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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
Commission File Number: 0-26567
E-MEDSOFT.COM
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(Exact name of small business issuer as specified in its charter)
Nevada 84-1037630
- ---------------------------- ---------------------------------
(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1300 Marsh Landing Parkway, Suite 106, Jacksonville, Florida 32250
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(Address of principal executive offices including zip code)
(904) 543-1001
--------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No___
As of September 1, 1999, 55,038,443 shares of common stock, $.001 par value
per share, were outstanding.
Transitional Small Business Disclosure Format (check one): Yes__ No X
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INDEX
Page No.
PART I. FINANCIAL STATEMENTS .............................. 3
Consolidated Balance Sheets dated June 30, 1999
(unaudited) and March 31, 1999 ......................... 3
Consolidated Statement of Operations (unaudited)
for the Three Months ended June 30, 1999 .............. 4
Consolidated Statement of Cash Flows (unaudited)
for the Three Months ended June 30, 1999 .............. 5
Notes to the Consolidated Financial Statements -
June 30, 1999(unaudited) .............................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS .... 10
PART II. OTHER INFORMATION ................................ 15
ITEM 1. LEGAL PROCEEDINGS ............................ 15
ITEM 2. CHANGES IN SECURITIES ........................ 15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES .............. 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS ............................. 15
ITEM 5. OTHER INFORMATION ............................ 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............. 15
SIGNATURES ................................................. 16
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e-MedSoft.com
Consolidated Balance Sheets
(Unaudited)
June 30, March 31,
1999 1999
(unaudited)
ASSETS
Current Assets:
Cash $ 57,654 $ 51,712
Restricted cash 135,201 138,435
Accounts receivable, net 1,976,606 4,181,285
Other receivables 381,376 1,062,133
Inventory 3,755,713 713,002
Related party receivables, net 228,198 193,263
Prepayments and other 433,192 381,591
Deferred taxes 14,210 14,555
Prepaid taxes 154,401 -
----------- -----------
7,136,551 6,735,976
Long-Term Assets:
Property and Equipment, net 1,614,537 1,308,863
Goodwill, net of amortization 7,884,070 8,054,630
Deferred financing, net of amortization - 1,363,439
----------- -----------
9,498,607 10,726,932
----------- -----------
TOTAL ASSETS $16,635,158 $17,462,908
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Line of credit $ 783,416 $ 967,425
Accounts payable 7,540,220 6,017,183
Accrued liabilities 376,108 412,405
Income taxes payable - 165,280
Current maturities of bridge financing 838,932 650,623
Current maturities of capitalized leases 239,758 165,275
----------- -----------
9,778,434 8,378,191
Long-Term Liabilities:
Capital leases 640,789 416,409
Bridge financing 800,000 1,361,877
Other long-term liabilities 1,193,581 1,193,581
----------- -----------
2,634,370 2,971,867
Shareholders' Equity:
Common shares 51,841 51,816
Paid in capital 7,586,404 6,951,312
Accumulated deficit (3,433,033) (904,617)
Accumulated other comprehensive income 17,142 14,339
----------- -----------
4,222,354 6,112,850
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $16,635,158 $17,462,908
=========== ===========
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e-MedSoft.com
Consolidated Statement of Operations
Three Months Ended June 30, 1999
(Unaudited)
NET SALES $ 4,443,251
COST OF SALES 3,629,499
-----------
GROSS PROFIT 813,752
OPERATING EXPENSES:
Research and development 247,959
Sales and marketing expense 611,775
General and administrative 1,405,978
Depreciation and amortization 344,519
-----------
Total Operating Expenses 2,610,231
-----------
OPERATING LOSS (1,796,479)
OTHER INCOME (EXPENSE):
Interest expense (1,335,277)
Other income 3,577
-----------
LOSS BEFORE INCOME TAXES AND
