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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period ended
June 30, 1998.
or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the transition period from ________ to ________.
Commission File Number: 0-28170
OACIS HEALTHCARE HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 68-0012790
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
300 DRAKE'S LANDING RD., SUITE 1000
GREENBRAE, CA 94904
(Address of principal executive offices, including zip code)
(415) 925-0121
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
At August 10, 1998, there were 10,523,521 shares of the Registrant's Common
Stock outstanding.
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OACIS HEALTHCARE HOLDINGS CORP.
QUARTERLY REPORT ON FORM 10-Q
INDEX
PAGE NO.
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of June 30, 1998 3
(unaudited) and December 31, 1997
Consolidated Statement of Operations 4
for the three months and six months ended June 30, 1998 and 1997(unaudited)
Consolidated Statement of Cash Flows 5
for the six months ended June 30, 1998 and 1997(unaudited)
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 19
INDEX TO EXHIBITS 20
Exhibit 10.13 Promissory Note dated June 2, 1998 for line of credit
extended to Oacis Healthcare Systems, Inc. (Debtor) by Union
Bank of California, N.A. 21
Exhibit 10.14 Security Agreement dated June 2, 1998 between Oacis Healthcare
Holdings Corp. (Debtor) and Union Bank of California, N.A. 26
Exhibit 27.1 Financial Data Schedule 35
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OACIS HEALTHCARE HOLDINGS CORP.
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
JUNE 30, DECEMBER 31,
1998 1997
------------ ----------
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents $ 6,865 $ 5,962
Short-term investments 4,915 9,687
Accounts receivable, net 8,721 8,276
Other current assets 1,670 1,149
-------- --------
Total current assets 22,171 25,074
Property and equipment, net 3,623 3,341
Capitalized software, net 3,435 2,382
Other assets 311 394
-------- --------
Total assets $ 29,540 $ 31,191
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,535 $ 1,784
Accrued expenses 2,609 2,818
Unearned revenue 3,867 3,585
-------- --------
Total current liabilities 8,011 8,187
-------- --------
Long-term obligations 288 461
-------- --------
Stockholders' equity:
Preferred Stock, $0.01 par value;
5,000,000 shares authorized; none issued
and outstanding -- --
Common Stock, $0.01 par value,
30,000,000 shares authorized; 10,506,000
and 10,330,000, shares issued and outstanding 105 103
Additional paid-in capital 48,972 48,542
Accumulated deficit (27,761) (26,002)
Deferred stock compensation (75) (100)
-------- --------
Total stockholders' equity 21,241 22,543
-------- --------
Total liabilities and stockholders' equity $ 29,540 $ 31,191
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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OACIS HEALTHCARE HOLDINGS CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share data)
(unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------- --------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
Revenues:
Software licenses $ 2,561 $ 2,588 $ 5,407 $ 4,326
Installation and support services 2,591 2,163 4,807 3,823
Third party hardware and software 1,178 2,110 2,545 3,509
------------ ------------ ------------ ------------
Total revenues 6,330 6,861 12,759 11,658
------------ ------------ ------------ ------------
Cost of revenues:
Software licenses 39 205 568 268
Installation and support services 1,724 1,581 3,355 3,046
Third party hardware and software 998 1,811 2,140 3,019
------------ ------------ ------------ ------------
Total cost of revenues 2,761 3,597 6,063 6,333
------------ ------------ ------------ ------------
Gross profit 3,569 3,264 6,696 5,325
------------ ------------ ------------ ------------
Operating expenses:
Sales and marketing 1,837 1,561 3,593 3,270
Research and development 1,686 1,723 3,368 3,087
General and administrative 989 902 1,830 1,859
------------ ------------ ------------ ------------
Total operating expenses 4,512 4,186 8,791 8,216
------------ ------------ ------------ ------------
Loss from operations (943) (922) (2,095) (2,891)
Interest income, net 161 278 336 602
------------ ------------ ------------ ------------
Net loss $ (782) $ (644) $ (1,759) $ (2,289)
============ ============ ============ ============
Basic and diluted net loss per share $ (0.07) $ (0.06) $ (0.17) $ (0.23)
============ ============ ============ ============
Weighted average common shares outstanding 10,462,205 10,111,823 10,396,775 10,091,727
============ ============ ============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
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OACIS HEALTHCARE HOLDINGS CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands, unaudited)
SIX MONTHS ENDED
JUNE 30,
------------------------
1998 1997
-------- --------
Cash flows from operating activities:
Net loss $ (1,759) $ (2,289)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 829 603
Stock compensation expense 25 24
Changes in assets and liabilities:
Accounts receivable, net (445) (490)
Other current assets (521) (1,085)
Other assets 83 (390)
Accounts payable (249) 549
Accrued expenses (644) 945
Unearned revenues 282 1,269
-------- --------
Net cash used in operating activities (2,399) (864)
-------- --------
Cash flows from investing activities:
Purchase of short-term investments (2,166) (4,689)
Sale of short-term investments 6,938 10,408
Purchases of property and equipment (1,033) (971)
Capitalized software development costs (1,131) (1,061)
-------- --------
Net cash provided by (used in) investing activities 2,608 (3,687)
-------- --------
Cash flows from financing activities:
Proceeds from option exercises 432 280
Proceeds from line of credit 400 --
Payments on capital lease obligations (138) (100)
-------- --------
Net cash provided by financing activities 694 180
-------- --------
Increase in cash and cash equivalents 903 3,003
Cash and cash equivalents, beginning of period 5,962 4,307
-------- --------
Cash and cash equivalents, end of period $ 6,865 $ 7,310
======== ========
Supplemental disclosure:
Cash paid for interest $ 30 $ 28
======== ========
Capital equipment lease additions $ 400 $ 286
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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OACIS HEALTHCARE HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
1. BASIS OF PRESENTATION
The financial statements included herein for Oacis Healthcare Holdings Corp.
(the "Company") have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. In
management's opinion, the interim financial data presented includes all
adjustments (which include only normal and recurring adjustments) necessary for
a fair presentation in accordance with generally accepted accounting principles.
