Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): May 25th, 1999
COMMISSION FILE NUMBER -0-300181-14825
MERIDIAN HOLDINGS, INC.
(Exact name of registrants specified in its charter)
COLORADO 52-2133742
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
900 Wilshire Avenue, Suite 500
Los Angeles, California 90017
(213) 627-8878 Fax: (213) 627-9183
(Address, Including Zip Code, And Telephone Number, Including Area Code,
Of Registrant's Principal Executive Offices)
ITEM 5. OTHER EVENTS
On May 25th, 1999, pursuant to an Asset Purchase Agreement dated
as ofMay 25th, 1999 (the "Purchase Agreement") by and among the
Registrant, Anthony C. Dike ("Seller"), the Registrant purchased
substantially all of the assets and assumed certain liabilities of
Seller in exchange for an aggregate of 25,000,000 shares of Common
Stock.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
See Exhibit B
(b) PRO FORMA FINANCIAL INFORMATION.
See Exhibit C
(c) EXHIBITS.
EXHIBIT ITEM. DESCRIPTION
----------- -----------
[S] [C]
Exhibit A - Asset Purchase Agreement, dated as of May 25th, 1999,
by and among the Registrant, and Anthony C. Dike.
Exhibit B - Bill of Sale & Audited Balance Sheet and Capnet Group
of Companies Executive Summary.
Exhibit C - Proforma Consolidated Financial Information of Meridian
Holdings, Inc. Post-Acquisition.
Exhibit D - Employment Agreement
Exhibit E - Press release of the Registrant dated May 25th, 1999.
Exhibit F - Definition of Terms
Exhibit G - List of Seller key employees & Consultants
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Meridian Holdings, inc.
(Registrant)
Date: May 25th, 1999 By:/s/ Charles Okehie
---------------------------------------------
Charles Okehie
(President, Chief Executive Officer, and Chief
Financial Officer)
EXHIBIT A
ASSET PURCHASE AGREEMENT
by:
MERIDIAN HOLDINGS, INC.
a Colorado corporation;
and
Anthony C. Dike
an individual
---------------------------
Dated as of May 25th, 1999
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TABLE OF CONTENTS
SECTION 1. Purchase and Sale of Asset....................................1
SECTION 2. Assumption of Obligations and Liabilities ....................1
SECTION 3. Purchase Price........................... ....................1
SECTION 4. Closing.......................... ............................1
SECTION 5. Delivery at Closing..................... .....................1
SECTION 6. Representations and Warranties of Seller......................1
SECTION 7. Representations and Warranties of Buyer............ ..........3
SECTION 8. Conditions Precedent to the Obligation of the Buyer...........3
SECTION 9. Conditions Precedent to the Obligation of the Seller..........3
SECTION 10. Further Assurances............................ ...............4
SECTION 11. Survival of Representations and Warranties....................4
SECTION 12. Indemnification...............................................4
SECTION 13. Investment Commitment and Registration Under The
Securities Act................................................4
SECTION 14. General Provisions............................................5
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made and entered into
as of this 25th day of May, 1999, by and between Meridian Holdings, Inc.,
a Colorado corporation, hereinafter referred to as "Buyer", and Anthony C.
Dike, an individual, hereinafter referred to as "Seller".
RECITALS
WHEREAS, Seller owns the physical and intangible assets described in
Exhibit B to this Agreement, (hereinafter the Acquired Assets); and
WHEREAS, Seller desires to sell and Buyer desires to purchase the business
and substantially all of the assets of Seller on the terms and subject to the
conditions set forth in this Agreement.
WHEREAS, Buyer is a publicly Non-trading and full-reporting company with a
current Form 10QSB filing with the Securities Exchange Commission.
AGREEMENT
NOW THEREFORE, in consideration of the Recitals and the mutual covenants,
conditions, representations and warranties hereinafter set forth, the parties
agree as follows:
1. PURCHASE AND SALE OF ASSETS. On the terms and subject to the conditions
set forth in this Agreement, Seller agrees to sell, convey, assign, transfer
and deliver to Buyer and Buyer agrees to purchase from Seller, at the closing
date of May 25th, 1999 all of the assets pertaining to the Acquired Assets
including the following: its business as a going concern; its contract to
sell product; its rights under licenses and agreements; its copyrights,
trademarks and trade names; all regulatory rights and filings all advertising
and promotional material associated with the Acquired Assets, hereinafter
described as Exhibit 'B', and any names and addresses of Sellers customers.
2. ASSUMPTION OF OBLIGATIONS AND LIABILITIES. Buyer shall assume the
obligations or liabilities of Seller as set forth in Exhibit 'B.' Other than
the liabilities and obligations of Seller as set forth in Exhibit 'B', Buyer
does not assume any other obligations or liabilities.
3. PURCHASE PRICE. As consideration for the sale, conveyance, assignment,
transfer, and delivery of the Acquired Assets, the Buyer agrees on the
Closing Date to pay to the Seller as follows: 25,000,000 shares of the
restricted common stock of the Seller.
4. CLOSING. The closing shall take place on the Closing Date of May 25th,
1999 at the offices of Meridian Holdings, Inc., 900 Wilshire Blvd.,
Suite 500, Los Angeles, California, at 1 P.M. local time or such other time
and place as the parties may agree upon in writing.
5. DELIVERIES AT CLOSING. At the closing on the Closing Date:
(a) Seller shall deliver to Buyer such bills of sale, deeds,
assignments and other instruments of sale, conveyance, assignment and transfer
as are sufficient in the opinion of Buyer and its counsel to vest in Buyer and
its successors or assigns the absolute, legal and equitable title to all of the
Acquired Assets.
(b) Buyer shall deliver to Seller a certificate representing 25,000,000
shares of the unregistered common stock of Meridian Holdings, Inc.
6. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller hereby represents and warrants to Buyer that:
(a) Seller, doing business as Capnet has the requisite power and
authority to own and operate its assets, properties and business and to carry
on its business as now conducted.
(b) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized and approved
by the requisite authority of Seller, and, when executed by the authorized
representative of the Seller, this Agreement will constitute a legal, valid
and binding agreement of Seller.
(c) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not result in a breach of the
terms and conditions of, or result in a loss of rights under, or result in the
creation of any lien, charge or encumbrance upon, any of the Acquired Assets
pursuant to (i) Seller's articles of incorporation or bylaws, (ii) any
franchise, mortgage, deed of trust, lease, license, permit, agreement,
instrument or undertaking to which Seller is a party or by which it or any of
its properties are bound, or (iii) any statute, rule, regulation, order,
judgement, award or decree.
(d) Seller has good and marketable title to all of its assets and
properties, including, without limitation, the assets related to the
Acquired Assets.
(e) Exhibit "B" attached hereto contains a list of all contracts,
agreements, licenses, leases, arrangements, commitments and other
undertakings to which Seller is a party or by which it or its property is
bound. Except as specified in Exhibit "B", all of such contracts,
agreements, leases, licenses and commitments are valid, binding and in full
force and effect, and are assignable to Buyer without the consent of any
other party.
(f) To Seller's knowledge, there is no suit, claim, action, or
proceeding now pending or threatened before any court, administrative or
regulatory agency, or any basis for such a claim which may result in any
judgment, order, decree, liability, or other determination, which could
have an adverse effect, financial or otherwise, upon Seller or any of the
Acquired Assets. No such judgment, order or decree has been entered which has
or could have such effect.
(g) To the best of Seller's knowledge, Seller has all licenses and
permits (federal, state and local) necessary to conduct its business and such
licenses and permits are in full force and effect. No violations are or
have been recorded in respect of such licenses or permits and no proceeding
is pending or threatened which could result in the revocation or limitation
of any of such licenses or permits.
(h) No consent is necessary to effect the transfer to Buyer of any of
the Acquired Assets and, upon the consummation of the transactions contemplated
hereby, Buyer will be entitled to use the Acquired Assets to the full extent
that Seller used the same immediately prior to the transfer of the Acquired
Assets.
(i) Copies of all documents described in Exhibit "B" hereto have been
made available to Buyer and, to the best of Seller's knowledge, are correct and
include all applicable amendments, supplements and modifications.
(j) Neither this Agreement nor any Exhibit hereto delivered by Seller
pursuant to this Agreement contains an untrue statement of a material fact
or omits to state a fact that is necessary in order to make the statements
contained herein and therein, in light of the circumstances under which they
are made, not materially misleading.
(k) Seller warrants that no product liability claims have been made
against the company and agrees to indemnify buyer for any claims made for
product purchased prior to the closing date.
(l) Seller warrants that the worldwide rights are being transferred herein.
7. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents and
warrants to Seller that:
(a) Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Colorado. Seller has the
requisite power and authority to own and operate its assets, properties and
business and to carry on its obligations hereunder. Buyer is authorized to
issue 50,000,000 shares of common stock with a par value of $.001. There are
957,500 shares of common stock outstanding, held by 58 shareholders.
(b) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized and approved
by the board of directors of Buyer, and, when executed by the authorized
representative of the Buyer, this Agreement will constitute a legal, valid
and binding agreement of Buyer.
(c) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not violate the Certificate of
Incorporation or the bylaws of Buyer or any agreement, contract or other
instrument to which Buyer is a party, or any statute, rule, regulation,
order, judgment, award or decree.
(d) The Shares, when issued, sold and delivered in accordance with the
terms of this Agreement, will be duly and validly issued, fully paid and
non-assessable restricted common shares.
e) There is no litigation, proceeding or investigation pending or, to
the knowledge of Buyer, threatened against Buyer affecting any of its assets
or properties that could result, either in any case or in the aggregate, in
any material adverse change in the assets, properties or business of Buyer, or
that could impair the validity of this Agreement or any action to be taken
pursuant to this Agreement.
(f) Neither this Agreement, nor any Exhibit to this Agreement, nor any
written statement or certificate or certificate furnished by Buyer in
connection with this Agreement, contains an untrue statement of a material
fact or omits to state a fact that is necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which they are made, not materially misleading.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER. All obligations of
Buyer under this Agreement are, at its option, subject to fulfillment of
each of the following conditions prior to or at the closing:
(a) All representations and warranties of Seller made in this Agreement
or in any Exhibit hereto delivered by Seller shall be true and correct as of
the Closing Date with the same force and effect as if made on and as of that
date.
(b) Seller shall have performed and complied with all agreements,
covenants and conditions required by this Agreement to be performed or
complied with by Seller prior to or at the Closing Date.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. All obligations of
Seller under this Agreement are, at its option, subject to fulfillment of
each of the following conditions prior to or at the closing:
(a) All representations and warranties of Buyer made in this Agreement
or in any Exhibit hereto delivered by Buyer shall be true and correct on and
as of the Closing Date with the same force and effect as if made on and as
of that date.
(b) Buyer shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by
Buyer prior to or at the Closing Date.
10. FURTHER ASSURANCES.
Following the closing, Seller agrees to take such actions and execute,
acknowledge and deliver to Buyer such further instruments of assignment,
conveyance and transfer and take any other action as Buyer may reasonably
request in order to more effectively convey, sell, transfer and assign to
Buyer any of the Acquired Assets, to confirm the title of Buyer thereto,
and to assist Buyer in exercising rights with respect to the Acquired
Assets.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made by each of the parties hereto shall
survive the closing for a period of three years after the Closing Date.
12. INDEMNIFICATION.
(a) Seller agrees to indemnify, defend and hold harmless Buyer against
any and all claims, demands, losses, costs, expenses, obligations, liabilities
and damages, including interest, penalties, and reasonable attorney's fees,
incurred by Buyer arising, resulting from, or relating to any breach of, or
failure by Seller to perform, any of its representations, warranties,
covenants or agreements in this Agreement or in any Exhibit or other
document furnished or to be furnished by Seller under this Agreement.
(b) Buyer agrees to indemnify, defend and hold harmless Seller against
any and all claims, demands, losses, costs, expenses, obligations, liabilities
and damages, including interest, penalties, and reasonable attorney's fees,
incurred by Seller arising, resulting from, or relating to any breach of,
or failure by Buyer to perform, any of its representations, warranties,
covenants or agreements in this Agreement or in any Exhibit or other
document furnished or to be furnished by Buyer under this Agreement, or
reason of any act or ommision of Buyer or any of its successors or assigns
after the Closing Date that constitutes a breach or default under, or a
failure to perform, any obligation, duty, or liability of Seller under any
contract, lease, license or other agreement to which it is a party or by
which it is bound at the Closing Date, but only to the extent to which Buyer
expressly assumes these obligations, duties and liabilities under this
Agreement.
13. INVESTMENT COMMITMENT AND REGISTRATION UNDER THE SECURITIES ACT.
(a) Seller represents to Buyer as follows:
(i) The Shares issued as consideration for the transfer of the
Acquired Assets are being acquired for Seller's own account for investment only
and not with a view to the distribution or resale of all or any portion of the
Shares.
(ii) Seller has access to complete information regarding the assets,
properties, business and finances of Buyer. Seller has met and discussed
the assets, properties, business and finances of Buyer with Buyer's officers
and directors, and has received, read and understood the contents of Buyer's
reports and documents filed by Buyer with the Securities Exchange Commission.
Seller acknowledges that Buyer's Form 10SB, filed with the Securities
Exchange Commission is currently subject to comments.
(b) Seller agrees as follows:
(i) Seller will not, directly or indirectly, offer or sell,
transfer or otherwise dispose of all or any portion of the Shares, or solicit
any offer to buy, purchase or otherwise acquire all or any portion of the
Shares, after the Closing Date, unless the Shares are duly registered under
the Securities Act of 1933, as amended (the "Act") and under applicable state
securities laws, or such proposed offer, sale, transfer or other disposition
of the Shares is exempt from the registration requirements of the Act and
applicable state securities laws.
(ii) Certificates representing the Shares may bear a legend in form
and substance satisfactory to counsel for Buyer referring to the investment
commitment contained in this Agreement, that the Shares have not been
registered under the Act or any state securities laws, and that no transfer
of the Shares may be made unless the Shares are registered under the Act or
an exemption from such registration is available.
(iii) Seller will provide Buyer with all information relating to
Seller, including complete details as to its proposed disposition of the Shares.
14. GENERAL PROVISIONS.
14.1 Construction. This Agreement shall be construed and enforced in
accordance with the laws of the State of California.
14.2 Notices. All notices, requests, demands and other communications
contemplated under this Agreement shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
express, certified or registered mail, postage prepaid, addressed to the
following parties, their successors in interest, or their permitted assignees
at the following addresses, or at such other addresses as the parties may
designate by written notice in the manner aforesaid:
If to Meridian Holdings, Inc. (Buyer)
Charles Okehie
President & CEO
Meridian Holdings, Inc.
900 Wilshire Blvd., Suite 500
Los Angeles, California 90017
with copies to
Neil Leibman, Esq
24 Greenway Plaza #1826
Houston, Texas 77046
If to Seller, then:
Anthony C. Dike
4127 West 62nd Street
Los Angeles, CA 90043
with copies to
Donald J. Stoecklein, Esq
Sperry Young & Stoecklein
1850 E. Flamingo Rd.
Suite 111
Las Vegas, Nevada 89119
14.3 Assignment. This Agreement shall not be assignable by any party without
the prior written consent of the other parties. Nothing contained in this
Agreement, express or implied, is intended to confer upon any person or entity
other than the parties to this Agreement and their successors and assignees,
any rights or remedies under this Agreement unless expressly so stated to the
contrary.
14.4 Remedies. Except as otherwise expressly provided herein, none of the
remedies set forth in this Agreement is intended to be exclusive, and each
party shall have all other remedies now or hereafter existing at law, in
equity, by statute or otherwise. The election of any one or more remedies
shall not constitute a waiver of the right to pursue other available remedies.
14.5 Arbitration. Any controversy or claim relating to this Agreement
(other than a request for injunctive relief), including any controversy or
claim as to the arbitrability of any controversy or claim and any claim
for rescission, shall be settled by arbitration in the city of Los Angeles,
State of California, in accordance with the then rules of the American
Arbitration Association, and judgment upon an award rendered in such
arbitration may be entered in any court having jurisdiction of the matter.
14.6 Attorneys Fees and Litigation Costs. If any arbitration proceeding
or other legal action is brought for the enforcement of this Agreement, or
because of an alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of this Agreement, the prevailing
party shall be entitled to recover its reasonable attorneys' fees and other
costs incurred in such arbitration proceeding or other legal action, in
addition to any other relief to which is maybe entitled.
14.7 Entire Agreement. This Agreement and the exhibits and other documents
specifically referred to herein or required to be delivered pursuant to the
terms of this Agreement represent the entire agreement of the parties hereto
with respect to the subject matter hereof, and supersede all prior agreements,
understanding, discussions, negotiations and commitments of any kind. This
Agreement may not be amended or supplemented, nor may any rights hereunder be
waived, except in writing signed by each of the parties affected thereby.
14.8 Section Headings. The section headings in this Agreement are included for
convenience only, are not a part of this Agreement and shall not be used in
construing it.
14.9 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above mentioned.
BUYER: Meridian Holdings, Inc.
/s/Charles Okehie
Charles Okehie, President
SELLER: Anthony C. Dike
/s/Anthony C. Dike
Anthony C. Dike
EXHIBIT B
BILL OF SALES
KNOW ALL MEN BY THESE PRESENTS, that I, Anthony C. Dike, of 4127 West 62nd
Street, Los Angeles, the State of California, in consideration of 25,000,000
shares of common stock of Meridian Holdings, Inc., and other just and valuable
consideration paid to me by Meridian Holdings, Inc. (A State of Colorado
Corporation) of 900 Wilshire Blvd., Suite 500, Los Angeles, the State of
California receipt of which is hereby acknowledged, have granted, bargained,
sold, conveyed, transferred, and delivered and by these presents do bargain,
sell, grant, convey, transfer, and deliver until said the State of California
the following goods and chattels:
1. Bidfair.com
2. Bolingo.com
3. Capnet.com
a. Capnet Gateway Online Services
b. Capnet Electronic Drug Store.
c. Capnet Document Archiving.
d. Capnet News Service
4. Capnet IPA
5. Intellectual Properties of the above entities.
6. Computer Hardware and Software, Tangible and Intangibles
7. Account Receiveables
8. Cash in the Bank of the above entities at First Professional Bank, Santa
Monica, California
9. Right to use the Trademarks and Internet Domain Names of the Above
entities.
10. Liabilities of Seller which are to be Assumed by Buyer.
a. All notes, loans and recurrent charges owed by Capnet as listed in
the audited financial statements of Capnet dated May 18th, 1999.
b. All leases, rents, and monthly installment obligations of Capnet
Group of Companies.
11. Management Agreements to be assumed Includes:
a) Meridian Medical Enterprises Corporation(Medical Management Contract filed
in paper)
b) MMG Investments Inc.(Secure Transaction Server Management Contract filed
in paper)
c) S.O.S Community Services, Inc.(Community Outreach Management Contract filed
in paper)
d) CGI Communications Services, Inc.(Web Server Hosting and Management Contract
filed in paper)
To have and to hold the same until Meridian Holdings, Inc., its' executors,
administrators, and assigns forever;
And I do for myself, my executors, my administrators and assigns warrant and
represent to Meridian Holdings, Inc., that the title conveyed is good, its
transfer is appropriate and rightful, and the equipment or property described
hereunder shall be delivered free of any security, lien or encumbrance thereon
EXECUTED this 25th day of May, 1999, at Los Angeles, in the State of
California.
