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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 February 28, 1999
Commission File Number: 33-8420-D
E-MEDSOFT.COM
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(Exact name of small business issuer as specified in its charter)
Nevada 84-1037630
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(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
20750 Ventura Boulevard, Suite 202, Woodland Hills, CA 91364
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(Address of principal executive offices including zip code)
(818) 710-9813
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(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 April 10, 1999, 51,771,470 shares of common stock, $.0001 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
Balance Sheets dated February 28, 1999 (unaudited)
and May 31, 1998 ...................................... 3
Statement of Operations (unaudited) for the Three and
Nine Months ended February 28, 1999 ................... 4
Statement of Cash Flows (unaudited) for the Three
and Nine Months ended February 28, 1999 ............... 5
Notes to Financial Statements - February 28, 1999
(unaudited) ........................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS .... 8
PART II. OTHER INFORMATION ................................ 10
ITEM 1. LEGAL PROCEEDINGS ............................ 10
ITEM 2. CHANGES IN SECURITIES ........................ 10
ITEM 3. DEFAULTS UPON SENIOR SECURITIES .............. 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS ............................. 10
ITEM 5. OTHER INFORMATION ............................ 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............. 11
SIGNATURES ................................................. 11
2
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e-MedSoft.com
Balance Sheets
February 28, May 31,
1999 1998
(unaudited)
ASSETS
Current Assets
Cash $ 90,729 $ 617
Related party receivables, net 635,270 12,000
Other - 2,108
----------- ---------
725,999 14,725
Other Assets
Other assets 6,965 -
----------- ---------
TOTAL ASSETS $ 732,964 $ 14,725
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable $ 28,750 3,448
Notes payable - 31,314
Other - 4,926
----------- ---------
28,750 39,688
Deferred Revenues 750,000 -
Shareholders' (Deficit)
Common Shares 51,771 1,400
Paid in Capital 36,414 534,747
Retained (Deficit) (133,971) (561,110)
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(45,786) (24,963)
----------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT) $ 732,964 $ 14,725
=========== =========
3
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e-MedSoft.com
Statement of Operations
(Unaudited)
Three and Nine Months Ended February 28, 1999
Three Nine
Months Months
REVENUE $ - $ -
OPERATING EXPENSES
Research and development 7,090 7,090
Sales and marketing expense 14,605 14,605
General and administrative 19,816 24,189
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Total Operating Expenses 41,511 45,884
Depreciation and Amortization - -
OTHER INCOME (EXPENSE) - 420
INTEREST EXPENSE - 1,356
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PRE TAX LOSS (41,511) (46,820)
TAX BENEFIT - -
----------- -----------
NET LOSS $ (41,511) $ (46,820)
=========== ===========
NET LOSS PER SHARE $ (0.00) $ (0.00)
AVERAGE WEIGHTED SHARES OUTSTANDING 37,061,363 14,996,203
4
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e-MedSoft.com
Statement of Cash Flow
(Unaudited)
Three and Nine Months Ended February 28, 1999
Three Nine
Months Months
CASH FLOW FROM OPERATING ACTIVITIES
Net operating loss $ (41,511) $ (46,820)
Adjustments to reconcile net loss to net
cash used in operating activities:
Decrease in accrued interest receivable 2,528 2,108
Increase in accrued interest payable 1,356 1,356
Increase in accounts payable 24,308 25,302
(Increase) in related party receivables, net (638,869) (638,869)
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(653,544) (656,923)
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CASH FLOW FROM INVESTING ACTIVITIES
Increase in other assets (6,965) (6,965)
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CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from notes payable - 4,000
Proceeds from deferred revenues 750,000 750,000
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750,000 754,000
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INCREASE IN CASH 89,491 90,112
CASH AT THE BEGINNING OF THE PERIOD 1,238 617
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CASH AT THE END OF THE PERIOD $ 90,729 $ 90,729
========= =========
NON CASH TRANSACTIONS
Issuance of restricted stock for
payment of debt 41,596 41,596
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$ 41,596 $ 41,596
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5
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e-MedSoft.com
Notes to Financial Statements
February 28, 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 and nine months ended February 28, 1999, are not
necessarily indicative of the results that may be expected for the year ending
May 31, 1999. 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. It is suggested that
these financial statements be read in conjunction with the May 31, 1998
audited financial statements and the accompanying notes thereto, and the Forms
8-K filed by the Company on January 7, 1999 and March 19, 1999 and the
amendments thereto.
