As filed with the Securities and Exchange Commission on January 17, 1997
Registration No. 333-11723
- ------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
AMENDMENT NO. 2
to
FORM SB-2
REGISTRATION STATEMENT
under the
SECURITIES ACT OF 1933
GLOBAL MED TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
Colorado 8741; 8071; 7372 84-1116894
-------- ---------------- ----------
(State or jurisdiction (Primary Standard (I.R.S Employer
of incorporation or Industrial Classification Identification
organization) Code Number) Number)
Global Med Technologies, Inc.
12600 West Colfax
Suite A-500
Lakewood, Colorado 80215
(303) 238-2000
(Address and telephone number of principal executive offices and
principal place of business)
-------------------------
Michael I. Ruxin, M.D.
Global Med Technologies, Inc.
12600 West Colfax
Suite A-500
Lakewood, Colorado 80215
(303) 238-2000
(Name, address and telephone number of agent for service)
COPIES OF ALL COMMUNICATIONS TO:
Albert Brenman, Esq. Thomas S. Smith, Esq.
Brenman Key & Bromberg, P.C. Smith, McCullough & Ferguson, P.C.
Mellon Financial Center 1610 Wynkoop Street
1775 Sherman Street, Suite 1001 Suite 300
Denver, Colorado 80203 Denver, Colorado 80202-1135
(303) 894-0234 (303) 892-6003
(303) 839-1633 FAX (303) 892-0457 FAX
APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
The Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this registration statement shall thereafter become effective in accordance
with section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said section 8(a), may determine.
<PAGE>
CALCULATION OF REGISTRATION FEE
===========================================================================
Proposed
Title of each Proposed maximum Amount
class of Amount maximum aggregate of
securities to to be offering offering registration
be registered registered price(1) price(1) fee
===========================================================================
1,537,550 Units, each
consisting of 2 shares
of Common Stock and 1
1 Class A Common Stock
Purchase Warrant (2) 1,537,550 $ 9.00 $13,837,950 $4,772
- --------------------------------------------------------------------------
Common Stock (3) 3,075,100 $ -0- -0- -0-
- --------------------------------------------------------------------------
Class A Common Stock
Purchase Warrants (3) 1,537,550 $ -0- -0- -0-
- --------------------------------------------------------------------------
Common Stock Underlying
Class A Common Stock
Purchase Warrants (4) 1,537,550 $ 5.85 8,994,668 3,102
- --------------------------------------------------------------------------
Common Stock (5) 947,970 $ 4.50 4,265,865 1,471
- --------------------------------------------------------------------------
Shares Underlying
Outstanding Warrants to
Purchase Common Stock (5) 187,800 $ 4.50 845,100 291
- --------------------------------------------------------------------------
Representative's Warrants
to Purchase Units 1 $100.00 100 Nil
- --------------------------------------------------------------------------
Representative's Units,
each consisting of 2
shares of Common Stock
and 1 Class A Common Stock
Purchase Warrant 133,700 $ 14.85 1,985,445 685
- --------------------------------------------------------------------------
Common Stock included in
Representative's Units (6) 267,400 $ -0- -0- -0-
- --------------------------------------------------------------------------
Class A Common Stock Purchase
Warrants included in the
Representative's Units (6) 133,700 $ -0- -0- -0-
- --------------------------------------------------------------------------
Common Stock Underlying
Class A Common Stock
Purchase Warrants included
in the Representative's
Units (4) 133,700 $ 8.67 1,159,179 400
==========================================================================
Total: $31,088,307 $10,721(7)
==========================================================================
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rules 457(a) and (g).
(2) Includes 200,550 Units consisting of 401,100 shares of Common Stock
and 200,550 Class A Common Stock Purchase Warrants, that may be
issued upon exercise of the Underwriters' over-allotment option.
(3) Included in the 1,537,550 Units. Accordingly, no separate filing fee
is payable for the registration of such shares of Common Stock and
Class A Common Stock Purchase Warrants.
(4) Pursuant to Rule 416, there are also being registered such additional
securities as may become issuable pursuant to the anti-dilution
provisions of the Warrants.
(5) Shares of Common Stock registered on behalf of Selling
Securityholders.
(6) Included in the Units which are issuable upon exercise of the
Representative's Warrants to Purchase Units. Accordingly, no separate
filing fee is payable for the registration of such shares of Common
Stock and Class A Common Stock Purchase Warrants.
(7) A fee of $11,303 was paid with the initial filing of this registration
statement.
--------------------
<PAGE>
CROSS REFERENCE SHEET
FORM SB-2
Item No. Sections in Prospectus
- --------- ----------------------
1 Front of Registration Statement and
Outside Front Cover of Prospectus . . . . . Cover Page
2 Inside Front and Outside Back Cover
Pages of Prospectus . . . . . . . . . . . . Inside Front Cover
Pages (i)(ii); Table of
Contents
3 Summary Information and Risk
Factors . . . . . . . . . . . . . . . . . . Prospectus Summary;
Risk Factors
4 Use of Proceeds . . . . . . . . . . . . . . Prospectus Summary; Use
of Proceeds
5 Determination of Offering Price . . . . . . Cover Page;
Underwriting
6 Dilution. . . . . . . . . . . . . . . . . . Risk Factors; Dilution
7 Selling Security Holders. . . . . . . . . . Not Applicable
8 Plan of Distribution. . . . . . . . . . . . Prospectus Summary;
Underwriting
9 Legal Proceedings . . . . . . . . . . . . . Litigation
10 Directors, Executive Officers,
Promoters and Control Persons . . . . . . . Management - Directors
and Executive Officers
11 Security Ownership of Certain
Beneficial Owners and Management. . . . . . Security Ownership of
Certain Beneficial
Owners and Management
12 Description of Securities . . . . . . . . . Description of
Securities; Dividend
Policy
13 Interest of Named Experts and
Counsel . . . . . . . . . . . . . . . . . . Experts
14 Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities . . . . . . . . . . . . . . Statement as to
Indemnification
15 Organization within Last Five Years . . . . The Company; Interests
of Management and
Others in Certain
Transactions
16 Description of Business . . . . . . . . . . Prospectus Summary;
Risk Factors; The
Company
17 Management's Discussion and
Analysis or Plan of Operation . . . . . . . Management's Discussion
and Analysis or Plan of
Operation
18 Description of Property . . . . . . . . . . The Company
19 Certain Relationships and Related
Transactions. . . . . . . . . . . . . . . . Interests of Management
and Others in Certain
Transactions
<PAGE>
20 Market for Common Equity and
Related Stockholder Matters . . . . . . . . Risk Factors
21 Executive Compensation. . . . . . . . . . . Management - Executive
Compensation
22 Financial Statements. . . . . . . . . . . . Index to Financial
Statements
23 Changes In and Disagreements With
Accountants on Accounting and
Financial Disclosure. . . . . . . . . . . . Experts
24 Indemnification of Directors and
Officers. . . . . . . . . . . . . . . . . . Indemnification of
Directors and Officers
25 Other Expenses of Issuance and
Distribution. . . . . . . . . . . . . . . . Other Expenses of
Issuance and
Distribution
26 Recent Sales of Unregistered
Securities. . . . . . . . . . . . . . . . . Recent Sales of
Unregistered Securities
27 Exhibits. . . . . . . . . . . . . . . . . . Exhibits
28 Undertakings. . . . . . . . . . . . . . . . Undertakings
<PAGE>
PROSPECTUS
GLOBAL MED TECHNOLOGIES, INC.
1,337,000 UNITS, EACH CONSISTING OF
TWO SHARES OF COMMON STOCK AND
ONE CLASS A COMMON STOCK PURCHASE WARRANT
This Prospectus relates to the offering (the "Offering") by Global Med
Technologies, Inc. (the "Company") of 1,337,000 units (the "Units"), each
consisting of two shares of Common Stock (the "Common Stock") and one Class
A Common Stock Purchase Warrant (the "Warrants"). The Common Stock and the
Warrants comprising the Units will not be separately tradeable or
transferable for a period of six months commencing on the date of this
prospectus or earlier at the discretion of RAF Financial Corporation (the
"Representative").
Prior to the Offering, there has not been any public market for the
securities of the Company. The initial public offering price of the Units
and the initial exercise price and other terms of the Warrants have been
arbitrarily determined by negotiation between the Company and the
Representative, as representative of the participating underwriters (the
"Underwriters"). It is anticipated that the offering price of the Units
will be between $7.00 and $9.00 per Unit. Application has been made to
approve the Units for quotation on the NASDAQ Small-Cap Market under the
trading symbol GLOBU. Only the Units will be listed for quotation on
NASDAQ until the Common Stock and Warrants become separately tradeable and
transferable. Thereafter, subject to the Company then meeting the NASDAQ
maintenance requirements, the Units will be delisted from quotation on
NASDAQ and only the Common Stock and Warrants will be listed for quotation
on NASDAQ.
Each Warrant entitles the registered holder thereof to purchase one
share of Common Stock at an exercise price of $________(130% of the initial
public offering price of the Common Stock) per share, subject to adjustment
in certain events, at any time commencing on the date the Warrants are
separately tradeable and transferable and ending on ________, 2000.
Commencing on the date the Warrants are separately tradeable and
transferable, the Warrants are subject to redemption by the Company at $.55
per Warrant at any time until the end of the second year after the date of
this Prospectus and thereafter at $.75 per Warrant at any time prior to
their expiration, on not less than 30 days' prior written notice to the
holders of Warrants, provided that the daily trading price per share (as
defined commencing on page 68) of Common Stock has been as least
$________(120% of the Warrant exercise price) for a period of at least 20
consecutive trading days ending within 10 days prior to the date upon which
the notice of redemption is given. Once exercisable, the Warrants will be
exercisable until the close of the business day preceding the date fixed
for redemption, if any. See Description of Securities - Warrants.
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
ANDIMMEDIATE SUBSTANTIAL DILUTION TO INVESTORS. POTENTIAL PURCHASERS
SHOULD NOT INVEST IN THESE SECURITIES UNLESS THEY CAN AFFORD THE RISK OF
LOSING THEIR ENTIRE INVESTMENT. SEE RISK FACTORS COMMENCING ON PAGE 7 OF
THIS PROSPECTUS AND DILUTION COMMENCING ON PAGE 22 OF THIS PROSPECTUS.
After completion of this Offering, the Company will amend this
Prospectus to permit certain of its security holders to publicly offer and
sell Common Stock. See SHARES ELIGIBLE FOR FUTURE SALE.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------
=========================================================================
Proceeds
Price to Underwriting to the
Public Discount(1) Company (2)
- -------------------------------------------------------------------------
Per Unit . . . . . . . . . . . . . $_____ $_____ $_____
- -------------------------------------------------------------------------
Total(3) . . . . . . . . . . . . . $_____ $_____ $_____
- -------------------------------------------------------------------------
Footnotes on following page.
It is expected that the delivery of the Units will be made at the
offices of the Representative on or about __________________ __, 1997.
RAF FINANCIAL CORPORATION
The date of this Prospectus is ___________________ __, 1997.
<PAGE>
______________________________
(1) The Company has also agreed to pay the Representative a non-accountable
expense allowance equal to 3% of the total Price to Public
for the Units and to issue to the Representative and its designees for
a nominal consideration warrants to purchase 133,700 Units at a
purchase price equal to 165% of the Price to Public (the
"Representative's Warrants"). Each Unit issuable upon exercise of the
Representative's Warrants will consist of two shares of Common Stock
and one Warrant exercisable at a price equal to 165% of the exercise
price of the Warrants. The Representative's Warrants and the
securities underlying the Representative's Warrants have been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), by means of the Registration Statement of which
this Prospectus is a part. Subject to certain limitations, upon
exercises of the Warrants occurring after one year from the date of
this Prospectus, the Company has also agreed to pay the Representative
a solicitation fee equal to 10% of the exercise price of the Warrants.
The Representative has a three year right of first refusal with
respect to future public or private offerings for cash by the Company
or any of its subsidiaries. In addition, the Company has agreed to
indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act. See UNDERWRITING.
(2) Before deducting expenses of the Offering payable by the Company
estimated at $240,000, which excludes the non-accountable expense
allowance described in Note (1) above, and assumes no exercise of the
Underwriters' over-allotment option. See USE OF PROCEEDS.
