-----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, Cok3fZo+CtsiHnqeHlL8MGSgpdZdy7dSD8cN+i5OHSDTx60UBpLRPAfpF/0jEjet /np8VyYwwlTkuJN+b+KyTQ== /in/edgar/work/0001017813-00-000018/0001017813-00-000018.txt : 20001121 0001017813-00-000018.hdr.sgml : 20001121 ACCESSION NUMBER: 0001017813-00-000018 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20001120 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/A SEC ACT: SEC FILE NUMBER: 000-22319 FILM NUMBER: 773469 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/A 1 0001.txt AMENDED QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10Q/A [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2000 ------------------------- 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: 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) (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 May 15, 2000, 8,050,202 common shares were outstanding. EXPLANATORY NOTE: The Company hereby amends Part I of its quarterly report Form 10-Q for the period ended March 31, 2000 to reflect the restatement of its Unaudited Condensed Consolidated Financial Statements as of and for the three-month period ended March 31, 2000. The restatement does not reflect any change to the Company's revenue or net loss but does reflect a change to earnings per share. See Note 8 to the Unaudited Condensed Consolidated Financial Statements. PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements
PATIENT INFOSYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - ----------------------------------------------------------------------------------------------------------------- ASSETS March 31, 2000 December 31, 1999 -------------- ----------------- As Restated, see Note 8 CURRENT ASSETS: Cash and cash equivalents $ 2,072,176 $ 489,521 Accounts receivable 688,565 650,279 Prepaid expenses and other current assets 156,728 202,064 ------------------------------------------- Total current assets 2,917,469 1,341,864 PROPERTY AND EQUIPMENT, net 1,184,322 1,291,351 Debt issuance costs (net of accumulated amortization of $86,500 and 771,000 382,500 Intangible assets (net of accumulated amortization of $48,434 and 574,290 584,669 Other assets 225,150 244,011 ------------------------------------------- TOTAL ASSETS $ 5,672,231 $ 3,844,395 =========================================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 226,786 $ 496,533 Accrued salaries and wages 337,856 190,232 Line of credit 2,500,000 - Accrued expenses 33,566 22,767 Deferred revenue 316,224 218,200 ------------------------------------------- Total current liabilities 3,414,432 927,732 ------------------------------------------- LINE OF CREDIT - 500,000 STOCKHOLDERS' EQUITY: Common stock - $.01 par value: shares authorized: 20,000,000; issued and outstanding: March 31, 2000 - 8,040,202; December 31, 1999 - 8,040,202 80,402 80,402 Preferred stock - $.01 par value: shares authorized: 5,000,000 Series C, 9% cumulative, convertible issued and outstanding March 31, 2000 - 100,000 1,000 - Additional paid-in capital 23,993,578 21,968,536 Accumulated other comprehensive income 1,805 1,805 Accumulated deficit (21,818,986) (19,634,080) ------------------------------------------- Total stockholders' equity 2,257,799 2,416,663 ------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,672,231 $ 3,844,395 =========================================== See notes to unaudited condensed consolidated financial statements.
PATIENT INFOSYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - ----------------------------------------------------------------------------------------------- Three Months Ended March 31, 2000 1999 ---- ---- As Restated, see Note 8 REVENUES Operations Fees $ 584,181 $ 833,812 Development Fees 4,000 - Licensing Fees 12,399 - ------------------------------------------- Total revenues 600,580 833,812 ------------------------------------------- COSTS AND EXPENSES Cost of sales 1,278,175 1,449,926 Sales and marketing 310,473 570,322 General and administrative 552,959 455,283 Research and development 85,552 118,419 ------------------------------------------- Total costs and expenses 2,227,159 2,593,950 ------------------------------------------- OPERATING LOSS (1,626,579) (1,760,138) OTHER INCOME (EXPENSE) (8,327) 46,411 ------------------------------------------- NET LOSS (1,634,906) (1,713,727) CONVERTIBLE PREFERRED STOCK DIVIDENDS (550,000) - ------------------------------------------- NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (2,184,906) $ (1,713,727) =========================================== NET LOSS PER SHARE - BASIC AND DILUTED $ (0.27) $ (0.21) =========================================== WEIGHTED AVERAGE COMMON SHARES 8,040,202 8,023,423 =========================================== See notes to unaudited condensed consolidated financial statements.
