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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q-SB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
SECURITIES AND EXCHANGE COMMISSION FILE NUMBER
000-26369
DICOM IMAGING SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 88-0422026
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1350 E. FLAMINGO ROAD
SUITE 847
LAS VEGAS, NV 89119
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(877) 624-6243
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(520) 441-8755
(REGISTRANT'S FACSIMILE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
requirements for the past 90 days.
YES [ ] NO [X]
The number of issued and outstanding shares of the Registrants Common
Stock, $0.001 par value, as of September 30, 1999, was 2,400,000.
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DICOM IMAGING SYSTEMS, INC.
<TABLE>
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PART I-FINANCIAL INFORMATION
Page
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Item 1. Financial Statements:
Balance Sheet at September 30, 1999........................................................3
Condensed Statements of Operations for the three month period
ended September 30, 1999...................................................................4
Condensed Statements of Cash Flows for the three month period
ended September 30, 1999...................................................................5
Notes to Unaudited Condensed Financial Statements..........................................6-7
Item 2. Management's Plan of Operation for the twelve month period
beginning September 30, 1999...............................................................8-9
PART II-OTHER INFORMATION
Item 1. Legal Proceedings .........................................................................9
Item 2. Changes in Securities......................................................................9
Item 3. Defaults Upon Senior Securities............................................................9
Item 4. Submission of Matters to a Vote of Security Holders........................................9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K...........................................................9
Signatures..........................................................................................9
Exhibit 27.1 Financial Data Schedule................................................................10
</TABLE>
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INFORMATION REQUIRED IN QUARTERLY REPORT
CERTAIN FORWARD-LOOKING INFORMATION
The information contained in this Quarterly Report includes
forward-looking statements. Since this information is based on current
expectations which involve risks and uncertainties, actual results could differ
materially from those expressed in the forward-looking statements.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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DICOM IMAGING SYSTEM, INC.
- --------------------------------------------------------------------------------
BALANCE SHEET
For Month Ended September 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
CASH ON HAND
Wells Fargo Checking USD $ 58,034
Check Register 35,295
Savings Register (370)
--------
Total Cash on Hand $ 92,959
Intercompany Account (73,038)
Accounts Receivable 511,022
Dicom Software Loan Receivable 44,201
Deferred Charges 27,058
----------
TOTAL CURRENT ASSETS $ 602,202
FIXED ASSETS
Deferred Tax Assets 130,809
Computer Equipment
Comp Equip - Original Cost 47,784
Comp Equip - Acc. Depreciation (6,892)
--------
TOTAL COMPUTER EQUIPMENT 40,892
Demo Equip - Original Cost 13,328
Demo Equip - Acc. Depreciation (1,062)
--------
Total Demonstration Equipment 12,266
----------
TOTAL FIXED ASSETS 53,158
---------
TOTAL ASSETS $ 786,169
=========
LIABILITIES
CURRENT LIABILITIES
Accounts Payable 28,340
Accrued Liabilities $ 11,751
--------
TOTAL CURRENT LIABILITIES 40,091
----------
TOTAL LIABILITIES 40,091
EQUITY
Owner's/Shareholder's Equity 1,000,000
Retained earnings (67,936)
Current Years Earnings $ (185,986)
----------
TOTAL EQUITY $ 746,078
---------
TOTAL LIABILITIES & EQUITY $ 786,169
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</TABLE>
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DICOM IMAGING SYSTEM, INC.
- --------------------------------------------------------------------------------
PROFIT & LOSS STATEMENT
For Months July-Sept 1999
<TABLE>
<CAPTION>
<S> <C> <C>
INCOME
Software/Support $ 655,456 ***
Hardware 35,986
Freight Collected 2,677
Discounts (201)
TOTAL INCOME $ 693,918
COST OF SALES 30,869
---------
GROSS PROFIT 663,049
EXPENSES
GENERAL & ADMINISTRATIVE EXP
Salaries 81,307
Development 32,733
--------
TOTAL GENERAL & ADMINISTRATIVE EXP 114,040
START-UP EXPENSES
Video 3,436
Initial Mailing 4,631
TS Costs 23,519
Web Design 6,248
Ads 9,001
Travel 24,530
Legal 36,137
Investor Relations 2,509
Bank charges $ 109
--------
TOTAL START-UP EXPENSES 110,120
OVERHEAD 62,366
---------
TOTAL EXPENSES 286,526
NET INCOME (LOSS) BEFORE TAXES 376,523
INCOME TAX EXPENSE 128,018
---------
NET INCOME (LOSS) $ 248,505
=========
NET INCOME (LOSS) PER SHARE BEFORE TAXES $ 0.1569
=========
NET INCOME (LOSS) PER SHARE AFTER TAXES $ 0.1035
=========
</TABLE>
*Average number of common shares outstanding 2,400,000.
