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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2002
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 0-22319
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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)
(585) 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 August 14, 2002, 10,956,024 common shares were outstanding.
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
PATIENT INFOSYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------
ASSETS June 30, 2002 December 31, 2001
------------- -----------------
CURRENT ASSETS:
Cash and cash equivalents $ 57,103 $ 29,449
Accounts receivable 323,083 273,791
Prepaid insurance 61,758 55,159
Prepaid expenses and other current assets 41,121 33,290
-----------------------------------------------
Total current assets 483,065 391,689
PROPERTY AND EQUIPMENT, net 382,661 498,472
Debt issuance costs (net of accumulated amortization of $893,235 and $884,301) - 8,934
Intangible assets (net of accumulated amortization of $371,471 and $299,685) 251,252 323,038
-----------------------------------------------
TOTAL ASSETS $ 1,116,978 $ 1,222,133
===============================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 112,959 $ 111,018
Accrued salaries and wages 194,622 176,618
Borrowings from directors 4,762,500 3,907,500
Line of credit 2,500,000 -
Accrued expenses 567,093 477,205
Accrued interest 492,074 282,530
Deferred revenue 106,648 123,140
-----------------------------------------------
Total current liabilities 8,735,896 5,078,011
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LINE OF CREDIT - 2,500,000
STOCKHOLDERS' DEFICIT:
Preferred stock - $.01 par value: shares authorized: 5,000,000
Series C, 9% cumulative, convertible
issued and outstanding - 100,000 1,000 1,000
Common stock - $.01 par value: shares authorized:
20,000,000; issued and outstanding: June 30,
2002 - 10,956,024; December 31, 2001 - 10,956,024 109,560 109,560
Additional paid-in capital 24,177,153 24,222,153
Accumulated deficit (31,906,631) (30,688,591)
-----------------------------------------------
Total stockholders' deficit (7,618,918) (6,355,878)
-----------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 1,116,978 $ 1,222,133
===============================================
See notes to unaudited consolidated financial statements.
PATIENT INFOSYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
---------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----
REVENUES
Operations Fees $ 522,636 $ 303,406 $ 996,456 $ 647,648
Development Fees 6,450 27,061 21,538 56,346
Licensing Fees 13,630 27,500 24,050 54,000
-----------------------------------------------------------------
Total revenues 542,716 357,967 1,042,044 757,994
-----------------------------------------------------------------
COSTS AND EXPENSES
Cost of sales 461,726 613,417 949,579 1,320,709
Sales and marketing 175,188 204,271 353,563 429,190
General and administrative 306,499 734,824 656,635 1,281,007
Research and development 23,786 42,106 47,636 95,431
-----------------------------------------------------------------
Total costs and expenses 967,199 1,594,618 2,007,413 3,126,337
-----------------------------------------------------------------
OPERATING LOSS (424,483) (1,236,651) (965,369) (2,368,343)
OTHER EXPENSE (132,036) (100,908) (252,671) (185,109)
-----------------------------------------------------------------
NET LOSS (556,519) (1,337,559) (1,218,040) (2,553,452)
CONVERTIBLE PREFERRED STOCK DIVIDENDS (22,500) (22,500) (45,000) (45,000)
-----------------------------------------------------------------
NET LOSS ATTRIBUTABLE TO
COMMON STOCKHOLDERS $ (579,019) $ (1,360,059) $ (1,263,040) $ (2,598,452)
=================================================================
NET LOSS PER SHARE - BASIC
AND DILUTED $ (0.05) $ (0.15) $ (0.12) $ (0.30)
=================================================================
WEIGHTED AVERAGE COMMON SHARES 10,956,024 8,919,357 10,956,024 8,569,779
=================================================================
See notes to unaudited consolidated financial statements.