(3) The Company has granted to the Underwriters a 30-day option to
purchase up to 200,550 additional Units from the Company at the Price
to Public, less the Underwriting Discount, solely to cover over-
allotments, if any. If the Underwriters exercise such option in full,
the total Price to Public, Underwriting Discount and Proceeds to
Company will be $_____, $_____, and $_____, respectively. See
UNDERWRITING.
THE UNITS OFFERED IN THIS OFFERING BY THE UNDERWRITERS ARE SUBJECT TO PRIOR
SALE. THE UNDERWRITERS RESERVE THE RIGHT TO WITHDRAW, CANCEL OR MODIFY
SUCH OFFER (WHICH MAY BE DONE ONLY BY FILING AN AMENDMENT TO THE
REGISTRATION STATEMENT) AND TO REJECT ORDERS IN WHOLE OR IN PART FOR THE
PURCHASE OF ANY OF THE COMPANY'S UNITS AND TO CANCEL ANY SALE EVEN AFTER
THE PURCHASE PRICE HAS BEEN PAID IF SUCH SALE, IN THE OPINION OF THE
UNDERWRITERS, WOULD VIOLATE FEDERAL OR STATE SECURITIES LAWS OR A RULE OR
POLICY OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. ("NASD").
IN CONNECTION WITH THIS OFFERING, THE REPRESENTATIVE MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE
UNITS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
WYNDGATE
TECHNOLOGIES(TM)
Wyndgate Technologies(TM), a division
of the Company, is a medical software
company specializing in information
systems that manage blood products
from donor recruitment and laboratory
testing to patient transfusion and
records management. [GRAPHIC OF BLOOD
BAGS OMITTED]
Wyndgate(TM)'s products help
protect the safety of blood
and blood products from
donation through blood center
delivery.
Wyndgate(TM)'s current product is
SafeTrace(TM), a blood bank management
information system. Wyndgate(TM) is in the
process of developing SafeTraceTx(TM), a
transfusion management information system.
Wyndgate(TM)'s products help protect the
safety of patient blood and blood product
use. Partial Client List
EDEN-OA(R) - Application Engine Stanford Medical School
------------------------------- Blood Center
SafeTrace(TM) Blood Bank of the Redwoods
SafeTraceTx(TM) Community Blood Center of
DataMed International(TM) Appleton
Medical Systems Belle Bonfils Memorial Blood
Other Medical Applications Center
Community Blood Bank,
Lincoln, Nebraska
Blood Bank of San Bernadino-
Riverside Counties
Sacramento Medical
Foundation Blood Center
Wyndgate(TM)'s products incorporate an Oklahoma Blood Institute
underlying proprietary technology, Coffee Memorial Blood Center
called EDEN-OA(R). EDEN-OA(R) is a Memorial Blood Centers of
rapid applications development tool Minnesota
created by Wyndgate(TM). EDEN-OA(R) Institute for Transfusion
provides the Company with a strategic Medicine
platform for future growth. With the Community Blood Bank of
EDEN-OA(R) software tool, the Company Erie County
will attempt to enter other medical Peninsula Blood Bank,
information management niche markets. Incorporated
The Blood Center of Central
Iowa
Blood Center of Southeast
Louisiana, Inc.
Siouxland Community Blood
Bank
Gulf Coast Regional
Blood Center
San Diego Blood Bank
Samuel W. Memorial Blood
Center
Tri-Counties Blood Bank,
Incorporated
<PAGE>
DATAMED
INTERNATIONAL(TM)
DataMed International(TM), a division of
the Company, is a medical information
management company specializing in the
third party administration of substance
abuse testing programs for large
corporations. Consequently, DataMed(TM)
is taking advantage of what the management
of the Company believes are the current [GRAPHIC OF TWO MEN LOOKING
trends of corporate outsourcing and AT COMPUTER OMITTED]
downsizing by selling its medical
information services principally to DataMed(TM)'s medical
Fortune 1000 and other corporations. physicians assist in
DataMed(TM) provides several products establishing the legal which
allow corporations to outsource all or defensibility of its part of
their employee substance abuse testing clients' substance abuse
programs. testing programs.
PARTIAL CLIENT LIST
Chevron Corporation
Owens Corning
The Company believes that the key to its Marriott International, Inc.
success is to provide medical information Air Products and Chemicals
management products and services to Jones Intercable, Inc.
"boutique" market niches. The Company Bechtel Corporation
believes that this will create Laidlaw Transit, Inc.
for quick penetration and
leadership in these market niches.
[GRAPHIC OF LABORATORY AND TEST
TUBES OMITTED] [PARTIAL GRAPHIC OF SILVER
DataMed(TM) is the liaison between DOLLAR OMITTED]
corporate clients and their selected
laboratories and collection sites, GMTI's products and services
helping to insure total quality bring value to clients and
management and continuous quality the public at large.
improvement.
<PAGE>
[GRAPHIC OF COMPUTER KEYBOARD OMITTED]
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
UNTIL ______________, 1997 ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION,
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
TABLE OF CONTENTS
Summary. . . . . . . . . . . . . . . 1 Executive Compensation . . . . . . . 53
The Offering . . . . . . . . . . . . 3 Security Ownership of Certain
Summary Financial Information. . . . 6 Beneficial Owners and Management. . 61
Risk Factors . . . . . . . . . . . . 7 Certain Relationships and Related
Use of Proceeds. . . . . . . . . . .18 Transaction . . . . . . . . . . . . 63
Capitalization . . . . . . . . . . .20 Description of Securities. . . . . . 64
Dilution . . . . . . . . . . . . . .21 Underwriting . . . . . . . . . . . . 67
Dividend Policy . . . . . . . . . .22 Legal Matters. . . . . . . . . . . . 70
Selected Financial Information . . .23 Experts. . . . . . . . . . . . . . . 70
Management's Discussion and Shares Eligible for Future Sale . . .70
Analysis or Plan of Operations. . .25 Additional Information . . . . . . .72
The Company. . . . . . . . . . . . .30 Glossary . . . . . . . . . . . . . .73
Legal Proceedings. . . . . . . . . .48 Financial Statements
Management . . . . . . . . . . . . .48
iii
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more
detailed information and consolidated financial statements appearing
elsewhere in this Prospectus.
THE COMPANY
Global Med Technologies, Inc. (the "Company") provides information
management software products and services to the healthcare industry and
provides substance abuse (which includes drug and alcohol) testing program
services to companies, including certain Fortune 1000 companies. The
Company consists of two divisions, Wyndgate Technologies ("Wyndgate") and
DataMed International ("DataMed"), both of which operate under their
respective trade names. Wyndgate develops, markets, licenses and supports
software for the healthcare industry. DataMed manages and markets a
variety of services that are designed to assist companies with
administering substance abuse testing programs.
Founded in 1984, Wyndgate initially developed a Student Information
System ("SIS") software product, an integrated software package for
colleges and universities to track student information. Wyndgate currently
has six contracts for the SIS software product still in effect. Pursuant
to an agreement with eight California blood centers, Wyndgate began
development of a blood tracking system to assist community blood centers,
hospitals, and plasma centers in the U.S. in complying with the quality and
safety standards of the Food and Drug Administration ("FDA") for the
collection and management of blood and blood products. After several years
of development and $1,080,000 paid by eight California blood centers,
Wyndgate has completed development and commenced marketing of the
SAFETRACE(TM) software product, which is a blood bank management
information software system, and which the Company believes to be the most
comprehensive and flexible system of its type available today. In
accordance with FDA regulations, the Company submitted a 510(k) application
to the FDA in October, 1995 for review of its SAFETRACE(TM) software
product, which is still pending. The Company is able to continue marketing
the SAFETRACE(TM) software product during the review process. There are no
assurances that the Company will receive a 510(k) clearance letter from the
FDA. If not, the Company will be required to discontinue marketing and
licensing the SAFETRACE(TM) software product.
In 1989, Wyndgate developed EDEN-OA(R) to utilize new technologies in
the evolving open systems computer market. EDEN-OA(R) is a rapid
applications development tool that can be used by software developers to
produce software products that operate in accordance with industry
standards based computer environments. EDEN-OA(R) can operate on different
types of computer hardware from different manufacturers and on several
different operating systems.
Since its acquisition of Wyndgate in 1995, the Company has been seeking a
strategic alliance with a multi-national health care corporation in order
to attempt to enhance its acceptance in health care markets and more
efficiently and rapidly market its current and possible future product
lines. To accomplish this goal, the Company's management held numerous
discussions with several different companies over the past year. On
November 14, 1996, the Company and Ortho Diagnostic Systems
-1-
<PAGE>
Inc. ("ODSI") entered into an Exclusivity and Software Development
Agreement (the "Exclusivity Agreement") in which the Company and ODSI
agreed to negotiate in good faith towards reaching a definitive agreement
relating to a transaction or transactions with respect to the Company's
activities and developments in information technology and intellectual
property relating to donor and transfusion medicine (the "Technology").
ODSI is a wholly owned subsidiary of Johnson & Johnson. Any such
transaction or transactions could take any form or structure, including,
without limitation, a sale or exchange of assets of the Company, including
the Technology. There can be no assurance that the Company and ODSI will
be able to reach to a definitive agreement on these or any other
arrangements. If the Company and ODSI are unable to reach a definitive
agreement, then the Company will renew its search for a strategic partner.
The Company also agreed to perform certain software development services in
consideration of the payment from ODSI of $500,000 in November 1996, and an
additional $500,000 received in January 1997. If the Company and ODSI
enter into a definitive agreement relating to the Technology, the Company's
other assets or Common Stock, then ODSI may decline the software
development services and apply the payments to the Company towards any
consideration payable to the Company in connection with the definitive
agreement. The Company also granted ODSI a right of first refusal during
the period May 14, 1997 through November 14, 1997, in the event the Company
proposes to transfer, dispose of, sell, lease, license (except on a
non-exclusive basis pursuant to the ordinary course of its business), mortgage
or otherwise encumber or subject to any pledge, claim, lien or security
interest of the Technology. See THE COMPANY - WYNDGATE TECHNOLOGIES
DIVISION - AGREEMENT WITH ORTHO DIAGNOSTIC SYSTEMS INC.
DataMed was founded in 1989 by Michael I. Ruxin, M.D., the Chairman
and CEO of the Company, to offer the services of a Medical Review Officer
("MRO") to the regulated segment of the substance abuse testing market.
Due to federal regulations, companies involved in commercial transportation
must comply with requirements mandating substance abuse testing of
employees in safety sensitive positions and substance abuse awareness
education for supervisors and employees. Additionally, federal substance
abuse testing requirements applicable to commercial transportation mandate
the use of an MRO to evaluate the quality and accuracy of the testing
laboratory and to determine legal or illegal use of substances. Corporate
outsourcing has been a positive factor for DataMed as some large companies
have contracted with DataMed to outsource the management of their substance
abuse testing programs.
DataMed provides customized program management services to companies
in an attempt to increase total program quality and decrease total program
costs. DataMed provides substance abuse testing management services which
coordinate and actively manage the specimen collection process, the
laboratory testing process, the MRO review process, the random testing
process, the blind sample quality control process, the substance abuse
testing process, and the data management process including compliance
reporting and record keeping.
Key elements of the Company's strategy include (i) expanding its sales
and marketing efforts to attempt to increase its customer base nationally
and internationally, (ii) developing new healthcare management software
products and services utilizing the Company's existing technology and
experience in blood bank management software and substance abuse management
services, (iii) expanding international markets within the transportation
and healthcare industries,
-2-
<PAGE>
(iv) developing strategic relationships and selective acquisitions to
capitalize on opportunities in its industry, and (v) maintaining its
technology advantage in developing regulatory compliance tracking software
and quality assurance software products by continuing to focus on research
and development.
National MRO, Inc., founded in 1989, changed its name to Global Data
Technologies, Inc. in June 1995 in connection with the merger of National
MRO, Inc. and The Wyndgate Group, Ltd. in May 1995, and changed its name
again in May 1996 to Global Med Technologies, Inc. The Company's executive
offices are located at 12600 West Colfax, Suite A-500, Lakewood, Colorado
80215, and its telephone number is (303) 238-2000.
THE OFFERING
Securities Offered. . . . . . 1,337,000 Units, each consisting of two
shares of Common Stock and one Warrant.
