<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1997.
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 000-27056
Medirisk, Inc.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 58-2256400
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
Two Piedmont Center, Suite 400, 3565 Piedmont Rd., Atlanta, Georgia 30305
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(Address of principal executive office) (Zip code)
</TABLE>
Registrant's Telephone Number Including Area Code: (404) 364-6700
-----------------------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
----- -----
The number of shares outstanding of the issuer's only class of Common
Stock, $.001 par value as of August 11, 1997 was 4,164,434.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
MEDIRISK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
6/30/97 12/31/96
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<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 9,195 $ 447
Accounts receivable, less allowance for
doubtful accounts of $158 and $97 at
June 30, 1997 and December 31, 1996, respectively 1,534 1,428
Prepaid expenses 584 921
Other current assets 547 175
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Total current assets 11,860 2,971
Property and equipment 2,242 1,736
Less accumulated depreciation and amortization 1,125 893
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Property and equipment, net 1,117 843
Excess of cost over net assets of businesses
acquired, less accumulated amortization
of $302 and $180 at June 30, 1997
and December 31, 1996, respectively 4,387 3,128
Intangible assets, less accumulated amortization
of $167 and $89 at June 30, 1997
and December 31, 1996, respectively 1,295 431
Software development costs, less accumulated
amortization of $39 and $20 at June 30,
1997 and December 31, 1996, respectively 317 101
Other assets 137 982
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Total other assets 6,136 4,642
Total assets $19,113 $8,456
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</TABLE>
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MEDIRISK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
6/30/97 12/31/96
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<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 287 $ 639
Accrued expenses 855 449
Current installments of long-term debt and
obligations under capital leases 217 1,842
Deferred revenue 2,278 2,536
-------- -------
Total current liabilities 3,637 5,466
Long-term debt and obligations under capital leases,
excluding current installments 203 7,195
Dividends payable -- 618
-------- -------
Total liabilities 3,840 13,279
STOCKHOLDERS' EQUITY (DEFICIT):
Series A convertible preferred stock, $.001 par value,
3,000 shares authorized; 1,292 issued and
outstanding shares at December 31, 1996 -- 1
Series B convertible preferred stock, $.001 par value;
400 shares authorized; 281 issued and
outstanding shares at December 31, 1996 -- --
Common stock - $.001 par value; 20,000 shares
authorized; 4,164 and 710 shares issued and outstanding
at June 30, 1997 and December 31, 1996, respectively 4 1
Additional paid in capital 28,350 4,972
Accumulated deficit (13,081) (9,797)
-------- -------
Total stockholders' equity (deficit) 15,273 (4,823)
Total liabilities and stockholders' equity (deficit) $ 19,113 $ 8,456
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE> 4
MEDIRISK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
------------ ----------
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 3,243 $2,297 $ 5,893 $ 3,874
Salaries, wages and benefits 1.718 1,637 3,480 2,758
Other operating expenses 894 650 1,539 1,006
Depreciation and amortization 249 226 450 322
Acquired in-process research and development costs 3,100 -- 3,100 6,180
------- ------ ------- -------
Operating loss (2,718) (216) (2,676) (6,392)
Interest income (expense), net 157 (214) 197 (266)
Other expense -- (37) -- (37)
------- ------ ------- -------
Loss before extraordinary item (2,561) (467) (2,479) (6,695)
------- ------ ------- -------
Extraordinary item - Loss on early extinguishment of debt -- -- (806) --
------- ------ ------- -------
Net loss (2,561) (467) (3,285) (6,695)
Series A and Series B convertible preferred stock dividend -- 50 25 101
requirement ------- ------ ------- -------
Net loss attributable to common stock $(2,561) $ (517) $(3,310) $(6,796)
======= ====== ======= =======
Net loss per share:
Loss before extraordinary item $ (0.63) $(0.23) $ (0.68) $ (3.06)
Extraordinary loss on early extinguishment of debt -- -- $ (0.22) --
------- ------ ------- -------
Net loss per share of common stock $ (0.63) $(0.23) $ (0.90) $ (3.06)
======= ====== ======= =======
Weighted average number of common shares outstanding 4,051 2,217 3,658 2,217
======= ====== ======= =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE> 5
MEDIRISK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands)
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<CAPTION>
SIX MONTHS
----------
ENDED JUNE 30,
--------------
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,285) $(6,695)