PATIENT INFOSYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
----------------------------------------------------------------------------------------------------------------------
Six Months Six Months
Ended Ended
June 30, 2002 June 30, 2001
OPERATING ACTIVITIES:
Net loss $ (1,218,040) $ (2,553,452)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 202,943 473,383
Gain on sale of property (400) (305)
Compensation expense related to issuance of stock and warrants - 352,673
(Increase) decrease in accounts receivable, net (49,292) 169,753
(Increase) decrease in prepaid insurance, expenses and other current assets (14,430) 25,500
Increase (decrease) in accounts payable 1,941 (89,913)
Increase in accrued salaries and wages 18,004 29,341
Increase in accrued expenses 254,432 184,291
Decrease in deferred revenue (16,492) (39,152)
-------- --------
Net cash used in operating activities (821,334) (1,447,880)
--------- -----------
INVESTING ACTIVITIES:
Property and equipment additions (6,412) (6,831)
Proceeds form the sale of property 400 800
---- ---
Net cash used in investing activities (6,012) (6,031)
------- -------
FINANCING ACTIVITIES:
Borrowing from directors 855,000 1,430,000
Net cash provided by financing activities 855,000 1,430,000
-------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 27,654 (23,911)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 29,449 28,231
------- ------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 57,103 $ 4,320
========= =======
Supplemental disclosure of non-cash information
Dividend declared on Class C Convertible Preferred Stock $ 45,000 $ 45,000
========= ========
See notes to unaudited consolidated financial statements.
PATIENT INFOSYSTEMS, INC.
Notes to Unaudited Consolidated Financial Statements for the periods ended June
30, 2002 and June 30, 2001
1. The accompanying consolidated financial statements for the three and six
month periods ended June 30, 2002 and June 30, 2001 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.
These unaudited consolidated financial statements should be read in
conjunction with the audited 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, 2001. Certain
reclassifications of 2001 amounts have been made to conform to 2002
presentations. The results of operations for the three and six month
periods ended June 30, 2002 are not necessarily indicative of the results
for the entire year ending December 31, 2002.
2. On March 28, 2002, the Company entered into an Amended and Restated Credit
Agreement with Wells Fargo Bank Iowa, N.A., which extended the term of the
Company's $2,500,000 credit facility to March 31, 2003, under substantially
the same terms as of December 31, 2002. Certain directors of the Company
guaranteed this extension.
On June 28, 2002, the Company and Wells Fargo agreed on an addendum to the
Amended and Restated Credit Agreement which extends the credit facility an
additional $500,000, bringing the total credit to $3,000,000. Certain
directors of the Company also guarantee the extended credit facility.
3. The Company borrowed $855,000 for working capital from Mr. Pappajohn during
the six month period ended June 30, 2002. From June 30, 2002 to August 14,
2002, the Company repaid Mr. Pappajohn $280,000 of prior borrowings. A
total of $4,482,500 has been borrowed from Mr. Pappajohn and Dr. Schaffer,
all of which is secured by the assets of the Company.
On March 25, 2002, Messrs. Pappajohn and Schaffer made a commitment to the
Company to obtain the operating funds that the Company believes would be
sufficient to fund its operations through December 31, 2002 based upon an
operational forecast for the Company. As with any forward-looking
projection, no assurances can be given concerning the outcome of the
Company's actual financial status given the substantial uncertainties that
exist. There can be no assurances given that Messers. Pappajohn or Schaffer
can raise either the required working capital through the sale of the
Company's securities or that the Company can borrow the additional amounts
needed.
On June 11, 2002, the board of directors of the Company approved the
conversion of up to $4,642,500 in debt and $438,099 of accrued interest
owed to Mr. Pappajohn and Dr. Schaffer into 36,289,993 shares of the
Company's common stock using a value of $0.14 per common share. The average
value of the Company's common stock based upon an average closing price for
a period immediately before June 11, 2002 was $0.1354. As of June 30, 2002,
the Company's Certificate of Incorporation authorizes the Company to issue
up to 20,000,000 shares of common stock, 10,956,024 of which were issued
and outstanding and 2,029,040 of which were reserved for issuance under
outstanding options, warrants and upon conversion of outstanding
convertible preferred stock. Giving effect to this debt conversion requires
an amendment to the Company's Certificate of Incorporation to authorize
additional common stock. The completion of this transaction cannot occur
unless and until the stockholders of the Company approve this amendment. A
date for a meeting of the stockholders of the Company has not yet been
determined.