EXTRAORDINGARY INCOME (3,128,179)
EXTRAORDINARY INCOME 357,152
-----------
LOSS BEFORE INCOME TAXES (2,771,027)
TAX BENEFIT 242,611
-----------
NET LOSS $ (2,528,416)
===========
BASIC AND DILUTED LOSS PER SHARE $ (.05)
============
AVERAGE WEIGHTED SHARES OUTSTANDING 51,834,107
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e-MedSoft.com
Consolidated Statement of Cash Flows
Three Months Ended June 30, 1999
(Unaudited)
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $ (2,528,416)
Adjustments to reconcile net loss to net
cash used in operating activities:
Gain on exchange of debt for warrants (357,152)
Issuance of share rights and options
for services 129,380
Depreciation 142,433
Amortization of goodwill 202,086
Amortization of deferred financing 1,243,439
(Increase)decrease in current assets:
Accounts receivable 2,182,869
Inventory (3,042,711)
Prepayments and other receivables 597,455
Increase (decrease)in current liabilities:
Accounts payable and accrued liabilities 1,457,136
Income taxes (319,680)
------------
Cash Used in Operating Activities (293,161)
------------
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to property and equipment (462,432)
Business acquisition (31,526)
------------
Cash Used in Investing Activities (493,958)
------------
CASH FLOW FROM FINANCING ACTIVITIES
Net proceeds from interim bridge financing 638,932
Net increase in financing leases 319,153
Net decrease to credit facility (165,024)
------------
Cash Provided by Financing Activities 793,061
------------
INCREASE IN CASH 5,942
CASH AT THE BEGINNING OF THE PERIOD 51,712
------------
CASH AT THE END OF THE PERIOD $ 57,654
============
NON-CASH TRANSACTIONS
Issuance of warrants for payment of debt $ 505,738
============
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e-MedSoft.com
Notes to Consolidated Financial Statements
June 30, 1999
(Unaudited)
1) CONDENSED FINANCIAL STATEMENTS
The financial statements included herein have been prepared by e-MedSoft.com
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted as allowed by
such rules and regulations, and e-MedSoft.com believes that the disclosures
are adequate to make the information presented not misleading. Operating
results for the three months ended June 30, 1999, are not necessarily
indicative of the results that may be expected for the year ending March 31,
2000. While management believes the procedures followed in preparing these
financial statements are reasonable, the accuracy of the amounts are in some
respects dependent upon the facts that will exist, and procedures that will be
accomplished by e-MedSoft.com later in the year. These financial statements
should be read in conjunction with the March 31, 1999 audited financial
statements and the accompanying notes thereto, and the Forms 8-K filed by the
Company on March 19, 1999 and September 1, 1999.
The management of e-MedSoft.com believes that the accompanying unaudited
condensed financial statements contain all adjustments (including normal
recurring adjustments) necessary to present fairly the operations and cash
flows for the periods presented.
2) BUSINESS COMBINATIONS
On March 19, 1999, the Company completed the acquisition of all issued and
outstanding stock of e-Net Technology Ltd. ("e-Net", formerly Palm Technology
Holdings Ltd), a UK based company. This acquisition has been accounted for
under the purchase method and therefore, the financial statements presented
herein include the operations of e-Net from the acquisition date. The
following information presents pro forma information for the prior year's
quarter ended June 30, 1998 of e-Net as if such transaction had occurred at
the beginning of that period (unaudited):
Revenues $4,806,595
Cost of Sales 3,907,924
Gross Margin 898,671
Operating Expenses 1,054,134
Amortization of Goodwill 202,222
Interest Expense 97,312
Loss Before Income Taxes $ (454,997)
In May 1999, the Company's UK subsidiary acquired a small Internet financial
services business. This transaction was accounted for under the purchase
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method. The goodwill realized in this acquisition was approximately $32,000
and is being amortized over a ten-year period.