*** Please see the accompanying notes
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DICOM IMAGING SYSTEM, INC.
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
For Months July - September 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net Profit $ 248,505
Decrease in deferred taxes 128,018
Deduct loan receivable (44,201)
Deduct accounts receivable increase (511,201)
Add back accounts payable increase 7,116
Increase in accrued liabilities 11,751
Deduct intercompany transfers 73,038
Add back legal advance 25,915
Net Cash (Used) In Operating Activities (61,059)
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment 412
---------
CASH FLOW FROM FINANCING ACTIVITIES -
Net increase (decrease) in cash (61,471)
=========
Cash, July 1, 1999 155,384
Cash, September 30, 1999 93,913
Reconciliation of cash decrease $ (61,471)
=========
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DICOM IMAGING SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
July 1 - September 31, 1999
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was incorporated March 17, 1999 under the laws of the State of
Nevada. The Company was organized to engage in any lawful activity. The Company
currently has no operations and, in accordance with SFAS #7, is considered a
development stage company.
In March of 1999 the Company entered into a license and distribution agreement
with Torchmark Holdings to secure rights to image archiving and retrieval
software for use in dental diagnostic procedures and for other applications.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING METHOD
The Company records income and expenses on the accrual method.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is recorded using the
straight-line method over the estimated useful life. Computer hardware and
equipment is depreciated over a period of three years.
INCOME TAXES
Income Taxes are provided for using the liability method of accounting in
accordance with Statement of Financial Accounting Standards No. 109 (SFAS #109)
"Accounting for Income Taxes." A deferred tax asset or liability is recorded for
all temporary differences between financial and tax reporting. Deferred tax
expense (benefit) results from the net change during the year of deferred tax
assets and liabilities.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
NOTE 3 - INCOME TAXES
The company reported a net income before taxes of $376,523 for the quarter
ending September 30, 1999. By applying the U.S. federal income tax rate of 34%
to pretax income, the company is reducing it's deferred tax asset by $128,018
and recording a tax expense of same.
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---------------------------------------------- -----------------
Net Operating Losses $130,809
---------------------------------------------- -----------------
Less: valuation allowance $ -
---------------------------------------------- -----------------
Net deferred tax assets $130,809
---------------------------------------------- -----------------
The deferred taxes are presented in the balance sheet as a long term asset.
At September 30, 1999 the Company has net operating loss carryfowards for
federal income tax purposes of $385,119, which are available to offset future
taxable income through 2019.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
asset will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which the related temporary differences become deductible.
NOTE 4 - STOCKHOLDERS' EQUITY
COMMON STOCK
The authorized common stock of the Company consists of 50,000,000 shares with a
par value of $0.001 per share. Issued and outstanding common stock shares equal
to 2,400,000 were issued on March 31, 1999.
PREFERRED STOCK
The authorized preferred stock of the Company consists of 10,000,000 shares with
a par value of $0.001 per share. No preferred stock shares were issued and
outstanding at September 30, 1999.
NOTE 5 - REVENUE RECOGNITION
THE REVENUE OF THE AMENDED AND RESTATED LICENSE AGREEMENT IS CONTINGENT ON THE
COMPANY MEETING CERTAIN MILESTONES. THERE CAN BE NO ASSURANCE THAT SUCH
MILESTONES WILL BE MET. The $655,456 in Software sales reflects a $600,000 sale
of a license agreement pursuant to the Amended and Restated License Agreement
effective September 29, 1999 and attached to this filing as an exhibit. In July
of 1999, Dicom had entered into a Software Agreement with Knowledge Systems
International ("Software Agreement") whereby Knowledge Systems International
would pay a License Fee of $400,000 for a license to certain Dicom software.
