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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q


x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

OR

o
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:     1-10768


MEDIWARE INFORMATION SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

 

           New York           

   11-2209324   

(State or other jurisdiction of 
Incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

11711 West 79th Street
            Lenexa, Kansas            


  66214  

(Address of principal executive offices)

Zip code


                    (913) 307-1000                    

(Registrant's telephone number including area code)

                                                                                               
(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Sections 12, 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 past 90 days.  Yes    X     No       


As of October 10, 2002, there were 7,285,259 shares of Common Stock, $0.10 par value, of the registrant outstanding.

 


MEDIWARE INFORMATION SYSTEMS, INC.

INDEX

PART I

Financial Information

 

Page

ITEM 1.

Financial Statements
Consolidated Balance Sheets as of September 30, 2002
and June 30, 2002

 

4

 

Consolidated Statements of Operations and Comprehensive Income
For the Three Months Ended September 30, 2002 and 2001

 

5

 

Consolidated Statements of Cash Flows
For the Three Months Ended September 30, 2002 and 2001

 

6

 

Notes to Financial Statements

 

7

 

Independent Accountants' Report

 

9

ITEM 2.

Management's Discussion and Analysis of Financial
Condition and Results of Operations

 

10

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risks

 

13

ITEM 4.

Controls and Procedures

 

13


Part II


Other Information

 

 

ITEM 1.

Legal Proceedings

None

 

ITEM 2.

Changes in Securities and Use of Proceeds

None

 

ITEM 3.

Defaults Upon Senior Securities

None

 

ITEM 4.

Submission of Matters to a Vote of Security Holders

None

 

ITEM 5.

Other Information

 

14

ITEM 6.

Exhibits and Reports on Form 8-K

 

14

Signature Page

 

 

15


Certifications

 

 

 

Exhibit 99.1

Certification by George J. Barry, Chief Executive Officer, and Jill H. Suppes, Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

33

 

 

 

 MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES

 CONSOLIDATED BALANCE SHEETS

 (Amounts in thousands except shares)

 

 

 

 

 

 

 

September 30,

 

June 30,  

 

 

2002        

 

2002     

 

 

(Unaudited)   

 

(Audited)  

ASSETS

 

 

 

 

Current Assets

 

 

 

 

   Cash and cash equivalents

 

$       4,025

 

$       3,228

   Accounts receivable (net of allowance of $668 at

 

 

 

 

      September 30, 2002 and $694 at June 30, 2002)

 

7,108

 

6,869

   Inventories

 

133

 

222

   Deferred Tax Asset

 

424

 

424

   Prepaid expenses and other current assets

 

         558

 

         511

      Total current assets

 

12,248

 

11,254

 

 

 

 

 

Fixed assets, net

 

1,290

 

1,259

Capitalized software costs, net

 

14,142

 

13,385

Goodwill, net

 

4,900

 

4,900

Purchased technology, net

 

970

 

1,096

Deferred tax asset

 

 

 

162

Other long term assets

 

         132

 

         132

      Total Assets

 

$      33,682

 

$      32,188

 

 

=========

 

=========

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current Liabilities

 

 

 

 

   Accounts payable

 

$       2,031

 

$       2,157

   Advances from customers

 

7,306

 

6,676

   Accrued expenses and other current liabilities

 

       2,607

 

       3,139

      Total current liabilities

 

11,944

 

11,972

 

 

 

 

 

  Notes payable and accrued interest payable to a related party

 

       1,361

 

       1,352

  Deferred Tax Liability

         401

            

      Total liabilities

 

      13,706

 

      13,324

 

 

 

 

 

Stockholders' Equity

 

 

 

 

   Preferred stock, $.01 par value; authorized 10,000,000

 

 

 

 

   Shares; none issued or outstanding

 

-

 

-

   Common stock, $.10 par value; authorized 12,000,000

 

 

 

 

   Shares; issued and outstanding; 7,285,000 shares at

 

 

 

 

   September 30, 2002 and 7,259,000 at June 30, 2002

 

728

 

726

   Additional paid-in capital

 

23,553

 

23,378

   Accumulated deficit

 

(4,251

(5,173)

   Accumulated other comprehensive (loss)

 

         (54

         (67)

     Total stockholders' equity

 

     19,976

 

      18,864

     Total Liabilities and Stockholders' Equity

$      33,682

$      32,188

 

 

=========

 

=========

See Notes to Consolidated Financial Statements

 

 

MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands, except per share amounts)

              Three Months Ended

               September 30,

               (Unaudited)

 

 

    2002    

 

    2001    

 

Revenues

 

 

 

 

 

  System sales

$     3,426

$     2,802

 

  Services

 

     4,560

 

     4,513

 

   Total revenues

 

     7,986

 

     7,315

 

 

 

 

 

Expenses

 

 

 

 

 

  Cost of systems

 

592

 

808

 

  Cost of services

 

1,499

 

1,419

 

  Software development costs

 

1,208

 

1,333

 

  Selling, general and administrative

 

     3,207

 

     3,042

 

   Total costs and expenses

 

     6,506

 

     6,602

 

  Operating income

 

1,480

 

713

 

 

 

 

 

 

 

Interest and other income 

 

22

 

12

 

Interest (expense)

 

       (19)

       (12)

 

  Income before provision for income taxes

 

1,483

 

713

 

 

Provision for income taxes  

 

      (561)

      (285)

 

  Net Income

922

428

Other Comprehensive Income (Loss)

Foreign Currency Translation Adjustment

          13

        (12)

Comprehensive Income

$       935

$       416

 

 

=========

 

=========

 

Earnings Per Common Share 

 

 

 

 

 

  Basic

$      0.13

$      0.06

 

 

=========

 

=========

 

  Diluted

$      0.12

$      0.06

 

 

 

=========

 

=========

 

Weighted Average Common Shares Outstanding 

 

 

 

 

 

  Basic

 

7,275

 

7,209

 

 

 

=========

 

=========

 

  Diluted

 

7,794

 

7,293

=========

=========

 

See Notes to Consolidated Financial Statements

 

 

MEDIWARE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in Thousands)

 

 

For The Three Months Ended  

 

