-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FMUTTMX8DpAIJZS/1PjgHgJFwWkIAvS2P/iJ+08agLbQYVrI31OoR81uzCsfN+iX VHy/U1f6ZDxogo/M1DJrdw== 0001017813-98-000015.txt : 19981123 0001017813-98-000015.hdr.sgml : 19981123 ACCESSION NUMBER: 0001017813-98-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 DATE AS OF CHANGE: 19981120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PATIENT INFOSYSTEMS INC CENTRAL INDEX KEY: 0001017813 STANDARD INDUSTRIAL CLASSIFICATION: 8090 IRS NUMBER: 161476509 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22319 FILM NUMBER: 98753976 BUSINESS ADDRESS: STREET 1: 46 PRINCE ST CITY: ROCHESTER STATE: NY ZIP: 14607 BUSINESS PHONE: 7162427200 MAIL ADDRESS: STREET 1: 46 PRINCE ST CITY: ROCHESTER STATE: NY ZIP: 14607 10-Q 1 QUARTERLY REPORT FOR PATIENT INFOSYSTEMS, INC. U.S. Securities and Exchange Commission Washington D.C. 20549 FORM 10Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF For the transition period from ..................................to............. Commission file number: 0-22319 PATIENT INFOSYSTEMS, INC. (Exact name of registrant as specified in its charter) __________Delaware_________________ _________16-1476509______________ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 46 Prince Street, Rochester, NY 14607 (Address of principal executive offices) (Zip Code) (716) 242-7200 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. Yes [X] No As of October 31, 1998, 8,020,042 common shares were outstanding. PART 1. FINANCIAL INFORMATION Item 1. Financial Statements. PATIENT INFOSYSTEMS, INC. CONDENSED BALANCE SHEETS - - --------------------------------------------------------------------------------
ASSETS September 30, 1998 December 31, 1997 - - ------ ------------------ ----------------- CURRENT ASSETS: Cash and cash equivalents ................................ $ 1,125,313 $ 779,317 Available-for-sale securities ............................ 8,043,596 12,232,335 Accounts receivable ...................................... 1,303,337 412,956 Prepaid expenses and other current assets ................ 232,623 405,507 ------- ------- Total current assets ............................... 10,704,869 13,830,115 PROPERTY AND EQUIPMENT, net ................................ 1,090,454 958,965 OTHER ASSETS ............................................... 447,393 247,393 ------- ------- TOTAL ASSETS .............................................. $ 12,242,716 $ 15,036,473 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable ........................................ $ 187,379 $ 89,674 Accrued salaries and wages .............................. 333,367 320,272 Accrued expenses ........................................ 62,057 79,236 Deferred revenue ........................................ 260,667 67,549 Accrued loss on development contracts ................... 30,997 30,997 ------ ------ Total current liabilities ......................... 874,467 587,728 STOCKHOLDERS' EQUITY: Common stock - $.01 par value: shares authorized: 20,000,000; issued and outstanding: September 30, 1998 - 8,020,042; December 31, 1997 - 8,011,522 ...... 80,200 80,115 Additional paid-in capital .............................. 21,561,533 21,550,009 Unrealized gain (loss) on available-for-sale securities . (3,147) 5,060 Accumulated deficit ..................................... (10,270,337) (7,186,439) ---------- ---------- Total stockholders' equity ........................ 11,368,249 14,448,745 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................ $ 12,242,716 $ 15,036,473 ============ ============
See notes to condensed financial statements PATIENT INFOSYSTEMS, INC. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) - - --------------------------------------------------------------------------------
Three Months Ended Nine Months Ended September 30, September 30, 1998 1997 1998 1997 ---- ---- ---- ---- REVENUES ........................................... $ 465,181 $ 433,059 $ 1,629,653 $ 1,526,866 ---------- ----------- ----------- ----------- COSTS AND EXPENSES: Cost of operations ............................... 708,297 398,696 1,642,868 1,284,838 Sales and marketing .............................. 452,922 492,318 1,287,623 1,295,979 General and administrative ....................... 718,883 752,564 2,037,397 1,748,999 Research and development ......................... 27,679 93,230 170,744 430,399 ------ ------ ------- ------- Total costs and expenses ................... 1,907,781 1,736,808 5,138,632 4,760,215 --------- --------- --------- --------- OPERATING LOSS ..................................... (1,442,600) (1,303,749) (3,508,979) (3,233,349) INTEREST INCOME .................................... 136,350 208,178 462,658 644,848 ------- ------- ------- ------- LOSS BEFORE INCOME TAXES ........................... (1,306,250) (1,095,571) (3,046,321) (2,588,501) INCOME TAXES ....................................... 42,593 1,991 37,577 (9,509) ------ ----- ------ ------ NET LOSS ........................................... $(1,348,843) $(1,097,562) $(3,083,898) $(2,578,992) =========== =========== =========== =========== NET LOSS PER SHARE - BASIC AND DILUTED ..................................... $ (.17) $ (.14) $ (.38) $ (.32) =========== =========== =========== =========== WEIGHTED AVERAGE COMMON AND POTENTIAL COMMON SHARES ..................... 8,020,042 7,995,062 8,017,844 7,969,972 ========= ========= ========= =========