3) RENEGOTIATION OF BRIDGE DEBT TERMS
On May 14, 1999, the Company renegotiated the terms of its bridge-financing
loan with Trammel Investors. The loan that was originally to be repaid on May
19, 1999, was extended for a two-year period ending May 19, 2001. In order to
obtain this extension, the Company agreed to make an initial principal payment
of $300,000 by September 30, 1999. In addition, the lender waived the
remaining origination fees payable of approximately $120,000. Accordingly,
the Company has reclassified the long-term portion of the loan to long-term
debt and has eliminated the origination fees against deferred financing costs.
4) EXCHANGE OF BRIDGE DEBT FOR EQUITY
On June 14, 1999, the Company entered into an agreement with Don Ayers to
exchange his existing bridge loan for equity. In consideration for the
termination of $750,000 bridge debt and related financing fees of
approximately $90,000 plus interest payable to Don Ayers, the Company issued
to the lender 150,000 warrants to purchase 150,000 shares of the Company's
common stock for $.01 per share. The warrants have been valued at
approximately $506,000. The Company has reflected a gain on the transaction
of approximately $357,000, representing the difference between the fair market
value of the warrants and the debt net of unamortized loan origination fees at
the date of the transaction.
5) COMPANY FUNDING
During the three months ended June 30, 1999 the Company received approximately
$650,000 from National Trust Properties, Inc. ("NTP") as interim funding of
its operations. At June 30, 1999, the Company has included this funding in
bridge debt. Subsequent to the quarter end, NTP funded another $483,000 and
agreed to fund the Company's domestic operations until the Company completes
its current financing effort or through October 31, 1999. On August 1,
1999,in consideration for approximately $848,000 of the funding by NTP, the
Company agreed to issue 1,500,000 shares of its common stock to NTP. The
balance of the funding will remain in bridge debt.
6) WARRANTS AND STOCK OPTIONS
In May 1999, the Company entered into a one year exclusive agreement with an
investment banking firm to provide numerous services to the Company including,
among other things, assistance to the Company on corporate developments and
financing strategies, identifying prospective investors and acquisition
targets, performing due diligence and valuation analyses of such targets and
providing other services to enable the Company to maximize awareness and
penetration of the Company in the investment and public communities. In
connection with this agreement, in addition to specific fees to be paid for
certain services, the Company provided three separate warrants of 1,725,715
each to purchase an aggregate of 5,177,145 shares of the Company's common
stock. If exercised, the agreement called for the investment banking firm to
pay prices ranging from $3.50 to $7.00 per share to exercise these warrants.
The investment banking firm did not deliver the services contemplated to have
been delivered in exchange for the Company's warrants. The Company has been
advised by counsel, and has itself separately concluded, that it is
appropriate to cancel and rescind the severable provision of warrants to the
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investment banking firm. Outside Company counsel has further advised that
such rescission is the definitively proper step in view of the failure of
consideration from the investment banking firm. Counsel has also advised the
Company that there is a less than 5% probability that these warrants have to
be issued. The balance of the investment banking agreement between the
Company and the investment banking firm continues in full force and effect.
The investment banking firm has maintained active performance with respect to
its other contractual undertakings. Management believes the investment
banking firm does not materially disagree with the Company's conclusions.
Thus the Company cancelled the warrants and did not record any related
compensation expense.
On September 9, 1999, the Company committed to issue 195,000 common shares at
$1.00 per share to certain members of management of e-Net in connection with
short-term financing obtained from such executives.
7) BASIC AND FULLY DILUTED EARNINGS PER SHARE
In accordance with SFAS No. 128, "Computation of Earnings Per Share," basic
earnings per share is computed by dividing the net earnings available to
common stockholders for the period by the weighted average number of common
shares outstanding during the period. Diluted earnings per share is computed
by dividing the net earnings for the period by the weighted average number of
common and common equivalent shares outstanding during the period.
Common equivalent shares, consisting of incremental common shares issuable
upon the exercise of stock options and warrants are excluded from the diluted
earnings per share calculation if their effect is anti-dilutive.
