Total eMed, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
| | March 31, 2000 | December 31, 1999 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | (unaudited) | | ||||||||
| ASSETS | ||||||||||
| CURRENT ASSETS: | ||||||||||
| Cash and cash equivalents | $ | 1,637 | $ | 3,150 | ||||||
| Short-term investments | 9,986 | 12,852 | ||||||||
| Accounts receivable, net of allowance for doubtful accounts of $302 as of March 31, 2000 and $265 as of December 31, 1999 | 1,527 | 1,312 | ||||||||
| Interest and other receivables | 286 | 303 | ||||||||
| Other current assets | 41 | 88 | ||||||||
| Total current assets | 13,477 | 17,705 | ||||||||
| PROPERTY AND EQUIPMENT, net | 4,786 | 4,201 | ||||||||
| OTHER NONCURRENT ASSETS: | ||||||||||
| Intangible assets | 1,863 | 1,934 | ||||||||
| Deposits | 43 | 42 | ||||||||
| Total other noncurrent assets | 1,906 | 1,976 | ||||||||
| Total assets | $ | 20,169 | $ | 23,882 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
| CURRENT LIABILITIES: | ||||||||||
| Accounts payable | $ | 424 | $ | 844 | ||||||
| Accrued payroll and related liabilities | 762 | 814 | ||||||||
| Accrued sales taxes | 250 | 250 | ||||||||
| Current portion of capital lease obligations | 5 | 5 | ||||||||
| Other current liabilities | 120 | 83 | ||||||||
| Total current liabilities | 1,561 | 1,996 | ||||||||
| LONG-TERM LIABILITIES: | ||||||||||
| Long-term portion of capital lease obligation | 16 | 17 | ||||||||
| Total liabilities | 1,577 | 2,013 | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||||
| REDEEMABLE SERIES A CONVERTIBLE PREFERRED STOCK, $0.001 par value, 435,200 shares authorized, issued and outstanding (redemption value of $12,349,525 including accrued dividends at January 1, 2003) | 6,362 | 5,817 | ||||||||
| STOCKHOLDERS' EQUITY: | ||||||||||
| Common stock, $0.0002 par value, 20,000,000 shares authorized, 2,747,790 shares issued and outstanding at March 31, 2000, 50,000 shares subscribed at March 31, 2000 | 1 | 1 | ||||||||
| Series B preferred stock, $0.001 par value, 14,000 shares authorized, issued and outstanding at March 31, 2000 | 13,772 | 13,772 | ||||||||
| Series C preferred stock, $0.001 par value, 12,000 shares authorized, issued and outstanding at March 31, 2000 | 11,772 | 11,772 | ||||||||
| Additional paid-in capital | 260 | 260 | ||||||||
| Stock receivables | — | (259 | ) | |||||||
| Accumulated deficit | (13,575 | ) | (9,494 | ) | ||||||
| Total stockholders' equity | 12,230 | 16,052 | ||||||||
| Total liabilities, redeemable preferred stock and stockholders' equity | $ | 20,169 | $ | 23,882 | ||||||
See accompanying notes to consolidated financial statements.
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Total eMed, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
for the three months ended March 31, 2000 and 1999
(in thousands)
| | March 31, 2000 | March 31 1999 | |||||
|---|---|---|---|---|---|---|---|
| | (unaudited) | (unaudited) | |||||
| REVENUES | 2,101 | 409 | |||||
| OPERATING EXPENSES: | |||||||
| Cost of revenues | 3,318 | 657 | |||||
| Selling, general and administrative | 2,020 | 400 | |||||
| Depreciation and amortization | 460 | 67 | |||||
| Total operating expenses | 5,798 | 1,124 | |||||
| Operating loss | (3,697 | ) | (715 | ) | |||
| OTHER INCOME (EXPENSE): | |||||||
| Interest income | 139 | 5 | |||||
| Other, net | 22 | — | |||||
| Total other income (expense) | 161 | 5 | |||||
NET LOSS | (3,536 | ) | (710 | ) | |||
| PREFERRED STOCK ACCRETION | (545 | ) | — | ||||
| NET LOSS APPLICABLE TO COMMON STOCK | (4,081 | ) | (710 | ) | |||
See accompanying notes to consolidated financial statements.
