UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1998
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 Z - 24196
MEDPLUS, INC.
(Exact name of registrant as specified in its charter)
Ohio 48-1094982
(State or other jurisdiction (I.R.S. Employer
Identification
of incorporation or organization) No.)
8805 Governor's Hill Drive, Suite 100
Cincinnati, OH 45249
(Address of principal executive offices)
(513) 583-0500
(Registrant's telephone number, including area code)
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 report(s), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No________
As of June 1, 1998, there were 6,175,717 shares of the
registrant's
common stock without par value issued and outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MEDPLUS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
Three Months Three Months
Ended Ended
April 30, April 30,
1998 1997
____________ ____________
Revenues:
Systems sales $ 566,977 932,991
Support and consulting revenues 895,497 316,474
____________ ____________
Total revenues 1,462,474 1,249,465
____________ ____________
Cost of revenues:
Systems sales 425,619 644,104
Support and consulting revenues 769,443 347,182
____________ ____________
Total cost of revenues 1,195,062 991,286
____________ ____________
Gross profit 267,412 258,179
Operating expenses:
Sales and marketing 1,455,354 1,039,825
Research and development 395,562 134,135
General and administrative 858,348 634,599
Universal Document management expenses (378,961) -
____________ ____________
Total operating expenses 3,088,225 1,808,559
____________ ____________
Operating loss (2,820,813) (1,550,380)
Other income, net 124,377 3,101
____________ ____________
Loss before income benefit (2,696,436) (1,547,279)
Income tax benefit (950,462) (59,396)
____________ ____________
Loss from continuing operations (1,745,974) (1,487,883)
Income from discontinued operations - 59,495
____________ ____________
Net loss $ (1,745,974) (1,428,388)
____________ ____________
____________ ____________
Earnings (loss) per share - basic and diluted:
Continuing operations $ (0.28) (0.25)
Discontinued operations 0.00 0.01
____________ ____________
Net loss per share $ (0.28) (0.24)
____________ ____________
____________ ____________
Weighted average number of shares of common stock
outstanding 6,160,157 5,921,546
____________ ____________
____________ ____________
See accompanying notes to consolidated financial statements.
MEDPLUS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
April 30, January 31,
1998 1998
____________ ____________
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 6,393,518 13,788,668
Accounts receivable, less allowance for doubtful accounts
of $120,000 at April 30, 1998 and $115,000 at January 31, 1998 3,252,224 4,167,702
Other receivables 365,058 71,728
Income taxes refundable 176,201 -
Inventories 784,641 757,471
Deferred tax asset 364,691 328,497
Prepaid expenses and other current assets 636,917 523,908
____________ ____________
Total current assets 11,973,250 19,637,974
____________ ____________
Capitalized software development costs, net 2,111,489 2,020,613
Fixed assets, net 1,442,012 1,347,465
Excess of cost over fair value of net assets acquired, net 787,895 781,391
Other assets 231,046 322,171
Net assets of discontinued operations 324,603 128,461
____________ ____________
$16,870,295 24,238,075
____________ ____________
____________ ____________
____________ ____________
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of obligations under
capital leases $ 179,257 132,206
Borrowings on line of credit - 1,496,353
Accounts payable 1,190,733 2,807,105
Accrued expenses 1,145,647 2,482,723
Accrued income taxes payable 92,705 1,346,869
Deferred revenue 446,390 496,306
Other current liabilities 297,000 297,000
____________ ____________
Total current liabilities 3,351,732 9,058,562
____________ ____________
Obligations under capital leases, excluding current installments 172,674 167,884
Deferred tax liability 450,741 534,644
____________ ____________
Total liabilities 3,975,147 9,761,090
____________ ____________
Shareholders' equity:
Common stock, no par value, authorized 15,000,000 shares;
issued and outstanding 6,175,114 shares at April 30, 1998
and 6,160,712 shares at January 31, 1998 - -
Additional paid-in capital 17,391,789 17,284,557
Accumulated deficit (4,365,723) (2,619,749)
Unearned stock compensation (130,918) (187,823)
____________ ____________
Total shareholders' equity 12,895,148 14,476,985
____________ ____________
$ 16,870,295 24,238,075
____________ ____________
____________ ____________
See accompanying notes to consolidated financial statements.
