UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
--------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission file number O - 22083
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GLOBAL MED TECHNOLOGIES, INC.
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(Exact name of small business issuer as specified in its charter)
COLORADO 84-116894
- ---------------------------- --------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
12600 West Colfax, Suite A-500, Lakewood, Colorado 80215
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(Address of principal executive offices)
(303) 238-2000
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(Issuer's telephone number)
Not Applicable
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(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
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As of June 30, 1997, 8,135,755 shares of the issuer's Common Stock were
outstanding.
Transitional Small Business Disclosure Format Yes No X
----- -----
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GLOBAL MED TECHNOLOGIES, INC.
FORM 10-Q/A
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
TABLE OF CONTENTS
PAGE NO.
Part I. Financial Information
Item 1. Financial Statements
a. Consolidated Balance Sheets as of June 30, 1997
(unaudited) and December 31, 1996
b. Unaudited Consolidated Statements of Operations for
the three months ended June 30, 1997 and June 30, 1996
and for the six months ended June 30, 1997 and
June 30, 1996
c. Unaudited Consolidated Statements of Cash Flows for the
six months ended June 30, 1997 and 1996
d. Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
b. Reports on Form 8-K
2
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Part I - Financial Information
Item 1. Financial Statements
Global Med Technologies, Inc.
Consolidated Balance Sheets
(In thousands)
JUNE 30,
1997 DECEMBER 31,
(UNAUDITED) 1996
---------------------------
ASSETS:
Cash and cash equivalents $ 3,775 $ 489
Accounts receivable-trade, net of
allowance for uncollectible
accounts of $145 and $75 at
June 30, 1997 and December 31,
1996, respectively 800 875
Unbilled revenues, net of allowance
for uncollectible accounts of $125
at June 30, 1997 and December 31, 1996 339 326
Prepaid expenses and other assets 101 196
Deferred offering costs - 486
----------------------------
Total current assets 5,015 2,372
Equipment and fixtures, at cost:
Furniture and fixtures 326 67
Machinery and equipment 233 -
Computer hardware and software 863 613
----------------------------
1,422 680
Less accumulated depreciation
and amortization (414) (189)
----------------------------
1,008 491
Capitalized software development
costs, less accumulated amortization
of $283 and $163 at June 30, 1997
and December 31, 1996, respectively 256 376
----------------------------
Total assets $ 6,279 $ 3,239
============================
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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Global Med Technologies, Inc.
Consolidated Balance Sheets (continued)
(In thousands, except par value information)
JUNE 30,
1997 DECEMBER 31,
(UNAUDITED) 1996
---------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 256 $ 483
Accrued expenses 429 731
Accrued payroll 207 243
Accrued compensated absences 380 352
Noncompete accrual 150 150
Unearned revenue 1,827 1,359
Short-term debt - 1,097
Notes payable (including $181 to
related parties at December 31, 1996) - 651
Current portion of capital lease
obligations 228 169
Net liabilities of discontinued
operations 666 1,132
----------------------------
Total current liabilities 4,143 6,367
Capital lease obligations,
less current portion 239 232
Commitments and contingencies - -
Stockholders' equity (deficit):
Preferred stock, $.01 par value:
Authorized shares - 10,000
None issued or outstanding - -
Common stock, $.01 par value:
Authorized shares - 40,000
Issued and outstanding shares - 8,136
and 4,994 at June 30, 1997 and
December 31, 1996, respectively 81 50
Additional paid-in capital 12,910 4,282
Accumulated deficit (11,094) (7,692)
----------------------------
Total stockholders' equity (deficit) 1,897 (3,360)
----------------------------
Total liabilities and stockholders'
equity $ 6,279 $ 3,239
============================
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
4
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Global Med Technologies, Inc.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per common share information)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
--------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Software sales and consulting $ 365 $ 2,582 $ 1,365 $ 2,771
Hardware and software,
obtained from vendors 50 41 220 91
--------------------------------------------------
TOTAL REVENUE 415 2,623 1,585 2,862
Cost of revenue and product
development:
Software sales and consulting 289 399 590 560
Hardware and software,
obtained from vendors 25 22 168 67
-------------------------------------------------
TOTAL COST OF REVENUE AND 314 421 758 627
PRODUCT DEVELOPMENT
-------------------------------------------------
Gross profit 101 2,202 827 2,235
Operating expenses:
Payroll and other 475 314 971 521
General and administrative 339 156 577 308
Sales and marketing 52 172 486 402
Research and development 649 364 1,078 725
Provision for doubtful accounts - 5 70 10
Depreciation and amortization 102 40 154 72
--------------------------------------------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS (1,516) 1,151 (2,509) 197
Interest income 65 10 115 10
Interest expense (16) (47) (47) (68)
Other (2) - (81) -
--------------------------------------------------
Income (loss) from continuing
operations before provision for
income taxes (1,469) 1,114 (2,522) 139
Provision for income taxes - - - -
--------------------------------------------------
Income (loss) from continuing
operations (1,469) 1,414 (2,522) 139
Loss from discontinued operations (336) (305) (880) (539)
--------------------------------------------------
NET INCOME (LOSS) $ (1,805) $ 809 $ (3,402) $ (400)
==================================================
NET INCOME (LOSS) FROM
CONTINUING OPERATIONS PER
COMMON SHARE $ (0.21) $ 0.25 $ (0.35) $ 0.03
Common shares used in computing
net income (loss) from continuing
operations per common share 7,153 4,384 7,153 4,384
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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Global Med Technologies, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
SIX MONTHS ENDED
JUNE 30,
1997 1996
---------------------------
OPERATING ACTIVITIES
Net loss $ (3,402) $ (400)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Net loss of discontinued operations 880 539
Depreciation and amortization 274 101
Loss on disposal of assets 2 -
Warrant issuance 63 -
Changes in operating assets and
liabilities:
Accounts receivable-trade, net 75 (390)
Unbilled revenues, net (13) (1,143)
Note receivable - (250)
Prepaid expenses and other assets 95 (11)
Accounts payable (227) 141
Accrued expenses (302) 308
Accrued payroll (36) 82
Accrued compensated absences 28 (6)
Noncompete accrual - (175)
Unearned revenue 468 222
----------------------------
Net cash used in continuing operations (2,095) (982)
Net cash used in discontinued operations (1,255) (585)
----------------------------
Net cash used in operating activities $ (3,350) $ (1,567)
INVESTING ACTIVITIES
Purchases of equipment and fixtures (438) (36)
Capital expenditures of discontinued
operations (58) (15)
Increase in software development costs - (40)
----------------------------
Net cash used in investing activities (496) (91)
FINANCING ACTIVITIES
Borrowings on short-term debt - 425
Principal payments on short-term debt (1,097) (105)
Principal payments under capital
lease obligations (95) (50)
Principal payments on notes payable (327) -
Principle payments of discontinued
operations (107) (105)
Issuance of notes payable - 751
Issuance of common stock 8,272 700
Deferred offering costs 486 (99)
----------------------------
Net cash provided by financing
activities 7,132 1,517
----------------------------
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
6
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Global Med Technologies, Inc.