Certain information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. However,
the Company believes that the disclosures are adequate to understand the
information presented. The results of operations for the six months ended June
30, 1998 are not necessarily indicative of the operating results expected for
the entire year. The financial statements included herein should be read in
conjunction with the Company's audited financial statements for the year ended
December 31, 1997, included on Form 10-KSB filed with the Securities and
Exchange Commission.
2. BASIC AND DILUTED NET LOSS PER SHARE
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earning per Share" (SFAS 128) and Staff Accounting Bulletin No. 98 during the
year ended December 31, 1997 and retroactively restated all prior periods. Basic
net loss per share is computed using the weighted average number of common
shares outstanding during the period. Diluted net loss per share is computed
using the weighted average number of common and common equivalent shares
outstanding during the period except that common equivalent shares are excluded
from the computation if the effect is anti-dilutive. Common equivalent shares
consist of the incremental shares issuable upon the conversion of preferred
stock and the exercise of stock options and warrants (using the treasury stock
method).
3. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS 130,
"Reporting Comprehensive Income." SFAS 130 establishes standards for reporting
and displaying comprehensive income and its components in a full set of
general-purpose financial statements. Adoption of SFAS 130 did not have a
material effect on the Company's financial statements for the quarter ended June
30, 1998.
In June 1997, the Financial Accounting Standards Board issued SFAS 131,
"Disclosures about Segments of an Enterprise and Related Information." This
statement establishes standards for the way companies report information about
operating segments in annual financial statements. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. The disclosures prescribed by SFAS 131 will be reflected in the
Company's financial statements for the year ending December 31, 1998.
In October 1997 and March 1998, the American Institute of Certified Public
Accountants issued Statement of Positions Nos. 97-2 and 98-4 ("SOP 97-2" and
"SOP 98-4") respectively, relating to software revenue recognition which the
Company has adopted for transactions entered into in the fiscal year beginning
January 1, 1998. SOP 97-2 and SOP 98-4 provide guidance on recognizing revenue
on software transactions and supersedes SOP 91-1, "Software Revenue
Recognition". Historically, the Company has accounted for the majority of its
software license fee revenue under Statement of Position 81-1, "Accounting for
Performance of Construction-Type and Certain Production-Type Contracts,"
accordingly the Company believes that the adoption of SOP 97-2 and SOP 98-4 will
not have a significant impact on its revenue recognition accounting policies.
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities." ("SFAS 133")
This statement establishes standards for derivative instruments and hedging
activities. The Company is required to adopt SFAS 133 in the first quarter of
2000. The Company does not anticipate that SFAS 133 will have a material impact
on financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Background
The Company develops, markets, licenses, installs, and supports clinical
information systems primarily for major medical centers, hospitals and
integrated healthcare delivery networks ("IDNs"). In 1986, the Company
introduced StatLAN, the initial version of the Company's clinical information
system. In 1994, the Company introduced Oacis. Oacis is comprised of the Oacis
Healthcare Network, which includes an interface engine, a clinical data
repository and an Enterprise Member/Patient Index and Clinical Care
applications, which facilitate the input and delivery of information at the
point of care.
Substantially all of the Company's revenues are derived from the licensing
and installation of Oacis. The Company intends to focus its sales and marketing
efforts on IDNs which currently account for a growing portion of the overall
market for clinical information systems. The formation of IDNs and a general
consolidation in the healthcare industry has a number of effects which include
the creation of larger healthcare networks with greater market concentration.
The Company believes that while such consolidation may result in an increase in
demand for open architecture clinical information systems such as the Company
provides, the near term effect of such consolidation reduces the resources
available for IDNs to invest in clinical information systems until such time as
the rate of consolidation slows. Additionally, the software industry as a whole
is currently addressing the issues related to Year 2000. Although the Company
believes that its products do not have significant Year 2000 issues, it believes
that IDN's in general are dealing with multiple software systems which do
require major attention to Year 2000 issues which may distract these IDN's from
pursuing enterprise information systems solutions such as the Company provides.
Accordingly, the Company believes that the market for the Company's products may
continue to develop slowly in the near term and that sales cycles will continue
to be long.
The Company's future success and financial performance depends in large part
upon the Company's ability to provide the increasing system functionality
required by its customers through the timely development and successful
introduction of new applications and enhancements to Oacis. The Company has
historically devoted significant resources to system enhancements and
development and believes that significant continuing development efforts
together with an increased focus on integration of third party applications will
be required to sustain and enhance the Company's competitive market position.
Additionally, the Company's ability to develop, market, sell and install its
systems depends on the Company's ability to recruit, hire and retain highly
skilled personnel in a number of technical and clinical fields particularly in
the area of installation services. The market for this highly skilled workforce
is extremely competitive.
The Company's cost of revenues for installation and support services, as
well as its operating expenses, are primarily comprised of personnel and
personnel related costs. These costs are impacted by a number of factors
including increases in personnel and adjustments in compensation levels to
remain competitive in the markets in which the Company operates. The Company
regularly appraises its competitive position with regard to compensation
strategies and makes adjustments when and as required. Additionally, the Company
adjusts salary levels, generally at the beginning of its reporting year, for all
personnel based on merit and other factors including increases in the cost of
living. As a result, the year over year quarterly results before the effect of
capitalized software reflect the increased operating expenses resulting from
increased personnel and personnel related expenses.
Revenue Recognition
The Company's revenues consist of license fees for the perpetual use of its
software, installation revenues associated with installing and configuring the
software to achieve system acceptance as well as implementation services to
further configure, design and test the system to meet specific customer needs,
revenues from the sale of third-party hardware and software, and revenues from
ongoing support services. The price of an Oacis system varies depending on a
number of factors, including the modules licensed and the volume of outpatient
visits and inpatient days for the customer organization, and generally ranges
from more than nine hundred thousand dollars to a few million dollars. The
Company resells third-party hardware and software pursuant to standard reseller
agreements.