/s/Anthony C. Dike
________________________
Anthony C. Dike (Owner)
/s/Charles Okehie
________________________
Charles Okehie
For: Meridian Holdings, Inc.
Capnet Group of Companies
Audited Financial Statements
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Capnet Group of Companies.
We have audited the combined balance sheet of the Capnet Group of Companies
and Subsidiary, as of December 31, 1998 and the related statements of income
and cash flows for the year then ended. Our responsibility is to express an
opinion on these financial statements based on our audit.
We have conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Capnet Group of Companies,
as of December 31, 1998 and the results of their operations and their cash
flows for the year then ended, in conformity with generally-accepted
accounting principles.
ANDREW M. SMITH
CERTIFIED PUBLIC ACCOUNTANT
Long Beach, California
May 26, 1999
Capnet Group of Companies
Balance Sheet
December 31, 1998
Assets
Current Assets
Cash $ 70,332
Accounts Receivable (Net of
Allowance for Doubtful
Accounts $400,000) (Note 3) 488,463
Inventories (Note 2) 10,509
569,304
Property, Plant, and Equipment
Net of Accumulated Depreciation (Note 1) 12,836
Intangible and Other Assets
Other Investments 500
Organization Costs (Note 1) 10,880
11,380
Total Assets $593,520
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable 159,094
Payroll Taxes Payable 5,332
Business Line of Credit (Note 7) 37,390
Loan Payable - MME (Note 6) 70,141
271,957
Non-Current Liabilities
Loans Payable (Note 4) 77,248
Stockholders' Equity (Note 2)
Retained Earnings (217,860)
Common Stock (1,000 shares authorized
par value $0.01, 1,000 shares issued
and outstanding) 10
Additional Paid in Capital 462,165
Total Stockholders' Equity 244,315
Total Liabilities and Stockholders' Equity $ 593,520
Capnet Group of Companies
Statement of Income
Year Ended December 31, 1998
Revenues
Professional Fees $ 627,683
Refunds 94
627,777
Operating Expenses
Auto 5,884
Bank Charges 2,125
Capitation Payments 237,869
Contract Labor 127,775
Contributions 11,050
Depreciation 10,926
Dues & Subscriptions 4,020
Employee Benefits 1,196
Equipment Rental 17,366
Insurance 12,461
Interest 9,087
Loan Costs 1,200
Loss on Investments 7,000
Management Fees 700
Office Supplies/Expense 13,668
Other Expenses 4,727
Payroll Taxes 3,682
Permits & Licenses 1,045
Postage & Delivery 1,402
Printing & Copying 2,740
Professional Fees 65,244
Rent 27,600
Repairs & Maintenance 2,274
Salaries-Others 42,332
Taxes-Other 372
Telephone & Communications 10,153
Utilities 1,900
625,798
Net Income $ 1,979
Retained Earnings January 1, 1997 (219,839)
Retained Earnings December 31, 1998 $ (217,860)
Capnet Group of Companies
Statement of Cash Flows
Year Ended December 31, 1998
Cash Flows from Operating Activities
Net Income 1,979
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 10,926
Inventory write-off 3,503
Non-cash loan costs 1,200
Collection of prior year's uncollectibles 17,696
Changes in assets and liabilities:
Increase in accounts receivable (188,463)
Increase in accounts payable 158,932
Increase in revolving credit line 413
Increase in payroll taxes payable 4,510
Decrease in Franchise taxes (800)
Net cash provided by operating activities 9,896
Cash-flow from financing activities
Repayment of loans payable (1,428)
Cash proceeds from revolving credit-line 8,000
Cash proceeds from bank loans 58,800
Cash repayment of revolving credit-line (12,493)
Proceeds from sale of stock 20,974
Net cash provided by financing activities 73,853
Cash Flows from Investing Activities
Cash spent on investments (500)
Purchase of equipment (10,438)
Cash Used by Investing Activities (10,938)
Net increase in cash 72,811
Cash at beginning of period 3,696
Cash Balance December 31, 1998 $ 76,507
Other Non-cash Transactions
During the second quarter, the company reclassified
$36,977 in credit and charge card debt from stockholder
loans to accounts payable - revolving credit-line
CAPNET GROUP OF COMPANIES
Notes to Financial Statements
December 31, 1998
NOTE 1 - Summary of Significant Accounting Policies
This summary of significant accounting policies of Capnet
Group of Companies (the "Company") is presented to assist
in understanding the Company's financial statements. These
financial statements and notes are the representation of the
Company's management, which is responsible for the integrity
and objectivity. These accounting policies conform to
generally accepted accounting principles and have been
consistently applied in the preparation of the financial
statements
Nature of Operations
Capnet Group of Companies (the Company) consists of the following:
1. Capnet IPA, (Independent Physician Association, is the management
component of the group of companies. In addition to the on-line
components described herein is also responsible for the administration
physician contracts and healthcare management. The major revenue
component is management fees.
2. Capnet Gateway Online Services, an internet based information and
management services company focused on providing content and
information regarding Healthcare, High Technology, and Humanity.
Is designed to be a subscription based site on the World Wide Web.
The potential also exists advertising revenues via Web banners, links
and the likes.
3. Bolingo.Com-High Technology Store, a retailer of high technology
products, which includes computer hardware, software, and accessories.
The company has an established relationship with Ingram Micro, Inc.,
wholesale distributor of high technology product. No inventories will
be maintained by the company, but rather orders placed with
distributors, once recieved from on-line customers, to be delivered by
the distributor. Currently, the company has access through its
relationship with Ingram and other distributors to over 90,000
products.
4. Bidfair.com-On line Auction Web Site, an on-line auction providing
a forum for buying, selling, and trading online via the Internet.
No placement fee will be required, but a success fee of 1% to 4% will
be charged on a stepped down basis; and
5. Capnet.com-Document archives, Capnet News, & Electronic Drug Store.
E-commerce products addressing various aspects of the medication
management process. Like Bolingo.com, no inventories will be maintained,
but instead orders place with distributors, when received from on-line
customers and processed.
The group of companies are the collective holdings of a single individual.
These companies are intended to provide the infrastructure for Meridian
Holdings, Inc. (MHC). The Assets of the Company were transferred to
Meridian Holdings, Inc. in exchange for stock in MHC. The surviving
Company intends to become an Internet retailer of computer software
products, and well as providing information and resources when fully
operational. The closing date of the acquisition was May 25, 1999.
Use of Estimates
Management will use estimates and assumptions in preparing
financial statements (e.g. depreciation). Those estimates and
assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and reported
revenues and expenses.
Fiscal Year
The Company operates on a December 31st year end.
Income Recognition
The Company prepares its financial statements and federal income
taxes on the accrual basis of accounting. The nature of the business
is such that the Company receives stock and other necessary materials
from the customers for processing. As such no inventories of any
significance are maintained.
Amortization
Organization costs are amortized over sixty months using the straight
line-method.
Depreciation
Furnishings and equipment transferred to the corporation by the
stockholder upon incorporation were recorded at the stockholder's book
value at the date of the transfer. New furnishings and equipment are
stated at cost. Depreciation is computed using straight-line and
declining balance methods over the assets estimated useful life.
NOTE 2 - Inventory
Inventory represents office and medical supplies held for future use.
NOTE 3 - Accounts Receivable
At December 31, 1998, accounts receivable represented (1) the residual
amount of fees earned and reasonably expected to be collected. The
stockholder transferred a total of $700,000, of which $300,000 were
reasonably expected to be collected. An allowance for doubtful accounts
of $400,000 was therefore established. Management is making every effort
possible to collect the outstanding medical fees. Because some of these
receivables date back as far as 1994, management believes that the
allowance for doubtful accounts is adequate and appropriate.
(2) Current period receivables total $188,463. Amounts presented herein
are based solely on management's belief and were not confirmed by
auditors.
NOTE 4 - Loans Payable
Following is a summary of the loans outstanding at
December 31, 1998 Loans payable - Sanwa Bank is a
freeline account. The loan has a tiered interest
rate ranging from 9.19% to 9.69% with a minimum
monthly payment of $125.56 $7,965
Loan payable - SBA (Small Business Administration). At
December 31, 1998, the loan had an interest rate of 4%,
with monthly payments of $58 9,283
Loan payable - L.A. Community Development Bank is a
$60,000 loan due March 31, 1999 plus interest. The
note has a stated interest rate of 10.75% 60,000
$77,248
NOTE 5 - Contingencies
The company has various contracts with Los Angeles County which are subject
to audit by the County. Such audits could result in claims against the
resources of the company. No provision has been made for any liabilities
which may arise from any such audits, since the amount, if any, cannot be
determined at this date.
NOTE 6 - Loan Guarantees
On July 1, 1998, Meridian Medical Group, P.C., dba Capnet IPA one
of the group of companies, became a co-borrower on $50,000 in loans.
Under the debt agreements, Meridian Medical Group, P.C., and Meridian
Medical Medical Enterprises (a related company) are named individually
and collectively as borrower. The loans mature as follows:
Amount
Maturity Interest
Date Rate
$25,000 Line of credit 7-01-99 8.5%
10,000 Note Payable 7-01-00 8.5%
15,000 Note Payable 7-01-02 8.5%
$50,000
At December 31, 1998, $41,141 was utilized. Addtionally $29,000 was
advanced by the Meridian Medical Enterprises, with no defined terms
for repayment.
NOTE 7 - Line-of-Credit
The stockholder has made available to the company a personal line-of-credit
with an available balance of $72,000. Any funds utilized by the corporation
will be repaid in accordance with the bank's term at the time or the
advance. At December 31, 1998 $37,390 was utilized.
NOTE 8 - Subsequent Events
On March 14, 1999, a demand for arbitration was filed for capitation
payments receivable for the months of May, 1998, through September, 1998.
The company is requesting payment of fees totaling $100,000. Further,
in connection with the company in the arbitration matter. The attorney
has assigned as a fee, a lien of forty percent (40%) of any amount recovered.
NOTE 9 - Furnishing and Equipment
Following is a summary of furnishings and equipment at December 31, 1998:
Computer Equipment $21,879
Office Equipment 23,874
Medical Equipment 58,094
103,847
Accumulated Depreciation (90,186)
Total $13,661
Furniture and equipment is depreciated over an estimated useful life
of 5-7 years.
NOTE 10 - Income Taxes
Operating Loss and Tax Credit Carryforwards
The Company has loss carryforwards totaling $217,860 that may be offset
against future taxable income. If not used, the carryforwards will expire
as follows:
Year 2011 $ 10,021
Year 2012 207,839
$217,860
As a result of the above carryforwards there is no provision for income tax
for the year ended December 31, 1998.
Clifford R. Benn
Certified Public Accountant
21839 S. Avalon Blvd # 103
Carson, California 90746
(310) 631-8145
INDEPENDENT AUDITOR'S REPORT
Stockholder
Meridian Medical Group, P.C.
Inglewood, California
I have audited the combined balance sheet of Meridian Medical Group,
P.C., dba: Capnet IPA, (a California Corporation), as of December 31,
1997 and the related statements of income/(loss), retained earnings,
and cash flows for the year then ended. These financial statements are
the responsibility of Capnet IPA's management. My responsibility is to
express an opinion on these financial statements based on my audit.
I have conducted my audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. I believe that my audit
provides a reasonable basis for my opinion.
As described in Note 3, the accompanying balance sheet shows $300,000
in accounts receivable at year end. The receivables were earned and billed
prior to the formation of the corporation. Accounts receivable at
December 31, 1997 were not audited by me.
In my opinion, except for any adjustment that might have been required had
I confirmed accounts receivables with the various clients, the financial
statements referred to above present fairly, in all material respects, the
financial position of Capnet IPA, as of December 31, 1998 and the results
of their operations and their cash flows for the year then ended, in
conformity with generally-accepted accounting principles.
CLIFFORD BENN
CERTIFIED PUBLIC ACCOUNTANT
March 16, 1998
Carson, California
Meridian Medical Group, P.C.
dba Capnet IPA
Balance Sheet
December 31, 1997
Assets
Current Assets
Cash $ 3,696
Inventories 14,012
Accoounts Receivable
(Net of doubtful accounts of $1,591,407) (Note 3) 300,000
Total Current Assets 317,708
Furnishings and Equipment (Note 1)
Computer Equipment 13,692
Office Equipment 20,798
Medical Equipment 58,094
92,584
Accumulated Depreciation (79,122)
Total Furnishings and Equipment 13,462
Organization Costs
(Net of $452 amortization) (Note 1) 1,808
Total Assets $ 332,978
Liabilities and Stockholders Equity
Current Liabilities
Accounts Payable $ 162
Payroll Taxes Payable 822
Franchise Taxes Payable (Note 4) 800
Loans Payable 9,538
Salaries Payable - Stockholder 156,000
Total Current Liabilities 167,322
Loan Payable - Sanwa Bank 9,138
Loan Payable - Stockholder (Note 5) 375,357
Total Liabilities 551,817
Stockholders' Equity
Common Stock (no par value;
authorized 1,000 shares, issued
and outstanding 2 shares 1,000
Retained Earnings (219,839)
Total Equity (218,839)
Total Liabilities and Stockholder's Equity $ 332,978
See Accompanying Notes and Auditor's Report
Meridian Medical Group, P.C.
dba Capnet IPA
Statement of Income/(Loss) and Change in Retained Earnings
For the year ended December 31, 1997
Medical Fees $ 41,195
Expenses
Accounting & Bookkeeping 1,004
Automobile Expenses 3,775
Contract Labor 3,669
Contributions 1,100
Dues & Subscriptions 2,562
Employee Benefits 1,473
Equipment Rental 3,575
Insurance 4,739
Interest 1,150
Laboratory Fees 477
Office Supplies/Expenses 9,321
Other Expenses 635
Payroll Taxes 2,179
Permits & Licenses 540
Postage & Delivery 125
Professional Fees 12,687
Rent 14,305
Repairs & Maintenance 2,044
Salaries - Officer 144,000
Salaries - Others 19,773
Telephone 8,313
Utilities 1,577
Total Expenses 239,023
Income Before Amortization &
Depreciation; and Income Taxes (197,828)
Amortization 452
Depreciation 8,759
Income Taxes (Note 4) 800
Net Loss (207,839)
Retained Earnings January 1, 1997 (12,000)
Retained Earnings December 31, 1997 $ (219,839)
See Accompanying Notes and Auditor's Report
Meridian Medical Group, P.C.
dba Capnet IPA
Statement of Income/(Loss) and Change in Retained Earnings
For the year ended December 31, 1997
Cash Flows from Operating Activities
Net Loss $ (207,839)
Adjustments to reconcile net loss to net cash flows
provided by operating activities
Amortization 452
Depreciation 8,759
Changes in current assets and liabilities
Decrease in accounts receivable 58,593
Increase in accounts payable 162
Increase in franchise taxes payable 800
Increase in payroll taxes payable 822
Increase in salaries payable 144,000
Net cash provided by operating activities 5,749
Cash Flows from Financing Activities
Cash proceeds stockholder's loans 11,781
Cash repayments of stockholder's loans (17,974)
(6,193)
Cash-flow from investing activities
Cash investment in organization costs (1,665)
Cash purchase of computer equipment (2,521)
Cash Flows from Financing Activities (4,186)
Increase (Decrease) in Cash (4,630)
Cash at beginning of year 8,326
Cash at end of year $ 3,696
See Accompanying Notes and Audotor's Report
Meridian Medical Group, P.C.
dba Capnet IPA
Notes to Financial Statements
For the year ended December 31, 1997
NOTE 1 - Summary of Significant Accounting Policies
Organization
Meridian Medical Group, P.C. (dba: Capnet, IPA) is a closely held
corporation organized under California corporate law.
Use of Estimates
Management will use estimates and assumptions in preparing
financial statements (e.g. depreciation). Those estimates and
assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and reported
revenues and expenses.
Fiscal Year
The Company operates on a December 31st year end.
Amortization
Organization costs are amortized over sixty months using the straight
line-method.
Depreciation
Furnishings and equipment transferred to the corporation by the
stockholder upon incorporation were recorded at the stockholder's book
value at the date of the transfer. New furnishings and equipment are
stated at cost. Depreciation is computed using straight-line and
declining balance methods over the assets estimated useful life.
NOTE 2 - Inventory
Inventory represents office and medical supplies hold for future use.
The amount shown on the balance sheet was furnished by management and
was not subjected to any audit procedures.
NOTE 3 - Accounts Receivable
Accounts receivable at December 31, 1997 represents the residual amount
of medical fees earned by the stockholder prior to incorporation. At the
time of incorporation, the stockholder transferred $1,950 of billed
medical fees receivable, or which $358,593 were reasonably expected to
be collected. During the year, $58,593 was collected. Management has
provided an aging of the receivables and is making every effort possible
to collect the outstanding medical fees. Although these receivables date
back as far as 1994, management believes that the bad debt allowance
established is appropriate. Accounts receivable were not confirmed or
subjected to any other audit procedures.
NOTE 4 - Income Taxes
The corporation is recognized by the federal government and California's
franchise tax board as Subchapter S corporation for income tax purposes.
As a subchapter S corporation, any income or loss generated by the
corporation is distributed to the stockholder and taxed at the
stockholder's rate. However, as a California corporation, the company
is required to pay minimum corporate tax of $800.
NOTE 5 - Loans Payable
Following is a summary of the loans outstanding at
December 31, 1997
Loans payable - Sanwa Bank is a
freeline account transferred to the company at
incorporation. At December 31, 1997, the loan
has a tiered interest rate ranging from 9.51%
to 10.01% with a minimum monthly payment of $138.19 $7,965
Loan payable - SBA (Small Business Administration)
transferred to the company at incorporation. At
December 31, 1997, the loan had an interest rate of
4%, with monthly payments of $58 and is due November 22,
1998 9,283
Loan payable - stockholder, non-interest bearing
with no stated due date 375,357
Total Loans Payable 394,033
Less: Loans due within one year (9,538)
Total Loans Payable, Long-Term $384,495
NOTE 6 - Line-of-Credit
The stockholder has made available to the company a personal line-of-credit
with an available balance of $72,000. Any funds utilized by the corporation
will be repaid in accordance with the bank's term at the time or the
advance.
NOTE 7 - Subsequent Events
On March 27, 1998, Meridian Medical Group, P.C. was granted a line-of-
credit by Meridian Medical Enterprises, Inc., a related company. The
amount of the funds made available is $430,000. In addition to providing
funds, Meridian Medical Enterprises, Inc. will be providing management
services for Meridian Medical Group, P.C.
Meridian Medical Enterprises, Inc. is to receive 17% of the net receipts
of Meridian Medical Group, P.C., of which 5% will represent payment on any
funds advanced. No interest terms were disclosed.