Each Warrant entitles the holder
thereof to purchase one share of Common
Stock. The Common Stock and the
Warrants will not be separately
tradable or transferrable for a period
of six months commencing on the date of
this Prospectus or earlier at the
discretion of the Representative. See
DESCRIPTION OF SECURITIES and
UNDERWRITING.
Offering Price. . . . . . . . $7.00 to $9.00 per Unit.
Common Stock Outstanding before
Offering . . . . . . . . . . 4,966,626 shares
Common Stock to be Outstanding
after Offering (1) . . . . . 7,908,596 shares
Warrants Outstanding before
Offering . . . . . . . . . . None
Warrants to be Outstanding
after Offering . . . . . . . 1,337,000 Warrants
Exercise Price of Warrants. . $___(130% of the initial public
offering price of the shares included
in the Units) per share of Common
Stock, subject to adjustment in certain
circumstances. See Description of
Securities - Warrants.
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Expiration Date of Warrants . _______, 2000 (three years after the
date of this Prospectus.)
Redemption of Warrants . . . Commencing on the date the Warrants are
separately tradeable and transferable,
the Warrants are redeemable by the
Company at $.55 per Warrant at any time
until the end of the second year after
the date of this Prospectus and
thereafter at $.75 per Warrant at any
time until their expiration, on not
less than 30 days' prior written notice
to the holders of Warrants, provided
that the closing bid price per share of
the Common Stock on the NASDAQ SmallCap
Market, or the last sale price per
share if listed on the NASDAQ National
Market System or a national exchange,
has been at least $____ (120% of the
Warrant exercise price) for a period of
20 consecutive trading days ending on
the tenth day prior to the date on
which the Company gives notice of
redemption. See DESCRIPTION OF
SECURITIES - WARRANTS.
Estimated net proceeds
to the Company(2). . . . . . $7,902,330 (Assuming an offering price
of $7.00 per Unit)
Use of Proceeds . . . . . . . The Company intends to use the net
proceeds of this Offering for sales and
marketing, to pay research and
development costs, to pay existing
accounts payable, accrued expenses and
existing debt, and for working capital
and general corporate purposes. See
USE OF PROCEEDS and THE COMPANY.
Risk Factors. . . . . . . . . An investment in the securities offered
by this Prospectus involves a high
degree of risk and immediate
substantial dilution. See RISK FACTORS
and DILUTION.
NASDAQ Symbol(3). . . . . . . Units: GLOBU(4)
____________________
(1) Includes: (i) 2,674,000 shares of Common Stock included in the Units
to be sold by the Company in this Offering, (ii) 137,646 shares of
Common Stock issuable upon the conversion of $516,200 of the principal
amount of 10% Notes (plus an estimated additional 10,324 shares
issuable upon conversion of accrued interest thereon) and (iii)
120,000 shares of Common Stock issuable to certain shareholders of the
Company pursuant to the terms of a private placement which provided
for a share adjustment in the event the price per share in the
Company's initial public offering is less than $4.90 per share. Does
not include: (i) up to 401,100 shares of Common Stock included in the
Units subject to the over-allotment option; (ii) up to 1,337,000
shares of Common Stock issuable upon exercise of the Warrants included
in the Units to be sold by the Company in this Offering (1,537,550
shares if the over-allotment option is exercised); (iii) up to 401,100
shares of Common Stock issuable upon the exercise of the
Representative's Warrants and the Warrants included in the Units
issuable upon exercise of the Representative's Warrants; and (iv)
927,929 shares of Common Stock issuable upon the exercise of
outstanding options and warrants to purchase shares
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of Common Stock, which includes 187,800 shares of Common Stock
underlying warrants issued in connection with the 10% Notes.
(2) After deduction of the Underwriting Discount and expense allowance and
additional offering expenses estimated at $240,000. Does not include
any proceeds from the sale of the Units included in the over-allotment
option.
(3) The continuation of quotations on NASDAQ is subject to certain
conditions. The failure to meet these conditions may prevent the
Company's securities from continuing to be quoted on NASDAQ. Failure
to maintain continued quotations on NASDAQ may have an adverse effect
on the market for the Company's securities. See RISK FACTORS.
(4) The Common Stock and the Warrants will not be separately tradeable or
transferable for a period of six months commencing on the date of this
Prospectus or earlier at the discretion of the Representative. Until
such time, it is unlikely that any trading market will develop for
such securities. Subject to the Company meeting the NASDAQ
maintenance requirements, the Company intends to delist the Units from
NASDAQ and to list the Common Stock and Warrants on NASDAQ on or about
the date the Common Stock and the Warrants are separately tradeable
and transferable.
OTHER SECURITIES BEING REGISTERED
As a result of agreements of the Company, the Registration Statement
of which this Prospectus is a part has registered for resale by certain
persons an additional 1,135,770 shares of Common Stock. Each such person
has agreed that they will not publicly offer, sell or otherwise dispose of,
any of such shares of the Company's Common Stock for a period of six months
after the date of this Prospectus. After the completion of this Offering,
the Company will amend its Registration Statement and this Prospectus to
permit such persons to publicly offer and sell such Common Stock after the
expiration of such six month period. See SHARES ELIGIBLE FOR FUTURE SALE -
CONCURRENT REGISTRATION BY SELLING SHAREHOLDERS.
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SUMMARY FINANCIAL INFORMATION
The following selected financial data should be read in conjunction
with the consolidated financial statements and notes thereto included
elsewhere in this Prospectus. The consolidated statement of operations
data for the years ended December 31, 1995 and 1994, and the consolidated
balance sheet data at December 31, 1995 are derived from and should be read
in conjunction with the consolidated financial statements of the Company
and notes thereto audited by Ernst & Young, LLP, independent auditors.
The selected financial data as of, and for the nine months ended
September 30, 1996 and 1995, are derived from the unaudited financial
statements of the Company, which, in the opinion of the Company reflect all
adjustments, consisting only of normal recurring accruals, necessary for a
fair presentation of the results for the nine months ended September 30,
1996 and 1995, which are not necessarily indicative of the results for a
full year.
Statement of Operations Data:
Years Ended Nine Months Ended
December 31, September 30,
--------------------- --------------------
1995 1994 1996 1995
---- ---- ---- ----
Revenues $6,674,118 $4,976,255 $8,929,549 $4,841,514
Cost of sales(1) 3,217,595 2,429,789 5,016,101 2,308,078
Gross profit 3,456,523 2,546,466 3,913,448 2,533,436
Selling, general and
administrative(1) 5,980,130 2,427,383 5,792,048 4,658,018
Income (loss) from
operations (2,523,607) 119,083 (1,878,600) (2,124,582)
Net income (loss) $(2,684,858) $ 172,247 $(2,074,117)$(2,041,348)
========== ========== ========== ==========
Net income (loss) per
common share(2) $ (.59) $ .04 $ (.44)$ (.45)
========== ========== ========== ==========
Common shares used in
computing net income
(loss) per common
share(2): 4,579,848 4,379,028 4,679,028 4,546,547
Balance Sheet Data: Dec. 31, 1995 September 30, 1996
------------- ------------------
Cash and cash
equivalents $ 421,743 $ 587,724
Working capital
(deficit) $(2,171,397) $(2,250,308)
Total assets $2,720,862 $6,509,592
Long-term liabilities $ 647,929 $ 804,517
Stockholders' equity
(deficit) $(1,458,485) $(1,092,094)
___________
(1) See Note 1 to the Consolidated Financial Statements for a description
of the reclassification of certain expenses.
(2) See Note 1 to the Consolidated Financial Statements for a description
of the computation of net income (loss) per common share.
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RISK FACTORS
The Units offered hereby are speculative in nature and involve a high
degree of risk. The Units should be purchased only by persons who can
afford to lose their entire investment. Therefore, prior to making any
purchase, each prospective investor should consider very carefully the
following risk factors, as well as all of the other information set forth
elsewhere in this Prospectus, including the information contained in the
financial statements.
SIGNIFICANT OPERATING LOSSES; NEGATIVE NET WORTH; NET WORKING CAPITAL
DEFICIT
For the fiscal year ended December 31, 1995, the Company incurred a
loss in the amount of $2,684,858, as compared to a profit of $172,247 for
the fiscal year ended December 31, 1994. The 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 Company incurred a loss for the nine
months ended September 30, 1996 of $2,074,117 as compared to a loss of
$2,041,348 for the nine months ended September 30, 1995. The increased
loss was primarily due to increases in overall staffing and related
expenses necessary to handle recent and anticipated future growth of the
Company. As of September 30, 1996, the Company had a negative working
capital deficit of $2,250,308 and the Company had a negative net worth of
$1,092,094. The Company anticipates that it will incur a loss of
approximately $4,725,000 for the year ended December 31, 1996. While the
Company anticipates that its software revenue will continue to increase in
future periods the Company expects to continue to incur losses until 1998,
and possibly thereafter, until its software products are better established
in its markets. 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 OR PLAN OF OPERATIONS and FINANCIAL STATEMENTS.
REVENUE FLUCTUATIONS
The Company has experienced revenue fluctuations when software for the
SAFETRACE(TM) software product is delivered and towards year end, when
clients of the Company historically tend to increase their substance abuse
testing activity. The SAFETRACE(TM) software product license fees are
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.
Software sales and consulting revenues have not followed seasonal patterns.
The substance abuse testing business has historically experienced higher
volumes of testing in the last six months of every year compared to the
first six months of the same year. As a result, the Company's operating
results could fluctuate widely 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
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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 two of the licensees of the
SAFETRACE(TM) software product, Wyndgate's blood tracking system, has the
SAFETRACE(TM) software product in operation. There is no assurance that
the additional licensees of the SAFETRACE(TM) software product to date will
ever become operational with their SAFETRACE(TM) software product, that the
Company will be able to license the SAFETRACE(TM) 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. See THE
COMPANY.
GOVERNMENT REGULATION
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, and the U.S.
Department of Transportation which 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 the Company is unable
to obtain a 510(k) clearance letter from the FDA for the Company to market
the SAFETRACE(TM) and/or the SAFETRACETX(TM) software products, or if in
the future the FDA also determines that the Company's SAFETRACETX(TM)
product requires FDA clearance prior to the marketing of such product, the
time delay to market the SAFETRACE(TM) software product could materially and
negatively impact the Company's business. The Company cannot predict the
effect of possible future legislation and regulation. See THE COMPANY -
WYNDGATE TECHNOLOGIES DIVISION - INDUSTRY OVERVIEW and THE COMPANY -
DATAMED INTERNATIONAL DIVISION - INDUSTRY OVERVIEW.
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 and
shareholders may lose their entire investment. See THE COMPANY.
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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. See THE COMPANY - WYNDGATE
TECHNOLOGIES DIVISION - DEVELOPMENT AGREEMENTS.
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 the customer if
Wyndgate fails to deliver the maintenance services consisting of product
bug fixes, regulatory compliance and updates. Wyndgate may terminate the
license if the customer fails to meet its contractual obligations,
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 the customers will continue to make the usage fee payments.
POSSIBLE LOSS OF DATAMED SUBSTANCE ABUSE MANAGEMENT CONTRACTS DUE TO
MATERIAL DEFAULT
DataMed's substance abuse testing service agreements have contract
terms that vary from one to five years and, unless cancelled generally
ninety days prior to the end of the license term, most are automatically
renewable. Generally, either party may terminate the service agreement
upon material default or bankruptcy of the other party, if such default or
bankruptcy is not cured within thirty days. Some of the service agreements
permit DataMed to terminate the service agreement if the customer does not
agree to permit price increases due to changes in regulations or
technology or due to the percentage of positive results increasing beyond
those negotiated in the agreement. However, there can be no assurance that
the Company will be able to meet all of its contractual obligations, or
that the customers will continue to use the DataMed services required to
keep the service agreements in force.
PRODUCT AND REPORTING LIABILITY
The Company has only recently completed the final testing stages for
the SAFETRACE(TM) software product and is in the beginning stages of
marketing and customer implementation. As of the date hereof, only two of
the Company's licensees have the SAFETRACE(TM) software product in
operation. Currently, the Company has product liability exposure for
defects in its SAFETRACE(TM) software product which may become apparent
through widespread use of the SAFETRACE(TM) software product. No claims
have been filed against the Company involving the SAFETRACE(TM) software
product and the Company is not aware of any material problems involving the
SAFETRACE(TM) 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
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<PAGE>
exposure. The Company maintains product liability insurance on a claims
made basis for the SAFETRACE(TM) 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.
