LIABILITIES> 3,454,411
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0
<COMMON> 0
<OTHER-SE> 10,342,591
<TOTAL-LIABILITY-AND-EQUITY> 14,517,747
<SALES> 1,392,921
<TOTAL-REVENUES> 3,776,780
<CGS> 1,028,331
<TOTAL-COSTS> 3,028,454
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<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,991,500)
<INCOME-TAX> (1,460,223)
<INCOME-CONTINUING> (4,531,277)
<DISCONTINUED> 177,299
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THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
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<MULTIPLIER> 1
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> APR-30-1998
<CASH> 6,412,583
<SECURITIES> 0
<RECEIVABLES> 3,858,383
<ALLOWANCES> 135,000
<INVENTORY> 784,641
<CURRENT-ASSETS> 12,516,247
<PP&E> 2,374,995
<DEPRECIATION> 799,088
<TOTAL-ASSETS> 17,218,431
<CURRENT-LIABILITIES> 3,699,867
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0
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<COMMON> 0
<OTHER-SE> 12,895,149
<TOTAL-LIABILITY-AND-EQUITY> 17,218,431
<SALES> 714,468
<TOTAL-REVENUES> 1,933,350
<CGS> 425,754
<TOTAL-COSTS> 1,382,913
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,710,277)
<INCOME-TAX> (955,860)
<INCOME-CONTINUING> (1,754,417)
<DISCONTINUED> 8,443
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,745,974)
<EPS-PRIMARY> (0.28)
<EPS-DILUTED> (0.28)
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THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 13,794,473
<SECURITIES> 0
<RECEIVABLES> 4,650,333
<ALLOWANCES> 130,000
<INVENTORY> 757,471
<CURRENT-ASSETS> 20,041,271
<PP&E> 2,087,181
<DEPRECIATION> 602,306
<TOTAL-ASSETS> 24,656,291
<CURRENT-LIABILITIES> 9,476,778
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 14,476,985
<TOTAL-LIABILITY-AND-EQUITY> 24,656,291
<SALES> 7,912,168
<TOTAL-REVENUES> 10,201,152
<CGS> 5,171,635
<TOTAL-COSTS> 7,226,191
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (11,667,176)
<INCOME-TAX> (3,475,777)
<INCOME-CONTINUING> (8,191,399)
<DISCONTINUED> 11,296,488
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,105,089
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.52
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THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
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MONTH PERIOD ENDED JULY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
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<RECEIVABLES> 3,927,115
<ALLOWANCES> 75,000
<INVENTORY> 466,231
<CURRENT-ASSETS> 7,069,659
<PP&E> 1,746,460
<DEPRECIATION> 478,891
<TOTAL-ASSETS> 13,128,797
<CURRENT-LIABILITIES> 5,281,956
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 7,769,182
<TOTAL-LIABILITY-AND-EQUITY> 13,128,797
<SALES> 3,587,399
<TOTAL-REVENUES> 4,462,646
<CGS> 2,015,786
<TOTAL-COSTS> 2,839,362
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,511,071)
<INCOME-TAX> (346,164)
<INCOME-CONTINUING> (2,164,907)
<DISCONTINUED> 533,453
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,631,454)
<EPS-PRIMARY> (0.28)
<EPS-DILUTED> (0.28)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
FINANCIAL STATEMENTS OF MEDPLUS, INC. AND SUBSIDIARIES AS OF AND FOR THE THREE
MONTH PERIOD ENDED APRIL 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> APR-30-1997
<CASH> 54,691
<SECURITIES> 0
<RECEIVABLES> 1,769,434
<ALLOWANCES> 65,000
<INVENTORY> 550,628
<CURRENT-ASSETS> 3,827,702
<PP&E> 1,678,828
<DEPRECIATION> 408,062
<TOTAL-ASSETS> 9,935,288
<CURRENT-LIABILITIES> 1,955,900
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 7,888,681
<TOTAL-LIABILITY-AND-EQUITY> 9,935,288
<SALES> 986,730
<TOTAL-REVENUES> 1,413,119
<CGS> 657,603
<TOTAL-COSTS> 1,073,491
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,735,320)
<INCOME-TAX> (121,260)
<INCOME-CONTINUING> (1,614,060)
<DISCONTINUED> 185,673
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,428,387)
<EPS-PRIMARY> (0.24)
<EPS-DILUTED> (0.24)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
FINANCIAL STATEMENTS OF MEDPLUS, INC. AND SUBSIDIARIES AS OF AND FOR THE ONE MONTH
TRANSITION PERIOD ENDED JANUARY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JAN-31-1997
<CASH> 1,013,020
<SECURITIES> 300,510
<RECEIVABLES> 1,848,121
<ALLOWANCES> 60,000
<INVENTORY> 285,569
<CURRENT-ASSETS> 4,595,386
<PP&E> 1,605,161
<DEPRECIATION> 341,077
<TOTAL-ASSETS> 11,043,850
<CURRENT-LIABILITIES> 1,666,377
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,264,516