MEDPLUS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended Three Months Ended
April 30, 1998 April 30, 1997
__________________ __________________
Cash flows from operating activities:
Loss from continuing operations $(1,745,974) (1,487,883)
Adjustments to reconcile loss from continuing operations
to net cash used in operating activities:
Amortization of capitalized software development costs 119,331 106,354
Depreciation and amortization 103,668 51,682
Amortization of unearned stock compensation costs 56,905 48,278
Amortization of excess of cost over fair value of net
assets acquired 13,354 1,929
Deferred income taxes (120,097) (59,396)
Realized gain on sales of investment securities
and fixed assets - (9,566)
Provision for loss on doubtful accounts 3,562 10,000
Changes in assets and liabilities:
Accounts receivable 998,040 (138,931)
Other receivables (32,651) 19,634
Inventories (27,170) (265,059)
Prepaid expenses and other assets (97,882) 46,346
Accounts payable and accrued expenses (1,517,303) 148,929
Income taxes (1,430,365) -
Deferred revenue (49,916) 15,591
__________________ __________________
Net cash used in operating activities (3,726,498) (1,512,092)
__________________ __________________
Cash flows from investing activities:
Capitalization of software development costs (210,207) (147,501)
Purchases of fixed assets (107,583) (79,730)
Proceeds from sales of investment securities and fixed assets - 323,114
Universal Document acquisition and offering costs (1,158,497) (82,741)
Payments made for acquisitions of businesses (19,858) -
Other advances and investments (260,679) (357,333)
__________________ __________________
Net cash used in investing activities (1,756,824) (344,191)
__________________ __________________
Cash flows from financing activities:
Proceeds from issuance of common stock, net
of issuance costs 58,083 11,100
Purchases of treasury stock (164,346) -
Proceeds from borrowings on line of credit 3,647 141,136
Repayments on line of credit (1,500,000) -
Principal payments on capital lease obligations (38,791) (7,856)
__________________ __________________
Net cash provided by (used in) financing
activities (1,641,407) 144,380
Net cash provided by (used in) discontinued operations (270,421) 738,557
__________________ __________________
Net decrease in cash and cash equivalents (7,395,150) (973,346)
Cash and cash equivalents, beginning of period 13,788,668 1,016,654
__________________ __________________
Cash and cash equivalents, end of period $ 6,393,518 43,308
__________________ __________________
__________________ __________________
Interest paid $ 74,954 9,610
__________________ __________________
__________________ __________________
Income taxes paid $ 600,000 -
__________________ __________________
__________________ __________________
See accompanying notes to consolidated financial statements.
MEDPLUS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
(1) Description of the Business
MedPlus, Inc. (the "Company") provides state-of-the-art
information management technology products and consulting services
to customers predominantly in the healthcare industry. The
Company's products presently consist of the ChartMaxx[tm]
Enterprise-wide Patient Record System ("ChartMaxx") and the
OptiMaxx[tm] Archival System ("OptiMaxx"). ChartMaxx is an
enterprise-wide electronic patient record system. OptiMaxx is an
optical disk-based archival system. The Company's FutureCORE[tm],
Inc. subsidiary ("FutureCORE") provides process improvement and
automation services, primarily in the areas of patient care and
laboratory services. On January 30, 1998, the Company acquired a
majority interest in DiaLogos[tm] Incorporated ("DiaLogos") which
specializes in assisting organizations in the integration of
enterprise-wide business systems with existing applications and
data using distributed object computing, including CORBA and Java
technologies, through education, consulting and implementation
services. DiaLogos is in the initial phases of developing several
products designed to simplify the effort of legacy system
integration.
(2) Summary of Significant Accounting Policies
(a) Interim Financial Information
The consolidated financial statements and the related
notes thereto are unaudited and have been prepared on the same
basis as the audited consolidated financial statements. In the
opinion of management, such unaudited financial statements include
all adjustments, consisting of only normal recurring adjustments,
necessary to present fairly the information set forth therein.