PATIENT INFOSYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - ------------------------------------------------------------------------------------------------------------------------------- Three Months Three Months Ended Ended March 31, 2000 March 31, 1999 -------------- -------------- As Restated, see Note 8 OPERATING ACTIVITIES: Net loss $ (1,634,906) $ (1,713,727) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 223,911 115,952 Compensation expense related to issuance of stock warrants 1,042 2,915 (Increase) decrease in accounts receivable, net (38,286) 436,553 (Increase) decrease in prepaid expenses and other current assets 45,336 (12,841) Decrease in other assets 18,861 34,294 Decrease in accounts payable (269,747) (10,090) Increase in accrued salaries and wages 147,624 128,330 Increase in accrued expenses 10,799 31,037 Increase in deferred revenue 98,024 20,057 ------------------------------------------- Net cash used in operating activities (1,397,342) (967,520) INVESTING ACTIVITIES: Property and equipment additions (20,003) (306,953) Purchases of available-for-sale securities - (10,847) Purchase of HealthDesk Intellectual Property, net - (608,166) ------------------------------------------- Net cash used in investing activities (20,003) (925,966) FINANCING ACTIVITIES: Proceeds from issuance of common and preferred stock, net 1,000,000 1,801 Line of credit borrowings 2,000,000 - ------------------------------------------- Net cash provided by financing activities 3,000,000 1,801 ------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,582,655 (1,891,685) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 489,521 6,316,955 ------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,072,176 $ 4,425,270 =========================================== Supplemental disclosures of cash flow information Cash paid and received for income taxes, net $ - $ 20,600 =========================================== Supplemental disclosures of non-cash information Fair value of stock purchase warrants issued in conjunction with guarantees by certain board members of borrowings on the line of credit $ 475,000 $ - =========================================== Value of beneficial conversion feature on Class C Convertible Preferred Stock recognized as a dividend $ 550,000 $ - =========================================== See notes to unaudited condensed consolidated financial statements.
PATIENT INFOSYSTEMS, INC. Notes to Unaudited Condensed Consolidated Financial Statements 1. The unaudited condensed consolidated financial statements for the three month periods ended March 31, 2000 and March 31, 1999 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 unaudited condensed consolidated financial statements should be read in conjunction with the unaudited condensed consolidated 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, 1999. The results of operations for the three months ended March 31,2000 are not necessarily indicative of the results for the entire year ending December 31, 2000. 2. Intangible assets represent the intellectual property (i.e.: tradenames, trademarks, licenses and brandnames) acquired from HealthDesk Corporation, which are being amortized over 15 years using the straight-line method. 3. On March 31, 2000, the Company completed a private placement of 100,000 shares of newly issued Series C 9% Cumulative Convertible Preferred Stock ("Series C"), raising $1,000,000 in total proceeds. These shares can be converted into Common Stock at a rate of 8 shares of Common Stock to 1 share of Series C Preferred Stock. Each Series C share has voting rights equivalent to 8 shares of Common Stock (800,000 shares). The proceeds from this issuance will be used to support the Company's operation. 4. In December 1999, the Company established a credit facility for $1,500,000 guaranteed by Derace Schaffer and John Pappajohn, two directors of the Company. In consideration for their guarantees, the Company granted to Dr. Schaffer and Mr. Pappajohn warrants to purchase an aggregate of 375,000 shares of common stock for $1.5625 per share. In March 2000, the facility was increased by $1,000,000 under substantially the same terms, also guaranteed by the same Board members. Because this line of credit is due and payable on March 31, 2001, amounts outstanding at March 31, 2000 and December 31, 1999 are reported as current and long-term liabilities, respectively. Additional warrants to purchase an aggregate of 250,000 shares of Common Stock for $2.325 per share, were granted to Dr. Derace Schaffer and Mr. John Pappajohn for their guarantee of this additional line of credit. The warrants are included in the debt issuance costs in the balance sheet. The estimated fair value of the warrants at March 31, 2000 is approximately $475,000 based on the application of the Black Scholes option pricing model which incorporates current stock price, expected stock price volatility, expected interest rates, and the expected holding period of the warrant. 5. The calculations for the basic and diluted loss per share were based upon loss attributable to common stockholders of $2,184,906 and $1,713,727 and a weighted average number of common shares of 8,040,202 and 8,023,423 for the three-month periods ended March 31, 2000 and 1999 respectively. Options and warrants to purchase shares of Common Stock were outstanding but not included in the computation of diluted loss per share for the three-month periods ended March 31, 2000 and 1999 because the effect would have been antidilutive due to the net loss in those periods. 