A summary of the shares used to compute net loss per share is as follows:
Three Months Ended
June 30, 1999
-----------------
Weighted average common shares
used to compute basic net loss
per share.............................. 51,834,107
Effect of dilutive securities........... --
----------
Weighted average common shares
used to compute diluted net
loss per share......................... 51,834,107
==========
For the three months ended June 30, 1999, options and warrants to purchase
7,049,574 shares of common stock were excluded from the computation of diluted
loss per share as such options and warrants were anti-dilutive.
8) RELATED PARTY TRANSACTIONS
The Company has reflected on its books various transactions with related
parties primarily as a result of the realignment of its operations in
connection with the acquisition and development of the healthcare management
system. As of June 30, 1999 the Company had related party receivables
totaling $228,198.
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9) SEGMENT INFORMATION
In June 1997, SFAS No. 131 "Disclosures about Segments of an Enterprise and
Related Information" was issued effective for fiscal years beginning after
December 15, 1997.
e-MedSoft.com derives its revenue from two operating segments: (1) transaction
and information services, primarily healthcare, delivered over the Internet,
private intranets or other networks and consulting contracts related to these
services and (2) the sale and installation of hardware and software products.
During the current period, the Company derived all of its revenues from its
operations in the United Kingdom, primarily from computer hardware and
software sales.
The accounting policies of the segments are the same and the Company evaluates
performance based on operating earnings of the respective business segments.
The Company's revenues from external customers and the long-lived assets at
June 30, 1999, classified by geographic area, were as follows (in thousands):
United United
States Kingdom Total
------ ------- -----
Revenues ........................ $ - $4,443 $ 4,443
Long-lived assets ............... 8,333 8,225 16,558
10) SUBSEQUENT EVENT
Subsequent to quarter end, the Company entered into a financing arrangement
with its strategic partner to fund the Company's operations in an amount not
to exceed $5,500,000. The obligation, which is secured by the Company's
assets, bears interest at prime plus 1% and is due one year from the draw date
or on the date the Company successfully obtains refinancing for the amounts
loaned under the financing arrangement, whichever is the earlier date. The
Company borrowed $2,500,000 through September 10, 1999.
On September 1, 1999, the Company acquired from University Affiliates IPA
("UA," an affiliate of University of Southern California School of Medicine) a
managed care computer software technology for approximately $6,500,000,
including a cash payment of $2,000,000 and the issuance of 1,721,973 shares of
the Company's common stock with an approximate value of $4,500,000. In
addition, the Company entered into a ten-year contract with UA for exclusive
access to UA's network of more than 2,500 physicians. The agreement includes
revenue sharing of UA's network and exclusive use of the technology in
connection with UA's expansion of its physician network. In addition, the
Company has agreed to finance certain costs to further develop the software.
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ITEM 2
e-MedSoft.com
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL HISTORY
e-MedSoft.com (the "Company") was initially organized in Nevada on August
25, 1986, in order to evaluate, structure and complete a merger with, or
acquisition of, prospects consisting of private companies, partnerships or
sole proprietorships.
On January 7, 1999, the Company acquired from Sanga e-Health, LLC
("SEH"), the rights to a JAVA-based, on-line health care management system in
exchange for 41,417,176 restricted shares (post-split) of the Company's common
stock. In connection with this transaction, the Company completed a 5 for 1
forward stock split having a record date of January 4, 1999. In addition, as
consideration for finder's fees and services, the Company issued 2,553,144
restricted shares of the Company's common stock and 1,035,429 warrants to
purchase restricted shares of the Company's common stock exercisable at $.25
per share over five years.
On March 19, 1999, the Company acquired all of the issued and outstanding
stock of e-Net Technology Ltd. ("e-Net", formerly Palm Technology Holdings
Ltd.), a UK based company. e-Net is a diversified computer services company,
providing consulting services, training, technical support, computer software
and computer hardware to a broad range of customers. This acquisition was
accounted for under the purchase method.