(b) Significant Accounting Policies
A description of the Company's significant accounting
policies can be found in the footnotes to the Company's annual
consolidated financial statements for the year ended January 31,
1998 included in its Annual Report on Form 10-KSB dated May 1,
1998. The accompanying consolidated financial statements should
be read in conjunction with those footnotes.
(c) Consolidation of DiaLogos Financial Statements
The Company acquired its majority interest in DiaLogos
on January 30, 1998, and it currently owns 56.5% of the
outstanding shares of DiaLogos common stock. The Company
consolidates the financial position and results of operations of
DiaLogos based on DiaLogos' fiscal year which ends on December 31.
Therefore, DiaLogos' financial position and results of operations
as of and for the two months ended March 31, 1998 have been
included in the accompanying consolidated financial statements.
The Company has recognized 100% of the results of operations of
DiaLogos for the two months ended March 31, 1998 as the minority
interest investment in DiaLogos has been reduced to zero.
Advances by the Company to DiaLogos during the month of April have
been included in other receivables.
(d) Fiscal Year
In December 1997, the Company changed its fiscal year
end from December 31 to January 31. Accordingly, the Company's
current fiscal quarter commenced on February 1, 1998 and ended on
April 30, 1998. The Company has recasted the quarterly financial
information for the fiscal year ended January 31, 1998 and has
presented the comparative financial information for the three
months ended April 30, 1997.
(e) Earnings (Loss) Per Share
Basic and diluted earnings (loss) per share are based on
the weighted average number of shares of common stock outstanding
for each period excluding any shares related to nonvested employee
stock awards. Dilutive securities have not been included in the
weighted average shares used for the calculation of diluted
earnings per share in periods of losses from continuing operations
because the effect of such securities would be antidilutive.
(f) Supplemental Cash Flow Information
DiaLogos entered into a capital lease obligation for
equipment of $90,632 in February 1998. The Company's discretionary
and profit-sharing contributions to the Company's Retirement
Savings and Investment Plan for the 1997 Plan year were funded in
March 1998 through the issuance of 31,629 shares of the Company's
common stock. As these are non-cash transactions, they have not
been presented in the Consolidated Statements of Cash Flows.
(3) Acquisition of DiaLogos
The following unaudited pro forma data presents the
results of operations as if the acquisition of DiaLogos had
occurred at the beginning of each period. The information
reflects DiaLogos' results of operations for the three months
ended March 31, 1998 and 1997 due to the Company consolidating
DiaLogos' results of operations based on DiaLogos' fiscal year
end. This summary is provided for information purposes only. It
does not necessarily reflect the actual results that would have
occurred had the acquisition been made as of those dates or of
results that may occur in the future.
Three Months Three Months
Ended Ended
April 30, April 30,
1998 1997
____________ ____________
Revenues $ 1,571,714 1,251,565
Loss from continuing operations (1,816,351) (1,835,952)
Net loss $ (1,816,351) (1,776,457)
____________ ____________
____________ ____________
Earnings (loss) per share - basic
and diluted:
Continuing operations $ (0.29) (0.31)
Discontinued operations 0.00 0.01
____________ ____________
Net loss $ (0.29) (0.30)
____________ ____________
____________ ____________
(4) Bank Agreements
On September 9, 1997, the Company and the Company's Universal
Document Management Systems, Inc. ("Universal Document")
subsidiary entered into a line of credit agreement ("Universal
line of credit") with a bank to fund the costs associated with
Universal Document's acquisitions and initial public offering
discussed in Note 5 and for working capital. The Universal line of
credit was paid in full and canceled on February 10, 1998.