6. In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities". In June 2000, the FASB issued SFAS No. 138, which amends certain provisions of SFAS 133 to clarify four areas causing difficulties in implementation. The amendment included expanding the normal purchase and sale exemption for supply contracts, permitting the offsetting of certain intercompany foreign currency derivatives and thus reducing the number of third party derivatives, permitting hedge accounting for foreign-currency denominated assets and liabilities, and redefining interest rate risk to reduce sources of ineffectiveness. We have appointed a team to implement SFAS 133 on a global basis for the Company. This team has been implementing an SFAS 133 compliant risk management information system, globally educating both financial and non-financial personnel, inventorying embedded derivatives and addressing various other SFAS 133 related issues. We will adopt SFAS 133 and the corresponding amendments under SFAS 138 on January 1, 2001. SFAS 133, as amended by SFAS 138, is not expected to have a material impact on the Company's condensed consolidated financial position, results of operations or cash flows. In September 2000, the Financial Accounting Standards Board issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities," which supercedes SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." This standard is effective for transfers occurring after March 31, 2001, with certain disclosure requirements effective for the year ending December 31, 2000. The Company does not believe the adoption of this standard will have a significant impact on the Company's condensed consolidated financial position, results of operations or cash flows. In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements," which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. SAB 101, as amended, is required to be adopted by the Company no later than the fourth quarter of fiscal year 2000. Although the Company has not fully assessed the implications of SAB 101, management does not believe the adoption of SAB 101 will have a significant impact on the Company's condensed consolidated financial position, results of operations or cash flows. 7. The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying unaudited condensed consolidated financial statements, the Company incurred an operating loss for the nine-month period ended March 31, 20000 of $1,626,579 and had an accumulated deficit of $19,634,080 at December 31, 1999. These factors, among others may indicate that the Company will be unable to continue as a going concern for a reasonable period of time. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is dependant upon its ability to generate sufficient cash flow to meet its obligations. Management is currently assessing the Company's operating structure for the purpose of reducing ongoing expenses, increasing sources of revenue and is negotiating the terms of additional debt or equity financing. 8. Subsequent to the issuance of the Company's unaudited condensed consolidated financial statements for the three month period ended March 31, 2000, the Company's management determined that the effective price at which the preferred shares referred to in Note 3 could be converted into common shares at the date of issuance ($1.25) was less than the current market price of the common stock ($1.9375) on that same date, resulting in a discount, or beneficial conversion feature, of $0.6875 per share. The resulting discount is analogous to a dividend and should have been recognized as a return to the preferred shareholders. In addition, debt amortization expense of $86,500 was reclassified from other expense to general and administrative expense and development fee revenue of $4,000 was reclassified from operating fee revenue for the three-month period ended March 31, 2000. Accordingly, the accompanying financial statements have been restated to give effect to the beneficial conversion feature and the reclassifications. A summary of the significant effects of the restatement is as follows:
As Previously As Reported Restated ---------------------------------- At March 31, 2000: Additional paid-in capital 23,443,578 23,993,578 Accumulated deficit (21,268,986) (21,818,986) For the three-month period ended March 31, 2000: General and administrative 466,459 522,959 Other expense (94,827) (8,327) Net loss (1,634,906) (1,634,906) Convertable preferred stock dividends - 550,000 Net loss attributable to common shareholders (1,634,906) (2,184,906) Net loss per share - Basic and diluted (0.20) (0.27)
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, 2000 and March 31, 1999 and its financial condition at March 31, 2000. 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 consolidated 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 the Company's working capital short falls, 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 including the Company's Annual Report on Form 10-K for the year ended December 31, 1999. As discussed in Note 8 to the unaudited condensed consolidated financial statements, the unaudited condensed consolidated financial statements as of and for the three-months ended March 31, 2000 have been restated. The accompanying discussion and analysis gives effect to the restatement. The restatement does not reflect any change to the Company's revenue or net loss but does reflect a change to earnings per share. Results of Operations Revenues Revenues consist of revenues from operations, development and licensing fees. Revenues decreased from $833,812 during the three months ended March 31, 1999 to $600,580 during the three months ended March 31, 2000, or 28%.