 

September 30              

 

 

(Unaudited)                

 

 

    2002    

 

    2001    

 

 

 

 

 

Cash Flows From Operating Activities

 

 

 

 

Net income

 

$          922

 

$          428

Adjustments to reconcile net income to

 

 

 

 

 net cash provided by operating activities:

 

 

 

 

   Depreciation and amortization

 

762

 

724

   Deferred tax asset and liabilities

 

563

 

285

   Provision for doubtful accounts

 

17

 

171

Changes in operating assets and liabilities:

 

 

 

 

   Accounts receivable

 

(257)

 

(862)

   Inventories

 

90

 

(37)

   Prepaid expenses and other assets

 

(47)

 

(108)

   Accounts payable, accrued expenses and

 

 

 

 

    customer advances

 

        (19)

 

        116

Net cash provided by operating activities

 

2,031

 

717

 

 

_________

 

_________

 

 

 

 

 

Cash Flows From Investing Activities

 

 

 

 

   Acquisition of fixed assets, net of disposals

 

(207)

 

(20)

   Capitalized software costs

 

(1,217)

 

(1,126)

   Acquisition of technology

 

              

 

       (325)

   Net cash used in investing activities

 

(1,424)

 

(1,471)

 

 

_________

 

_________

 

 

 

 

 

Cash Flows From Financing Activities

 

 

 

 

   Proceeds from exercise of options

 

         177

 

          10

   Net cash provided by financing activities

 

177

 

10

 

 

_________

 

_________

 

 

 

 

 

Foreign currency translation adjustments

 

         13

 

         (12)

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

797

 

(756)

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

      3,228 

 

       2,343

 

 

 

 

 

Cash and cash equivalents at end of period

 

$       4,025 

 

$        1,587

 

 

=========

 

=========

 

 

 

 

 

See Notes to Consolidated Financial Statements.

 

 

MEDIWARE INFORMATION SYSTEMS, INC., AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


1.     FINANCIAL STATEMENTS

In the opinion of management, the accompanying unaudited, consolidated, condensed financial statements contain all adjustments necessary to present fairly the financial position of the Company and its results of operations and cash flows for the interim periods presented. Such financial statements have been condensed in accordance with the applicable regulations of the Securities and Exchange Commission ("SEC") and therefore, do not include all disclosures required by accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with the Company's audited financial statements for the year ended June 30, 2002 included in the Company's annual report filed on Form 10-K.

The results of operations for the three months ended September 30, 2002 are not necessarily indicative of the results to be expected for the entire fiscal year.


2.     EARNINGS PER SHARE

Basic earnings per share have been computed using the weighted average number of shares of common stock of the Company outstanding for each period presented. For the three months ended September 30, 2002 and September 30, 2001, the dilutive effect of stock options and other common stock equivalents is included in the calculation of diluted earnings per share using the treasury stock method.


3.     RELATED PARTY TRANSACTIONS

On October 11, 2000, Fratelli Auriana, an entity controlled by Mr. Lawrence Auriana, the Chairman of the Board of the Company and holder of more than 5% of the Company's outstanding Common Stock, committed to loan the Company up to $2,000,000, in addition to amounts previously loaned to the Company, to be drawn in multiples of $250,000, as needed by the Company. Conditions were finalized and signed December 1, 2000 between Fratelli Auriana, Mr. Auriana and the Company. On July 15, 2002, the Company and Fratelli Auriana entered into a Second Amendment to the Loan Agreement between the two parties, extending the maturity date to September 30, 2004. As of October 18, 2002, the Company has not borrowed against this loan agreement.

In August 2002, the Company entered into two agreements with Dr. John Gorman and his affiliates pertaining to the Company's HCLL product, which is in development. Dr. Gorman is a director of the Company. These agreements modify two earlier agreements that the Company entered into with Dr. Gorman and his affiliates prior to his joining the Board. In September 1998, Glace, Inc. ("Glace"), an affiliate of Dr. Gorman, entered into a Consulting Agreement with the Company to provide certain development services related to HCLL, which was then known as Hemocare 2000 (the "1998 Consulting Agreement"). In September 1999, Dr. Gorman, on behalf of himself and a then to be formed entity, entered into a Software Agreement with the Company under which Dr. Gorman was granted the right to the Hemocare 2000 software for uses outside of the healthcare field, in exchange for a payment of $200,000 (the "1999 Software Agreement"), and Dr. Gorman and the Company agreed to share certain legal costs associated wi th seeking patent protection for the Hemocare 2000 software.

In the first of the August 2002 agreements, it was agreed that Glace would accept a payment from the Company of $38,000 as a final payment for all consulting fees due under the 1998 Consulting Agreement. The Company paid the $38,000 in the first quarter of fiscal 2003 and in turn waived any right to recover consulting fees previously paid by it under that agreement and confirmed its obligation to pay Glace a milestone payment of $250,000 upon the grant by the FDA of 510K approval for HCLL. Additionally, the Company paid Glace an advance of $100,000 on this milestone during the quarter ended September 30, 2002, which is subject to repayment by Glace in four equal annual installments of $25,000 each if 510K approval for HCLL is not granted by December 31, 2004. The Company also paid $4,000 towards patent costs on an additional provisional patent for the HCLL technology, with the understanding that the Company has no obligation to pay for any further patent work on HCLL undertaken by Dr. Gorm an's companies.

The second of the August 2002 agreements was an amendment to the 1999 Software Agreement. This agreement codified that the Company retains all rights to the Hemocare 2000 technology within the healthcare field, and that Deep Sky Software, Inc. ("Deep Sky"), a company formed by Dr. Gorman, has an exclusive license to the Hemocare 2000 technology outside of the healthcare field. The amendment clarified that the healthcare field for this purpose includes the provision of any product, information, software, service or activity to healthcare service providers. In addition, Dr. Gorman, Glace and Deep Sky agreed to release the Company and related parties from any claims that they might have arising out of the 1998 Consulting Agreement, the 1999 Software Agreement and all other agreements relating to the Hemocare 2000 technology, other Company products and services, any product or services provided by Dr. Gorman, Glace or Deep Sky to the Company, and any other aspect of their business relationship.