(5) Commitments and Contingency
(a) Universal Document Acquisitions and Initial Public
Offering
The Company's Universal Document subsidiary has hired a
senior management team and entered into agreements with two
consulting firms to assist it in the identification and
recruitment of certain design automation software resellers and
integrators (collectively, along with Universal Document, the
"Founding Companies") that Universal Document may acquire or
combine with, and to assist Universal Document in an initial
public offering of its common stock. In September and October
1997, Universal Document entered into definitive purchase
agreements, which were contingent upon a successful initial public
offering, to acquire nine such companies. On October 10, 1997,
Universal Document filed a registration statement on Form S-1 with
the Securities and Exchange Commission to offer its common stock
to the public. Universal Document filed subsequent amendments to
this registration statement on December 15, 1997 and January 9,
1998. Under the terms of the initial public offering as disclosed
in the registration statement, Universal Document and the Company
would offer to sell 1,850,000 and 750,000 shares, respectively.
Universal Document would use a portion of its proceeds from the
sale of shares in the offering and the issuance of additional
shares to acquire the nine companies with which it had entered
into acquisition agreements. The Company would retain a minority
interest in Universal Document after the initial public offering.
In connection with its initial public offering, Universal Document
would change its name to Synergis Technologies, Inc. Due to
adverse market conditions for initial public offerings in January
1998, Universal Document postponed the initial public offering
upon the advice of its underwriters.
Universal Document had capitalized direct, incremental
costs during the year ended January 31, 1998 related to the
potential acquisitions and initial public offering for
accountants', attorneys', and consultants' fees ("acquisition and
offering costs") that were to become a cost of the acquired
companies or costs of the initial public offering upon the
completion of the transactions. As a result of its decision to
postpone its initial public offering, Universal Document expensed
in January 1998 all such costs capitalized during the fiscal year
ended January 31, 1998.
The Company currently plans to continue to proceed with
the acquisitions and initial public offering. As of June 12,
1998, Universal Document had entered into definitive purchase
agreement extensions, which are contingent upon a successful
initial public offering, with four of the Founding Companies and
was negotiating definitive purchase agreement extensions with four
of the other Founding Companies. In addition, Universal Document
had entered into a non-binding letter of intent to acquire another
design automation software reseller and integrator. As a result,
the Company has capitalized certain acquisition and offering costs
as of April 30, 1998. These costs were not material to the
Company's consolidated financial statements as of that date. If
for any reason the initial public offering should not take place
and the acquisitions should not occur, then these acquisition and
offering costs will be charged to expense in the period that it is
determined that the initial public offering and acquisitions will
not take place. Similar costs incurred in future periods will be
treated in a consistent manner. The Company also incurred $378,961
of operating expenses during the three months ended April 30, 1998
associated with the senior management team hired to manage the
acquisitions, offering and integration of the Founding Companies.
The Company and Universal Document have entered into a
variety of agreements related to the Universal Document
acquisitions and initial public offering. These agreements
include consulting agreements, employment agreements, an amendment
of the HWB purchase agreement, definitive purchase agreements and
letters of intent with the target companies, and stock incentive
agreements associated with Universal Document common stock. The
significant financial terms of these agreements are contingent
upon the successful completion of an initial public offering of
Universal Document's common stock. The Company is currently
evaluating the structure of the acquisitions and initial public
offering. As a result of such evaluation, many, if not all, of the
agreements referred to above may either be terminated or
significantly amended.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Fiscal Year
In December 1997, the Company changed its fiscal year end from
December 31 to January 31. Accordingly, the Company's current
fiscal quarter commenced on February 1, 1998 and ended on April
30, 1998. The Company has recasted the quarterly financial
information for the fiscal year ended January 31, 1998 and has
presented the comparative financial information for the three
months ended April 30, 1997.
DiaLogos Acquisition
The Company acquired its majority interest in DiaLogos on January
30, 1998, and it currently owns 56.5% of the outstanding shares of
DiaLogos common stock. The Company consolidates the financial
position and results of operations of DiaLogos based on DiaLogos'
fiscal year which ends on December 31. Therefore, DiaLogos'
financial position and results of operations as of and for the two
months ended March 31, 1998 have been included in the accompanying
consolidated financial statements as of and for three months ended
April 30, 1998. The Company has recognized 100% of the results of
operations of DiaLogos for the two months ended March 31, 1998 as
the minority interest investment in DiaLogos has been reduced to
zero. Future fiscal quarters will contain the results of
operations of DiaLogos for the relevant three month period.
