MedcomSoft Inc. (TSX – MSF) today announced its financial results for the fourth quarter and the full year periods ended June 30, 2008.
Overall revenues in fiscal 2008 were lower than fiscal 2007 levels by $940,308 or 46%, operating expenses in fiscal 2008 were higher than fiscal 2007 levels by $340,184 or 5% and net loss for the 2008 fiscal year widened to approximately $5.8 million from approximately $4.5 million in fiscal 2007. On a per share basis, the net loss for the fiscal year increased from $0.07 in 2007 (basic and fully diluted) to $0.08 in 2008 (basic and fully diluted).
The increased loss is attributable to the Company’s failure to achieve expected market penetration under its initial commercialization strategy. MedcomSoft’s Board of Directors has been restructured and a new management has been installed. Operating costs have been realigned and a new business strategy has been adopted to address these deficiencies. See “Outlook” below.
To fund the strategic review process, the Company closed private placement equity financings for gross proceeds of $1.84 million and $1.62 million in the third and fourth quarters of fiscal 2008, respectively. The Company’s cash levels at year end were approximately $1.75 million compared to approximately $1.87 million as at June 30, 2007.
|Three Months ended June 30,||Twelve Months ended June 30,|
|Revenue||$ 128,828||$ 932,276||$ 1,122,434||$ 2,062,742|
|Departmental Operating Expenses:|
|Sales and marketing||139,573||426,817||1,228,014||1,853,573|
|Research and development||270,219||337,471||1,250,688||1,091,324|
|General and administrative||1,187,897||395,310||2,567,340||1,661,236|
|Total departmental operating expenses||1,840,310||1,510,833||6,283,617||5,913,432|
|Licenses and other product costs||26,312||28,908||124,082||103,572|
|Total operating expenses||1,895,478||1,659,938||6,935,501||6,595,317|
|Loss from operations||(1,766,650)||(727,662)||(5,813,067)||(4,532,575)|
|Net loss for the year||$ (1,764,106)||$ (718,300)||$ (5,789,625)||$ (4,472,506)|
|Average number of shares outstanding||86,370,714||68,453,635||76,623,379||65,217,479|
|Net earnings (loss) per share:|
|- non-diluted basis||(0.02)||(0.01)||(0.08)||(0.07)|
|- diluted basis||(0.02)||(0.01)||(0.08)||(0.07)|
Consolidated revenues for the fourth quarter of fiscal 2008 were $128,828 compared to $932,276 in the fourth quarter of the prior year, which included approximately $500,000 in revenues on 60 licenses sold to one of the Company’s large customers. For the year, revenues in fiscal 2008 were $1,122,434 compared with $2,062,742 in fiscal 2007 for a decrease of $940,308 or 46%. The decrease in consolidated revenues resulted from fewer software licenses sold in fiscal 2008 compared with fiscal 2007, and lower training, implementation and support service revenues from fewer delivered training services, offset by an increase in maintenance fee revenues by over 50%, resulting from a larger customer install base with renewal maintenance agreements.
Overall operating expenses for fiscal 2008 increased by $340,184 or by 5% to $6,935,501 from $6,595,317 in fiscal 2007. Total operating expenses on a quarterly basis are presented below.
|Fiscal 2008||$ 1,684,763||$ 1,713,469||$ 1,641,791||$ 1,895,478||$ 6,935,501|
|Fiscal 2007||$ 1,376,953||$ 1,686,644||$ 1,871,782||$ 1,659,938||$ 6,595,317|
Overall operating expenses (which include non-cash expenses of amortization and stock compensation expense) increased in the fourth quarter of fiscal 2008 by $235,540 or by 14%, to $1,895,478 from $1,659,938 in the fourth quarter of fiscal 2007, due primarily to non-recurring related party transactions of $560,000 recorded in general and administrative expenses for the agreement made with the former Chief Executive Officer, pursuant to the termination of his employment, offset by lower departmental expenses in sales and marketing, services and research and development.
The Company incurred a net loss for the fourth quarter of fiscal 2008 of $1,764,106 or a loss of $0.02 per common share, compared to a net loss of $718,300 or $0.01 per common share in the fourth quarter of the prior year. On a year to date basis, the Company incurred a net loss in fiscal 2008 of $5,789,625 or a loss of $0.08 per common share, compared to a net loss of $4,472,506 or $0.07 per common share in fiscal 2007.