 

 

 

 

INDEPENDENT ACCOUNTANTS' REPORT

To The Board of Directors and Stockholders of
Mediware Information Systems, Inc.

We have reviewed the accompanying condensed consolidated balance sheet of Mediware Information Systems, Inc. and subsidiaries as of September 30, 2002, and the related condensed consolidated statements of operations and comprehensive income, and cash flows for the three-month periods ended September 30, 2002 and 2001. These condensed consolidated financial statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet as of June 30, 2002, and the related consolidated statements of operations and comprehensive income, stockholders' equity, and cash flows for the year then ended (not presented herein), and in our report dated August 2, 2002, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of June 30, 2002, is fairly stated in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Eisner LLP
New York, New York
October 18, 2002

 

 

ITEM 2.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                   CONDITION AND RESULTS OF OPERATIONS


Forward-Looking Statements

Certain statements made in or incorporated into this 10-Q may constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995, as the same may be amended from time to time (the "Act") and in releases made by the SEC from time to time. Such forward-looking statements are not based on historical facts and involve known and unknown risks, uncertainties and other factors, which may cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements. These risks and uncertainties include: (i) fluctuations in quarterly operating results, (ii) reliance on third party software, (iii) dependence on third party marketing relationships, (iv) changes in the healthcare industry, (v) significant competition, (vi) the Company's ability to manage its rapid growth, (vii) the effects of government regulations on the Company, (viii) product related liabilities, (ix) risks a ssociated with system errors and warranties, and (x) risks associated with the development, marketing and sale of new software products. Amplification of such risks may be found in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2002. The Company does not intend to update publicly any forward-looking statements.

Results of Operations for the Three Months Ended September 30, 2002 as Compared to the Three Months Ended September 30, 2001

Total revenues for the quarter ended September 30, 2002 were $7,986,000, an increase of $671,000 or 9.2% from the prior year's first quarter total of $7,315,000. The Pharmacy, JAC, and Operating Room divisions experienced increases in total revenues in the quarter ended September 30, 2002 as compared to the quarter ended September 30, 2001. These increases were partially offset by a decline in total revenues in the Blood Bank division.

System sales, which include proprietary software, third party software and hardware sales for the first quarter of fiscal 2003 were $3,426,000, an increase of 22.3% or $624,000 from a year ago. The Pharmacy division system sales increased by $1,098,000 or 60.1% to a total of $2,925,000, primarily due to two Integrated Delivery Networks (IDNs) sales in the quarter ended September 30, 2002. These two contracts represent approximately 30% of total revenues for the three months ended September 30, 2003. This increase was offset by a decrease in system sales in the Blood Bank division of $505,000 or 59.3% to a total of $346,000 in the first quarter of fiscal 2002 as compared to the same quarter a year ago.

Service revenues, which include recurring software support, implementation and training services, increased by $47,000 to $4,560,000, or 1.0%, compared to prior year service revenues of $4,513,000.

Cost of systems includes the cost of computer hardware and sublicensed software purchased from computer and software manufacturers as part of a complete system offering. These costs can vary as the mix of revenue varies between high margin proprietary software and lower margin computer hardware and sublicensed software components. Cost of systems was 17.3% of new system sales for the quarter ended September 30, 2002 compared to 28.8% in the same quarter last year. Cost of systems was $592,000, a decrease of $216,000 or 26.7% from $808,000 in the first quarter of 2002 reflecting the overall increase in proprietary software sales and a lower mix of hardware sales in the most recent quarter.

Cost of services includes the salaries of client service personnel and communications expenses along with the direct expenses of the client service function. Cost of services increased 5.6% or $80,000 to $1,499,000 in the first quarter of fiscal 2003 as compared to the same quarter a year ago. The increase in cost of services was primarily a response to the increased demand of the Company's WORxä Pharmacy System. Cost of services was 32.9% of related revenues in the first quarter of fiscal 2003, as compared to 31.4% in the same quarter of fiscal 2002. Management believes, but cannot assure, that demand for its contracted services will continue to be strong.

Software development costs include salaries, consulting, documentation, office and other related expenses incurred in product development along with amortization of capitalized software development costs. Software development costs decreased 9.4% or $125,000 for the quarter ended September 30, 2002 as compared to the same quarter in the prior fiscal year. The Operating Room division experienced approximately $103,000 in increased software development costs in the quarter as compared to the same quarter in Fiscal 2002, while the Blood Bank division incurred decreases in software development costs of $238,000. Cash expenditures related to software development exclude the impact of capitalization and amortization. Cash expenditures in the September 30, 2002 quarter were approximately $1,965,000, a decrease of $88,000 or 4.3% compared to $2,053,000 expenditures in the quarter ended September 30, 2001. The Pharmacy and Operating Room divisions experienced modest increases in cash expenditures for the quarter ended September 30, 2002. The Blood Bank division experienced a decrease of $129,000 in overall development spending in the quarter ended September 30, 2002 as its new transfusion product approaches the conclusion of its development phase. At September 30, 2002, approximately 66% of the net capitalized software costs will initiate amortization upon the commercialization of related software, the majority of which relates to the Company's Blood Bank transfusion product. The Company anticipates, but cannot assure, that it will commercialize its new Blood Bank software in calendar 2003, subject to attaining FDA approval. While cash expenditures for the Blood Bank division are expected to decline, total expenses may not decline due to the amortization costs.

Selling, general and administrative ("SG&A") expenses include marketing and sales salaries, commissions, travel and advertising expenses. Also included is bad debt expense; legal, accounting and professional fees; salaries and bonus expenses for corporate, divisional, financial and administrative staffs; utilities, rent, communications and other office expenses; and other related direct administrative expenses. SG&A for the quarter ended September 30, 2002 was $3,207,000, an increase of $165,000 or 5.4%, compared to $3,042,000 in the first quarter of fiscal 2002.

Net income was $922,000 for the quarter ended September 30, 2002, an increase of $494,000 or 115.4% as compared to net income of $428,000 in the quarter ended September 30, 2001.