<TOTAL-LIABILITY-AND-EQUITY> 11,043,850
<SALES> 138,785
<TOTAL-REVENUES> 248,444
<CGS> 96,817
<TOTAL-COSTS> 221,024
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (595,212)
<INCOME-TAX> 0
<INCOME-CONTINUING> (595,212)
<DISCONTINUED> (26,549)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (621,761)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
FINANCIAL STATEMENTS OF MEDPLUS, INC. AND SUBSIDIARIES AS OF AND FOR THE TWELVE
MONTH PERIOD ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,700,607
<SECURITIES> 300,510
<RECEIVABLES> 1,992,424
<ALLOWANCES> 60,000
<INVENTORY> 229,624
<CURRENT-ASSETS> 6,174,633
<PP&E> 1,572,514
<DEPRECIATION> 344,410
<TOTAL-ASSETS> 12,606,640
<CURRENT-LIABILITIES> 2,228,272
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,857,993
<TOTAL-LIABILITY-AND-EQUITY> 12,606,640
<SALES> 3,126,299
<TOTAL-REVENUES> 4,567,644
<CGS> 1,676,525
<TOTAL-COSTS> 2,509,992
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,991,660)
<INCOME-TAX> (569,339)
<INCOME-CONTINUING> (3,395,321)
<DISCONTINUED> 923,129
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,472,192)
<EPS-PRIMARY> (0.42)
<EPS-DILUTED> (0.42)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
FINANCIAL STATEMENTS OF MEDPLUS, INC. AND SUBSIDIARIES AS OF AND FOR THE SIX
MONTH PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,501,904
<SECURITIES> 305,872
<RECEIVABLES> 1,901,448
<ALLOWANCES> 42,000
<INVENTORY> 126,121
<CURRENT-ASSETS> 7,352,036
<PP&E> 1,113,208
<DEPRECIATION> 222,075
<TOTAL-ASSETS> 13,076,061
<CURRENT-LIABILITIES> 1,624,776
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 11,365,932
<TOTAL-LIABILITY-AND-EQUITY> 13,076,061
<SALES> 1,147,889
<TOTAL-REVENUES> 1,683,476
<CGS> 698,642
<TOTAL-COSTS> 962,013
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,683,089)
<INCOME-TAX> (450,994)
<INCOME-CONTINUING> (1,232,095)
<DISCONTINUED> 573,283
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (658,812)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
FINANCIAL STATEMENTS OF MEDPLUS, INC. AND SUBSIDIARIES AS OF AND FOR THE THREE
MONTH PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,981,336
<SECURITIES> 4,972
<RECEIVABLES> 1,430,214
<ALLOWANCES> 17,000
<INVENTORY> 128,636
<CURRENT-ASSETS> 8,081,151
<PP&E> 1,000,039
<DEPRECIATION> 188,652
<TOTAL-ASSETS> 13,502,554
<CURRENT-LIABILITIES> 2,078,414
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 11,321,035
<TOTAL-LIABILITY-AND-EQUITY> 13,502,554
<SALES> 516,037
<TOTAL-REVENUES> 858,668
<CGS> 297,765
<TOTAL-COSTS> 400,154
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (675,830)
<INCOME-TAX> (159,276)
<INCOME-CONTINUING> (516,554)
<DISCONTINUED> 170,993
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (345,561)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
FINANCIAL STATEMENTS OF MEDPLUS, INC. AND SUBSIDIARIES AS OF AND FOR THE NINE
MONTH PERIOD ENDED OCTOBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> OCT-31-1997
<CASH> 359,916
<SECURITIES> 0
<RECEIVABLES> 4,885,574
<ALLOWANCES> 75,000
<INVENTORY> 510,846
<CURRENT-ASSETS> 7,725,394
<PP&E> 1,893,316
<DEPRECIATION> 535,587
<TOTAL-ASSETS> 15,382,643
<CURRENT-LIABILITIES> 8,710,804
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,610,285
<TOTAL-LIABILITY-AND-EQUITY> 15,382,643
<SALES> 1,036,468
<TOTAL-REVENUES> 9,764,928
<CGS> 5,018,621
<TOTAL-COSTS> 7,380,596
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,747,618)
<INCOME-TAX> (174,559)
<INCOME-CONTINUING> (6,573,059)
<DISCONTINUED> 1,544,006
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,029,053)
<EPS-PRIMARY> (0.85)
<EPS-DILUTED> (0.85)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONSOLIDATED
FINANCIAL STATEMENTS OF MEDPLUS, INC. AND SUBSIDIARIES AS OF AND FOR THE NINE
MONTH PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,180,525
<SECURITIES> 305,632
<RECEIVABLES> 1,532,626
<ALLOWANCES> 42,015
<INVENTORY> 186,250
<CURRENT-ASSETS> 6,828,381
<PP&E> 1,343,202
<DEPRECIATION> 255,098
<TOTAL-ASSETS> 12,852,590
<CURRENT-LIABILITIES> 1,797,187
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,973,162
<TOTAL-LIABILITY-AND-EQUITY> 12,852,590
<SALES> 2,258,135
<TOTAL-REVENUES> 3,244,212
<CGS> 1,234,621
<TOTAL-COSTS> 1,745,719
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,396,626)
<INCOME-TAX> (467,538)
<INCOME-CONTINUING> (1,929,088)
<DISCONTINUED> 593,328
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,335,760)
<EPS-PRIMARY> (0.23)
<EPS-DILUTED> (0.23)
</TABLE>