Consolidated Statements of Cash Flows (continued)
(Unaudited)
SIX MONTHS ENDED
JUNE 30,
1997 1996
---------------------------
(IN THOUSANDS)
Net increase (decrease) in cash and
cash equivalents $ 3,286 $ (141)
Cash and cash equivalents at
beginning of period 489 422
----------------------------
Cash and cash equivalents at
end of period $ 3,775 $ 281
============================
Supplemental disclosures:
The Company entered into capital lease obligations of approximately
$57,000 and $112,000 during the six months ended June 30, 1997 and
1996, respectively.
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
7
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Notes to Unaudited Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Global Med
Technologies, Inc. (the "Company") have been prepared by management in
accordance with generally accepted accounting principles for interim
financial information and with the regulations of the Securities and
Exchange Commission. Accordingly, they do not include all information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of only normal recurring adjustments) considered necessary for
a fair presentation of its financial position at June 30, 1997 and the
results of its operations for the six months and the quarter ended June 30,
1997 and 1996 have been included.
While management believes the disclosures presented are adequate to prevent
misleading information, it is suggested that the accompanying unaudited
consolidated financial statements be read in conjunction with the audited
consolidated financial statements and the notes thereto contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996,
as filed with the Securities and Exchange Commission. The interim results
of operations for the six months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for any other interim period
of 1997 or for the year ending December 31, 1997.
The unaudited consolidated financial statements have been restated to
reflect the sale of the Company's DataMed International division as
discontinued operations in accordance with Accounting Principles Board
Opinion No. 30 ("APB 30") (see Note 2).
2. DISCONTINUED OPERATIONS
On June 20, 1997, Global Med Technologies, Inc. ("the Company") entered
into a letter of intent with National Medical Review Offices, Inc. ("NMRO")
which provides, subject to the approval of the shareholders of the Company
and the satisfaction of certain other conditions, that the Company will
sell its DataMed International division ("DataMed") to NMRO. The letter of
intent provides that NMRO will (i) pay the Company $1.2 million in cash,
$600,000 of which was deposited into an escrow account with a bank on July
2, 1997, (ii) assume certain capital lease obligations related to DataMed
as of June 30, 1997, (iii) assume accounts payable and accrued expenses
related to DataMed as of June 30, 1997, and (iv) be assigned accounts
receivable related to DataMed at June 30, 1997.
The letter of intent provides that NMRO will assume the operations of
DataMed, effective June 30, 1997. The contracts pursuant to which DataMed
performs substance abuse testing for its customers are not assignable.
Therefore, the Company has agreed to encourage DataMed's customers to
enter into new substance abuse testing contracts with NMRO, and to use its
best efforts to facilitate customers' transfer to NMRO. There will be no
adjustment in the purchase price to be paid to the Company, however, in the
event current DataMed customers do not enter into new substance abuse
contracts with NMRO.
It is anticipated that most of the employees of DataMed will be employed by
NMRO, and the letter of intent provides that NMRO will assume the accrued
payroll and vacation pay related to these employees. Among the employees
who would become employees of NMRO is Bart K.
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Valdez, who is currently the acting Chief Financial Officer of the Company,
as well as the Director of Operations of DataMed.
The terms of the agreement with NMRO resulted from arm's length
negotiations between representatives of the Company and representatives of
NMRO.
Consummation of the transaction is dependent upon preparation and execution
of a definitive asset purchase and sale agreement, completion of NMRO's due
diligence, approval of the Company's shareholders and various other
conditions. The final agreement will also include the Company's agreement
not to compete with NMRO in the substance abuse testing business and to
maintain the confidentiality of trade secrets of that business.
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(In thousands, except per common share information)
The unaudited operating results of the discontinued operations are
summarized as follows:
SIX MONTHS ENDED
JUNE 30,
1997 1996
---------------------------
Substance abuse testing and
other revenue $ 2,953 $ 3,116
Cost of revenue 2,151 1,844
----------------------------
Gross profit $ 802 $ 1,272
============================
Net loss $ (880) $ (539)
============================
Net loss per common share $ (0.12) $ (0.12)
============================
The unaudited net liabilities of the discontinued operations are summarized
as follows:
JUNE 30, DECEMBER 31,
1997 1996
---------------------------
Current assets $ 913 $ 1,022
Equipment and fixtures, net 472 738
Current liabilities (1,789) (2,426)
Long-term liabilities (262) (466)
----------------------------
Net liabilities $ (666) $ (1,132)
============================
3. INITIAL PUBLIC OFFERING AND LIQUIDITY AND MANAGEMENT'S PLANS
During the first quarter of 1997, the Company completed an initial public
offering in which approximately 2,914,000 shares of common stock were
issued (including approximately 240,000 shares issued in connection with
the exercise of the underwriter's over-allotment option) which
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provided the Company with approximately $8.3 million, net of expenses (the
February 1997 public offering).
From inception to June 30, 1997, the Company incurred cumulative net losses
of approximately $11.1 million. The Company expects to continue to incur
losses until 1999, and possibly thereafter, until its existing SAFETRACE(R)
software product is fully implemented and fully operational within the
Company's customers information system environment and until its
transfusion management information system software product, which is
currently under development, is established in its markets.