Liquidity and Capital Resources

As of September 30, 2002, the Company had cash and cash equivalents of $4,025,000. In addition, the Company had an available loan facility in the amount of $2,000,000 as of September 30, 2002. The Company's working capital was $304,000 and current ratio was 1.03:1 at September 30, 2002, compared to a working capital deficit of $718,000 and a current ratio of 0.94:1 at June 30, 2002. The Company's net cash generated from operating activities was $2,031,000 for the three months ended September 30, 2002, compared to net cash provided by operations of $717,000 during the same period in fiscal year 2002.

The Company invested $1,424,000 and $1,471,000 during the three months ended September 30, 2002 and 2001 respectively. Primarily, the Company invested in ongoing software development projects in the Blood Bank and Operating Room divisions and in related fixed assets. Of amounts invested, the Company capitalized $1,217,000 and $1,126,000 of product development costs during the three months ended September 30, 2002 and 2001, respectively.

For the three months ended September 30, 2002, the Company received $177,000 related to proceeds from the exercise of options, compared to $10,000 generated in the same period a year ago.

The Company's liquidity is influenced by the Company's ability to successfully compete in an increasing competitive industry. The markets that the company serves continue to be impacted by consolidation among hospital information systems (HIS) providers. The Company believes that these providers offer more integrated but less clinical functionality in their software solutions to the same markets. The Company's ability to successfully compete is dependent upon its ability provide superior clinical functionality in its targeted hospital departments. Factors that may affect liquidity include the ability to penetrate the market with its products, maintain or reduce the length of the selling cycle, and the ability to collect cash from clients as implementations progress. Exclusive of activities involving any future acquisitions of products or companies that complement or augment the existing line of products, management believes that current funds, cash generated from operations, and the loan commitment from F ratelli Auriana, an entity controlled by Lawrence Auriana, the Chairman of the Board of Directors of the Company, described above in Note 3 to the Financial Statements, will be sufficient to meet operating requirements for the foreseeable future. The Company continues to review its long-term cash needs. Currently, there are no plans for additional outside financing.

 

New Accounting Pronouncements

None.

 

ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES
                   ABOUT MARKET RISKS

The Company does not currently have any material exposure to foreign currency transaction gains or losses. However, the Company does have some exposure to foreign currency rate fluctuations arising from sales made to customers in the United Kingdom. These transactions are made by the Company's U.K. based, wholly owned subsidiary which transacts business in the local functional currency. To date, the Company has not entered into any derivative financial instrument to manage foreign currency risk and is currently not evaluating the future use of any such financial instruments.

 

ITEM 4.      CONTROLS AND PROCEDURES

The Company's chief executive officer and chief financial officer have reviewed and evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 240.13a-14(c) and 15d-14(c) promulgated under the Securities Exchange Act of 1934) as of a date within ninety days before the filing date of this quarterly report. Based on that review and evaluation, which included inquiries made to certain other employees of the Company, the chief executive officer and chief financial officer have concluded that the Company's current disclosure controls and procedures, as designed and implemented, are reasonably adequate to ensure that they are provided with material information relating to the Company required to be disclosed in the reports the Company files or submits under the Securities Exchange Act of 1934. There have not been any significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. There were no significant deficiencies or material weaknesses identified, and therefore no corrective actions were taken.

 

 

PART II

 

ITEM 5.      OTHER INFORMATION


During the quarter, the Company, through its professionals, requested the Internal Revenue Service (IRS) to issue a Compliance Statement with respect to the Company's 401(k) Plan (the Plan) by filing a VCO Application. As disclosed in the Company's fiscal year 2002 10-K filing, the Company noted technical deficiencies during fiscal 2002 in the Plan subsequent to the 1998 Amendment. The Company has voluntarily corrected the deficiencies and believes, but cannot assure, that it will not incur any significant penalties or other costs related to the deficiencies. The VCO Application process allows for the Company to identify and suggest corrections, which the IRS reviews and makes a determination. Per conversations with the Company's professionals, the effect of the determination issued by the IRS is not expected to be material.

 

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

(a).           Exhibits

Exhibit 10.45

Employment Agreement dated August 1, 2002 between Mediware Information Systems, Inc. and Don L. Jackson

Exhibit 10.46

Employment Agreement dated August 26, 2002 between Mediware Information Systems, Inc. and Jeffrey Karp

Exhibit 11.

Schedule of Computation of Net Earnings Per Share

Exhibit 15.

Letter of awareness from Eisner LLP dated October 18, 2002 concerning unaudited interim financial information

 

(b). Reports on Form 8-K

During the quarter ended September 30, 2002, the Company filed one report on Form 8-K on August 27, 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.


                                                   MEDIWARE INFORMATION SYSTEMS, INC.
                                                                       (Registrant)

 

  October 21, 2002                           GEORGE J. BARRY                    
          Date                                         GEORGE J. BARRY
                                                            PRESIDENT AND CHIEF EXECUTIVE OFFICER

 

  October 21, 2002                          JILL H. SUPPES                          
          Date                                        JILL H. SUPPES
                                                           CHIEF FINANCIAL OFFICER

 

 

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, George J. Barry, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Mediware Information Systems, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: October 21, 2002

/s/ George J. Barry
- ------------------------
     George J. Barry
     Chief Executive Officer

 

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jill Suppes, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Mediware Information Systems, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: October 21, 2002

/s/ Jill Suppes
- ------------------------
     Jill Suppes
     Chief Financial Officer

 

EXHIBIT 10.45

 

 

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (hereinafter "this Agreement") is made as of the 1st day of August, 2002 between Mediware Information Systems, Inc., (hereinafter "the Company") and Don L. Jackson (hereinafter "the Executive").

WHEREAS, the Company desires to employ the Executive as its Vice President and General Manager for the Blood Bank Division, and the Executive desires to be so employed by the Company, on the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements herein set forth, the Company and the Executive hereby agree as follows:

1. Employment. The Company hereby agrees to employ the Executive, and the Executive hereby agrees to serve as Vice President and General Manager of the Blood Bank Division of the Company. The Executive agrees to perform such services customary to such office as shall from time to time be assigned to him by the President and Chief Executive Officer. The Executive further agrees to use his best efforts to promote the interests of the Company and to devote his full business time and energies to the business and affairs of the Company.

