Analyst report-mdtk
equitynet.net e-MedSoft.com Randall D. Lewis, CFA - Analyst
OTCBB:MDTK -- $2.94 November 9, 1999
Stock Price:
$2.94
Shares Outstanding:
55.0 M
12 mo. Price Range:
$0.20 ? 7.00
Estimated Float:
16.5 M
Industry Sector:
Healthcare Info Systems
Recommendation:
Buy
30-day Avg. Daily Vol.
38,600
12-18 mo. Target Price:
$6 -10
Business Model Better Defined, Comes to Fruition
We are upgrading our rating on e-MedSoft.com to a "BUY" recommendation. Much of the
uncertainty regarding the Company and the industry has been removed as e-MedSoft has defined its business model and
frankly, seems to be setting a precedent in the industry. Competition has heated up, with competitors, such as Healtheon,
HBO & Company, Shared Medical and IDX all vying for space in the health.net market. The industry is also finally
starting to see contract arrangements mature, easing the burden on analysts to try to predict sources of revenue.
e-MedSoft?s agreements with healthcare organizations have also matured. The Company?s contracts have three distinct
characteristics: (1) revenue sharing, rather than subscription fee-based models; (2) geographic exclusivity as healthcare
organizations expand their value chains through the Company?s systems; and (3) long-term agreements (on the order of
ten years).
Through discussions with many of e-MedSoft?s clients, it is clear that the Company is offering a true business solution,
rather than simply relying on an advertising revenue model like some of its competitors. This makes perfect sense. For
healthcare organizations, implementing a total electronic solution is a major decision. Systems must provide significant
value in day-to-day operations rather than focus on a model that is rapidly becoming extinct. e-MedSoft?s recurring
revenue model is being proven as the new industry standard.
HIGHLIGHTS
The Pan American Health System and its affiliates recently have chose e-MedSoft.com to provide
comprehensive technology solutions involving the deployment of a Web portal with full functionality
and content for all of the Pan American network?s facilities, providers and patients. In landing this
contract, the Company beat out HBO & Company, Shared Medical and IDX. This is a major coup
for a company that is below the investment radar screen of its competitors. In fact, after contacting
Pan American, we discovered that e-MedSoft entered into Pan American?s review and selection
process halfway through. We feel this is a solid testament to the Company?s technology. Pan
American chose e-MedSoft not only because of the Company?s technology, but also for its flexibility
(both technological and corporate), the ability to integrate all existing systems and those of future
members, and price. The portal will provide seamless bilingual connectivity to the network?s diverse
market population throughout the Southeastern United States.
The Pan American Health System comprises a community hospital in Miami, as well as an
MSO (Management Services Organization), a PHO (Physician-Hospital Organization) and a
recently- acquired, major Managed Care Network in South Florida. Patient care is provided
by a Medical Staff of over 1,200 physicians. This contract is a perfect example of the value
chain expansion and revenue-sharing arrangement alluded to earlier. The term of this
agreement is 15 years.
Through the portal, the e-MedSoft.com customer will have access to various functions that will
assist with managing clinics, private practices, plans and hospitals. The portal will provides
access to a selection of information services, pharmaceuticals, labs, and medical supplies to
Pan American?s community of healthcare professionals. It will also electronically integrate all of
a community?s participants, thus streamlining and enhancing patient care and improving each
organization?s efficiency.
e-MedSoft.com?s United Kingdom subsidiary changed its name to e-Net Technology Limited
(formerly Palm Technology Holdings Ltd., a UK based company which owned all of the issued and
outstanding stock of UK-based Relay Business Systems Ltd.). e-Net recently signed a contract with
the United Kingdom Transplant Support Service Authority, an agency of the United Kingdom
National Health Service, to provide a browser-based application, called the HealthDB solution. The
system will connect 12 transplant offices throughout the UK through a private Intranet, as well as
provide complete organ donor and transplant management.
The Company closed an exclusive 10-year contract with University Affiliates IPA, an affiliate of the
University of Southern California School of Medicine and the largest fully accredited IPA in the U.S.
The contract also called for e-MedSoft to purchase University Affiliates? SamSynâ managed care
computer software technology for $2 million in cash. This contract, which includes a revenue sharing
agreement between the parties, dramatically increases the Company?s exposure to the healthcare
community through exclusive access to University Affiliates? network of more than 2,500 physicians
and 80,000 patients. We believe the additional exposure, as well as the contract itself, will provide a
solid revenue base.
During the quarter, e-MedSoft also contracted with Home Medical of America, the nation?s
largest privately-held provider of home healthcare services, to provide Web access and functionality
for selected legacy mainframe applications in connection with the Company?s base of physicians on
the growing e-MedSoft.com network. This system will allow HMA to connect its 125 locations and
14,000 employees in 42 states to the e-MedSoft.com network.
As stated in our initial report, the Company planned to enter the e-commerce segment of the
health.net market in addition to providing connectivity solutions. Thus, it has introduced espartoâ ,
an e-commerce and e-business Web software product written in 100% pure Javaâ . esparto was
developed to simplify the complexity inherent in adapting a company?s standard business practices
and systems to Internet business. The esparto architecture allows e-commerce and e-business
solutions to be quickly implemented.
We also stated in our initial report that the Company?s technology has applications beyond
healthcare, as evidenced by uses in other industries and e-Net?s recent contract with Dickies (UK)
Limited, a subsidiary of Williamson-Dickie, the world's largest work apparel manufacturer. Dickies
plans to use the previously-described, espartoâ product to implement a Web-based, e-business
solution for its distribution channels across the UK and Europe. In addition, Combined Independents
Holdings (CIH), an independent electrical wholesaler providing service to over 800 retail members,
has also chosen espartoâ to streamline its business-to-business-to-consumer ordering process.
These contracts bring to light two important strategic points. First, it shows the Company?s ability to
transport its technology to other industries that are just beginning to upgrade to Web-based solutions.
Second, it solidifies e-MedSoft?s rationale for acquiring e-Net Technology, which is proving its ability
to generate sales.
e-MedSoft signed an agreement with Pharmaceutical Corporation of America ("PCA") under which
PCA will utilize the Company?s system for the marketing and distribution of more than 3,000
pharmaceutical products and prescription drugs to healthcare providers and consumers across the
United States, including the Los Angeles County USC Medical Center, the U.S. Department of
Defense, the Veterans Administration, and numerous managed care organizations and point-of-care
facilities throughout the country. This contract virtually rounds out use of e-MedSoft?s solutions by
the entire healthcare sector.
On May 28, 1999, the Company's Board of Directors decided to change the fiscal year end from
May 31 to March 31 since March 31 is the year end of e-Net Technology, which was acquired in
March 1999.
The Company filed its 10-KSB for the new fiscal year ended March 31, 1999 on September 15.
Though e-MedSoft has entered into several agreements as noted above, no revenues for the period
ended March 31, 1999 were generated from the sale of its core services. Revenues of $2,650,000
that were recorded reflect approximately 13 days of operations consolidated from the e-Net
subsidiary. Though accounts receivable make up nearly 2/3 of the Company?s working capital,
e-MedSoft does not appear to be working capital constrained at this time.
CONCLUSION
Based on these facts, we are upgrading our recommendation on e-MedSoft.com to a "BUY". The Company is helping
define an entire industry and continues to solidify its product offerings. It is also proving its product flexibility and
functionality, two aspects key to its success. At these price levels, we continue to recommend the purchase of the stock
for those investors that can commit risk capital and have a longer-term time horizon.
View Next 10 Messages | Respond | Previous | Next |