Software license fee and installation services revenues from contracts where
the Company is actively involved in the installation of the system, which are
primarily in the United States and Canada, are recognized on a percentage of
completion basis measured
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either by the labor hours incurred or upon attainment of customer acceptance
milestones as provided for in the underlying Software License Agreement. The
Company generally bills its installation and implementation services as the
services are provided. Software license fees are generally billed in accordance
with installation or software acceptance milestones. Accordingly, revenues
recognized in advance of achieving billing milestones are recorded as unbilled
accounts receivable and collections resulting from billing milestones achieved
in advance of recognizing revenues are recorded as unearned revenues on the
consolidated balance sheet. If the total estimated cost of a contract is
expected to exceed the contract price, determined primarily by the installation
component of the contract, the total estimated loss is charged to expense in the
period the loss is identified. In addition, in certain transactions where
existing customers seek to expand the license rights of previously licensed
software, the Company recognizes license fee revenue from certain software
components upon the granting of these expanded rights and when collection of the
additional license fees are probable.
Software license fee revenues from contracts where the Company is not
actively involved in the installation of the system, typically contracts outside
of North America, are recognized as contract amounts become due and payable by
the international partner typically on a milestone basis. In addition, revenue
recognition on a contract milestone basis can cause quarterly revenue and
earnings variability due to the size and timing of such milestones. Because the
Company is not actively involved in these international installations, milestone
attainment and consequently revenue recognition on these contracts may be
delayed for reasons which include delays caused by the customer, or the
Company's international integration partner, both of which are beyond the
control of the Company.
The Company also recognizes revenues from support fees and sales of
third-party hardware and software. Support agreements generally cover a one year
period and the associated revenues are recognized ratably over the period of the
support agreement. Third-party hardware and software revenues are recognized
upon delivery of the related hardware and software. Third-party hardware and
software are generally sold pursuant to a purchase order and are not governed by
the terms of the software license and services agreement.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
Revenues
In the three months ended June 30, 1998, total revenues decreased 8% to $6.3
million from $6.9 million in the three months ended June 30, 1997. Of these
amounts, software license fee revenues were essentially unchanged at $2.6
million, installation and support services revenues increased 20% to $2.6
million and third-party hardware and software revenue decreased 44% to $1.2
million. Software license fee revenue, although unchanged from the prior year
quarter, reflected a shift to domestic revenues. In recent quarters,
international revenues have contributed significantly to software license fee
revenues. However, in the quarter ended June 30, 1998, all software license fee
revenue was derived from domestic contracts which compares with $1.4 from
international contracts in the second quarter of 1997. International revenues
are subject to quarterly variability due to the revenue recognition policies
employed for these contracts. Future international revenue contribution will be
primarily dependent on additional international contracts, the timing and amount
of such will continue to be subject to variability. The increase in installation
and support services revenues from the same quarter in 1997 was primarily due to
a higher number of billable hours resulting from an increase in the number of
projects and higher utilization rates and, to a lesser degree, from an increase
in support services revenues. The decrease in third-party hardware and software
revenues compared to the prior year second quarter was due mainly to the timing
of new customer contracts which generally include significant third-party
hardware and software components.
Cost of Revenues
Cost of revenues were $2.7 million, or 44% of total revenues, in the three
months ended June 30, 1998, compared to $3.6 million, or 52% of total revenues,
in the three months ended June 30, 1997. Cost of installation and support
services increased 9% to $1.7 million in the three months ended June 30, 1998
from $1.6 million in the three months ended June 30, 1997 as a result of an
increase in the number of installation personnel and the average cost of those
personnel including an increase in the use of third-party installation
personnel which generally carry a higher hourly cost than Oacis personnel. The
increase in cost of installation and support services was partially offset by a
decrease in the cost of support services, due in part to the restructuring of
the support organization announced at the end of 1997. Gross profit as a
percentage of total revenues increased to 56% in the three months
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ended June 30, 1998 from 48% in the three months ended June 30, 1997. Gross
profit on software license fees increased to 98% in the second quarter of 1998
from 92% in the prior year period due primarily to the shift in the mix of
revenues to domestic contracts which generally do not carry distribution fees.
Included in the cost of software license fees in the second quarter of 1997 was
$140,000 in international distributor fees. The Company anticipates that future
gross margin percentages on software license fees will be lower than that
experienced in the second quarter of 1998 and more in line with historical
levels as a result of increases in amortization of software development costs
and that software license fee gross margin percentages may fluctuate on a
quarter to quarter basis due to timing of recognition of license fees and
related distribution fees for international contracts. Gross profit on
installation and support services increased to 33% for the second quarter of
1998 from 27% in the prior year period due primarily to improved margins in the
support organization where revenues have increased as more clients have
initiated support services while expenses were lower during the quarter due in
part to the restructuring previously noted. The Company expects that
installation and support services margins may decline in the third and fourth
quarters, consistent with prior years, due in part to the seasonal effects of
holiday schedules. Gross profit on third-party hardware and software increased
to 15% in the three months ended June 30, 1998 from 14% in the three months
ended June 30, 1997.
Sales and Marketing
Sales and marketing expenses increased 18% to $1.8 million in the three
months ended June 30, 1998 from $1.6 million in the three months ended June 30,
1997 and increased as a percentage of total revenues to 29% in the three months
ended June 30, 1998 from 23% in the three months ended June 30, 1997. The
increase in sales and marketing expenses was attributable in part to an increase
in marketing fees related to the Company's marketing agreement with the VHA,
Inc. ("VHA"). The VHA marketing fees are expensed as revenue is recognized on
VHA contracts and are paid upon collection of billing milestones. An increase in
consulting, salary, commission and related expenses also contributed to the
overall increase. The Company expects sales and marketing expenses to increase
during the remainder of the year due to increased VHA marketing fees and
increased travel related expenses resulting from increased sales related
activity. Additionally, quarterly sales and marketing expenses may fluctuate as
a result of the timing of commission expenses associated with new contract
signings and attainment of project milestones on existing contracts.
Research and Development
Research and development expenses, before software capitalization, increased
2% to $2.3 million in the three months ended June 30, 1998 from $2.2 million in
the three months ended June 30, 1997, and increased as a percentage of total
revenue to 36% for the three months ended June 30, 1998 from 32% in the three
months ended June 30, 1997. The increase in expenses was primarily attributable
to increased personnel and personnel related expenses and partially offset by
lower consulting costs. Capitalized software development costs were $583,000, or
approximately 26% of research and development costs, for the three months ended
June 30, 1998 as compared to $487,000, or approximately 22%, for the three
months ended June 30, 1997. The higher software capitalization rate is due to an
increase in the number of products in the later stages of development.