Adjustments to reconcile net loss to net cash
used in operating activities:
Acquired in-process research and development costs 3,100 6,180
Depreciation and amortization 450 322
Other -- 136
Loss on early extinguishment of debt 806 --
Decrease (increase) in:
Accounts receivable 257 101
Other assets 80 (133)
Increase (decrease) in:
Accounts payable (504) (23)
Accrued expenses and other liabilities (458) 68
Deferred revenue (938) (55)
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Net cash used in operating activities (492) (99)
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Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (3,533) (6,985)
Purchases of property and equipment (253) (41)
Additions to software development costs (242) (109)
Loan to Officer 0 (113)
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Net cash used in investing activities (4,028) (7,248)
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Cash flows from financing activities:
Proceeds from issuance of common stock 22,614 8
Proceeds from issuance of Series B conv. pref. stock -- 2,000
Payments for Series B conv. pref. stock issuance costs -- (221)
Payments of dividends (643) --
Proceeds from issuance of long-term debt, related party -- 6,900
Payments of debt issuance costs -- (345)
Payments on long-term debt and obl. under capital leases (8,726) (151)
Repayment of note receivable from stockholder 23 14
------- -------
Net cash provided by financing activities 13,268 8,205
------- -------
Net increase in cash and cash equivalents 8,748 858
Cash and cash equivalents at beginning of period 447 289
------- -------
Cash and cash equivalents at end of period $ 9,195 $ 1,147
======= =======
</TABLE>
See accompanying notes to consolidated condensed financial statements
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<PAGE> 6
MEDIRISK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL:
The consolidated condensed financial statements as of June 30, 1997
and for the six months ended June 30, 1997 and 1996 are unaudited. In the
opinion of management, all adjustments, consisting of normal recurring
accruals, necessary for the fair presentation of the consolidated financial
position and results of operations and cash flows for the periods presented
have been included. Results for the interim period are not necessarily
indicative of results that may be expected for the full year.
These consolidated condensed financial statements should be read in
conjunction with the consolidated financial statements and notes included in
the Annual Report on Form 10-K of Medirisk, Inc. for the year ended December
31, 1996.
2. MAJOR CUSTOMERS:
One customer accounted for 15% of the Company's revenue for the six
months ended June 30, 1997 and 1996.
3. LOSS PER SHARE OF COMMON STOCK:
Loss per share of Common Stock for all periods presented are based on
the weighted average shares of Common Stock outstanding. Loss per share does
not include the effect of outstanding Common Stock equivalents because the
effect is antidilutive. The three and six months ended June 30, 1996 weighted
average shares outstanding assumes the conversion of the Company's Series A and
Series B Convertible Preferred Stock into Common Stock.
4. EXTRAORDINARY ITEM:
As a result of the application of a portion of the net proceeds of the
Company's initial public offering to repay indebtedness, the Company incurred a
one-time, non-recurring, non-cash charge of $806,000 with respect to
accelerated amortization of original issue discount on Senior Subordinated
Notes and related deferred financing costs. Due to the Company's losses no
income tax benefit was applied to the extraordinary loss presented.
5. LINE OF CREDIT:
In March 1997 the Company entered into a Credit Agreement with
NationsBank under which a $10 million revolving credit facility (the
"NationsBank Revolver") is made available to the Company. The NationsBank
Revolver is available to fund working capital needs as well as new product
development and acquisitions.
6. INITIAL PUBLIC OFFERING:
In January 1997, the Company sold 2,300,000 shares of its Common Stock
in an initial public offering in which it received approximately $22,626,000,
net of offering costs of approximately $903,000. As a result of the
consummation of the offering, the Company's Series A and Series B Convertible
Preferred Stock were converted into 1,021,809 shares of Common Stock. In
addition, all of the Company's accrued dividends and debt, excluding obligations
under capital leases, were repaid.
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<PAGE> 7
7. ACQUISITION
Effective June 1, 1997 the Company acquired all of the shares of CIVS,
Inc., a Rockville, Maryland-based provider of credentialling services to
hospitals and managed care organizations, for $3.5 million in cash and 129,166
shares of the Company's Common Stock at a price of $7.50 per share. The Company
recorded the acquisition using the purchase method of accounting with $3.1
million of the purchase price allocated to acquired in-process research and
development costs and charged to the consolidated statement of operations on
June 30, 1997.