Knowledge Systems International breached this Software Agreement in August, 1999
due to non-payment. The Licensee of the Amended and Restated License Agreement
desired to engage in a collaboration, joint venture or equity arrangement with
Dicom Imaging Systems, Inc. Upon learning that Knowledge Systems International
had breached its Software Agreement with Dicom due to non-payment, the Licensee
desired to negotiate a License to assume some of the profits that Knowledge
Systems International would have earned under the Software Agreement. Dicom and
Licensee negotiated a License Agreement and then an Amended and Restated License
Agreement, whereby Licensee would earn up to $50,000 in royalties for a License
to the Image Explorer Software in exchange for payment of a License Fee of
$600,000. Only $100,000 of the License Fee has been paid to date. There are
certain milestones that must be reached in order for the remaining $500,000 to
be paid. The first Milestone is that Dicom must have its application to trade on
the NASD OTC Bulletin Board approved by January 31, 2000. In addition, Dicom has
represented to Licensee that there will be total sales of at least $400,000 of
the Licensed Software by January 31, 2000, total sales of at least $600,000 by
March 31, 1999, total sales of at least $800,000 by May 31, 1999 and total sales
of $1,000,000 by June 30, 1999 ("Sales Milestones"). If any of the Sales
Milestones are not met, Licensee is entitled to (1) cancel the License and (2)
request a refund of License Fees paid to date, less any paid Royalty Payments.
Dicom must pay the Licensee 50% of its gross revenue from the sale of the Image
Explorer Software for the three year term of the License, up to a maximum of the
total of the License Payments plus $50,000. While management anticipates that
all of the milestones will be met, there can be no assurance that this will be
the
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case. While management has been advised by the auditors of Dicom that the full
$600,000 License Fee may be recognized as sales revenue in this quarter ending
September 30, 1999, it is possible that Dicom will realize no net revenue from
the Amended and Restated License Agreement if the milestones are not met.
Item 2. Management's Plan of Operation over the twelve month period beginning
June 30, 1999
Dicom Imaging Systems, Inc., a Nevada Corporation ("Dicom" or "DIS" or
the "Company") is a development stage software provider to the dental industry
and associated groups. It is the plan of Dicom to capture market share of
imaging software in dentistry by producing and distributing, free of charge, an
imaging software application known as IMAGE EXPLORER AND IMAGE EDITOR ("Image
Explorer") to dentists, dental specialists, dental laboratories, dental
insurance companies, and educational facilities throughout North America. Dicom
requires registration of its Image Explorer product by its customers through a
telephone registration system. At the point of registration of IMAGE EXPLORER,
it is anticipated that Dicom representatives will market a series of value added
software modules, support services and select imaging hardware devices to its
software registrants.
The core Image Explorer product functions primarily as a means for
dental professionals to categorize, manage and manipulate patient images by
means of a visual interface. The value added software modules each provide
products to assist dental professionals with a specific area of image management
and manipulation, such as cosmetic whitening procedures on teeth. The value
added software modules can be added and integrated as dental professionals
become more familiar with the Dicom's Image Explorer technology. Dicom had not
yet commenced sales of its Image Explorer product at June 30, 1999. Sales of the
Image Explorer product were commenced in July, 1999.
Dicom's plan of operation over the next twelve months is to continue to
develop and improve the Software throughout the year, responding to customer
comments and requests and producing an updated version of the core product,
Image Explorer. Dicom intends to aggressively capture market share over the next
twelve months through attendance at nearly every significant dental tradeshow
held in Canada and the United States. We plan to staff our booths at these
tradeshows with Dicom personnel who can explain and market our product to the
dentists in attendance. In addition, Dr. Gane plans an aggressive lecture,
seminar campaign, where he will speak to audiences of dental professionals
throughout Canada about dental imaging in general and Image Explorer in
particular. Because Dr. Gane receives a number of invitations to speak
throughout the year to dental professionals eager to improve and develop their
practices, we feel that these events provide him with an opportunity to promote
Image Explorer throughout the year to a large number of dental professionals.