General and Administrative
General and administrative expenses increased 10% to $1.0 million in the
three months ended June 30, 1998 from $0.9 million in the three months ended
June 30, 1997, and increased to 16% as a percentage of total revenue for the
three months ended June 30, 1998 from 13% for the same period in the prior year.
The increase in general and administrative expenses was due to an increase in
personnel related expenses, including consulting expense.
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Revenues
In the six months ended June 30, 1998, total revenues increased 9% to $12.8
million from $11.7 million in the six months ended June 30, 1997. Of these
amounts, software license fee revenues increased 25% to $5.4 million,
installation and support services revenues increased 26% to $4.8 million and
third-party hardware and software revenues decreased 27% to $2.5 million. The
increase in software license fee revenues was due to a $1.2 million, or 46%,
increase in revenue from the domestic customer base which was partially offset
by a $0.2 million, or 9%, decrease in international revenues. International
revenues for the six month period ended June 30,
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1998 accounted for approximately 12% of total revenues as compared to 14% for
the same prior year period. The Company expects international revenues will
continue to contribute to quarterly variability during the remainder of the
year. The increase in installation and support services revenues from the same
period in 1997 was due to an increase in billable installation hours resulting
from increased installation activity as well as increased support services
revenues resulting from new sites that have initiated support services since
June 30, 1997. The decrease in third-party hardware and software revenues was
due mainly to the timing of new customer contracts which generally include
significant third-party hardware and software components.
Cost of Revenues
Cost of revenues were $6.1 million, or 48% of total revenues, in the six
months ended June 30, 1998, compared to $6.3 million, or 54% of total revenues,
in the six months ended June 30, 1997. Cost of installation and support services
increased 10% to $3.4 million in the six months ended June 30, 1998 from $3.0
million in the six months ended June 30, 1997 as a result of an increase in the
number of installation personnel and the average cost of those personnel
including an increase in the use of third-party installation personnel which
generally carry a higher hourly cost than Oacis personnel. The increase in the
cost of installation and support services was offset by a decrease in the cost
of support services, due in part to the restructuring of the support
organization announced at the end of 1997. Gross profit as a percentage of total
revenues increased to 52% in the six months ended June 30, 1998 from 46% in the
six months ended June 30 1997. Gross profit on software license fees decreased
to 89% from 94% due to increases in international distributor fees during the
six months ended June 30, 1998. The Company anticipates that the gross margin
percentage on software license fees will continue to fluctuate on a quarterly
basis as a result of the timing of international revenues and the amount of
distributor fees associated with those revenues. Gross profit on installation
and support services increased to 30% for the first half of 1998 from 20% in the
prior year period due to improved margins in both the support and installation
organizations, with the principal improvement in margins resulting from the
support organization where revenues have increased as more clients have
initiated support services while expenses were lower during the period due in
part to the restructuring previously noted. Gross profit on third-party hardware
and software increased to 16% in the six months ended June 30, 1998 from 14% in
the six months ended June 30, 1997 principally due to the mix of third-party
products sold.
Sales and Marketing
Sales and marketing expenses increased 10% to $3.6 million in the six months
ended June 30, 1998 from $3.3 million in the six months ended June 30, 1997 and
was 28% of total revenues - unchanged from the prior year six month period. The
increase in sales and marketing expenses was attributable in part to an increase
in marketing fees related to the Company's marketing agreement with the VHA in
addition to an increase in compensation related expenses. The VHA marketing fees
are expensed as revenue is recognized on VHA contracts and are paid upon
collection of billing milestones. Quarterly sales and marketing expenses may
fluctuate as a result of the timing of commission expenses associated with new
contract signings and attainment of project milestones on existing contracts.
Research and Development
Research and development expenses, before software capitalization, increased
8% to $4.5 million in the six months ended June 30, 1998 from $4.1 million in
the six months ended June 30, 1997. The increase was a result of an overall
increase in personnel as well as an increase in the average cost of personnel
partially offset by lower consulting expense. Software capitalization totaled
$1.1 million, or 25% of total research and development costs, for the six months
ended June 30, 1998 as compared to $1.1 million, or 26% of research and
development costs, for the six months ended June 30, 1997. Research and
development costs, before software capitalization, decreased as a percentage of
total revenue to 35% for the six months ended June 30, 1998 from 36% for the six
months ended June 30, 1997.
General and Administrative
General and administrative expenses decreased 2% to $1.8 million in the six
months ended June 30, 1998 from $1.9 million in the six months ended June 30,
1997, and decreased as a percentage of total revenue to 14% for the six months
ended June 30, 1998 from 16% for the six months ended June 30, 1997. The
decrease was due to lower headcount related expenses partially offset by higher
consulting expenses.
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LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998 the Company's cash and cash equivalents and short-term
investments totaled $11.8 million as compared to $15.6 million at December 31,
1997.
The Company will be relocating its corporate headquarters during the third
quarter of 1998 commensurate with the expiration of its current corporate office
lease. In conjunction with this relocation, the Company will incur capital
expenditures totaling approximately $3 million for leasehold improvements,
furniture, computers and equipment of which the Company has already paid
$500,000 as of June 30, 1998 and expects that it will be required to fund the
remaining amount during the third quarter.
During June 1998, the Company entered into a financing agreement which
allows the Company to borrow up to $3 million through April 1999 with Union
Bank of California at which time the outstanding amount converts to a four year
term loan with interest rate terms equal to Libor plus 1 1/4%. All outstanding
amounts are secured by the Company's short-term investments to the extent of the
outstanding balance. As of June 30, 1998, expenditures of $400,000 had been
financed under this agreement.
During 1997, the Company invested $2,253,000 in capital expenditures
primarily related to computers and office equipment. Of this amount, $423,000
was acquired under a capital lease agreement with Comdisco, Inc. ("Comdisco").
In April 1996, the Company entered into a master lease agreement with
Comdisco which enabled the Company to finance the purchase of new equipment, or
sell and lease back certain existing equipment, up to an aggregate of $1.0
million. The lease term is 42 months from the date of funding, and the annual
interest rate is 8.5%. As of June 30, 1998, $1,000,000 of new equipment was
financed under this agreement.
