UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (date of earliest event reported): June 8, 1999
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)
N/A
(Former name or former address, if changed since last report)
Item 5. Other Events.
On June 8, 1999, the registrant amended a Securities Purchase
Agreement (the "Agreement"), originally entered into on April 30,
1999, with three investment firms to obtain $6,100,000 in debt and
equity financing. In summary, the terms of the Agreement provide
for financing of $4,100,000 in Series A Convertible Preferred
Shares and $2,000,000 in subordinated debentures. Notification of
this event, including a copy of the Amended and Restated
Agreement, was included in a filing with the Securities and
Exchange Commission on Form 8-K on June 9, 1999. Certain terms of
this Agreement were subject to shareholder approval, which
occurred at the Company's special and annual shareholders' meeting
held on June 18, 1999. The final closing of the transaction
occurred on June 25, 1999. The pro forma effect of this
transaction has been reflected on the Company's Pro Forma
Consolidated Balance Sheet as of May 31, 1999, and the related Pro
Forma Consolidated Statements of Operations for the four month
period ended May 31, 1999 and for the fiscal year ended January
31, 1999 filed herewith as Item 7(b).
Item 7. Financial Statements and Exhibits
Financial Statements
(a) Financial statements
No financial statements are required to be included in this
filing.
(b) Pro forma financial information
The Pro Forma Consolidated Balance Sheet as of May 31, 1999, and
the related Pro Forma Consolidated Statements of Operations for
the four month period ended May 31, 1999 and for the fiscal year
ended January 31, 1999, reflecting, on a pro forma basis, the debt
and equity financing filed herewith as Item 7(b).
Exhibits
(c) Exhibits
No exhibits are required to be included in this filing.
Item 7 (b)
MedPlus, Inc.
Pro Forma Financial Information
(Unaudited)
On April 30, 1999, the Company entered into an Agreement (the
"Agreement") with three investment firms to obtain $6,100,000 in
debt and equity financing. The terms of the Agreement provide for
financing of $2,000,000 in subordinated debentures (the "Notes")
and $4,100,000 in Series A Convertible Preferred Shares (the
"Preferred Shares"). Certain terms of the Agreement were amended
on June 8, 1999. Additionally, certain terms of the agreement
were approved by the Company's shareholders at the Company's
special and annual shareholders' meeting held on June 18, 1999.
The final closing of the transaction occurred on June 25, 1999.
On April 30, 1999, the Company issued the Notes, due 2004. The
Notes carry an annual coupon rate, payable quarterly, of 10% in
the first year, 12% from May 1, 2000 through October 31, 2000 and
14% thereafter. The Company is also required to pay a 2% fee on
the amount of principal outstanding on each annual anniversary of
October 31, 1999. The principal portion of the Notes is payable as
follows: $666,666 in April 2002, $666,667 in April 2003 and
$666,667 in April 2004; however, the Company may redeem the Notes
at any time during their term without penalty. In circumstances
specified in the Agreement, if the Company receives cash proceeds
from certain transactions, as defined, the Company may be required
to pay any outstanding principal balance and accumulated interest
thereon. The Notes require the Company to issue to the holders of
the Notes five-year warrants to purchase 281,137 Preferred Shares
at an exercise price of $1.66. This warrant price is subject to
adjustment if the Company does not meet specified requirements
relating to the appreciation of its stock price at the end of a
defined two-year period. Holders of the warrants can elect to
convert warrants to Preferred Shares, but would receive a reduced
number of Preferred Shares.
On June 25, 1999, the Company issued to the investors 2,371,815
Preferred Shares, with $.01 stated par value, at a purchase price
of $1.729 per share for gross proceeds of $4,100,000. The
Preferred Shares are convertible into the Company's common stock
on a one-for-one basis. However, the conversion ratio could be
subject to certain price and dilution adjustments which
essentially place restrictions on the Company's ability to issue
warrants, options or other rights, issue convertible securities or
stock dividends, or make changes in option prices or conversion
rates. The Company is required to pay a cumulative dividend
quarterly at a rate of 4% per share for the first four years,
increasing to 10% thereafter. The Preferred Shares include (a)
voting rights, (b) receive preferential treatment upon liquidation
of the Company and (c) convert into common shares upon certain
events. In addition, upon meeting certain requirements specified
in the Agreement, the Company can elect at its option to convert
the Preferred Shares into common shares of the Company. Also, the
Company issued to the Investors ten-year warrants for the purchase
of 721,702 Preferred Shares at a purchase price of $1.66. These
warrants cannot be exercised unless the value of the Company's
stock price as traded on the NASDAQ over a twenty-day period
exceeds $7.17.