During the quarter ended June 30, 1997, management became aware of certain
delays in future software license fee revenues expected from certain large
internationally based blood centers and hospital organizations. These
delays are expected to cause a greater use of liquidity and capital
resources during the remainder of 1997 than originally anticipated. Based
on this information, management anticipates that the Company's current and
anticipated cash balances will not be sufficient to meet the Company's
capital or liquidity requirements as presently structured. Management
recognizes that the Company must obtain additional capital resources,
consider significant reductions to its software development programs and/or
sharply curtail all of its operating expense categories to enable it to
continue operations with available cash resources. Management's plans
include consideration of the sale of additional equity securities and the
sale of DataMed which would provide sufficient resources to continue the
Company's operations and its software development programs for the
remainder of 1997. Management anticipates the Company will continue to
incur losses until 1999, and possibly thereafter; accordingly, the Company
will require additional capital beyond management's current capital raising
efforts.
The Company is currently evaluating potential investment banking
relationships to assist it on the possible sale of equity securities.
Management expects that these efforts may result in the introduction of
other parties with interests and resources which may be compatible with
that of the Company. However, no assurances can be given that the Company
will be successful in raising additional capital. Further, there can be no
assurance, assuming the Company successfully raises additional funds, that
the Company will achieve profitability or positive cash flow. If the
Company is unable to obtain adequate financing, management will be required
to sharply curtail the Company's software development programs and all of
its operating expense categories.
4. COMMITMENTS AND CONTINGENCIES
During November 1996, the Company (through its Wyndgate division) entered
into an Exclusivity and Software Development Agreement (Agreement) with
Ortho Diagnostic Systems, Inc. (ODSI), a subsidiary of Johnson & Johnson.
This Agreement requires the Company to perform certain software development
services in consideration of the payment by ODSI of $500,000 received by
the Company in November 1996, and an additional payment of $500,000
received by the Company in January 1997. Both payments received by the
Company are included in unearned revenue at June 30, 1997. The Agreement
provided that until May 14, 1997 (the "Exclusivity Period"), ODSI had the
exclusive right to negotiate with the Company with respect to the Company's
activities and developments in information technology and intellectual
property relating to donor and transfusion medicine (the "Technology") and
that, during the Exclusivity Period, the Company would not, directly or
through any intermediary, accept, encourage, solicit, entertain or
otherwise discuss any acquisition of any of the Company's
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common stock, business, property or know-how, including the Technology,
with any person or entity other than ODSI or an affiliate thereof and would
not otherwise encumber the ability of ODSI or an affiliate thereof to enter
into any arrangement with the Company concerning the Technology.
Prior to the expiration of the Exclusivity Period, the Company received
communication from ODSI that it had not yet completed an internal
evaluation of the Company's Technology and would not be prepared at the
conclusion of the Exclusivity Period to discuss any form of proposed
transaction between the Company and ODSI. ODSI requested, and the Company
agreed, that ODSI be permitted to continue its evaluation of the Company's
Technology, on a non-exclusive basis, with the intent of responding to the
Company by July 14, 1997 regarding whether or not they would propose some
form of transaction with the Company. On July 14, 1997, the parties agreed
to a further extension to September 30, 1997.
Pursuant to the Agreement, the Company granted ODSI a right of first refusal
for a period of six months after the expiration of the Exclusivity Period in
the event the Company proposes to transfer, dispose of, sell, lease, license
(except on a non-exclusive basis in the ordinary course of its business),
mortgage or otherwise encumber or subject to any pledge, claim, lien, charge,
encumbrance or security interest (except for a security interest with a bank
which was in effect at the time the Agreement was negotiated) of any kind or
any nature of the Technology. In connection with the extension of the
Agreement to September 30, 1997, ODSI relinquished its right of first refusal.
5. SHORT-TERM DEBT
As of December 31, 1996, the Company owed $1,097,000 in short-term debt.
This amount, plus accrued interest, was paid in full out of the net
proceeds of the February 1997 public offering during the six months ended
June 30, 1997.
6. NOTES PAYABLE
As of December 31, 1996, the Company owed $651,000 related to a 1996 10%
note offering. Of the $651,000, $327,000, plus accrued interest, was paid
in full during the six months ended June 30, 1997 out of the net proceeds
of the February 1997 public offering. The remaining balance of $324,000,
plus accrued interest of $24,750, was converted into approximately 93,000
shares of common stock during the six months ended June 30, 1997.
7. NET LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share, which is required to be adopted on December
31, 1997. At that time, the Company will be required to change the method
currently used to compute net loss per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. The impact
of Statement 128 on the calculation of primary and fully diluted net loss
per share for the six months ended June 30, 1997 and June 30, 1996 is not
expected to be material.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
- --------
Global Med Technologies, Inc. is comprised of two operating divisions,
Wyndgate Technologies ("Wyndgate") and DataMed International ("DataMed").
Wyndgate designs, develops, markets and supports health care information
management software products for blood banks, hospitals and other
facilities. Revenues for Wyndgate are derived from the licensing of
software, the provision of consulting and other value-added support
services and the sale of related hardware and software obtained from
vendors. DataMed is in the business of substance abuse testing and medical
surveillance management services, including medical review officer
functions, data management, record storage and coordination of all
substance abuse testing program elements. Revenues for DataMed are derived
from the provision of substance abuse testing management services and the
coordination of laboratory and collection site services for substance abuse
tests. The Company, has entered into an agreement to sell DataMed, subject
to shareholder approval.
During the three months ended March 31, 1997, the Company completed an
initial public offering in which approximately 2,914,000 shares of common
stock were issued and provided the Company with approximately $8.3 million,
net of expenses (the February 1997 public offering). Through July 1997,
the Company has used approximately $4.5 million of the net proceeds from
the February 1997 public offering. The use of proceeds to date have been
principally expended to repay short-term debt, notes payable, accounts
payable and other accrued expenses, to fund Wyndgate's research and
development and sales and marketing efforts, as well as for general working
capital purposes. Due to delays in the software license fee revenues and
delays in the implementation cycles discussed below as part of Liquidity and
Capital Resources, the Company's use of the net proceeds from the February
1997 public offering for working capital purposes has been, and is expected
to continue to be, greater than originally anticipated. As a result,
management anticipates that the remaining funds will not be sufficient to
fund the Company's anticipated cash requirements during the fourth quarter
of 1997.
