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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB/A
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
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Commission File No.: 0-22073
DAOU SYSTEMS, INC.
(Name of small business issuer in its charter)
Delaware 330284454
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5120 Shoreham Place
San Diego, California 92122
(619) 452-2221
(Address of principal executive offices and Registrant's telephone number)
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Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: Common
Stock, $0.001 par value per share
Indicate by check mark whether 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 periods that Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES /X/ NO / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Report or any amendment to this
Report.
The Registrant's revenues for the year ended December 31, 1997 were: $41.7
million.
The aggregate market value of Registrant's voting and non-voting common
equity, held by non-affiliates, computed by reference to the average of the
closing bid and asked prices of the Common Stock as reported by Nasdaq on March
6, 1998, was $185,572,073. Shares of Common Stock held by officers and
directors of Registrant and by persons who hold 5% or more of the outstanding
shares of Common Stock have been excluded from the calculation of this amount in
that such persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily conclusive.
As of March 6, 1998, the number of issued and outstanding shares of
Registrant's Common Stock was 11,826,654.
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DOCUMENTS INCORPORATED BY REFERENCE
Registrant's definitive Proxy Statement which will be filed with the
Securities and Exchange Commission on or before April 30, 1998 in connection
with Registrant's annual meeting of stockholders to be held on May 19, 1998 is
incorporated by reference into Part III of this Report.
Transitional Small Business Disclosure Format: YES / / NO /X/
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The undersigned Registrant hereby amends the following items, financial
statement, exhibits or other portions of its Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1997 as set forth in the pages attached
hereto:
1. Item 13 (Exhibits and Reports on Form 8-K) Pages 2-4
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ITEM 13: EXHIBITS AND REPORTS ON FORM 8-K.
(a) CURRENT REPORTS ON FORM 8-K. The Registrant filed the following
Current Reports on Form 8-K with the Commission during the fourth quarter of
the year ended December 31, 1997:
(1) Current Report on Form 8-K, filed on October 29, 1997,
reporting the Registrant's acquisition on October 15, 1997 of all of the
issued and outstanding shares of On-Line Networking, Inc., a New Jersey
corporation ("On-Line"), through the issuance of 150,000 shares of the
Registrant's Common Stock. The acquisition was accomplished by means of a
pooling-of-interests merger (the "On-Line Merger") of On-Line with DAOU
On-Line, Inc., a Delaware corporation and wholly-owned subsidiary of the
Registrant ("DAOU On-Line").
(2) Current Report on Form 8-K, filed on November 17, 1997,
reporting the Registrant's revenue and net income of $4,100,000 and $180,000,
respectively, for the 30-day period ended November 14, 1997. Such revenue
and net income amounts include 30 days of combined operations of the
Registrant and DAOU On-Line.
(3) Current Report on Form 8-K/A, filed on November 26, 1997,
amending and completing the Registrant's Current Report on Form 8-K, filed on
October 29, 1997. This Current Report on Form 8-K/A contained (i) audited
financial statements of On-Line for the years ended December 31, 1996 and
1995, and (ii) certain unaudited pro forma combined financial statements of
the Registrant and On-Line for the nine months ended September 30, 1997 and
1996 and for the years ended December 31, 1996 and 1995.
(b) EXHIBITS.
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<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- --------
<S> <C>
2.1(1) -- Agreement and Plan of Merger, dated January 9, 1997, by and
between the Registrant and DAOU Systems, Inc., a California
corporation.
2.2(2) -- Agreement and Plan of Merger, dated as of July 8, 1997, by
and among the Registrant, DAOU-Integrex, Inc., a Delaware
corporation and wholly-owned subsidiary of the Registrant,
Integrex Systems Corporation, a Delaware corporation, and the
stockholders of Integrex Systems Corporation.
2.3+(3) -- Agreement and Plan of Merger, dated as of September 25, 1997,
by and among the Registrant, DAOU On-Line, On-Line and the
stockholders of On-Line.
3.1(1) -- Amended and Restated Certificate of Incorporation of the Registrant.
3.2(1) -- Bylaws of the Registrant.
4.1 -- Reference is made to Exhibits 3.1 and 3.2.
4.2(1) -- Specimen stock certificate.
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- --------
<S> <C>
4.3(1) -- Investors' Rights Agreement, dated October 26,
1995, between the Registrant and the parties
named therein.
4.4(1) -- Series A Preferred Stock Purchase Warrant No. 1,
dated October 26, 1995, between the Registrant
and Needham & Company, Inc.
4.5(1) -- Series A Preferred Stock Purchase Warrant No. 2,
dated October 26, 1995, between the Registrant
and Needham Capital S.B.I.C., L.P.