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Total eMed, Inc. and Subsidiaries
Consensed Consolidated Statements of Cash Flows
for the three months ended March 31, 2000 and 1999
(in thousands)
| | March 31, 2000 | March 31, 1999 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| | (unaudited) | (unaudited) | |||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net loss | $ | (3,536 | ) | $ | (710 | ) | |||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | 460 | 67 | |||||||||
| Loss (gain) on disposal of property and equipment | (22 | ) | — | ||||||||
| Changes in operating assets and liabilities, excluding effects of acquisitions | |||||||||||
| Accounts receivable | (215 | ) | (197 | ) | |||||||
| Interest and other receivables | 17 | (8 | ) | ||||||||
| Other current assets | 47 | 17 | |||||||||
| Other noncurrent assets | (1 | ) | — | ||||||||
| Accounts payable | (420 | ) | 124 | ||||||||
| Accrued payroll and related liabilities | (52 | ) | 180 | ||||||||
| Other current liabilities | 37 | 478 | |||||||||
| Net cash used in operating activities | (3,685 | ) | (49 | ) | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
| Purchases of property and equipment | (952 | ) | (758 | ) | |||||||
| Acquisition of assets, net of cash | — | (800 | ) | ||||||||
| Short-term investments, net | 2,865 | — | |||||||||
| Net cash used in investing activities | 1,913 | (1,558 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Proceeds from sale of preferred stock | — | 25,545 | |||||||||
| Proceeds from stock receivables | 260 | — | |||||||||
| Payment on capital lease obligations | (1 | ) | (1 | ) | |||||||
| Net cash provided by financing activities | 259 | 25,544 | |||||||||
NET CHANGE IN CASH | (1,513 | ) | 23,937 | ||||||||
CASH, at beginning of period | 3,150 | 1,826 | |||||||||
| CASH, at end of period | 1,637 | 25,763 | |||||||||
| SUPPLEMENTAL NON-CASH INFORMATION | |||||||||||
| Assets acquired in acquisitions through assumption of liabilities | — | $ | 10 | ||||||||
See accompanying notes to consolidated financial statements.
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Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share data) (unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Total eMed, Inc. (the "Company") is a Delaware corporation formed on December 31, 1999. The Company is the accounting successor to Network Health Services, Inc., which was formed and began operations on March 4, 1998. The Company was formed as part of a corporate reorganization in which all stockholders of Network Health Services, Inc. exchanged all of their shares of Network Health Services, Inc. for all of the shares of the Company. The Company is a medical records solution company, which provides medical record transcription and related services to healthcare providers practicing in outpatient settings. The Company receives medical dictation in digital format from subscribing physicians, transcribes the dictation into text format, stores specific data elements from the records, then transmits the completed medical record to the originating physician in the prescribed format. As of December 31, 1999, the Company employed medical transcriptionists located in 35 states and provides transcription services to numerous outpatient clinics located in eight states. The market for the Company's services, which incorporate telecommunications technology, is characterized by risk and uncertainty as a result of emerging competition, rapidly evolving technology and concentration primarily in the outpatient healthcare industry. Consequently, the Company is exposed to both technological risks and concentration risk related to the Company's ability to collect the amounts due from customers as a result of economic fluctuations in the general economy and the outpatient healthcare industry.
BASIS OF PRESENTATION
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted under the Securities and Exchange Commission's rules and regulations. The unaudited condensed consolidated financial statements and notes included herein should be read in conjunction with the Company's audited Annual Report on Form 10-K for the year ended December 31, 2000 filed with the Securities and Exchange Commission.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of Total eMed, Inc. and its wholly-owned subsidiaries: Total eMed of Tennessee, Inc., Total eMed Financing Co., Inc. and Total eMed Leasing Co., LLC. All significant intercompany balances and transactions have been eliminated in consolidation.
(2) INTANGIBLE ASSETS
Intangible assets, net of accumulated amortization, consists of the following:
| | March 31, 2000 | December 31, 1999 | ||||
|---|---|---|---|---|---|---|
| Goodwill | $ | 995 | $ | 1,006 | ||
| Client lists | 353 | 330 | ||||
| Workforce lists | 325 | 386 | ||||
| Non-compete agreements | 190 | 212 | ||||
| $ | 1,863 | $ | 1,934 | |||
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(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
| | March 31, 2000 | December 31, 1999 | |||||
|---|---|---|---|---|---|---|---|
| Leased equipment | $ | 28 | $ | 28 | |||
| Leasehold improvements | 36 | 33 | |||||
| Furniture and equipment | 383 | 361 | |||||
| Computer equipment and software | 5,531 | 4,570 | |||||
| Less: accumulated depreciation and amortization | (1,192 | ) | (791 | ) | |||
| Net property and equipment | $ | 4,786 | $ | 4,201 | |||
(4) SUBSEQUENT EVENTS
On April 4, 2000, MedQuist Transcriptions, LTD. filed a suit in the Delaware Court of Chancery, MEDQUIST TRANSCRIPTIONS, LTD. V. JOHN H. DAYANI, TOTAL EMED, INC. AND MEDICALOGIC, INC. against Dr. John H. Dayani, Total eMed, Inc. and MedicaLogic, Inc. MedQuist alleging that Total eMed misappropriated its trade secrets through Dr. Dayani, the founder of Total eMed and a former director and employee of MedQuist. This suit was related to other litigation between MedQuist and Dr. Dayani.
MedQuist sought to enjoin Total eMed and MedicaLogic from taking any action to consummate the MedicaLogic/Total eMed merger, and sought to enjoin MedicaLogic and Total eMed from aiding and abetting Dr. Dayani's alleged breach of his fiduciary duties and the further dissemination or misappropriation of MedQuist's trade secrets. On April 18, 2000, the court denied Medquist's motion for expedited consideration of its request for a preliminary injunction, and on May 2, 2000 this suit was voluntarily dismissed without prejudice.
In May 2000, MedicaLogic, Inc. completed its acquisition of the Company, issuing approximately 7,450,000 shares of Medicalogic, Inc. common stock and assuming appoximately 550,000 options in a transaction valued at approximately $343.8 million.
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