CAPNET GROUP OF COMPANIES EXECUTIVE SUMMARY
Date: 5/25/99
Contact: Anthony C. Dike (Chairman & CEO)
Telephone: 310-993-2963
Capnet Group of Companies is a roll-up of successful Internet related
business entities. These business entities includes:
1. Bidfair.com
2. Bolingo.com
3. Capnet.com
a. Capnet Gateway Online Services
b. Capnet Electronic Drug Store.
c. Capnet Document Archiving.
d. Capnet News Service
4. Capnet.IPA
1. Bidfair.com
"Bidfair.com" (http://www.bidfair.com) is an Internet premier person to
person auction site, a Web-based community in which buyers and sellers
are brought together in an efficient and entertaining auction format to
buy and sell personal items such as antiques, coins, collectibles,
computers, memorabilia, stamps and toys. The Bidfair.com service permits
sellers to list items for sale, buyers to bid on items of interest and
all Bidfair.com users to browse through listed items in a fully-automated,
topically-arranged, intuitive and easy-to-use online service that is
available 24 hours a day, seven days a week
The Internet offers for the first time the opportunity to create a
compelling global marketplace for person-to-person trading--the exchange
of goods between individuals. This trading has traditionally been
conducted through trading forums, such as classified advertisements,
collectibles shows, garage sales and flea markets, or through intermediaries,
such as auction houses and local dealer shops. These markets are highly
inefficient because: (i) their fragmented, regional nature makes it difficult
and expensive for buyers and sellers to meet, exchange information and
complete transactions; (ii) they offer a limited variety and breadth of goods;
(iii) they often have high transaction costs from intermediaries; and
(iv) they are information inefficient, as buyers and sellers lack a reliable
and convenient means of setting prices for sales or purchases. Despite these
inefficiencies, the Company believes that the market for traditional
person-to-person trading in the U.S. through auctions and classified ads
exceeded $50 billion in goods sold in 1997. An Internet-based centralized
trading place can overcome the inefficiencies associated with traditional
person-to-person trading by facilitating buyers and sellers meeting, listing
items for sale, exchanging information, interacting with each other and,
ultimately, consummating transactions. Through such a trading place, buyers
can access a significantly broader selection of goods to purchase and sellers
have the opportunity to sell their goods efficiently to a broader base of
buyers. As a result, a significant market opportunity exists for an
Internet-based centralized trading place that applies the unique attributes
of the Internet to facilitate person-to-person trading.
Bidfair.com Solutions
By leveraging the interactive nature of the Internet, Bidfair.com
facilitates a sense of community through direct buyer and seller
communication, thereby enabling the interaction between individuals
with mutual interests. In addition, this community orientation,
facilitation of direct buyer and seller communication and efficient access
to information on a particular buyer or seller's trading history can
help alleviate the risks of anonymous trading. As a result, there exists
a significant market opportunity for an Internet-based centralized trading
place that applies the unique attributes of the Internet to facilitate
person-to-person trading.
Buying From Bidfair.com Auction Website
By featuring different auction styles, the Company encourage participants
to not only compete for items, but to have some fun.
If you are bidding in a Winning Bid auction (a simple bidding war between
participants), the highest bid wins. The fewer the items available, the
fiercer the competition.
In a Clear Price auction, the wise participants win by underbidding the
big spenders. In multiple-item auctions, every winning bidder gets the items
for the lowest winning bid.
In a Second Price auction, winning bidders get the item for an amount equal
to the highest losing bid plus the bid increment, or the lowest winning bid,
whichever is less.
At no point during the process does the Company take possession of either
the item being sold or the buyer's payment for the item.
Selling on Bidfair.com Auction Website
A seller who registers with Bidfair.com can list a product for auction by
completing a short online form. The seller selects a minimum price for
opening bids for the item and chooses whether the auction will last three,
five or seven days. Additionally, a seller may select a reserve price for
an item, which is the minimum price at which the seller is willing to sell
the item and is typically higher than the minimum price set for opening
bids. The reserve price is not disclosed to bidders. A seller can elect to
sell items in individual auctions or, if he or she has multiple identical
items, can elect to hold a "Dutch Auction." For example, an individual
wishing to sell 10 identical watches could hold 10 individual auctions or
hold a Dutch Auction in which the 10 highest bidders would each receive a
watch and all lower bids would be rejected. A seller may also specify that
an auction will be a private auction. With this format, bidders' e-mail
addresses are not disclosed on the item screen or bidding history screen.
Sellers pay no placement fee, and are charged a success fee that steps down
from 4% to 1% of the transaction value only if an auction is concluded with
a successful bid.
Completion of the Transaction
At the end of an auction period, if a bid exceeds the minimum price and,
if one is set, the reserve price, Bidfair.com automatically notifies the
buyer and seller via email and the buyer and seller can then consummate
the transaction independently of Bidfair.com. At the time of the email
notification, Bidfair.com charges the seller a success fee equal to 4%
of the first $20 of the purchase price, 2% of any purchase price between
$20 and $1,000 and 1% of any purchase price over $1,000. At no point during
the process does the Company take possession of either the item being sold
or the buyer's payment for the item. Rather, the buyer and seller must
independently arrange for the shipment of and payment for the item, with
the buyer typically paying for shipping.
Bidfair.com Business Model Success
Bidfair.com offers its clients an exciting online auction experience
with buying, selling, and trading their wares online via the Internet.
Our online auction site offers you the chance to buy virtually any tradable
items at strikingly low prices. The Company allows its buyers and sellers
to bypass traditionally expensive, regionally-fragmented intermediaries
and transact business on a 24 hour a day, seven day a week basis. Because
Bidfair.com carries no inventory, sellers bypass costly traditional
intermediaries, thus allowing for a lower selling costs and increasing
the sellers' likelihood of finding buyers willing to pay his or her target
price. To list an item on Bidfair.com, sellers pay no placement fee and
are charged a success fee that steps down from 4% to 1% of the transaction
value only if an auction is concluded with a successful bid. As a result,
sellers for the first time can sell relatively inexpensive items which had
previously been prohibitively expensive to list through most traditional
trading forums. By allowing sellers to conveniently reach a broad range
of buyers, Bidfair.com also ameliorates the time-consuming, logistical
inconvenience of individual selling. Buyers have access to a broad selection
of items and avoid the need to pay expensive markups or commissions to
intermediaries. Buyers are not charged for trading through Bidfair.com.
The critical mass of items listed on Bidfair.com provides a mutual benefit
for buyers and sellers to more effectively determine an appropriate price for
an item.
Registration
While any visitor to Bidfair.com can browse through the Bidfair.com service
and view the items listed for auction, in order to bid for an item or to
list an item for sale, buyers and sellers must first register with
Bidfair.com. Users register by completing a short online form and
thereafter can immediately bid for an item or list an item for sale.
2. Bolingo.com
Bolingo.com, is a retailer of high technology products, which includes
computer accessories, hardware and software on the internet.
There are over 200,000 computer software programs and related hardware
available for sale through our major distributor. The Company intends over
time to expand its catalog into other information-based products, such as
new high technology product information dissemination, training and
promotion. Bolingo.com has virtually unlimited online shelf space and
offers customers a vast selection through an efficient search-and-retrieval
interface. Through its relationship with Ingram Micro, Inc., the world's
largest Wholesale Distributor of High-Technology Products, the Company
offers a catalog of more than 90,000 products, easy-to-use search and
browse features, e-mail services, personalized shopping services,
Web-based credit card payment and direct shipping to customers to any
place in the world, using Ingram Micros' World Wide Distribution Channels.
In the future, additional High Technology Products may be added to the
catalog through direct relationship with the manufacturers or product
major distributors worldwide. An on-line customer now could be able to
browse through the Company's catalog and select one or more items to
purchase. When a product is identified, the customer may then fill-out
an order entry form on-line. The information required to complete the
order form would include details of the items to be purchased and the
credit card information for the sale. From the completed order form,
the credit card information may be verified electronically via Cybercash
an Internet based credit card verification facility. Upon verification,
the funds will be automatically deposited into a trust account maintained
at Wells Fargo bank and the customer will be assigned an electronic
identification number, which will enable the customer track the purchased
item(s) for shipping purposes, or electronic download via the Internet
into the customers computer hard-drive. For hardware products, the company
has established a relationship with one of the major distributors of computer
hardware and software products, to help fulfill all on-line orders placed
through our web-site.
Bolingo.com was founded to capitalize on the opportunity for on-line
retailing. Management believes that High Technology product distribution,
utilizing the model set forth herein, is particularly suited to on-line
retailing for several reasons. First, an on-line retailer can offer
virtually unlimited on-line shelf space. Secondly, it can offer its
customers a wide range of products that, hitherto, would have required
a large amount of operational space. Thirdly, serving a global market,
on-line retailers can realize substantial economies relative to the
traditional storefront retailer.
The ability of the Company to introduce the marketing channel as
described above, is predicated on the willingness of the manufacturers
of the products to enter into distribution/vendor agreements with the
Company.
The company projects revenues of $1,200,000 during the first year.
3. Capnet.com
Capnet.com is an internet based information and management services
company specifically focused on providing management, content and
information regarding Healthcare, High Technology and Humanity.
Capnet Gateway Online Services, a division of Capnet.com, has been
sited in various Internet Magazines, rating companies etc. Capnet
Gateway Online Services has recently signed a licensing agreement
with Meridian Medical Group, P.C. to publish all its Clinical Outcomes
Analysis, Drug and Care Utilization data, as well as it's "Policies and
Procedure Manual" on a subscription basis via its' internet transaction
server. The company also is in the process of finalizing negotiation with
a major University Teaching Hospital and Medical Center, to acquire the
license to convert all their recently published Disease State Management
Protocols into a portable Electronic Document to be marketed on a
subscription basis via the Internet.
In addition, the company has recently finalized arrangement with UPI Inc.,
an International News agency, to provide News content to Capnet Gateway
Online Services. The news feed focuses on the following areas of human
concern: General, Financial, Healthcare, Entertainment, Technology and
Sports News. One of the most interesting aspect of the News section is
the dynamic nature of the hourly News Summary, which brings News-feeds
from different parts of the world every hour.
Capnet.com Electronic Drug Store
Background
According to the Health Care Financing Administration (HCFA),
healthcare expenditures in the United States totaled approximately
$1.0 trillion in 1996, or 14% of the country's gross domestic product,
making it the largest single sector of the economy. One of the fastest
growing components of healthcare expenditures is pharmaceutical costs,
which last year totaled approximately $100 billion, according to IMS
HEALTH, a leading provider of pharmaceutical information. According to
HCFA, pharmaceutical costs are expected to increase at an annual rate
of approximately 10% through 2007, driven by an aging population, the
accelerating introduction of new drugs, direct-to-consumer advertising
by pharmaceutical manufacturers and cost advantages over alternate forms
of care, most notably inpatient hospital care. This in turn has created
pressure on managed care organizations to control pharmacy costs and
improve the process of managing medication treatments.
Physicians have also been affected as healthcare has shifted from a
fee-for-service model to managed care forms of reimbursement, which
increasingly transfer financial risk for pharmaceutical costs from
traditional third-party payers to physicians. This transfer of risk
has often had an adverse financial impact on physicians. Moreover,
as healthcare becomes increasingly consumer driven, patients are seeking
more information, control and convenience, placing additional time and
financial pressures on physicians. These changes have led many physicians
in the United States to search for tools and solutions to improve practice
efficiency, increase revenue, comply with managed care guidelines and
address patient needs.
Rapid Growth of the Internet and E-commerce
The Internet is becoming an increasingly important medium in healthcare,
providing the opportunity for unprecedented connectivity and access to
information for all participants in the healthcare delivery process. We
believe that an increasing number of physicians regularly access the
Internet, indicating their willingness to adopt technology. Consumer
usage of the Internet continues to grow rapidly, and health and medical
information was the second most popular subject of Web-based information
retrieval searches in 1997 according to Media Metrix, an independent
Internet research firm. In addition, it is estimated that e-commerce will
grow from $28 billion in 1998 to over $100 billion by 2002.
The Opportunity
The current process for prescribing and delivering medications is
inefficient, unnecessarily costly and error-prone. Physicians write
virtually all of the 2.8 billion annual prescriptions by hand, resulting
in errors and necessitating millions of telephone inquiries from
pharmacies for clarification and correction. When physicians write
In future, this center will be the starting point for retrieval of hard to
find information, for a nominal fee, a phenomenon that is currently not
catching on amongst current internet users.
Capnet News
In addition, the company has recently finalized arrangement with UPI Inc.,
an International News agency, to provide News content to Capnet Gateway
Online Services. The news feed focuses on the following areas of human
concern: General, Financial, Healthcare, Entertainment, Technology and
Sports News. One of the most interesting aspect of the News section is
the dynamic nature of the hourly News Summary, which brings News-feeds
from different parts of the world every hour.
The company will generate over 60% of its revenue from Management Services
and the rest through Electronic Commerce transaction activities and Banner
Advertisement.
4. CAPNET IPA
"Capnet IPA" ("Independent Physician Association"), with over 10 payor
contracts, 600 physicians, 15 Community hospitals, four Teaching Hospitals
and other ancillary services companies contracted within its network, is
the core component of Capnet.com, healthcare management division business.
The linkage of these entities is imminent as the convergence of technology
brings to bear the burden of information overload currently one of the
biggest problems in the healthcare industry. The company believes that by
using currently available Internet Technology most of the healthcare
industry information processing could be handled more efficiently. To be
competitive, the Company must license leading technologies, enhance its
existing services and content, develop new technologies that address the
increasingly sophisticated and varied needs of healthcare professionals
and healthcare consumers and respond to technological advances and emerging
industry standards and practices on a timely and cost-effective basis. To
this end the company is in the process of acquiring additional healthcare
related companies whose business purpose and technology will further enhance
the companies ability to achieve its' business goals and objectives in the
healthcare industry.
The key components of management services to be provided to Capnet's
affiliated healthcare providers and organizations includes:
Cost Efficiency and Quality Outcome analysis
Pharmaceutical Benefit Management
Dynamic Unified Electronic Prescription/OTC Drug Formulary development
Electronic Drug Store for Prescription/OTC Drug ordering and processing
R & D Product Substitution Compliance
Drug Utilization Data analysis
Care Utilization Data analysis
Care Provider Network and Referral Pattern analysis
Quality Management Incentive Compliance
Dynamic and Comprehensive Clinical Pathways
Health Risk and Needs Assessments of the Patient Population Served
Case Management.
Electronic Medical Record System
Clinical Laboratory and Diagnostic Cardiovascular, Pulmonary, Nuclear
Medicine and Radiological Database Repositories.
Contract Negotiations, Mergers and Acquisition
Strategic Healthcare Planning, Marketing and Implementation utilizing
all the available Internet Technologies at Capnet.coms' disposal.
THE HEALTH CARE INDUSTRY
OVERVIEW AND DIRECTION
The $1 trillion health care industry is currently going through a
period of tremendous change. Nowhere is this more evident than the
patient care delivery network where the three main components -
physician groups, insurers and hospitals - are scrambling for
market share, volume and control.
The U.S. Health Care Delivery System
Each component is highly fragmented and contains several segments.
Over the last 30 years, many important changes have dramatically
altered the landscape of the health care delivery system. In 1994,
health care expenditures in the U.S. totaled $938.3 billion, up
6.1 % compared to 1993. Health care represented 13.9% of the total
U.S. gross domestic product in 1994. Today, the market is estimated
to be approaching $1 trillion. Between 1960 and 1993, per-capita
spending for personal health care increased from $126 to $2,920.
This is a huge industry that affects nearly everyone in the country.
As a result of the size and growth of the market, American medicine
is facing serious challenges. The cost of, access to, and quality of
health care are significant issues. The health care delivery system
must change as it seeks resolution of these issues.
Capnet.com management views the Medicare business as an opportunity
for major cost and risk savings. Although Medicare risk contracting
is expected to grow to $334 billion by 2002, it constitutes only 14%
of the nation's headcount while accounting for 45% of total health
care dollars. As Medicare is the fastest growing HMO in the country,
Medicare risk contracting represents a significant opportunity for
risk pool savings. In the six states of Capnet.com's initial focus,
Medicare represents $3.7 billion in physician revenues. Based on
Capnet.com's projected market share of 5%, this represents $185
million in revenues in the six-state region.
Medicare Benefit Payments
Capnet.com Initial Target Region
State Medicare Payments Physician Share** Capnet Share***
California * 10,000,000 3,000,000 150,000
Colorado**** 1,634,905 359,679 17,984
Wyoming**** 159,246 35,034 1,752
Utah**** 629,943 138,587 6,929
Montana**** 395,644 87,042 4,352
Idaho**** 401,179 88,259 4,413
Total 13,220,917 3,708,601 185,430
* California revenue figures are based on rough estimate, however,
Los Angeles County has over 300,000 Medicare beneficiaries.
** Physician Share is 22% of Medicare Payments
*** Capnet Share is 5% of Physician Share
**** Source: HCFA/OBA/BDMS, March 1995
Estimated Medicare Spending and Medicare Risk
Source: Congressional Budget Office and Robertson, Stephens Co.
HISTORICAL PERSPECTIVE
The earlier traditional health care financing methods gave nearly
unlimited license to overspend. Third party financing and marketing
of health insurance created third parties to collect and dispense monies
for healthcare services rendered. For many years this system worked well.
Growing risk pools made it possible to meet big needs of the few, from the
small payments of the many. However, contained in the above method of
healthcare services payment system were the seeds for its DESTRUCTION!
i.e., Cost Plus for Hospitals and Fee-For-Services for Physicians!
The traditional system offered other incentives to use resources and
services as long as the insurance companies paid the tab. This system
provided an environment of free spending and was not very efficient from
a business perspective. Physicians involved in this type of delivery system
had very little incentive to control costs or provide needed healthcare
within given budgets. Medicare adopted this spend thrift financing approach
against the advice of some, but with the approval of many, who feared fixed
budgets or pricing would restrict their ability to provide effective
healthcare. Faced with unlimited demands, prospects for unlimited payment
for the richest of our population (Physicians) started... And the race was
on! Little time lapsed before growing healthcare cost burdens caused
employers and governments agencies to demand a change.
* The first major attempt to control healthcare costs came shortly after
Medicare and Medicaid laws were passed. The nation turned to Centralized
planning to allocate Capital Resources. This strategy failed in the face
of increased demands, which in turn were fueled by a flawed payment
system that was instrumental in the "usual and customary" reimbursement
patterns that rewarded health professionals based on geographical
location and other actuarial method.
* While national health planning strategies were failing, the concept of
managed care began to develop through the creation of HMO, PPO, EPO and
other acronyms of the same stock!
* The earlier HMOs' were financed largely by Federal grants and later
converted to public market-financed. There was a push by HMOs to
increase profit and reduce costs.
* The emergence of HMOs came at a time when health insurance companies were
moving away from community-rated insurance to corporate or group-rated
insurance. The sense of Community sharing of healthcare risk was being
lost as corporations and other groups chose to reduce their health care
costs by extracting themselves from the community pool.
* The focused marketing of HMOs toward young and healthy groups exacerbated
the flight from the concept of community health. The result is massive
cost shifting among buyers of health services and massive displacement
of potential buyers of health insurance, which are either deemed an
unhealthy risk or care rates.
* This selective underwriting has left millions of Americans uninsured!