See notes to condensed financial statements. PATIENT INFOSYSTEMS, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) - - --------------------------------------------------------------------------------
Nine Months Nine Months Ended Ended September 30, September 30, 1998 1997 ---- ---- OPERATING ACTIVITIES: Net loss .....................................................................$ (3,083,898) $ (2,578,992) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization ..................................... 269,591 218,690 Amortization of premiums and discounts on available-for-sale securities (112,190) (171,501) Compensation expense related to issuance of stock warrants ............... 7,827 6,299 (Increase) in accounts receivable ........................................ (890,380) (418,095) Decrease (increase) in accrued interest receivable ....................... 47,416 (124,777) Decrease in prepaid expenses and other current assets .................... 125,467 55,561 Increase (decrease) in accounts payable .................................. 97,705 (147,355) Increase in accrued salaries and wages ................................... 13,096 81,014 (Decrease) increase in accrued expenses .................................. (17,179) 9,692 Increase in deferred revenue ............................................. 193,118 50,469 (Decrease) in accrued loss on development contracts ...................... - (25,974) ------- ------- Net cash used in operating activities .............................. (3,349,427) (3,044,969) ---------- ---------- INVESTING ACTIVITY: Property and equipment additions ............................................. (401,081) (353,641) Purchases of available-for-sale securities .................................. (6,797,236) (16,060,452) Maturities of available-for-sale securities .................................. 11,089,959 4,545,000 Increase in other assets ..................................................... (200,000) (250,000) -------- -------- Net cash provided by (used in) investing activities .................. 3,691,642 (12,119,093) --------- ----------- FINANCING ACTIVITIES: Proceeds from issuance of common stock, net .................................. 3,781 2,244,700 Decrease in accrued initial public offering costs ............................ -- (446,568) -------- -------- Net cash provided by financing activities .......................... 3,781 1,798,132 ----- --------- DECREASE IN CASH AND CASH EQUIVALENTS ......................................... 345,996 (13,365,930) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .......................................................... 779,317 15,666,609 ------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................................................$ 1,125,313 $ 2,300,679 ============ ============ Supplemental disclosures of cash flow information Cash paid and received for income taxes, net ................................$ 37,577 $ (9,509) ============ ============
See notes to condensed financial statements. PATIENT INFOSYSTEMS, INC. Notes to Condensed Financial Statements 1. The condensed financial statements for the three and nine month periods ended September 30, 1998 and September 30, 1997 are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The condensed financial statements should be read in conjunction with the financial statements and notes thereto, together with management's discussion and analysis of financial condition and results of operations contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. The results of operations for the nine months ended September 30, 1998 are not necessarily indicative of the results for the entire year ending December 31, 1998. 2. Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This statement requires that all items recognized under accounting standards as components of comprehensive earnings be reported in an annual financial statement that is displayed with the same prominence as other annual financial statements. This statement also requires that an entity classify items of other comprehensive earnings by their nature in an annual financial statement. For example, other comprehensive earnings may include foreign currency translation adjustments, minimum pension liability adjustments, and unrealized gains and losses on marketable securities classified as available-for-sale. Annual financial statements for prior periods will be reclassified, as required. The Company's total comprehensive earnings were as follows:
Three Months End Nine Months Ended September 30, September 30, 1998 1997 1998 1997 ---- ---- ---- ---- Net losses $(1,348,843) $(1,097,562) $(3,083,898) $(2,578,992) Other comprehensive earnings: Unrealized losses on available-for-sale securities 1,886 6,774 (8,207) 13,419 ----- ----- ------ ------ Comprehensive earnings $(1,346,957) $(1,090,788) $(3,092,105) $(2,565,573) =========== =========== =========== ===========