The Company's working capital and capital requirements will depend upon
numerous factors including possible customer installation delays, lengthy sales
cycles, the Company's plans for developing, acquiring or licensing new
applications and technologies, the Company's requirements to purchase additional
capital equipment and the level of resources that the Company devotes to its
sales and marketing activities. The Company believes that its existing capital
resources and available financing arrangements will be adequate to fund its
current operations for at least the next 12 months. Thereafter, the Company may
require additional funds to support its operations and may seek to raise such
additional funds through public or private equity financing or from other
sources. There can be no assurance that additional financing will be available
at all or that, if available, such financing will be obtainable on terms
favorable to the Company.
FACTORS AFFECTING OPERATING RESULTS
This report on Form 10-Q contains forward-looking statements which involve
risks and uncertainties. The Company's actual results could differ materially
from those anticipated by such forward-looking statements as a result of certain
factors including those set forth below.
HISTORY OF OPERATING LOSSES; UNCERTAIN PROFITABILITY. The Company has
incurred a net loss of $4.1 million for the year ended December 31, 1997 and
$1.8 million for the six months ended June 30, 1998, and as of June 30, 1998 had
an accumulated deficit of $27.8 million. The Company has not achieved consistent
profitability on a quarterly basis and has not achieved annual profitability.
The Company's prior operating history, consolidation and uncertainty in the
healthcare industry, dependence on the emerging market for IDNs, dependence on
Oacis as its principal product, effects of Year 2000 issues on IDN's clinical
information system purchasing decisions, long sales and installation cycles, and
dependence upon key personnel and third parties, competition, and general
economic and other factors make the prediction of future operating results
difficult. There can be no assurance that any of the Company's business
strategies will be successful or that the Company will be able to achieve
consistent revenue growth or achieve consistent profitability on a quarterly or
annual basis.
CONSOLIDATION AND UNCERTAINTY IN THE HEALTH CARE INDUSTRY, DEPENDENCE ON
EMERGING MARKET FOR IDNs. Many health care providers are consolidating to create
larger health care networks and IDNs with greater market concentration. The
Company focuses its sales and marketing efforts primarily on IDNs, which
currently account for a growing portion of the overall market for clinical
information systems. The Company believes that consolidation and formation of
IDNs will continue and may ultimately result in an increase in demand for open
architecture clinical information systems such as the
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Company provides, and accordingly focuses its sales and marketing efforts on
this market. However, the near term effect of such consolidation includes
reducing the resources available for IDNs to invest in clinical information
systems until such time as the rate of consolidation slows. Accordingly, the
Company believes that the market for the Company's products may continue to
develop slowly in the near term and that sales cycles will continue to be long.
In addition, continued consolidation could erode the Company's existing customer
base and reduce the size of the Company's target market. Additionally, the
resulting enterprises could have greater bargaining power, which could lead to
price erosion of the Company's systems and services. The reduction in the size
of the Company's target market resulting from industry consolidation or delays
in purchasing clinical information systems due to industry consolidation or the
failure of the Company to maintain adequate price levels could have a material
adverse effect on the Company's business, financial condition and results of
operations. The health care industry also is subject to changing political,
economic and regulatory influences that may affect the procurement practices and
operation of health care industry participants. During the past several years,
the United States health care industry has been subject to an increase in
governmental regulation and reform proposals. These reforms may increase
governmental involvement in health care, lower reimbursement rates and otherwise
change the operating environment for the Company's customers. Health care
industry participants may react to these proposals and the uncertainty
surrounding such proposals by curtailing or deferring investments, including
those for the Company's systems and services. The failure of the Company to
maintain adequate price levels or sales as a result of legislative or
market-driven reforms could have a material adverse effect on the Company's
business, financial condition and results of operations.
YEAR 2000. Many computer systems experience problems handling dates beyond
the year 1999. Therefore, some computer hardware and software will need to be
modified prior to the year 2000 in order to remain functional. The Company along
with an independent third-party consultant is assessing both the internal
readiness of its computer systems and the compliance of its computer products
and software sold to customers for handling the Year 2000. The Company expects
to implement successfully the systems and programming changes necessary to
address Year 2000 issues, and does not believe that the cost of such actions
will have a material effect on the Company's results of operations or financial
condition. There can be no assurance, however, that there will not be a delay
in, or increased costs associated with, the implementation of such changes, and
the Company's inability to implement such changes could impact the timing of
installations and have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company is also assessing the possible effects on the Company's
operations of the Year 2000 readiness of key suppliers and subcontractors. The
Company's reliance on suppliers and subcontractors, and, therefore, on the
proper functioning of their information systems and software, means that failure
to address Year 2000 issues could have a material impact on the Company's
operations and financial results; however, the potential impact and related
costs are not known at this time. Additionally, Oacis' customers are currently
assessing their own systems and those of vendors for compliance with Year 2000.
Installation work required by customers to implement Year 2000 releases may
distract customers attention from acquiring and installing Oacis' Systems. Such
distraction could have a material adverse affect on the Company's business,
financial condition and results of operations.
DEPENDENCE ON OACIS; MARKET ACCEPTANCE; SYSTEM ENHANCEMENTS. Substantially
all of the Company's revenues are currently derived from licenses of Oacis.
Therefore, any significant reduction in licensing of Oacis would have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company's future success and financial performance depends in
large part upon the Company's ability to provide the increasing system
functionality required by its customers through the timely development or
integration of new applications and enhancements and the successful introduction
of such applications and enhancements to Oacis. The Company has historically
devoted significant resources to system enhancements and research and
development and believes that significant continuing development efforts will be
required to sustain and enhance the Company's competitive market position. There
can be no assurance that the Company will successfully develop or integrate,
introduce, market and sell new system enhancements or applications, or that
system enhancements or new applications developed or integrated by the Company
will meet the requirements of health care providers and achieve market
acceptance.
LONG SALES AND INSTALLATION CYCLES. The sales cycle for large scale clinical
information systems is lengthy. The Company's sales cycle is subject to delays
associated with the lengthy approval process that typically accompanies
significant capital expenditures, customer budgeting cycles and changes in
customer budgets, changes or the anticipation of changes in the regulatory
environment affecting healthcare organizations, changes in the customer's
strategic information system initiatives, competing information systems projects
within the customer organization, consolidation in the health care industry in
general, the highly sophisticated nature of the Company's products and
competition in the market for clinical information systems. Additionally, during
the sales process, the Company expends substantial time, effort and funds
preparing a contract proposal, demonstrating the system, arranging visits to
customer reference sites and negotiating the contract. For these and other
reasons, the Company's sales cycle is
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lengthy and the Company does not have the ability to predict when or if the
sales process with a prospective customer will result in a signed contract.