* Physicians and other healthcare providers responded well to a growing
but false sense of price competition. Huge discounts were offered to
HMOs, insurers, or employers who had large number of purchasers. As a
result, the displacement of the uninsured or underinsured became even
more severe. Healthcare providers have slipped unwittingly into the mode
of discriminatory pricing. Those individuals who were good insurance
risks or employed by the wealthiest corporations now paid less for the
same health care services than those who were uninsured, underinsured
or employed by a smaller less wealthy Corporation.
* Without structural changes in the system, the current managed care
delivery system, riddled with preferential risks and discriminatory
pricing is destined to fail.
CONSOLIDATION STRUCTURE
The rapid escalation of health care costs has resulted in the growth
and evolution of "managed care." Managed care was initiated by payers
and employers, and later gained support from governmental agencies. This
widespread support has shifted market power from physicians to health plans
due to their size, access to capital, relationships to buyers and ability
to manage risks
Medical practices, for the most part, are small businesses and the
physician-owners frequently lack the capital resources and business
expertise to operate efficiently and effectively. In addition, the small
size of most medical practices does not provide negotiating strength in
dealings with other entities in the medical delivery system, such as
hospitals, HMOs and other physician groups. Specifically, in dealing with
hospitals and insurance carriers, medical practices are at a disadvantage.
Hospitals and insurance carriers have large business staffs and sophisticated
information systems which are not available to individual practices.
Most small practices lack the business expertise and systems to analyze
reimbursement levels, trends and administrative costs. They typically sign
managed care contracts, regardless of reimbursement and conditions, for
fear of losing patients. Belonging to 20,30, or more HMO and PPO networks
without the expertise and information systems for-analysis can result in
actually losing money on several networks without knowing it.
In an effort to gain support against stronger hospitals and insurance
companies, many physicians have begun to join larger group practices.
In 1995, only 30.7% of physicians were in-groups with over 100 physicians,
and almost two-thirds of physicians were in-groups of 50 or less. Many
physicians and small physician groups are just beginning to realize the
benefits of consolidation and are seeking a way to fortify their position
and take advantage of the economies of scale offered by larger group
organizations
Changes in the medical delivery system and the financing of medical
services have reduced reimbursement for physicians while burdening
medical groups with additional and more complex administrative tasks.
These factors both decrease revenue and increase overhead expenses. Many
physicians have attempted to maintain their take-home, compensation by
increasing their working hours. While this was initially successful,
physicians have run out of hours and reached the limit of their physical
endurance.
Breakdown of Group Practices, By Size, 1995
Group Group Physician
Size Practices Positions
# of Groups % of Total # of Physicians % of Total
3-4 8,926 45.8% 30,941 14.7%
5-9 6,904 35.4% 42,930 20.4%
10-25 2,657 13.6% 38,913 18.5%
26-49 527 2.7% 18,063 8.6%
50-99 226 1.2% 15,193 7.2%
100+ 238 1.2% 64,770 30.7%
Total 19,478 100.0% 210,810 100.0%
Source: AMA, Medical Groups in the U.S., 1996 and JP Morgan
There is a simultaneous oversupply and shortage of physicians, depending
on location. Nationally, there is an oversupply of specialists, however,
there,is a shortage of specialists is rural areas. Specifically in the
state of California and Rocky Mountain region, many rural communities have
no support or must rely on visiting specialists who have regular office
time in rural communities on a weekly or monthly basis. At the same time,
and to some extent because of the lack of specialists, rural areas have a
difficult time recruiting and retaining primary care physicians. Rural
primary care physicians often require special training to treat a wider
variety of body systems than they were originally trained to treat. They
often do extensive surgery, obstetrics and emergency medicine.
Enlarging medical practices to mitigate some of the limitations of size
through merger, acquisition or internal growth has limits. Practices of the
size required to gain efficiency, effectiveness; and strength are often in
violation of federal antitrust regulations. In many locations, the community
is not large enough to support a practice which is large enough to realize
economies of scale. This is especially true in rural areas.
Increasingly, these physicians are turning away from affiliations with the
two traditional integrators of networks - hospitals and insurers - and
looking for both capital and management expertise from for-profit practice
management firms. The role of hospitals is also changing as over capacity
results in consolidations and closures.
Despite all the changes in the health care, delivery system, physicians
still occupy the central role in health care because they deliver the care.
Since physicians are the deliverers of care, improvements in quality and
cost must be accomplished by changing physician behavior. Due to the fact
that physicians control an estimated 85% of health care, spending, efforts
at reducing the cost of health care must be fundamentally driven by
physicians.
Affiliation Strategy
Central to the new dynamic delivery model of management services is an
economic alignment between Capnet IPA and :
Physicians and providers of healthcare services as partners and shareholders
who have demonstrated established practice patterns resulting in optimal
utilization of healthcare services and disciplined cost control.
Tertiary care and Community hospitals with shared interest in managing
risk contracts in a highly capitated managed care environment.
Health plans and third party payors whose members are assigned to Capnet
IPA for provision of healthcare services.
Capnet IPA had a revenue of $627,683 as of December 31st, 1998. The revenue
for the First Quarter of 1999 is $252,223.09, with a projected annualized
revenue for 1999 of $1.5 Million.
Sales And Marketing
The Company markets Capnet.com through its internal sales force and its
strategic distribution relationships which typically couple the Company's
use of the strategic partner's services or content with the strategic
partner's obligation to market Capnet.com to its customer or client base.
The Company's distribution partners, which target different healthcare
sectors, combined with the Company's internal sales force, provide the
Company with sales and marketing professionals who are experienced in
the healthcare industry. The Company's and its strategic partners' direct
marketing efforts, which may include promotional offers, direct mail and
telemarketing initiatives, emphasize the ease of use and adoption, attractive
pricing and integrated solution offered by Capnet.com. The Company has
entered into, and intends to continue to enter into, strategic alliances
with parties who have established customer or client bases that have an
anticipated need for the services provided through Capnet.com. In connection
with certain of these strategic alliances, such as the alliances with, DRL
Network, Allscript Pharmaceuticals, Pam Pacific and Associates, DTS Wireless,
MDS Technologies, Microsoft Corporation, Link-Exchange, Ingram Micro, Sager
Midern, etc., the Company has agreed to bear the cost of certain subsidized
promotional offers, to compensate such partners for each subscriber that
Capnet.com obtains through their marketing efforts or to make guaranteed
payments to such partners. The Company intends to continue to enter into
additional promotional arrangements in the future.
The Company is currently engaged in a significant branding and promotional
campaign to increase awareness of the Capnet.com brand.
The Company is employing a combination of online advertising and other
marketing and promotional efforts aimed at defining a desirable online
destination for healthcare professionals and consumers, attracting new
subscribers and consumers, increasing traffic on its Web site and developing
additional revenue opportunities. The Company also promotes Web-based services
through traditional print media, including trade journals, newspapers and
magazines targeted at healthcare professionals, and participates in tradeshows,
conferences and speaking engagements as part of its ongoing public relations
program. The Company plans to continue to allocate significant resources to
marketing Capnet.com.
For its Electronic Drugstore, the company intends to market its products
services through an internal direct sales force and intend to pursue
strategic relationships with key suppliers of physician practice management
systems, physician-focused Internet portals and managed care organizations
to complement our internal efforts.
Since the participating physicians are part of Capnet IPA, we target sites
with a large number of high-volume prescribing physicians in states where
in-office dispensing is well-established or where many physicians bear
financial risk for pharmaceutical costs. We will use a variety of tools
to attract prospective customers, including editorials, articles and
advertisements in trade journals, as well as executive seminars, exhibits
at selected trade shows and other direct marketing techniques.
TECHNOLOGICAL COMPONENT
A critical element in the merger of talent and capacity of practitioners
is the use of computerized medical records. Electronic networking with a
high level of security allows appropriate records to be shared among member
practitioners. This system provides rural practitioners with support from
a broad scope of specialty talent that is responsive to patient's needs,
fosters the practice of conservative medicine and provides care that is
convenient for patients at an affordable cost.
Furthermore, CAPNET.com, was born out of the need to develop technologies
to assist healthcare practitioners to reduce overhead, while simultaneously
increasing staff efficiency. The healthcare industry is currently under-going
a tremendous amount of changes. Physicians and other healthcare organizations
keep trying to manage change, but we always manage the things we don't like.
It's time that healthcare providers truly make change their best friend,
because change is going to continue to accelerate because of technology.
To make rapid change our friend, we need to know what will happen before
it happens. This is why it is critical to understand the future of technology.
By understanding the future, you will be able to surpass the competition.
Anthony C. Dike, MD, who is the founder and pioneer of the CAPNET.com
conceptual model, believes that "The next 10 years are already Invented-and
the Tools are here and the Challenge is to use the Technology in New ways,
and not the Old ways".
The whole idea in developing CAPNET.com programs and network is to enable
the participating providers and service organizations embrace the technologies
they want - one or all the components listed above, at their own self learning
pace. To quote Samuel Johnson, "Men may be convinced, but they cannot be
pleased against their will".
TELECOMMUNICATIONS COMPONENT
Telemedicine Network
Administration
Clinical
Data Internet
Repository Hosp A Hosp B Acces
Hosp C
Out-patient Surgi-Center
Clinic
Communication
Network Home Health
Physician
Physician's Payors
Home Supplies Laboratories
Data Master
Security Patient
Optical Internet Index
Disk Access
Storage
Opportunity for Connectivity
Already, the mobile work force numbers 45 million, and
nearly 40% of all employees. By the year 2000, sales of
wireless data will reach %12 billion annually, and the
market for portable devices will climb to 15 million units.
Mobile wireless computing in healthcare continues to draw
significant attention. There are several examples of wireless
mobile computing in hospitals across the country. Physicians as
a professional group, due to their job requirement, constitute the
largest consumer of mobile telecommunication services. Almost all
actively practicing physician has wireless pager and some sort of
message center.
However, there are very few large implementations of this technology
in ambulatory care setting. As compared with home and acute care,
ambulatory care has several significant challenges associated with it.
This includes staff tolerance for technological complexity, clinician
acceptance and the ability to handle years of existing paper-based
medical records.
CAPNET.com has arranged with CGI Communications Services, Inc., which
has a strategic partnership relationship with the following leaders in
the area of telecommunication i.e. US Robotics -Mobile Communication
Division, (d/b/a Megahertz Inc.), AT&T Easylink Services, Microsoft
Corporation, Ram Mobile Data, and DTS Wireless Services, Inc., to
provide participating healthcare providers an effective communication
tools to help them manage their patients more effectively.
Each participating provider will have access to a full range of
Telecommunications services, including "After Hours" Medical Emergency
Services Coverage.
Furthermore, each participating healthcare provider will have option
to sign-up for a turn-key wireless telecommunication services whereby
they are provided with the following items on a rental/lease terms:
* A Hand-Held Computer e.g. HP Palmtop PC.
* A wireless modem e.g. US Robotics (Megahertz Allpoints Wireless PC Card)
* Access to Mobitex Network, the International de facto standard for wireless
communications e.g Ram Mobile Data Network.
* A Subscription to wireless service which includes a client software, Internet
Address, personal 800 number for 24hour message center, personal 888 fax
number for receiving fares, registration of fax coversheet, letterhead, and
signature, and 5 pages of stored attachments. (with option to purchase
additional stored fax attachment service, accessories e.t.c.).e.g. DTS
Wireless Services, Inc.
* Internet Browser e.g. Microsoft Internet Explorer Version 4.X or
Netscape Communicator Version 4.X.
This design will alert on-call personnel to priority messages in a timely
and cost effective manner. The Telecommunications package includes
customizable mailbox system, remote paging, and E-mail. Additional
optional mail boxes may be added to accommodate medical groups or staff.
The CAPNET.com Gateways will make it possible to provide inexpensive,
efficient and engaging real time linkages across the entire healthcare
Community. Many companies, including integrated delivery systems,
pharmaceutical and managed care organizations, can take advantage of
new connectivity tools as shown in the schematic drawing below:
Telecommunications Benefits
* Instant and comprehensive dissemination of timely, provider specific
information such as health plan costs and benefits, physician site
locations and biographical profiles, and urgent care advice from
tele-nurses.
* Access to clinical studies and consumer health information contained
in both public and private data repositories.
* Access to medical records, test results, authorization rules and care
guidelines stored on the company or off-site data bases.
* Member Health-Risk and Needs Assessment information gathering by robotics
voice response outbound telephone technology
* E-Mail messaging between providers across the care continuum and directly
into patients home.
* A Communications forum or chat-line for physicians wishing to share ideas
with colleagues, as well as patients with chronic diseases, wishing to
communicate with other patients about common conditions, experiences and
treatment options.
* Enrollment for self-help training programs, on-line teleconferences and
participation in regularly scheduled healthcare seminars via a tele-medicine
video conferencing, telephone or Internet Connectivity.
* Secure areas of any communication channel can be used to disseminate
information to selected audiences, e.g. clinical updates, management
reports, and marketing promotions.
* Cost effective connectivity to private WANs, organizational Intranet,
and other geographical remote care sites or other providers anywhere in
the world.
* Access to Capnet.com Electronic Drugstore for product ordering and
utilization.
* Efficient addressing that enables the end-user to transmit data quickly
and mote efficiently as compared to data-over-cellular and data-over-trunk
line.
* Assured Receipt: Store and forward capability, which allows messages that
cannot be delivered immediately to be stored in the network. Messages are
then forwarded to the mobile unit at the first available opportunity.
* Preview e-mail headers before downloading so as to help the provider select
which messages to read, hold, discard or forward. The physician then manages
wireless costs by paying only for those e-mail downloaded.
* Ability to reply to and send e-mail to anyone in the world with an Internet
address.
* Ability to receive phone messages called into the healthcare providers
personal 800 number. Calls could be re-directed to an operator-assisted
24 hour message center for wireless delivery i.e. Voice-Text or Text-Voice
Messaging service.
* Ability to send messages to fax machines, most Alpha numeric pagers and even
telephones.
* Ability to fax documents by using a personalized pre-stored letterhead,
personal signature and even the physician's most used fax attachments.
* Global dial-in access, which allows the healthcare provider to download or
send e-mail, fax, and phone messages, no matter where they are in the world.
* Access to the WWW and download pages in text mode from a favorite site.
* No third party misinterpretation because messages are received with complete
accuracy
* Improved response time
* Savings of up to 40% over existing service Physicians phone answered on the
first ring
* Each incoming message is time and date stamped
* Callers never placed on hold
* Physicians immediately notified of an emergency by pager
* Access to Capnet.com Disease Management Information System, for database
access, e.g. patient medical record, laboratory data and download.
Other Benefits To Participating Physician
1. CAPNET will pursue the application and continuous enhancement of
technology to support efficient and effective clinical and business
operations. This includes "bottom up" and "top down" analysis so as
not to unduly interfere with current clinical and business operations.
II. Wherever practical, local area networks in practices and administrative
offices will be connected to CAPNET's wide area network to eliminate
duplication and allow efficient interchange of information at a minimal
cost.
Ill. CAPNET will develop a proper mix of physician specialties, mid-level
providers, and medical facilities in order to insure the success
of the above strategy.
IV. CAPNET will develop a business approach to contracting with HMOs,
PPOs and other managed care carriers and entities. Contracts among
the various elements of the health care delivery business should be
fair to all parties, provide for reasonable administration and allow
a fair profit.
CAPNET plans to use the business approach to assess contracting
opportunities, negotiate mutually beneficial agreements and then,
monitor the cost and profit of each agreement.
V CAPNET will conduct periodic operations analyses/reviews to evaluate
practice operations in the context of the patient, practitioners, staff,
payer, community and business environment in which the practice operates.
The result of the analyses are specific recommendations for improvement
along with a plan for implementation.
VI. CAPNET will provide expertise to member practices in the area of
clinical and business operations. Expertise is provided through standard
operational techniques and procedures as well as through an internal and
contracted staff with expertise in a wide variety of fields. Support
includes:
A. Clinical operations
B. Medical records
C. High-tech systems (such as computers, phone systems and electronic
data inter change with hospitals and laboratories)
D. Billing and collections
E. Personnel/payroll systems
F. Financial operations and analysis
G. Legal
H. Marketing
I. Joint purchasing of medical and business supplies and equipment
J. Insurance purchasing - malpractice and business insurance
K. Development and implementation of clinical protocol
L. Development and negotiation of risk contracts
V1I. CAPNET will provide reporting standards that allow CAPNET management
to monitor and analyze member practices. Practices which are out of
compliance will be analyzed in more detail by support staff. Practice
guidelines are the basis for analysis of each member group to determine
what, if any, improvements are clinically and operationally warranted
considering the local environment. Guidelines include:
A. Staffing costs
B. Profit margin
C. Overhead costs
D. Administration costs
E. Accounts receivable
F. Cost of providing clinical services, medical supplies and equipment
G. Industry operating ratios
VIII. CAPNET will select providers based on credentials and ethical
standards. A system of screening potential members is used to assure
that problem practitioners are not invited to join. Providers will be
selected based on the following criteria:
A. Exceptional clinical standards
B. High ethical standards
C. A demonstrated history of providing quality, cost-
effective medical care
IX. CAPNET will create compensation formulas which are designed to attract
and retain good practitioners and maintain long-term harmony and
productivity. A sound compensation formula can help avoid many of the
problems in a medical "group." Practitioner incentives are designed to
engage the practitioners in the pursuit of CAPNET's mission.
X. CAPNET will use member meetings as a tool to nourish the benefits of
synergy:
A. State councils meet monthly, board of directors quarterly and the
corporation will hold an annual meeting.
B. Within the organization, groups such as office managers and financial
staff meet periodically.
X1. CAPNET will integrate mid-level practitioners to allow and foster the
efficient, effective delivery of care. Mid-level practitioners provides
a balance of care givers at all levels. For example, the membership
consists of MDs, DOs, ODs, LCSs, DPMs, etc.
Sales And Marketing
The Company markets Capnet.com through its internal sales force and its
strategic distribution relationships which typically couple the Company's
use of the strategic partner's services or content with the strategic
partner's obligation to market Capnet.com to its customer or client base.
The Company's distribution partners, which target different healthcare sectors,
combined with the Company's internal sales force, provide the Company with
sales and marketing professionals who are experienced in the healthcare
industry. The Company's and its strategic partners' direct marketing efforts,
which may include promotional offers, direct mail and telemarketing
initiatives, emphasize the ease of use and adoption, attractive pricing
and integrated solution offered by Capnet.com. The Company has entered
into, and intends to continue to enter into, strategic alliances with
parties who have established customer or client bases that have an
anticipated need for the services provided through Capnet.com.
In connection with certain of these strategic
alliances, such as the alliances with, DRL Network, Allscript Pharmaceuticals,
Pam Pacific and Associates, DTS Wireless, MDS Technologies, Microsoft
Corporation, Link-Exchange, Ingram Micro, Sager Midern, etc., the Company
has agreed to bear the cost of certain subsidized promotional offers, to
compensate such partners for each subscriber that Capnet.com obtains through
their marketing efforts or to make guaranteed payments to such partners.
The Company intends to continue to enter into additional promotional
arrangements in the future.
The Company is currently engaged in a significant branding and promotional
campaign to increase awareness of the Capnet.com brand.
