<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
June 16, 2000
------------------------------------------------
Date of Report (date of earliest event reported)
e-MedSoft.com
----------------------------------------------------
Exact name of Registrant as Specified in its Charter
Nevada 1-15587 84-1037630
--------------------------- --------------- ---------------------------
State or Other Jurisdiction Commission File IRS Employer Identification
of Incorporation Number Number
1300 Marsh Landing Parkway, Suite 106, Jacksonville, FL 32250
-------------------------------------------------------------
Address of Principal Executive Offices, Including Zip Code
(904) 543-1001
--------------------------------------------------
Registrant's Telephone Number, Including Area Code
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL INFORMATION OF BUSINESSES ACQUIRED. The following
financial statements for VidiMedix Corporation as of December 31, 1999 and
March 31, 2000 (unaudited), and for the year ended December 31, 1999, and the
three months ended March 31, 2000 and 1999 (unaudited) are filed herewith:
INDEX
PAGE
Financial Statements For the year ended December 31, 1999,
and the three month periods ended March 31, 2000 and
1999 (unaudited), Together With Report of Independent
Public Accountants:
Report of Independent Public Accountants .................. F-1
Balance Sheets - December 31, 1999 and March 31, 2000
(unaudited) ............................................... F-2
Statements of Operations for the year ended December 31,
1999 and the three months ended March 31, 2000 and
1999 (unaudited)........................................... F-3
Statements of Changes in Shareholders' Deficit for the year
ended December 31, 1999 and the three month period ended
March 31, 2000 (unaudited) ................................ F-4
Statements of Cash Flows for the year ended December 31,
1999 and the three month periods ended March 31, 2000 and
1999 (unaudited) .......................................... F-5
Notes to Financial Statements for the year ended
December 31, 1999 ......................................... F-6-F-19
(b) PRO FORMA FINANCIAL INFORMATION. Unaudited Pro Forma Financial
Statements for e-MedSoft.com and VidiMedix Corporation as of March 31, 2000,
and for the year ended December 31, 1999 are filed herewith on pages F-20 to
F-23.
(c) EXHIBITS.
Exhibit
Number Description Location
------- ----------- --------
10.16 Agreement and Plan of Merger and Previously filed
Reorganization dated June 6, 2000,
among e-MedSoft.com, VidiMedix
Acquisition Corporation and
VidiMedix Corporation
2
<PAGE>
10.17 First Amendment to Agreement and Previously filed
Plan of Merger and Reorganization
dated June 14, 2000, among
e-MedSoft.com and VidiMedix
Acquisition Corporationn
23 Consent of Independent Public Filed electronically
Accountants herewith
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, hereunto duly authorized.
e-MedSoft.com
Dated: August 30, 2000 By:/s/ Margaret A. Harris
Margaret A. Harris, Chief Financial
Office
3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of VidiMedix Corporation:
We have audited the accompanying balance sheet of VidiMedix Corporation (a
Texas corporation) as of December 31, 1999, and the related statements of
operations, changes in shareholders' deficit and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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 VidiMedix Corporation as of
December 31, 1999, and the results of its operations and its cash flows for
the year then ended in conformity with accounting principles generally
accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company was acquired by a subsidiary of
e-MedSoft.com (e-MedSoft) for assumption of approximately $6.2 million of the
Company's debt and liabilities. e-MedSoft settled certain of these
liabilities through the issuance of its common stock and warrants to acquire
its common stock, and it has provided funding so that a portion of these
obligations could be repaid by the Company. The Company, however, has
suffered recurring losses from operations and has historically not generated
positive cash flows from operations, and e-MedSoft's plans with respect to the
Company have not yet been finalized. These items raise substantial doubt
about the Company's ability to continue as going concern. The financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern.
/s/ Arthur Andersen, LLP
Austin, Texas
August 30, 2000
F-1
<PAGE>
VIDIMEDIX CORPORATION
BALANCE SHEETS
December 31, March 31,
1999 2000
------------ ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 1,048 $ 3,705
Accounts receivable 116,752 62,846
Inventory 74,931 65,820
Prepaid expenses and other current
assets 411,629 398,942
------------ ------------
Total current assets 604,360 531,313
------------ ------------
PROPERTY AND EQUIPMENT, net 79,578 73,762
SOFTWARE DEVELOPMENT COSTS, net 734,861 667,028
DEPOSITS AND OTHER ASSETS 101,642 739,956
------------ ------------
Total assets $ 1,520,441 $ 2,012,059
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 707,566 $ 1,089,017
Accrued liabilities 1,023,236 1,303,142
Deferred revenue 1,112,445 1,223,798
Notes payable to related parties 752,903 862,903
Notes payable to employees 157,330 157,330
Notes payable 1,880,938 2,169,840
------------ ------------
Total current liabilities 5,634,418 6,806,030
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 6)
SHAREHOLDERS' DEFICIT:
Series A convertible preferred stock,
$.01 par value; aggregate liquidation
value $4,577,459; 2,407,406 shares
authorized; and 2,384,093 shares
issued and outstanding 23,841 23,841
Common stock, $.01 par value; 10,000,000
shares authorized; 1,782,740 shares
issued and outstanding 17,827 17,827
Additional paid-in capital 5,238,707 5,886,834
Accumulated deficit (9,394,352) (10,722,473)
------------ ------------
Total shareholders' deficit (4,113,977) (4,793,971)
Total liabilities and shareholders'
deficit $ 1,520,441 $ 2,012,059
============ ============
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