3. In March 1998 the Accounting Standards Executive Committee issued Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use". This statement provides guidance on accounting for the costs of computer software developed or obtained for internal use. This statement will be effective for fiscal years beginning after December 15, 1998. Management is evaluating the impact on the Company's financial statements. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Management's discussion and analysis provides a review of the Company's operating results for the three and nine month periods ended September 30, 1998 and September 30, 1997 and its financial condition at September 30, 1998. The focus of this review is on the underlying business reasons for significant changes and trends affecting the revenues, net earnings and financial condition of the Company. This review should be read in conjunction with the accompanying condensed financial statements. In an effort to give investors a well-rounded view of the Company's current condition and future opportunities, this Quarterly Report on Form 10-Q includes forecasts by the Company's management about future performance and results. Because they are forward-looking, these forecasts involve uncertainties. These uncertainties include risks of market acceptance of or preference for the Company's systems and services, competitive forces, the impact of, and changes in, government regulations, general economic factors in the healthcare industry and other factors discussed in the Company's filings with the Securities and Exchange Commission. Results of Operations Revenues -------- Revenues consist of revenues from development, licensing and operational fees. Revenues increased from $433,059 during the three months ended September 30, 1997 to $465,181 during the three months ended September 30, 1998, or 7%, and increased from $1,526,866 for the nine months ended September 30, 1997 to $1,629,653 or 7% for the nine months ended September 30, 1998. Three Months Ended Nine Months Ended September 30, September 30, Revenues 1998 1997 1998 1997 - - -------- ---- ---- ---- ---- Development Fees $ 80,970 $158,267 $ 634,373 $ 761,372 Licensing Fees - 70,834 169,444 354,167 Operational Fees 384,211 203,958 825,836 411,327 ------- ------- ------- ------- Total Revenues $465,181 $433,059 $1,629,653 $1,526,866 ======== ======== ========== ========== Revenue from development fees decreased from $158,267 during the third quarter of 1997 to $80,970 during the third quarter of 1998, or 49% and decreased from $761,372 during the first nine months of 1997 to $634,373, or 17%, during the first nine months of 1998. Development revenues include clinical, technical and operational design or modification and customization of the Company's primary disease management programs. The Company had provided substantial development services to a single customer during the first six months of 1998, for the development of a specific program, which was terminated during the third quarter. There were no adjustments to previously recorded revenue as a result of the termination of the agreement. The Company will continue to offer development programs for particular customers. However, no assurance can be given that development fees will be significant in the future. The Company did not recognize licensing revenues during the third quarter of 1998 as compared to the third quarter of 1997 during which $70,834 was recognized. Licensing fees decreased from $354,167 during the first nine months of 1997 to $169,444, or 52%, during the first nine months of 1998. Licensing revenue represents amounts the Company charges its customers, in a one-time fee basis, for the right to enroll patients in or the right to license other entities certain of its programs, primarily, but not limited to, the Company's standardized asthma and diabetes programs. The Company did not enter into any one-time licensing agreements in the third quarter 1998. Revenue from operational fees increased from $203,958 during the third quarter of 1997 to $384,211 during the third quarter of 1998, or 88%, and increased from $411,327 during the first nine months of 1997 to $825,836, or 101%, during the first nine months of 1998. The increase in operational revenues are due to increases in membership levels in the Company's disease management programs and primarily from the Company's nurse triage demand management programs. The nurse triage demand management programs operate from the Company's medical call center which was established in May 1998 in Wayne, PA. The medical call center is staffed by registered nurses on a 24 hour, 7 day a week schedule. Revenue from the Company's contracts is recognized ratably in accordance with contract terms on the basis of per-member and/or per enrollment fees. The Company anticipates that operational fees will continue to increase over the next twelve months as enrollments increase. The Company also provides other services to customers in the healthcare industry which involve new applications of its information capture and delivery systems. These services include patient surveys, health risk assessments, patient satisfaction surveys, physician education programs and marketing support functions. As the Company expands its operations, it intends to emphasize operational revenue to the exclusion of development revenues. Costs and Expenses ------------------ Cost of operations include salaries and related benefits, services provided by third parties, and other expenses associated with the development of the Company's customized disease state management programs, as well as the operation of each of its disease state management programs. Cost of operations was $708,297 for the three months ended September 30, 1998, as compared to $398,696 for the three months ended September 30, 1997. For the nine months ended September 30, 1998, cost of operations was $1,642,868, as compared to $1,284,838 for the nine months ended September 30, 1997. The increase in these costs reflects an increased