The Company is employing a combination of online advertising and other
marketing and promotional efforts aimed at defining a desirable online
destination for healthcare professionals and consumers, attracting new
subscribers and consumers, increasing traffic on its Web site and developing
additional revenue opportunities. The Company also promotes Web-based services
through traditional print media, including trade journals, newspapers and
magazines targeted at healthcare professionals, and participates in tradeshows,
conferences and speaking engagements as part of its ongoing public relations
program. The Company plans to continue to allocate significant resources to
marketing Capnet.com.
For its Electronic Drugstore, the company intends to market its products
services through an internal direct sales force and intend to pursue strategic
relationships with key suppliers of physician practice management systems,
physician-focused Internet portals and managed care organizations to
complement our internal efforts.
Since the participating physicians are part of Capnet IPA, We target sites
with a large number of high-volume prescribing physicians in states where
in-office dispensing is well-established or where many physicians bear
financial risk for pharmaceutical costs. We will use a variety of tools
to attract prospective customers, including editorials, articles and
advertisements in trade journals, as well as executive seminars, exhibits
at selected trade shows and other direct marketing techniques.
Competition
The Company anticipates competing directly and indirectly for subscribers,
consumers, content and service providers, advertisers and acquisition
candidates with the following categories of companies: (i) online services
or Web sites targeted to the healthcare industry generally; (ii) publishers
and distributors of traditional off-line media, including those targeted to
healthcare professionals, many of which have established or may establish
Web sites; (iii) general purpose consumer online services which provide
access to healthcare-related content and services; (iv) public sector
and non-profit Web sites that provide healthcare information without
advertising or commercial sponsorships; (v) vendors of healthcare
information, products and services distributed through other means,
including direct sales, mail and fax messaging; and (vi) Web search and
retrieval services and other high-traffic Web sites. The Company does not
have the contractual right to prevent its subscribers, other than physician
members of Capnet IPA who are under obligation to utilizes the Company's
Website and services for information processing and medical transaction
and certain promotional plans, from terminating their service or changing
to a competing network. The Company believes that the principal competitive
factors in attracting and retaining healthcare subscribers are the depth,
breadth and timeliness of services and content, the ability to offer
compelling content and services and brand recognition.
Other important factors in attracting and retaining healthcare professionals
include ease of use, quality of service and cost. The Company believes that
the principal competitive factors that will attract advertisers include price,
the number of healthcare professionals who subscribe to Capnet.com, the
aggregate traffic on Capnet.com's website, the demographics of the Company's
subscriber and user bases and the creative implementation of advertisement
placements.
For the electronic Drugstore, the company believes that there are no
competitors in medication management that offer a comprehensive solution
with ease of use, accessibility, information content and value proposition
comparable to ours. However, several organizations offer components that
overlap with certain components of our solutions and may become increasingly
competitive with us in the future.
We face competition from several types of organizations, including the
following:
* physician practice management systems suppliers;
* electronic medical records providers;
* healthcare electronic data interchange providers;
* point-of-care dispensing providers;
* Internet pharmacies; and
* Internet information providers.
Exhibit C
Proforma Consolidated Financial Information of Meridian
Holdings, Inc. Post-Acquisition.
Meridian Holdings, Inc.
Pro Forma Consolidated Balance Sheet (Unaudited)
The unaudited pro forma financial information is presented as if the
merger of Meridian Holdings, Inc. and Capnet Group of Companies had occurred
on March 31, 1999. The unaudited Pro Forma Consolidated Balance Sheet and
Statement of Operations should be read in conjunction with the Company's
consolidated financial statements and the accompanying notes included in
its Form 10SB filed for the fiscal year ended December 31, 1998.
The unaudited Pro Forma Consolidated Balance Sheet and Statement of
Operations is prepared for illustrative purposes and is not necessarily
indicative of what the actual financial position would have been at
March 31, 1999, nor does it purport to represent the future financial
position of the Company.
Meridian Holdings, Inc.
Pro-Forma Balance Sheet (Unaudited)
March 31, 1999
Assets
Current Assets
Cash $ 38,108
Accounts Receivable 471,208
Inventories (Note 2) 10,509
Prepaid Expenses & Other Assets -
519,825
Property, Plant, and Equipment
Net of Accumulated Depreciation (Note 1) 24,067
Intangible and Other Assets
Other Investments 500
Organization Costs (Note 1) 17,969
18,469
Total Assets $ 562,360
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $ 95,509
Payroll Taxes Payable -
Business Line of Credit 37,390
132,899
Non-current Liabilibies
Loans Payable 17,248
Stockholders' Equity (Note 2)
Retained Earnings 72,862
Common Stock (50,000,000 shares
authorized, par value $0.001,
25,957,500 shares issued and
outstanding) 25,958
Additional Paid in Capital 313,394
Total Stockholders' Equity 412,213
Total Liabilities and Stockholders' Equity $ 562,360
Meridian Holdings, Inc.
Pro-Forma Statement of Operations (Unaudited)
Quarter Ended March 31, 1999
Capnet Group Meridian Pro Forma
of Companies Holdings, Inc. Combined
Revenues $ 268,191 $ 268,191
Operating Expenses 234,193 234,193
Other Income 137 137
Income from Operations 34,134 34,134
Provision for Income Taxes 6,827 6,827
Net Income $ 27,307 $ 27,307
Weighted Average Shares
Outstanding 1,000 957,500 25,957,500
Basic Earnings per Share $ 27.31 Nil $ 0.001
Meridian Holdings, Inc.
Statement of Cash Flows (Unaudited)
Quarter Ended March 31, 1999
Cash Flows from Operating Activities
Net Loss $ 27,307
Adjustments to reconcile net loss to net
cash provided by operating activities:
Changes in assets and liabilities:
Decrease in accounts receivable 17,255
Increase in accounts payable (63,585)
Increase in revolving credit line -
Increase in payroll taxes payable (5,332)
Net cash used by operating activities (24,355)
Cash-flow from financing activities
Proceeds from the sale of stock 10,450
Net cash provided by financing activities 10,450
Cash Flows from Investing Activities
Acquisition of fixed assets (11,231)
Increase in organization costs (7,089)
Cash Used by Investing Activities (18,319)
Net increase in cash (32,224)
Cash at beginning of period 70,332
Cash Balance December 31, 1998 $ 38,108
Other Non-cash Transactions
Capnet Group of Companies were acquired for 25,000,000 additional
shares, and shareholder loans in the amount of $130,141 were also
converted to additional paid in capital.
EXHIBIT D
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 25th day
of May, 1999 by and between Meridian Holdings, Inc. ("Employer" or
the "Company") and Anthony C. Dike,("Employee").
RECITALS
WHEREAS, Employer desires to hire and employ Employee as
President and CEO of Employer, or in such other position
with Employer or an affiliate corporation of Employer as
Employer may from time-to-time decide, as provided herein;
and
WHEREAS, Employee desires to be employed by Employer as
provided herein.
NOW, THEREFORE, in consideration of the mutual covenants
and agreements contained herein, the parties agree as follows:
1. Employment.
The Company agrees to employ Employee and Employee hereby agrees to be
employed by the Company or by such of its affiliate corporations as
determined by the Company, on a full-time basis, for the period and upon
the terms and conditions hereinafter set forth.
2. Capacity and Duties.
Employee will be employed as President & CEO of Employer or such other
position as Employer shall decide. Employee will also be elected to the
Board of Director of the Employer as the Chairman of the Board, subject
to the approval of the Board of Directors of the Employer. Employee
will make himself available to provide to Meridian Holdings, Inc. such
services as such entity shall request of him. During his employment,
Employee shall perform the duties and bear the responsibilities
commensurate with his position and shall serve the Employer faithfully
and to the best of his ability. Employee shall devote 100% of his
working time to carrying out his obligations hereunder.
3. Compensation and Benefits.
3.1 The Company will pay Employee during the Term of this
Agreement an annual base salary, payable in accordance
with customary Company procedures. The annual base salary
will be One hundred and forty-four Thousand and 00/100
Dollars ($144,000.00).
3.2 In addition to the base salary, Employee shall be eligible
for an annual performance bonus in an exact amount to be
determined by the Company. The annual bonus will be based
on objectives and goals set for the Company (the annual
bonus is expected to be approximately fifty percent (50%)
of annual base salary if all objectives and goals are met).
3.3 In addition to salary and bonus payments as provided above,
the Company will provide Employee, during the Term of this
Agreement, with the benefits of such insurance plans,
hospitalization plans, stock plans, retirement plans and
other employee fringe benefits as shall be generally provided
to senior executive officers of the Company (including sick
leave and four (4) weeks vacation time)and for which Employee
may be eligible under the terms and conditionsthereof.
3.4 Throughout the Term of this Agreement, the Company shall
provide Employee a monthly car allowance in the amount of
One Thousand and 00/100 Dollars($1,000.00). The Company
will gross up Employee's income to offset the tax impact of
the car allowance.
3.5 Throughout the Term of this Agreement, the Company will
reimburse Employee for all reasonable out-of-pocket expenses
incurred by Employee in connection with the business of the
Company and the performance of his duties under this Agreement,
upon presentation to the Company by Employee of an itemized
accounting of such expenses with reasonable supporting data.
3.6 The Company will provide to Employee from time to time stock
options under Meridian Holdings, Inc.'s Incentive Stock Option
Plan as approved by the board of directors.
4. Term.
The initial term of this Agreement shall be for one (1) year, commencing
on May 10th, 1999 ("Initial Term"). Upon completion of the first (12)
twelve months of the Term, this Agreement will automatically renew from
month to month such that there will always be twelve (12) months remaining
in the Term, unless and until either party shall give at least (30) thirty
days notice to the other of his or its intention to terminate this Agreement.
The applicable provisions of Section 6, 7, 8, 9 and 10 shall remain in full
force and effect as provided and for the time periods specified in such
Sections notwithstanding the termination of this Agreement; all other
obligations of either party to the other under this Agreement shall
terminate at the end of the Term.
5. Termination.
5.1 If Employee dies during the Term of this Agreement, the Company
shall pay his estate the compensation that would otherwise be
payable to him for the remaining term of this Agreement.
5.2 If, during the Term of this Agreement, Employee is prevented
from performing his duties by reason of illness or incapacity
for one hundred forty (140) days in any one hundred eighty (180)
day period, the Company may terminate this Agreement, upon thirty
(30) days prior notice thereof to Employee or his duly appointed
legal representative.
5.3 The Company may terminate this Agreement at any time during the
Term upon the happening of any of the following events:
5.3.1 The sale by the Company of substantially all of its
assets to a single purchaser or associated group of
purchasers who are not affiliates of the Company.
5.3.2 The sale, exchange or other disposition in one or
more related transactions resulting in a change of
ownership of fifty percent (50%) or more of the
outstanding voting stock of the Company to or with
a person, firm or corporation not then an affiliate
of the Company.
5.3.3 The merger or consolidation of the Company in a
transaction not involving an affiliate of the Company
in which the shareholders of the Company receive less
than fifty percent (50%) of the outstanding voting stock
of the new continuing corporation.
5.3.4 A bona fide decision by the Company to terminate its
business and liquidate its assets (but only if such
liquidation is not part of a plan to carry on the
Company's business through its shareholders).For the
purpose of this Agreement, the term "affiliate" means
a person, firm or corporation that directly or
indirectly, through one or more intermediaries,
controls, is controlled by, or is under common
control with the Company.
5.4 The Company may terminate this Agreement immediately for gross
negligence or intentional misconduct by the Employee.
5.5 The Company may terminate this Agreement immediately upon the
commission by Employee of theft, fraud, embezzlement or any
other felony or upon a material breach by Employee of any
obligation or covenant created by or under this Agreement.
5.6 Employee may terminate this Agreement upon at least thirty (30)
days prior notice to the Company upon the happening of any of the
events described in Section 5.3 above.
5.7 If this Agreement is terminated by the Company under Section 4 or
Section 5.3 or by Employee under Section 5.6 during the Term hereof,
the Company will pay Employee a Termination Fee equal to Employee's
then current monthly base salary multiplied by twelve (12) plus an
amount equivalent to twelve (12) months of COBRA premiums. Such
Termination Fee will be paid in twelve (12) equal installments
with the exception of the COBRA equivalent payment which will
be paid in a lump sum.
6. Covenant Not to Compete.
6.1 During the Term of this Agreement (or, if longer, during the term
of Employee's employment with the Company or any of its affiliates)
and for a period of twelve (12) months after termination of this
Agreement (or, if later, termination of Employee's employment with
the Company or any of its affiliates), Employee shall not, directly
or indirectly, own, mange, operate, control, be employed by, or
participate in the ownership, management, operation or control of a
business that is engaged in the same business as the Company within
any area or at any location constituting, during the term of
Employee's employment and/or at the time Employee's employment
is terminated, a Relevant Area. For the purposes of this Section 6,
including all subsections of this Section 6, the business in which
the Company is engaged is providing Internet Related services and
all other services the Company provides during the term of
Employee's employment ("Services"). The "Relevant Area" shall be
defined for the purposes of this Agreement as any area located within,
or within fifty (50) miles of, the legal boundaries or limits of any
city within which the Company or any affiliate thereof is providing
Services, or in which the Company has publicly announced or
privately disclosed to Employee that it plans to provide Services.
6.2 During the Term of this Agreement (or, if longer, during the term
of Employee's employment with the Company or any of its affiliates)
and for a period of twelve (12) months after termination of this
Agreement (or, if later, termination of Employee's employment with
the Company or any of its affiliates), Employee shall not (i)
directly or indirectly cause or attempt to cause any employee
of the Company or any of its affiliates to leave the employ of
the Company or any affiliate, (ii) in any way interfere with
the relationship between the Company and any employee or
between an affiliate and any employee of the affiliate, or
(iii) interfere or attempt to interfere with any transaction
in which the Company or any of its affiliates was involved
during the Term of this Agreement or Employee's employment,
whichever is longer.
6.3 Employee agrees that, because of the nature and sensitivity of
the information to which he will be privy and because of the
nature and scope of the Company's business, the restrictions
contained in this Section 6 are fair and reasonable.
7. Confidential Information:
7.1 The relationship between the Company and the Employee is one
of confidence and trust. This relationship and the rights
granted and duties imposed by this Section shall continue
until a date ten (10) years from the date Employee's employment
is terminated.
7.2 As used in this Agreement (i) "Confidential Information" means
information disclosed to or acquired by Employee about the
Company's plans, products, processes and services including
the Services and any Relevant Area, including information
relating to research, development, inventions, manufacturing,
purchasing, accounting, engineering, marketing, merchandising,
selling, pricing and tariffed or contractual terms, customer
lists and prospect lists or other market information, with
respect to any of the Company's then current business activities;
and (ii) "Inventions" means any inventions, discoveries, concepts
and ideas, whether patentable or not, including, without limitation,
processes, methods, formulas, and techniques (as well as related
improvements and knowledge) that are based on or related to
Confidential Information, that pertain in any manner to the
Company's then currently used technology, expertise or business
and that are made or conceived by Employee, either solely or
jointly with others, and while employed by the Company or within
six (6) months thereafter, whether or not made or conceived
during working hours or with the use of the Company's facilities,
materials or personnel.
7.3 Employee agrees that he shall at no time during the Term of his
employment or at any time thereafter disclose any Confidential
Information or component thereof to any person, firm or corporation
to any extent or for any reason or purpose or use any Confidential
Information or component thereof for any purpose other than the
conduct of the Company's business.
7.4 Any Confidential Information or component thereof that is directly
or indirectly originated, developed or perfected to any degree by
Employee during the Term of this employment by the Company shall
be and remain the sole property of the Company and shall be deemed
trade secrets of the Company.
7.5 Upon termination of Employee's employment pursuant to any of the
provisions herein, Employee or his legal representative shall
deliver to the Company all originals and all duplicates and/or
copies of all documents, records, notebooks, and similar
repositories of or containing Confidential Information then in
his possession, whether prepared by him or not.
7.6 Employee agrees that the covenants and agreements contained in
this Section 7 are fair and reasonable and that no waiver or
modification of this Section or any covenant or condition set
forth herein shall be valid unless set forth in writing and duly
executed by the parties hereto. Employee agrees to execute such
separate and further confidentiality agreements embodying the
provisions of this Section 7 as the Company may reasonably
request.
8. Injunctive Relief.
Upon a material breach or threatened material breach by Employee of
any of the provisions of Sections 6 and 7 of this Agreement, the Company
shall be entitled to an injunction restraining Employee from such breach.
Nothing herein shall be construed as prohibiting the Company from pursuing
any other remedies for such breach or threatened breach, including recovery
of damages from Employee.
9. No Waiver.
A waiver by the Company of a breach of any provision of this Agreement
by Employee shall not operate or be construed as a waiver of any subsequent
or other breach by Employee.
10. Severability.
It is the desire and intent of the parties that the provisions of this
Agreement shall be enforced to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any particular provision or portion of this
Agreement shall be adjudicated to be invalid or unenforceable, this
Agreement shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only
with respect to the operation of such Section in the particular jurisdiction
in which such adjudication is made.
11. Notices.
All communications, requests, consents and other notices provided for
in this Agreement shall be in writing and shall be deemed given if mailed
by first class mail, postage prepaid, certified or return receipt requested
to the last known address of the recipient.
12. Governing Law.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of California.
13. Assignment.
The Company may assign its rights and obligations under this Agreement
to any affiliate of the Company or, subject to the provisions of Section 5.3,
to any acquirer of substantially all of the business of the Company, and all
covenants and agreements hereunder shall inure to the benefit of and be
enforceable by or against any such assignee. Neither this Agreement nor any
rights or duties hereunder may be assigned or delegated by Employee.
14. Amendments.
No provision of this Agreement shall be altered, amended, revoked or
waived except by an instrument in writing, signed by each party to this
Agreement.
15. Binding Effect.
Except as otherwise provided herein, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective legal representatives, heirs, successors and assigns.
16. Execution in Counterparts.
This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
17. Entire Agreement.
This Agreement sets forth the entire agreement and understanding
of the parties and supersedes all prior understandings, agreements or
representations by or between the parties, whether written or oral,
which relate in any way to the subject matter hereof,
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
/s/ Anthony C. Dike,
- ----------------------
Employee
Meridian Holdings Inc.
By: /s/ _______________
Board of Directors
EXHIBIT E
FORM OF PRESS RELEASE
FOR IMMEDIATE RELEASE
For Investor Inquiries: For Press Inquiries:
Anthony C. Dike Marlin Hines
Meridian Holdings, Inc. Meridian Holdings, Inc.
213-627-8878 213-627-8521
MERIDIAN HOLDINGS, INC., ACQUIRES CAPNET GROUP OF COMPANIES
New acquisitions will increase revenue Base to include Premier Online Auction
Site, Internet Portal, Healthcare Transaction Management, and Hi-Tech Store.
Los Angeles, MAY 25, 1999 -- Meridian Holdings, Inc. (OTC: MEHO) an emerging
Internet Electronic Commerce Company today announced the acquisition of Capnet
Group of Companies. Capnet Group of Companies is a roll-up of successful
Internet related business entities which includes: 1) Bidfair.com-Internet
Auction Website; 2) Bolingo.com-Online Hi Tech Store; 3)Capnet.com-Internet
Portal which includes-i)Capnet Gateway Online Services; ii) Capnet Electronic
Drug Store; iii) Capnet Document Archiving; iv) Capnet News Service;
v) Capnet IPA.