The following pro forma consolidated balance sheet and pro forma
consolidated statements of operations (collectively, the "pro
forma consolidated statements") are based upon the historical
consolidated financial statements of the Company, adjusted to give
effect to the debt and equity financing described above.
The pro forma consolidated balance sheet assumes that the equity
financing occurred on May 31, 1999 and includes the debt financing
which occurred on April 30, 1999. The fiscal year 1999 and year-
to-date 2000 pro forma consolidated statements of operations
assume that the debt and equity financing occurred as of the first
day of the Company's 1999 and 2000 fiscal years, respectively.
Certain pro forma adjustments relating to the debt and equity
financing are based upon preliminary estimates. Therefore,
certain amounts are subject to adjustment based upon the actual
outcome of the transaction. Also, the consolidated statements are
unaudited. As a result, the ultimate effect of the transaction
may differ from the pro forma adjustments presented herein and
described in the accompanying notes.
The pro forma consolidated statements do not purport to present
what the Company's financial position and results of operations
would actually have been had the financing occurred on May 31,
1999 for the pro forma consolidated balance sheet, or on the first
day of the Company's 1999 and 2000 fiscal years for the pro forma
consolidated statements of earnings, or purport to project the
Company's results of operations for any future period. The pro
forma consolidated statements reflect certain assumptions
described in the accompanying notes. The pro forma consolidated
statements and accompanying notes should be read in conjunction
with the audited consolidated financial statements of the Company
and the related notes thereto which are included in the Company's
Annual Report on Form 10-KSB for its fiscal year ended January 31,
1999, the Company's quarterly reports on Form 10-QSB, and the
Company's Current Report on Form 8-K dated June 8, 1999 (all filed
with the Securities and Exchange Commission).
MEDPLUS, INC. AND SUBSIDIARIES
Pro Forma Consolidated Balance Sheet
As of May 31, 1999
(unaudited)
<TABLE><CAPTION>
Financing
Pro Forma
Historical(a) Adjustments Pro Forma
------------ --------------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,667,967 4,100,000(b) 5,767,967
Accounts receivable 4,745,028 4,745,028
Other receivables 47,463 47,463
Income tax receivable 25,000 25,000
Inventories 418,525 418,525
Prepaid expenses 763,214 (160,000)(c) 603,214
------------ --------------- -----------
Total current assets 7,667,197 3,940,000 11,607,197
------------ --------------- -----------
Capitalized software
development costs, net 2,625,768 2,625,768
Fixed assets, net 1,518,285 1,518,285
Excess of cost over fair
value of net assets 687,740 687,740
Other assets 390,695 390,695
------------ --------------- -----------
$12,889,685 3,940,000 16,829,685
============ =============== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of
obligations under
capital leases $ 189,903 189,903
Borrowings on line of credit 2,839,581 2,839,581
Accounts payable 1,275,898 392,508(c) 1,668,406
Accrued expenses 1,296,418 1,296,418
Deferred revenue 1,409,354 1,409,354
------------ --------------- -----------
Total current liabilities 7,011,154 392,508 7,403,662
============ =============== ===========
Obligations under capital
leases, excluding current
installments 100,320 100,320
Long-term debt 2,000,000 (32,809)(b) 1,776,825
(190,366)(c)
------------ --------------- -----------
9,111,474 169,333 9,280,807
------------ --------------- -----------
Shareholders' equity:
Common stock, no par value,
authorized 15,000,000 shares:
issued 6,255,269 shares - - -
Preferred stock, .01 par value,
authorized 5,000,000 shares
issued 2,371,815 shares - 23,718(b) 23,718
Additional paid-in capital 17,746,465 4,109,091(b) 21,839,699
(362,142)(c)
346,285 (d)
Treasury stock, at cost,
200,000 shares (863,497) (863,497)
Accumulated deficit (13,046,937) (346,285)(d) (13,393,222)
Unearned stock compensation (57,820) (57,820)
------------ --------------- -----------
Total shareholders' equity 3,778,211 3,770,667 7,548,878
------------ --------------- -----------
------------ --------------- -----------
$12,889,685 3,940,000 16,829,685
============ =============== ===========
See notes to Pro Forma Consolidated Balance Sheet. </TABLE
MedPlus, Inc. and Subsidiaries
Notes to Pro Forma Consolidated Balance Sheet
As of May 31, 1999
Certain pro forma adjustments relating to the debt and equity
financing are based upon preliminary estimates. Therefore,
certain amounts are subject to adjustment based upon the actual
outcome of the transaction. Also, the consolidated statements are
unaudited. As a result, the ultimate effect of the transaction
may differ from the pro forma adjustments presented herein and
described in these notes.