The unaudited pro forma results of operations of the Company for the
six months ended June 30, 1997 and 1996 as if the acquisition described above
had been effective January 1, 1996 is summarized as follows:
<TABLE>
<CAPTION>
SIX MONTHS
--------------------------------
ENDED JUNE 30,
--------------------------------
1997 1996
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<S> <C> <C>
Revenue $ 7,012 $ 5,077
Loss before extraordinary item (3,146) (6,836)
Extraordinary item - Loss on early extinguishment of debt (806) --
------- -------
Net loss (3,952) (6,836)
Series A and Series B convertible preferred stock dividend requirement 25 101
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Net loss attributable to common stock (3,977) (6,937)
======= =======
Net loss per share:
Loss before extraordinary item $ (0.83) $ (2.92)
Extraordinary item - Loss on early extinguishment of debt $ (0.21) --
Series A and Series B convertible preferred stock dividend requirement $ (0.01) $ (0.04)
------- -------
Net loss per share of common stock $ (1.05) $ (2.96)
======= =======
Weighted average number of common shares outstanding 3,778 2,346
</TABLE>
The unaudited pro forma results do not necessarily represent results
which would have occurred if the acquisition had taken place on the date
indicated nor are they necessarily indicative of the results of future
operations.
<PAGE> 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Medirisk is a leading provider of proprietary databases and related
decision-support software and analytical services to the healthcare industry in
the United States. The Company's healthcare information products and services
consist of financial products, clinical performance products and physician
database products. Prior to 1996, the Company provided only financial products
consisting of comprehensive, objective physician-related information regarding
medical fees and healthcare utilization patterns to both payers and providers.
In 1996, the Company undertook an acquisition strategy to expand its
product offerings. The Company acquired Formations in Health Care, Inc.
("Formations") and PracticeMatch, Inc. ("PracticeMatch") in January and March
1996, respectively. Formations offers clinical performance products that allow
customers to measure treatment outcomes across a range of care within a variety
of medical specialties. PracticeMatch offers physician database products to
assist customers in cost-effective in-house physician recruiting.
The Company acquired Staff-Link, Inc. ("Staff-Link") and CIVS, Inc.
("CIVS") in May and June of 1997, respectively. Staff-Link was an asset
purchase that provided the Company with an additional customer base for the
physician database products. CIVS provides cost-effective and efficient
services for the verification of healthcare provider credentials. As a result
of these various acquisitions, the Company's historical financial statements
are not representative of financial results to be expected for future periods.
In connection with these acquisitions, the Company acquired intangible
assets which are being amortized over various useful lives. The amortization
periods are based on, among other things, the nature of the products and
markets, the competitive position of the acquired companies and the
adaptability to changing market conditions of the acquired companies. The
Company recorded amortization expense relative to intangible assets of $118,000
and $91,000 for the three months ended and $199,000 and $119,000 for the six
months ended June 30, 1997 and 1996, respectively.
Also in connection with these acquisitions, the Company recorded
non-recurring charges related to in-process research and development costs of
approximately $1.0 million for Formations, $5.1 million for PracticeMatch and
$3.1 million for CIVS. The amount of each of these non-recurring charges was
equal to the estimated current fair value, based on the adjusted cash flows
(discounted by a risk adjusted weighted average cost of capital of 19% for
Formations, 20% for PracticeMatch and 25% for CIVS), of specifically identified
technologies for which technological feasibility had not yet been established
pursuant to Statement of Financial Accounting Standards No. 86, "Accounting for
the Costs of Computer Software to be Sold, Leased or Otherwise Marketed," and
for which future alternative uses did not exist.
Medirisk's products are licensed pursuant to single-year and
multi-year agreements. Revenue from licenses of financial products is
recognized upon the delivery of the data and, in the case of multi-year
agreements, on the anniversary of the date of delivery. Revenue from licenses
of clinical performance products is recognized over the life of the contract as
services are performed. Revenue from licenses of physician database products
is recognized ratably over the life of the customer contract. All other
revenue, including training, consulting fees and other miscellaneous services,
is recognized upon the performance of the applicable services. Because a
higher proportion of financial products historically have been licensed in the
second half of the year, the Company may experience sequentially higher revenue
in the third and fourth calendar quarters and, consequently, sequentially lower
revenues in the first and second calendar quarters.