The results of operations presented herein reflect the net sales and
expenses of e-Net and the costs of development and marketing the Company's
Software product acquired on January 7, 1999 (see above). Prior to the
acquisition of the on-line health care management system on January 7, 1999,
and the acquisition of e-Net on March 19, 1999, the Company's operating
expenses, interest income and expense were minimal. Therefore, the financial
statements included herein only present the historical information for the
three months ended June 30, 1999. The following analysis compares the
operating results for the three months ended June 30, 1999 to pro forma
information for the three months ended June 30, 1998, which gives effect to
the acquisition of e-Net as if such transaction had occurred at the beginning
of that period (in thousands)(unaudited):
6/30/99 6/30/98
Pro forma
Net Sales $4,443 $4,807
Cost of Sales 3,629 3,908
Gross Margin 814 899
Operating Expenses 2,610 1,256
Operating loss (1,796) (357)
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NET SALES
Net sales for the three months ended June 30, 1999 were $4.4 million
compared to pro forma revenues for the three months ended June 30, 1998 of
$4.8 million. Orders in process (backlog) and not included in net sales at
June 30, 1999 and 1998 were approximately $4.8 million and $2.2 million,
respectively. The increased backlog in fulfilling orders for the quarter
ended June 30, 1999 was a direct result of delayed product delivery from the
Company's major supplier, Sun Microsystems. The decrease in reported net
sales was approximately $400,000. Approximately $270,000 of this decrease was
due to lower foreign exchange rates and the remaining decrease was due to
slightly lower sales of software and consultancy services that tend to
fluctuate on a quarterly basis.
COST OF SALES
Cost of sales for the three months ended June 30, 1999 were $3.6 million
compared to pro forma cost of sales of $3.9 million for the comparable prior
year period. The decrease in cost of sales was mainly due to lower exchange
rates and to lower sales of software and consultancy services. Cost of sales
as a percent of revenues increased slightly from 81.3% for the pro forma
quarter ended June 30, 1998 to 81.7% in the quarter ended June 30, 1999. This
slight increase also reflects the decrease in software revenues that generally
reflect a higher gross margin.
OPERATING COSTS
RESEARCH AND DEVELOPMENT
Research and development costs mainly consist of salaries and equipment
costs of the internal development of new software products in the UK. During
the quarter ended June 30, 1999 e-Net incurred approximately $248,000 in
development costs.
SALES AND MARKETING
Sales and marketing costs of approximately $612,000 mainly consist of
costs for salaries, travel, advertising, marketing literature and seminars.
These costs reflect the Company's business plan to increase markets and
customers throughout the United States and United Kingdom. The main increase
from the June 1998 pro forma amount was due to salaries in the United Kingdom,
which reflected the planned software start-up company as well as geographical
expansion of personnel and offices.
GENERAL AND ADMINISTRATIVE
General and administrative costs of approximately $1,406,000 mainly
consist of salaries, facility costs and professional fees. During the quarter
ended June 30, 1999, the Company incurred higher salary expense, travel costs
and professional fees for the reorganization of e-Medsoft and for e-Net to
align its operations in accordance with its business plans. These costs,
which include legal fees, accountancy fees and other consulting fees, also
represent the efforts of the Company to broaden its market visibility and
obtain funding for its operations and planned expansion.
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DEPRECIATION AND AMORTIZATION
Depreciation and amortization of approximately $344,000 include
depreciation of equipment of approximately $142,000 and the amortization of
goodwill of $202,000. The Company is amortizing goodwill over a ten-year
period.
FINANCE COSTS
Finance costs of approximately $1,335,000 include approximately
$1,243,000 of amortization of deferred financing costs incurred as a result of
the bridge financing obtained for the acquisition of e-Net. As of June 30,
1999 all deferred financing costs have been amortized. In addition, finance
costs include interest expense on the Company's bridge debt and e-Net's credit
facility.