The time required to fully implement the Company's systems can vary
significantly depending on the needs and skill sets of its customers. Full
implementation of an Oacis system typically requires nine to 18 months,
depending on a number of factors including the size of the customer, the system
licensed, the number of legacy systems to be interfaced, the degree of
customization requested by the customer and the customer's implementation
schedule. This period may be longer if unforeseen technical, integration or
other problems arise during the implementation process, if the Company has
insufficient trained installation personnel to handle several implementations
simultaneously, if the Company is unable to contract with third parties to
provide supplemental implementation resources, or if a customer decides to delay
the implementation schedule. Due to this long implementation cycle, the
Company's future results of operations depend in large part on maintaining
efficient and timely implementation procedures, particularly since a typical
system license and implementation contract is relatively large compared to the
Company's annual revenues. In addition, payments to the Company are dependent
upon achievement of certain implementation or software acceptance milestones,
the achievement of which can be dependent upon the customer and other
third-parties. If implementation is delayed, then payments and revenue
recognition may also be delayed. Any failure by the Company to install or
implement its clinical information systems on a timely basis could have a
material adverse effect on the Company's business, financial condition and
results of operations.
INTERNATIONAL SALES. The Company has licensed clinical information systems
to customers located outside of the United States and expects to continue
marketing its systems to foreign customers. In 1995, revenues from international
customers were immaterial, however, revenues from international customers
accounted for approximately 4% and 16% of the total revenues in 1996 and 1997,
respectively. In the first six months of 1998, international revenues accounted
for 12% of total revenues. The Company expects that international revenues may
continue to be a significant component of total revenues in future quarters.
Accordingly, the Company's operating results may increasingly be subject to the
risks inherent in international transactions, including difficulties in staffing
and managing foreign sales operations, changes in regulatory requirements,
exchange rates, tariffs or other barriers, and other factors including
dependence on third-party distributors and installers of the Company's products.
Additionally, due to the revenue recognition model used for international sales
(sales outside of North America) this increasing reliance on international sales
may result in higher quarter to quarter variability of software revenues.
POTENTIAL VARIABILITY IN QUARTERLY OPERATING RESULTS. The Company's
quarterly revenues and operating results have varied significantly in the past
and are likely to vary substantially from quarter to quarter in the future.
Quarterly revenues and operating results may fluctuate as a result of a variety
of factors, including the following: the Company's long sales cycle; demand for
the Company's systems, applications and services, including variability in
demand, orders for and shipment of hardware; increasing dependence on
international revenues; the number, timing and significance of announcements and
releases of system enhancements and new applications by the Company and its
competitors; the termination of, or a reduction in, offerings of the Company's
systems, applications and services; the loss of customers due to consolidation
in the health care industry; delays in installations requested by customers or
caused by other factors; the timing of revenue recognition; the amount of
backlog at the beginning of any particular quarter; customer budgeting cycles
and changes in customer budgets; investments by the Company in marketing, sales,
research and development, and administrative personnel necessary to support the
Company's anticipated operations; marketing and sales promotional activities;
software defects and other system quality factors; and general economic
conditions. In particular, the timing of revenue recognition can be affected by
many factors, including the timing of customer attainment of software acceptance
or installation milestones. As a result of the relatively large size of each
customer contract, combined with the Company's method of revenue recognition,
quarterly results are likely to be significantly affected by small changes in
the number of customer contracts in process during a particular quarter. There
can be no assurance that the Company will not experience delays in recognizing
revenue in the future, particularly considering the complexity and large scale
of installations of the Company's systems. In addition, since purchase of the
Company's systems generally involves a significant commitment of capital, any
downturn in any potential customer's business or the economy in general,
including changes in the health care market, could have a material adverse
effect on the Company's business, financial condition and results of operations.
Moreover, the Company's operating expense levels are relatively fixed and, to a
large degree, are based on anticipated revenues. If revenues are below
expectations, net income is likely to be disproportionately affected. Further,
it is likely that in some future quarter the Company's unit sales volume,
revenue, backlog or operating results will be below the expectations of public
market analysts and investors. In such event, the trading price of the Company's
Common Stock would likely be materially adversely affected.
HIGHLY COMPETITIVE MARKET. Competition in the market for clinical
information systems and services is intense and is expected to increase. The
Company's competitors include other providers of health care information systems
and services, and health
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care consulting firms. The Company's principal competitors include 3M Health
Information Systems, Cerner Corporation, HBO & Company, HealthVISION, Inc. and
Shared Medical Systems Corporation. Furthermore, other major health care
information companies not presently offering clinical information systems may
enter the Company's markets. Increased competition could result in price
reductions, reduced gross margins, and loss of market share, any of which could
materially adversely affect the Company's business, financial condition and
results of operations. In addition, many of the Company's competitors and
potential competitors have significantly greater financial, technical, product
development, marketing and other resources and market recognition than the
Company. Many of the Company's competitors also currently have, or may develop
or acquire, substantial installed customer bases in the health care industry. As
a result of these factors, the Company's competitors may be able to respond more
quickly to new or emerging technologies and changes in customer requirements or
to devote greater resources to the development, promotion and sale of their
products than the Company. There can be no assurance that the Company will be
able to compete successfully against current and future competitors or that
competitive pressures faced by the Company will not materially adversely affect
its business, financial condition and results of operations.
