-----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, BV63tPVJXAm2Cb2Px8i8NR3Ktq6tBwx7xcrtKJ8ZpjaE93A+mC7eUXNbpJ/FRDJB 8fn513L7mYrEHYPOw5KQXg== 0001017813-99-000010.txt : 19990518 0001017813-99-000010.hdr.sgml : 19990518 ACCESSION NUMBER: 0001017813-99-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PATIENT INFOSYSTEMS INC CENTRAL INDEX KEY: 0001017813 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISC HEALTH & ALLIED SERVICES, NEC [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: 99627754 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 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 1999 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 April 30, 1999, 8,033,002 common shares were outstanding. PART I. FINANCIAL INFORMATION Item 1. Financial Statements. PATIENT INFOSYSTEMS, INC. CONDENSED BALANCE SHEETS
ASSETS March 31, 1999 December 31, 1998 -------------- ----------------- (Unaudited) CURRENT ASSETS: Cash and cash equivalents ..................................... $ 4,425,270 $ 6,316,955 Available-for-sale securities ................................. 1,040,521 1,029,674 Accounts receivable ........................................... 884,072 1,320,626 Prepaid expenses and other current assets ..................... 232,819 219,978 ------- ------- Total current assets .................................... 6,582,682 8,887,233 PROPERTY AND EQUIPMENT, net ..................................... 1,373,495 1,182,494 OTHER ASSETS .................................................... 1,023,872 450,000 --------- ------- TOTAL ASSETS .................................................... $ 8,980,049 $ 10,519,727 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable .............................................. $ 294,346 $ 304,436 Accrued salaries and wages .................................... 406,261 277,931 Accrued expenses .............................................. 89,941 58,904 Deferred revenue .............................................. 273,125 253,068 ------- ------- Total current liabilities ............................... 1,063,673 894,339 STOCKHOLDERS' EQUITY: Common stock - $.01 par value: shares authorized: 20,000,000; issued and outstanding: March 31, 1999 - 8,033,002; December 31, 1998 - 8,020,042 ............ 80,330 80,200 Additional paid-in capital .................................... 21,565,680 21,561,093 Accumulated Deficit ........................................... (13,729,634) (12,015,905) ----------- ----------- Total stockholders' equity .............................. 7,916,376 9,625,388 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...................... $ 8,980,049 $ 10,519,727 ============ ============
See notes to condensed financial statements. PATIENT INFOSYSTEMS, INC. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Three Months Ended Ended March 31, 1999 March 31, 1998 -------------- -------------- REVENUES Operations Fees ............................................................. $ 833,812 $ 107,263 Licensing Fees .............................................................. -- 162,500 Development Fees ............................................................ -- 20,591 ------- ------- Total revenues ......................................................... 833,812 290,354 ------- ------- COSTS AND EXPENSES Cost of sales ............................................................... 1,449,926 712,738 Sales and marketing ......................................................... 570,322 446,887 General and administrative .................................................. 455,283 282,350 Research and development .................................................... 118,419 75,081 ------- ------ Total costs and expenses .............................................. 2,593,950 1,517,056 --------- --------- OPERATING LOSS ................................................................ (1,760,138) (1,226,702) Investment gain (loss) ........................................................ (34,294) -- Other income .................................................................. 80,705 171,664 ------ ------- NET LOSS ...................................................................... $(1,713,727) $(1,055,038) =========== =========== NET LOSS PER SHARE - BASIC AND DILUTED ................................................................ $ (.21) $ (.13) =========== =========== WEIGHTED AVERAGE COMMON AND POTENTIAL COMMON SHARES ................................................. 8,023,423 8,013,631 ========= =========
See notes to condensed financial statements. PATIENT INFOSYSTEMS, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Three Months Ended Ended March 31, 1999 March 31, 1998 -------------- -------------- OPERATING ACTIVITIES: Net loss ..................................................................... $(1,713,727) $(1,055,038) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization ............................................ 115,952 83,231 Amortization of premiums and discounts on available-for-sale securities . -- (44,751) Compensation expense related to issuance of stock warrants ............... 2,915 2,609 Decrease (increase) in accounts receivable, net .......................... 436,553 (5,997) (Increase) decrease in prepaid expenses and other current assets ........ (12,841) 50,531 (Decrease) increase in accounts payable .................................. (10,090) 70,425 Increase (decrease) in accrued salaries and wages ........................ 128,330 (112,872) Increase in accrued expenses ............................................. 31,037 15,076 Increase in deferred revenue ............................................. 20,057 91,614 ------ ------ Net cash used in operating activities .............................. (1,001,814) (905,172) ---------- -------- INVESTING ACTIVITY: Property and equipment additions ............................................. (306,953) (120,122) Purchases of available-for-sale securities .................................. (10,847) (3,509,164) Maturities of available-for-sale securities .................................. -- 4,112,000 (Decrease) increase in other assets .......................................... 34,294 (200,000) Purchase of HealthDesk Intellectual Property, net ............................ (608,166) -- -------- -------- Net cash provided by (used in) investing activities .................. (891,672) 282,714 -------- ------- FINANCING ACTIVITIES: Proceeds from issuance of common and preferred stock, net .................... 1,801 784 Decrease in accrued initial public offering costs ............................ -- -- -------- ------- Net cash provided by financing activities .......................... 1,801 784 ----- --- DECREASE IN CASH AND CASH EQUIVALENTS ......................................... (1,891,685) (621,674) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .......................................................... 6,316,955 779,317 --------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................................................ $ 4,425,270 $ 157,643 =========== =========== Supplemental disclosures of cash flow information Cash paid and received for income taxes, net ................................ $ 20,600 $ 3,081 =========== ===========
See notes to condensed financial statements. PATIENT INFOSYSTEMS, INC. Notes to Condensed Financial Statements 1. The condensed financial statements for the three month periods ended March 31, 1999 and March 31, 1998 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, 1998. The results of operations for the three months ended March 31, 1999 are not necessarily indicative of the results for the entire year ending December 31, 1999. 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 Ended March 31, 1999 1998 ---- ---- Net losses $(1,713,727) $(1,055,038) Other comprehensive earnings: Unrealized losses on available-for-sale securities - (2,333) --------- --------- Comprehensive earnings $(1,713,727) $(1,057,371) =========== =========== 3. Certain 1998 amounts have been reclassified to conform with 1999 presentations. 4. On February 26, 1999, the Company, through its newly formed, wholly-owned subsidiary, Patient Infosystems Acquisition Corp., acquired substantially all of the assets of HealthDesk Corporation, a consumer healthcare software company primarily engaged in the business of designing and developing Internet based products in the healthcare, wellness and disease management industries. The acquired assets include inventory, intellectual property, hardware and software. The principal consideration paid for the transaction was $761,463. The Company paid for the acquisition using its available cash. 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 month periods ended March 31, 1999 and March 31, 1998 and its financial condition at March 31, 1999. 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 The Company generated revenue of $833,812 for the three months ended March 31, 1999, as compared to $290,354 during the three months ended March 31, 1998. A summary of revenues by category is as follows: Three Months Ended March 30, Revenues 1999 1998 ---- ---- Operations Fees $833,812 $107,263 Licensing Fees - 162,500 Development Fees - 20,591 -------- ------ Total Revenues $833,812 $290,354 ======== ======== Operations revenues are generated as the Company provides services to its customers for their disease-specific programs, for demand management programs and patient surveys. Operations revenues increased 88% from $107,263 for the first quarter 1998 to $833,812 for the first quarter 1999. Operations revenues increased significantly in the first quarter 1999, as the Company continues to increase the membership levels in the Company's disease state management programs and as a result of increased activities with its demand management programs and patient surveys. Licensing revenue represents amounts that the Company charges its customers, on 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. There were no license fees in the first quarter 1999 as compared to license fees in the amount of $162,500 in the first quarter 1998, which were primarily attributed to the Company's licensing agreement with ReCall Services, Inc., in the amount of $150,000, for the development and operation of a database service bureau. Development revenue represents the amounts that the Company charges its customers for the development of the capability to deliver services in its customized programs. The decrease in program development revenues from the first quarter of 1998 to the first quarter of 1999 reflects the Company's completion of the development of its primary disease management programs. The Company has not entered into new development agreements and does not anticipate that