EXTRAORDINARY GAIN
The extraordinary gain of approximately $357,000 is due to the
recognition of the gain associated with the exchange of bridge debt and its
related origination fees and interest payable for the issuance of warrants.
INCOME TAXES
Income tax benefit of approximately $243,000 reflects an estimated tax
benefit for the U.K. operations that the Company projects will be used by the
end of the year. The Company estimated the effective U.K. tax rate at 33%.
LIQUIDITY
The operating costs of the Company have been funded by its operations,
credit facility, and through loans from private investors. As of June 30,
1999, the Company had negative working capital of approximately $2.6 million,
including cash of $58,000 and restricted cash of $135,000. The negative
working capital includes approximately $1.6 million for the Company's credit
facility and bridge financing. It is anticipated that the credit facility
will continue to renew and not be payable within a year.
During the quarter ended June 30, 1999, the Company renegotiated the
financing terms on the debt obtained in connection with the e-Net acquisition.
As a result, $750,000 of the debt was exchanged for warrants to acquire
150,000 shares of the Company's common stock at $.01, and the remaining debt
was extended 24 months to May 19, 2001. The Company agreed to make a
principal payment of $300,000 in September 1999 to obtain this extension.
During the three months ended June 30, 1999 the Company received
approximately $650,000 from National Trust Properties, Inc. ("NTP") as interim
funding of its operations. At June 30, 1999, the Company has included this
funding as bridge debt. Subsequent to the quarter end, NTP funded another
$483,000 and agreed to fund the Company's domestic operations until the
Company completes its current financing effort or through October 31, 1999.
On August 1, 1999,in consideration for approximately $848,000 of funding, the
Company agreed to issue 1,500,000 shares of its common stock to NTP.
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Subsequent to the quarter, the Company entered into a financing
arrangement with its strategic partner to fund the Company's operations and
acquisition of managed care computer software technology in an amount not to
exceed $5,500,000. The obligation bears interest at prime plus 1%, is secured
by the Company's assets and is due one year from the draw date or if the
Company successfully obtains refinancing for the amounts loaned under the
financing arrangement, whichever is the earlier date. The Company has
borrowed $2,500,000 through September 10, 1999, of which $2,000,000 was used
to fund the purchase of managed care software technology.
Also subsequent to the quarter end, e-Net's management advanced the
subsidiary approximately 260,000 pounds to provide working capital. The
advance is scheduled for repayment on September 30, 1999. The credit facility
for 900,000 pounds expired on July 31, 1999, and was extended to September 30,
1999 and increased to 1,300,000 pounds. The Company has reached an interim
agreement with the bank to renew the line for 900,000 pounds through July 31,
2000. The Company is currently in negotiations to increase the funding on the
renewed line to 1,300,000 pounds.
In May 1999, the Company entered into a one year exclusive agreement with
an investment banking firm to provide numerous services to the Company
including, among other things, assistance on corporate developments and
financing strategies, identifying prospective investors and acquisition
targets, performing due diligence and valuation analyses of targets.
The Company believes that the funds available on the $5,500,000 financing
agreement are sufficient to meet the working capital needs of its U.S. and
U.K. operations through at least fiscal 2000. It is management's belief that
the long range operations (post fiscal year 2000) of the Company are dependent
upon the ability of the Company to obtain additional debt or equity funding to
support the 1) implementation and roll-out of its newly acquired healthcare
management system to customers under contract, 2) to expand its customer base
and 3) develop, acquire or enhance new applications and services. The Company
is actively pursuing additional financing and equity arrangements to
accomplish these goals, however, there can be no assurance that funding will
be available on terms acceptable to the Company, or at all.
YEAR 2000 COMPLIANCE
The Company is aware of the issues associated with the programming code
in existing computer systems as the year 2000 approaches. The Company has
reviewed its proprietary health care management software systems that were
acquired in January 1999 and which the Company has started marketing to
customers. The Company believes that these systems and applications, which the
Company has continued to develop, are designed to be Year 2000 compliant.