2. Term of Employment. The employment hereunder shall be for a term of [one] year, commencing on the date hereof and ending on the [first] anniversary of the date hereof (the "'Expiration Date"), unless terminated earlier pursuant to Paragraph 4 of this Agreement (the "Term of Employment"). This Agreement shall automatically renew for successive terms of one (1) year (each a "Renewal Term") commencing on the first day immediately following the Expiration Date, unless such renewal is objected to by either the Company or the Executive by giving prior written notice more than ninety (90) days and less than one hundred and twenty (120) days prior to the scheduled Expiration Date. In the event of such renewal, the last day of each successive Renewal Term shall be deemed the Expiration Date.

3. Compensation and Other Related Matters.

(a) Salary. As compensation for services rendered hereunder, the Executive shall receive an Annual Base Salary of One Hundred Fifty Thousand Dollars ($150,000.00), which salary shall be paid in accordance with the Company's then prevailing payroll practices for its executives and shall be subject to review annually by the Board of Directors.

(b) Bonus. The Executive shall be eligible to receive a bonus of 50% of his Annual Base Salary per annum for achieving mutual objectives established by the Company and the Executive.

(c) Stock Options. Subject to the approval of the Company's Board of Directors, the Executive shall be granted Fifty Thousand (50,000) non-qualified options (the "'Options") to purchase shares of the Company's Common Stock, par value $.10 per share, (the "Stock") under the Company's Equity Incentive Plan. The Options shall be subject to the terms of the 2001 Stock Option Plan and the Executive's Non-Qualified Stock Option Agreement (the "Option Agreement"), attached hereto as Exhibit "'A". Subject to the Option Agreement (which shall govern the Options in the event of any conflict between this Agreement and the Option Agreement), the Company and the Executive agree as follows:

(i) Vesting. Subject to continued employment of the Executive, the Options shall vest and become exercisable as follows: Sixteen Thousand Six Hundred Sixty-Six (16,666) Options shall become exercisable on the first anniversary of the commencement of the Term of Employment, Sixteen Thousand Six Hundred Sixty-Seven (16,667) Options shall become exercisable on the second anniversary date of the commencement of the Term of Employment; and Sixteen Thousand Six Hundred Sixty-Seven (16,667) Options shall become exercisable on the third anniversary date of the commencement of the Term of Employment. In addition, upon an acquisition or sale of the Company, as defined in Paragraph 5(f), below, any remaining unexercisable Options shall become exercisable immediately.

(ii) Exercise. The Options shall be exercisable at a price equal to the fair market value of the Stock on the day the Term of Employment commences. The fair market value of the Stock shall equal the average of the high and low market sale prices on such day as reported by NASDAQ. The Options shall be exercisable for five years from the commencement of the Term of Employment.

(d) Other Benefits. The fringe benefits, perquisites and other benefits of employment, including three (3) weeks vacation, to be provided to the Executive shall be equivalent to such benefits and perquisites as are provided to other senior executives of the Company as amended from time to time.

(e) Reimbursement. Subject to policies established from time to time by the Company, the Company shall reimburse the Executive for the reasonable expenses incurred by him in connection with the performance of his duties hereunder, including but not limited to, travel expenses and entertainment expenses, for which the Executive shall account to the Company in a manner sufficient to conform to Internal Revenue Service requirements.

4. Termination. The Company shall be entitled to terminate the Executive's employment for "Cause" at any time immediately upon delivery of written notice or for no Cause at any time upon ninety (90) days prior written notice. Termination by the Company of the employment of the Executive for "Cause" shall mean termination based upon (i) the willful failure by the Executive to follow directions communicated to him by the President and Chief Executive Officer; (ii) the willful engaging by the Executive in conduct which is materially injurious to the Company, monetarily or otherwise; (iii) a conviction of, a plea of nolo contendere, a guilty plea or confession by the Executive to an act of fraud, misappropriation or embezzlement or to a felony; (iv) the Executive's habitual drunkenness or use of illegal substances; (v) a material breach by the Executive of this Agreement; or (vi) an act of gross neglect or gross misconduct which the Company deems in good faith to be good a nd sufficient cause. The Employee shall have the right to terminate the Executive's employment without cause at any time upon ninety (90) days prior written notice.

5. Compensation Upon Termination or During Disability

(a) Disability. During any period that the Executive fails to perform his full-time duties with the Company for a three month period as a result of incapacity due to physical or mental illness (the "Disability Period"), the Executive shall continue to receive his Annual Base Salary at the rate set forth in Paragraph 3(a) of this Agreement, less any compensation payable to the Executive under the applicable disability insurance plan of the Company during the Disability Period, until this Agreement is terminated pursuant to Paragraph 4 hereof. Thereafter, or in the event the Executive's employment shall be terminated by reason of his death, the Executive's benefits shall be determined under the Company's insurance and other compensation programs then in effect in accordance with the terms of such programs and the Company shall have no further obligation to the Executive under this Agreement.

(b) Death. In the event of the Executive's death, the Executive's beneficiary shall be entitled to receive the Executive's Annual Base Salary at the rate set forth in Paragraph 3(a) of this Agreement until the date of his death. Thereafter, the Company shall have no further obligation to the Executive or the Executive's beneficiary under this Agreement.

(c) Cause. If the Executive's employment shall be terminated by the Company for "Cause" as defined in Paragraph 4 of this Agreement, the Company shall continue to pay the Executive his Annual Base Salary at the rate set forth in Paragraph 3(a) of this Agreement through the date of termination of the Executive's employment. Thereafter, the Company shall have no further obligation to the Executive under this Agreement.

(d) Termination Without Cause by the Company. If the Company voluntarily terminates the Executive's employment with the Company pursuant to Paragraph 4 of this Agreement, the Company shall continue to pay the Executive Executive's Annual Salary during the One Hundred Twenty (120) day notice period provided for in Paragraph 4 at the rate in effect as of the day immediately preceding the commencement of the notice period, payable in equal installments consistent with the Company's normal salary payment cycles then in effect. Until the earlier of the end of the three month notice period or the commencement of the provision of health benefits to the Executive by a successor employer, the Executive will continue to receive the same coverage of health insurance as immediately before the date of the termination, at the expense of the Company. Thereafter, the Executive acknowledges that the Company shall have no further obligation to the Executive under this Agreement.