Similarly, if DataMed were to release an erroneous substance abuse
test report to an employer stating that an employee's test had shown
positive results (a "false positive"), the Company could be held liable for
the publication of such information. Although the Company carries medical
professional liability insurance which insures against liability associated
with such an occurrence, there can be no assurance that a recovery or
multiple recoveries may not exceed the insurance limit, or that such
coverage will continue to be available at reasonable prices. See THE
COMPANY.
DEPENDENCE ON MAJOR CUSTOMERS
During the nine months ended September 30, 1996, two of the Company's
customers, Laidlaw Transit, Inc. and Gulf Coast Regional Blood Center,
accounted for approximately 13% and 13.5%, respectively, of the Company's
revenues. During 1995, three of the Company's customers, Laidlaw Transit,
Inc., Chevron Corporation, and a group consisting of eight California blood
centers (the "Royalty Group"), accounted for approximately 18%, 12% and
10%, respectively, of the Company's revenues. See THE COMPANY - WYNDGATE
TECHNOLOGIES DIVISION - DEVELOPMENT AGREEMENTS. During 1994, two of the
Company's customers, Chevron Corporation and the Royalty Group, accounted
for approximately 19% and 18%, respectively, of the Company's revenues.
Laidlaw Transit, Inc. is associated with the transportation industry.
Chevron Corporation is associated with extraction and distribution of oil
and gas. The Royalty Group, through a 1992 development agreement with
Wyndgate, assisted in financing the development of Wyndgate's
SAFETRACE(TM) software product. Gulf Coast Regional Blood Center is a
blood center located in Texas. Non-renewal or termination of the
contractual arrangements with these key 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.
See THE COMPANY - CUSTOMERS.
SUBSTANTIAL COMPETITION
There is substantial competition in all aspects of the blood bank and
hospital information management and substance abuse testing industries.
Numerous companies are developing technologies and marketing products and
services in the health care information management area and many companies
are engaged in substance abuse testing. Many of these competitors have
been 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. See THE COMPANY - WYNDGATE
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TECHNOLOGIES DIVISION - COMPETITION and THE COMPANY - DATAMED INTERNATIONAL
DIVISION - COMPETITION.
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. There is no
assurance that the Company will be able to expand its business operations.
The current activities of DataMed and Wyndgate in the substance abuse and
blood center markets do not assure future business expansion or
profitability. See THE COMPANY.
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 tools or products infringe upon the
rights of others, the Company may be subject to suit for damages or an
injunction to cease the use of such tools or products. The Company is not
aware of any claims or infringements of the Company's software tools or
products upon the rights of others. See THE COMPANY.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING
The Company anticipates, based on its current proposed plans and
assumptions relating to its operations, that the proceeds of this Offering,
together with projected cash flow from
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operations, will be sufficient to satisfy its contemplated cash
requirements for the next 12 to 18 months, although the Company anticipates
that it will continue to incur operating losses and significant capital
expenses during that period. Thereafter, the Company will likely require
substantial funds in addition to the proceeds of this Offering in order to
continue to develop and market its products. See MANAGEMENT'S DISCUSSION
AND ANALYSIS OR PLAN OF OPERATIONS, USE OF PROCEEDS and THE COMPANY.
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. See
MANAGEMENT.
ONE OUTSIDE DIRECTOR
Presently, only one of the Company's Directors, John D. Gleason, is an
"outside" director, i.e., not a member of management. Mr. Gleason is a
member of the Company's Audit/Systems Committee, but not a member of the
Compensation Committee. See MANAGEMENT.
POTENTIAL FUTURE DILUTION
Currently, the Company has outstanding options and warrants to issue
up to 927,929 shares of the Company's Common Stock that are exercisable
from $1.00 to $3.75 per share. In addition, the Company has reserved for
issuance 147,970 shares of Common Stock underlying the 10% Notes. The
issuance of any shares pursuant to exercise of the options and warrants or
conversion of the 10% Notes at less than the book value per share of the
Company's Common Stock could dilute the book value of the Common Stock. In
addition, 120,000 shares of Common Stock will be issuable by the Company to
certain shareholders pursuant to the terms of a private placement which
provided for a share adjustment in the event the price per share in the
Company's initial public offering is less than $4.90 per share. This
adjustment will dilute a purchaser's investment herein. See DILUTION.
NO DIVIDENDS
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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. No person seeking dividend income from an
investment should invest in this Offering. See DESCRIPTION OF SECURITIES -
DIVIDEND POLICY.
AUTHORIZED STOCK AVAILABLE FOR ISSUANCE BY THE COMPANY
After the sale of the Units being offered hereby, the Company will
have 7,908,596 shares of Common Stock outstanding, out of a total of
40,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock
authorized for future issuance under the Company's Articles of
Incorporation. This figure includes (i) 137,646 shares of Common Stock
issuable upon conversion of $516,200 of the principal amount of 10% Notes,
(ii) approximately 10,324 shares issuable upon conversion of accrued
interest thereon and (iii) 120,000 shares of Common Stock issuable to
certain shareholders of the Company pursuant to the terms of a private
placement which provided for a share adjustment in the event the price per
share in the Company's initial public offering is less than $4.90 per
share. It does not, however, include 1,337,000 shares issuable upon
exercise of the Warrants or 927,929 shares issuable upon exercise of other
outstanding options and warrants. The remaining shares of Common Stock and
Preferred Stock not issued or reserved for specific purposes may be issued
without any action or approval of the Company's shareholders. Although
there are no present plans, agreements or undertakings involving the
issuance of such shares except as disclosed in this Prospectus, any such
issuances could be used as a method of discouraging, delaying or preventing
a change in control of the Company or could dilute the public ownership of
the Company. There can be no assurance that the Company will not undertake
to issue such shares if it deems it appropriate to do so. See DILUTION and
DESCRIPTION OF SECURITIES.
SUBSTANTIAL DILUTION TO INVESTORS
The Company has previously issued 4,966,626 shares of Common Stock.
Of these shares, 3,307,405 shares, including 1,960,000 shares issued in
conjunction with the May 1995 Wyndgate merger, were issued to subscribers
during the past two years at prices ranging from $2.45 to $3.75 per share.
Purchasers in this offering will pay an estimated $3.50 to $4.50 per share.
Accordingly, there is a significant disparity between the price per share
paid by present shareholders and the price to be paid by the public
purchasers in this offering. As a result of some of these prior issuances
of Common Stock by the Company, and the net losses the Company has
incurred, there will be immediate and substantial dilution to the investors
in this Offering in that the net tangible book value per share of the
Common Stock after the Offering will be substantially less than the public
offering price of the Units. The dilution to new investors, after giving
effect to conversion of the principal amount of the 10% Notes into shares
of Common Stock, and after giving effect to the sale of shares of Common
Stock in this Offering (ascribing no value to the Warrants), will be
approximately $2.63 per share. This represents a reduction of
approximately 75% from the $3.50 assumed offering price per share. See
DILUTION.
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NO PRIOR JOINT OPERATIONS
Both of the Company's divisions have prior operating histories and
revenues. However, the principals of the Company have worked together for
only the past year, and have experience in the industries only in which
their respective divisions were engaged. Consequently, there can be no
assurance that the Company will be able to successfully operate either
division or both divisions. Furthermore, the Company may be considered as
being in an early stage of development due to the lack of operating history
in its two business segments. See THE COMPANY.
LIMITED CAPITALIZATION
The Company has only limited capitalization available to it and is
dependent on the proceeds of this Offering to effect its intended
operations. The Company may need additional capital 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. See
THE COMPANY.
CONTROL BY PRESENT SHAREHOLDERS
After giving effect to the sale of 1,337,000 Units to be issued in
this Offering and the conversion of $516,200 principal amount of the 10%
Notes and accrued interest thereon, the present shareholders will control
approximately 63% of the outstanding shares of Common Stock of the Company,
without giving effect to the exercise of the Warrants, other outstanding
options and warrants or the Underwriters' over-allotment option. The
Company's officers, directors, holders of more than 5% of the Company's
outstanding Common Stock prior to the Offering, and their affiliates will
own approximately 42% of the outstanding Common Stock of the Company and
will be able to substantially influence all matters requiring approval by
the shareholders of the Company, including the election of directors. The
Company does not provide for cumulative voting in the election of
directors; hence, purchasers of the securities offered hereby should not
expect to be able to elect any directors to the Company's Board of
Directors. See SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
ALLOCATION OF PROCEEDS IN DISCRETION OF MANAGEMENT
Approximately 10% of the proceeds from the Offering will be used by
management for working capital and general corporate purposes. In
addition, approximately 15.5% of the proceeds of the Offering has been
allocated to the repayment of debt. See USE OF PROCEEDS.
POSSIBLE ANTI-TAKEOVER EFFECTS OF PROXIES AND RIGHT OF FIRST REFUSAL
GRANTED TO ODSI, PREFERRED STOCK AND SEVERANCE PAYMENTS
Certain of the Company's officers, directors and major shareholders
beneficially owning 3,033,034 shares of the Company's Common Stock have
granted an irrevocable proxy to ODSI until November 14, 1997, to vote their
shares in favor of a proposal to approve any definitive agreement between
the Company and ODSI relating to the Technology and on any other proposal
-14-
<PAGE>
relating to the sale of any of the stock of the Company or all or
substantially all of the assets of the Company or any of the Technology.
Each of the shareholders granting a proxy to ODSI has also granted ODSI a
right of first refusal in the event a shareholder proposes to transfer,
dispose of or otherwise sell such shareholder's shares to a third party or
grant an option to acquire the shares to any third party. The grant of the
proxies and rights of first refusal to ODSI could have the effect of
delaying, deferring or preventing a change in control of the Company or a
bid by a third person for the Company and/or the Technology. See SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The Board of Directors of the Company may issue shares of Preferred
Stock without stockholder approval on such terms as the Board may
determine. The rights of the holders of Common Stock will be subject to,
and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. In addition, as discussed
under MANAGEMENT - EMPLOYMENT AGREEMENTS, if the Company terminates the
employment of Michael I. Ruxin, William J. Collard, Gerald F. Willman, Jr.
or Joseph F. Dudziak for any reason other than cause or disability, the
Company will be required to pay a lump sum per individual ranging from
approximately $220,000 (representing approximately two years salary) to
$2.5 million. The effect of the severance payment provisions is to
increase the likelihood that a potential purchaser will seek to negotiate
directly with the Board of Directors and management in order to gain
control of the Company or its assets rather than directly approaching the
Company's shareholders as a group. All of the foregoing could have the
effect of delaying, deferring or preventing a change in control of the
Company and could limit the price that certain investors might be willing
to pay in the future for shares of the Company's Common Stock. See
MANAGEMENT - EMPLOYMENT AGREEMENTS and DESCRIPTION OF SECURITIES -
PREFERRED STOCK.
DETERMINATION OF OFFERING AND EXERCISE PRICES
The offering price of the Units and the exercise price of the Warrants
were determined arbitrarily by negotiation between the Company and the
Representative. In determining the prices, the Company and the
Representative considered (among other things) estimates of the business
potential of the Company, the management of the Company, the Company's
plans for the expansion of its business base, the general condition of the
securities markets and the amount of retained equity to the present
shareholders. Prospective investors should not consider the offering price
of the Units or the exercise price of the Warrants as necessarily
indicative of the actual value of the Units or underlying shares of Common
Stock or Warrants. The offering price of the Units and the exercise price
of the Warrants do not bear any direct relationship to the Company's
assets, book value, net worth or business potential, or to any other
traditionally recognized criteria of value.
RESTRICTIONS ON EXERCISE OF WARRANTS; POSSIBLE REDEMPTION OF WARRANTS
Investors purchasing Units in this Offering will not be able to
exercise the Warrants included therein unless at the time of exercise this
Registration Statement is current, or a new registration statement
registering the Common Stock issuable upon exercise of the Warrants is
effective and such shares have been registered and/or qualified or deemed
to be exempt from
-15-
<PAGE>
registration and/or qualification under the securities laws of the state of
residence of the holder of the Warrants. The Company does not intend to
advise holders of the Warrants of their inability to exercise the Warrants
other than in response to a specific written inquiry to the Company. The
value of the Warrants may be greatly reduced if a current registration
statement covering the shares of Common Stock underlying the Warrants is
not effective or if such Common Stock is not registered or exempt from
registration in the states in which the holders of the Warrants reside.