10.1(1) -- Form of Indemnification Agreement.
10.2(1)(4) - DAOU Systems, Inc. 1996 Stock Option Plan, as
amended.
10.3(1)(4) - Form of Incentive Stock Option Agreement under
the 1996 Stock Option Plan.
10.4(1)(4) - Form of Nonstatutory Stock Option Agreement under
the 1996 Stock Option Plan.
10.5(1)(4) -- Employment Agreement, effective as of
November 11, 1996, between Robert C. McNeill
and the Registrant.
10.6(1) -- Sublease Agreement, dated March 1, 1996,
between the Registrant and Adobe Systems
Incorporated.
10.7+(1) -- Information Management Agreement, dated April
1, 1996, between the Registrant and Candler
Health System.
10.8+(1) -- Principle Agreement, dated June 18, 1996,
between the Registrant and Catholic Medical
Center of Brooklyn & Queens, Inc.
10.9+(1) -- Principal Agreement, dated June 29, 1995, between
the Registrant and Mercy Health Services.
10.10+(1) -- Master Agreement, dated June 4, 1996, between
the Registrant and Atlantic Health System.
10.11(1) -- Form of Master Services Agreement.
21* -- Subsidiaries of the Registrant.
23* -- Consent of Ernst & Young LLP, independent auditors.
24* -- Power of Attorney.
27.1* -- Financial Data Schedule for year ended December 31,
1997.
27.2 -- Financial Data for the year ended December 31,
1996 and each of the quarters ended March 31,
1997 and June 30, 1997.
</TABLE>
* Previously filed.
+ Confidential treatment has been granted with respect to certain portions of
this exhibit.
(1) Incorporated by reference to the similarly described exhibits filed in
connection with the Registrant's Registration Statement on Form SB-2, File
No. 333-18155, declared effective by the Commission on February 12, 1997.
(2) Incorporated by reference to the exhibit filed in connection with the
Registrant's Current Report on Form 8-K filed with the Commission on July
18, 1997.
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(3) Incorporated by reference to the exhibit filed in connection with the
Registrant's Current Report on Form 8-K with the Commission filed on
October 29, 1997.
(4) Identifies a management contract or compensatory plan or arrangement of the
Registrant.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this Amendment No. 1 to Form 10-KSB to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: March 31, 1998 DAOU SYSTEMS, INC.
By: /s/ DANIEL J. DAOU
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Daniel J. Daou
President
In accordance with the Exchange Act, this Amendment No. 1 to Form 10-KSB
has been signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
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<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
*
- ----------------------------------- Chief Executive Officer and Chairman of the Board
Georges J. Daou (Principal Executive Officer)
/s/ DANIEL J. DAOU
- ----------------------------------- President and Director
Daniel J. Daou March 31, 1998
*
- ----------------------------------- Senior Vice President, Chief Financial Officer and
Fred C. McGee Secretary (Principal Financial and Accounting Officer)
*
- ----------------------------------- Director
Richard B. Jaffe
*
- ----------------------------------- Director
David W. Jahns
*
- ----------------------------------- Director
John H. Moragne
*By: /s/ DANIEL J. DAOU
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Daniel J. Daou, Attorney-in-Fact March 31, 1998
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<TABLE> <S> <C>
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<S> <C> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997 JUN-30-1997
<CASH> 2,457 17,458 5,688
<SECURITIES> 0 0 9,513
<RECEIVABLES> 6,291 5,329 8,329
<ALLOWANCES> 120 134 120
<INVENTORY> 3,783 5,028 5,914
<CURRENT-ASSETS> 13,195 29,285 30,126
<PP&E> 1,895 2,749 3,267
<DEPRECIATION> 740 744 943
<TOTAL-ASSETS> 14,832 31,718 32,876
<CURRENT-LIABILITIES> 4,318 5,499 6,580
<BONDS> 0 0 0
0 0 0
0 0 0
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<OTHER-SE> 2,237 26,157 26,182
<TOTAL-LIABILITY-AND-EQUITY> 14,832 31,718 32,876
<SALES> 28,383 7,094 15,886
<TOTAL-REVENUES> 28,383 7,094 15,886
<CGS> 20,107 4,979 10,926
<TOTAL-COSTS> 27,533 7,492 16,195
<OTHER-EXPENSES> 0 1 1
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> (198) (116) (329)
<INCOME-PRETAX> 1,048 (283) 19
<INCOME-TAX> 126 (154) 31
<INCOME-CONTINUING> 922 (129) (12)
<DISCONTINUED> 0 0 0
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<CHANGES> 0 0 0
<NET-INCOME> 922 (129) (12)
<EPS-PRIMARY> 0.10 (.01) .00
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