From inception to June 30, 1997, the Company incurred cumulative net losses
of approximately $11.1 million. The Company expects to continue to incur
losses until 1999, and possibly thereafter, until its existing SAFETRACE(R)
software product is fully implemented and fully operational within the
Company's customers information system environment and until its
transfusion management information system software product, which is
currently under development, is established in its markets.
During the quarter ended June 30, 1997, management became aware of certain
delays in future software license fee revenues expected from certain large
internationally based blood centers and hospital organizations. See
Liquidity and Capital Resources below for further discussion of the
Company's cash requirements and management's plans.
The Company's Wyndgate division has historically incurred, and expects to
continue to incur, losses related to its operations, including the
continued costs for research and development of new software products by
Wyndgate and the expansion of sales and marketing resources. The timing
and amounts of the Company's expenditures will depend upon a number of
factors, including the progress of the Company's research and development
process, the status and timing of regulatory approval, the timing of market
acceptance of the Company's products, the level of support needed by the
Company's customers to implement the software products they license from
Wyndgate, and the efforts required to develop the Company's sales and
marketing organization.
This Quarterly Report contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
including, without limitation, statements regarding the sufficiency of the
Company's liquidity and sources of capital. Any statements contained
herein which are not historical facts or which contain the words expect,
believe or anticipate, or words of similar import shall be deemed to be
forward-looking statements. These
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forward-looking statements are subject to certain risks, uncertainties and
other factors which could cause actual results to differ materially.
Additional information regarding factors that could potentially affect the
Company or its financial results may be included in the Company's filings
with the Securities and Exchange Commission.
The results of operations for the six months ended June 30, 1997 are not
necessarily indicative of the results that may be expected for any other
interim period of 1997 or for the year ending December 31, 1997.
Results of Operations for the three and six months ended
- --------------------------------------------------------
June 30, 1997 and 1996
- ----------------------
REVENUES. Revenues are comprised of software sales and consulting
revenues, and sales of hardware and software obtained from vendors.
Revenues from software sales and consulting decreased compared to the same
periods in 1996 by $1,406,000 or 51% and $2,217,000 or 86% for the six
months and quarter ended June 30, 1997, respectively. This decrease in
software sales and consulting revenue is primarily the result of
significantly reduced sales and related deliveries of Wyndgate's
SAFETRACE(R) software products.
Revenues from hardware and software, obtained from vendors increased
compared to the same periods in 1996 by $129,000, or 142%, and $9,000 or
22%, for the six months and quarter ended June 30,1997, respectively. This
increase was primarily due to an increase in the average price per order
and in the number of Wyndgate customers which ordered third party hardware
and software through Wyndgate.
The Company's marketing and sales efforts will continue to be focused on
current and future Wyndgate software products and services. If future sales
of Wyndgate's SAFETRACE(R) software product licenses are less than
management anticipates, the Company's revenues, gross margins, and
liquidity may be materially adversely affected.
COST OF REVENUE AND PRODUCT DEVELOPMENT. Cost of revenue and product
development as a percentage of revenues was 48% and 76% for the six months
and quarter ended June 30, 1997, respectively, compared to 22% and 16% for
the six months and quarter ended June 30, 1996, respectively.
Cost of software sales and consulting as a percentage of the related
revenue was 43% and 79% for the six months and quarter ended June 30, 1997,
respectively, compared to 20% and 15% for the same periods in 1996. This
increase was primarily a result of decreased sales of Wyndgate's
SAFETRACE(R) software product licenses which are typically priced at
higher profit margins than revenues from consulting and implementation
related services.
Cost of hardware and software, obtained from vendors as a percentage of the
related revenue was 76% and 50% for the six months and quarter ended June
30, 1997, respectively, compared to 74% and 54% for the same periods in
1996. Typically, hardware and software, obtained from vendors is priced at
lower profit margins than revenues from software sales and consulting.
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GROSS PROFIT. Gross profit as a percentage of revenue was 52% and 24% for
the six months and quarter ended June 30, 1997, respectively, compared to
78% and 84% for the same periods in 1996. This decrease in gross profit
was primarily a result of the decreased sales of the higher margin
SAFETRACE(R) software products discussed above.
PAYROLL AND OTHER. Payroll and other increased $450,000 or 86% and $161,000
or 51% for the six months and quarter ended June 30, 1997, respectively,
compared to the same periods in 1996. The increase in payroll and other was
primarily due to increased salary and employee benefit costs incurred as a
result of the hiring of additional client service personnel necessary to
manage Wyndgate's new customers together with increased management
personnel.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
$269,000 or 87% and $183,000 or 117% for the six months and quarter ended
June 30, 1997, respectively, compared to the same periods in 1996. The
increase in general and administrative expenses was attributable primarily
to outside contract services, insurance related expenses, leased office
space expenses and other general and administrative expenses which were
related to the increase in the number of Wyndgate employees.
SALES AND MARKETING. Sales and marketing expenses were $486,000 and
$52,000 for the six months and quarter ended June 30, 1997, respectively,
an increase of $84,000 or 21% for the six months ended and a decrease of
$120,000 or 70% for the quarter ended June 30, 1997 compared to the same
periods in 1996. The decrease in sales and marketing expenses for the
quarter ended June 30, 1997 was primarily due to a $200,000 decrease
related to certain stock options granted to a business advisory enterprise
expensed in 1996 and 1997 and which expired on June 30, 1997. This decrease
was offset by increased activity in advertising and direct sales personnel
and travel related expenditures of Wyndgate. Management expects that there
will be additional increases in sales and marketing expenses if the Company
is successful in introducing its new transfusion management information
system, the SAFETRACE TX(TM) software product and if the Company is
successful in its current capital raising efforts.
RESEARCH AND DEVELOPMENT. Research and development expenses increased
$353,000 or 49% and $285,000 or 78% for the six months and quarter ended
June 30, 1997, respectively, compared to the same periods in 1996. The
increase in research and development expenses was primarily due to an
increase in the number of employees assigned to software development at
Wyndgate. Management expects research and development expenses to increase
as additional software development related to Wyndgate's SAFETRACE TX(TM)
software product is planned within 1997.
PROVISION FOR DOUBTFUL ACCOUNTS. The provision for doubtful accounts
increased $60,000 or 600% for the six months ended June 30, 1997 and
decreased $5,000 or 100% for the quarter ended June 30, 1997 compared to
the same periods in 1996. The provision for doubtful accounts for the six
months ended June 30, 1997 of $70,000 provided for potential
uncollectability of certain accounts receivable.