it will be paid for program development in the future. Costs and Expenses Cost of sales include salaries and related benefits, services provided by third parties, and other expenses associated with the development of the Company's disease state management programs, as well as the operation of its demand management programs and the conduct of patient surveys. Cost of sales for the three months ended March 31, 1999 consisting of costs associated with the operation of the Company's programs were $1,449,926, as compared to $712,738 for the three month period ended March 31, 1998. The increase in these costs primarily reflects an increased level of program development and operational 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. Sales and marketing expenses consist primarily of salaries, related benefits, travel costs, sales materials and other marketing related expenses Sales and marketing expenses for the three months ended March 31, 1999 were $570,322 as compared to $446,887 for the three month period ended March 31, 1998. Spending in this area has increased due to expansion of the Company's sales and marketing staff. 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 March 31, 1999 were $455,283, as compared to $282,350 for the three month period ended March 31, 1998. 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 March 31, 1999 were $118,419, as compared to $75,081 for the three months ended March 31, 1998. The increase in research and development expenses from the first quarter of 1998 to the first quarter of 1999 reflects the Company's development of its primary disease management programs and Internet based products. The Company uses the core technologies associated with these products to support the Company's other programs which include disease management, case management, demand management, patient surveys and clinical studies. The Company generates net investment income from cash balances and investments. Investment income decreased to $46,411 for the three months ended March 31, 1999, as compared to $171,664 for the three month period ended March 31, 1998. The decrease in net investment income reflects the use by the Company of its available cash and the reduction of proceeds that can earn interest. Included in the net investment income is the investment loss for the first quarter 1999 associated with the Company's investment in Patient Infosystems Canada, Inc., which is engaged in the sale, marketing and service of the Company's products and services in Canada. The first quarter 1999 loss includes expenses attributable to sales and marketing and related administrative expense. The Company had a net loss of $1,713,727 for the three months ended March 31, 1999, and a net loss of $1,055,038 for the three months ended March 31, 1998. This represents a net loss per share of $.21 for the first quarter of 1999, as compared to a net loss of $.13 per share in the first quarter of 1998. Liquidity and Capital Resources At March 31, 1999 the Company had working capital of $5,519,009 as compared to working capital of $7,992,894 at December 31, 1998. Since its inception the Company has primarily funded its operations, working capital needs and capital expenditures from the sale of equity securities. 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. If the Company is not able to operate profitably or to reduce its losses significantly, it will be required to seek additional capital or reduce its operations. No assurance can be given that any additional capital will be available on terms that are acceptable to the Company, if at all. Inflation Inflation did not have a significant impact on the Company's costs during either the first quarter of 1999 or the first quarter of 1998. The Company continues to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions. Year 2000 Issues The Year 2000 issue refers to the inability of computerized systems and technologies to recognize and process dates beyond December 31, 1999. The Company has reviewed the Company's information technology systems, cable network equipment and other embedded technologies. A significant portion of the Company's computerized systems and technologies have been developed, installed or upgraded in recent years and are generally more likely to be Year 2000 ready. The Company is also evaluating the potential impact as a result of its reliance on third-party systems that may have year 2000 issues. Computerized business applications that could be adversely affected by the year 2000 issue include: * information processing and financial reporting systems, * customer billing systems, * customer service systems, * telecommunication transmission and reception systems, and * facility systems. System failure or miscalculation could result in an inability to process transactions, send invoices, accept customer orders or provide customers with products and services. Customers could also experience a temporary inability to receive or use the Company's products and services. The Company has developed a program to assess and address the year 2000 issue. This program consists of the following phases: * inventorying and assessing the impact on affected technology and systems, * developing solutions for affected technology and systems, * modifying or replacing affected technology and systems * testing and verifying solutions * implementing solutions, and * developing contingency plans. The Company has substantially completed inventorying and assessing the affected computerized systems and technologies. The Company is in various stages of its year 2000 compliance program with respect to the remaining phases as it relates to the affected systems and technologies. 