(e) Acquisition or Sale of Company. If a third party described in Paragraph 5(f) of this Agreement terminates the Executive due to "an acquisition or sale of the Company", as described in Paragraph 5(f) below, the Company shall pay the Executive an amount equal to six months of Executive's Annual Base Salary at the rate in effect at the date of termination of the Executive's employment during the period of the Executive's employment, payable in six equal monthly installments. Until the earlier of the end of the six month period immediately following the termination of employment, or the commencement of the provision of health benefits to the Executive by a successor employer, the Executive will continue to receive the same coverage of health insurance as immediately before the date of the termination, at the expense of the Company. Thereafter, the Executive acknowledges that the Company shall have no further obligation to the Executive under this Agreement. Notwithstanding the fo regoing, if in conjunction with an acquisition or sale of the Company to a third party, the third party (i) requests that the Executive continue to provide services to the Company or such third party after the closing of the acquisition or sale of the Company and (ii) agrees to pay the Executive compensation for the Executive's services at a rate at least equal to the Executive's compensation in effect as of the date immediately preceding the date on which the acquisition or sale of the Company is consummated, the Executive must provide such services for at least ninety (90) days, unless the third party terminates Executive's services without Cause prior to the end of such ninety (90) day period. If the Executive fails to fulfill the requirement of the preceding sentence for any reason, then the Executive will not be eligible for payments under this Paragraph 5(e). On the other hand, if the Executive does fulfill such requirement and the Executive's employment is subsequently terminated within the six month period following the acquisition or sale of the Company, then the Executive will be entitled to receive the payments described in this Paragraph 5(e). Payments under this Paragraph 5(e) are intended to be in lieu of the payments the Executive would otherwise be entitled to under Paragraph 5(d), which will not apply in the case of an acquisition or sale of the Company.

(f) Definition. For purposes hereof, "an acquisition or sale of the Company" to or by "a third party" shall mean the occurrence of any transaction or series of transactions which within a six (6) month period result in (I) greater than fifty percent (50%) of the then outstanding shares of Common Stock of the Company (for cash, property including, without limitation, stock in any corporation or other third party legal entity, indebtedness or any combination thereof) have been redeemed by the Company or purchased by a third party not previously affiliated with the Company, or exchanged for shares in any other corporation or other third party legal entity not previously affiliated with the Company, or any combination of such redemption, purchase or exchange, (II) greater than fifty percent (50%) in book value of the Company's gross assets are acquired by a third party not previously affiliated with the Company (for cash, property including, without limitation, stock in any co rporation whether or not unaffiliated with the Company, indebtedness of any person or any combination thereof), or (III) the Company is merged or consolidated with another private or public corporation or other third party legal entity and the former holders of shares of Common Stock of the Company own less than 25% of the voting power of the acquiring, resulting or surviving corporation or other third party legal entity. For the purposes hereof a director or officer of the Company shall be considered "affiliated with the Company."

6. Confidentiality and Restrictive Covenants.

(a) The Executive acknowledges that:

(i) the business in which the Company is engaged is intensely competitive and his employment by the Company will require that he have continual access to and knowledge of confidential information of the Company, including, but not limited to, the nature and scope of its products, the object and source code offered, marketed or under development by the Company or under consideration by the Company for development, acquisition, or marketing by the Company and the documentation prepared or to be prepared for use by the Company (and the phrase "by the Company" shall include other vendors, licensees or and resellers and value-added resellers of the Company's products or proposed product) and the Company's plans for creation, acquisition, improvement or disposition of products or software, expansion plans, financial status and plans, products, improvements, formulas, designs or styles, method of distribution, lists of remarketing and value-added and other resellers customer lists and cont act lists, product development plans, rules and regulations, personnel information and trade secrets of the Company, all of which are of vital importance to the success of the Company's business, provided that Confidential Information will not include information which has become publicly known otherwise than through a breach by Executive of the provisions of this Agreement (collectively, "Confidential Information");

(ii) the direct or indirect disclosure of any Confidential Information would place the Company at a serious competitive disadvantage and would do serious damage, financial and otherwise, to the Company's business;

(iii) by his training, experience and expertise, the Executive's services to the Company will be special and unique; and

(iv) if the Executive leaves the Company's employ to work for a competitive business, in any capacity, it would cause the Company irreparable harm.

(b) Covenant Against Disclosure. The Executive therefore covenants and agrees that all Confidential Information relating to the business products and services of the Company, any subsidiary, affiliate, seller or reseller, value-added vendor or customer shall be and remain the sole property and confidential business information of the Company, free of any rights of the Executive. The Executive further agrees not to make any use of the confidential information except in the performance of his duties hereunder and not to disclose the information to third parties, without the prior written consent of the Company. The obligations of the Executive under this Paragraph 6 shall survive any termination of this Agreement. The Executive agrees that, upon any termination of his employment with the Company, all Confidential Information in his possession, directly or indirectly, that is in written or other tangible or readable form (together with all duplicates thereof) will forthwith be retur ned to the Company and will not be retained by the Executive or furnished to any third party, either by sample, facsimile, film, audio or video cassette, electronic data, verbal communication or any other means of communication.

(c) Non-competition. The Executive agrees that, during the Term of Employment and for a period of one (1) year following the date of termination of the Executive's employment with the Company, the Executive will not, directly or indirectly, own, manage, operate, control or participate in the ownership, management or control of, or be connected as an officer, employee, partner, director, or otherwise with, or have any financial interest in, or aid or assist anyone else in the conduct of, any entity or business which competes with any business conducted by the Company or any of its subsidiaries or affiliates, in the United States, Canada and the UK and any other area where such business is being conducted on the date the Executive's employment is terminated hereunder. Notwithstanding the foregoing the Executive's ownership of securities of a public company engaged in competition with the Company not in excess of five (5%) percent of any class of such securities shall not be considered a breach of the covenants set forth in this Paragraph 6.