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) ACQUISITION OF HEALTHCARE MANAGEMENT SYSTEM
On January 7, 1999, the Company acquired from Sanga e-Health, LLC ("SEH"), the
rights to a JAVA-based, on-line healthcare 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, 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. As a result of these transactions, SEH owned approximately
80% of the outstanding shares and is the acquiring company for accounting
purposes. This transaction is considered a reverse acquisition and as a
capital transaction that results in a capital reorganization. Accordingly,
the Company's assets have been reflected at fair value and the acquiring
company's assets at acquisition date have been reflected at their carryover
basis. There has been no goodwill or intangible assets recognized for this
acquisition in the financial statements.
(3) SOFTWARE LICENSE/ASSIGNMENT OF RIGHTS UNDER FINANCING AGREEMENTS
On January 23, 1999, the Company approved and ratified the termination of the
Software License Agreement which was entered into on December 2, 1998 between
SEH and Sanga International ("Sanga") for the sub-licensing of the healthcare
management system's software ("Software") to end-users thereof. The effect of
this termination was the assignment and transfer from Sanga to the Company of
all right, title and interest under or with respect to all of Sanga's
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contractual rights and privileges arising from their agreements with various
healthcare providers for the sub-leasing of the Software. In connection
therewith and in connection with certain other transactions, previous funding
received by Sanga from such healthcare agreements was transferred to the
Company. The previous funding received by Sanga was based on an agreement
with various third parties whereby is was anticipated that $1.5 million would
be received based upon accounts receivable to be derived from signed Master
Agreements and Memorandums of Understanding. The Company has reflected funds
received per this agreement as deferred revenues.
(4) 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 February 28, 1999 the Company had receivables from it's parent
company, SEH, and members of the parent company LLC totaling $635,270. In
addition, the parent company has received services from persons connected with
it in furtherance of the continuing development and marketing of the Software.
These services have been absorbed by SEH and are, therefore, not reflected on
the Company's financial statements included herein.
(5) SUBSEQUENT EVENT
On March 19, 1999, the Company completed the acquisition of all of the issued
and outstanding stock of Palm Technology Holdings Ltd. ("Palm"), a UK based
company which owns all of the issued and outstanding stock of UK based Relay
Business Systems Ltd. ("Relay"). Relay 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 will be accounted for under the purchase method and therefore, the
financial statements presented herein do not reflect the operations of Relay
or any of the transactions described below.
The Company purchased the shares of Palm pursuant to a Share Acquisition
Agreement, which was originally entered into on July 22, 1998 between the
shareholders and Sanga International. At the close, the Company paid
$2,200,000 in cash. Of this amount $1,500,000 was borrowed and the balance
was paid out of working capital. In addition, the parent company, SEH,
contributed and transferred 3 million of its restricted shares to Sanga in
consideration for Sanga's assignment of all rights and obligations under this
agreement. There were other costs relative to the financing of the $1,500,000.
In addition to the Palm acquisition, the Company has entered into various
agreements and letters of understanding relative to investments in the Company
or advances to the Company of between $7,500,000 and $12,000,000. The Company
believes these transactions will be completed by June 1, 1999, however, there
is no guarantee that any of the deals will actually close. The Company is
actively pursuing these and various other sources of financing but the Company
is unable to announce with certainty the results of any of these efforts.
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ITEM 2
e-MedSoft.com
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
e-MedSoft.com (the "Company") was initially organized in Nevada on August 24,
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 healthcare 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, 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. As a result of these transactions, SEH owned approximately
80% of the outstanding shares and is the acquiring company for accounting
purposes. This transaction is considered a reverse acquisition and as a
capital transaction that results in a capital reorganization. Accordingly,
the Company's assets have been reflected at fair value and the acquiring
company's assets at acquisition date have been reflected at their carryover
basis. There has been no goodwill or intangible assets recognized for this
acquisition in the financial statements.
In addition, subsequent to the quarter end, the Company acquired all of the
issued and outstanding stock of Palm Technology Holdings Ltd. ("Palm"), a UK
based company which owns all of the issued and outstanding stock of UK based
Relay Business Systems Ltd. ("Relay"). Relay 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 will be accounted for under the purchase method and, therefore,
the financial statements presented herein do not reflect the operations of
Relay or any of the transactions incurred with respect to this acquisition.