Dicom intends over the next twelve months to negotiate supply
relationships with most of the major dental product distributors in North
America and to greatly expand the number of distributors who stock the Dicom
product. Dicom has planned an aggressive advertising campaign in Dental Products
Report and other dental trade magazines to continue to promote Image Explorer
throughout the year to dental professionals.
Dicom intends to purchase the license rights to the medical version of
the Image Explorer product from Torchmark. Originally, Dicom had anticipated
purchasing and commencing development on the medical version of the Image
Explorer software in October, 1999. Presently, management anticipates that his
will occur by December, 1999. Management intends to spend the balance of the
next twelve months developing and marketing the medical version of Image
Explorer to medical professionals.
Dicom intends to develop and enhance its web site over the next twelve
months and to drive traffic to the site by pursuing links with other dental
related sites and by purchasing banner advertisements on dental product sites.
Dicom is currently in discussions with various Internet consultants to add
multimedia and enhanced functionality to the web site, as well as improve
graphic design elements.
Dicom intends to streamline its customer support functions over the
next twelve months through extensive scripting of commonly experienced technical
and product usage problems as they are encountered by our customer support
staff. In addition, Dicom intends to begin its intensive telemarketing campaign
and to continue it throughout the next twelve months, with a goal of contacting
by telephone all leads generated by our presence at trade shows, Dr. Gane's
lectures, through our web site and through reader responses to our
advertisements in dental trade magazines.
In addition to developing an upgraded version of the core Image
Explorer product during the next twelve months, Dicom intends to develop other
value-added software modules and other methods for
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enhancing its revenue stream, including corporate partnering agreements and
agreements to bundle the Image Explorer core product with other manufacturer's
hardware products.
Under the terms of Dicom's stock subscription agreements with its
common shareholders, Dicom is prohibited from raising additional capital through
the sale of new equity in the company or through the undertaking of any material
indebtedness without the consent of the shareholders. Dicom intends, however, to
obtain a waiver of this prohibition in November of 1999, at which point Dicom
intends to undertake a limited offering of its securities. Management has not
yet determined the terms or amount of such a potential offering.
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
In July of 1999, Dicom had entered into a Software Agreement with
Knowledge Systems International ("Software Agreement") whereby Knowledge Systems
International would pay a License Fee of $400,000 for a license to certain Dicom
software. Knowledge Systems International breached this Software Agreement in
August, 1999 due to non-payment. Dicom negotiated an Amended and Restated
License Agreement in September, 1999 with another party for a $600,000 license
fee. This license fee is contingent on Dicom meeting certain Milestones. The
first Milestone is that Dicom must have its application to trade on the NASD OTC
Bulletin Board approved by January 31, 2000. In addition, Dicom has represented
to Licensee that there will be total sales of at least $400,000 of the Licensed
Software by January 31, 2000, total sales of at least $600,000 by March 31,
1999, total sales of at least $800,000 by May 31, 1999 and total sales of
$1,000,000 by June 30, 1999 ("Sales Milestones"). If any of the Sales Milestones
are not met, Licensee is entitled to (1) cancel the License and (2) request a
refund of License Fees paid to date, less any paid Royalty Payments. Dicom must
pay the Licensee 50% of its gross revenue from the sale of the Image Explorer
Software for the three year term of the License, up to a maximum of the total of
the License Payments plus $50,000. While management anticipates that all of the
milestones will be met, there can be no assurance that this will be the case.
While management has been advised by the auditors of Dicom that the full
$600,000 License Fee may be recognized as sales revenue in this quarter ending
September 30, 1999, it is possible that DICOM WILL REALIZE NO NET REVENUE FROM
THE AMENDED AND RESTATED LICENSE AGREEMENT IF THE MILESTONES ARE NOT MET.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1 Amended and Restated License Agreement between Registrant and
Douglas Campbell effective September 29, 1999.
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Exhibit 27.1 Financial Data Schedule
(b) Reports on 8-K
None.
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
DICOM IMAGING SYSTEMS, INC.
- ---------------------------
(Registrant)
Date: November 7, 1999
----------------
By: /s/ David Gane
--------------------------
David Gane
President and Chief Executive Officer
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EXHIBIT 10.1
AMENDED AND RESTATED
SOFTWARE LICENSE AGREEMENT
This Amended and Restated Software License Agreement ("Agreement") is
effective as of September 29, 1999 by and between Dicom Imaging Systems, Inc.,
a Nevada corporation ("Dicom") and Douglas Campbell ("Licensee").