The Company's revenue is composed of both recurring revenue from the
Company's current customer base as well as revenue from new customers. The
Company defines its recurring revenue percentage with respect to any particular
period as the quotient, expressed as a percentage, of (i) revenue recognized
during such period
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<PAGE> 9
from a sale of a product to a customer who purchased a similar product in the
prior period, divided by (ii) the Company's total revenue in the prior period.
In determining its recurring revenue percentage, the Company includes in its
revenue the revenue of entities acquired during the period as if such
acquisition had occurred at the beginning of the prior period. The Company
does not include revenue in its recurring revenue percentage to the extent that
such revenue exceeds total revenue in the prior period. The Company's
recurring revenue percentage for the three months ended June 30, 1997 was
approximately 80% and approximately 79% for the six months ended June 30, 1997.
In addition to acquisitions, the Company seeks to expand its product
offerings through internal product development. The Company capitalizes
internal product development costs incurred after technological feasibility has
been established and prior to general product release. Capitalized development
costs totaled $317,000, net of accumulated amortization, at June 30, 1997.
RESULTS OF OPERATIONS
The following table sets forth, for the fiscal periods indicated,
certain items from the statements of operations of the Company expressed as a
percentage of revenue:
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<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
------------- -------------
STATEMENT OF OPERATIONS: 1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Revenue 100 % 100 % 100 % 100%
Salaries, wages and benefits 53 71 59 71
Other operating expenses 27 28 26 26
Depreciation and amortization 8 10 8 8
Acquired in-process research and
development costs 96 -- 52 160
--- --- --- ----
Operating loss (84) (9) (45) (165)
Interest and other income (expense), net 5 (11) 3 (8)
--- --- --- ----
Loss before extraordinary item (79) (20) (42) (173)
Extraordinary item -- -- (14) --
--- --- --- ----
Net loss (79)% (20)% (56)% (173)%
=== === === ====
</TABLE>
QUARTER ENDED JUNE 30, 1997 COMPARED TO QUARTER ENDED JUNE 30, 1996
Revenue. Revenue for the three months ended June 30, 1997 was $3.2
million, an increase of $946,000 or 41% over the same period in the prior year.
The increase was primarily the result of internal growth and incremental
revenue attributable to the CIVS acquisition.
Salaries, wages and benefits. Salaries, wages and benefits for the
three months ended June 30, 1997 were $1.7 million, an increase of $81,000 or
5% over the same period in the prior year. Salaries, wages and benefits as a
percentage of revenue decreased to 53% from 71% in the same period in the prior
year. This decrease resulted primarily from leveraging the personnel
investments made during 1996 as revenue increased through both internal growth
and acquisitions.
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<PAGE> 10
Other operating expenses. Other operating expenses for the three
months ended June 30, 1997 were $894,000, an increase of $244,000 or 38% over
the same period in the prior year. The acquisition of CIVS accounted for the
majority of the increase and the remainder was primarily related to costs to
maintain a public company. Other operating expenses decreased as a percentage
of revenue to 27% as compared to 28% in the same period in the prior year.
Depreciation and amortization. Depreciation and amortization expenses
for the three months ended June 30, 1997 were $249,000, an increase of $23,000
or 11% over the same period in the prior year. The increase was primarily the
result of the goodwill amortization associated with the acquisitions of CIVS and
Staff-Link. Depreciation and amortization as a percentage of revenue decreased
to 8% as compared to 10% in the same period in the prior year.
Acquired in-process research and development costs. Acquired
in-process research and development costs for the three months ended June 30,
1997 were $3.1 million as compared to $0 in the same period in the prior year.
As discussed above, in connection with the acquisition of CIVS the Company
acquired the ongoing research and development activities of the entity. At the
effective date of the acquisition the Company recorded non-recurring charges
resulting from expensing acquired research and development costs.
Interest income (expense), net. Net interest income for the three
months ended June 30, 1997 was $157,000, compared to net interest expense of
$214,000 for the same period in the prior year. The improvement is primarily
due to the income earned on the net proceeds from the Company's initial public
offering and the decrease in interest expense resulting from the repayment of
debt with proceeds from the initial public offering.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Revenue. Revenue for the six months ended June 30, 1997 was $5.9
million, an increase of $2.0 million or 52% over the same period in the prior
year. The increase was primarily the result of the Company's March 1996
acquisition of PracticeMatch and the June 1997 acquisition of CIVS.
PracticeMatch was included for the full six months in 1997 compared to a
partial six months in the prior year. The remainder of the revenue increase was
attributable to internal growth.