Liquidity, Capital Resources and Financial Position
|As at June 30,|
|Cash||$ 1,751,682||$ 1,874,460|
|Other current assets||191,905||380,977|
|Capital assets and long term assets||272,645||323,670|
|Total assets||$ 2,216,232||$ 2,579,107|
|Long term capital lease obligations||25,894||49,992|
|Total liabilities and shareholders’ equity||$ 2,216,232||$ 2,579,107|
The Company had cash of $1,751,682 as at June 30, 2008 compared to $1,874,460 as at June 30, 2007 for a net decrease of $122,778. The net decrease was primarily due to the Company’s financing activities, of $4,389,313, net of its use of cash in its operating activities of $4,512,883 for the year.
As at June 30, 2008, the Company had working capital of $89,417, which management believes is not sufficient to sustain operations over the next 12 months. The Company has not been profitable over the past seven years and its ability to continue as a going concern is dependent upon its ability to obtain the necessary financing and generate future profitable operations to meet its obligations and repay its liabilities arising from normal business operations when they come due. In addition, although the Company had a cash balance of $1,751,682 as at June 30, 2008, the Company expects a cash balance of approximately $650,000 as of September 30, 2008.
The Company believes that in order to alleviate liquidity concerns and achieve sustained profitability, it is imperative to develop other strategic relationships and strengthen its balance sheet. The Company is pursuing various alternatives to achieve these objectives. There can be no assurances that the Company’s financing initiatives will be consummated or be available on acceptable terms.
As recently announced, the Company’s management and advisors developed a revised business plan that has been approved by the Board of Directors. The revised business plan will use a highly focused direct sales channel to access identifiable priority customers and strategic partners in an effort to target customers with the highest probability of yielding immediate returns and to increase the adoption rate of the Company’s electronic medical record product in the U.S. market. Coinciding with these strategic initiatives, the Company is also pursuing capitalization options which will add strength to its balance sheet.
The Company has retained the Health Care Investment Banking Group of Raymond James & Associates to explore funding and strategic alternatives to support the execution of the revised business plan. Management estimates that approximately $15.0 million of additional capital will be required by the Company to implement all elements of the revised business plan.
In conjunction with the development of the revised business plan and associated financing requirements, the Company has identified a senior management team with extensive domain expertise and a track record of success in the U.S. HIT market. Subject to completion of the targeted financing and final negotiation of mutually satisfactory employment terms, this senior management team would join the Company to drive the execution of the revised business plan.
For further details on these operational and business highlights as well as the financial results of the Company for fiscal 2008, please see the Company’s Management Discussion and Analysis of Financial Condition and Results of Operations and the Company’s Audited Consolidated Financial Statements for fiscal 2008, which will be filed on SEDAR at www.sedar.com.
Founded in 1994, MedcomSoft Inc. develops cutting-edge software solutions for the healthcare industry. MedcomSoft has pioneered the use of numerically codified point-of-care clinical terminologies to create a new generation of highly interoperable EMRs, which significantly enhance disease surveillance and accelerate clinical research. MedcomSoft’s award-winning software applications include Electronic Medical Records, physician order entry systems with e-prescribing, document management, practice management and clinical data search, data mining, and disease surveillance systems. MedcomSoft is the recipient of the "Best of KLAS" award in 2007 year-end report in the Ambulatory EMR 1-5 Physicians category. In addition, a MedcomSoft practice was recently awarded the prestigious 2007 HIMSS Davies Award. www.medcomsoft.com
This news release contains forward-looking statements regarding MedcomSoft's expectations and beliefs with respect to future events and/or financial performance. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual events or results to differ materially from those expressed or implied in such forward looking statements. Such factors and risks include, but are not limited to: market conditions; competition, including price and product functionality; economic environment; and the ability to develop and deliver new products in a timely manner. The reader is referred to the documents that the Company files from time to time with applicable Canadian securities and regulatory authorities for a discussion on certain risks and uncertainties that could cause actual results to differ from those projected, anticipated, or implied. MedcomSoft does not undertake to update forward-looking statements.