Three Months Ended March 31, Revenues 2000 1999 - -------- ---- ---- Operations Fees Disease Management and Compliance $ 171,757 $ 148,778 Surveys 130,409 454,107 Demand Management 232,762 198,713 Other 49,253 32,215 ------------------------------ Total Operations Fees 584,181 833,812 Development Fees 4,000 - Licensing Fees 12,399 - ------------------------------ Total Revenues $ 600,580 $ 833,812 ------------------------------
Operations revenues are generated as the Company provides services to its customers. Operations revenues decreased from $833,812 during the three months ended March 31, 1999 to $584,181 during the three months ended March 31, 2000. Operations revenues continue to be the primary source of revenue for the Company. The decrease in operations revenues reflected reduced revenues from the conduct of surveys that resulted from the elimination of a Medicare product by one of the Company's primary customers. Demand Management revenues increased 17% due to marginal increases in the membership of existing clients and the addition of McClelland Air Force Base as a new customer. The Company has identified possible new customers, but there can be no assurance that such prospects will contribute revenue in the near term, if at all. Development revenue represents the amounts that the Company charges its customers for the development of its customized programs. There was $4,000 in development revenues in the three months ended March 31, 2000 as compared to no development revenue for the same period of 1999. The Company has entered into new development agreements but anticipates that revenue from program development will remain immaterial in the future. License revenues recognized from the Case Management Support Systems for the three months ended March 31, 2000 were $12,399. The Company has not entered into any new licensing agreements for its Case Management Support System and the revenue for the current period reflects ongoing revenue from the existing agreements. Costs and Expenses Cost of sales include salaries and related benefits, services provided by third parties, and other expenses associated with the implementation and delivery of the Company's standard and customized population, demand, and disease management programs. Cost of sales for the three-months ended March 31, 2000 consisting of costs associated with the operation of the Company's programs was $1,278,175 as compared to $1,449,926 for the three month period ended March 31, 1999. The decrease in these costs primarily reflects a response to the decreased level of population and disease management operational activities. The Company's gross margin continues to be negative. The Company anticipates that revenue must increase before it will recognize economies of scale. No assurance can be given that revenues will increase or that, if they do, they will exceed expenses. 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, 2000 were $310,473 as compared to $570,322 for the three-month period ended March 31, 1999. Spending in this area has decreased due to the resignation or termination of several members of the sales staff. The Company anticipates expansion of the Company's sales and marketing staff and expects it will continue to invest in the sales and marketing process, and that such expenses related to sales and marketing may 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, 2000 were $552,959, as compared to $455,283 for the three-month period ended March 31, 1999. These expenditures have been incurred to maintain the corporate infrastructure necessary to support anticipated program operations. The increase in these costs during the period reflected a single severance payment of $58,763 to Donald A. Carlberg who resigned as Chief Executive Officer effective March 30, 2000 and amortization of $857,500 in debt issuance cost for the establishment of a $2,500,000 line of credit. This cost is a non-cash item related to the fair market value of warrants to purchase the Company's common stock, which were issued to two directors in consideration for their guarantee of the debt. The amortization expense recorded was $86,500 for the three-month period ended March 31, 2000. Without these charges, general and administrative costs would have decreased $47,587 to $407,696 as compared to the same period of 1999. The Company expects that general and administrative expenses will remain relatively constant in future periods. Research and development expenses consist primarily of salaries and related benefits and administrative costs associated with the development of certain components of the Company's integrated information capture and delivery system, as well as development of the Company's standardized disease management programs and the Company's Internet based technology products. Research and development expenses for the three months ended March 31, 2000 were $85,552, as compared to $118,419 for the three months ended March 31, 1999. The Company recorded a loss of $8,327 for the three-month period ended March 31, 2000 as opposed to a gain of $46,411 for the three-month period ended March 31, 1999 in other income. The net decrease in these amounts is principally due to the reduction of cash for which the Company was paid interest and the increase of interest expenses on debt. The Company had a net loss attributable to the Common shareholders after preferred stock dividends of $2,184,906 for the three months ended March 31, 2000, as compared to a net loss of $1,713,727 for the three months ended March 31, 1999. This represents a net loss per share of $.27 for the first quarter of 2000, as compared to a net loss of $.21 per share in the first quarter of 1999. The preferred stock dividends include a beneficial conversion feature for the 100,000 shares of Series C Stock of $550,000. Liquidity and Capital Resources At March 31, 2000 the Company had a working capital deficit of $496,963 as compared to working capital of $414,132 at December 31, 1999. Through March 31, 2000 these amounts reflect the effects of the Company's continuing losses as well as the borrowings against its $2,500,000 line of credit, $500,000 of which was considered to be a long term liability at December 31, 1999. Since its inception, the Company has primarily funded its operations, working capital needs and capital expenditures from the sale of equity securities. The Company completed an initial public offering of its common stock on January 8, 1997, at which time, it generated net proceeds to the Company of $16,314,048. On March 31, 2000, the Company completed a private placement of 100,000 shares of newly issued Series C 9% Cumulative Convertible Preferred Stock ("Series C"), raising $1,000,000 in total proceeds. These shares can be converted into Common Stock at a rate of 8 shares of Common Stock to 1 share of Series C Preferred Stock. Each Series C share has voting rights equivalent to 8 shares of Common Stock (800,000 shares). The proceeds from this issuance have been used to support the Company's operations. The fair market value of the Company's Common Stock at the time of issuance of Series C Stock was $1.9375 per share. The Series C Preferred Stock is convertible as a price equal to $1.25 per share of Common Stock resulting in a discount, or beneficial conversion feature, of $0.6875 per share. The total amount of this beneficial conversion feature ($550,000) is deemed to be the equivalent of a preferred stock dividend. The Company recorded the deemed dividend at the date of issuance by debiting accumulated deficit and crediting additional paid-in capital, with no net effect on total stockholders' equity. However, this amount increased the loss applicable to common stockholders in the calculation of basic and diluted net loss per share for the three-month period ended March 31, 2000 by approximately $0.07. In December 1999, the Company established a credit facility for $1,500,000 guaranteed by Derace Schaffer and John Pappajohn, two directors of the Company. In consideration for their guarantees, the Company granted to Dr. Schaffer and Mr. Pappajohn warrants to purchase an aggregate of 375,000 shares of common stock for $1.5625 per share. In March 2000, the facility was increased by $1,000,000 under substantially the same terms, also guaranteed by the same Board members. Because this line of credit is due and payable on March 31, 2001, amounts outstanding at March 31, 2000 and December 31, 1999 are reported as current and long-term liabilities, respectively. Additional warrants to purchase an aggregate of 250,000 shares of Common Stock for $2.325 per share, were granted to Dr. Derace Schaffer and Mr. John Pappajohn for their guarantee of this additional line of credit. The warrants are included in the debt issuance costs in the balance sheet. The estimated fair value of the warrants at March 31, 2000 is approximately $475,000 based on the application of the Black Scholes option pricing model which incorporates current stock price, expected stock price volatility, expected interest rates, and the expected holding period of the warrant. The Company has expended substantial amounts to expand its operational capabilities and strengthen its infrastructure, which at the same time has increased its administrative and technical costs. In addition, the Company's cash has been steadily depleted as a result of operating losses. To the extent that the Company anticipates that its losses will continue or increase, the Company's available capital will continue to decline. Accordingly, the Company has been required to seek additional capital to maintain its operations. The Company is continuing its efforts to raise additional capital privately through the sale of convertible preferred stock in a private placement to accredited investors through the efforts of its officers and