VIDIMEDIX CORPORATION
STATEMENTS OF OPERATIONS
Year Ended Three Months Ended
December 31, March 31,
1999 1999 2000
----------- --------- -----------
(Unaudited)
REVENUES:
Licenses and hardware 1,280,481 124,586 47,980
Maintenance 19,388 630 33,823
---------- --------- -----------
Total revenues 1,299,869 125,216 81,803
OPERATING EXPENSES:
Cost of revenues 606,303 67,599 42,026
Research and development 615,731 33,793 455,097
Sales and marketing 1,429,602 381,249 467,016
General and administrative 1,285,413 305,790 348,966
----------- --------- -----------
Total operating expenses 3,937,049 788,431 1,313,105
----------- --------- -----------
LOSS FROM OPERATIONS (2,637,180) (663,215) (1,231,302)
INTEREST INCOME 270 - -
INTEREST EXPENSE (318,246) (38,794) (89,125)
OTHER EXPENSE, net (14,120) (3,610) (7,694)
----------- --------- -----------
NET LOSS $(2,969,276) $(705,619) $(1,328,121)
=========== ========= ===========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
VIDIMEDIX CORPORATION
STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Series A
Convertible Additional Total
Preferred Stock Common Stock Paid-In Accumulated Shareholders'
Shares Amount Shares Amount Capital Deficit Deficit
--------- ------- --------- ------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1998 2,384,093 $23,841 1,549,290 $15,493 $5,206,003 $( 6,425,076) $(1,179,739)
ISSUANCE OF STOCK TO
EMPLOYEES FOR SERVICES - - 18,635 186 14,163 - 14,349
EXERCISE OF STOCK OPTIONS - - 214,815 2,148 18,541 - 20,689
NET LOSS - - - - - (2,969,276) (2,969,276)
--------- ------- --------- ------- ---------- ------------ -----------
BALANCE, December 31, 1999 2,384,093 23,841 1,782,740 17,827 5,238,707 (9,394,352) (4,113,977)
ISSUANCE OF WARRANTS
(Unaudited) - - - - 648,127 - 648,127
NET LOSS (Unaudited) - - - - - (1,328,121) (1,328,121)
--------- ------- --------- ------- ---------- ------------ -----------
BALANCE, March 31, 2000
(unaudited) 2,384,093 $23,841 1,782,740 $17,827 $5,238,707 $(10,722,473) $(5,442,098)
========= ======= ========= ======= ========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
VIDIMEDIX CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended Three Months Ended
December 31, March 31,
1999 1999 2000
----------- --------- -----------
(Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,969,276) $(705,619) $(1,328,121)
Adjustments to reconcile net loss to net cash used in operating
activities-
Depreciation 65,936 23,475 12,921
Accretion of discount on notes payable 34,554 8,639 -
Amortization of lease guaranties 39,252 9,813 9,813
Amortization of software development costs 79,139 - 67,833
Stock issued to employees for services 14,349 - -
Changes in assets and liabilities-
Accounts receivable (11,258) (8,002) 53,907
Inventory (19,444) 31,307 9,111
Prepaid software license 144,650 36,163 -
Prepaid expenses and other current assets (374,074) (21,549) 12,687
Deposits 16,276 - -
Software development costs (814,000) (302,208) -
Accounts payable 125,874 145,956 381,452
Accrued liabilities 596,158 83,853 279,903
Deferred revenue 1,050,761 39,412 111,354
----------- --------- -----------
Net cash used in operating activities (2,021,103) (658,763) (389,140)
----------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (34,622) (15,111) (7,106)
----------- --------- -----------
Net cash used in investing activities (34,622) (15,111) (7,106)
----------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank line of credit 2,067,205 130,928 227,759
Repayment on bank line of credit (2,045,372) (161,057) (288,272)
Proceeds from issuance of bridge notes and other notes 2,026,149 679,625 485,000
Repayment of bridge notes and other notes (18,752) 0 (25,585)
Proceeds from the exercise of stock options 20,689 17,737 -
----------- --------- -----------
Net cash provided by financing activities 2,049,919 667,233 398,903
----------- --------- -----------
NET (DECREASE) INCREASE IN CASH (5,806) (6,641) 2,657
CASH, beginning of period 6,854 6,854 1,048
----------- --------- -----------
CASH, end of period $ 1,048 $ 213 $ 3,705
=========== ========= ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 4,201 $ 181 $ 3,545
NONCASH INVESTING AND FINANCING ACTIVITY:
Estimated fair value of warrants issued for consulting services $ - $ - $ 648,127
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
VIDIMEDIX CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. THE COMPANY:
VidiMedix Corporation (the Company) is an Internet-enabled telemedicine/health
information technology solutions provider. The Company develops and markets
software systems that enable real-time interactive encounters between
doctors/caregivers and their patients. The software systems combine video,
voice and data transmission capabilities to allow doctors and other caregivers
to examine, diagnose and initiate treatment of a patient over the Internet or
other communication network, regardless of where they are located. The
Company was incorporated in Texas in June 1995 and has office locations in
both Austin, Texas, and San Diego, California.
On June 16, 2000, the Company's outstanding preferred and common stock was
purchased by a subsidiary of e-MedSoft.com (e-MedSoft) for assumption of
approximately $6.2 million in debt and liabilities. Of this amount,
approximately $3.3 million was repaid with approximately 380,000 shares of
e-MedSoft common stock and warrants to purchase approximately 336,000 shares
of e-MedSoft common stock at an exercise price of $8.63 per share. See Note 9
regarding the settlement of certain of the Company's debt obligations and
liabilities in connection with and subsequent to the acquisition. In
connection with the acquisition, e-MedSoft has committed to issue up to an
additional 6 million shares of its common stock to the Company's shareholders
as an earn-out payment based on the Company achieving certain sales targets.
e-MedSoft has accounted for this acquisition under the purchase method of
accounting. The accompanying financial statements of the Company do not
reflect the effect of the purchase accounting.