4. The calculations for the basic and diluted loss per share were based upon
the loss attributable to common stockholders of $579,019 and $1,360,059 and
a weighted average number of common shares of 10,956,024 and 8,919,357 for
the three month periods ended June 30, 2002 and 2001 respectively. The
calculations for the basic and diluted loss per share were based upon the
loss attributable to common stockholders of $1,263,040 and $2,598,452 and a
weighted average number of common shares of 10,956,024 and 8,569,779 for
the six month periods ended June 30, 2002 and 2001 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 and six
month periods ended June 30, 2002 and 2001 because the effect would have
been antidilutive due to the net loss in those periods.
5. The accompanying unaudited 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 consolidated financial
statements, the Company incurred a net loss for the six month period ended
June 30, 2002 of $1,218,040 and had an accumulated deficit of $31,906,631
at June 30, 2002. 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 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 ability to continue 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.
6. On June 29, 2001, Statement of Financial Accounting Standards("SFAS") No.
142, "Goodwill and Other Intangible Assets" was issued by the Financial
Accounting Standards Board. SFAS No. 142 changes the accounting for
goodwill from an amortization method to an impairment-only approach.
Amortization of goodwill, including goodwill recorded in past business
combinations, will cease upon adoption of this statement. The Company has
adopted SFAS No. 142 on January 1, 2002 and there was no effect on the
Company's consolidated financial statements resulting from the adoption.
SFAS No. 144 establishes a single accounting model for the impairment or
disposal of long-lived assets, including discontinued operations. SFAS No.
144 superseded SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of", and APB Opinion No.
30, "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions." The provisions of SFAS No.
144 are effective in fiscal years beginning after December 15, 2001, with
early adoption permitted, and in general are to be applied prospectively.
There was no material effect on the Company's consolidated financial
statements resulting from the adoption of SFAS No. 144 in 2002.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Management's discussion and analysis provides a review of the Company's
operating results for the three and six month periods ended June 30, 2002 and
June 30, 2001 and its financial condition at June 30, 2002. 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 unaudited
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 ability to continue its operations as a
result of, among other things, continuing losses, working capital short falls,
uncertainties with respect to sources of capital, risks of market acceptance of
or preference for the Company's systems and services, competitive forces, the
impact of, 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, 2001.
Results of Operations
Revenues
Revenues consist of revenues from operations, development fees and
licensing fees. Revenues increased to $542,716 from $357,967 during the three
months ended June 30, 2002 and 2001, respectively, or 51.6%. Revenues increased
to $1,042,044 from $757,994 during the six months ended June 30, 2002 and 2001,
respectively, or 37.5%.
Three Months Ended Six Months Ended
June 30, June 30,
Revenues 2002 2001 2002 2001
-------- ---- ---- ---- ----
Operations Fees
Disease Management and Compliance $ 280,466 $ 116,597 $ 511,544 $ 253,774
Surveys 56,341 36,059 104,805 86,180
Demand Management 155,829 132,750 320,569 271,694
Other 30,000 18,000 59,538 36,000
------------------------------ -------------------------------
Total Operations Fees 522,636 303,406 996,456 647,648
Development Fees 6,450 27,061 21,538 56,346
Licensing Fees 13,630 27,500 24,050 54,000
------------------------------ -------------------------------
Total Revenues $ 542,716 $ 357,967 $ 1,042,044 $ 757,994
------------------------------ -------------------------------
Operations revenues are generated as the Company provides services to its
customers. Operations revenues increased to $522,636 and $996,456 from $303,406
and $647,648 during the three and six month periods ended June 30, 2002 and
2001, respectively. Operations revenues continue to be the primary source of
revenue for the Company. Operations revenues increased because the Company began
providing services to new customers and because its volume of services to
existing customers increased.