(a) The amounts in the "Historical" column are derived from the
unaudited financial records of the Company as of May 31, 1999.
The $2,000,000 related to the subordinated notes was received on
April 30, 1999 and is included in the "Historical" column.
(b) Represents the receipt and allocation of gross proceeds
related to the equity portion of the financing.
(c) Represents the estimated debt issue costs and equity
financing costs incurred to complete the debt and equity
financing. The portion allocated to long-term debt will be
amortized to interest expense over the estimated term of the debt.
The portion allocated to paid-in capital reduces shareholders'
equity in the consolidated balance sheet.
(d) Represents the beneficial conversion feature on the preferred
share issuance. The amount is calculated as the effect of the
differential between the conversion price of the Preferred Shares
and the closing market price on the date of commitment of the
Preferred Shares multiplied by the number of shares issued.
MEDPLUS, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
For the Four Month Period Ended May 31, 1999
(unaudited)
</TABLE>
<TABLE><CAPTION>
Financing
Pro Forma
Historical(a) Adjustments Pro Forma
------------ --------------- -----------
<S> <C> <C> <C>
Revenues:
Systems sales $ 2,944,236 2,944,236
Support and consulting revenues 1,749,497 1,749,497
------------ --------------- -----------
Total revenues 4,693,733 - 4,693,733
------------ --------------- -----------
Cost of revenues:
Systems sales 1,515,080 1,515,080
Support and consulting revenues 1,571,675 1,571,675
------------ --------------- -----------
Total cost of revenues 3,086,755 - 3,086,755
------------ --------------- -----------
Gross profit 1,606,978 - 1,606,978
Operating expenses:
Sales and marketing 1,228,339 1,228,339
Research and development 635,345 635,345
General and administrative 1,353,718 1,353,718
------------ --------------- -----------
Total operating expenses 3,217,402 - 3,217,402
------------ --------------- -----------
Operating loss (1,610,424) - (1,610,424)
Other income (expense):
Other income (expense), net (89,348) (101,600)(b) (190,948)
Synergis management expenses,
acquisition and offering costs (179,663) (179,663)
------------ --------------- -----------
Total other income(expense) (269,011) (101,600) (370,611)
------------ --------------- -----------
Net loss (1,879,435) (101,600) (1,981,035)
Conversion discount on preferred stock - (346,285)(c) (346,285)
Preferred stock dividend requirements - (81,828)(d) (81,828)
------------ --------------- -----------
common shareholders $(1,879,435) (529,713) (2,409,148)
============ =============== ===========
Loss per common share
(basic and diluted) $ (0.31) (0.40)
============ ===========
Weighted average shares
outstanding 6,051,508 6,051,508
============ ===========
See notes to Pro Forma Consolidated Statements of Operations. </TABLE>
MEDPLUS, INC. AND SUBSIDIARIES
Pro Forma Consolidated Statement of Operations
For the Year Ended January 31, 1999
(unaudited)
<TABLE><CAPTION>
Financing
Pro Forma
Historical(a) Adjustments Pro Forma
------------ --------------- -----------
<S> <C> <C> <C>
Revenues:
Systems sales $ 6,155,381 6,155,381
Support and consulting revenues 5,274,603 5,274,603
------------ --------------- -----------
Total revenues 11,429,984 - 11,429,984
------------ --------------- -----------
Cost of revenues:
Systems sales 3,411,387 3,411,387
Support and consulting revenues 4,918,588 4,918,588
------------ --------------- -----------
Total cost of revenues 8,329,975 - 8,329,975
------------ --------------- -----------
Gross profit 3,100,009 - 3,100,009
Operating expenses:
Sales and marketing 5,542,008 5,542,008
Research and development 2,062,848 2,062,848
General and administrative 4,048,093 4,048,093
------------ --------------- -----------
Total operating expenses 11,652,949 - 11,652,949
------------ --------------- -----------
Operating loss (8,552,940) - (8,552,940)
Other income (expense):
Other income (expense), net (14,751) (304,800)(b) (319,551)