WHEREAS, Dicom and Licensee previously entered into that certain
Software License Agreement ("Previous Agreement") of even date herewith; and
WHEREAS, Dicom and Licensee desire to amend and restate the Previous
Agreement in the form of this Agreement; and
WHEREAS, Due to covenants Dicom has made to certain holders of its
common shares, no new equity issuance may be made by Dicom at the present time;
WHEREAS, Licensee desires to have a strategic alliance with Dicom which
both parties anticipate will lead to a future equity investment by Licensee into
Dicom and Licensee's entering into this Agreement is explicitly conditioned upon
Dicom's meeting certain corporate milestones necessary to facilitate this
strategic alliance and equity investement;
WHEREAS, Licensee understands that Dicom has presented Licensee with an
opportunity to purchase a License to certain Dicom software which Licensee
desires to purchase;
NOW THEREFORE, in consideration of the mutual covenants the sufficiency
of which is hereby acknowledged, the parties agrees as follows:
1. LICENSE. In consideration for the Payment Amount, as noted below,
Licensee is hereby granted an exclusive license ("License") to the Dicom
software product known as Image Explorer ("Licensed Software"). Dicom agrees
that it may not sell or sublicense the Image Explorer, except under the terms of
this License. Licensee acknowledges that it takes this License subject to the
conditions and exclusions of the License Agreement between Dicom and Torchmark
Holdings, Ltd. and that Licensee has been provided a copy of the same.
2. PAYMENT AMOUNT. In consideration for the License, Licensee agrees to
pay Dicom $600,000 (the "Payment Amount") in accordance with this Section 2.
$100,000 of the Payment Amount shall be paid by Licensee immediately upon
execution of this Agreement ("Initial Payment"). The remaining Payment Amounts
shall be due in equal installments on the 30th of November, 1999; the 31st of
January, 2000 and the 31st of March, 2000 ; the 31st of May; and the 31st of
July ("Subsequent Payments"). Licensee's obligation to make Subsequent Payments
is subject to Section 4 of this Agreement.
3. ROYALTY PAYMENTS.
a. EXCLUSIVITY OF RESALE. Dicom and the Licensee acknowledge that
the Licensee is not in the business of dental software and the
only practical method for Licensee to sell the Licensed
Software is via Dicom and its value added resellers or via a
third party distributor or value added reseller. Although
Licensee would be free to sell the Licensed Software through a
third party or other value added resellers not affiliated with
Dicom, in consideration for the Royalty Payment, as defined
below, Licensee agrees not to do so.
b. BEST EFFORTS TO SELL LICENSED SOFTWARE. Dicom agrees,
covenants and warrants use its best efforts to cause the
Licensed Software to be sold to retail or wholesale
purchasers.
c. ROYALTY PAYMENT. Dicom agrees to pay fifty percent of the
gross revenue received and collected, less returns, from the
sale of the Licensed Software to Licensee as a Royalty
Payment. Such a Royalty Payment shall continue until
extinguished in accordance with Section 4 of this Agreement.
d. PAYMENT SCHEDULE. Dicom shall make the Royalty Payment to
Licensee within fifteen days of the end of each calendar month
in which a sale of the Licensed Software is made by Dicom
("Due Date").
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Dicom agrees that any payments not tendered by the Due Date
shall be subject to a Late Payment Charge of 1.5% per month
until paid in full.
e. RIGHT OF INSPECTION. Dicom agrees to allow the Licensee to
inspect the books and records of Dicom from time-to-time and
upon at least thirty-six hours of advance notice in order to
insure compliance with this Section 3.
4. CORPORATE RELATIONSHIP AND MILESTONES. The Parties understand that
their mutual obligations hereunder are conditioned upon the fulfillment of
certain agreed upon milestones which are elaborated in this Section 4.