(d) Further Covenant. Until the date which is one (1) year after the date of the termination of the Executive's employment hereunder for any reason, the Executive will not, directly or indirectly, take any of the following actions, and, to the extent the Executive owns, manages, operates, controls, is employed by or participates in the ownership, management, operation or control of, or is connected in any manner with, any business of the type and character engaged in and competitive with that conducted by the Company or any of its subsidiaries or affiliates during the period of the Executive's employment, the Executive will use his best efforts to ensure that such business does not take any of the following actions:

(i) persuade or attempt to persuade any customer of the Company or any seller, reseller or value-added vendor of the Company or of its products to cease doing business with the Company or any of its subsidiaries or affiliates, or to reduce the amount of business it does with the Company or any of its subsidiaries or affiliates;

(ii) solicit for himself or any entity the business of (A) any customer of the Company or any of its subsidiaries or affiliates, or (B) any seller, reseller or-value-added vendor of the Company, or of its products, or (C) solicit any business from a customer which was a customer of the Company or any of its subsidiaries or affiliates within six months prior to the termination of the Executive's employment; and

(iii) persuade or attempt to persuade any employee of the Company or any of its subsidiaries or affiliates or any individual who was an employee of the Company or any of its subsidiaries or affiliates, at any time during the six-month period prior to the Executive's termination of employment, to leave the employ of the Company or any of its subsidiaries or affiliates.

7. Intellectual Property. The Executive hereby agrees that any and all (i) software, object code, source code, and documentation, (ii) any improvements, inventions, discoveries, formulae, processes, methods, know-how, confidential data, patents, trade secrets, (iii) Food and Drug Administrative ("FDA") applications seeking approval by the FDA, information contained in the Forms 510-k of the FDA and approvals from FDA, and (iv) other proprietary information made, developed or created by the Executive (whether at the request or suggestion of the Company or otherwise, whether alone or in conjunction with others, and whether during regular working hours of work or otherwise) during the period of his employment with the Company, which may be directly or indirectly useful in, or relate to, the business being carried out by the Company or any of its subsidiaries or affiliates, shall be promptly and fully disclosed by the Executive to the Board of Directors and shall be the Company's exc lusive property as against the Executive, and the Executive shall promptly deliver to the Board of Directors of the Company all papers, drawings, models, data and other material relating to any invention made, developed or created by him as aforesaid.

The Executive shall, upon the Company's request and without any payment therefor, execute any documents necessary or advisable in the opinion of the Company's counsel to direct issuance of patents, copyrights and FDA applications or approvals of the Company with respect to such inventions or work product or improvements or enhancements as are to be the Company's exclusive property as against the Executive under this Paragraph 7 or to vest in the Company title to such inventions as against the Executive, the expense of securing any such patent or copyright, to be borne by the Company.

8. Breach by Employee. Both parties recognize that the services to be rendered under this Agreement by the Executive are special, unique and extraordinary in character, and that in the event of a breach by Employee of the terms and conditions of the Agreement to be performed by him, then the Company shall be entitled, if it so elects, to institute and prosecute proceedings in any court of competent jurisdiction, either in law or in equity, to enforce the specific performance thereof by the Executive. Without limiting the generality of the foregoing, the parties acknowledge that a breach by the Executive of his obligations under Paragraph 6 or 7 would cause the Company irreparable harm, that no adequate remedy at law would be available in respect thereof and that therefore the Company would be entitled to injunctive relief with respect thereto.

9. Arbitration. Without precluding acting to obtain specific performance and/or injunctive relief pursuant to Paragraph 8 above, in the event of any dispute between the parties hereto arising out of or relating to this Agreement or the employment relationship, including, without limitation, any statutory claims of discrimination, between the Company and the Executive (except any dispute with respect to Paragraphs 6 and 7 hereof), such dispute shall be settled by arbitration in Nassau County or New York County, State of New York, or in Wyandotte County or the City of Kansas City, State of Kansas, in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association. The parties hereto agree that the arbitral panel shall also be empowered to grant injunctive relief to a party, which may be included in any award. Judgment upon the award rendered, including injunctive relief, may be entered in any court having jurisdict ion thereof. Notwithstanding anything herein to the contrary, if any dispute arises between the parties under Paragraphs 6 or 7, neither the Executive nor the Company shall be required to arbitrate such dispute or claim, but each party shall have the right to institute judicial proceedings in any court of competent jurisdiction with respect to such dispute or claim. If such judicial proceedings are instituted, the parties agree that such proceedings shall not be stayed or delayed pending the outcome of any arbitration proceeding hereunder.

10. Miscellaneous.

(a) Successors; Binding Agreement. This Agreement and the obligations of the Company hereunder and all rights of the Executive hereunder shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns, provided, however, that the duties of the Executive hereunder are personal to the Executive and may not be delegated or assigned by him.

(b) Notice. All notices of termination and other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand, delivered by an express delivery (one day service), delivered by telefax and confirmed by express mail or one day express delivery service, or mailed by United States registered mail, return receipt requested, addressed as follows:

If to the Company:

Mediware Information Systems, Inc.
11711 W. 79th Street
Lenexa, Kansas 66214
Attn: President and Chief Executive Officer

If to the Executive:

Don L. Jackson
428 Sortwell Court
El Dorado Hills, CA 95762

or to such other address as either party may designate by notice to the other, which notice shall be deemed to have been given upon receipt.

(c) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to the conflict of law rules thereof.

(d) Waivers. The waiver of either party hereto of any right hereunder or of any failure to perform or breach by the other party hereto shall not be deemed a waiver of any other right hereunder or of any other failure or breach by the other party hereto, whether of the same or a similar nature or otherwise. No waiver shall be deemed to have occurred unless set forth in writing executed by or on behalf of the waiving party. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.

(e) Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall otherwise remain in full force and effect. Moreover, if any one or more of the provisions contained in this Agreement is held to be excessively broad as to duration, scope or activity, such provisions shall be construed by limiting and reducing them so as to be enforceable to the maximum extent compatible with applicable law.

(f) Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.

(g) Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties in respect of the subject matter contained herein, and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of either party in respect of said subject matter.