Minority interest 297,000 297,000
Synergis management expenses,
acquisition and offering costs (2,070,731) (2,070,731)
------------ --------------- -----------
Total other income (expense) (1,788,482) (304,800) (2,093,282)
------------ --------------- -----------
Loss before income tax benefit (10,341,422) (304,800) (10,646,222)
Income tax benefit (1,616,370) (1,616,370)
------------ --------------- -----------
Loss from continuing operations (8,725,052) (304,800) (9,029,852)
Income from discontinued operations 177,299 - 177,299
------------ --------------- -----------
Net loss (8,547,753) (304,800) (8,852,553)
------------ --------------- -----------
Conversion discount on preferred stock - (346,285)(c) (346,285)
Preferred stock dividend requirements - (327,310)(d) (327,310)
------------ --------------- -----------
Loss attributable-common shareholders $ (8,547,753) (978,395) (9,526,148)
============ =============== ===========
Loss per common share (basic and diluted)
Continuing operations $ (1.43) (1.59)
Discontinued operations 0.03 0.03
------------ -----------
Net loss $ (1.40) (1.56)
============ ===========
Weighted average shares outstanding 6,109,439 6,109,439
------------ -----------
See notes to Pro Forma Consolidated Statements BLE>
MedPlus, Inc. and Subsidiaries
Notes to Pro Forma Consolidated Statements of Operations
For the Four Month Period Ended May 31, 1999 and the Year Ended
January 31, 1999
Certain pro forma adjustments relating to the debt and equity
financing are based upon preliminary estimates. Therefore,
certain amounts are subject to adjustment based upon the actual
outcome of the transaction. Also, the consolidated statements are
unaudited. As a result, the ultimate effect of the transaction
may differ from the pro forma adjustments presented herein and
described in these notes.
The Agreement related to the debt and equity financing includes a
number of provisions which on a prospective basis may accelerate
the payment of the Notes, increase the number of Preferred Shares
outstanding, prompt the conversion of the Preferred Shares
outstanding into common shares of the Company, or allow for
certain other events which may have an effect on the Company's
future statements of operations. As it is uncertain as to whether
any of these events would have occurred on a pro forma basis, the
effect of these types of transactions have been excluded from the
pro forma statements of operations included herein.
(a) The amounts in the "Historical" column included in the
statement of operations for the year ended January 31, 1999 are
derived from the audited financial statements of the Company as of
January 31, 1999 included in the Company's Annual Report as filed
in its Form 10-KSB for the year then ended. The amounts in the
"Historical" column for the statement of operations for the four
month interim period ended May 31, 1999 are derived from the
unaudited financial records of the Company as of May 31, 1999.
(b) Represents interest expense related to the Notes. Total
interest expense related to the Notes includes interest on the
Notes, the amortization of a discount allocated to the
subordinated notes through a valuation of the terms of the
agreement, and the amortization of estimated debt issuance costs.
The effective interest rate utilized, which includes all of the
above charges, was approximately 15 1/4 %.
(c) Represents the beneficial conversion feature on the preferred
share issuance. The amount is calculated as the effect of the
differential between the conversion price of the Preferred Shares
and the closing market price on the date of commitment of the
Preferred Shares multiplied by the number of shares issued.
(d) Represents the effect of dividends issued to preferred
shareholders, including the effect of the issuance of increasing
rate dividends.
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.
MEDPLUS, INC.
Date: July 9, 1999
By: /s/ Daniel A. Silber
Daniel A. Silber
Chief Financial Officer
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</TABLE>