DEPRECIATION AND AMORTIZATION. Compared to the same periods in 1996,
depreciation and amortization increased $82,000 or 114% and $62,000 or 155%
for the six months and quarter ended June 30, 1997, respectively. The
increase in depreciation and amortization is due to the increases in fixed
assets.
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INTEREST INCOME. Interest income increased $105,000 and $55,000 for the
six months and quarter ended June 30, 1997, respectively, compared to the
same periods in 1996. The increase was primarily due to interest income
derived from the net proceeds of the February 1997 public offering.
INTEREST EXPENSE. Interest expense decreased $21,000 and $31,000 for the
six months and quarter ended June 30, 1997, respectively, compared to the
same periods in 1996. This decrease was primarily due to the repayment of
approximately $1.4 million in short term debt and notes payable from the
net proceeds of the February 1997 public offering, which was partially
offset by an increase in interest expense on capital lease obligations.
OTHER. Compared to the same periods in 1996, other expenses increased
$81,000 and $2,000 for the six months and quarter ended June 30, 1997,
respectively. This increase was primarily due to $79,000 of expenses
incurred during the first quarter in 1997 in conjunction with the issuance
and registration of warrants to two individuals.
Liquidity and Capital Resources
- -------------------------------
The Company had cash and cash equivalents of $3.78 million at June 30,
1997, none of which is restricted. During the quarter ended June 30, 1997,
management became aware of delays in future software license fee revenues
expected from certain large internationally based blood centers and
hospital organizations. These delays are expected to cause a greater use of
liquidity and capital resources during the remainder of 1997 than
originally anticipated. Based on this recent information, management
anticipates that the Company's current and anticipated cash balances will
not be sufficient to meet the Company's capital requirements as the Company
is presently structured, even if DataMed is sold. Management recognizes
that the Company must obtain additional capital resources, consider
significant reductions to its software development programs and/or sharply
curtail all of its operating expense categories to enable it to continue
operations with available resources. Management's plans include
consideration of the sale of additional equity securities and the sale of
DataMed which would provide sufficient resources to continue the Company's
operations and its software development programs for the remainder of 1997.
The Company anticipates it will continue to incur losses until 1999, and
possibly thereafter; accordingly, the Company will require additional
capital beyond current capital raising efforts.
The Company had working capital of $872,000 at June 30, 1997 compared to a
working capital deficit of $4 million at December 31, 1996. Excluding the
net liabilities of the discontinued operations, the Company had working
capital of $1.5 million at June 30, 1997 compared to a working capital
deficit of $2.9 million at December 31, 1996. The change in working
capital during the six months ended June 30, 1997 was primarily due to the
completion of the February 1997 public offering which generated
approximately $8.3 million in net proceeds. To date, the net proceeds from
the February 1997 public offering have principally been expended to repay
short term debt, notes payable, accounts payable and other accrued
expenses, to fund Wyndgate's research and development and sales and
marketing efforts, and for general working capital purposes.
The Company used $3.4 million in net cash for operating activities for the
six months ended June 30, 1997, compared to $1.6 million for the same
period in 1996. These amounts include $1.3 million net cash used by
discontinued operations for the six months ended June 30, 1997 and $585,000
net cash used by discontinued operations for the same period in 1996. The
cash used in continuing operations for the six months ended June 30, 1997
consisted primarily of the net loss from continuing operations of $2.5
million and net decreases of $537,000 in certain current
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liabilities partially offset by an increase of $468,000 in unearned revenue
and $274,000 of depreciation and amortization expense incurred during the
six months ended June 30, 1997.
Net cash used in investing activities was $496,000 and $91,000 for the six
months ended June 30, 1997 and 1996, respectively. This included capital
expenditures by discontinued operations of $58,000 and $15,000 for the six
months ended June 30, 1997 and 1996, respectively. For the six months
ended June 30, 1997, net cash used in investing activities consisted
entirely of purchases of equipment and fixtures related to the increase in
the number of Wyndgate employees and Wyndgate's occupation of additional
office space. For the six months ended June 30, 1996, net cash used in
investing activities consisted of purchases of equipment and fixtures
related to the increase in the number of employees and an increase in
capitalized software development costs.
Net cash provided by financing activities was $7.1 million and $1.5 million
for the six months ended June 30, 1997 and 1996, respectively. This
included capital lease principal payments for discontinued operations of
$107,000 and $105,000 for the six months ended June 30, 1997 and 1996,
respectively. During the six months ended June 30, 1997, the Company
completed its February 1997 public offering and received approximately $8.3
million in net proceeds. The Company used a portion of these net proceeds
to repay approximately $1.4 million in short term debt and notes payable,
and also to pay certain offering and distribution costs related to the
February 1997 public offering. In addition, the Company paid $95,000 in
principal payments on its capital lease obligations during the six months
ended June 30, 1997.
The implementation cycle of Wyndgate's SAFETRACE(R) software products is
running longer than originally anticipated. Based on recent experience,
management now anticipates that the implementation cycle will typically
take an average of approximately 14 months. The implementation cycles are
dependent on various items including the clients' size and the complexity
of the clients' standard operating procedures. Seven of the current
twenty-five SAFETRACE(R) software product clients are implemented and are
operational on the SAFETRACE(R) software product. The results of the
implementation cycle delays are expected to delay future SAFETRACE(R)
software product maintenance revenues, future progress payments from
clients as defined in the SAFETRACE(R) software product license agreements,
the anticipated increase in future software license fee revenue from
further sales of the SAFETRACE(R) software product, and cause a greater use
of liquidity and capital resources than originally anticipated.
The Company is currently evaluating potential investment banking
relationships to assist it in the possible sale of equity securities. The
Company also has entered into a letter of intent to sell DataMed, subject
to shareholder approval. Assuming the Company successfully raises
additional funds and/or shareholders approve the sale of DataMed, there can
be no assurance that the Company will achieve profitability or positive
cash flow. If the Company is unable to obtain adequate financing or if
consummation of the DataMed transaction does not occur during the next
three to five months, management will be required to sharply curtail the
Company's software development programs and all of its operating expense
categories. If the Company is successful in raising additional funds
through the sale of additional equity securities, such a change in
capitalization could also increase the number of shares of common stock
outstanding, thus diluting ownership of current shareholders in the
Company.