Salaries, wages and benefits. Salaries, wages and benefits for the
six months ended June 30, 1997 were $3.5 million, an increase of $722,000 or
26% over the same period in the prior year. This increase was primarily the
result of the Company's acquisitions of PracticeMatch and CIVS, as well as
increased expenses related to new sales, marketing and administrative personnel
hired to enhance the Company's corporate infrastructure. Salaries, wages and
benefits decreased as a percentage of revenue to 59% for the six months ended
June 30, 1997 as compared to 71% for the same period in the prior year. This
decrease resulted primarily from leveraging the personnel investments made
during 1996 as revenue increased through both acquisitions and internal growth.
Other operating expenses. Other operating expenses for the six months
ended June 30, 1997 were $1.5 million, an increase of $533,000 or 53% over the
same period in the prior year. This increase was primarily the result of the
Company's acquisitions of PracticeMatch and CIVS. Other operating expenses as
a percentage of revenue remained at 26% for the six months ended June 30, 1997
and the prior year.
Depreciation and amortization. Depreciation and amortization expenses
for the six months ended June 30, 1997 were $450,000, an increase of $128,000
or 40% over the same period in the prior year. This increase was primarily the
result of the Company's acquisition of PracticeMatch and technology investments
made in 1996. As a percentage of revenue, depreciation and amortization
remained at 8% for the six months ended June 30, 1997 and 1996.
Acquired in-process research and development costs. Acquired
in-process research and development costs for the six months ended June 30,
1997 were $3.1 million, a decrease of $3.1 million or 50% over the same period
in the prior year. As discussed above, in connection with the acquisitions of
Formations, PracticeMatch and CIVS the Company acquired the ongoing research
and development activities of each entity. At the effective date of each
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<PAGE> 11
acquisition the Company recorded non-recurring charges resulting from expensing
acquired in-process research and development costs.
Interest income(expense), net. Net interest income for the six months
ended June 30, 1997 was $197,000, compared to net interest expense of $266,000
for the same period in the prior year. The improvement was a result of the
interest income earned on the net proceeds from the Company's initial public
offering and the decrease in interest expense resulting from the repayment of
debt with proceeds from the initial public offering.
Extraordinary items. The Company recorded an extraordinary loss for
the six months ended June 30, 1997 of $806,000 related to a one-time,
non-recurring, non-cash charge for bond discount and debt issue cost associated
with the early extinguishment of debt.
LIQUIDITY AND CAPITAL RESOURCES
The Company completed its initial public offering of Common Stock in
January 1997 and received approximately $22.6 million in net proceeds.
Approximately $9.1 million of these net proceeds were used to repay a senior
subordinated note and certain notes issued in connection with the Company's
acquisition of PracticeMatch, to pay accrued dividends on the Company's Series
A and Series B Convertible Preferred Stock and to repay a bridge loan provided
by NationsBank. The Company intends to use the balance of the net proceeds of
its initial public offering for working capital and general corporate purposes,
including potential acquisitions of healthcare information businesses and
development of new products.
In addition, in March 1997, NationsBank and the Company entered into a
Credit Agreement under which a $10.0 million revolving credit facility (the
"NationsBank Revolver") is available to the Company. The NationsBank Revolver
is secured by substantially all of the Company's assets. Under the terms of
the NationsBank Revolver the Company may, subject to customary terms,
conditions and covenants, borrow up to $10.0 million to fund working capital
needs as well as new product development and acquisitions. The Credit
Agreement for the NationsBank Revolver provides that the NationsBank Revolver
will bear interest at varying rates based on LIBOR and NationsBank's prime rate
and will mature on March 28, 1999. Under the terms of the NationsBank
Revolver, the Company is subject to various restrictive covenants regarding,
among other things, payment of any dividends, capital expenditures limitations,
incurrence of indebtedness from others in excess of certain amounts, and
consummation of certain mergers and acquisitions without the consent of the
lender. Financial covenants include, but are not limited to, maintaining debt
to capitalization ratios, minimum net worth ratios, debt service coverage
ratios and cash flow leverage ratios.
In June of 1997 the Company acquired CIVS for $3.5 million in cash and
129,166 shares of the Company's Common Stock. The Company also anticipates
direct deal costs of $175,000 and $300,000 of integration costs will be
incurred through the balance of the year.