Three Months Ended April 30, 1998 and April 30, 1997
Revenues for the three months ended April 30, 1998 (or "first
quarter of fiscal 1999") were $1,462,474, an increase of $213,009
or 17% over the $1,249,465 reported for the comparable period in
fiscal 1998. Systems sales decreased 39% from the three months
ended April 30, 1997 (or "first quarter of fiscal 1998") primarily
as a result of the mix and relative size of ChartMaxx and OptiMaxx
systems sold. Support and consulting revenues increased 183% from
the three months ended April 30, 1997 due to the addition of
consulting and education revenues from DiaLogos and increased
support and consulting revenues from the Company's ChartMaxx and
OptiMaxx product lines as the number of installed sites of the
division's products continues to increase.
Gross profit for the three months ended April 30, 1998 was
$267,412, or 18% of revenues, compared to $258,179, or 21% of
revenues, for the three months ended April 30, 1997. The gross
profit percentage on systems sales decreased from 31% in the first
quarter of fiscal 1998 to 25% in the first quarter of fiscal 1999
due to a higher proportion of lower margin third party hardware
and software relative to proprietary software included in certain
sales and increased software amortization. The gross profit
percentage on support and consulting revenues increased from -10%
in the first quarter of fiscal 1998 to 14% in the first quarter of
fiscal 1999. The increase in this percentage was primarily a
result of the addition of the gross margins on DiaLogos'
consulting and education revenues and the increased support
revenues noted above. These items were partly offset by an
increase in customer support, installation, and consulting
personnel in advance of related revenues and lower than expected
utilization rates of those personnel. Future gross profit margins
for support and consulting services may continue to be depressed
in the near term as a result of the timing of systems sales,
unforeseen delays in implementation schedules, the number and
timing of additions to the implementation and consulting staff
relative to when they become billable to customers, or the need to
use independent consultants while the Company is further
developing its implementation and consulting staff.
Operating expenses for the first quarter of fiscal 1999 were
$3,088,225 compared to $1,808,559 for the first quarter of fiscal
1998, an increase of 71%. Excluding $378,961 of Universal Document
management expenses, operating expenses increased $900,705 or 50%
over the comparable period of fiscal 1998. The Company has
continued to increase its investment in its sales and marketing
efforts for the ChartMaxx product line and DiaLogos. The principle
areas of investment have been direct sales, channel partner
programs, national accounts, and general marketing activities as
evidenced by the 40% increase in sales and marketing expenditures
over the first quarter of fiscal 1998. The increase in operating
expenses is also a result of the inclusion of the operating
expenses of DiaLogos and an increase in personnel in the areas of
product development and administration. Universal Document
management expenses represent personnel and other costs associated
with Universal Document's senior management team which has been
hired to manage Universal Document's initial public offering,
acquisitions and operations after the offering.
Other income, net, which consists primarily of interest
income and expense, increased to $124,377 in the first quarter of
fiscal 1999 from $3,101 in the comparable quarter of fiscal 1998.
This increase is a result of the increase in the Company's cash
and cash equivalents balances from fiscal 1998 due to cash
received from the sale of the Company's IntelliCode division and
shares of the Company's common stock to Becton, Dickinson and
Company in January 1998.
The Company's income tax benefit increased from $59,396 in the
first quarter of fiscal 1998 to $950,462 in the first quarter of
fiscal 1999. The Company recognized the full benefit of its net
operating loss for income taxes purposes from the first quarter of
fiscal 1999 through the carryback of this loss against taxable
income in fiscal 1998 generated by the sale of the IntelliCode
division. The Company's ability to recognize the full benefit of
its net operating loss for the first quarter of fiscal 1998 was
limited by the Company's establishment of a valuation allowance
against that net operating loss carryforward.