CERTAIN FACTORS BEARING ON FUTURE RESULTS
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CERTAIN OF THE STATEMENTS ABOVE ARE FORWARD-LOOKING STATEMENTS. FURTHER,
THE COMPANY MAY FROM TIME TO TIME MAKE ORAL FORWARD-LOOKING STATEMENTS.
THE FOLLOWING ARE IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE PROJECTED IN ANY FORWARD-LOOKING STATEMENTS.
SIGNIFICANT OPERATING LOSSES; NEGATIVE NET WORTH; NET WORKING CAPITAL
DEFICIT
For the fiscal years ended December 31, 1996 and 1995, the Company incurred
a loss in the approximate amounts of $4.5 million and $2.7 million,
respectively. The 1995 loss was primarily due to (i) employee compensation
which increased because of additional sales and operations staff hired by
the Company in 1995 in anticipation of future growth of the Company's
operations and (ii) expenses related to the merger with The Wyndgate Group,
Ltd. The increased loss in 1996 was primarily due to increases in overall
staffing and related expenses necessary to handle recent and anticipated
future growth of the Company. For the six months ended June 30, 1997, the
Company had a loss of $2.5 million from continuing operations. As of June
30, 1997 and excluding the net liabilities of the discontinued operations,
the Company had working capital of approximately $1.5 million.
Additionally, as of June 30, 1997, the Company had cumulative net losses of
approximately $11.1 million. There can be no assurance that the Company
will be able to generate sufficient revenues to operate profitably in the
future or to pay the Company's debts as they become due. See MANAGEMENT'S
DISCUSSION AND ANALYSIS.
ANTICIPATED NEGATIVE CASH FLOW
Management anticipates that the Company's current and anticipated cash
balances will not be sufficient to meet the Company's capital requirements,
given the Company's current cost structure. Even if the sale of DataMed is
approved by the Company's shareholders, the Company will require additional
funds to operate in the fourth quarter of 1997. Accordingly, the Company
must generate additional capital, consider significant reductions to its
software development programs and/or sharply curtail its operating costs to
enable it to continue operations with available cash resources. The sale
of DataMed would provide additional, but not sufficient, resources to
assure the continuation of the Company's operations and its software
development programs. The Company is currently evaluating potential
investment banking relationships to assist it in raising equity capital.
However, no assurances can be given that the Company will be successful in
raising additional capital or that the sale of DataMed will be approved by
the Company's shareholders. Further, there can be no assurance, assuming
the sale of DataMed is approved by the Company's shareholders, that the
Company will achieve profitability or positive cash flow. If the Company
is unable to obtain adequate financing, management will be required to
sharply curtail the Company's software development programs and all of its
operating expense categories.
REVENUE FLUCTUATIONS
The Company has experienced revenue fluctuations when its SAFETRACE(R)
software product is delivered. The SAFETRACE(R) software product license
fees have historically been recognized as revenue upon delivery of the
software if no significant vendor obligations exist as of the delivery
date, and therefore are subject to delays of the delivery service and
customer delayed delivery requests. Quarter to quarter revenue
fluctuations could also be affected by the decision on whether or not to
recognize revenues based upon the length of time the Company's customers
take to implement the Company's software products. The implementation
cycle of Wyndgate's SAFETRACE(R) software products is taking longer than
originally anticipated. Based on recent experience, management anticipates
that the implementation cycle will typically take approximately 14 months.
Further, special development projects required by customers concurrent with
the licensing of the Company's software products and other significant
obligations could result in revenue recognition delays. As a result, the
Company's operating
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results could fluctuate significantly from quarter to quarter and investors
should put more emphasis on the Company's results for a full year rather
than on the Company's quarterly results.
LACK OF SIGNIFICANT OPERATING HISTORY
The Company has been in existence since 1989. As such, the Company is
subject to many of the risks common to enterprises with a limited operating
history, including potential under-capitalization, limitations with respect
to personnel, financial and other resources and limited customers and
revenues. As of the date hereof, only seven of the licensees of the
SAFETRACE(R) software product, Wyndgate's blood tracking system, have the
SAFETRACE(R) software product in operation. There is no assurance that the
additional licensees of the SAFETRACE(R) software product to date will ever
become operational with their SAFETRACE(R) software product, that the
Company will be able to license the SAFETRACE(R) software product to
additional persons, that the Company will be able to develop and license
new products or that the Company will be successful. The likelihood of
success of the Company must be considered in light of the problems,
expenses, difficulties, complications and delays frequently encountered in
connection with the development and marketing of new products.
GOVERNMENT REGULATION
In April 1997, Wyndgate received notification from the FDA of their finding
of "substantial equivalence" of the Company's SAFETRACE(R) software
product. This determination permits the Company to continue to market the
SAFETRACE(R) software product.
The Company's products and services are subject to regulations adopted by
governmental authorities, including the FDA, which governs blood center
computer software products regulated as medical devices. The U.S.
Department of Transportation issues regulations regarding procedures
applicable to substance abuse testing programs required in six
transportation industries. Government regulations can be burdensome and
may result in delays and expense to the Company. In addition,
modifications to regulations could adversely affect the timing and cost of
new products and services introduced by the Company. Failure to comply
with applicable regulatory requirements can result in, among other things,
operating restrictions and fines. For instance, if in the future the FDA
determines that the Company's SAFETRACE TX(TM) product requires FDA
clearance prior to the marketing of such product, the time delay to market
the SAFETRACE TX(TM) software product could materially and negatively
impact the Company's business. The Company cannot predict the effect of
possible future legislation and regulation. The Company will also be
required to follow applicable Good Manufacturing Practices ("GMP")
regulations of the FDA, which include testing, control and documentation
requirements, as well as similar requirements in other countries, including
International Standards Organization ("ISO") 9001 standards. Failure to
meet these requirements would preclude the Company from marketing its
products on a commercial basis, and therefore would materially and
adversely affect the Company's business, financial condition and results or
operations.