The Company has established relationships with several new customers and
entered into a joint marketing relationship with one of its strategic partners.
While the Company is now receiving increased revenues from these relationships
are, no assurances can be given that such revenues will increase or continue at
their current rate. The Company has identified other possible new customers, but
there can be no assurance that such prospects will contribute revenue in the
near term, if at all.
Development fee revenues decreased from $27,061 and $56,346 to $6,450 and
21,538 for the three and six month periods ended June 30, 2001 and 2002,
respectively. This decline was due to decreased emphasis by the Company on
generating revenue for the development of new programs. Development fee revenue
represents the amounts that the Company charges its customers for the
development of customized programs for which it anticipates on-going operations
revenues. The Company has entered into new development agreements but
anticipates that revenue from program development will remain relatively low in
the future.
License fee revenues recognized from the Case Management Support System was
$13,680 and $24,050 as compared to $27,500 and 54,000 for the three and six
month periods ended June 30, 2002 and 2001, respectively. The Company has not
entered into any new licensing agreements for its Case Management Support System
and the revenue for the current period reflects 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 and six month periods ended
June 30, 2002 was $461,726 and $949,579, respectively as compared to $613,417
and $1,320,709 for the same respective periods of 2001. The decrease in these
costs primarily reflects savings derived from organizational changes in the
Company's operational departments. The Company's gross margin, being total
revenues over cost of sales, was positive for the three and six month periods
ended June 30, 2002. The Company anticipates that revenue must increase
significantly before it will recognize further economies of scale. No assurance
can be given that revenues will increase or that, if they do, they will continue
to exceed costs and 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 and six month periods ended June 30,
2002 were $175,188 and $353,563, respectively as compared to $204,271 and
$429,190 for the same respective periods of 2001. Spending in this area has
decreased due to the termination of 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 and
six month periods ended June 30, 2002 were $306,499 and $656,635 respectively,
as compared to $734,824 and $1,281,007 for the same respective periods of 2001.
These expenditures have been incurred to maintain the corporate infrastructure
necessary to support anticipated program operations. The decrease in these costs
during the period reflected a lower amount of debt issuance cost amortization.
The debt issuance cost amortization expense recorded was $0 and $8,934 for the
three and six month periods ended June 30, 2002 as compared to $356,807 and
$549,557 for the three and six month periods ended June 30, 2001. Without these
charges, general and administrative costs would have decreased from $378,017 and
$731,449 for the three and six month periods ended June 30, 2001 to $306,499 and
$647,701 for the three and six month periods ended June 30, 2002.
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 and six month periods ended June 30, 2002 were $23,786
and $47,636, respectively, as compared to $42,106 and $95,431 for same
respective periods of 2001.
The Company recorded other expenses of $132,036 and $252,671 for the three
and six month periods ended June 30, 2002 as compared to $100,908 and $185,109
for the same respective periods of 2001, principally due to the increase of
interest expenses on debt.
Income (loss)
The Company had a net loss attributable to the common shareholders after
preferred stock dividends, of $579,019 and $1,263,040 for the three and six
month periods ended June 30, 2002 compared to $1,360,059 and $2,598,452 for the
same respective periods of 2001. This represents a net loss per common share of
$.05 and $.12 for the three and six month periods ended June 30, 2002, as
compared to a net loss of $.15 and $.30 per common share for the same respective
periods of 2001.