The Company currently has no specific plans with respect to the use of
the remaining $8.4 million of the net proceeds of its initial public offering
or the NationsBank Revolver, and the Company's cash flow from operations has
generally been sufficient to fund liquidity needs of the Company other than
acquisitions and new product development. The Company anticipates that
borrowings under the NationsBank Revolver and the remaining net proceeds of the
initial public offering will be used principally for working capital and
general corporate purposes, for potential acquisitions of complementary
businesses or products in the healthcare information industry and for the
development of additional products. Although the Company continually seeks
suitable acquisition candidates with complementary businesses and products in
the healthcare information industry, it is not currently a party to any
definitive agreement or letter of intent regarding any acquisition. Pending
the application of the net proceeds as described above, the Company has
invested the remaining net proceeds of its initial public offering in
short-term, interest-bearing, investment-grade securities.
In January 1996, the Company and HealthPlan Services Corporation
("HPSC") entered into a Securities Purchase Agreement, under which HPSC
purchased 280,623 shares of Series B Convertible Preferred Stock for $2.0
million and agreed to purchase up to $10.0 million in original principal amount
of Senior Subordinated
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<PAGE> 12
Notes. In connection with the issuance of the Senior Subordinated Notes, the
Company agreed to issue warrants to purchase up to 432,101 shares of Common
Stock. In March 1996, the Company issued $6.9 million in original principal
amount of the Senior Subordinated Notes to HPSC and warrants to purchase
298,150 shares of Common Stock. The Company used $1.5 million of the proceeds
from the sale of Series B Convertible Preferred Stock to complete the
acquisition of Formations. Medirisk used approximately $5.4 million of the
proceeds from the issuance of the Senior Subordinated Notes to complete the
acquisition of PracticeMatch. In addition, in connection with the
PracticeMatch acquisition, the Company issued acquisition notes to the sellers
in an aggregate amount of $1.1 million. The HPSC Senior Subordinated Note, a
NationsBank bridge loan and the acquisition notes were repaid in full upon the
completion of the Company's initial public offering in January 1997. Upon such
repayment, HPSC's obligation to purchase additional Senior Subordinated Notes
terminated.
The Company has working capital of $8.2 million as of June 30, 1997 as
compared to a working capital deficit of $2.5 million as of December 31, 1996.
This increase is due primarily to the receipt of the net proceeds of the
Company's initial public offering.
Net cash used by operating activities totaled $492,000 for the six
months ended June 30, 1997 as compared to $99,000 for the same period in the
prior year. The increase in cash used of $393,000 was primarily the result of
timing of customer payments related to the deferred revenue.
Net cash used in investing activities was approximately $4.0 million
for the six months ended June 30, 1997 as compared to $7.2 million for the same
period in the prior year. In 1996, $7.0 million was used to fund the
acquisition of Formations and PracticeMatch,. while $3.6 million was used to
fund the acquisitions of CIVS and Staff-Link in the same period in 1997.
Net cash provided by financing activities was $13.3 million for the
six months ended June 30, 1997 as compared to $8.2 million for the same period
in the prior year. As previously discussed, in 1997 the Company retained
$13.7 million of the net proceeds from its initial public offering, and the
cash provided in 1996 resulted from the net proceeds under the HPSC Securities
Purchase Agreement.
After the application of the net proceeds from its initial public
offering, the Company believes that the remaining proceeds, borrowings under
the NationsBank Revolver and cash generated from operations will be sufficient
to meet the capital expenditure and working capital needs for the Company's
operations for the near term. The Company's future liquidity and cash
requirements will depend on a wide range of factors, including development
costs associated with new products, enhancements of existing products, and
acquisitions. Although the Company has no present commitments or agreements
regarding acquisitions, the Company's strategy is to acquire additional
complementary products and businesses. If the proceeds of the Offering,
borrowings under the NationsBank Revolver and cash flow from operations are not
sufficient to fund such acquisitions, the Company will be required to seek
additional financing, and there can be no assurance that such financing will be
available in amounts and at terms acceptable to the Company.
EFFECTS OF INFLATION
Management does not believe that inflation has had a material impact
on results of operations for the periods presented. Substantial increases in
costs, particularly the cost of labor for product development, marketing and
sales, could have an adverse impact on the Company and the healthcare
information industry.