FLUCTUATIONS IN OPERATING RESULTS
Results of operations are expected to fluctuate significantly from quarter
to quarter depending upon numerous factors, including demand for the
Company's products; the timing of new software license agreements with
Wyndgate customers; the ability of the Company to develop, introduce and
market new and enhanced versions of the Company's products on a timely
basis; personnel changes; changes in Company strategy, and the level of
international sales. Quarter to quarter operating results could also be
affected by the timing of the receipt of individual customer orders and
other revenue fluctuation factors discussed above.
LIMITED SALES, MARKETING AND DISTRIBUTION SYSTEMS
The Company's Wyndgate division has made limited sales of its SAFETRACE(R)
software product to date. The Company currently markets its SAFETRACE(R)
software product through a small direct sales force, both in the U.S. and
internationally. Establishment of a complete sales force capable of
effectively commercializing the Company's SAFETRACE(R) software product,
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and other software products currently under development, will require
substantial efforts and require significant management and financial
resources. The Company has also been evaluating other strategic business
alliances, which may assist in the development of a national and
international sales, marketing and distribution system. Any alliance which
is developed by the Company could require substantial capital and financial
resources. There can be no assurance that the Company will be able to
establish such a sales capability on a timely basis, if at all. Moreover,
there can be no assurance that any business alliance entered into by the
Company would be successful in such commercialization efforts.
POTENTIAL DIFFICULTIES IN MANAGING BUSINESS UNDERGOING RAPID GROWTH
The Company's future success will depend to a significant extent on the
ability of its current and future management personnel to operate
effectively, both independently and as a group. Most of the Company's
management team have no prior experience as senior executives of a public
corporation. There can be no assurance that the management team will
operate together effectively. To compete successfully against current and
future competitors, to complete research and development in progress and to
develop future products, the Company believes that it must continue to
expand its operations, particularly in the areas of research and
development, sales and marketing, and customer implementation and training.
If the Company were to experience significant growth in the future, such
growth would likely place significant strain upon the Company's management,
operating and financial systems and resources. To accommodate such growth
and compete effectively, the Company must continue to implement and improve
its internal information systems, procedures and controls, and to expand,
train, motivate and manage its work force. There can be no assurance that
the Company's personnel, systems, procedures and controls will be adequate
to support the Company's future operations. Any failure to implement and
improve the Company's operational, financial and management systems or to
expand, train, motivate or manage employees could materially and adversely
affect the Company's business, financial condition and results of
operations.
RAPIDLY CHANGING TECHNOLOGY
The market for applications software is characterized by rapidly changing
technology and by changes from mainframe to client/server computer
technology, including frequent new product introductions and technological
enhancements in the applications software business. During the last five
years, the use of computer technology in the information management
industry has expanded significantly to create intense competition. With
rapidly expanding technology, there can be no assurance that the Company,
with its limited resources, will be able to acquire or maintain any
technological advantage. The Company's success will be in large part
dependent on its ability to use the developing technology to its maximum
advantage and to remain competitive in price and product performance. If
the Company is unable to acquire or maintain a technological advantage, or
if the Company fails to stay current and evolve in the applications
software and information management fields, its efforts may not be
successful.
ROYALTY AGREEMENTS
Pursuant to certain royalty agreements, the Company is required to pay
certain of its sales proceeds directly to outside parties. Such payments
may adversely affect the Company's available cash to fund future operations
and the Company's future profitability.
POSSIBLE LOSS OF SOFTWARE LICENSES DUE TO FAILURE TO MEET MAINTENANCE
SCHEDULES
The Wyndgate software license agreements have a license term that varies,
but are typically five year licenses which are automatically renewable.
The software license may be terminated by customers if Wyndgate fails to
deliver maintenance services consisting of product bug fixes, regulatory
compliance and updates. Wyndgate may terminate licenses if customers fail
to meet
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their contractual obligations to Wyndgate, primarily the payment of usage
fees. However, there can be no assurance that the Company will be able to
meet all of the maintenance services and contractual commitments required
to keep the license agreements in force or that customers will continue to
make usage fee payments.
POSSIBLE SHRINKAGE OF MARKET DUE TO MULTIPLE SITE CONTRACTS
Presently, the Company has one specific contract which covers multiple
blood banks. The potential number of customers for the Company's
SAFETRACE(R) market could be reduced if the Company were to enter into
additional multiple site contracts. While the Company believes the
license fee charged for such multi-site arrangements is comparable to the
license fee which would be earned on an equivalent number of single site
licenses, there can be no assurance that the Company's revenues will be
equivalent to what it would have earned under single site licenses.
PRODUCT AND REPORTING LIABILITY
As of the date hereof, only seven of the Company's licensees have the
SAFETRACE(R) software product in operation. Currently, the Company has
product liability exposure for defects in its SAFETRACE(R) software product
which may become apparent through widespread use of the SAFETRACE(R)
software product. No claims have been filed against the Company involving
the SAFETRACE(R) software product and the Company is not aware of any
material problems involving the SAFETRACE(R) software product. While the
Company will continue to attempt to take appropriate precautions, there can
be no assurance that it will completely avoid product liability exposure.
The Company maintains product liability insurance on a claims made basis
for the SAFETRACE(R) software product in the aggregate of at least $4
million. There can be no assurance that such coverage will be available in
the future, that it will be available at reasonable prices, or that it will
be available in amounts adequate to cover any product liabilities that may
be incurred by the Company.
DEPENDENCE ON MAJOR CUSTOMERS
During the six months ended June 30, 1997, four Wyndgate customers - Belle
Bonfils Memorial Blood Center (Belle Bonfils), Denver, Colorado;
Haemonetics Corporation, Braintree, Massachusetts; Rhode Island Blood
Center (Rhode Island), Providence Rhode Island; and Lifeblood/Mid-South
Regional Blood Center (Lifeblood), Memphis, Tennessee, each accounted for
13%, 34%, 12% and 10%, respectively, of the Company's revenues. During the
three months ended June 30, 1997, five Wyndgate customers - Belle Bonfils;
Lifeblood; Rhode Island; Institute for the Transfusion Medicine,
Pittsburgh, Pennsylvania; and the Royalty Group (a group of eight
California blood centers, through a 1992 development agreement with
Wyndgate, paid $1.1 million to partially fund Wyndgate's development of its
SAFETRACE(R) software product); each accounted for 12%, 32%, 10%, 16% and
12%, respectively, of the Company's revenues. Accounts receivable and
unbilled revenues as of June 30, 1997 from the above customers were
approximately $500,000 and $200,000, respectively. In order to attempt
to reduce its credit risks, the Company generally requires substantial
down payments and progress payments during the course of implementation of
its software products. Non-renewal or termination of the contractual
arrangements with these key Wyndgate customers could have a material adverse
effect on the Company. There can be no assurance that the Company will be
able to retain these key customers or, if such customers are not retained,
that the Company would be able to attract and retain new customers to replace
the revenues currently generated by these customers. With the sale of DataMed,
the Company will lose all of the revenues from that division's customers.