Discontinued operations in the first quarter of fiscal 1998
represent the results of operations of the Company's IntelliCode
division and the Step2000 Workflow, Document Management, and
Application Development System ("Step2000") segment of Universal
Document, which the Company is currently in the process of
selling. In the fourth quarter of fiscal 1998, the Company
accrued the estimated loss on disposal of the net assets of the
Step2000 segment and its estimated losses through the anticipated
date of disposal. The Company expects to complete the disposal of
this segment no later than January 31, 1999.The Company's net loss
for the first quarter of fiscal 1999 was $1,745,974 compared to a
net loss in the first quarter of fiscal 1998 of $1,428,388. The
increase in the net loss is a result of lower gross profit margins
and increased operating expenses partially offset by increased
interest income and the increase in the income tax benefit.
Universal Document Acquisitions and Initial Public Offering
The Company's Universal Document subsidiary has hired a senior
management team and entered into agreements with two consulting
firms to assist it in the identification and recruitment of
certain design automation software resellers and integrators
(collectively, along with Universal Document, the "Founding
Companies") that Universal Document may acquire or combine with,
and to assist Universal Document in an initial public offering of
its common stock. In September and October 1997, Universal
Document entered into definitive purchase agreements, which were
contingent upon a successful initial public offering, to acquire
nine such companies. On October 10, 1997, Universal Document
filed a registration statement on Form S-1 with the Securities and
Exchange Commission to offer its common stock to the public.
Universal Document filed subsequent amendments to this
registration statement on December 15, 1997 and January 9, 1998.
Under the terms of the initial public offering as disclosed in the
registration statement, Universal Document and the Company would
offer to sell 1,850,000 and 750,000 shares, respectively.
Universal Document would use a portion of its proceeds from the
sale of shares in the offering and the issuance of additional
shares to acquire the nine companies with which it had entered
into acquisition agreements. The Company would retain a minority
interest in Universal Document after the initial public offering.
In connection with its initial public offering, Universal Document
would change its name to Synergis Technologies, Inc. Due to
adverse market conditions for initial public offerings in January
1998, Universal Document postponed the initial public offering
upon the advice of its underwriters.
Universal Document had capitalized direct, incremental costs
during the year ended January 31, 1998 related to the potential
acquisitions and initial public offering for accountants',
attorneys', and consultants' fees ("acquisition and offering
costs") that were to become a cost of the acquired companies or
costs of the initial public offering upon the completion of the
transactions. As a result of its decision to postpone its initial
public offering, Universal Document expensed in January 1998 all
such costs capitalized during the fiscal year ended January 31,
1998.
The Company currently plans to continue to proceed with the
acquisitions and initial public offering. As of June 12, 1998,
Universal Document had entered into definitive purchase agreement
extensions, which are contingent upon a successful initial public
offering, with four of the Founding Companies and was negotiating
definitive purchase agreement extensions with four of the other
Founding Companies. In addition, Universal Document had entered
into a non-binding letter of intent to acquire another design
automation software reseller and integrator. As a result, the
Company has capitalized certain acquisition and offering costs as
of April 30, 1998. These costs were not material to the Company's
consolidated financial statements as of that date. If for any
reason the initial public offering should not take place and the
acquisitions should not occur, then these acquisition and offering
costs will be charged to expense in the period that it is
determined that the initial public offering and acquisitions will
not take place. Similar costs incurred in future periods will be
treated in a consistent manner. The Company also incurred $378,961
of operating expenses during the three months ended April 30, 1998
associated with the senior management team hired to manage the
acquisitions, offering and integration of the Founding Companies.
The Company and Universal Document have entered into a variety of
agreements related to the Universal Document acquisitions and
initial public offering. These agreements include consulting
agreements, employment agreements, an amendment of the HWB
purchase agreement, definitive purchase agreements and letters of
intent with the target companies, and stock incentive agreements
associated with Universal Document common stock. The significant
financial terms of these agreements are contingent upon the
successful completion of an initial public offering of Universal
Document's common stock. The Company is currently evaluating the
structure of the acquisitions and initial public offering. As a
result of such evaluation, many, if not all, of the agreements
referred to above may either be terminated or significantly
amended.