The accompanying financial statements have been prepared assuming the Company
will continue as going concern. The Company has suffered recurring losses
from operations, has historically not generated positive cash flows from
operations, and e-MedSoft's plans with respect to the Company have not yet
been finalized. These items raise substantial doubt about the Company's
ability to continue has a going concern. The accompanying financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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 reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
F-6
<PAGE>
Interim Financial Information
The interim financial statements for the three months ended March 31, 1999 and
2000, are unaudited and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and notes required by accounting principles
generally accepted in the United States for complete financial statements. In
the opinion of the Company's management, the unaudited interim financial
statements contain all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation. The results of
operations for the interim periods are not necessarily indicative of the
results for the entire year.
Inventory
Inventory consists primarily of computer hardware purchased on behalf of the
Company's customers in connection with contracts for the sale of the Company's
products. Inventory is valued at the lower of cost or net realizable value.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
assets as follows:
Computer equipment 3 years
Software 3 years
Furniture and fixtures 7 years
Leasehold improvements Estimated useful
life or term of
the lease, if shorter
Maintenance and repairs are charged to expense as incurred. Upon retirement
or sale, the cost of the assets disposed of and the related accumulated
depreciation are removed from the accounts and any resulting gain or loss is
included in net income.
Software Development Costs
Costs of internally developed software for resale are expensed until the
technological feasibility of the software product has been established.
Thereafter, software development costs are capitalized and subsequently
reported at the lower of unamortized cost or net realizable value. The
capitalized software costs are amortized using the straight-line method over
the three-year estimated useful life of the related product, beginning upon
the declaration of the underlying product as generally available for sale.
Amortization expense for the year ended December 31, 1999, and for the three
months ended March 31, 1999 and 2000, was approximately $79,100, $-
(unaudited) and $67,800 (unaudited), respectively. This amortization expense
is reported within cost of revenues in the accompanying statements of
operations. Accumulated amortization at December 31, 1999, and March 31,
2000, was approximately $79,100 and $146,900 (unaudited), respectively.
F-7
<PAGE>
Asset Impairment
The Company assesses asset impairment based on the guidance set forth in
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed
of." The Company reviews its long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If the
sum of the expected future cash flows from the use of the asset and its
eventual disposition is less than the carrying amount of the asset, an
impairment loss is recognized based on the fair value of the asset.
Deferred Revenue
Customers are billed based on milestone completion as stipulated in the
underlying contracts, and all amounts are recorded as deferred revenues until
recognized in accordance with the Company's revenue recognition policy.
Management believes that the deferred revenue as of December 31, 1999, and
March 31, 2000, will be recognized during 2000 in connection with the
completion of the related contracts. See Note 3 for a detail of deferred
revenue.
Revenue Recognition
The Company's product is a bundled hardware and software system wherein the
software is licensed under a perpetual license. Revenue is recognized in
accordance with Statement of Position (SOP) 97-2, "Software Revenue
Recognition," and SOP 98-9, "Modification of SOP 97-2, Software Revenue
Recognition, With Respect to Certain Transactions." For perpetual licenses
which provide maintenance, the portion of the license fee associated with
maintenance is unbundled and recognized ratably over the maintenance period.
Maintenance contracts are available thereafter for negotiated periods, and the
prices of the contract are generally based on the value of the licensed
software products. The revenue allocated to the bundled hardware and software
is generally recognized upon completion of installation and testing. Costs
incurred to install the bundled hardware and software systems are deferred
until completion of installation and testing, at which time they are
recognized as cost of revenues.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements," as amended by SAB No. 101B, which is to be adopted no later than
the quarter ending December 31, 2000, but is effective as of January 1, 2000.
SAB No. 101 clarifies the SEC's views regarding recognition of revenue.
Management does not believe that adoption of this pronouncement will have a
significant effect on the Company's financial position or results of
operations.
Cost of Revenues
Cost of revenues consists primarily of computer hardware, personnel costs
related to the installation of the Company's product and amortization of
software development costs.
F-8
<PAGE>
Warranty Costs
The Company generally warrants its software for 90 days after delivery of the
products. Warranty costs have historically not been significant, and
management does not believe that it has any significant warranty exposure as
of December 31, 1999, and March 31, 2000.
Stock-Based Compensation
The Company accounts for stock-based employee compensation arrangements in
accordance with the provisions of Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees," and complies with the
disclosure requirements of SFAS No. 123, "Accounting for Stock-Based
Compensation."
Income Taxes
The Company uses the liability method of accounting for income taxes as set
forth in SFAS No. 109, "Accounting for Income Taxes." Under this method,
deferred tax liabilities and assets are recognized for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
bases of assets and liabilities.
Major Customers and Risk Concentrations
The Company had revenues greater than 10 percent of total revenues to the
following major customers:
<TABLE>
<CAPTION>
Year Ended Three Months Ended Three Months Ended
December 31, 1999 March 31, 1999 March 31, 2000
---------------------- ----------------------- -----------------------
Percent of Percent of Percent of
Revenues Revenues Revenues Revenues Revenues Revenues
-------- ---------- -------- ---------- -------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Customer A $549,215 42.25% $ - - $ 8,019 9.80%
Customer B 216,360 16.64 - - 2,672 3.27
Customer C 161,466 12.42 - - 1,198 1.46
Customer D 181,341 13.95 122,175 97.57% 2,685 3.28
Customer E 132,605 10.20 - - - -
Customer F - - - - 47,959 58.63
Customer G - - - - 17,990 22.00
</TABLE>
The Company had receivables greater than 10 percent of total receivables from
the following major customers:
December 31, 1999 March 31, 2000
Percent of Percent of
Receivable Receivables Receivable Receivables
---------- ----------- ---------- -----------
(Unaudited)
Customer H $54,773 46.91% $ 2,613 4.08%
Customer I 39,000 33.40 - -
Customer C 22,500 19.27 27,835 43.46
Customer D - - 12,432 19.41
Customer G - - 19,055 29.75
F-9
<PAGE>
The Company's customers are primarily in the healthcare industry.