These acquisitions expand Meridian Holding's client and Internet Electronic
Commerce Offering. The acquisition has been structured as a tax free exchange
of stock for assets, therefore, the differences between the recognized fair
values of acquired assets, including tangible assets, and their historical
tax bases are not deductible for tax purposes.
ACQUISITION OF CAPNET.COM AND RELATED ENTITIES
Capnet Group of Companies is a roll-up of successful Internet related
business entities which will be merged into Meridian Holdings, Inc.,
a publicly non-trading SEC full reporting company. These business entities
includes:
1. Bidfair.com
2. Bolingo.com
3. Capnet.com
a. Capnet Gateway Online Services
b. Capnet Electronic Drug Store.
c. Capnet Document Archiving.
d. Capnet News Service
4. Capnet.IPA
1. Bidfair.com
"Bidfair.com" (http://www.bidfair.com) is an Internet premier person to
person auction site, a Web-based community in which buyers and sellers
are brought together in an efficient and entertaining auction format to
buy and sell personal items such as antiques, coins, collectibles,
computers, memorabilia, stamps and toys. The Bidfair.com service permits
sellers to list items for sale, buyers to bid on items of interest and all
Bidfair.com users to browse through listed items in a fully-automated,
topically-arranged, intuitive and easy-to-use online service that is
available 24 hours a day, seven days a week.
By leveraging the interactive nature of the Internet, Bidfair.com facilitates
a sense of community through direct buyer and seller communication, thereby
enabling the interaction between individuals with mutual interests. In
addition, this community orientation, facilitation of direct buyer and
seller communication and efficient access to information on a particular
buyer or seller's trading history can help alleviate the risks of anonymous
trading. As a result, there exists a significant market opportunity for an
Internet-based centralized trading place that applies the unique attributes
of the Internet to facilitate person-to-person trading.
Buying From Bidfair.com Auction Website
By featuring different auction styles, the Company encourage participants
to not only compete for items, but to have some fun.
If you are bidding in a Winning Bid auction (a simple bidding war between
participants), the highest bid wins. The fewer the items available, the
fiercer the competition.
In a Clear Price auction, the wise participants win by underbidding the big
spenders. In multiple-item auctions, every winning bidder gets the items for
the lowest winning bid.
In a Second Price auction, winning bidders get the item for an amount equal
to the highest losing bid plus the bid increment, or the lowest winning bid,
whichever is less.
At no point during the process does the Company take possession of either
the item being sold or the buyer's payment for the item.
Selling on Bidfair.com Auction Website
A seller who registers with Bidfair.com can list a product for auction by
completing a short online form. The seller selects a minimum price for
opening bids for the item and chooses whether the auction will last three,
five or seven days. Additionally, a seller may select a reserve price for
an item, which is the minimum price at which the seller is willing to sell
the item and is typically higher than the minimum price set for opening bids.
The reserve price is not disclosed to bidders. A seller can elect to sell
items in individual auctions or, if he or she has multiple identical items,
can elect to hold a "Dutch Auction." For example, an individual wishing to
sell 10 identical watches could hold 10 individual auctions or hold a Dutch
Auction in which the 10 highest bidders would each receive a watch and all
lower bids would be rejected. A seller may also specify that an auction
will be a private auction. With this format, bidders' e-mail addresses are
not disclosed on the item screen or bidding history screen. Sellers pay no
placement fee, and are charged a success fee that steps down from 4% to 1%
of the transaction value only if an auction is concluded with a successful
bid.
Completion of the Transaction
At the end of an auction period, if a bid exceeds the minimum price and, if
one is set, the reserve price, Bidfair.com automatically notifies the buyer
and seller via email and the buyer and seller can then consummate the
transaction independently of Bidfair.com. At the time of the email
notification, Bidfair.com charges the seller a success fee equal to 4%
of the first $20 of the purchase price, 2% of any purchase price between
$20 and $1,000 and 1% of any purchase price over $1,000. At no point during
the process does the Company take possession of either the item being sold
or the buyer's payment for the item. Rather, the buyer and seller must
independently arrange for the shipment of and payment for the item, with
the buyer typically paying for shipping.
Bidfair.com Business Model Success
Bidfair.com offers its clients an exciting online auction experience
with buying, selling, and trading their wares online via the Internet.
Our online auction site offers you the chance to buy virtually any
tradable items at strikingly low prices. The Company allows its buyers
and sellers to bypass traditionally expensive, regionally-fragmented
intermediaries and transact business on a 24 hour a day, seven day a
week basis. Because Bidfair.com carries no inventory, sellers bypass costly
traditional intermediaries, thus allowing for a lower selling costs and
increasing the sellers' likelihood of finding buyers willing to pay his
or her target price. To list an item on Bidfair.com, sellers pay no placement
fee and are charged a success fee that steps down from 4% to 1% of the
transaction value only if an auction is concluded with a successful bid.
As a result, sellers for the first time can sell relatively inexpensive
items which had previously been prohibitively expensive to list through
most traditional trading forums. By allowing sellers to conveniently
reach a broad range of buyers, Bidfair.com also ameliorates the
time-consuming, logistical inconvenience of individual selling. Buyers
have access to a broad selection of items and avoid the need to pay
expensive markups or commissions to intermediaries. Buyers are not
charged for trading through Bidfair.com. The critical mass of items
listed on Bidfair.com provides a mutual benefit for buyers and sellers
to more effectively determine an appropriate price for an item.
Registration
While any visitor to Bidfair.com can browse through the Bidfair.com service
and view the items listed for auction, in order to bid for an item or to
list an item for sale, buyers and sellers must first register with
Bidfair.com. Users register by completing a short online form and thereafter
can immediately bid for an item or list an item for sale.
3. Bolingo.com
Bolingo.com, is a retailer of high technology products, which includes
computer accessories, hardware and software on the internet.
There are over 200,000 computer software programs and related hardware
available for sale through our major distributor. The Company intends
over time to expand its catalog into other information-based products,
such as new high technology product information dissemination, training
and promotion. Bolingo.com has virtually unlimited online shelf space and
offers customers a vast selection through an efficient search-and-retrieval
interface. Through its relationship with Ingram Micro, Inc., the world's
largest Wholesale Distributor of High-Technology Products, the Company offers
a catalog of more than 90,000 products, easy-to-use search and browse
features, e-mail services, personalized shopping services, Web-based credit
card payment and direct shipping to customers to any place in the world,
using Ingram Micros' World Wide Distribution Channels.
In the future, additional High Technology Products may be added to the
catalog through direct relationship with the manufacturers or product
major distributors worldwide. An on-line customer now could be able to browse
through the Company's catalog and select one or more items to purchase. When
a product is identified, the customer may then fill-out an order entry form
on-line. The information required to complete the order form would include
details of the items to be purchased and the credit card information for the
sale. From the completed order form, the credit card information may be
verified electronically via Cybercash an Internet based credit card
verification facility. Upon verification, the funds will be automatically
deposited into a trust account maintained at Wells Fargo bank and the customer
will be assigned an electronic identification number, which will enable the
customer track the purchased item(s) for shipping purposes, or electronic
download via the Internet into the customers computer hard-drive. For hardware
products, the company has established a relationship with one of the major
distributors of computer hardware and software products, to help fulfill all
on-line orders placed through our web-site.
Bolingo.com was founded to capitalize on the opportunity for on-line
retailing. Management believes that High Technology product distribution,
utilizing the model set forth herein, is particularly suited to on-line
retailing for several reasons. First, an on-line retailer can offer virtually
unlimited on-line shelf space. Secondly, it can offer its customers a wide
range of products that, hitherto, would have required a large amount of
operational space. Thirdly, serving a global market, on-line retailers can
realize substantial economies relative to the traditional storefront retailer.
The ability of the Company to introduce the marketing channel as described
above, is predicated on the willingness of the manufacturers of the products
to enter into distribution/vendor agreements with the Company.
3. Capnet.com
Capnet.com is an internet based information and management services company
specifically focused on providing management, content and information
regarding Healthcare, High Technology and Humanity. Capnet Gateway Online
Services, a division of Capnet.com, has been sited in various Internet
Magazines, rating companies etc. Capnet Gateway Online Services has recently
signed a licensing agreement with Meridian Medical Group, P.C. to publish
all its Clinical Outcomes Analysis, Drug and Care Utilization data, as well
as it's "Policies and Procedure Manual" on a subscription basis via its'
internet transaction server. The company also is in the process of finalizing
negotiation with a major University Teaching Hospital and Medical Center, to
acquire the license to convert all their recently published Disease State
Management Protocols into a portable Electronic Document to be marketed on
a subscription basis via the Internet.
In addition, the company has recently finalized arrangement with UPI Inc., an
International News agency, to provide News content to Capnet Gateway Online
Services. The news feed focuses on the following areas of human concern:
General, Financial, Healthcare, Entertainment, Technology and Sports News.
One of the most interesting aspect of the News section is the dynamic nature
of the hourly News Summary, which brings News-feeds from different parts of
the world every hour.
Capnet.com Electronic Drug Store
Background
According to the Health Care Financing Administration (HCFA), healthcare
expenditures in the United States totaled approximately $1.0 trillion in
1996, or 14% of the country's gross domestic product, making it the largest
single sector of the economy. One of the fastest growing components of
healthcare expenditures is pharmaceutical costs, which last year totaled
approximately $100 billion, according to IMS HEALTH, a leading provider of
pharmaceutical information. According to HCFA, pharmaceutical costs are
expected to increase at an annual rate of approximately 10% through 2007,
driven by an aging population, the accelerating introduction of new drugs,
direct-to-consumer advertising by pharmaceutical manufacturers and cost
advantages over alternate forms of care, most notably inpatient hospital
care. This in turn has created pressure on managed care organizations to
control pharmacy costs and improve the process of managing medication
treatments.
Physicians have also been affected as healthcare has shifted from a
fee-for-service model to managed care forms of reimbursement, which
increasingly transfer financial risk for pharmaceutical costs from
traditional third-party payers to physicians. This transfer of risk
has often had an adverse financial impact on physicians. Moreover, as
healthcare becomes increasingly consumer driven, patients are seeking more
information, control and convenience, placing additional time and financial
pressures on physicians. These changes have led many physicians in the
United States to search for tools and solutions to improve practice
efficiency, increase revenue, comply with managed care guidelines and
address patient needs.
Rapid Growth of the Internet and E-commerce
The Internet is becoming an increasingly important medium in healthcare,
providing the opportunity for unprecedented connectivity and access to
information for all participants in the healthcare delivery process. We
believe that an increasing number of physicians regularly access the
Internet, indicating their willingness to adopt technology. Consumer usage
of the Internet continues to grow rapidly, and health and medical information
was the second most popular subject of Web-based information retrieval
searches in 1997 according to Media Metrix, an independent Internet research
firm. In addition, it is estimated that e-commerce will grow from $28 billion
in 1998 to over $100 billion by 2002.
The Opportunity
The current process for prescribing and delivering medications is
inefficient, unnecessarily costly and error-prone. Physicians write
virtually all of the 2.8 billion annual prescriptions by hand, resulting
in errors and necessitating millions of telephone inquiries from pharmacies
for clarification and correction. When physicians write prescriptions, they
often do not have ready access to information that would help ensure that
the prescription is clinically sound, cost effective and compliant with
managed care organizations' pharmacy guidelines. The pharmacist or managed
care organization checks this information only after the physician writes
the prescription. The inability of managed care organizations to communicate
with physicians at the time of prescribing has made it difficult to manage
pharmaceutical costs. The existing process further inconveniences the
patient, who must travel from the physician's office to a pharmacy and must
often wait for the prescription to be filled. In addition, despite the fact
that pharmaceutical manufacturers spend billions of dollars promoting the
use of their drugs, physicians have a difficult time staying current on the
rapidly expanding body of pharmaceutical products and knowledge.
Capnet.com Electronic Drug Store Solution
We offer or intend to offer other e-commerce products that address various
aspects of the medication management process. We currently have an internet
e-commerce section that enables physicians to purchase pre-packed
prescription drugs and other office supplies that could be dispensed from
their offices via the internet. We have also negotiated with a mail-order
company to handle additional fulfillment of prescription orders thus making
it possible for patients to have their prescriptions electronically routed
to the pharmacies of their choice or to receive their medications by mail.
To physicians, we intend to offer Internet-based information services to
permit them to better care for their patients. To patients, we intend to
offer ancillary information and electronic services focused on improving
care, including patient education and compliance.
Our solution redesigns the pharmaceutical healthcare delivery process to
benefit each participant. By providing ready access to information during
the prescribing process, our system benefits physicians by reducing the
amount of time spent clarifying and changing prescriptions. In addition,
our system enables physicians to better manage financial risk and to
increase practice revenue through dispensing medications. Patients
benefit from the convenience, immediacy and confidentiality of receiving
prescription medications in the physician's office. Patients also gain
access to valuable information that enables them to play a more active
role in managing their healthcare. Managed care organizations benefit
from higher physician compliance with their pharmacy guidelines, resulting
in lower overall costs. Pharmacies benefit from improved connectivity with
physicians, which enhances efficiency and reduces the likelihood of errors.
Benefits of our Model
Online Ordering. Through our Web site, http://www.capnet.com/drugstore.asp,
we currently sell pharmaceuticals to physicians, enabling them to provide
patients with medications in the office, and we plan to facilitate the
delivery of pharmaceutical products directly to patients in the future
through a mail order system. We also enable healthcare professionals to
purchase medical-related texts, journals and products online. Also, the
non-prescription drug section of the online ordering system is developed
for the general consumer to be able to order non-prescription items and
cosmetics, including health foods and vitamins online.
Physician's Interactive. The company intends also to offer an interactive
web-forum for physicians to discuss various issues regarding their
pharmaceutical usage and experience. This product will enable pharmaceutical
manufacturers and managed care organizations to deliver drug education and
detailing to physicians more efficiently and cost-effectively via the
Internet, without the face-to-face interaction currently required. In
future, as the technology evolves, the company will be able to offer
interactive video-conferencing to participating physicians and the
pharmaceutical representatives to discuss their experience and pharmaceutical
needs.
Intelligent Reminder. We intend to offer a service to track patient
compliance with prescribed treatment and to send reminders to patients,
physicians and managed care organizations. By increasing compliance, we
expect to improve patient care and reduce unnecessary office visits,
benefiting patients, physicians and managed care organizations.
Patient Education. Through Capnet IPA and other healthcare entities the
company intends to acquire, we will provide information to patients,
enabling them to take a more active role in managing and improving the
quality and cost of their healthcare. Specific information regarding
health state, managed care and medications will be made available on
the Web site and via e-mail.
Prepackaged Medications
The company fulfill orders for prepackaged medications through various
FDA-licensed repackaging vendors within continental United states of
America. Enabling our physicians members to sell repackaged pharmaceuticals
is an important component of our value proposition.
Capnet Document Archives (Information Warehouse)
Data Mining Products. As a by-product of electronic prescribing, we accumulate
data that correlates the medications prescribed with the related diagnosis.
This type of correlated data is not readily available on a broad scale, and
we believe that we can market it to pharmaceutical manufacturers and managed
care organizations. Currently, the Company is offering such services, via the
internet at http://www.capnet.com:5293/tr/. The company currently offers
information regarding healthcare, general market trends and archives of its
Capnet News items.
Capnet Gateway Online Services has recently signed a licensing agreement
with Meridian Medical Group, P.C. to publish all its Clinical Outcomes
Analysis, Drug and Care Utilization data, as well as it's "Policies and
Procedure Manual" on a subscription basis via its' internet transaction
server. The company also is in the process of finalizing negotiation with
a major University Teaching Hospital and Medical Center, to acquire the
license to convert all their recently published Disease State Management
Protocols into a portable Electronic Document to be marketed on a
subscription basis via the Internet.
In future, this center will be the starting point for retrieval of hard to
find information, for a nominal fee, a phenomenon that is currently not
catching on amongst current internet users.
Capnet News
In addition, the company has recently finalized arrangement with UPI Inc.,
an International News agency, to provide News content to Capnet Gateway
Online Services. The news feed focuses on the following areas of human
concern: General, Financial, Healthcare, Entertainment, Technology and
Sports News. One of the most interesting aspect of the News section is
the dynamic nature of the hourly News Summary, which brings News-feeds
from different parts of the world every hour.
The company will generate over 60% of its revenue from Management Services
and the rest through Electronic Commerce transaction activities and Banner
Advertisement.
CAPNET IPA
"Capnet IPA" ("Independent Physician Association"), with over 10 payor
contracts, 600 physicians, 15 Community hospitals, four Teaching Hospitals
and other ancillary services companies contracted within its network, is the
core component of Capnet.com, healthcare management division business. The
linkage of these entities is imminent as the convergence of technology
brings to bear the burden of information overload currently one of the
biggest problems in the healthcare industry. The company believes that
by using currently available Internet Technology most of the healthcare
industry information processing could be handled more efficiently. To
be competitive, the Company must license leading technologies, enhance
its existing services and content, develop new technologies that address
the increasingly sophisticated and varied needs of healthcare professionals
and healthcare consumers and respond to technological advances and emerging
industry standards and practices on a timely and cost-effective basis. To
this end the company is in the process of acquiring additional healthcare
related companies whose business purpose and technology will further enhance
the companies ability to achieve its' business goals and objectives in the
healthcare industry.
The key components of management services to be provided to Capnet's
affiliated healthcare providers and organizations includes:
Cost Efficiency and Quality Outcome analysis
Pharmaceutical Benefit Management
Dynamic Unified Electronic Prescription/OTC Drug Formulary development
Electronic Drug Store for Prescription/OTC Drug ordering and processing
R & D Product Substitution Compliance
Drug Utilization Data analysis
Care Utilization Data analysis
Care Provider Network and Referral Pattern analysis
Quality Management Incentive Compliance
Dynamic and Comprehensive Clinical Pathways
Health Risk and Needs Assessments of the Patient Population Served
Case Management.
Electronic Medical Record System
Clinical Laboratory and Diagnostic Cardiovascular, Pulmonary, Nuclear
Medicine and Radiological Database Repositories.
Contract Negotiations, Mergers and Acquisition
Strategic Healthcare Planning, Marketing and Implementation utilizing
all the available Internet Technologies at Capnet.coms' disposal.
THE HEALTH CARE INDUSTRY
OVERVIEW AND DIRECTION
The $1 trillion health care industry is currently going through a period of
tremendous change. Nowhere is this more evident than the patient care
delivery network where the three main components - physician groups,
insurers and hospitals - are scrambling for market share, volume and control.
The U.S. Health Care Delivery System
Physicians
Patient
Employers
Government
Insurers Hospitals
Each component is highly fragmented and contains several segments. Over
the last 30 years, many important changes have dramatically altered the
landscape of the health care delivery system. In 1994, health care
expenditures in the U.S. totaled $938.3 billion, up 6.1 % compared to
1993. Health care represented 13.9% of the total U.S. gross domestic product
in 1994. Today, the market is estimated to be approaching $1 trillion.