Commencing on the date the Warrants are separately tradeable and
transferable, the Warrants are subject to redemption by the Company on 30
days prior written notice provided that the daily trading price for the
shares is above $____(120% of the Warrant exercise price) for at least 20
consecutive trading days ending within ten days prior to the date of the
notice of redemption. If the Warrants are redeemed, Warrantholders will
lose their right to exercise the Warrants except during such 30 day
redemption period. See DESCRIPTION OF SECURITIES - WARRANTS.
SHARES ELIGIBLE FOR FUTURE SALE
All of the 4,966,626 shares of the Company's Common Stock presently
issued and outstanding are "restricted securities" as that term is defined
under Rule 144 promulgated under the Securities Act of 1933, as amended.
Of this amount, 1,659,221 shares have been held in excess of two years, and
will be available for sale 90 days after the date hereof pursuant to Rule
144. In addition, 1,135,770 shares, including 187,800 shares underlying
warrants exercisable at $3.75 per share, have been registered for sale
under the Registration Statement of which this Prospectus is a part, and
will be eligible for sale commencing six months after the date of this
Prospectus. Before this Offering, there has been no public market for the
securities of the Company. Sales of substantial amounts of shares by
shareholders after such six month period pursuant to this Prospectus or
sales made pursuant to Rule 144 or otherwise could adversely affect the
market price of the Company's securities and make it more difficult for the
Company to sell equity securities in the future at a time and price which
it deems appropriate. The Company is unable to predict the effect that
sales made after such six month period or Rule 144 or otherwise may have on
the then prevailing market price of the Common Stock. Nonetheless, the
possibility exists that the sale of these shares may have a depressive
effect on the prices of the Company's Common Stock and Warrants. See
DESCRIPTION OF SECURITIES.
NO PRIOR PUBLIC MARKET AND POSSIBLE VOLATILITY OF PRICE OF UNITS, SHARES OF
COMMON STOCK AND WARRANTS
The prices of securities of publicly traded corporations tend to
fluctuate widely. It can be expected, therefore, that if and when trading
commences in the Company's Units, Common Stock and Warrants, there may be
wide fluctuations in price. There has been no prior public market for the
Units, Common Stock or Warrants and despite the initial listing of the
Units on NASDAQ, there is no assurance that a market will develop in the
Units or be sustained. The lack of a current market for the Units, Common
Stock and Warrants, fluctuations in trading interest and changes in the
Company's operating results, financial condition and prospects could have
a significant impact on the market prices for the Units, Common Stock and
the Warrants. See UNDERWRITING.
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<PAGE>
NASDAQ MAINTENANCE REQUIREMENTS AND EFFECTS OF POSSIBLE DELISTING; RISKS
RELATED TO LOW-PRICED STOCKS
Although the Company's Units have been approved for initial listing on
the NASDAQ Small-Cap Market upon notice of issuance of such securities, the
Company must continue to meet certain maintenance requirements in order for
such securities to continue to be listed on NASDAQ. Further, the Company
must meet such maintenance requirements for the Company to be able to list
the Company's Common Stock and Warrants on NASDAQ at such time as they are
separately tradeable and transferable. NASDAQ recently announced that it
intended to propose new entry and maintenance requirements for companies
traded on the NASDAQ Small-Cap Market, including increased financial
standards and requiring the companies to have at least two independent
directors and an audit committee, a majority of which are independent
directors. There can be no assurance that the Company will be able to meet
such new proposals if such new proposals are adopted. If the Company's
securities are delisted from NASDAQ, this could restrict investors'
interest in the Company's securities and could materially and adversely
affect any trading market and prices for such securities. In addition, if
the Company's securities are delisted from NASDAQ, and if the Company's net
tangible assets do not exceed $2 million, and if the Common Stock is
trading for less than $5.00 per share, then the Company's Units, Common
Stock and Warrants would each be considered a "penny stock" under federal
securities law. Additional regulatory requirements apply to trading by
broker-dealers of penny stocks which could result in the loss of effective
trading markets, if any, for the Company's Units, Common Stock and
Warrants.
WARRANTS TO REPRESENTATIVE
Upon successful completion of this Offering, the Company will sell to
the Representative and its designees, for a nominal cost, warrants to
purchase up to 133,700 Units (the "Representative's Warrants") at a
purchase price equal to 165% of the Price to Public of the Units in this
Offering. The Representative's Warrants will be exercisable for a forty
nine month period, commencing 11 months from the date of their issuance.
The Representative will be given the opportunity to profit from a rise in
the market price of the Company's Common Stock with a resulting dilution of
the interest of stockholders. Furthermore, the Company will give certain
registration rights with regard to the Units underlying the Representative's
Warrants and issuable upon exercise of the Warrants included in such Units
and such registration could result in substantial expense to the Company.
See UNDERWRITING.
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<PAGE>
USE OF PROCEEDS
Assuming an offering price of $7.00 per Unit, the net proceeds to the
Company after deduction of the underwriting discount (10%) and estimated
expenses of the offering, including the Representative's nonaccountable
expense allowance will be approximately $7,902,330. The net proceeds are
anticipated to be used as follows:
Sales and marketing(1) $2,000,000 25.3%
Research and development(2) 2,500,000 31.6%
Payment of accounts payable and
accrued expenses 1,390,000 17.6%
Debt repayment(3) 970,000 12.3%
Notes payable(4) 253,000 3.2%
Working capital and general
corporate purposes(5) 789,330 10.0%
---------- ------
$7,902,330 100.0%
========== ======
___________________
(1) Sales and marketing includes expenses for increased advertising
activity including trade shows, product demonstrations and other
advertising and promotional efforts. Sales and marketing may also
include expenses associated with the development of strategic
marketing affiliations within the Company's industry.
(2) Included in research and development is the expenditure of
approximately $860,000 to convert the EDEN-OA(R) tool to a graphical
based program, including conversion of the current SAFETRACE(TM)
software product and all enhancements in process of being made to the
SAFETRACE(TM) software product. Also included are expenditures of
approximately $420,000 for the development of the SAFETRACETX(TM)
software product, and $515,000 for continuing efforts to obtain the
FDA 510(k) clearance letter, documentation for the SAFETRACETX(TM)
software product development and expansion of the Customer Help Line.
Additionally, $500,000 will be used for ongoing research and
development of information systems technology utilized in the
Company's DataMed division to enhance the automation of its customer
service. The remaining $205,000 will be used for development of
products ancillary to the SAFETRACE(TM) software product line.
Approximately $2,000,000 of these expenditures are anticipated to be
made in 1997 and $500,000 in 1998.
(3) The Company has a revolving line of credit with a bank which bears
interest at 2% plus prime compounded monthly per annum. As of
September 30, 1996, the Company's outstanding balance on the line of
credit was $970,000. The borrowed funds were used for working capital.
The Company may borrow additional funds from a bank or other sources.
In the event additional funds are borrowed, such funds, together with
any interest thereon, will be repaid from the proceeds of this
offering. The Company may be required to provide additional
incentives, such as options and/or warrants, to the lender(s) in
connection with such borrowing.
(4) Includes $235,000 principal and estimated accrued interest of
approximately $18,000 on the 10% Notes, $85,000 principal amount of
which are owned by certain directors and officers of the Company and
a principal shareholder of the Company. See Certain Relationships
and Related Transactions. Holders of an additional $516,200 principal
amount of 10% Notes have indicated their intention to convert their
10% Notes for 137,646 shares of Common Stock plus an estimated
additional 10,324 shares for approximately $38,715 of accrued
interest. The proceeds from the sale of the 10% Notes were used for
working capital.
(5) The Company may use a portion of the funds allocated for working
capital to acquire companies and/or technology in fields related to
the Company's business. The Company has no present plans, proposals,
arrangements or understandings with respect to acquisitions of other
companies or technology.
The allocation of the net proceeds from this Offering set forth above
represents the Company's best estimate based on its present plans and
certain assumptions regarding general economic and industry conditions and
the Company's anticipated future revenues and expenditures. If any of
these factors change, the Company may find it necessary or advisable to
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<PAGE>
reallocate some of the proceeds from working capital to other of the
above-described categories. The Company anticipates, based on its current
proposed plans and assumptions relating to its operations, that the
proceeds of this Offering, together with projected cash flow from
operations will be sufficient to satisfy its contemplated cash requirements
for the next 12 to 18 months, although the Company anticipates that it will
continue to incur operating losses and significant capital expenses during
that period. The Company's cash requirements beyond this period will
depend on many factors, including (but not limited to) the Company's cash
flow from operations, the length of time it may take for the Company to
develop or acquire products or services for the market, the market
acceptance of these products or services, and the response of competitors
who may develop competing products or services at lower cost. To the
extent that the funds generated by this Offering are insufficient to fund
the Company's activities in the short or long term, the Company may need to
raise additional debt or equity through public or private financings. The
Company has no commitment for any such financing, and there can be no
assurance that any additional financing will be available to the Company,
when needed, and on reasonable terms. See RISK FACTORS.
If the over-allotment option is exercised (of which there can be no
assurance), the Company will receive additional net proceeds of
approximately $1,221,350. Any proceeds received from the exercise of the
over-allotment option will be added to working capital.
The amounts set forth above merely indicate the proposed use of
proceeds, and the actual expenditures may vary substantially from the
estimates. None of the items set forth in the foregoing table should be
considered as a firm commitment by the Company.
To the extent that the net proceeds are not used immediately, the
Company will invest such net proceeds in short-term government securities
through a bank or in a non-discretionary account of the Company with the
Representative.
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<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of the
Company as of September 30, 1996, and as adjusted to reflect the sale of
the 1,337,000 Units at an assumed offering price of $7.00 per Unit and
receipt of net proceeds of approximately $7,902,330 therefrom.
September 30, 1996
------------------------
Unaudited As Adjusted
--------- -----------
Notes payable. . . . . . . . . . . . . . . . $ 751,200 $ -0- (1)
Current portion of capital lease
obligations . . . . . . . . . . . . . . . . 402,968 402,968
Line of credit . . . . . . . . . . . . . . . 970,100 100
Capital lease obligations,
less current portion. . . . . . . . . . . . 804,517 804,517
Stockholders' Equity (deficit):
Preferred Stock, $.01 par value;
10,000,000 shares authorized,
no shares issued and outstanding . . . . 0 0
Common Stock, $.01 par value; 40,000,000
shares authorized, 4,966,626 shares
issued and outstanding; 7,898,272
issued and outstanding, as adjusted 49,666 78,982 (1)
Additional paid in capital . . . . . . . . . $4,131,967 $12,521,181 (1)
Accumulated deficit. . . . . . . . . . . . . $(5,273,727) $(5,273,727)
Total Stockholders' Equity (deficit) . . . . $(1,092,094) $7,326,436 (1)
_______________
(1) Assumes holders of $516,200 principal amount of 10% Notes convert
their 10% Notes into 137,646 shares of Common Stock and the issuance
of 120,000 shares of Common Stock to certain shareholders of the
Company pursuant to the terms of a private placement which provided
for a share adjustment in the event the price per share in the
Company's initial public offering is less than $4.90 per share. Does
not include (i) approximately $38,715 of accrued interest on the 10%
Notes which will be converted into approximately 10,324 shares of
Common Stock or (ii) additional accrued interest on the 10% Notes of
approximately $18,000 to be paid in cash.