Accordingly, the Company is exposed to risks of fluctuations and funding in
the healthcare industry. The Company is exposed to potential credit risk
related to changes in business and economic factors; however, management
believes that its contract acceptance, billing and collection policies are
adequate to minimize the potential credit risk.
3. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consists of the following:
December 31, March 31,
1999 2000
------------ ---------
(Unaudited)
Advances to employees $ 4,470 $ 4,359
Prepaid expenses 62,967 50,391
Deferred contract costs (see Note 2) 344,192 344,192
-------- --------
$411,629 $398,942
======== ========
Property and Equipment
Property and equipment, net, consists of the following:
December 31, March 31,
1999 2000
------------ ---------
(Unaudited)
Computer equipment $206,030 $213,136
Furniture and fixtures 3,937 3,937
Purchased software 69,233 69,233
Leasehold improvements 15,154 15,154
-------- --------
294,354 301,460
Less- Accumulated depreciation
and amortization (214,776) (227,698)
-------- --------
$ 79,578 $ 73,762
======== ========
Depreciation and amortization expense for the year ended December 31, 1999,
and for the three months ended March 31, 1999 and 2000, was approximately
$66,000, $23,500 (unaudited) and $12,900 (unaudited), respectively.
F-10
<PAGE>
Deposits and Other Assets
Deposits and other assets consists of the following:
December 31, March 31,
1999 2000
------------ ---------
(Unaudited)
Deposits on operating leases $ 47,002 $ 47,002
Guarantees on operating leases 54,640 44,827
Prepaid consulting fees - 648,127
-------- --------
$101,642 $739,956
======== ========
One of the Company's directors personally guaranteed certain of the Company's
operating leases. In consideration for providing the guarantees, the Company
issued warrants to the director to acquire 98,459 shares of the Company's
common stock and recorded the estimated fair value of the warrants as
guarantees on operating leases. This asset is being amortized to various
operating expenses over the term of the related leases. Amortization expense
for the year ended December 31, 1999, and for the three months ended March 31,
1999 and 2000, was approximately $39,252, $9,813 (unaudited) and $9,813
(unaudited), respectively. See Note 7.
In connection with entering into a three-year agreement with a consulting firm
in January 2000, the Company issued a warrant to the consulting firm to
acquire 1,661,865 shares of the Company's common stock for $0.77 per share.
The warrant was vested 50 percent upon issuance with the remaining 50 percent
vesting in 90 days from the date of issuance. The Company recorded the
estimated fair value of the warrant as prepaid consulting fees, and this
amount will be amortized to sales and marketing over the period of the
consulting agreement. No amortization expense has been reflected in the
accompanying statement of operations for the three months ended March 31,
2000. See Notes 6 and 7.
Accrued Liabilities
Accrued liabilities consists of the following:
December 31, March 31,
1999 2000
------------ ---------
(Unaudited)
Accrued incentive compensation $ 547,982 $ 627,125
Accrued vacation 131,930 158,171
Accrued interest 176,600 244,511
Accrued salaries - 129,396
Accrued taxes 16,947 37,014
Other accrued expenses 149,777 106,925
---------- ----------
$1,023,236 $1,303,142
========== ==========
F-11
<PAGE>
Deferred Revenue
Deferred revenue consists of the following:
December 31, March 31,
1999 2000
------------ ---------
(Unaudited)
Licenses and hardware contracts $ 937,798 $1,167,294
Maintenance contracts 174,647 56,504
---------- ----------
$1,112,445 $1,223,798
========== ==========
4. NOTES PAYABLE:
The Company has the following notes payable to various related parties,
employees and third parties as of December 31, 1999, and March 31, 2000:
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
------------ ----------
(Unaudited)
<S> <C> <C>
Notes payable to related parties-
Various bridge notes payable to related parties;
due dates ranging from December 1999 to June 2000;
interest at 10% per annum; unsecured. The
Company has been unable to repay these notes as
they become due, but the notes were settled in
connection with the acquisition of the Company
by e-MedSoft which is described in Note 1. Also
see Note 9. $ 711,544 $ 791,544
Various notes payable to officers and directors;
maturing June 30, 2000; interest at 10% per
annum; unsecured. The notes were settled in
connection with the acquisition of the Company
by e-MedSoft which is described in Note 1. Also
see Note 9. 41,359 71,359
---------- ----------
752,903 862,903
---------- ----------
Various notes payable to employees for unpaid wages;
certain of the notes with principal totaling $109,500
were due the earlier of December 31, 1999, completion
of a sale of Series B preferred stock or the sale of
the Company; certain of the notes totaling $47,380 are
due the earliest of June 30, 2000, completion of a
second permanent equity financing of at least $5
million or the sale of the Company; interest at 10%
per annum; unsecured. The Company has been unable
to repay these notes as they become due, but the
notes were settled in connection with the acquisition
of the Company by e-MedSoft which is described in
Note 1. Also see Note 9. 157,330 157,330
---------- ----------
F-12
<PAGE>
Notes payable to third parties-
Bridge notes payable to corporations; due dates
ranging from December 1999 to June 2000; interest
at 10% per annum; unsecured. The Company has
been unable to repay these notes as they become
due, but they were settled in connection with
the acquisition of the Company by e-MedSoft which
is described in Note 1. Also see Note 9. 1,210,000 1,360,000
Bridge notes payable to individuals; due dates
ranging from November 1999 through June 2000;
interest at 10% per annum; unsecured. The Company
has been unable to repay these notes as they
become due, but the notes were settled in connec-
tion with the acquisition of the Company by
e-MedSoft which is described in Note 1. Also see
Note 10. 375,000 600,000
Demand note payable to a corporation; interest at
12 percent per annum; unsecured. 2,445 -
Accounts Receivable Purchase Agreement with a bank;
automatically renewable on an annual basis; the
Company may receive up to 80% of the acceptable
accounts receivable delivered to the financial
institution; the agreement provides for a maximum
outstanding balance of $500,000; amounts outstanding
are due upon realization of the related receivables;
interest payable monthly at 1.75% of the average
daily account balance (effective annual interest rate
of 21%); secured by certain assets of the Company. 93,493 32,981
Note payable to a bank; maturing the earlier of
February 10, 2000 or the closing of the sale of any
equity securities to one or more institutional investors
or venture capital firms; interest at prime plus 1.5
percent (10 percent and 10.33 percent at December 31,
1999, and March 31, 2000, respectively); secured by
certain assets of the Company, including inventory,
equipment, contract rights and intangibles. 200,000 176,859
---------- ----------
1,880,938 2,169,840
---------- ----------
$2,791,171 $3,190,073
========== ==========
</TABLE>
The agreements with respect to the accounts receivable purchase agreement and
note payable to a bank contain warranties and covenants and require
maintenance of certain financial ratios. Default on any warranty or covenant
could affect the ability to borrow under the agreements and, if not waived or
corrected, could accelerate the maturity of any borrowings outstanding under
the applicable agreement. At December 31, 1999, and March 31, 2000, the
Company was in default of warranties and covenants contained in these
agreements and such defaults had not been waived. All amounts due under the
agreements, however, have been reflected as current liabilities in the
accompanying balance sheets.