FORWARD-LOOKING STATEMENTS
The Company may from time to time make written or oral forward-looking
statements contained in the Company's filings with the Securities and Exchange
Commission (the "Commission") and its reports to stockholders. Statements made
in this Quarterly Report on Form 10-Q, other than those concerning historical
information, should be considered forward-looking and subject to various risks
and uncertainties. Such forward-looking statements are made based on
management's belief, as well as on assumptions made by, and information
currently available to, management, and are made pursuant to, and in reliance
upon, the "safe harbor" provisions
- 11 -
<PAGE> 13
of the Private Securities Litigation Reform Act of 1995. The Company's actual
results may differ materially from the results anticipated in these
forward-looking statements due to numerous factors, including the following:
History of Operating Losses and Uncertain Profitability; Risks Related to
Growth; Risks of Integration of Acquired Operations; Dependence on Data
Sources and AMA Licenses; Dependence on Intellectual Property Rights;
Uncertainty and Consolidation in the Health Care Industry; Risks of Rapid
Technological Change; Intense Competition; Risks of Customer Concentration;
Potential for System Defects; Concentration of Ownership; Dependence on Key
Personnel; Variable Quarterly Operating Results and Seasonality; No Prior
Public Market and Possible Volatility of Stock Price; Potential Adverse
Effects of Substantial Number of Shares Eligible for Future Sale; Adverse
Impact of Anti-takeover Provisions; No Dividends; and Risks Associated with
Unspecified Use of Proceeds. For a more complete discussion of these factors,
please see the section entitled "Risk Factors" in the Company's Registration
Statement on Form S-1, as amended, as originally filed with the Commission on
September 28, 1996, Registration Number 33-12311.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.=
The Registrant currently maintains all cash in United States dollars
in highly liquid, interest-bearing, investment-grade instruments with
maturities of less than three months, which the Company considers cash
equivalents; therefore, the Registrant has no "market risk sensitive
instruments," and no disclosure is required under this Item.
- 12 -
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 - Statements of Computation of Per Share Loss.
27 - Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
During the quarter ended June 30, 1997, the Company did not file any
reports on Form 8-K; however, on July 9, 1997, the Company filed a report on
Form 8-K to report the acquisition of all of the capital stock of CIVS, Inc.,
which acquisition was consummated June 24, 1997.
- 13 -
<PAGE> 15
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.
Medirisk, Inc.
August 14, 1997 By: /s/
---------------------------------
Kenneth M. Goins, Jr.
Executive Vice President
Chief Financial Officer
(duly authorized and principal
financial officer)
- 14 -
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
11 Statements of Computation of Per Share Loss
27 Financial Data Schedule (for SEC use only)
</TABLE>
- 15 -
<PAGE> 1
EXHIBIT 11
MEDIRISK, INC. AND SUBSIDIARIES
STATEMENTS OF COMPUTATION OF PER SHARE LOSS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss attributable to common stock $(2,561) $ (517) $(3,310) $(6,796)
======= ====== ======= =======
Net loss per share:
Loss before extraordinary item $ (0.63) $(0.23) $ (0.68) $ (3.06)
Extraordinary loss on early extinguishment of debt -- -- $ (0.22) --
------- ------ ------- -------
Net loss per share of common stock $ (0.63) $(0.23) $ (0.90) $ (3.06)
======= ====== ======= =======
Weighed average number of common shares outstanding 4,051 2,217 3,658 2,217
======= ====== ======= =======
</TABLE>
- 16 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE MEDIRISK, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE
30, 1997 AND THE MEDIRISK, INC. CONSOLIDATED CONDENSED BALANCE SHEET AS OF
JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 9,195
<SECURITIES> 0
<RECEIVABLES> 1,692
<ALLOWANCES> 158
<INVENTORY> 0
<CURRENT-ASSETS> 11,860
<PP&E> 2,242
<DEPRECIATION> 1,125
<TOTAL-ASSETS> 19,113
<CURRENT-LIABILITIES> 3,637
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 15,269
<TOTAL-LIABILITY-AND-EQUITY> 19,113
<SALES> 5,893
<TOTAL-REVENUES> 5,893
<CGS> 0
<TOTAL-COSTS> 8,569
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 197
<INCOME-PRETAX> (2,479)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,479)
<DISCONTINUED> 0
<EXTRAORDINARY> (806)
<CHANGES> 0
<NET-INCOME> (3,285)
<EPS-PRIMARY> (0.90)
<EPS-DILUTED> (0.90)
</TABLE>