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<PAGE>
DILUTION
The Company's net tangible book value (deficiency) as of September 30,
1996 was ($1,866,592) or ($.38) per share. The "net tangible book value
per share" represents the Company's total tangible assets less its total
liabilities, divided by the number of shares of Common Stock outstanding at
September 30, 1996. After giving effect to (i) the conversion of $516,200
principal amount of outstanding 10% Notes for a total of 137,646 shares of
Common Stock (ii) the issuance of 120,000 shares of Common Stock to certain
shareholders of the Company pursuant to the terms of a private placement
which provided for a share adjustment in the event the price per share in
the Company's initial public offering is less than $4.90 per share and
(iii) the sale of the 1,337,000 Units at an assumed offering price of $7.00
per Unit and allocating no value to the Class A Warrants included in the
Units, and without giving effect to the possible exercise of the over-
allotment option, the Company's pro forma net tangible book value at
September 30, 1996, would have been approximately $6,901,938 or $.87 per
share. This represents an immediate increase in net tangible book value
(deficiency) per share of $1.25 to existing shareholders, and an immediate
dilution of $2.63 per share of Common Stock (75%) to the investors
purchasing Units in this Offering. The following table illustrates
dilution in net tangible book value on a per share basis to new investors:
Price to investors. . . . . . . . . . . . . . . . . . . . $3.50
Net tangible book value before Offering. . . . . . . . . $ (.38)
Increase attributable to new investors . . . . . . . . . $ 1.25
Pro forma net tangible book value
after Offering . . . . . . . . . . . . . . . . . . . . . $ .87
-----
Dilution to new investors(1). . . . . . . . . . . . . . . $2.63
=====
_________
(1) If the over-allotment option is exercised in full, dilution to
new investors would be $2.52.
The following table sets forth the number of shares of Common Stock
purchased from the Company, the effective cash contribution made and the
price per share paid by existing shareholders and by purchasers of the
1,337,000 Units offered hereby (at an assumed offering price of $7.00 per
Unit), without deducting estimated expenses and fees of the Representative.
<TABLE>
<CAPTION>
Total Avg. Price
Shares Purchased Consideration Paid Per Share
------------------- ------------------- ---------
Number Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Officers, Directors
and Promoters(1). . . . 2,237,372 28.3% $ 100,000 0.7% $ .04
Other
Shareholders(2) . . . . 2,997,224 37.9 4,699,946 33.2 $1.57
New Investors. . . . . . 2,674,000 33.8 9,359,000 66.1 $3.50
--------- ----- ----------- -----
Total . . . . . . . . 7,908,596 100.0% $14,158,946 100.0%
========= ====== =========== ======
</TABLE>
_______________
(1) Includes shares purchased by Michael I. Ruxin, William J. Collard and
Gerald F. Willman, Jr., and shares issuable to Joseph F. Dudziak upon
conversion of the 10% Notes and accrued interest thereon. Mr. Collard
and Mr. Willman's shares were issued in connection with The Wyndgate
Group, Ltd., merger. No value has been assigned to the shares issued
to Mr. Collard and Mr. Willman.
(2) Includes (i) shares (other than shares issued to Mr. Collard and Mr.
Willman) issued in connection with the merger with The Wyndgate Group,
Ltd., as to which no value has been assigned, (ii) 137,646 shares
issuable upon the conversion of the principal amount of the 10% Notes
(plus an estimated additional 10,324 shares issuable upon conversion
of accrued interest of approximately $38,715 thereon), other than the
shares issuable to Joseph F. Dudziak upon conversion of the 10% Notes
and accrued interest thereon and (iii) 120,000 shares of Common Stock
issuable to certain shareholders of the Company pursuant to the terms
of a private placement which provided for a share adjustment in the
event the price per share in the Company's initial public offering is
less than $4.90 per share.
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<PAGE>
The computations in the tables set forth above assume no exercise of
outstanding warrants or stock options as of the date hereof, and assume no
exercise of the Underwriters' over-allotment option. On the date of this
Prospectus, there were outstanding options and warrants to purchase 927,929
shares of Common Stock (including, but not limited to, 187,800 shares of
Common Stock underlying Warrants issued in connection with the sale of the
10% Notes) at a weighted average exercise price of $2.77 per share.
DIVIDEND POLICY
The payment of dividends by the Company is within the discretion of
its Board of Directors and depends in part upon the Company's earnings,
capital requirements and financial condition. Since its inception, the
Company has not paid any dividends on its Common Stock and does not
anticipate paying such dividends in the foreseeable future. The Company
intends to retain earnings, if any, to finance its operations.
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<PAGE>
SELECTED FINANCIAL INFORMATION
The following table sets forth selected financial information
regarding the results of operations and financial position of the Company
for the periods and at the dates indicated. The financial statements of
the Company as of December 31, 1995 and for the years ended December 31,
1995 and 1994 have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report included elsewhere in this Prospectus. The
selected financial information as of September 30, 1996 and for the nine
months ended September 30, 1996 and 1995 are derived from the unaudited
interim consolidated financial statements of the Company set forth
elsewhere in this Prospectus and include, in the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary for
the fair presentation of its results of operations for such periods. The
results of operations for the nine months ended September 30, 1996, are not
necessarily indicative of the results to be expected for the full year.
This data should be read in conjunction with the Company's consolidated
financial statements (including the notes thereto) and the Company's
unaudited interim consolidated financial statements appearing elsewhere in
this Prospectus and in conjunction with MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS.
STATEMENT OF OPERATIONS DATA:
Years Ended Nine Months Ended
December 31, September 30,
--------------------- --------------------
1995 1994 1996 1995
---- ---- ---- ----
Drug testing and other $5,740,487 $3,836,136 $4,680,448 $3,957,936
Software sales and
consulting 933,631 1,140,119 4,249,101 883,578
---------- ---------- ---------- ----------
Total revenue 6,674,118 4,976,255 8,929,549 4,841,514
Cost of sales
and product
development(1) 3,217,595 2,429,789 5,016,101 2,308,078
---------- ---------- ---------- ----------
Gross profit $3,456,523 $2,546,466 $3,913,448 $2,533,436
OPERATING EXPENSES
Payroll and other(1) 1,998,452 708,718 1,574,799 1,431,242
General and
administrative(1) 1,478,666 605,459 1,418,894 1,240,230
Sales and marketing(1) 1,731,533 657,988 1,903,569 1,471,986
Research and development 654,500 403,714 547,387 442,342
Depreciation and
amortization 116,979 51,504 347,399 72,218
---------- ---------- ---------- ----------
Income/Loss from
operations $(2,523,607) $ 119,083 $(1,878,600)$(2,124,582)
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<PAGE>
Years Ended Nine Months Ended
December 31, September 30,
--------------------- --------------------
1995 1994 1996 1995
---- ---- ---- ----
OTHER INCOME (EXPENSE)
Interest income
(expense), net (61,112) 6,339 (179,464) (20,581)
Other (70,608) - (16,053) (4,943)
Income (loss) before
provision for (benefit
from) income taxes (2,655,327) 125,422 (2,074,117) (2,150,106)
Provision for (benefit
from) income taxes 29,531 (46,825) - (108,758)
---------- ---------- ---------- ----------
Net Income (Loss) $(2,684,858) $ 172,247 $(2,074,117)$(2,041,348)
========== ========== ========== ==========
___________________
(1) See Note 1 to the Consolidated Financial Statements for a description
of the reclassification of certain expenses.
BALANCE SHEET DATA:
December 31, September 30,
1995 1996
------------ ------------
Working capital (deficit). . . . . . . . . . $(2,171,397) $(2,250,308)
Total assets . . . . . . . . . . . . . . . . $ 2,720,862 $ 6,509,592
Accumulated deficit. . . . . . . . . . . . . $(3,199,610) $(5,273,727)
Stockholder's equity (deficit) . . . . . . . $(1,458,485) $(1,092,094)
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
GENERAL
The Company and its two divisions are in the business of providing
information management software products and services to the healthcare
industry and substance abuse testing program services to companies.
Wyndgate is primarily involved in providing software products,
services and maintenance to purchasers of licenses for its SAFETRACE(TM)
software product. Revenues from the sales of software licenses are
recognized upon delivery of the software product to the customer unless the
Company has significant related vendor obligations remaining. Revenue from
post contract customer support is recognized over the period the customer
support services are provided, and software services revenue is recognized
as services are performed.
DataMed provides substance abuse testing management services.
Revenues from DataMed are recognized as services are provided. DataMed
typically contracts with its customers to provide for laboratory and
collection site services (which DataMed obtains from others), Medical
Review Officer ("MRO") services, data management, record storage and
coordination of all substance abuse testing program elements. DataMed
serves international, national and regional clients in a variety of
industries.
In November 1996, DataMed elected to terminate its contracts with
approximately 560 customers, representing approximately $400,000 of revenue
for the nine months ended September 30, 1996. DataMed's election was made
to improve operating efficiencies with its remaining customer contracts.
The terminated contracts represented customers each contributing average
annual revenues of less than $1000. DataMed expects it will be able to
improve its gross profit margins by eliminating the inefficiencies
associated with these smaller accounts, thus improving its ability to serve
its remaining customers.
The above Statement of Operations Data reflect results of operations
of the Company through the nine month period ended September 30, 1996.
While the Company has not finalized results of operations after that date,
the Company expects that it will have a consolidated net loss for the three
months ended December 31, 1996 of approximately $2,650,000, which will
result in a net loss of approximately $4,725,000 for the year ended
December 31, 1996.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AS COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1995
REVENUES. Revenues increased by $4.1 million, or 85%, to $8.9 million
for the nine months
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<PAGE>
ended September 30, 1996 ("Interim 1996") compared to $4.8 million for the
nine months ended September 30, 1995 ("Interim 1995"). The increase was
primarily the result of both the introduction of Wyndgate's SAFETRACE(TM)
software product which accounted for approximately $3.4 million and the
increase in substance abuse test volume which increased by approximately
27,000 tests, or 21%, to approximately 157,000 tests in Interim 1996
compared to approximately 130,000 tests in Interim 1995.
COST OF SALES AND PRODUCT DEVELOPMENT. Cost of sales and product
development as a percentage of revenues increased 8% to 56% in Interim 1996
compared to 48% in Interim 1995 primarily as a result of the following:
increased royalty fee expenses based on increased sales of Wyndgate's
SAFETRACE(TM)software product licenses; increased resales of vendor
hardware and software priced at lower profit margins than Company developed
software sales and increased amortization expense of the capitalized
software development costs related to the development of Wyndgate's
SAFETRACE(TM)software product.
GROSS PROFIT. Gross profit as a percentage of revenues decreased 8%
to 44% in Interim 1996 compared to 52% in Interim 1995 as a result of the
increased costs discussed above and primarily as a result of increased
sales of software and hardware purchased from third party manufacturers.
PAYROLL AND OTHER. Payroll and other increased $143,557, or 10.0%, in
Interim 1996 compared to Interim 1995. The increase in payroll and other
was primarily due to the hiring of additional management personnel together
with increases in client service personnel necessary to manage the
Company's new customers. Management does not expect significant increases
in payroll and other costs for the foreseeable future.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
increased $178,664, or 14.4%, in Interim 1996 compared to Interim 1995.
The increase in general and administrative expenses was attributable
primarily to increases in outside contract services, product liability
insurance, bad debt expense, leased office space and other general
administrative expenses which were related to the increase in the number of
employees. These expenses were offset by a significant decline in merger
and reorganization expenses.
SALES AND MARKETING. Sales and marketing expenses increased $431,583
or 29% in Interim 1996 compared to Interim 1995. The increase in sales and
marketing expenses was primarily due to increased activity in advertising
media, trade shows and direct sales including personnel and travel related
expenditures for both divisions of the Company. Management expects that
there will be increases in sales and marketing expenses if the Company is
successful in introducing its new transfusion management information
system, the SAFETRACETX(TM) software product.
RESEARCH AND DEVELOPMENT. Research and development expenses were
$547,387 in Interim 1996 compared to $442,342 in Interim 1995 representing
an increase of 24%. The increase in research and development expenses was
primarily due to an increase in the number of employees assigned to
software and systems development at both divisions of the Company.
Management expects research and development expenses to increase as
additional software development related to the Company's blood management
product line is planned within the next fiscal year.
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DEPRECIATION AND AMORTIZATION. Depreciation and amortization
increased $275,181, in Interim 1996 compared to Interim 1995. The increase
in depreciation and amortization is due to the increases in fixed assets.
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YEAR ENDED DECEMBER 31, 1995 AS COMPARED TO THE YEAR ENDED DECEMBER 31,
1994
Revenues. Revenues increased by $1.7 million, or 34%, to $6.7
million for the year ended December 31, 1995 ("1995") compared to $5
million for the year ended December 31, 1994 ("1994"). The increase was
primarily the result of the increase in substance abuse test volume which
increased by approximately 82,000 tests, or 64%, to approximately 210,000
tests in 1995 compared to approximately 128,000 tests in 1994. The
increase in substance abuse test volume was offset by a decrease in
software sales and consulting revenue of $206,448. The decrease in
software sales and consulting revenue was primarily the result of a focused
effort to complete the development of the SAFETRACE(TM) software product
during 1995.