F-13
<PAGE>
5. INCOME TAXES:
As of December 31, 1999, and March 31, 2000, the Company had federal net
operating loss carryforwards of approximately $9 million and $10.1 million
(unaudited), respectively. The net operating loss carryforward will expire in
varying amounts through 2019 if not utilized.
Utilization of the net operating loss may be subject to a substantial annual
limitation due to the "change in ownership" provisions of the Internal Revenue
Code of 1986. The annual limitation may result in the expiration of the net
operating loss before utilization.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred taxes are as follows:
December 31, March 31,
1999 2000
------------ -----------
(Unaudited)
Deferred tax assets-
Net operating loss carryforwards $ 3,062,026 $ 3,433,762
Depreciation and amortization 25,401 28,291
Accrued compensation and other 231,170 310,995
----------- -----------
Gross deferred tax asset 3,318,597 3,773,048
----------- -----------
Deferred tax liability-
Other (4,129) (4,129)
----------- -----------
Gross deferred tax liability (4,129) (4,129)
----------- -----------
Less- Valuation allowance (3,314,468) (3,768,919)
----------- -----------
Net deferred tax asset $ - $ -
=========== ===========
A valuation allowance has been provided to offset the net deferred tax assets
due to the uncertainties regarding the future realization of the net operating
loss carryforward and other deferred tax assets.
The Company's provision for income taxes differs from the expected tax benefit
amount computed by applying the statutory federal income tax rate of 34
percent to the loss before income taxes as a result of the application of the
valuation allowance.
6. COMMITMENTS AND CONTINGENCIES:
Leases
The Company leases office space and equipment under noncancelable operating
leases with various expiration dates through May 2001. Rent expense for the
year ended December 31, 1999, and the three months ended March 31, 1999 and
2000, was approximately $462,000, $115,000 (unaudited) and $125,000
F-14
<PAGE>
(unaudited), respectively. The terms of the office lease provide for rental
payments on a graduated scale. The Company recognizes rent expense on a
straight-line basis over the lease period and has accrued for rent expense
incurred but not paid.
Future minimum lease payments under noncancelable operating leases consist of
the following:
For the year ending December 31-
2000 $470,326
2001 168,574
2002 73,650
2003 6,130
--------
Total minimum lease payments $718,680
========
Litigation
The Company is, from time to time, subject to various disputes or legal
actions arising in the ordinary course of business. As of December 31, 1999,
and March 31, 2000, the Company was not involved in any significant disputes
or legal actions.
Employment Agreements
The Company maintains employment agreements with 12 key employees. The terms
of the employment agreements is generally three years, and the agreements
provide for payment of the employees' salaries for a stated period of time
ranging from three months up to one year from the date of termination.
Termination must be without cause, as defined. As of December 31, 1999, the
maximum contingent liability was approximately $640,000. None of these
employees have been terminated in connection with the acquisition of the
Company be e-MedSoft in June 2000 (see Note 1).
Consulting and Marketing Agreements
The Company has noncancellable agreements with various individuals to provide
consulting services to the Company. These agreements require the Company to
make payments to the individuals during the periods that the agreements are in
effect. As of December 31, 1999, future minimum payments under the agreements
totaled approximately $120,000 for 2000 and $110,000 for 2001.
In February 2000, the Company entered into a noncancellable agreement with a
firm to provide various marketing services. The agreement requires the
Company to make payments during the period that the agreement is in effect.
As of March 31, 2000, future minimum payments under the agreement totaled
approximately $36,000 for 2000 and $24,000 for 2001.
Distribution and Service Agreement
In January 2000, the Company entered into a three year agreement with a
healthcare consulting firm to promote the Company's products in its marketing
materials and marketing efforts, including the consulting firm's web sites,
client newsletters and other client publications and seminars. The consulting
firm also agreed to train certain of its personnel concerning the Company's
products. The Company agreed to the following:
F-15
<PAGE>
* The Company will purchase a minimum of $3 million of consulting services
from the consulting firm over the term of the agreements. If the Company
does not purchase this minimum by the termination date of the agreement or
if the agreement is terminated prior to its term for any reason other than
a breach by the consulting firm, the Company will owe the difference
between the minimum commitment and the actual amount of consulting
services purchased:
* The Company will pay approximately $6.7 million for being designated as a
preferred member of the consulting firm's digital business transformation
partner program. Of this amount, $1.7 million shall be paid in cash
($75,000 upon execution of the agreement, $650,000 in June 2000, $500,000
in September 2000, and $500,000 in December 2000), $3 million in warrants
to purchase the Company's stock, $6,700 in cash for each introduction to
potential customers up to a maximum of $1 million, and 20 percent of the
contract value for each client of the consulting firm that contracts with
the Company up to a maximum of $1 million.