(h) Headings Descriptive. The headings of the several paragraphs of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any of this Agreement.

(i) Capacity. The Executive represents and warrants that he is not a party to any agreement that would prohibit him from entering into this Agreement or performing fully his obligations hereunder.

 

IN WITNESS WHEREOF, the Company and the Executive have executed this Agreement as of the date first written above.

EXECUTIVE

MEDIWARE INFORMATION SYSTEMS, INC.

 

 

 

 

/s/ Don L. Jackson              

By:      /s/ George J. Barry              

    Don L. Jackson

Name:      George J. Barry
Title:         President and Chief Executive Officer

 

 

 

EXHIBIT 10.46

 

August 22, 2002

Mr. Jeffrey D. Karp
6208 N. Mattox Road
Kansas City, MO 64151

Dear Jeff:

It's great to have you on board! I'm sure you'll be an excellent fit with the O.R. Division. To confirm previous discussions, you have accepted the position of Vice President & General Manager for our Operating Room Division. You will be reporting directly to me as President and CEO of Mediware. The following outlines the terms of our offer:

Compensation:

An annual compensation package will be comprised of:

 


(a) an annual base salary of $150,000.00, paid in bi-weekly
installments as earned.

 

(Payday is every other Thursday and you can expect to receive your first paycheck by the third Thursday after you start.)

 

(b) A bonus opportunity of up to 50% of your annualized base salary. The criteria for this bonus opportunity are to be approved by the CEO no later than 45 days after the date of hire.

 

(c) options for the purchase of 50,000 shares of the stock of Mediware Information Systems, Inc. These options vest in accordance with Mediware's normal policy of 25% per year. As with all Mediware options, grants are subject to the approval of the Mediware Board of Directors.

 

(d) termination. The Company shall be entitled to terminate the Employee's employment for "Cause" at any time immediately upon delivery of written notice or for no Cause at any time upon sixty (90) days prior written notice. Termination by the Company of the employment of the Employee for "Cause" shall mean termination based upon (i) the willful failure by the Executive to follow directions communicated to him by the General Manager or the President and Chief Executive Officer; (ii) the willful engaging by the Employee in conduct which is materially injurious to the Company, monetarily or otherwise; (iii) a conviction of, a plea of nolo contendere, a guilty plea or confession by the Employee to an act of fraud, misappropriation or embezzlement or to a felony; (iv) the Employee's habitual drunkenness or use of illegal substances; (v) Failure by the Employee to achieve the revenue goals assigned by the General Manager or the President and Chief Executive Officer; or (vi) an act of gross neglect or gross misconduct which the Company deems in good faith to be good and sufficient cause.

Benefits:

You will be offered the company benefit package and 401(K) plan and are eligible for both on the first day of the month following completion of 30 days of employment. The 401(K) and Flex Benefit Plans are available on the next quarterly enrollment. Enclosed is a benefit packet for your review. If you opt to take our insurance coverage, please complete the necessary forms and return them in the self-addressed stamped envelope. Judy Perry, Human Resources Administrator, is available at 913-307-1108, should you have any questions. The Company reserves the right to amend, modify or terminate medical or other insurance coverage in the future.

Vacation:

You will be entitled to three weeks' paid vacation earned per year.

Reimbursements:

During the term of your employment, you will be reimbursed for any qualifying travel and business-related expenses.

Start Date:

Your official full-time start date will be August 26, 2002.

If you have questions please give me a call. You may also reach my assistant, Judy Perry, at 913-307-1108. My e-mail address is bud.barry@mediware.com and Judy's is judy.perry@mediware.com. We look forward to having you as an integral member of our team

Very truly yours,



/s/ George J. Barry      
    George (Bud) Barry
    President & CEO

Enclosures

Agreed / Accepted:  Jeffrey Karp     
Signature:                  Jeffrey Karp     

Date: August 26, 2002

 

 

EXHIBIT 11

 

 

Three Months Ended      
September 30

 

Three Months Ended      
September 30

 

 

 

 

      2002       

 

      2001       

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$    922,000

 

$    428,000

 

 

 

 

 

 

 

 

 

Weighted-average Common Shares:

 

 

 

 

 

 

Outstanding

 

7,275,000

 

7,209,000

 

 

 

 

 

 

 

 

 

Basic Earnings (loss) Per Share

 

$        0.13

 

$        0.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$    922,000

 

$    428,000

 

 

 

 

 

 

 

 

 

Weighted-average Common Shares:

 

 

 

 

 

 

Outstanding

 

7,275,000

 

7,209,000

 

 

 

 

 

 

 

 

 

Options and Warrants

 

  519,000

 

    84,000

 

 

 

 

7,794,000

 

7,293,000

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share

 

$        0.12

 

$        0.06

 

 

 

 


EXHIBIT 15

 

To the Board of Directors and Stockholders of
Mediware Information Systems, Inc.

We have reviewed, in accordance with standards established by the American Institute of Certified Public Accountants, the unaudited interim condensed consolidated financial statements of Mediware Information Systems, Inc. and subsidiaries as of September 30, 2001 and for the three month periods ended September 30, 2002 and 2001, as indicated in our review report dated October 18, 2002; because we did not perform an audit, we expressed no opinion on those financial statements.

We are aware that our review report, which is included in your Quarterly Report on Form 10-Q for the quarter ended September 30, 2002, is incorporated by reference in the Registration Statement on Form S-8 (No. 333-07591).

We are also aware that our review report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Section 7 and 11 of that Act.

Eisner LLP

New York, New York
October 18, 2002

 

EXHIBIT 99.1

 

CERTIFICATION

PURSUANT TO 18 U.S.C. 1350

(AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)

 

In connection with the Quarterly Report on Form 10-Q (the "Form 10-Q") of Mediware Information Systems, Inc. for the quarter ended September 30, 2002, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned officers of the Company certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his or her respective knowledge:

    1. The Report fully complies, in all material respects, with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
    2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 Dated: October 21, 2002

/s/ George J. Barry

 

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     George J. Barry
     Chief Executive Officer

 

 

Dated: October 21, 2002

/s/ Jill H. Suppes

 

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     Jill H. Suppes
     Chief Financial Officer