Furthermore, the Parties are contemplating a future strategic alliance whereby
Licensee would make an equity investment in Dicom. Licensee's obligations
hereunder and this future relationship are conditioned upon Dicom's meeting
certain corporate milestones at outlined in this Section 4.
a. PUBLIC COMPANY STATUS. Dicom has represented to Licensee and
Licensee has specifically relied upon Dicom's representation
that Dicom is a fully reporting public entity, filing timely
periodic reports under the Securities and Exchange Act of
1934. Dicom also represents that its common shares will be
trading on the National Association of Securities Dealers'
("NASD") Over the Counter Bulletin Board Exchange within sixty
days from the effective date of this Agreement. In the event
that Dicom should be approved for such trading by the NASD
("Approval"), the payment due on November 30, 1999 under
Section 2 of this Agreement shall be immediately due and
payable. If the NASD has not approved Dicom's application for
trading by November 30, 1999, Licensee may elect to withhold
Subsequent Payments under this Agreement until such time as
Approval has been granted. If Approval has not been granted by
January 31, 2000, Licensee may elect to terminate this
Agreement pursuant to section 5 hereof.
b. CORPORATE MILESTONES. Dicom has represented to Licensee that
there will be total sales of at least $400,000 of the Licensed
Software by January 31, 2000, total sales of at least $600,000
by March 31, 1999, total sales of at least $800,000 by May 31,
1999 and total sales of $1,000,000 by June 30, 1999 ("Sales
Milestones"). If any of the Sales Milestones are not met,
Licensee may immediately terminate this Agreement pursuant to
section 5 below.
5. TERMINATION. The term of this Agreement is three years. At the end
of three years, any Royalty Payments due Licensee shall cease and Licensee's
rights hereunder, including the License, shall be extinguished. This Agreement
may be terminated by either party pursuant to a specific provision of this
Section 5 as described below.
a. TERMINATION BY DICOM. Dicom may terminate this Agreement at
any time by refunding the Initial Payment, the Subsequent
Payments (to the extent that these have been tendered) and an
early Termination Fee of $50,000. Any payments due by Dicom
under this Section shall be offset by the amount of any
Royalty Payments actually made by Dicom to Licensee.
b. TERMINATION BY LICENSEE. Licensee may terminate this agreement
as indicated in section 4 of this Agreement. If Licensee
elects to terminate this Agreement, he is entitled to receive
the return of the Initial Payment and any Subsequent Payments
made, less any Royalty Payments actually made by Dicom to
Licensee. The Licensee's rights hereunder, and the Royalty
Obligations of Dicom, are not extinguished until the refund
amount is paid in full. Dicom agrees that the sums due under
this Section 5(b) are to be paid within 30 days of
termination under this Section 5(b).
6. LEGAL OBLIGATION. Licensee understands that this Agreement is a
legal obligation of Licensee enforceable in accordance with its terms.
Furthermore, Licensee specifically understands and agrees that he will be
obligated to make the full amount of the Initial Payment and Subsequent Payments
provided that Dicom satisfies the conditions in Section 4 of this Agreement.
7. MISCELLANEOUS PROVISIONS. This Agreement shall inure to the benefit
of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the Parties hereto. This Agreement represents the entire
agreement and understanding between the Parties concerning the subject matter
hereof, including any transactions ever entered into or contemplated between the
Parties and supersedes and replaces any and all prior agreements and
understandings concerning the same. This Agreement may only be amended in
writing signed by the Parties. This Agreement shall be governed by the laws of
the State of Nevada. This Agreement may be executed in counterparts, and each
counterpart shall have the same force and effect as an original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.
<PAGE> 3
IN WITNESS WHEREOF, the undersigned respective parties have caused this
Agreement to be executed in their names effective as of the day and year first
above written.
On behalf of Dicom Imaging Systems, Inc.
Dicom Imaging Systems, Inc.
a Nevada corporation
By:
-----------------------------------
Title:
---------------------------------
Licensee:
- -----------------------------------
Douglas Campbell
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 93,913
<SECURITIES> 0
<RECEIVABLES> 511,022
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 602,202
<PP&E> 53,158
<DEPRECIATION> 0
<TOTAL-ASSETS> 786,169
<CURRENT-LIABILITIES> 40,091
<BONDS> 0
0
0
<COMMON> 1,000,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 786,169
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 286,526
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 376,523
<INCOME-TAX> 128,018
<INCOME-CONTINUING> 248,505
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 248,505
<EPS-BASIC> 0.157
<EPS-DILUTED> 0.104
</TABLE>