In connection with this agreement, the Company issued a warrant to the
consulting firm to purchase 1,661,865 shares of the Company's common stock at
$0.77 per share. This warrant was 50 percent vested upon issuance with the
remaining 50 percent to vest in 90 days. The warrant expires ten years from
the date of issuance. The Company estimated the approximate $648,000 fair
value of this warrant using the minimum value method and has recorded this
amount as prepaid consulting fees within Deposits and Other Assets in the
accompanying balance. These prepaid consulting fees are being amortized over
the term of the consulting agreement (see Note 3). In connection with the
acquisition of the Company by e-MedSoft in June 2000 (see Note 1), this
warrant was cancelled.
Other
During 1998, the Company entered into a software license agreement which
requires prepayment for license fees. The Company is obligated to purchase a
minimum number of licenses during the two-year period ending September 1,
2000. If the Company does not purchase the minimum quantity, a shortfall
payment could be required. The contract terminates under certain conditions
or on September 1, 2000, unless the parties mutually agree to extend the term
for additional one-year periods. Although the Company will not have purchased
the minimum number of license agreements by September 1, 2000, management does
not believe there will be any shortfall payment required since the Company has
been charged full price for the software they purchased during 1999 and did
not receive the volume discounts that would necessitate a shortfall payment.
The Company has noncancellable agreements with various service providers to
purchase minimum levels of service over stated periods. As of December 31,
1999 future minimum payments under the agreements totaled approximately
$41,700 for 2000 and $60,200 for 2001 and thereafter.
7. CAPITAL STOCK:
Series A Convertible Preferred Stock
The Company's articles of incorporation, as amended, authorize the Company to
issue 5,000,000 shares of $.01 par value preferred stock, 2,407,406 shares of
which have been designated as Series A preferred stock (Series A). Each share
of Series A is convertible to common stock upon issuance, at the option of the
holder, based on a conversion ratio of 1:1 as of December 31,
F-16
<PAGE>
1999, subject to adjustment for dilution. Each share of Series A
automatically converts into the number of shares of common stock into which
such shares are convertible at the then effective conversion ratio upon the
closing of a public offering of common stock at a per share price of at least
$3.00 per share, subject to adjustment for dilution, with net proceeds of at
least $7,500,000.
The holders of the Series A will be entitled to participate in dividends on
common stock, when and if declared by the board of directors. In the event of
any liquidation, dissolution or winding up of the Company, either voluntary or
involuntary, Series A holders are entitled to receive an amount of $1.92 per
share, plus any declared but unpaid dividends prior to and in preference to
any distribution to the holders of common stock. If the assets of the Company
available for distribution to shareholders upon dissolution, liquidation or
winding up are insufficient to permit payment in full of the liquidation value
to holders of the Series A preferred stock, $4,577,459, at December 31, 1999,
the entire assets will be distributed on a pro rata basis among the Series A
shareholders.
The holders of the Series A are entitled to vote on all matters and shall have
that number of votes equal to the number of shares of common stock into which
each such holder's Series A could then be converted.
Common Stock
The Company's Articles of Incorporation, as amended, authorize the Company to
issue 10,000,000 shares of $0.01 par value common stock. Certain shares are
subject to a right of repurchase at issue value at the Company's option only,
subject to vesting, which is generally over a four-year period from the
earlier of the grant date or employee hire date, as applicable, until vesting
is complete. At December 31, 1999, there were 85,543 shares subject to
repurchase.
Warrants
In connection with certain notes payable to related parties, consulting
agreements and lease guarantees by a director of the Company, the Company
issued warrants in 1998 to purchase 527,062 shares of common stock at prices
ranging from $0.175 to $1.92 per share. Such warrants are outstanding at
December 31, 1998, and expire in varying amounts through July 2003.
In connection with the acquisition of the Company by e-MedSoft in June 2000
(see Note 1), all of the Company's outstanding warrants were canceled.
Stock Options
The Company has two stock option plans. The plans provide for the granting of
stock options to employees and consultants of the Company. Options granted
under the plans may be either incentive stock options or nonqualified stock
options. Incentive stock options (ISO) may be granted only to Company
employees (including officers and directors who are also employees).
Nonqualified stock options (NSO) may be granted to Company employees and
consultants. The Company has reserved 1,839,965 shares of common stock for
issuance under the plans.
Options under the plans may be granted for periods of up to 10 years and at
prices determined by the board of directors, provided, however, that (a) the
exercise price of an ISO shall not be less than 100 percent of the estimated
F-17
<PAGE>
fair value of the shares on the date of grant and (b) the exercise price of an
ISO granted to a 10 percent shareholder shall not be less than 110 percent of
the estimated fair value of the shares on the date of grant.
Options are exercisable upon vesting for a period of up to 10 years at such
times and under such conditions as determined by the board of directors.