Liquidity and Capital Resources
At June 30, 2002 the Company had a working capital deficit of $8,252,831 as
compared to $4,686,322 at December 31, 2001. Through June 30, 2002, these
amounts reflect the effects of the Company's continuing losses as well as
increased borrowings, $2,500,000 of which was considered to be a long-term
liability at December 31, 2001 but is classified as a current liability at June
30, 2002. Since its inception, the Company has primarily funded its operations,
working capital needs and capital expenditures from the sale of equity
securities or the incurrence of debt.
On March 28, 2002, the Company entered into an Amended and Restated Credit
Agreement with Wells Fargo Bank Iowa, N.A., which extended the term of the
$2,500,000 credit facility to March 31, 2003, under substantially the same
terms. Certain directors of the Company guaranteed this extension.
On June 28, 2002, the Company and Wells Fargo agreed on an addendum to the
Amended and Restated Credit Agreement which extends the credit facility by an
additional $500,000, increasing the total credit to $3,000,000. Messers.
Pappajohn and Schaffer also guarantee the extended credit facility.
The Company borrowed $855,000 for working capital from Mr. Pappajohn during
the six month period ended June 30, 2002. From June 30, 2002 to August 14, 2002,
the Company repaid Mr. Pappajohn $280,000 of prior borrowings. A total of
$4,482,500 has been borrowed from Mr. Pappajohn and Dr. Schaffer, all of which
is secured by the assets of the Company.
On March 25, 2002, Messrs. Pappajohn and Schaffer made a commitment to the
Company to obtain the operating funds that the Company believes would be
sufficient to fund its operations through December 31, 2002 based upon an
operational forecast for the Company. As with any forward-looking projection, no
assurances can be given concerning the outcome of the Company's actual financial
status given the substantial uncertainties that exist. There can be no
assurances given that Messers. Pappajohn or Schaffer can raise either the
required working capital through the sale of the Company's securities or that
the Company can borrow the additional amounts needed.
On June 11, 2002, the board of directors of the Company approved the
conversion of up to $4,642,500 in debt and $438,099 of accrued interest owed to
Mr. Pappajohn and Dr. Schaffer into 36,289,993 shares of the Company's common
stock using a value of $0.14 per common share. The average value of the
Company's common stock based upon an average closing price for a period
immediately before June 11, 2002 was $0.1354. As of June 30, 2002, the Company's
Certificate of Incorporation authorizes the Company to issue up to 20,000,000
shares of common stock, 10,956,024 of which were issued and outstanding and
2,029,040 of which were reserved for issuance under outstanding options,
warrants and upon conversion of outstanding convertible preferred stock. Giving
effect to this debt conversion requires an amendment to the Company's
Certificate of Incorporation to authorize additional common stock. The
completion of this transaction cannot occur unless and until the stockholders of
the Company approve this amendment. A date for a meeting of the stockholders of
the Company has not yet been determined.
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 depleted as a result of operating losses. The Company anticipates
that its losses will continue and, but for the continuing loans from Mr.
Pappajohn, the Company has no available capital. Mr. Pappajohn is not obligated
to continue funding the Company's operations beyond December 31, 2002 and the
Company cannot be certain whether or for how long Mr. Pappajohn will continue to
loan the Company funds. The Company is continuing its efforts to identify
additional capital privately, which may involve the sale of convertible
preferred stock or further debt equity. No assurance can be given that the
Company will successfully raise the necessary funds. 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 cease operations.
Inflation
Inflation did not have a significant impact on the Company's costs during
the three and six month periods ended June 30, 2002 and June 30, 2001. 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 the Company's ability to continue its operations as a
result of, among other things, continuing losses, working capital short falls,
uncertainties with respect to sources of capital, risks of market acceptance of
or preference for the Company's systems and services, competitive forces, the
impact of, 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, 2001. 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
On June 29, 2001, Statement of Financial Accounting Standards("SFAS") No.
142, "Goodwill and Other Intangible Assets" was issued by the Financial
Accounting Standards Board. SFAS No. 142 changes the accounting for goodwill
from an amortization method to an impairment-only approach. Amortization of
goodwill, including goodwill recorded in past business combinations, will cease
upon adoption of this statement. The Company has adopted SFAS No. 142 on January
1, 2002 and there was no effect on the Company's consolidated financial
statements resulting from the adoption.