NEED TO MANAGE CHANGING OPERATIONS; DEPENDENCE UPON KEY PERSONNEL. The
Company's anticipated future operations may place a strain on its management
systems and resources. The Company expects that it will be required to continue
to improve its financial and management controls, reporting systems and
procedures, and will need to expand, train and manage its work force. There can
be no assurance that the Company will be able to effectively manage these tasks,
and the failure to do so could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company intends to
hire additional installation, research and development and sales personnel in
1998 and beyond. Competition for such personnel is intense and there can be no
assurance that the Company will be able to attract, assimilate or retain
additional highly qualified employees in the future. If the Company is unable to
hire and retain such personnel, particularly those in key positions, the
Company's business, financial condition and results of operations could be
materially adversely affected. The Company's future success also depends in
significant part upon the continued service of its executive officers and other
key sales, marketing, development and installation employees. The loss of the
services of any of its executive officers or other key employees could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company has historically experienced turnover in
certain key positions of the Company and high turnover in general. Additions of
new and departures of existing personnel can be disruptive and could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company is seeking to supplement its service delivery
capability through partnerships with healthcare related consulting firms. There
can be no assurance that the Company will be successful in incorporating
third-party consulting services into its existing services operations. Failure
by the Company to incorporate third-party consulting services into its existing
services operations could have a material adverse affect on the Company's
business, financial condition and results of operations.
DEPENDENCE ON THIRD PARTY PRODUCTS. The Company's systems are dependent upon
a number of third-party computer hardware and software products. There can be no
assurance that financial or other difficulties experienced by third-party
providers will not have an adverse impact upon the technologies incorporated by
the Company's systems, or that, if such technologies become unavailable, the
Company will be able to find suitable alternatives. In particular, both the
Gateway++ and Oacis Data Repository components of Oacis incorporate a Sybase
relational database. Any significant failure by Sybase to meet the Company's
database requirements could have a material adverse effect on the Company's
business, financial condition and results of operations. A decline in Sybase's
reputation could reduce the appeal of the Company's products to its potential
customers. Although the Company believes that it can port Oacis to other
relational database platforms, such efforts would require substantial time and
investment and would have an adverse affect on the Company's operations,
including its ability to complete other product development. In addition, Oacis
includes a number of embedded software products licensed from third parties.
Failure of such third parties to maintain or enhance their products could impair
the functionality of Oacis and could require the Company to obtain alternative
products from other sources or to develop such software internally, either of
which could involve costs and delays as well as diversion of engineering
resources. In addition, modifications or enhancements by these third-party
vendors often require that the Company modify its own software products to
operate with these enhancements or modifications. There can be no assurance that
the Company will be able to modify its own software to accommodate third-party
changes or that the effort to make such changes will not adversely affect the
Company's other development projects.
RISK OF SYSTEM DEFECTS; FAILURE TO MEET PERFORMANCE CRITERIA. Systems as
complex as those offered by the Company frequently contain errors or failures,
especially when first introduced or when new versions are released. Although the
Company conducts extensive testing, the Company has in the past released systems
that contain defects, has discovered software errors in certain of its
enhancements and applications after their introduction and, as a result, has
experienced delays in recognizing revenues and incurred higher than expected
operating expenses during certain periods in order to correct these errors. The
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Company's systems are intended for use in a clinical health care setting, to
collect and display clinical information used in the diagnosis and treatment of
patients. As a result, the Company expects that its customers and potential
customers have a greater sensitivity to system defects than the market for
software products generally. In addition, customer contracts typically provide
that the Oacis system is warranted to meet certain performance criteria
concerning response time and system availability. The Company also will
generally recommend hardware configurations that it believes will be adequate to
achieve user acceptable response time performance and system availability.
Failure of a customer's system to meet these performance criteria could
constitute a material breach under such contracts, and could delay revenue
recognition and require that the Company incur additional expense in order to
make the system meet these performance criteria or to purchase additional
hardware where the recommended hardware configurations have been determined to
be inadequate. Although to date the Company has not experienced material adverse
effects resulting from any software errors or performance failures, there can be
no assurance that, despite testing by the Company and by current and potential
customers, errors or performance failures will not occur in new enhancements or
applications after commencement of commercial shipments, resulting in loss of
revenue or delay in market acceptance, diversion of development resources,
damage to the Company's reputation, or increased service and warranty costs, any
of which could have a material adverse effect upon the Company's business,
financial condition and results of operations.
LIMITED PROPRIETARY RIGHTS; RISK OF INFRINGEMENT. The Company relies on a
combination of trade secrets, copyright and trademark laws, nondisclosure and
other contractual provisions to protect its proprietary rights. The Company has
not filed any patent applications covering its technology or registered any of
its copyrights with state or federal agencies. There can be no assurance that
measures taken by the Company to protect its intellectual property will be
adequate or that the Company's competitors will not independently develop
systems and services that are substantially equivalent or superior to those of
the Company. Substantial litigation regarding intellectual property rights
exists in the software industry, and the Company expects that software products
may be increasingly subject to third-party infringement claims as the number of
competitors in the Company's industry segment grows and the functionality of
systems overlap. Although the Company believes that its systems and applications
do not infringe upon the proprietary rights of third parties, there can be no
assurance that third parties will not assert infringement claims against the
Company in the future or that a license or similar agreement will be available
on reasonable terms in the event of an unfavorable ruling on any such claim. In
addition, any such claim may require the Company to incur substantial litigation
expenses or subject the Company to significant liabilities and could have a
material adverse effect on the Company's business, financial condition and
results of operations.
PRODUCT LIABILITY AND MEDICAL MALPRACTICE. The Company's clinical
information systems provide clinical information used by clinicians in the
diagnosis and treatment of patients. Any failure by the Company's systems to
provide accurate, reliable and timely information, or to adequately protect the
confidentiality of the information, could result in claims against the Company.
The Company maintains insurance to protect against claims associated with the
use of its systems, but there can be no assurance that its insurance coverage
would adequately cover any claims asserted against the Company. A successful
claim brought against the Company in excess of its insurance coverage could have
a material adverse effect on the Company's business, financial condition and
results of operations. Even unsuccessful claims could result in the Company's
expenditure of funds in litigation and diversion of management time and
resources. There can be no assurance that the Company will not be subject to
product liability or medical malpractice claims that will result in liability in
excess of its insurance coverage, that the Company's insurance will cover such
claims or that appropriate insurance will continue to be available to the
Company in the future at commercially reasonable rates.