Between 1960 and 1993, per-capita spending for personal health care
increased from $126 to $2,920. This is a huge industry that affects
nearly everyone in the country. As a result of the size and growth of
the market, American medicine is facing serious challenges. The cost of,
access to, and quality of health care are significant issues. The health
care delivery system must change as it seeks resolution of these issues.
Capnet.com management views the Medicare business as an opportunity for major
cost and risk savings. Although Medicare risk contracting is expected to grow
to $334 billion by 2002, it constitutes only 14% of the nation's headcount
while accounting for 45% of total health care dollars. As Medicare is the
fastest growing HMO in the country, Medicare risk contracting represents a
significant opportunity for risk pool savings. In the six states of
Capnet.com's initial focus, Medicare represents $3.7 billion in physician
revenues. Based on Capnet.com's projected market share of 5%, this represents
$185 million in revenues in the six-state region.
Medicare Benefit Payments
Capnet.com Initial Target Region
State Medicare Payments Physician Share** Capnet Share***
California * 10,000,000 3,000,000 150,000
Colorado**** 1,634,905 359,679 17,984
Wyoming**** 159,246 35,034 1,752
Utah**** 629,943 138,587 6,929
Montana**** 395,644 87,042 4,352
Idaho**** 401,179 88,259 4,413
Total 13,220,917 3,708,601 185,430
* California revenue figures are based on rough estimate, however, Los
Angeles County has over 300,000 Medicare beneficiaries.
** Physician Share is 22% of Medicare Payments
*** MMEC Share is 5% of Physician Share
**** Source: HCFA/OBA/BDMS, March 1995
Estimated Medicare Spending and Medicare Risk
Table
Source: Congressional Budget Office and Robertson, Stephens Co.
HISTORICAL PERSPECTIVE
The earlier traditional health care financing methods gave nearly unlimited
license to overspend. Third party financing and marketing of health
insurance created third parties to collect and dispense monies for
healthcare services rendered. For many years this system worked well.
Growing risk pools made it possible to meet big needs of the few, from
the small payments of the many. However, contained in the above method of
healthcare services payment system were the seeds for its DESTRUCTION! i.e.,
Cost Plus for Hospitals and Fee-For-Services for Physicians!
The traditional system offered other incentives to use resources and services
as long as the insurance companies paid the tab. This system provided an
environment of free spending and was not very efficient from a business
perspective. Physicians involved in this type of delivery system had very
little incentive to control costs or provide needed healthcare within given
budgets. Medicare adopted this spend thrift financing approach against the
advice of some, but with the approval of many, who feared fixed budgets or
pricing would restrict their ability to provide effective healthcare. Faced
with unlimited demands, prospects for unlimited payment for the richest of
our population (Physicians) started... And the race was on! Little time
lapsed before growing healthcare cost burdens caused employers and
governments agencies to demand a change.
* The first major attempt to control healthcare costs came shortly after
Medicare and Medicaid laws were passed. The nation turned to Centralized
planning to allocate Capital Resources. This strategy failed in the face
of increased demands, which in turn were fueled by a flawed payment system
that was instrumental in the "usual and customary" reimbursement patterns
that rewarded health professionals based on geographical location and other
actuarial method.
* While national health planning strategies were failing, the concept of
managed care began to develop through the creation of HMO, PPO, EPO and
other acronyms of the same stock!
* The earlier HMOs' were financed largely by Federal grants and later
converted to public market-financed. There was a push by HMOs to increase
profit and reduce costs.
* The emergence of HMOs came at a time when health insurance companies were
moving away from community-rated insurance to corporate or group-rated
insurance. The sense of Community sharing of healthcare risk was being lost
as corporations and other groups chose to reduce their health care costs by
extracting themselves from the community pool.
* The focused marketing of HMOs toward young and healthy groups exacerbated
the flight from the concept of community health. The result is massive cost
shifting among buyers of health services and massive displacement of
potential buyers of health insurance, which are either deemed an unhealthy
risk or care rates.
* This selective underwriting has left millions of Americans uninsured!
* Physicians and other healthcare providers responded well to a growing but
false sense of price competition. Huge discounts were offered to HMOs,
insurers, or employers who had large number of purchasers. As a result,
the displacement of the uninsured or underinsured became even more severe.
Healthcare providers have slipped unwittingly into the mode of discriminatory
pricing. Those individuals who were good insurance risks or employed by the
wealthiest corporations now paid less for the same health care services
than those who were uninsured, underinsured or employed by a smaller less
wealthy Corporation.
* Without structural changes in the system, the current managed care
delivery system, riddled with preferential risks and discriminatory pricing
is destined to fail.
CONSOLIDATION STRUCTURE
The rapid escalation of health care costs has resulted in the growth and
evolution of "managed care." Managed care was initiated by payers and
employers, and later gained support from governmental agencies. This
widespread support has shifted market power from physicians to health
plans due to their size, access to capital, relationships to buyers and
ability to manage risks
Medical practices, for the most part, are small businesses and the
physician-owners frequently lack the capital resources and business
expertise to operate efficiently and effectively. In addition, the small
size of most medical practices does not provide negotiating strength in
dealings with other entities in the medical delivery system, such as
hospitals, HMOs and other physician groups. Specifically, in dealing with
hospitals and insurance carriers, medical practices are at a disadvantage.
Hospitals and insurance carriers have large business staffs and sophisticated
information systems which are not available to individual practices.
Most small practices lack the business expertise and systems to analyze
reimbursement levels, trends and administrative costs. They typically
sign managed care contracts, regardless of reimbursement and conditions,
for fear of losing patients. Belonging to 20,30, or more HMO and PPO networks
without the expertise and information systems for-analysis can result in
actually losing money on several networks without knowing it.
In an effort to gain support against stronger hospitals and insurance
companies, many physicians have begun to join larger group practices. In
1995, only 30.7% of physicians were in-groups with over 100 physicians, and
almost two-thirds of physicians were in-groups of 50 or less. Many physicians
and small physician groups are just beginning to realize the benefits of
consolidation and are seeking a way to fortify their position and take
advantage of the economies of scale offered by larger group organizations
Changes in the medical delivery system and the financing of medical services
have reduced reimbursement for physicians while burdening medical groups with
additional and more complex administrative tasks. These factors both
decrease revenue and increase overhead expenses. Many physicians have
attempted to maintain their take-home, compensation by increasing their
working hours. While this was initially successful, physicians have run out
of hours and reached the limit of their physical endurance.
Breakdown of Group Practices, By Size, 1995
Group Group Physician
Size Practices % of Total Positions
# of Groups # of Physicians % of Total
3-4 8,926 45.8% 30,941 14.7%
5-9 6,904 35.4% 42,930 20.4%
10-25 2,657 13.6% 38,913 18.5%
26-49 527 2.7% 18,063 8.6%
50-99 226 1.2% 15,193 7.2%
100+ 238 1.2% 64,770 30.7%
Total 19,478 100.0% 210,810 100.0%
Source: AMA, Medical Groups in the U.S., 1996 and JP Morgan
There is a simultaneous oversupply and shortage of physicians, depending on
location. Nationally, there is an oversupply of specialists, however, there,
is a shortage of specialists is rural areas. Specifically in the state of
California and Rocky Mountain region, many rural communities have no support
or must rely on visiting specialists who have regular office time in rural
communities on a weekly or monthly basis. At the same time, and to some
extent because of the lack of specialists, rural areas have a difficult time
recruiting and retaining primary care physicians. Rural primary care
physicians often require special training to treat a wider variety of body
systems than they were originally trained to treat. They often do extensive
surgery, obstetrics and emergency medicine.
Enlarging medical practices to mitigate some of the limitations of size
through merger, acquisition or internal growth has limits. Practices of the
size required to gain efficiency, effectiveness; and strength are often in
violation of federal antitrust regulations. In many locations, the community
is not large enough to support a practice which is large enough to realize
economies of scale. This is especially true in rural areas.
Increasingly, these physicians are turning away from affiliations with the
two traditional integrators of networks - hospitals and insurers - and
looking for both capital and management expertise from for-profit practice
management firms. The role of hospitals is also changing as over capacity
results in consolidations and closures.
Despite all the changes in the health care, delivery system, physicians still
occupy the central role in health care because they deliver the care. Since
physicians are the deliverers of care, improvements in quality and cost must
be accomplished by changing physician behavior. Due to the fact that
physicians control an estimated 85% of health care, spending, efforts at
reducing the cost of health care must be fundamentally driven by physicians.
Affiliation Strategy
Central to the new dynamic delivery model of management services is an
economic alignment between Capnet IPA and :
Physicians and providers of healthcare services as partners and shareholders
who have demonstrated established practice patterns resulting in optimal
utilization of healthcare services and disciplined cost control.
Tertiary care and Community hospitals with shared interest in managing risk
contracts in a highly capitated managed care environment.
Health plans and third party payors whose members are assigned to Capnet
IPA for provision of healthcare services.
Capnet IPA had a revenue of $627,683 as of December 31st, 1998. The revenue
for the First Quarter of 1999 is $252,223.09, with a projected annualized
revenue for 1999 of $1.5 Million.
Sales And Marketing
The Company markets Capnet.com through its internal sales force and its
strategic distribution relationships which typically couple the Company's
use of the strategic partner's services or content with the strategic
partner's obligation to market Capnet.com to its customer or client base.
The Company's distribution partners, which target different healthcare
sectors, combined with the Company's internal sales force, provide the
Company with sales and marketing professionals who are experienced in the
healthcare industry. The Company's and its strategic partners' direct
marketing efforts, which may include promotional offers, direct mail and
telemarketing initiatives, emphasize the ease of use and adoption, attractive
pricing and integrated solution offered by Capnet.com. The Company has
entered into, and intends to continue to enter into, strategic alliances
with parties who have established customer or client bases that have an
anticipated need for the services provided through Capnet.com. In connection
with certain of these strategic alliances, such as the alliances with, DRL
Network, Allscript Pharmaceuticals, Pam Pacific and Associates, DTS Wireless,
MDS Technologies, Microsoft Corporation, Link-Exchange, Ingram Micro, Sager
Midern, etc., the Company has agreed to bear the cost of certain subsidized
promotional offers, to compensate such partners for each subscriber that
Capnet.com obtains through their marketing efforts or to make guaranteed
payments to such partners. The Company intends to continue to enter into
additional promotional arrangements in the future.
The Company is currently engaged in a significant branding and promotional
campaign to increase awareness of the Capnet.com brand.
The Company is employing a combination of online advertising and other
marketing and promotional efforts aimed at defining a desirable online
destination for healthcare professionals and consumers, attracting new
subscribers and consumers, increasing traffic on its Web site and developing
additional revenue opportunities. The Company also promotes Web-based
services through traditional print media, including trade journals,
newspapers and magazines targeted at healthcare professionals, and
participates in tradeshows, conferences and speaking engagements as part
of its ongoing public relations program. The Company plans to continue
to allocate significant resources to marketing Capnet.com.
For its Electronic Drugstore, the company intends to market its products
services through an internal direct sales force and intend to pursue
strategic relationships with key suppliers of physician practice
management systems, physician-focused Internet portals and managed
care organizations to complement our internal efforts.
Since the participating physicians are part of Capnet IPA, we target sites
with a large number of high-volume prescribing physicians in states where
in-office dispensing is well-established or where many physicians bear
financial risk for pharmaceutical costs. We will use a variety of tools
to attract prospective customers, including editorials, articles and
advertisements in trade journals, as well as executive seminars, exhibits
at selected trade shows and other direct marketing techniques.
TECHNOLOGICAL COMPONENT
A critical element in the merger of talent and capacity of practitioners is
the use of computerized medical records. Electronic networking with a high
level of security allows appropriate records to be shared among member
practitioners. This system provides rural practitioners with support from
a broad scope of specialty talent that is responsive to patient's needs,
fosters the practice of conservative medicine and provides care that is
convenient for patients at an affordable cost.
Furthermore, CAPNET.com, was born out of the need to develop technologies
to assist healthcare practitioners to reduce overhead, while simultaneously
increasing staff efficiency. The healthcare industry is currently under-going
a tremendous amount of changes. Physicians and other healthcare organizations
keep trying to manage change, but we always manage the things we don't like.
It's time that healthcare providers truly make change their best friend,
because change is going to continue to accelerate because of technology.
To make rapid change our friend, we need to know what will happen before
it happens. This is why it is critical to understand the future of technology.
By understanding the future, you will be able to surpass the competition.
Anthony C. Dike, MD, who is the founder and pioneer of the CAPNET.com
conceptual model, believes that "The next 10 years are already Invented-and
the Tools are here and the Challenge is to use the Technology in New ways,
and not the Old ways".
The whole idea in developing CAPNET.com programs and network is to enable
the participating providers and service organizations embrace the technologies
they want - one or all the components listed above, at their own self
learning pace. To quote Samuel Johnson, "Men may be convinced, but they cannot
be pleased against their will".
TELECOMMUNICATIONS COMPONENT
Telemedicine Network
Administration
Clinical
Data Internet
Repository Hosp A Hosp B Acces
Hosp C
Out-patient Surgi-Center
Clinic
Communication
Network Home Health
Physician
Physician's Payors
Home Supplies Laboratories
Data Master
Security Patient
Optical Internet Index
Disk Access
Storage
Opportunity for Connectivity
Already, the mobile work force numbers 45 million, and nearly 40% of all
employees. By the year 2000, sales of wireless data will reach %12
billion annually, and the market for portable devices will climb to
15 million units.
Mobile wireless computing in healthcare continues to draw significant
attention. There are several examples of wireless mobile computing in
hospitals across the country. Physicians as a professional group, due to
their job requirement, constitute the largest consumer of mobile
telecommunication services. Almost all actively practicing physician has
wireless pager and some sort of message center.
However, there are very few large implementations of this technology in
ambulatory care setting. As compared with home and acute care, ambulatory
care has several significant challenges associated with it. This includes
staff tolerance for technological complexity, clinician acceptance and
the ability to handle years of existing paper-based medical records.
CAPNET.com has arranged with CGI Communications Services, Inc., which has a
strategic partnership relationship with the following leaders in the area of
telecommunication i.e. US Robotics -Mobile Communication Division, (d/b/a
Megahertz Inc.), AT&T Easylink Services, Microsoft Corporation, Ram Mobile
Data, and DTS Wireless Services, Inc., to provide participating healthcare
providers an effective communication tools to help them manage their patients
more effectively.
Each participating provider will have access to a full range of Tele-
communications services, including "After Hours" Medical Emergency Services
Coverage.
Furthermore, each participating healthcare provider will have option to
sign-up for a turn-key wireless telecommunication services whereby they are
provided with the following items on a rental/lease terms:
* A Hand-Held Computer e.g. HP Palmtop PC.
* A wireless modem e.g. US Robotics (Megahertz Allpoints Wireless PC Card)
* Access to Mobitex Network, the International de facto standard for wireless
communications e.g Ram Mobile Data Network.
* A Subscription to wireless service which includes a client software,
Internet Address, personal 800 number for 24hour message center, personal
888 fax number for receiving fares, registration of fax coversheet,
letterhead, and signature, and 5 pages of stored attachments. (with
option to purchase additional stored fax attachment service, accessories
e.t.c.).e.g. DTS Wireless Services, Inc.
* Internet Browser e.g. Microsoft Internet Explorer Version 4.X or Netscape
Communicator Version 4.X.
This design will alert on-call personnel to priority messages in a timely
and cost effective manner. The Telecommunications package includes
customizable mailbox system, remote paging, and E-mail. Additional optional
mail boxes may be added to accommodate medical groups or staff.
The CAPNET.com Gateways will make it possible to provide inexpensive,
efficient and engaging real time linkages across the entire healthcare
Community. Many companies, including integrated delivery systems,
pharmaceutical and managed care organizations, can take advantage
of new connectivity tools as shown in the schematic drawing below:
Telecommunications Benefits
* Instant and comprehensive dissemination of timely, provider specific
information such as health plan costs and benefits, physician site
locations and biographical profiles, and urgent care advice from
tele-nurses.
* Access to clinical studies and consumer health information contained in
both public and private data repositories.* Access to medical records,
test results, authorization rules and care guidelines stored on the company
or off-site data bases.
* Member Health-Risk and Needs Assessment information gathering by robotics
voice response outbound telephone technology
* E-Mail messaging between providers across the care continuum and directly
into patients home.
* A Communications forum or chat-line for physicians wishing to share ideas
with colleagues, as well as patients with chronic diseases, wishing to
communicate with other patients about common conditions, experiences and
treatment options.
* Enrollment for self-help training programs, on-line teleconferences and
participation in regularly scheduled healthcare seminars via a
tele-medicine video conferencing, telephone or Internet Connectivity.
* Secure areas of any communication channel can be used to disseminate
information to selected audiences, e.g. clinical updates, management
reports, and marketing promotions.
* Cost effective connectivity to private WANs, organizational Intranet,
and other geographical remote care sites or other providers anywhere in
the world.
* Access to Capnet.com Electronic Drugstore for product ordering and
utilization.
* Efficient addressing that enables the end-user to transmit data quickly
and mote efficiently as compared to data-over-cellular and data-over-trunk
line.
* Assured Receipt: Store and forward capability, which allows messages that
cannot be delivered immediately to be stored in the network. Messages
are then forwarded to the mobile unit at the first available opportunity.
* Preview e-mail headers before downloading so as to help the provider select
which messages to read, hold, discard or forward. The physician then
manages wireless costs by paying only for those e-mail downloaded.
* Ability to reply to and send e-mail to anyone in the world with an Internet
address.
* Ability to receive phone messages called into the healthcare providers
personal 800 number. Calls could be re-directed to an operator-assisted 24
hour message center for wireless delivery i.e. Voice-Text or Text-Voice
Messaging service.
* Ability to send messages to fax machines, most Alpha numeric pagers and
even telephones.
* Ability to fax documents by using a personalized pre-stored letterhead,
personal signature and even the physician's most used fax attachments.
* Global dial-in access, which allows the healthcare provider to download or
send e-mail, fax, and phone messages, no matter where they are in the world.
* Access to the WWW and download pages in text mode from a favorite site.
* No third party misinterpretation because messages are received with
complete accuracy
* Improved response time
* Savings of up to 40% over existing service Physicians phone answered on
the first ring
* Each incoming message is time and date stamped
* Callers never placed on hold
* Physicians immediately notified of an emergency by pager
* Access to Capnet.com Disease Management Information System, for database
access, e.g. patient medical record, laboratory data and download.
Other Benefits To Participating Physician
1. CAPNET will pursue the application and continuous enhancement of
technology to support efficient and effective clinical and business
operations. This includes "bottom up" and "top down" analysis so as
not to unduly interfere with current clinical and business operations.
II. Wherever practical, local area networks in practices and
administrative offices will be connected to CAPNET's wide area
network to eliminate duplication and allow efficient interchange of
information at a minimal cost.
Ill. CAPNET will develop a proper mix of physician specialties, mid-level
providers, and medical facilities in order to insure the success of
the above strategy.
IV. CAPNET will develop a business approach to contracting with HMOs, PPOs
and other managed care carriers and entities. Contracts among the
various elements of the health care delivery business should be fair
to all parties, provide for reasonable administration and allow a fair
profit.
CAPNET plans to use the business approach to assess contracting
opportunities, negotiate mutually beneficial agreements and then,
monitor the cost and profit of each agreement.