level of program operations activities, as well as the Company's creation of the capacity necessary to handle anticipated increases in the number of individuals to whom the Company provides services. Costs of operations are expected to continue to exceed related revenues until the volume of patient enrollments in the Company's programs that the Company provides to its customers increases further. Sales and marketing expenses for the three months ended September 30, 1998 were $452,922, as compared to $492,318 for the three months ended September 30, 1997. For the nine months ended September 30, 1998, cost of sales were $1,287,623, as compared to $1,295,979 for the nine months ended September 30, 1997. These costs consist primarily of salaries, related benefits, travel costs, sales materials and other marketing related expenses. Spending in this area has remained consistent as Company's sales and marketing staff has not expanded during the nine months ended September 30, 1998, however, it is anticipated that the Company will continue to invest in the sales and marketing process, and that such expenses will increase in future periods. General and administrative expenses include the costs of corporate operations, finance and accounting, human resources and other general operating expenses of the Company. General and administrative expenses for the three months ended September 30, 1998 were $718,883 as compared to $752,564 for the three months ended September 30, 1997. For the nine months ended September 30, 1998, general and administrative expenses were $2,037,397 as compared to $1,748,999 for the nine months ended September 30, 1997. These expenditures have been incurred to maintain the corporate infrastructure necessary to support anticipated program operations. The increase in these costs was caused by an increase in the Company's level of business activity, and the addition of required administrative personnel. The Company expects that general and administrative expenses will increase in future periods. Research and development expenses consist primarily of salaries and related benefits and administrative costs allocated to the Company's research and development personnel for development of certain components of its integrated information capture and delivery system, as well as development of the Company's standardized disease state management programs. Research and development expenses for the three months ended September 30, 1998 were $27,679 as compared to $93,230 for the three months ended September 30, 1997. For the nine months ended September 30, 1998, research and development expenses were $170,744 as compared to $430,399 for the nine months ended September 30, 1997. The decrease in research and development expenses from the third quarter of 1997 to the third quarter of 1998 reflects the Company's completion of the development of its primary disease management programs The Company anticipates that research and development expenses will continue to decrease in future periods, as the Company continues to expand its operations. Interest income was $136,350 for the three months ended September 30, 1998, as compared to $208,178 for the three months ended September 30, 1997. For the nine months ended September 30, 1998, interest income was $462,658 as compared to $644,848 for the nine months ended September 30, 1997. The decrease in interest income reflects the use by the Company of its available cash and the reduction of proceeds that can earn interest. The Company had a net loss of $1,348,843 for the three months ended September 30, 1998 as compared to $1,097,562 for the three months ended September 30, 1997. For the nine months ended September 30, 1998, the Company had a net loss of $3,083,898 as compared to $2,578,992 for the nine months ended September 30, 1997. This represents a net loss per share of $.17 for the third quarter of 1998, as compared to a net loss of $.14 per share in the third quarter of 1997. For the nine months ended September 30, 1998, the net loss per share is $.38 as compared to $.32 net loss per share for the nine months ended September 30, 1997. Liquidity and Capital Resources ------------------------------- At September 30, 1998 the Company had working capital of $9,830,402 as compared to working capital of $13,242,387 at December 31, 1997. Since its inception the Company has primarily funded its operations, working capital needs and capital expenditures from the sale of equity securities. The Company's initial capitalization of $500,000 was completed in February 1995. The Company received $1,800,000 from the sale of equity securities in a private placement during the third quarter of 1995, and $3,000,000 from the sale of additional equity securities in a private placement during the third quarter of 1996. On December 19, 1996 the Company completed an initial public offering of its common stock which generated net proceeds to the Company of $14,082,048. The underwriters of the Company's initial public offering exercised their over-allotment option on January 8, 1997 resulting in net proceeds to the Company of $2,232,000. The Company has continued to expend increasing amounts to expand its operational capabilities including, increasing its administrative and technical costs. To the extent that revenues do not increase, the Company's losses will increase, creating an increased burden on the Company's available capital. The Company has entered into an Asset Purchase Agreement