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. Costs incurred to date directly related to addressing the year 2000 are approximately $50,000. The Company currently estimates the total cost of its year 2000 remediation program to be approximately $60,000. Although the Company will continue to incur substantial capital expenditures in the ordinary course of meeting its telecommunications system upgrade program through the year 2000, it will not specifically accelerate its expenditures to facilitate year 2000 readiness, and accordingly such expenditures are not included in the above estimate. The Company has begun communicating with others with whom it does significant business to determine their year 2000 readiness and to determine the extent to which the Company is vulnerable to year 2000 issues related to those third parties. The Company purchases much of its technology from third parties. There can be no assurance that the systems of other companies on which the Company's systems rely will be year 2000 ready or timely converted into systems compatible with the Company's systems. The Company's failure or a third party's failure to become year 2000 ready or the Company's inability to become compatible with third parties with which the Company has a material relationship, may have a material adverse effect on the Company, including significant service interruption or outages, however, the Company cannot currently estimate the extent of any such adverse effects. The Company is in the process of identifying secondary sources to supply its systems or services in the event it becomes probable that any of its systems will not be year 2000 ready prior to the end of 1999. The Company is also in the process of identifying secondary vendors and service providers to replace those vendors and service providers whose failure to be year 2000 ready could lead to a significant delay in the Company's ability to provide its service to its customers. 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. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company is exposed to changes in interest rates primarily in its cash transactions. The Company does not believe it is exposed to changes in foreign currently exchange rates because it does not currently invest in foreign currency instruments. A discussion of the Company's accounting policies for financial instruments is included in the Summary of Significant Accounting Policies in the Notes to the Financial Statements. The Company currently does not have any international operations nor does invest its cash in foreign currency instruments. The balances the Company has in cash or cash equivalents are generally available without legal restrictions to fund ordinary business operations. The Company regularly invests excess operating cash in certificates of deposit and U.S. government bonds and other bonds that are subject to changes in short-term interest rates. Accordingly, the Company believes that the market risk arising from its holding of these financial instruments is minimal. The Company made purchases of available-for-sale securities in the amounts of $10,847 for the three months ended March 31, 1999 and $3,509,164 for the three months ended March 31, 1998. PART II - OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds Use of Proceeds The Company has used and continues to use the proceeds from its initial public offering of Common Stock on December 23, 1996 (File No. 333-07643) for capital improvements and expansion of its telephone and computer capabilities for sales and marketing and for general corporate purposes more fully discussed in the financial statements and the notes thereto appearing elsewhere herein. Item 6. Exhibits and Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended March 31, 1999 Exhibits: (11) Statements of Computation of Per Share Earnings See Page 11 of this Quarterly Report on Form 10-Q. (27) Financial Data Schedule Filed electronically EX-11 2 STATEMENT OF COMPUTATION OF PER SHARE EARNINGS Exhibit 11. Statement of Computation of Per Share Earnings PATIENT INFOSYSTEMS, INC. Three Months Three Months Ended Ended March 31, 1999 March 31, 1998 Net Loss $ (1,713,727) $ (1,055,038) ------------ ------------ Weighted average common and potential common shares 8,023,423 8,013,631 --------- --------- Net Loss per share - Basic and Diluted $ (.21) $ (.13) ============ ============ 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: May 17, 1999 PATIENT INFSYSTEMS, INC. (Registrant) /s/ Donald A. Carlberg May 17, 1999 - ---------------------- ------------ Donald A. Carlberg Date Director, President and Chief Executive Officer /s/ John V. Crisan May 17, 1999 - ------------------ ------------ John V. Crisan Date Chief Financial Officer EX-27 3 FINANCIAL DATA SCHEDULE
5 1 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 4,425,270 1,040,521 888,202 4,130 0 6,582,682 2,350,120 976,625 8,980,049 1,063,673 0 0 0 80,330 7,836,046 7,916,376 833,812 833,812 1,449,926 2,593,950 0 0 0 (1,713,727) 0 (1,713,727) 0 0 0 (1,713,727) (.21) (.21)
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