V CAPNET will conduct periodic operations analyses/reviews to evaluate
practice operations in the context of the patient, practitioners,
staff, payer, community and business environment in which the practice
operates. The result of the analyses are specific recommendations for
improvement along with a plan for implementation.
VI. CAPNET will provide expertise to member practices in the area
of clinical and business operations. Expertise is provided through
standard operational techniques and procedures as well as through
an internal and contracted staff with expertise in a wide variety of
fields.
Support includes:
a. Clinical operations
b. Medical records
c. High-tech systems (such as computers, phone systems and electronic data
inter change with hospitals and laboratories)
d. Billing and collections
e. Personnel/payroll systems
f. Financial operations and analysis
g. Legal
h. Marketing
i. Joint purchasing of medical and business supplies and equipment
j. Insurance purchasing - malpractice and business insurance
k. Development and implementation of clinical protocol
l. Development and negotiation of risk contracts
V1I. CAPNET will provide reporting standards that allow CAPNET management
to monitor and analyze member practices. Practices which are out of
compliance will be analyzed in more detail by support staff. Practice
guidelines are the basis for analysis of each member group to determine
what, if any, improvements are clinically and operationally warranted
considering the local environment. Guidelines include:
A. Stafting costs
B. Protit margin
C. Overhead costs
D. Administration costs
E. Accounts receivable
F. Cost of providing clinical services, medical supplies and equipment
G. Industry operating ratios
VIII. CAPNET will select providers based on credentials and ethical
standards. A system of screening potential members is used to
assure that problem practitioners are not invited to join. Providers
will be selected based on the following criteria:
A. Exceptional clinical standards
B. High ethical standards
D. A demonstrated history of providing quality, cost-
effective medical care
IX. CAPNET will create compensation formulas which are designed to attract
and retain good practitioners and maintain long-term harmony and
productivity. A sound compensation formula can help avoid many of
the problems in a medical "group." Practitioner incentives are designed
to engage the practitioners in the pursuit of CAPNET's mission.
X. CAPNET will use member meetings as a tool to nourish the benefits of
synergy:
C. State councils meet monthly, board of directors quarterly and the
corporation will hold an annual meeting.
D. Within the organization, groups such as office managers and financial
staff meet periodically.
X1. CAPNET will integrate mid-level practitioners to allow and foster the
efficient, effective delivery of care. Mid-level practitioners provides
a balance of care givers at all levels. For example, the membership
consists of MDs, DOs, ODs, LCSs, DPMs, etc.
Sales And Marketing
The Company markets Capnet.com through its internal sales force and its
strategic distribution relationships which typically couple the Company's
use of the strategic partner's services or content with the strategic
partner's obligation to market Capnet.com to its customer or client base.
The Company's distribution partners, which target different healthcare
sectors, combined with the Company's internal sales force, provide the
Company with sales and marketing professionals who are experienced in
the healthcare industry. The Company's and its strategic partners'
direct marketing efforts, which may include promotional offers,
direct mail and telemarketing initiatives, emphasize the ease of use
and adoption, attractive pricing and integrated solution offered by
Capnet.com. The Company has entered into, and intends to continue to
enter into, strategic alliances with parties who have established customer
or client bases that have an anticipated need for the services provided
through Capnet.com. In connection with certain of these strategic alliances,
such as the alliances with, DRL Network, Allscript Pharmaceuticals, Pam
Pacific and Associates, DTS Wireless, MDS Technologies, Microsoft
Corporation, Link-Exchange, Ingram Micro, Sager Midern, etc., the Company
has agreed to bear the cost of certain subsidized promotional offers, to
compensate such partners for each subscriber that Capnet.com obtains through
their marketing efforts or to make guaranteed payments to such partners.
The Company intends to continue to enter into additional promotional
arrangements in the future.
The Company is currently engaged in a significant branding and promotional
campaign to increase awareness of the Capnet.com brand.
The Company is employing a combination of online advertising and other
marketing and promotional efforts aimed at defining a desirable online
destination for healthcare professionals and consumers, attracting new
subscribers and consumers, increasing traffic on its Web site and developing
additional revenue opportunities. The Company also promotes Web-based
services through traditional print media, including trade journals,
newspapers and magazines targeted at healthcare professionals, and
participates in tradeshows, conferences and speaking engagements as part
of its ongoing public relations program. The Company plans to continue to
allocate significant resources to marketing Capnet.com.
For its Electronic Drugstore, the company intends to market its products
services through an internal direct sales force and intend to pursue
strategic relationships with key suppliers of physician practice
management systems, physician-focused Internet portals and managed care
organizations to complement our internal efforts.
Since the participating physicians are part of Capnet IPA, We target sites
with a large number of high-volume prescribing physicians in states where
in-office dispensing is well-established or where many physicians bear
financial risk for pharmaceutical costs. We will use a variety of tools
to attract prospective customers, including editorials, articles and
advertisements in trade journals, as well as executive seminars, exhibits
at selected trade shows and other direct marketing techniques.
Competition
The Company anticipates competing directly and indirectly for subscribers,
consumers, content and service providers, advertisers and acquisition
candidates with the following categories of companies: (i) online
services or Web sites targeted to the healthcare industry generally;
(ii) publishers and distributors of traditional off-line media, including
those targeted to healthcare professionals, many of which have established
or may establish Web sites; (iii) general purpose consumer online services
which provide access to healthcare-related content and services;
(iv) public sector and non-profit Web sites that provide healthcare
information without advertising or commercial sponsorships; (v) vendors of
healthcare information, products and services distributed through other
means, including direct sales, mail and fax messaging; and (vi) Web search
and retrieval services and other high-traffic Web sites. The Company does
not have the contractual right to prevent its subscribers, other than
physician members of Capnet IPA who are under obligation to utilizes the
Company's Website and services for information processing and medical
transaction and certain promotional plans, from terminating their service
or changing to a competing network. The Company believes that the principal
competitive factors in attracting and retaining healthcare subscribers are
the depth, breadth and timeliness of services and content, the ability to
offer compelling content and services and brand recognition.
Other important factors in attracting and retaining healthcare professionals
include ease of use, quality of service and cost. The Company believes that
the principal competitive factors that will attract advertisers include
price, the number of healthcare professionals who subscribe to Capnet.com,
the aggregate traffic on Capnet.com's website, the demographics of the
Company's subscriber and user bases and the creative implementation of
advertisement placements.
For the electronic Drugstore, the company believes that there are no
competitors in medication management that offer a comprehensive solution
with ease of use, accessibility, information content and value proposition
comparable to ours. However, several organizations offer components that
overlap with certain components of our solutions and may become increasingly
competitive with us in the future.
We face competition from several types of organizations, including the
following:
* physician practice management systems suppliers;
* electronic medical records providers;
* healthcare electronic data interchange providers;
* point-of-care dispensing providers;
* Internet pharmacies; and
* Internet information providers.
"Amongst the greatest thing that has happened in the world is the
introduction of the Internet and the popularization of Electronic
Commerce as a viable option for consumer purchasing use" said Anthony C.
Dike, the Principal of Capnet.com
According to Anthony C. Dike, the company has come a long way from being
just an internet list and directory entity to full fledge electronic
commerce and management company.
Anthony C. Dike, now assumes the control of the affairs of the company as
the Chairman and CEO. He will elect a new board of directors, as well as
appoint additional officers to help him manage the day to day affairs of
the company.
Management anticipates a combined revenue of over $30 million within the
first year of operation.
ABOUT MERIDIAN HOLDINGS
Meridian Holdings, Inc., (OTC: MEHO), based in Los Angeles, is an Internet
based company with special emphasis on Electronic-Commerce Transaction.
The Company is focusing on providing services that generate recurring
revenue. Internet based communities, on-line mall, classified advertisement
and auction websites will be developed, acquired or be affiliated with the
Company. The Company expects that the majority of its revenues will
initially consist of recurring subscription revenues and revenues from
management services agreement. If the Company is successful in increasing
its subscriber base, building brand recognition and increasing traffic on
its Web site, the Company expects revenues from advertising, transaction
and sponsorship fees to increase as percentages of its total revenues.
The Company intends to pursue acquisitions that it believes are
complementary to its existing business and will help it build its subscriber
and consumer bases, increase its services and potentially provide additional
sources of revenue.
*This press release contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Except for the historical information
contained herein, this press release contains forward-looking statements,
including statements containing the words, "believes," "anticipates,"
"expects" and similar words. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others: the Company's limited operating history and
variability of operating results. Such factors include, among other things,
the Company's financial performance; changes in the competitive environment;
adverse changes in the economy; ability to maintain long-term relationships
with customers and contractors; and other financing requirements.
EXHIBIT E
DEFINITION OF TERMS
For purposes of the Agreement (including this Exhibit A):
"ACQUISITION TRANSACTION" shall mean any transaction involving:
(a) the sale, license, disposition or acquisition of all or
a material portion of Seller's business or assets;
(b) the issuance, disposition or acquisition of (i) any partnership
interest or other security of Seller, or (ii) any option, call, warrant,
convertible instrument or right (whether or not immediately exercisable)
to acquire any partnership interest or other security of Seller; or
(c) any merger, consolidation, business combination,
reorganization or similar transaction involving Seller.
"AFFILIATE" means and include: (i) any current or former partner of
Seller; (ii) any sibling, uncle, aunt, niece or nephew of any person
described in clause (i); (iii) any ancestor or lineal descendant of any
person described in clauses (i) or (ii); (iv) any current or former spouse
of any person described in clauses (i), (ii) or (iii) or any person who is
a member of the same household of the person described in clauses (i),
(ii) or (iii) or who has resided with such person for more than 10 days in
any calendar year; (v) any ancestor or lineal descendant of any person
described in clauses (i), (ii), (iii) or (iv); or (vi) any entity or person
in which any of the foregoing have a direct or indirect interest (except
through ownership of less than 5% of the outstanding shares of any entity
whose securities are listed on a national securities exchange or traded
in the national over-the-counter market).
"AGREEMENT" shall mean the Asset Purchase Agreement to which this
Exhibit A is attached (including the Disclosure Schedule), as it may be
amended from time to time.
"COMMON STOCK" shall mean the common stock of Buyer.
"CONSENT" shall mean any approval, consent, ratification, permission,
waiver or authorization (including any Governmental Authorization).
"CONTRACT" shall mean any written agreement, contract, subcontract,
lease, understanding, instrument, promissory note, warranty, insurance policy,
benefit plan or legally binding commitment or undertaking of any nature.
"DAMAGES" shall include any loss, damage, injury, decline in value,
lost opportunity, liability, claim, demand, settlement, judgment, award,
fine,penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
"DISCLOSURE SCHEDULE" shall mean the schedule (dated as of the date
of the Agreement) delivered to Buyer on behalf of Seller, and delivered to
Seller on behalf of Buyer.
"ENCUMBRANCE" shall mean any lien, pledge, hypothecation, charge,
mortgage, security interest, encumbrance, claim, infringement, interference,
option, right of first refusal, preemptive right, community property interest
or restriction of any nature (including any restriction on the voting of any
security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise ortransfer of any other attribute of ownership of any asset).
"ENVIRONMENTAL LAW" shall mean any federal, state, local or foreign
Legal Requirement relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface
orsubsurface strata), including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
materials.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"GAAP" shall mean generally accepted accounting principles.
"GOVERNMENTAL AUTHORIZATION" shall mean any: (a) permit, license,
certificate, franchise, permission, clearance, registration, qualification or
authorization issued, granted, given or otherwise made available by or under
theauthority of any Governmental Body or pursuant to any Legal Requirement;
or (b)right under any Contract with any Governmental Body.
"GOVERNMENTAL BODY" shall mean any: (a) nation, state, commonwealth,
province, territory, county, municipality, district or other jurisdiction of
anynature; (b) federal, state, local, municipal, foreign or other government;
or(c) governmental or quasi-governmental authority of any nature (including
anygovernmental division, department, agency, commission, instrumentality,
official, organization, unit, body or Entity and any court or other
tribunal).
"INDEMNITEES" shall mean the following Persons: (a) Buyer;
(b) Buyer'scurrent and future affiliates; (c) the respective Representatives
of the Personsreferred to in clauses "(a)" and "(b)" above; and (d) the
respective successors and assigns of the Persons referred to in clauses
"(a)", "(b)" and "(c)" above;
"LEGAL PROCEEDING" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding), hearing, inquiry, audit, examination
orinvestigation commenced, brought, conducted or heard by or before, or
otherwise involving, any court or other Governmental Body or any arbitrator
or arbitration panel.
"LEGAL REQUIREMENT" shall mean any federal, state, local, municipal,
foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise
putinto effect by or under the authority of any Governmental Body, including
butnot limited to, any bulk transfer law.
"MATERIAL ADVERSE EFFECT" means a violation or other matter will be
deemed to have a "Material Adverse Effect" on Seller if such violation or
othermatter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in the Agreement
or in Seller Closing Certificate but for the presence of "Material
Adverse Effect" or other materiality qualifications, or any similar
qualifications, in such representations and warranties) would have a material
adverse effect on Seller's business, condition, assets, liabilities,
operations, financial performance or prospects.
"PERSON" shall mean any individual, Entity or Governmental Body.
"PROPRIETARY ASSET" shall mean any: (a) patent, patent application,
trademark (whether registered or unregistered), trademark application, trade
name, fictitious business name, service mark (whether registered or
unregistered), service mark application, copyright (whether registered or
unregistered), copyright application, trade secret, know-how, customer list,
franchise, system, computer software, computer program, invention, design,
blueprint, engineering drawing, proprietary product, technology, proprietary
right or other intellectual property right or intangible asset; or (b) right
to use or exploit any of the foregoing.
"RELATED PARTY" shall mean: (i) each individual who is, or who
has at any time since December 31, 1997 been, an officer of Seller;
(ii) each member of the immediate family of each of the individuals
referred toin clauses "(i)" and "(ii)" above; and (iv) any trust or
other entity (other than Seller) in which any one of the individuals
referred to in clauses "(i)","(ii)" and "(iii)" above holds (or in
which more than one of such individuals collectively hold), beneficially
or otherwise, a material voting, proprietary orequity interest).
"REPRESENTATIVES" shall mean officers, directors, employees, agents,
attorneys, accountants, advisors and representatives.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLER CONTRACT" shall mean any Contract: (a) to which Seller is a
party; (b) by which Seller or any of its assets is or may become bound or
underwhich Seller has, or may become subject to, any obligation; or (c) under
which Seller has or may acquire any right or interest.
"SELLER PROPRIETARY ASSET" shall mean any Proprietary Asset owned by
or licensed to Seller or otherwise used by Seller.
"TAX" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax,
ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax,
business tax, withholding tax or payroll tax), levy, assessment, tariff, duty
(including any customs duty), deficiency or fee, and any related charge or
amount (including any fine, penalty or interest), imposed, assessed or
collected by or under the authority of any Governmental Body.
"TAX RETURN" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information
filed with or submitted to, or required to be filed with or submitted to,
any Governmental Body in connection with the determination, assessment,
collection or payment of any Tax or in connection with the administration,
implementation or enforcement of or compliance with any Legal Requirement
relating to any Tax.
"TRADE RIGHTS" means and include: (i) all United States, state and
foreign trademark rights, business identifiers, trade dress, service marks,
trade names, and brand names, including all claims for infringement, and all
registrations thereof and applications therefor and all goodwill associated
with the foregoing accruing from the dates of first use thereof; (ii) all
UnitedStates and foreign copyrights, copyright registrations and copyright
applications, including all claims for infringement, and all other rights
associated with the foregoing and the underlying works of authorship;
(iii) allUnited States and foreign patents and patent applications,
including all claimsfor infringement and all international proprietary
rights associated therewith;(iv) all contracts or agreements granting
any right, title, license or privilege under the intellectual property
rights of any third party; and (v) all inventions, mask works and mask
work registrations, know-how, discoveries, improvements, designs, trade
secrets, shop and royalty rights, employee covenants and agreements
respecting intellectual property and non-competition and all other
types of intellectual property.
"YEAR 2000 COMPLIANT" means, with respect to a computer, computer
program or other item of software (i) the functions, calculations, and other
computing processes of the computer, program or software (collectively,
"Processes") perform in a consistent and correct manner without interruption
regardless of the date on which the Processes are actually performed and
regardless of the date input to the applicable computer system, whether
before,on, or after January 1, 2000; (ii) the computer, program or
software accepts,calculates, compares, sorts, extracts, sequences, and
otherwise processes date inputs and date values, and returns and displays
date values, in a consistent and correct manner regardless of the dates
used whether before, on, or after January 1, 2000; (iii) the computer,
program or software accepts and responds to year input, if any, in a
manner that resolves any ambiguities as to century in a defined,
predetermined, and appropriate manner; (iv) the computer, program or
software stores and displays date information in ways that are unambiguous
as to the determination of the century; and (v) leap years will be determined
by the following standard (A) if dividing the year by 4 yields an integer, it
is a leap year, except for years ending in 00, but (B) a year ending in 00 is
a leap year if dividing it by 400 yields an integer.
EXHIBIT F
LIST OF SELLER KEY EMPLOYEES & CONSULTANTS
Lionel du Boisblanc
Elizabeth Campos
Julie Puraty
Fred Brown
Lavonda Hodges
Darnell Wyrick
Edward Williams
Robert Smith
Paul Dillon
Tyrone Stallings
Marlin Hines
Nancy Arreola
Maricella Arreola
Roger Mullendore
Raymond O. Dike, Esq (Overseas Representative)
Effective on the closing of the acquisition, the Company's Officers and
Directors were as follows: Anthony C. Dike, MD- Chairman, President and
Chief Executive officer.
Anthony C. Dike, MD is also the medical director of Meridian Medical Group,
P.C., Chairman and CEO of Meridian Health Systems, Inc. He originated the
idea of "Computer Aided Provider NETwork," (CAPNET) as a facilitator of
vertical integrated Electronic Commerce delivery system, that will foster
the continuous growth and expansion of the capabilities of the Internet
and providing for easy dissemination of time critical information over a
secured private networks. He is the Chairman/CEO of Intercare Diagnostics,
Inc and CGI Communications Services, Inc. Anthony C. Dike, MD, is also a
consultant to the United Nations Developmental Program for Tokten (Transfer
of Knowledge Through Expatriate National). He is also a consultant to the
U.S. Department of Education Office of Special Education and Rehabilitation
(NIDRR), as a grant application reviewer. He is also a member of Medical
Advisory Board as well as Pharmacy & Therapeutic ("P&T") Committee of LA
Care Health Plan. Member of the Medical Affairs Committee of Los Angeles
County Community Health Plan. He has authored various Multimedia Software
Titles including the Mirage Systems Multimedia Biofeedback Program the first
FDA approved software only for Biofeedback and relaxation training; Body Pain
Trigger Points Program; Stress Profiling Program; Drmagic(tm) Medical
Practice Management Program. He is also the founder of Capnet Gateway
Online Services, an Internet based information management company
http://www.capnet.com; Bolingo.com (hi-Tech E-commerce Store
http://www.bolingo.com; Bidfair.com (a person to person Auction site
http://www.bidfair.com ;.