Had compensation cost for the Company's stock-based compensation plan been
determined based on the fair value at the grant dates for the awards under a
method prescribed by SFAS No. 123, the Company's net loss would have been
increased to the pro forma amounts indicated below:
The fair value of each option grant is estimated on the date of grant using
the minimum value method with the following weighted-average assumptions used
for grants during the year ended December 31, 1999:
December 31, March 31,
1999 2000
----------- ---------
(Unaudited)
Dividend yield - -
Expected volatility - -
Risk-free rate of return 5.89% 7.07%
Expected life 9.42 years 9.90 years
The following table summarizes the activity in the Company's stock option
plans:
December 31, 1999 March 31, 2000
--------------------- ------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
--------- -------- ------- --------
(Unaudited)
Outstanding, beginning of
period 1,047,778 $0.783 768,754 $0.723
Awards 21,000 0.776 101,112 0.770
Exercises (214,815) 0.096 - -
Forfeitures (85,209) 0.749 - -
--------- -------
Outstanding, end of period 768,754 0.723 869,866 0.729
========= =======
Options exercisable 497,594 0.912 497,594
========= =======
Weighted average fair value 0.343 0.390
of options granted during
the period
F-18
<PAGE>
The following is additional information relating to options outstanding at
December 31, 1999:
Options Outstanding Options Exercisable
------------------------------------ ----------------------
Weighted
Average
Remaining Weighted Weighted
Contractual Average Average
Exercise Number Life Exercise Number Exercise
Prices Outstanding (Years) Price Exercisable Price
-------- ----------- ----------- -------- ----------- --------
$0.085 62,598 2.33 $0.085 44,511 $0.085
0.100 41,730 2.75 0.100 27,817 0.100
0.770 560,258 9.42 0.770 321,098 0.770
1.920 104,168 2.83 1.920 104,168 1.920
------- -------
768,754 497,594
======= =======
In connection with the acquisition of the Company by e-MedSoft in June 2000
(see Note 1), all the Company's outstanding options were canceled.
8. BENEFIT PLAN:
The Company has a defined contribution profit-sharing plan (the Plan)
incorporating features under Section 401(k) of the Internal Revenue Code
designed to provide retirement benefits to its employees. The Plan covers
substantially all employees of the Company. The plan documents state that the
Company may provide a matching contribution. For the year ended December 31,
1999, and the three months ended March 31, 2000, the Company did not elect to
make a matching contribution.
9. SUBSEQUENT EVENT:
As discussed in Note 1, all of the Company's outstanding common and preferred
stock was acquired by a subsidiary of e-MedSoft on June 16, 2000, for
assumption of approximately $6.2 million in debt and liabilities. Upon
acquisition, the Company's bridge notes and related accrued interest, totaling
approximately $3.2 million at the acquisition date, were settled through the
issuance of approximately 366,000 shares of e-MedSoft common stock and
warrants to acquire approximately 336,000 shares of e-MedSoft common stock at
$8.63 per share. Also upon acquisition, accrued interest of approximately
$30,000 on the notes payable to employees, $15,000 in miscellaneous accrued
liabilities and $94,000 in accrued vacation were settled through the issuance
of approximately 14,000 shares of e-MedSoft common stock. e-MedSoft also
issued options to purchase 50,000 shares of its common stock at an exercise
price equal to the per share value of e-MedSoft's common stock on the date of
issuance in settlement of the Company's accrued incentive compensation of
approximately $602,000 as of the date of acquisition. Subsequent to the
acquisition, e-MedSoft loaned approximately $1.3 million in cash to the
Company, most of which has been used to pay certain of the Company's other
liabilities that existed as of the date of acquisition.
F-19
<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS.
The following unaudited pro forma combined financial statements are
derived from the audited March 31, 2000 financial statements of e-MedSoft.com
and the audited December 31, 1999 financial statements of VidiMedix
Corporation and give effect to the acquisition of VidiMedix Corporation (the
"VidiMedix Acquisition") by the registrant on June 16, 2000. The unaudited
pro forma combined balance sheet as of March 31, 2000 and the unaudited pro
forma combined statements of operations for the year ended March 31, 2000
reflect the VidiMedix Acquisition as if it had occurred on March 31, 2000 for
the unaudited pro forma combined balance sheet and at April 1, 1999 for the
unaudited pro forma combined statement of operations. The unaudited pro forma
combined financial statements do not purport to be indicative of the results
that would actually have been obtained if the combination had been in effect
on the dates indicated, or that may be obtained in the future. The unaudited
pro forma combined financial statements should be read in conjunction with the
audited March 31, 2000 consolidated financial statements of e-MedSoft.com and
the audited December 31, 1999 financial statements of VidiMedix Corporation,
together with the related notes thereto.
F-20
<PAGE>
e-MedSoft.com
Unaudited Proforma Combined Balance Sheet
March 31, 2000
<TABLE>
<CAPTION>
Proforma Proforma
VidiMedix Adjustments (1) Combined
e-MedSoft (unaudited) DR. CR. (unaudited)
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 59,866,213 $ 3,705 $ - $ - $ 59,869,918
Accounts Receivable, net 17,817,382 62,846 - - 17,880,228
Other Receivables 2,111,310 4,359 - - 2,115,669
Inventory 1,106,960 65,820 - - 1,172,780
Prepayments and Other
Current Assets 1,554,570 394,583 - - 1,949,153
------------ ----------- ----------- ----------- ------------
82,456,435 531,313 - - 82,987,748
------------ ----------- ----------- ----------- ------------
Long-Term Assets:
Property, Plant and Fixtures, net 2,603,302 73,762 - - 2,677,064
Goodwill, net 37,867,333 - 6,268,390 (2) - 44,135,723
Investments 26,285,000 - - - 26,285,000
Technology License Fee 2,800,000 - - - 2,800,000
Deferred Software Costs 8,640,202 667,028 - - 9,307,230
Distribution Channel 36,100,000 - - - 36,100,000
Deferred Contract 67,462,914 - - - 67,462,914
Other Assets 881,467 739,956 - - 1,621,423
------------ ----------- ----------- ----------- ------------
182,640,218 1,480,746 6,268,390 - 190,389,354
------------ ----------- ----------- ----------- ------------
TOTAL ASSETS $265,096,653 $ 2,012,059 $ 6,268,390 $ - $273,377,102
============ =========== =========== =========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Line of Credit $ 807,180 $ 32,981 - - $ 840,161
Accounts Payable 21,269,973 1,089,017 - - 22,358,990
Accruals and Other Liabilities 4,443,805 3,597,331 3,039,208 (2) 100,000 (2) 5,101,928
Income Taxes Payable 443,409 - - - 443,409
Deferred Sales - 1,223,798 - - 1,223,798
Related Party Debt 138,782 862,903 862,903 (2) - 138,782
Current Maturities 942,981 - - - 942,981
------------ ----------- ----------- ----------- ------------
28,046,130 6,806,030 3,902,111 100,000 31,050,049
------------ ----------- ----------- ----------- ------------
Long Term Liabilities:
Capital Leases 739,306 - - - 739,306
Bridge Financing 67,528 - - - 67,528
Lease Commitments 3,063,700 - - - 3,063,700
------------ ----------- ----------- ----------- ------------
3,870,534 - - - 3,870,534
------------ ----------- ----------- ----------- ------------
Minority Interest 4,176,862 - - - 4,176,862
Stockholders' Equity:
Preferred Stock - 23,841 23,841 (4) - -
Common Shares 75,735 17,827 17,827 (4) 380 (3) 76,115
Paid in Capital 244,495,796 5,886,834 5,886,834 (4) 5,276,150 (3) 249,771,946
Stock Subscription (5,000,000) - - - (5,000,000)
Retained Earnings (Deficit) (10,568,404) (10,722,473) - 10,722,473 (4) (10,568,404)
------------ ----------- ----------- ----------- ------------
229,003,127 (4,793,971) 5,928,502 15,999,003 234,279,657
------------ ----------- ----------- ----------- ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $265,096,653 $ 2,012,059 $ 9,830,613 $16,099,003 $273,377,102
============ =========== =========== =========== ============
The accompanying notes are an integral part of these unaudited proforma
combined financial statements.