Accordingly, the Company did not incur any costs or reflect any expenses
during the period for implementation of Year 2000 programming code corrections
and does not anticipate any such costs in the future.
e-Net has implemented programs to identify and correct year 2000
problems. This program was initiated in the early part of 1997 and a
company-wide program was carried out and steps were taken to re-write software
and take other actions necessary to ensure that the Company's software and
hardware is year 2000 compliant. The risk analysis also considered the impact
on the business of year 2000 related failures by the Company's significant
suppliers and customers. The predominant supplier, Sun Microsystems provided
the Company with a formal confirmation that they are fully year 2000
compliant. The Company has been in communication with its other significant
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suppliers and customers to ensure that any potential problems are rectified.
However, given the complexity of the issue, it is the Company's belief that
they can not guarantee that no year 2000 problems will remain. e-Net's
management believes that it has achieved an acceptable state of readiness and
it also has the appropriate resources available to deal promptly with
significant subsequent failures or issues that might arise.
The Company is just starting to work with some of its customers of the
health care management system and one of the items which will be addressed is
whether the customers' existing computer systems are year 2000 compliant.
Management expects that many of the companies it will be selling to in the
health care industry are not year 2000 compliant. Until the Company learns
more about the specific facts of its customers, it is not able to determine
what the impact will be on the Company if these customers are not year 2000
compliant. However, the Company shall have no liability for any failure of
customers' or third party's software, hardware, applications, databases or
other systems to be year 2000 compliant or any year 2000 issues not solely
caused by the Company's system.
The Company may be vulnerable to the failure of various third party
vendors and suppliers to be year 2000 compliant. Its business will be
dependent on the operation of numerous systems that could potentially be
impacted by year 2000 related problems. Those systems include hardware and
software systems used by the Company to deliver services to its customers;
communications networks such as the internet and private intranets, which the
Company will depend on to provide electronic transactions to its customers;
the internal systems of the customers; and non-information technology systems
and services used by the Company in its business, such as telephone systems
and building systems. The Company will be conducting an assessment of third
party hardware and systems used in providing services to its customers and in
otherwise conducting its business during the second and third calendar
quarters of 1999.
The Company has not yet initiated formal contingency planning processes
to mitigate the risk to the Company of any year 2000 problems, but the Company
intends to complete this process by September 30, 1999.
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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.
During June 1999, shareholders owning more than a majority of the shares
outstanding signed consent minutes that approved amending the Company's
Articles of Incorporation to add the authorization of 5,000,000 shares of
$.001 par value preferred stock. No shares of preferred stock have been
issued as of the date of this Report.
ITEM 5. OTHER INFORMATION. None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
27 Financial Data Schedule Filed herewith
electronically
(b) REPORTS ON FORM 8-K. The Company filed a Current Report on Form
8-K dated June 2, 1999 which reported under Item 8 that on May 28, 1999 the
Company changed its fiscal year end from May 31 to March 31.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
e-MedSoft.com
Date: October 1, 1999 By: /s/ Margaret A. Harris
Margaret A. Harris, Chief
Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet and statements of operations found on pages 3 and 4 of the
Company's Form 10-QSB for the year to date, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 57,654
<SECURITIES> 0
<RECEIVABLES> 2,357,982
<ALLOWANCES> 0
<INVENTORY> 3,755,713
<CURRENT-ASSETS> 7,136,551
<PP&E> 1,614,537
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,635,158
<CURRENT-LIABILITIES> 9,778,434
<BONDS> 0
0
0
<COMMON> 51,841
<OTHER-SE> 4,153,371
<TOTAL-LIABILITY-AND-EQUITY> 16,635,158
<SALES> 4,443,251
<TOTAL-REVENUES> 4,443,251
<CGS> 3,629,499
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,610,231
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,335,277
<INCOME-PRETAX> (2,771,027)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,528,416)
<EPS-BASIC> (.05)
<EPS-DILUTED> (.05)
</TABLE>