directors. No assurance can be given that the Company will successfully raise the necessary funds. In addition, the Company anticipates that as its losses continue, it will likely need to raise additional funds during 2000. However, no assurance can be given that the Company will be able to obtain additional financing on favorable terms, if at all. In addition, any additional financing, which includes the issuance of additional securities of the Company, may be dilutive to the Company's existing stockholders. If the Company is unable to identify additional capital, it will be required to curtail or cease operations. Nasdaq Continued Listing Requirements In order for the Company's Common Stock to continue to be quoted on the Nasdaq National Market, it must have net tangible assets of at least $4 million. As of March 31, 2000, the Company's net tangible assets were less than $4 million. Accordingly, the Company expects that its Common Stock may be delisted from the Nasdaq National Market. Nevertheless, the Company intends to try to satisfy the continuing listing criteria to be listed on the Nasdaq Small Cap Market so that if its shares are delisted from the Nasdaq National Market, that its Common Stock may be listed for trading on the Nasdaq Small Cap Market. No assurance can be given that the liquidity of the Common Stock will not be adversely affected if it is traded on the Nasdaq Small Cap Market ("Nasdaq"). In order to satisfy continued listed criteria on the Nasdaq Small Cap Market, a company must have, among other things, net tangible assets of at least $2 million and maintain a stock price in excess of $1 per share. Whether or not the Company can be deemed to satisfy the listing requirements of the Nasdaq Small Cap Market as of March 31, 2000, to the extent that the Company continues to incur losses and is unable to raise additional equity, it will not be able to maintain compliance with the continued listing requirements of the Nasdaq Small Cap Market. No assurance can be given that the Company's Common Stock will continue to be listed on Nasdaq. If the failure to meet the maintenance criteria results in the Company's Common Stock no longer being eligible for quotation on Nasdaq, trading, if any, of the Common Stock would thereafter be conducted in the non-Nasdaq over-the-counter market. As a result of such delisting, an investor may find it more difficult to dispose of or to obtain accurate quotations as to the market value of the Company's Common Stock. In addition, if the Common Stock was to become delisted from Nasdaq and the trading price of the Common Stock was less than $5.00 per share, trading in the Common Stock would be subject to the requirements of certain rules promulgated under the Securities Exchange Act of 1934, as amended ("the "Exchange Act"), which require additional disclosure by broker-dealers in conjunction with any trades involving a stock defined as a penny stock (generally, any non-Nasdaq equity security that has a market price of less than $5.00 per share, subject to certain exceptions). Such rules require the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith, and impose various sales practice requirements on dealer-brokers who sell penny stocks to persons other than established customers and accredited investors (generally institutions). For these types of transactions, the dealer-broker must make a special suitability determination for the purchaser and must receive the purchaser's written consent to the transaction prior to sale. The additional burdens imposed on broker-dealers by such requirements may discourage them from effecting transactions in the Common Stock, which could severely limit the liquidity of the Common Stock and the ability to sell the Common Stock in the secondary market. In the absence of an active trading market, purchasers of the Common Stock may experience difficulty in selling their shares. The trading price of the Common Stock is expected to be subject to significant fluctuations in response to variations in quarterly operating results, changes in analysts' earnings estimates and other factors. In addition, the stock market is subject to price and volume fluctuations that affect the market prices for companies and that are often unrelated to operating performance. Inflation Inflation did not have a significant impact on the Company's costs during the three periods ended March 31, 2000 and March 31, 1999. The Company continues to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions. 