For what it's worth, the following is a report that I had prepared after having had a 30 minute conversation with Dr Aita on March 3, 1999 (drafted on March 5, 1999). It sums up my conversation with Dr Aita as well as some of the DD that I have collected over the past year.
General Information
There initially was a private placement for 1,000,000 Units (special warrants 'sw') at 0,75$. Each sw allowed its holder to subscribe to a common share at no additional cost. The sw were exercised once the visa was obtained. These shares are held by two groups. The latter are split up as follows: 466,666 - 533,334.
Moreover, there was an underwriting done by Merit. Rampart Securities acted as the latter's agent due to the fact that Merit was not registered with the QSC. The underwriting was for 1,500,000 shares at 1,20$.
There are currently 17,833,333 common shares outstanding, with a float of 8,321,743 shares, reflecting various shareholder escrow agreements.
The directors and officers of MedcomSoft as a group, beneficially own or control, directly or indirectly, 9,932,865 Common Shares of MedcomSoft, representing approx. 57% of the outstanding Common Shares.
In addition thereto, pursuant to Ontario Securities Commission Policy 5.9, 9,511,590 Common Shares have been deposited in escrow with MedcomSoft's transfer agent, as escrow agent, subject to release as follows:
(a) immediately after nine months following the issuance of the receipt for MedcomSoft's final prospectus, 10% of the escrowed Common Shares;
(b) 20% of the escrowed Common Shares will be released immediately after each of the first, second and third anniversaries of the initial release: and
(c) 30% of the escrowed Common Shares will be released immediately after the fourth anniversary of the initial release.
Subject to the automatic release provisions of Policy 5.9, as described above, none of the Common Shares owned by such individuals may be released from escrow or transferred within escrow without prior written consent of the Ontario Securities Commission.
Dr Aita confirmed that, as of today, the free float was 2,500,000. The latter is probably due to various private escrow agreements. The following reflects IMHO the difference between the above-mentioned number (8,321,743) and the number given to me by Dr Aita:
-Approx 2,000,000 shares are directly or indirectly held by the individuals having participated in the Private Placement (escrow agreement in effect)
-Approx 1,000,000 shares are held by relatives of the aforementioned.
-Approx 1,500,000 shares are held by a certain pension fund
-Approx 1,500,000 shares are held by some major players from United Arabia (Arabie Saoudite)
These shares are very tightly held and because of various shareholder escrow agreements, will not be sold before certain criteria's are met.
Dr Aita mentioned that he was contacted by various individuals looking to purchase large amounts of stock. One of these individuals was looking for approx 150,000 shares. The latter was the reason why we saw the volume we saw last Friday. Another individual was looking for 300,000 shares. Due to the unavailability of shares, this individual cannot purchase said number of shares on the open market.
I was told that they would be willing to proceed with a second offering if the shares are issued at a reasonable level. Asked on what he considered to be a reasonable level, he replied $3-$4. Therefore, I personally think that such an offering will take place in a few months. I presume it will be for 2,000,000 - 3,000,000 shares.
In addition thereto, Dr Aita was contacted by 2 big firms that were very interested in making a market for MDCM. Thus, I expect to see 3 MM's in the very near future.
Promotion
Dr Aita seemed to be a very conservative type. He told me that he did not want the share price to get ahead of the company's true value. He preferred establishing the necessary infrastructures and customer support services (Training module units, ...) before launching any promotional campaigns. This seems to have paid off very nicely.
They just hired a very reputable PR firm located in Ontario: Beaudoin & Associates. They will be sending fact sheets to most of the brokerage firm. Moreover, in the coming weeks, Dr Aita will be meeting with numerous institutional front managers.
In the next 6 weeks, they will be releasing between 10-12 PR's.
These releases will be concentrating on 3 aspects:
-Sales performance
-New Products
-Alliances
Apparently, there will be a buy recommendation coming out next week.
Sales
They expect to be profitable this year. Actually, he said that they expect to be profitable by March-April. Anything beyond that is a bonus. Just to put things in perspective, they didn't expect to be profitable before 2Q 2000.
January sales reflect approx a 200% increase over last quarter. February sales reflect a major increase over January. Therefore, their sales seem to be increasing exponentially. He mentioned that 50% of the February sales were by referral (IMO this is due to the fact that they concentrated on establishing the necessary customer support services and infrastructures).
In the short term (coming months), they are concentrating on Ontario. The reason is the following. Out of 50,000 Canadian doctors, 20,000 are located in Ontario. Of these, 80% still have to comply with Y2K problem (the Ontario Health Ministry requires them to be Y2K compliant). The March 18 deadline has been extended until July. Thus, I expect the exponential growth to continue.
Products
I was told that they are presently negotiating something VERY BIG. It is internet related. He told me he could not reveal any additional information (he looked very excited about this). IMO it is a health information network using the Internet to connect various healthcare industry stakeholders with the Ministry of Health. It will allow medical practitioners to gain access to any medical record via the Internet.
They have a new product that they will be integrating into their Medworks software. Apparently it is an artificial intelligence nomenclature (he used some techie terms) which allows a practitioner to, either by voice recognition or light-pen, funnel out the possible condition of the patient. This is a result of 20 years of scientific research. Apparently, the latter was tested in a couple of the more respectable US universities (He mentioned Yale and a couple others). I was told that said product would be released in the coming weeks.
Thus, they have integrated in one software the practice management(billing, etc...) aspect with the more technical medical aspect.
Expositions
On March 13-14, the Quebec Ministry of Health is having an exposition in Quebec City during which will be announced an alliance between MDCM and a third party. Very big news! This will allow them to penetrate the Quebec market. Since our healthcare is paid for by the government, I expect to see some big $$$$$.
In May, there is an Electronic Patient's records Trade show in Miami during which they will be launching a new product. IMO, the product will be the Internet related information network. (Medical Records)
International Market
As mentioned earlier, the manual instructions were translated in Spanish and in Portuguese which means they are targeting the international market.
Phillipines
Together with their alliances they will provide hardware, software and training so that almost 2000 hospitals in the Philippines can put medical records on line. The first phase of the project is worth an estimated $33 million, while the value of the second could top $200 million.
The first phase of the PCHIN (Philippine Community Health Information Network) project, including deployment to 1,863 hospitals and all participating payers in the Philippines, is planned for this spring. And is worth an estimated $33.5 million.
The second phase is worth $200 million and will include the connection of physicians, pharmacies, drug stores, radiologists and laboratories in addition to pharmaceutical distributors.
These are two major "protocols of intention" (documents committing the parties to move ahead with a certain project) .
Before it is over, the deal is expected to be worth more than $233 million.
I was given the following reason for the encountered delay:
Last year, a new government was elected. They requested a renewed market study before entering into a deal with MDCM. Management met with them on several occasions during the months of November and December. They were very satisfied with the studies forwarded to them by management. As a result, a group of individuals are now doing a DD on the company before giving the official OK. We should be hearing from them in the coming months.
Malaysia
The Malaysia deal (expected to be worth between $25 and $30 million)
was delayed because of the economic situation. He was under the impression that things should pick up this summer.
You can find some information on these contracts in their definitive prospectus.
Dr Sami Aita
1 800 616-8858
1 416 867-6000 |