COST OF SALES AND PRODUCT DEVELOPMENT. Cost of sales and product
development as a percentage of revenues decreased 1% to 48% in 1995
compared to 49% in 1994 primarily as a result of decreases in laboratory
and collection site expenses related to substance abuse testing. These
expenses decreased because the Company renegotiated certain laboratory and
collection site agreements.
GROSS PROFIT. Gross profit as a percentage of revenues increased 1% to
52% in 1995 compared to 51% in 1994 as a result of the decreased costs
discussed above.
PAYROLL AND OTHER. Payroll and other increased $1,289,734, or 182%,
in 1995 compared to 1994. The increase in payroll and other was primarily
due to an increase in management personnel together with increases in staff
handling substance abuse testing.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
increased $873,207, or 144%, in 1995 compared to 1994. The increase in
general and administrative expenses can be primarily attributable to the
following events: $164,500 in expenses related to the 1995 merger with
Wyndgate; a $244,000 provision for doubtful accounts; an expense of
$350,000 for payments for certain non-compete agreements with management
personnel; and approximately $161,000 for options granted to certain
shareholders. These increases in general and administrative expenses were
offset by decreases in other general and administrative expenses. The
increases noted above are anticipated to reflect events not expected to
reoccur. See the discussion below in Credit Loss Experience for a further
discussion of bad debt expense.
SALES AND MARKETING. Sales and marketing expenses increased
$1,073,545, or 163%, in 1995 compared to 1994. The increase in sales and
marketing expenses was primarily due to increased activity in advertising
media, trade shows and direct sales including personnel and travel and
related expenditures for both divisions of the Company.
RESEARCH AND DEVELOPMENT. Research and development expenses increased
$250,786 or 62% from 1994 to 1995. The increase in research and
development is primarily due to increased staff hired by Wyndgate to
complete the development of its SAFETRACE(TM) software product during the
second half of 1995.
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DEPRECIATION AND AMORTIZATION. Depreciation and amortization
increased $65,475 in 1995 compared to 1994. The increase in depreciation
and amortization is due to the increases in fixed assets.
CREDIT LOSS EXPERIENCE. The Company establishes an allowance for
doubtful accounts based upon factors surrounding the credit risk specific
to customers, historical trends and other information. The Company
performs ongoing credit evaluations of its customers' financial condition
and maintains allowances for potential credit losses. Actual losses,
allowances and accounts receivable turnover trends generally have been
within management's expectations. The Company's provision for doubtful
accounts was $244,000 in 1995. A significant portion of this reserve was
as a result of management's decision to reserve accounts receivable which
had been properly billed according to its contract with a specific and
significant customer, but for which the customer's expectation was to
receive billings directly from certain subcontractors of the Company rather
than from the Company. The Company is continuing to work with this
customer to resolve billing issues and anticipates there may be an
additional increase in the provisions for doubtful accounts in 1996 related
to accounts receivable with this customer.
During the nine months ended September 30, 1996, the provision for
doubtful accounts was approximately $156,000, or approximately 2% of
revenues. The provision for doubtful accounts is included in general and
administrative expenses. Management is not aware of any other unusual
credit risks or material collection problems which have not been accounted
for in the allowance for doubtful accounts.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficit of approximately $2.3
million as of September 30, 1996 compared with a working capital deficit at
December 31, 1995 of approximately $2.2 million. The Company used cash in
operating activities of approximately $2.7 million for the nine months
ended September 30, 1996 compared to approximately $432,000 for the
comparable period in 1995. The increase in cash used for the first nine
months of 1996 is attributable primarily to an increase of approximately
$2.4 million in accounts receivable and unbilled receivables and an
increase in note receivable of $250,000, offset by increases in accrued
payroll and other accrued expenses. The Company used cash in investing
activities of approximately $184,000 for the nine months ended September
30, 1996 compared with approximately $268,000 for the comparable period in
1995. These operating and investing activities were financed primarily
from the proceeds of private placements of Common Stock, notes payable and
short term borrowing on a line of credit with a bank.
The Company generated approximately $751,000 from the issuance of
notes payable during the nine months ended September 30, 1996 and received
net short-term borrowings of $470,000 for the same period from its line of
credit. Additionally, the Company received proceeds of approximately
$1,740,000 from the private placement of its Common Stock after deducting
commissions and expenses of $260,000 during the same period. For the nine
months ended September 30, 1996, the Company also used cash from the
financing activities by making
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approximately $254,000 in principal payments on capital leases and by
payment of $350,000 of issuance and distribution costs for the Offering.
Cash provided by financing activities for the nine months ended
September 30, 1995 included proceeds from the issuance of common stock of
approximately $735,000. Net proceeds for this period from other sources
were minimal.
The Company's cash flows have historically been used primarily in
investing in software development and working capital needs. The Company
intends to use proceeds from the Offering primarily to repay debt, to pay
certain accounts payable and accrued expenses, and for research and
development, sales and marketing programs, and working capital and general
corporate purposes. See USE OF PROCEEDS.
The Company maintains a $1,000,000 line of credit with a bank secured
by substantially all of the Company's assets, except for those assets under
lease agreements, which bears interest at prime plus two percent and
matures February 12, 1997. The amount drawn on this line of credit at
September 30, 1996 was $970,000. A principal stockholder of the Company
has personally guaranteed the repayment of any amounts under the line of
credit.
The Company recognizes the significant impact of accounts receivable
on its working capital needs. The substantial increase in revenue from
software sales and consulting for the nine months ended September 30, 1996
have generated corresponding increases in accounts receivable. While
management does not believe there are any unusual or material credit risks
related to the Company's software sales, the high number of software
installations for the Company's customers within a short period of time has
created billing and collection delays. Management intends to aggressively
pursue more timely billing and collection of accounts receivable to correct
these delays.
The Company anticipates that it will incur a loss of approximately
$4,725,000 for the year ended December 31, 1996. While the Company
anticipates that its software revenues will continue to increase in future
periods, the Company expects to continue to incur losses until 1998, and
possibly thereafter, until its software products are better established in
its markets. The Company expects that the net proceeds of this Offering
will enable the Company to meet its liquidity and capital requirements for
approximately twelve to eighteen months. There can be no assurance that
the Company can generate sufficient revenues, earnings and cash collections
from software sales and substance abuse testing sales to satisfy its working
capital requirements after such time. The Company's working capital
requirements will depend on numerous factors, including progress of the
Company's research and development of the SAFETRACETX (TM) software
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product, other new products, as well as new applications for its present
core products, which include both SAFETRACE(TM) and the SAFETRACETX(TM)
software products. Additionally, the Company's working capital
requirements may depend upon its success in obtaining a FDA 510(k)
clearance letter within the next twelve to eighteen months. Failure to
receive such clearance letter may require the Company to seek additional
financing. The Company may seek financing to meet its working capital
requirements through strategic alliances within the Company's industry and
through collaborative arrangements with other suppliers to the Company's
customers. There can be no assurance, however, that additional funds, if
required, will be available from sources historically available to the
Company or other sources on favorable terms, if at all.
EFFECT OF INFLATION AND FOREIGN CURRENCY EXCHANGE
The Company has not experienced unfavorable effects on its results of
operations due to currency exchange fluctuations with its foreign customers
or material effects upon its results of operations as a result of domestic
inflation.
THE COMPANY
Global Med Technologies, Inc. (the "Company") provides information
management software products and services to the healthcare industry and
provides substance abuse testing program services to companies, including
certain Fortune 1000 companies. National MRO, Inc., founded in 1989,
changed its name to Global Data Technologies, Inc. in June 1995 in
connection with the merger of National MRO, Inc. and The Wyndgate Group,
Ltd. in May 1995, and changed its name again in May 1996 to Global Med
Technologies, Inc. The Company now consists of two divisions, Wyndgate
Technologies ("Wyndgate") and DataMed International ("DataMed"), both of
which operate under their respective trade names. Wyndgate develops,
markets, licenses and supports software for the healthcare industry.
DataMed manages and markets a variety of services that are designed to
assist companies with administering substance abuse testing programs.
The Company has received several indications of interest regarding a
possible acquisition of the DataMed division. While the Company has no
specific plans for divestiture of this division, or any segment of the
Company, any offer which enhances return on invested capital and
shareholder value and which furthers the Company's strategic goals will be
seriously evaluated to insure that the best interests of the Company and
its shareholders are served.
Founded in 1984, Wyndgate initially developed a Student Information
System ("SIS"), an integrated software package for colleges and
universities to track student information. Wyndgate currently has six
contracts for SIS still in effect. Pursuant to an agreement with eight
California blood centers (the "Royalty Group"), Wyndgate began development
of a blood tracking system to assist community blood centers, hospitals,
plasma centers and outpatient clinics in the U.S. in complying with the
quality and safety standards of the FDA for the collection and management
of blood and blood products. After several years of development and
$1,080,000 paid by the Royalty Group, Wyndgate has completed development
and commenced marketing of the SAFETRACE(TM) software product (Wyndgate's
blood bank management information system
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software), which it believes to be the most comprehensive and flexible
system of its type available today. In accordance with FDA regulations,
the Company submitted a 510(k) application to the FDA in October, 1995 for
review of its software product, which is still pending. The Company is
able to continue marketing the SAFETRACE(TM) software product during the
review process. There are no assurances that the Company will receive a
FDA clearance letter for its 510(k) application. If not, the Company will
be required to discontinue marketing and licensing the SAFETRACE(TM)
software product. See THE COMPANY - WYNDGATE TECHNOLOGIES DIVISION -
INDUSTRY OVERVIEW.
In 1989 Wyndgate developed EDEN-OA(R) to utilize new technologies in
the evolving open systems computer market. EDEN-OA(R) is a rapid
applications development tool that can be used by software developers to
produce software products that operate in accordance with industry
standards based computer environments. EDEN-OA(R) interfaces with database
management systems and operates on multiple computer and operating system
platforms. The Company plans to continue to use EDEN-OA(R) to develop
other medical software applications.
DataMed was founded in 1989 by Michael I. Ruxin, M.D. to offer the
services of a Medical Review Officer ("MRO") to the regulated segment of
the substance abuse testing market. Due to federal regulations, companies
involved in commercial transportation must comply with requirements
mandating substance abuse testing of employees in safety sensitive
positions and substance abuse awareness education for supervisors and
employees. Additionally, federal substance abuse testing requirements
applicable to commercial transportation mandate the use of an MRO to
evaluate the quality and accuracy of the testing laboratory and to
determine legal or illegal use of substances. Corporate outsourcing has
been a positive factor for DataMed as some large companies have contracted
with DataMed to outsource the management of their substance abuse testing
programs.
DataMed provides customized program management services to companies
in an attempt to increase total program quality and decrease total program
costs. DataMed provides substance abuse testing management services which
coordinate and actively manage the specimen collection process, the
laboratory testing process, the MRO review process, the random testing
process, the blind sample quality control process, the substance abuse
testing process, and the data management process including compliance
reporting and record keeping.
STRATEGY
The following are key elements of the Company's strategy; however,
there can be no assurance that the Company will be successful in its
strategy.
EXPAND SALES & MARKETING EFFORTS. Upon completion of this Offering,
the Company intends to increase its sales and marketing efforts by hiring
additional field sales and other marketing personnel during the twelve
months following this Offering. The Company has hired six sales and
marketing personnel in the last twelve months. The Company believes it can
increase its penetration of the U.S. blood bank information management
market as well as the substance abuse testing program management market
through its planned sales and marketing staff.
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DEVELOP NEW HEALTHCARE MANAGEMENT SOFTWARE PRODUCTS AND SERVICES. The
Company believes that it can develop new products and services from its
existing technology base. The Company plans to build upon its technology
base by using EDEN-OA(R) to develop new applications. In the future, the
Company intends to introduce a transfusion management information system,
to be known as the SAFETRACETX(TM) software product.
EXPAND INTERNATIONAL MARKETS. The Company is focused on expanding
international markets. The Company continues to pursue new international
customers within the transportation industries, including but not limited
to, international shipping. The Company also plans to pursue international
growth as it relates to blood banks, plasma centers and hospitals.