The results of operations presented herein reflect costs of development and
marketing the Company's Software product acquired on January 7, 1999 (see
above). There have been no revenues reflected in this period. Prior to the
acquisition on January 7, 1999, the Company's operating expenses, interest
income and expense were minimal.
The operating costs of the Company have been funded by members of the
Company's parent (Sanga e-Health, LLC) and have also been financed through
receipt of funds from a financing company. The financing company provided
approximately $750,000 under a commitment to fund the Company based on future
receivables of the Company for certain signed healthcare Master Agreements or
Memorandums of Understanding. As of February 28, 1999, the Company had
$697,249 in working capital, including cash of $90,729.
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The Company believes that funds available from its current credit facilities
and operations will be sufficient to meet its current working capital needs
for the next twelve months. The Company is actively pursuing additional
financing to support future operations, expansion of the business and working
capital needs of the Company. The Company has entered into various agreements
and letters of understanding relative to investments in the Company or
advances to the Company of between $7,500,000 and $12,000,000. The Company
believes these transactions will be completed by June 1, 1999, however, there
is no guarantee that any of the deals will actually close. The Company is
actively pursuing these and other sources of financing, but the Company is
unable to announce with certainty the results of any of these efforts. It is
management's belief that the Company should vigorously attempt to raise
additional funds to support (a) the implementation and roll out of its newly
acquired healthcare management system to customers under contract, (b) the
expansion of its customer base, (c) potential acquisitions that may arise from
time to time; (d) the development and enhancement of new applications and
services; and (e) repayment of bridge financing incurred in connection with
the acquisition of Palm. However, there can be no assurances 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 healthcare 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.
The Company's UK-based Relay Business Systems, which was acquired on
March 19, 1999, 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 taken to re-write software and take any
other actions necessary to ensure that the Company's software and hardware is
year 2000 compliant. The risk analysis undertaken 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 Limited,
provided the Company with a formal confirmation that they are fully year 2000
compliant. In the case of other significant suppliers and customers the
Company has been in communication so as to ensure that any potential problems
are rectified. However, given the complexity of the problems, it is the
Company's belief that they can not guarantee that no year 2000 problems will
remain. The UK-based company'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 the customers for the
healthcare 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
healthcare 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.
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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 as 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.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
During December 1998, the Company issued a total of 800,000 shares (as
adjusted for the 5 for 1 forward split) to two persons as consideration for
outstanding loans that they converted. One of these persons was the Company's
President and the other was a shareholder. There shares were issued in
reliance on the exemption provided by Section 4(2).
On January 7, 1999, the Company issued 41,417,176 shares of its Common
Stock to Sanga e-Health LLC in connection with the acquisition of certain
rights to a JAVA-based online healthcare management system. With respect to
this transaction, the Company relied on Section 4(2) of the Act. Sanga e-
Health LLC executed a Stock Acquisition and Technology Agreement in which it
represented that it was acquiring the shares for investment only and not for
the purpose of resale or distribution. In connection with the foregoing
transaction, the Company issued a total of 2,553,144 shares to two persons as
finder's fees and it issued 1,035,429 warrants to one person as a finder's
fee. These shares and warrants were issued in reliance on the exemption
provided by Section 4(2). The appropriate restrictive legend was placed on
all certificates and stop transfer orders were issued to the transfer agent.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During December 1998, shareholders owning more than a majority of the
shares outstanding signed consent minutes which approved a change of the
Company's name from High Hopes, Inc. to Medtech, Inc., and during February
1999, shareholders owning more than a majority of the shares outstanding
signed consent minutes which approved a change of the Company's name from
Medtech, Inc. to e-MedSoft.com.
ITEM 5. OTHER INFORMATION. None.
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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 January 7, 1999, which reported on Items 1, 2 and 7.
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: April 19, 1999 By:/s/ Margaret A. Harris
Margaret A. Harris, Chief
Financial Officer
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<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> 9-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> FEB-28-1999
<CASH> 90,729
<SECURITIES> 0
<RECEIVABLES> 635,270
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 725,999
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 732,964
<CURRENT-LIABILITIES> 28,750
<BONDS> 0
0
0
<COMMON> 51,771
<OTHER-SE> (97,557)
<TOTAL-LIABILITY-AND-EQUITY> 732,964
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 45,884
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,356
<INCOME-PRETAX> (46,820)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (46,820)
<EPS-PRIMARY> (.00)
<EPS-DILUTED> 0
</TABLE>