SUBSTANTIAL COMPETITION
There is substantial competition in all aspects of the blood bank and
hospital information management. Numerous companies are developing
technologies and marketing products and services in the health care
information management area. Many of these competitors have been
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in business longer than the Company and have substantially greater
personnel and financial resources available to them than the Company, and
there can be no assurance that the Company will be able to compete with
these competitors successfully.
DEPENDENCE ON DEVELOPMENT OF NEW BUSINESSES
Through the merger with The Wyndgate Group, Ltd., the Company became
engaged in the information management section of the blood center market.
To effect its plan of operations, which includes the generation of
increased revenues, the Company must expand its operations significantly
beyond the historical operations of DataMed and Wyndgate to other markets
which require similar management information services. The Company has
entered into an agreement to sell DataMed, subject to shareholder approval.
There is no assurance that the Company will be able to expand its business
operations. The current activities of Wyndgate in the blood center market
does not assure future business expansion or profitability.
PROPRIETARY RIGHTS AND LICENSES
The Company's success depends in part on its ability to obtain and enforce
intellectual property rights for its technology and software, both in the
United States and in other countries. The Company's proprietary software
is protected by the use of copyrights, trademarks, confidentiality
agreements and license agreements that restrict the unauthorized
distribution of the Company's proprietary data and limit the Company's
software products to the customer's internal use only. While the Company
has attempted to limit unauthorized use of its software products or the
dissemination of its proprietary information, there can be no assurance
that the Company will be able to retain its proprietary software rights and
prohibit the unauthorized use of proprietary information.
The Company may file additional applications for patents, copyrights, and
trademarks as management deems appropriate. There can be no assurance that
any patents, copyrights, or trademarks the Company may obtain will be
sufficiently broad to protect the Company's products, or that applicable
law will provide effective legal or injunctive remedies to stop
infringement on the Company's patents (if obtained), trademarks, or
copyrights. In addition, there can be no assurance that any patent,
trademark, or copyright obtained by the Company will not be challenged,
invalidated, or circumvented, that intellectual property rights obtained by
the Company will provide competitive advantages, or that the Company's
competitors will not independently develop technologies or products that
are substantially equivalent or superior to those of the Company. In
addition, if the Company's software products infringe upon the rights of
others, the Company may be subject to suit for damages or an injunction to
cease the use of products. The Company is not aware of any claims or
infringements of the Company's software products upon the rights of others.
DEPENDENCE ON PERSONNEL
The Company is significantly dependent on a limited number of personnel,
including Michael I. Ruxin, M.D. (Chairman and Chief Executive Officer),
Joseph F. Dudziak (President and Chief Operating Officer), William J.
Collard (Secretary/Treasurer, Director and President of the Wyndgate
division), and Gerald F. Willman, Jr. (Director and Vice President of the
Wyndgate division). Although all of these individuals are subject to
employment agreements, such agreements are difficult to enforce against
employees. If the Company fails to retain the services of one or more of
these employees, the Company's operations may be adversely affected. The
Company does not have key man insurance on any of its officers or
employees; however, the Company is the designated beneficiary of a term
life insurance policy for Dr. Ruxin in the face amount of $1,000,000.
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NO DIVIDENDS
The Company does not anticipate paying any cash dividends for the
foreseeable future. The Company expects that future earnings, if any, will
be used to finance growth.
LIMITED CAPITALIZATION
The Company has only limited capitalization available to it. The Company
anticipates it will need additional capital during the fourth quarter of
1997 to pursue its intended business plan; however, the Company has
received no commitment from any person for that financing, and there can be
no assurance that adequate financing will be available on reasonable terms,
if and when needed.
POTENTIAL LITIGATION DUE TO THE SALE OF DATAMED
DataMed's substance abuse testing service agreements have contract terms
that vary from one to five years and, unless canceled generally ninety days
prior to the end of the license term, most are automatically renewable.
Generally, such contracts are not assignable. The Asset Purchase Agreement
for the sale of DataMed provides that the Company will assign its customers
contracts to the purchaser, and if the customer does not consent to the
assignment, the purchaser can require the Company to terminate any such
non-consenting customer's contract. The Company will not conduct any form
of substance abuse testing if the sale of DataMed is approved by the
Company's shareholders. While the Company does not consider it likely, it
is possible non-consenting customers could commence litigation against the
Company for failure to provide substance abuse testing pursuant to such
customer's contract with DataMed.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. Description
----------- -----------
11.1 Statement re: Computation of Per Share Loss Over
the Period February 11, 1997 to June 30, 1997*
11.2 Statement re: Computation of Per Share Loss Over
the Period January 1, 1997 to June 30, 1997*
27 Financial Data Schedule*
* previously filed
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended
June 30,1997. However, on July 7, 1997, Global Med Technologies,
Inc. (the "Company") filed a Form 8-K report, dated June 20, 1997,
reporting the June 20, 1997 letter of intent entered into between
the Company and National Medical Review Offices, Inc. ("NMRO")
pursuant to Item 2, Acquisition or Disposition of Assets. The
letter of intent provides, subject to the approval of the
shareholders of the Company and the satisfaction of certain other
conditions to be set forth in a definitive asset purchase
agreement, that the Company will sell its DataMed International
division to NMRO.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GLOBAL MED TECHNOLOGIES, INC.
Date: August 20, 1997 By /s/ MICHAEL I. RUXIN
---------------------------------
Michael I. Ruxin, M.D.
Chief Executive Officer
Date: August 20, 1997 By /s/ BART K. VALDEZ
---------------------------------
Bart K. Valdez
Acting Chief Financial Officer