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. Accounting Pronouncements In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities". In June 2000, the FASB issued SFAS No. 138, which amends certain provisions of SFAS 133 to clarify four areas causing difficulties in implementation. The amendment included expanding the normal purchase and sale exemption for supply contracts, permitting the offsetting of certain intercompany foreign currency derivatives and thus reducing the number of third party derivatives, permitting hedge accounting for foreign-currency denominated assets and liabilities, and redefining interest rate risk to reduce sources of ineffectiveness. We have appointed a team to implement SFAS 133 on a global basis for the Company. This team has been implementing an SFAS 133 compliant risk management information system, globally educating both financial and non-financial personnel, inventorying embedded derivatives and addressing various other SFAS 133 related issues. We will adopt SFAS 133 and the corresponding amendments under SFAS 138 on January 1, 2001. SFAS 133, as amended by SFAS 138, is not expected to have a material impact on the Company's condensed consolidated financial position, results of operations or cash flows. In September 2000, the Financial Accounting Standards Board issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities," which supercedes SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." This standard is effective for transfers occurring after March 31, 2001, with certain disclosure requirements effective for the year ending December 31, 2000. The Company does not believe the adoption of this standard will have a significant impact on the Company's condensed consolidated financial position, results of operations or cash flows. In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements," which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. SAB 101, as amended, is required to be adopted by the Company no later than the fourth quarter of fiscal year 2000. Although the Company has not fully assessed the implications of SAB 101, management does not believe the adoption of SAB 101 will have a significant impact on the Company's condensed consolidated financial position, results of operations or cash flows. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company is exposed to changes in interest rates primarily in its cash transactions. The interest paid on the Company's outstanding line of credit is based upon the prime rate. The Company has the option of reducing its interest expenses by rolling the outstanding line of credit balance into notes that carry a rate equal to LIBOR plus 1.75%. In relation to the operations of Patient Infosystems Canada, fluctuations of foreign currency can impact the Company's net operating results. However, management believes that due to the relative size of its operations in Canada, such impact would be considered immaterial to the consolidated financial statements. The Company currently has no significant investments 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 did not make any purchases of available-for-sale securities in the three months ended March 31, 1999 and 2000. PART II - OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds Series C Preferred Stock On March 31, 2000, the Company received $1,000,000 in proceeds from a private sale of 100,000 shares of Series C Convertible Preferred Stock. The Series C Convertible Preferred carries a 9% cumulative dividend provision and can be converted into Common Stock at a rate of 8 shares of Common to 1 share of Preferred. Each share of Series C Convertible Preferred Stock has voting rights equal to the number of shares of Common Stock into which it can be converted. Item 6. Exhibits and Reports on Form 8-K Exhibits: - -------- (a) (11) Statements of Computation of Per Share Earnings (27) Financial Data Schedule (b) No reports on Form 8-K were filed during the quarter ended March 31, 2000 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 20, 2000 PATIENT INFOSYSTEMS, INC. (Registrant) Date November 20, 2000 /s/ Roger L. Chaufournier ----------------- ------------------------- Roger L. Chaufournier Director, President and Chief Executive Officer Date November 20, 2000 /s/ Kent A. Tapper ----------------- ------------------------- Kent A. Tapper Principle Accounting Officer EX-11 2 0002.txt STATEMENT OF COMPUTATION OF PER SHARE EARNINGS Exhibit 11. Statement of Computation of Per Share Earnings
PATIENT INFOSYSTEMS, INC. Three Months Ended March 31, 2000 1999 ---- ---- As Restated, see Note 8 Net loss $ (1,634,906) $ (1,713,727) Convertible preferred stock Dividends (550,000) - --------------- --------------- Net loss attributable to common shareholders $ (2,184,906) $ (1,713,727) --------------- --------------- Weighted average common shares 8,040,202 8,023,423 --------------- --------------- Net Loss per share - Basic and diluted $ (0.27) $ (0.21) =============== ===============
EX-27 3 0003.txt FDS --
5 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 2,072,176 0 688,565 50,000 0 2,917,469 2,631,015 1,446,693 5,672,231 3,414,432 0 0 1,000 80,402 2,176,397 5,672,231 600,580 600,580 1,278,175 2,227,159 0 0 21,954 (1,634,906) 0 (1,634,906) 0 0 0 (1,634,906) (.27) (.27)
-----END PRIVACY-ENHANCED MESSAGE-----