Liquidity and Capital Resources
The Company's business requires significant amounts of working
capital to finance new product research and development, the
expansion of its sales and marketing organization, anticipated
revenue growth, capital expenditures and strategic investments.
The Company has financed its operations, working capital needs,
and investments through the sale of common stock, bank borrowings,
capital lease financing agreements, and recently, the sale of the
assets of its IntelliCode division. The Company's principal uses
of cash since inception have been for funding operations, capital
expenditures, research and development activities, investments in
and advances to companies which are deemed to have strategic value
to the Company, and funding costs associated with the Universal
Document acquisitions and initial public offering.
The Company's revolving line of credit agreement ("MedPlus line of
credit") with a bank permits the Company to borrow a maximum of
$10,000,000 subject to a defined net worth formula. The term of
the MedPlus line of credit extends through December 31, 1998, and
the MedPlus line of credit is secured by substantially all of the
Company's assets. At April 30, 1998, the maximum amount available
under the MedPlus line of credit was $10,000,000. No amounts were
outstanding under the MedPlus line of credit at April 30, 1998 and
January 31, 1998.
On September 9, 1997, the Company and Universal Document entered
into a line of credit agreement ("Universal line of credit") with
a bank to fund the costs associated with Universal Document's
acquisitions and initial public offering discussed in Note 5 of
the consolidated financial statements and for working capital.
The amount outstanding under the Universal line of credit at
January 31, 1998 was $1,496,353. The Universal line of credit was
paid in full and canceled on February 10, 1998.
The Company believes that its cash and cash equivalents, available
line of credit, and cash generated from operations will be
sufficient to finance its expected growth and cash requirements.
The Company also believes that it has the ability to
renegotiate or extend its existing line of credit, secure other
debt or equity financings, or sell assets to provide additional
cash if needed. There can be no assurance, however, that these
additional sources of financing will be available on a timely
basis or on terms satisfactory to the Company. The Company does
plan to renegotiate or extend its existing line of credit in
fiscal 1999. In addition, in the event that Universal Document
executes an initial public offering in fiscal 1999, the Company
expects this would provide additional cash to the Company through
the sale of an as yet undetermined amount of shares of Universal
Document held by the Company and the reimbursement of Universal
Document's management, acquisition, and offering costs funded by
the Company.
PART II. OTHER INFORMATION
Items 1-5. None
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are hereby filed as part of this Form
10-QSB:
Exhibit Sequentially
Number Description of Exhibits Numbered Page
________ _______________________ _____________
27 Financial Data Schedule
for three months ended
April 30, 1998 13
27.1 Restated Financial Data
Schedule for three months
ended April 30, 1997 14
27.2 Restated Financial Data
Schedule for three months
ended March 31, 1996 15
(b) The following reports on Form 8-K were filed during the three
month period ended April 30, 1998:
(i) Current Report on Form 8-K filed February 11, 1998
announcing that on January 28, 1998, the Company had sold all the
assets of its IntelliCode Intelligent Bar Coding Systems division
to Becton, Dickinson and Company for an initial payment of $17.4
million and the assumption of certain liabilities. The Company
also sold 222,556 shares of its common stock to Becton, Dickinson
and Company for $2,000,000.
(ii) Current Report on Form 8-K filed February 17, 1998
announcing that on January 30, 1998, the Company had exercised its
option to purchase additional shares of DiaLogos Incorporated
("DiaLogos") and that the Company now owned 56.5% of DiaLogos.
The Company paid approximately $1,191,960 for its ownership
interest in DiaLogos by converting advances made to DiaLogos over
the previous eighteen months.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MedPlus, Inc.
Date: 6/15/98 By: /s/ Daniel A. Silber
Daniel A. Silber
Vice President and Chief Financial
Officer
* Pursuant to the last sentence of General
Instruction G to Form 10-QSB, Mr. Daniel
A. Silber has executed this Quarterly
report on Form 10-QSB both on behalf of
the registrant and in his capacity as its
principal financial and accounting
officer.