with HealthDesk Corporation ("HealthDesk") pursuant to which the Company has agreed to purchase substantially all of the assets of HealthDesk for approximately $600,000 in cash, without assuming any significant liabilities or obligations of HealthDesk with respect to the acquired assets. HealthDesk is a corporation primarily engaged in the business of designing and developing Internet based products in the healthcare, wellness and disease management industries. HealthDesk's common stock is currently listed on the Nasdaq SmallCap Market. The closing of the acquisition is subject to numerous conditions, including approval of HealthDesk's stockholders. In addition, either party may terminate the Asset Purchase Agreement if the acquisition is not consummated by November 30, 1998. John Pappajohn, a member of the Board of Directors of the Company, is also a member of the Board of Directors of HealthDesk. Inflation --------- Inflation did not have a significant impact on the Company's costs during either the third quarter of 1998 or the third quarter of 1997. The Company continues to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions. Impact of the Year 2000 on Computer Systems ------------------------------------------- The Company has established a program to assess the impact of the Year 2000 on the software and hardware utilized in its internal operations. The cost to address the Year 2000 issues has been estimated at $60,000. This program includes the following phases: identifying affected software, hardware, and telecommunication equipment and assessing the impact on the Year 2000 issue; hardware and software remediation; testing; assess the Year 2000 readiness of customers and suppliers; and developing a contingency plan. Modification and testing of hardware and software is currently in process with an anticipated completion date of December 31, 1998. The Company has completed adaptation of all internally created systems and has begun surveying its customers and suppliers regarding their readiness for the Year 2000. Final testing to independently validate readiness will begin when the Company has received all third party hardware and software promised to date. The Company believes it will address and resolve any possible issues associated with the integration of Year 2000 data in a timely fashion and will not materially affect future financial results or cause reported financial information to be inaccurate. However, unforeseen internal problems or unanticipated events, including the inability of third party vendors or customers to integrate Year 2000 data could occur, causing a material adverse effect on the Company's business, results of operations and financial condition. Forward Looking Statements -------------------------- When used in this and in future filings by the Company with the Securities and Exchange Commission, in the Company's press releases and in oral statements made with the approval of an authorized executive officer of the Company, the words or phrases "will likely result," "expects," "plans," "will continue," "is anticipated," "estimated," "project," or "outlook" or similar expressions (including confirmations by an authorized executive officer of the Company of any such expressions made by a third party with respect to the Company) are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, each of which speak only as of the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. These uncertainties include risks of market acceptance of or preference for the Company's systems and services, competitive forces, the impact of, and changes in, government regulations, general economic factors in the healthcare industry and other factors discussed in the Company's filings with the Securities and Exchange Commission. The Company has no obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended September 30, 1998. Exhibits: (11) Statements of Computation of Per Share Earnings See Page 11 of this Quarter Report on Form 10-Q. (27) Financial Data Schedule Filed electronically EX-11 2 COMPUTATION OF PER SHARE EARNINGS Exhibit 11. Statement of Computation of Per Share Earnings PATIENT INFOSYSTEMS, INC.
Three Months Ended Nine Months Ended September 30, September 30, 1998 1997 1998 1997 ---- ---- ---- ---- Net Loss .......................................... $(1,348,843) $(1,097,562) $(3,083,898) $(2,578,992) ----------- ----------- ----------- ----------- Weighted average common and potential common shares ...................... 8,020,042 7,995,062 8,017,844 7,969,972 --------- --------- --------- --------- Net Loss per share - Basic and Diluted ............ $ (0.17) $ (0.14) $ (0.38) $ (0.32) =========== =========== ============ ===========
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. Dated: November 16, 1998 PATIENT INFSYSTEMS, INC. (Registrant) /s/ Donald A. Carlberg November 16, 1998 - - ---------------------- ----------------- Donald A. Carlberg Date Director, President and Chief Executive Officer /s/ Lynda J. Bates November 16, 1998 - - ------------------ ----------------- Lynda J. Bates Date Controller EX-27 3 FINANCIAL DATA SCHEDULE
5 1 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 1,125,313 8,043,596 1,303,337 0 0 10,704,869 1,862,463 772,009 12,242,716 874,467 0 0 0 80,200 11,288,049 12,242,716 1,629,653 1,629,653 1,642,868 5,138,632 0 0 0 (3,046,321) 37,577 (3,083,898) 0 0 0 (3,083,898) (0.38) (0.38)
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