SFAS No. 144 establishes a single accounting model for the impairment or
disposal of long-lived assets, including discontinued operations. SFAS No. 144
superseded SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of", and APB Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." The provisions of SFAS No. 144 are effective in fiscal years
beginning after December 15, 2001, with early adoption permitted, and in general
are to be applied prospectively. There was no effect on the Company's
consolidated financial statements resulting from the adoption of SFAS No. 144 in
2002.
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 rolling the outstanding
line of credit balance into notes that carry a rate equal to LIBOR plus 1.75%.
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Borrowing from directors
The Company borrowed $855,000 for working capital from Mr. Pappajohn during
the six month period ended June 30, 2002. From June 30, 2002 to August 14, 2002,
the Company repaid Mr. Pappajohn $280,000 of prior borrowings. A total of
$4,482,500 has been borrowed from Mr. Pappajohn and Dr. Schaffer, all of which
is secured by the assets of the Company.
On March 25, 2002, Messrs. Pappajohn and Schaffer made a commitment to the
Company to obtain the operating funds that the Company believes would be
sufficient to fund its operations through December 31, 2002 based upon an
operational forecast for the Company. As with any forward-looking projection, no
assurances can be given concerning the outcome of the Company's actual financial
status given the substantial uncertainties that exist. There can be no
assurances given that Messers. Pappajohn or Schaffer can raise either the
required working capital through the sale of the Company's securities or that
the Company can borrow the additional amounts needed.
On June 11, 2002, the board of directors of the Company approved the
conversion of up to $4,642,500 in debt and $438,099 of accrued interest owed to
Mr. Pappajohn and Dr. Schaffer into 36,289,993 shares of the Company's common
stock using a value of $0.14 per common share. The average value of the
Company's common stock based upon an average closing price for a period
immediately before June 11, 2002 was $0.1354. As of June 30, 2002, the Company's
Certificate of Incorporation authorizes the Company to issue up to 20,000,000
shares of common stock, 10,956,024 of which were issued and outstanding and
2,029,040 of which were reserved for issuance under outstanding options,
warrants and upon conversion of outstanding convertible preferred stock. Giving
effect to this debt conversion requires an amendment to the Company's
Certificate of Incorporation to authorize additional common stock. The
completion of this transaction cannot occur unless and until the stockholders of
the Company approve this amendment. A date for a meeting of the stockholders of
the Company has not yet been determined.
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
--------
(a) (11) Statements of Computation of Per Share Earnings
(b) No reports on Form 8-K were filed during the six month period ended June
30, 2002
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: August 14, 2002
---------------
PATIENT INFOSYSTEMS, INC.
(Registrant)
Date: August 14, 2002 /s/ Roger L. Caufournier
---------------- --------------------------------------------
Roger L. Chaufournier
Director, President and
Chief Executive Officer
Date: August 14, 2002 /s/ Kent A. Tapper
---------------- --------------------------------------------
Kent A. Tapper
Principal Accounting Officer
Exhibit 11. Statement of Computation of Per Share Earnings
PATIENT INFOSYSTEMS, INC.
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----
Net loss $ (556,519) $ (1,337,559) $ (1,218,040) $ (2,553,452)
Convertible preferred Stock dividends (22,500) (22,500) (45,000) (45,000)
-------- -------- -------- --------
Net loss attributable to
Common Stockholders $ (579,019) $ (1,360,059) $ (1,263,040) $ (2,598,452)
----------- ------------- ------------- -------------
Weighted average common shares 10,956,024 8,919,357 10,956,024 8,569,779
----------- ---------- ----------- -----------
Net loss per share - Basic and diluted $ (0.05) $ (0.15) $ (0.12) $ (0.30)
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