Notes to Consolidated Financial Statements

Index Company Profile Financial Highlights Dear Fellow Shareholders Question and Answer with the CEO ASP Solutions HealtheWare HealthWeb Complementary Business Milestones Form 10-K Report of Independent Accountants Balance Sheets Statements of Operations Statements of Comprehensive Loss Statement of Stockholders' Equity (Deficit) Statements of Cash Flows Notes to Consolidated Financial Statements Valuation and Qualifying Accounts Corporate Information

NOTE 6 Notes Payable and Lines of Credit    In September 2000, the Company executed a Secured Term Note facility with a lending institution for a total available amount of $10.0 million. A total of $4.0 million was borrowed under a Secured Term Note. The Company subsequently paid the outstanding balance on its existing line of credit of $2.7 million from borrowings under the Secured Term Note. The Secured Term Note was due and repaid by the Company in October 2000, after the acquisition of Erisco was consummated.    In September 2000, the Company also entered into a Loan and Security Agreement and Revolving Credit Note with the same lender, providing for a revolving credit facility in the maximum principal amount of $15.0 million. The revolving credit facility became effective upon repayment of any outstanding balance on the Secured Term Note. In October and December 2000, the Loan and Security Agreement and Revolving Credit Note were amended to include Erisco and RIMS, respectively, as additional borrowers. The revolving credit facility is secured by all of the Company's receivables and expires in September 2002.    Borrowings under the revolving credit facility are limited to and shall not exceed 80% of qualified accounts as defined in the Loan and Security Agreement. Interest on the revolving credit facility is prime plus 1.5%. In addition, there is a monthly 0.0333% usage fee and a monthly 0.083% loan management fee. Interest is payable monthly in arrears on the first business day of the month. The revolving credit facility contains certain covenants that the Company must adhere to during the term of the agreement, including a tangible net worth, as defined, of at least $12.0 million and the generation of a minimum monthly net earnings before interest, depreciation and amortization and minimum cash balances, as defined in the Loan and Security Agreement. As of December 31, 2000, the Company had outstanding borrowings on the revolving line of credit of $11.4 million.    In December 1999, the Company entered into a lease line of credit with a financial institution. This lease line of credit was specifically established to finance computer equipment purchases. The lease line of credit has a limit of $2.0 million and expired as scheduled in December 2000. Borrowings under the lease line of credit at December 31, 2000 totaled approximately $1.5 million and are collateralized by the assets under lease. In accordance with the terms of the lease line of credit, the outstanding balance is being repaid in monthly installments of principal and interest through June 2003.    In January 1999, the Company entered into a financing agreement for $675,000 in order to acquire a software license. The non-interest bearing note (imputed interest rate of 7.80%) is due in sixty equal monthly installments. Borrowings under the financing agreement are collateralized by the software that the Company purchased with the note proceeds. At December 31, 2000, there was approximately $369,000 principal balance remaining on the note.    In connection with the acquisition of Creative Business Solutions, Inc. and HealthWeb Systems, Ltd. in February 1999 (Note 12), the Company issued notes of $270,000. The notes bear interest at 8.00% per annum and the interest is payable annually in arrears. Fifty percent of the principal balance is payable on the first anniversary and fifty percent is payable on the second anniversary of the issue date. At December 31, 2000, there was $135,000 principal balance remaining on the notes.    In May 1999, the Company entered into a financing agreement for approximately $1.1 million. The amount is due in twelve equal monthly installments and bears interest at 10% per annum. Borrowings under the financing agreement are collateralized by the license that the Company purchased from the lender. At December 31, 1999, there was $386,000 principal balance remaining on the note. The debt was paid in full in April 2000.    In March 1999, the Company entered into a revolving line of credit agreement with a financial institution. In October 1999, the Company entered into a subsequent agreement which increased the amount available under the line of credit. The line of credit has a total capacity of $3.0 million and expires in December 2001. Borrowings under the line of credit bear interest at prime plus 0.50% and are collateralized by corresponding cash balances on deposit classified as restricted cash on balance sheet. Interest is payable monthly as it accrues. The line of credit agreement contains covenants that the Company must adhere to during the term of the agreement including restrictions on the payment of dividends. As of December 31, 2000, there were no outstanding borrowings on the line of credit. The Company has outstanding seven standby letters of credit in the aggregate amount of $1.5 million which serve as security deposits for the Company's capital leases. The Company is required to maintain a cash balance equal to the outstanding letters of credit, which is classified as restricted cash on the balance sheet.    Notes payable and lines of credit consist of the following at December 31: NOTES PAYABLE LINES OF CREDIT --------------- ----------------- 2000 1999 2000 1999 ----- ------ -------- ----- Revolving credit facility of $15.0 million, interest at prime plus 1.5% (11.0% at December 31, 2000), payable monthly in arrears........................ $ -- $ -- $ 11,438 $ -- Equipment lease line of credit, secured by equipment, due in monthly installments through June 2003, with interest rates between 9.72% and 10.18%............................................ -- -- 1,524 973 Financing agreement, collateralized by software license purchased (imputed interest rate of 7.80%) due in equal monthly installments through January 2004.............................................. 369 471 Related party note issued in connection with the acquisition of CBS and HealthWeb, due in February 2001, interest at 8%, payable annually in arrears........................................... 135 270 Note payable to lending institution, collateralized by license purchased, due in equal monthly installments, interest at 10% per annum........... -- 386 Other obligations due in monthly installments through October 2002, with interest rates up to prime plus 1.5% (11.0% at December 31, 2000)...... 103 -- ----- ------ -------- ----- Total notes payable and lines of credit............. 607 1,127 12,962 973 Less: Current portion............................... (343) (623) (12,089) (293) ----- ------ -------- ----- $ 264 $ 504 $ 873 $ 680 ===== ====== ======== =====    Future principal payments of notes payable at December 31, 2000 are as follows: FOR THE PERIODS ENDING DECEMBER 31, NOTES PAYABLE LINES OF CREDIT ----------------------------------- ------------- --------------- 2001................................................... $ 343 $ 12,089 2002................................................... 124 718 2003................................................... 129 155 2004................................................... 11 -- 2005................................................... -- -- ----- -------- 607 12,962 Less: Current portion....................................... (343) (12,089) ----- -------- $ 264 $ 873 ===== ========