MedcomSoft Inc. Reports Second Quarter Financial Results

Business Wire,  Feb 26, 2002  

• E-mail
• Print
• Link

Business Editors & High Tech Writers

TORONTO--(BUSINESS WIRE)--Feb. 26, 2002

MedcomSoft Inc. (TSE:MSF) today announced financial and operating results for its second quarter ended December 31, 2001.

Highlights for the second quarter

Following the tragic events of September 11, the official launch of MedcomSoft's US application Record, and the expected market penetration was shifted back by approximately one quarter. This combined with the default of Lamsak on its $4 million payment in July 2001 has prompted the Company to reduce its burn rate by slowing its activity in Research and Development while increasing its focus on Sales and Marketing. In that regard, during the second quarter MedcomSoft reduced its Research and Development team through attrition and lay offs from 91 to 38 and grew its direct sales teams while maintaining a core group of Value Added Resellers for distribution in the United States. MedcomSoft grew its United States sales and marketing group from 22 to 40 employees for its direct sales teams and moved its United States headquarters to Boca Raton, Florida. As a result of the reorganization the total headcount was reduced from 149 as at September 30, 2001 to 111 as at January 31, 2002 a reduction of 25.5%.

MedcomSoft refined its new Value-Added Reseller (MVAR) Program to better promote referrals and create value-added opportunities for their best-of-breed, high-end VARs and resellers. These high-end partners will provide users of the MedcomSoft solution with local presence and support across the US, and will help promulgate new usage models by developing and adding customized, value-added solutions on top of the MedcomSoft platform.

The Company re-organized the senior management team to focus on the accelerated penetration of MedcomSoft Record in the United States. Further, the company announced the election of Dr. Ross R. Black, a prominent medical professional with vast experience and knowledge of the U.S. family physicians community, to the Company's Board of Directors.

MedcomSoft entered into a strategic alliance agreement with Cybear Inc. whereby MedcomSoft sends geographically targeted communication and advertising for MedcomSoft products on Cybear's Physicians' Online website. Cybear Inc., a member of Andrx Corporation - Cybear Group (Nasdaq:CYBA), is the parent company of Physicians' Online (POL). Subsequent Events Financing

On February 7, 2002, the company announced that it had closed approximately $2 million in Private Placement Equity financing. The Private Placement consisted of the issue of common shares and warrants in the capital of MedcomSoft Inc. Each common share was issued at $0.92 per common share and each warrant is exercisable at $1.02 per warrant. The warrants expire ten months from the closing date. The common shares have a four-month hold period from the closing date after which they are freely tradable.

Marketing

In January, with its new U.S. headquarters fully operational, MedcomSoft initiated a substantial marketing campaign backed up by intensive telemarketing and fax broadcast and includes a large number of professional seminars to be conducted in over 100 U.S. cities over the subsequent 12-week period. Results of Operations

Revenue for the second quarter was $65 thousand compared to $6.8 million for the second quarter last year. For the second quarter the gross margin was $57 thousand or 88% of revenue compared to $5.7 million or 84% of revenue for the second quarter of the prior year. Included in the $6.8 million of revenue recorded during the second quarter last year was $6.6 million recorded in connection with software license and service fees on its Australian contract with Lamsak.

Loss from operations in the second quarter was ($4.4) million compared to an income of $3.8 million for the same period last year. The net loss after tax in the second quarter was ($4.4) million or ($0.19) per common share, on a fully diluted basis, compared to an income of $2.4 million or $0.09 per share for the second quarter last year.

The majority of the impact on the Company's second quarter profitability compared to that of the second quarter of last year reflects the following three factors:

-- Recognition of $6.6 million in contracted software license fees under the
Lamsak Software License Agreement during the second quarter of last year with
no corresponding license fees during the second quarter of this year.

-- Research and development expenditures amounting to $1.6 million in
connection with the development of its United States software products,
including MedcomSoft Record, MedcomSoft Disease Management, and MedcomSoft
Claims. During the second quarter of last year, the majority of the research
and development activities were focused on the development of the Australian
product under contract with Lamsak with $262 thousand expended on the United
States products.

-- Significant spending in sales and marketing compared to the second quarter
last year continuing the trend from the first quarter of this year. In
connection with the execution of its sales and achieving its product
distribution readiness, the head office for the company's wholly owned United
States subsidiary, MedcomSoft Corporation, was moved from Saratoga Springs, New
York to Boca Raton, Florida, and 28 sales and marketing staff were added to the
direct sales team in order to execute the Company's United States market
penetration strategy.