</TABLE>
F-21
<PAGE>
e-MedSoft.com
Unaudited Proforma Combined Statement of Operations
For the Year Ended March 31, 2000
<TABLE>
<CAPTION>
Proforma Proforma
Adjustments (1) Combined
e-MedSoft(5) VidiMedix(5) DR. CR. (unaudited)
----------- ----------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net Sales $45,982,416 $ 1,299,869 $ - $ - $47,282,285
Costs and Expenses
Cost of Sales 35,890,430 783,632 - - 36,674,062
Research and Development 1,515,054 578,768 - - 2,093,822
Sales and Marketing 5,255,502 1,234,634 - - 6,490,136
General and Administrative 8,743,921 1,274,079 - - 10,018,000
Non Cash Compensation 832,240 - - - 832,240
Depreciation and Amortization 1,916,012 65,936 895,484 (6) - 2,877,432
----------- ----------- ----------- --------- ------------
54,153,159 3,937,049 895,484 - 58,985,692
----------- ----------- ----------- --------- ------------
Loss from Operations (8,170,743) (2,637,180) (895,484) - (11,703,407)
Interest & Other Expense 1,570,329 332,096 - 318,246 (7) 1,584,179
----------- ----------- ----------- --------- ------------
Loss Before Income Taxes,
Extraordinary Item and Minority
Interest (9,741,072) (2,969,276) (895,484) 318,246 (13,287,586)
Extraordinary Income 357,152 - - - 357,152
----------- ----------- ----------- --------- ------------
Loss Before Income Taxes and
Minority Interest (9,383,920) (2,969,276) (895,484) 318,246 (12,930,434)
Tax Provision 360,798 - - - 360,798
Minority Interest, net of tax (79,384) - - - (79,384)
----------- ----------- ----------- --------- ------------
Net Loss $(9,665,334) $(2,969,276) $ (895,484) $ 318,246 $(13,211,848)
=========== =========== =========== ========= ============
Net Loss Per Share $ (0.17) $ (0.23)
Average Weighted Shares
Outstanding 56,345,463 379,573 - - 56,725,036
</TABLE>
The accompanying notes are an integral part of these unaudited proforma
combined financial statements.
F-22
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
GENERAL
1. The adjustments included in the unaudited pro forma combined
financial statements are based upon currently available information and upon
certain assumptions that e-MedSoft.com's management believes are reasonable.
e-MedSoft.com accounted for the VidiMedix Acquisition as a purchase of
VidiMedix by e-MedSoft.com. VidiMedix's assets and liabilities were recorded
at their initial estimated fair market value, less certain adjustments, as of
the date of the VidiMedix Acquisition. There can be no assurance that the
actual adjustments will not differ significantly from the pro forma
adjustments reflected herein.
2. The following table details the allocation of the VidiMedix
purchase price:
VidiMedix purchase price $5,276,530
Acquisition costs 100,000
----------
Adjusted purchase price 5,376,530
Add: VidiMedix negative equity 4,793,970
Less: Debt paid by issuance of
e-MedSoft common stock and warrants (3,300,592)
Settlement of accrued incentive
compensation through issuance of
e-MedSoft stock options (601,518)
----------
Goodwill $6,268,390
==========
The purchase price in connection with this acquisition represents the
value of 379,573 shares of the Company's common stock issued plus warrants to
purchase an aggregate of 366,216 shares of the Company's common stock at $8.63
per share.
The allocation of the purchase price of VidiMedix is preliminary and will
be finalized upon completion of asset valuations. In addition, e-MedSoft.com
is still evaluating certain obligations of VidiMedix prior to the acquisition
and further adjustments to the preliminary purchase price may result.
The goodwill will be amortized using the straight-line method over a
period of 7 years.
3. Reflects the issuance of 379,573 million restricted shares of
e-MedSoft common stock and 336,216 warrants, valued at $5,276,530, to certain
creditors of VidiMedix Corporation.
4. Reflects the elimination of VidiMedix's historical shareholders'
equity balance.
5. The unaudited combined pro forma statement of operations include
e-MedSoft.com audited operations for the year ended March 31, 2000
that were derived from e-MedSoft.com's audited March 31, 2000 consolidated
financial statements. The statement of operations for VidiMedix Corporation
included in the pro forma is for the year ended December 31, 1999 that were
derived from VidiMedix's audited December 31, 1999 financial statements.
6. Represents the amortization of goodwill using the straight-line
method over a period of 7 years.
7. Represents savings of interest on notes payable.
F-23