GOVERNMENT REGULATION. The United States Food and Drug Administration (the
"FDA") is responsible for assuring the safety and effectiveness of medical
devices under the Federal Food, Drug and Cosmetic Act. Computer products are
subject to regulation when they are used or are intended to be used in the
diagnosis of disease or other conditions, or in the cure, mitigation, treatment
or prevention of disease, or are intended to affect the structure or function of
the body. The FDA could determine in the future that predictive applications of
the Company's systems and applications make them clinical decision tools subject
to FDA regulation. Medical devices are subject to regulation by the FDA, which
requires, among other things, premarket notifications or approvals and
compliance with labeling, registration and listing requirements, good
manufacturing practices and records and reporting requirements. Compliance with
these regulations could be burdensome, time consuming and expensive. The Company
also could become subject to future legislation and regulations concerning the
manufacture and marketing of medical devices and health care software systems.
These could increase the cost and time necessary to market new products and
could affect the Company in other respects not presently foreseeable. The
Company cannot predict the effect of possible future legislation and regulation.
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The confidentiality of patient records and the circumstances under which
such records may be released for inclusion in the Company's databases is subject
to substantial regulation by state governments. These state laws and regulations
govern both the disclosure and use of confidential patient medical record
information. Although compliance with these laws and regulations is principally
the responsibility of the hospital, physician or other health care provider with
access to the Company's information system, regulations governing patient
confidentiality rights are evolving rapidly. Additional legislation governing
the dissemination of medical record information has been proposed at both the
state and federal level. This legislation may require holders of such
information to implement security measures that may be of substantial cost to
the Company. There can be no assurance that changes to state or federal laws
will not materially restrict the ability of health care providers to submit
information from patient records to the Company's systems.
RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS. The Company may in the future
pursue acquisitions of complementary products, technologies or businesses.
Future acquisitions by the Company may result in potentially dilutive issuances
of equity securities, the incurrence of additional debt and amortization
expenses related to goodwill and other intangible assets, which could adversely
affect the Company's results of operations. In addition, acquisitions involve
numerous risks, including difficulties in the assimilation of the operations,
products and personnel of the acquired company, the diversion of management's
attention from other business concerns, risks of entering markets in which the
Company has no direct prior experience, and the potential loss of key employees
of the acquired company. There can be no assurance that the Company will ever
successfully complete an acquisition.
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PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits:
3.1(1) Certificate of Incorporation of Registrant
3.2(2) Bylaws of Registrant.
4.1(3) Form of Common Stock certificate.
10.1(4) 1996 Stock Plan and form of agreement thereunder.
10.2(3) 1996 Director Option Plan and form of option agreement
thereunder.
10.3(5) 1996 Employee Stock Purchase Plan and form of subscription
agreement thereunder.
10.4(3) Form of Indemnification Agreement entered into between
Registrant and its directors and executive officers.
10.5(3) Restated Stockholders Agreement dated as of April 8, 1996
between the Registrant and certain stockholders.
10.6(3) Lease dated August 30, 1990 for facilities located at 100
Drake's Landing Road, Greenbrae, California, together with
related expansion and extension agreements and work agreements.
10.7(3) Lease dated July 10, 1992 for facilities located in Atlanta,
Georgia, together with an addendum thereto dated March 29, 1993.
10.8(3) Employment Agreement dated May 17, 1995 between Jim McCord and
Oacis Healthcare Systems, Inc., a wholly-owned subsidiary of the
Registrant ("Subsidiary").
10.9(3) Master Lease Agreement and Equipment Schedule VL-1, each dated
as of March 1, 1996, between Comdisco, Inc. and Subsidiary.
10.11(3) Standard form of Software License Agreement for the Oacis
System.
10.12(6) Lease dated March 19, 1997 for Facility located at 1101 5th
Avenue, San Rafael, Marin County, California 10.13 Promissory
Note dated June 2, 1998 for line of credit extended to Oacis
Healthcare Systems, Inc. (Debtor) by Union Bank of California,
N.A. attached hereto.
10.13 Promissory Note dated June 2, 1998 between Oacis Healthcare
Holdings Corp. (Debtor) and Union Bank of California, N.A.
attached hereto.
10.14 Security Agreement dated June 2, 1998 between Oacis Healthcare
Holdings Corp. (Debtor) and Union Bank of California, N.A.
attached hereto.
21.1(3) Subsidiaries of the Registrant.
27.1 Financial Data Schedule
- ----------
(1) Incorporated by reference to Exhibit 3.2 previously filed with the
Company's Registration Statement on Form SB-2 (No. 333-02804-LA).
(2) Incorporated by reference to Exhibit 3.3 previously filed with the
Company's Registration Statement on Form SB-2 (No. 333-02804-LA).
(3) Incorporated by reference to the same numbered exhibit previously filed
with the Company's Registration Statement on Form SB-2 (No. 333-02804-LA).
(4) Incorporated herein by reference to the Company's 1996 Stock Plan, as filed
with the Commission on April 30, 1998 with the Company's definitive proxy
statement for its 1998 Annual Meeting of Stockholders and to the form of
agreement thereunder, as previously filed as Exhibit 10.1 with the
Company's Registration Statement on Form SB-2 (No. 333-02804-LA).
(5) Incorporated herein by reference to the Company's 1996 Employee Stock
Purchase Plan and form of subscription agreement thereunder, as filed with
the Commission on April 30, 1997 with the Company's definitive proxy
statement for its 1997 Annual Meeting of Stockholders.
(6) Incorporated by reference to the same numbered exhibit previously filed
with the Company's Form 10-KSB for the year ended December 31, 1996.
(b) Reports on Form 8-K
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No reports on Form 8-K were filed by the Company during the six months ended
June 30, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OACIS HEALTHCARE HOLDINGS CORP.
(Registrant)
Date August 14, 1998 /s/ Stephen F. Ghiglieri
----------------- ---------------------------------------
Stephen F. Ghiglieri Vice President,
Finance and Administration,
Chief Financial Officer and
Secretary (Principal Financial and
Accounting Officer)
Date August 14, 1998 /s/ Jim McCord
----------------- ---------------------------------------
Chairman and Chief Executive Officer
(Principal Executive Officer)
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INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
10.13 Promissory Note dated June 2, 1998 for line of credit extended to Oacis
Healthcare Systems, Inc. (Debtor) by Union Bank of California, N.A.
10.14 Security Agreement dated June 2, 1998 between Oacis Healthcare Holdings Corp.
(Debtor) and Union Bank of California, N.A.
27.1 Financial Data Schedule
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