DEVELOP STRATEGIC RELATIONSHIPS. The Company intends to pursue
strategic relationships in order to further develop uses for its
technology. Additionally, the Company may work with other healthcare
information providers to develop applications based on EDEN-OA(R).
MAINTAIN TECHNOLOGY ADVANTAGE. The Company believes that the
foundation of its SAFETRACE(TM) software product, EDEN-OA(R), is an
important technological advancement, and that the maintenance of this
technological advancement is essential in order for the Company to compete
effectively. The Company will continue to focus research and development
on evolving this software development tool. The funds generated by this
Offering may not be sufficient to enable the Company to accomplish its
goal, and additional financing may be required.
SALES AND MARKETING
The Company intends to continue to sell and market its medical
information management products and services through a direct sales force.
Each sales representative will have a geographic area and will market all
products and services. Additionally, the Company will continue to respond
to requests for proposals ("RFPs") issued by blood banks, plasma centers,
hospitals and other entities which are usually Fortune 1000 companies. The
Company is pursuing opportunities within the blood bank industry and will
continue to focus on Fortune 1000 companies to market DataMed's services.
CUSTOMERS
The Company's current customer base includes Fortune 1000 companies
that are required by the U.S. Department of Transportation or their own
company policy to have a substance abuse testing program and small to large
community blood banks.
During the nine months ended September 30, 1996, two of the Company's
customers, Laidlaw Transit, Inc. and Gulf Coast Regional Blood Center,
accounted for approximately 13% and 13.5%, respectively, of the Company's
revenues. During 1995, three of the Company's customers, Laidlaw Transit,
Inc., Chevron Corporation and the Royalty Group, accounted for
approximately 18%, 12% and 10%, respectively, of the Company's revenues.
See WYNDGATE
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TECHNOLOGIES DIVISION - DEVELOPMENT AGREEMENTS. During 1994, two of the
Company's customers, Chevron Corporation and the Royalty Group, accounted
for approximately 19% and 18%, respectively, of the Company's revenues.
Laidlaw Transit, Inc. is associated with the transportation industry.
Chevron Corporation is associated with the oil and gas industry. The
Royalty Group, through a 1992 development agreement with Wyndgate, assisted
in the financing of the development of Wyndgate's SAFETRACE(TM) software
product. Gulf Coast Regional Blood Center is a blood bank located in
Texas. Non-renewal or termination of the contractual arrangements with
these key 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 were not retained, that the Company will be
able to attract and retain new customers to replace the revenues currently
generated by these customers. See THE COMPANY - SALES AND MARKETING.
The Company currently has 22 (including the Royalty Group) blood banks
as customers for its SAFETRACE(TM) software product and intends to continue
to target domestic and international blood banks, plasma centers and
hospitals. DataMed has a number of customers for its substance abuse
testing services, including certain Fortune 1000 and other transportation
companies.
RESEARCH AND DEVELOPMENT
During the fiscal years ended December 31, 1995 and 1994, and during
the first nine months of 1996, the Company expended $654,500, $403,714 and
$547,387, respectively, for research and development.
EMPLOYEES
As of September 30, 1996, the Company had 145 full-time employees,
consisting of 12 employees for the Company, 59 at Wyndgate and 74 at
DataMed. Of the 145 full-time employees, 49 employees were in research and
development, nine employees were in sales and marketing, 13 employees were
in administration, and 74 employees were in program management and
implementation. The Company has employment agreements with certain
personnel. See MANAGEMENT. The Company's employees are not represented by
a labor union or subject to collective bargaining agreements. The Company
has never experienced a work stoppage and believes that its employee
relations are satisfactory.
PROPERTIES
The Company currently occupies two primary locations. The Company
occupies approximately 17,000 square feet of office space in Lakewood,
Colorado pursuant to a lease that expires on December 31, 2000. The
Company also leases approximately 8,800 square feet of office space in
Sacramento, California pursuant to a lease that expires on August 31, 1998.
The Company also has employees located in Virginia, Illinois, Pennsylvania
and Texas. No office lease is required at those locations because the
employees work out of their homes. During the nine months ended September
30, 1996, office lease expenses per month were approximately $25,000.
Additional leased space will be required to accommodate the planned
personnel increases.
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WYNDGATE TECHNOLOGIES DIVISION
Wyndgate designs, develops, markets, licenses and supports software
for the healthcare industry. Pursuant to an agreement with eight
California blood centers, Wyndgate developed a blood tracking system called
the SAFETRACE(TM) software product to assist community blood centers,
plasma centers, hospitals and outpatient clinics in the U.S. in complying
with the quality and safety standards of the FDA for the collection and
management of blood and blood products. Wyndgate incorporates and
integrates products and services for the management of the blood supply and
its derived products from donor recruitment to shipment from the blood bank
to the hospital, clinic, medical research institution or other purchaser.
The SAFETRACE(TM) software product was developed using the Company's
application development tool, EDEN-OA(R). The Company intends to utilize
its proprietary EDEN-OA(R) software development tool to attempt to develop
new products for the medical information market.
In addition, Wyndgate provides training and consulting services for
installation, implementation, special programming, system design, and
maintenance for the SAFETRACE(TM) software product. The majority of
customers for the SAFETRACE(TM) software product and the Student
Information System software product ("SIS") use all or a portion of these
services. Historically, maintenance and product upgrades from Wyndgate's
SIS software product have provided an on-going revenue stream and
information concerning Wyndgate's customers' requirements and satisfaction.
Special programming services can result in customer funded development, as
was done with the SAFETRACE(TM) software product.
INDUSTRY OVERVIEW
The management of the Company believes that market driven forces to
increase quality while containing rising healthcare costs have resulted in
an increasing demand for healthcare information systems that meet the
changing needs of the marketplace. This shift has resulted in systems that
utilize new technologies to provide higher-accuracy information.
With the spread of AIDS and Hepatitis-B, stringent FDA guidelines have
been imposed on blood banks in order to ensure a safe blood supply. Some
community blood centers ("CBCs") have been cited by the FDA for
noncompliance and some have even been closed. The American Red Cross and
Blood Systems, Inc. blood centers are currently under consent decrees
requiring them to comply with FDA guidelines. The blood banking industry
has developed various in-house systems to track blood collection, testing,
processing, distribution and transfusion activities. The Company believes
that most blood center in-house developed systems are not fully integrated
and do not offer the capabilities required by the FDA in view of the fact
that the Company's current customers are switching from their in-house
systems to the Company's SAFETRACE(TM) software product. While laboratory
equipment vendors have developed automated testing and reporting procedures
directed at a segment of the community blood center process, these systems
address only the laboratory function and are not fully integrated. The
Company believes that blood centers and the laboratory equipment products
vendors are looking for a way to meet the FDA guidelines and minimize their
risk and cost.
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The FDA required all blood tracking application software vendors to
submit a 510(k) application for review by March 31, 1996. The application
process for FDA review and compliance with the new guidelines relates to
computer software products regulated as medical devices. The FDA considers
software products intended for the following to be medical devices: (i)
use in the manufacture of blood and blood components; or (ii) maintenance
of data used to evaluate the suitability of donors and the release of blood
or blood components for transfusion or further manufacturing. As medical
device manufacturers, the Company and its competitors are required to
register with the Center for Biologics Evaluation and Research ("CBER"),
list their medical devices, and submit a pre-market notification or
application for pre-market review. There is no deadline to receive a
clearance letter from the FDA and the FDA has allowed those vendors that
have submitted a 510(k) by March 31, 1996, to market and license their
product. A competitor recently received a 510(k) clearance letter from the
FDA for certain modules of its blood bank management information system
software product. The Company does not believe this will impact Wyndgate's
marketing of its SAFETRACE(TM) software product because the Company does
not believe that this competitor offers the spectrum of software modules
offered by the Company.
WYNDGATE STRATEGY
The key elements of Wyndgate's strategy to address the market include:
EXPAND SALES AND MARKETING EFFORTS TO INCREASE ITS CUSTOMER BASE
NATIONALLY AND INTERNATIONALLY. In the near-term, the Company will
aggressively pursue opportunities in the U.S. and abroad in blood tracking
and management with its SAFETRACE(TM) software product. The Company has no
reason to believe that it will not receive an FDA 510(k) clearance letter
in the future. The Company plans to continue to respond to any and all
requests by the FDA for additional information up to and including
resubmission of the 510(k) application. However, there can be no assurance
that the Company will receive an FDA 510(k) clearance letter.
DEVELOP NEW HEALTHCARE MANAGEMENT SOFTWARE PRODUCTS AND SERVICES. By
using its background in healthcare information systems, the Company will
continue to attempt to develop new applications based upon its EDEN-OA
architecture. In the future, the Company intends to introduce a
transfusion management information system (the SAFETRACETX(TM) software
product). However, there can be no assurance that such introduction to the
market will occur.
STRATEGIC RELATIONSHIPS AND SELECTIVE ACQUISITIONS. Wyndgate intends
to continue to pursue strategic relationships to further develop uses for
its technology.
SOFTWARE PRODUCTS
The SAFETRACE(TM) software product is a set of integrated software
modules that are used to manage and control multiple aspects of blood and
plasma operations, from recruiting of donors and collecting donated blood
or plasma, to testing and manufacturing of blood products, distribution and
billing. The Company currently markets its SAFETRACE(TM) software product
to blood banks and plasma centers and eventually will market it to
hospitals and transfusion centers. A customer can license one or more
modules as needed to automate its operations.
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SAFETRACE(TM) Modules Function
- --------------------- --------
DONOR RECRUITMENT Used by the marketing department of a blood
or plasma center to systematically solicit,
recruit and schedule donors. Facilitates
the recruiting process by producing call
lists on demand or scheduling calls by batch
processing.
DONOR MANAGEMENT Provides a means for registering donors and
recording necessary medical and personal
donor data. All real-time donor deferral
and eligibility information is used to
determine current eligibility status of the
donor to be registered.
LABORATORY MANAGEMENT Performs a number of data recording and
evaluation functions. Permits the posting
of tests either by interfacing directly with
testing equipment or manually. Also
performs inventory label validation, which
helps to ensure that all blood components
are suitable for distribution and have been
properly tested, validated and labeled.
BLOOD INVENTORY
AND DISTRIBUTION Maintains current inventories of all
available blood products which have been
tested and labeled. Records the movement of
blood products from the blood or plasma
center to the customer and between
customers. Also maintains records for
imported blood related products.
SPECIAL PROCEDURES Registers patients and tracks blood
requirements for surgeries. Also provides
the capabilities to define and manage
special requests for autologous, designated
and therapeutic donations.
BILLING Implements the pricing and billing practices
associated with each blood product for
customers. Also provides financial
information for management control.
The SAFETRACE(TM) software product relies on its donor identification,
laboratory component, labeling and release site-based logic technology to
assist blood banks in complying with FDA regulations. The SAFETRACE(TM)
software product has an 85% table driven structure which permits it to
easily adapt to each customer's individual and unique operations. The
SAFETRACE(TM) software product has been developed using industry standards,
common operating systems and database managers to ensure portability.
Because of the independence of the SAFETRACE(TM) software product's
database, operating systems and hardware, customers have freedom and
flexibility in selecting computer hardware and software components. The
SAFETRACE(TM) software product permits customers to preserve their
application software and training investment as customer systems needs and
technology change. Currently, management estimates the SAFETRACE(TM)
software product consists of more than 1.5 million lines of code, 390 data
tables, 59 labeling occurrences of component and release logic, 3,000
discrete programs and over 1,000 screens and windows.
SERVICES
Wyndgate believes that the high quality of the services component of
the business is the key to retaining current customers, enhancing
Wyndgate's reputation for quality and improving market penetration.
Wyndgate's services begin with initial customer contact and continue
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throughout the relationship. Services include complete installation and
implementation, training, consulting and maintenance. The license
agreements currently being used by Wyndgate typically commit a customer to
five years of maintenance service. The fees associated with the
maintenance service are typically invoiced monthly, quarterly or annually
in advance. The Company believes that service fees, excluding maintenance,
range from 10% to 50% of the initial software license fee. Under the
Company's current license agreements, only the software license fee and the
maintenance fee are required to be paid and the other fees are optional.
However, many customers that have licensed the SAFETRACE(TM) software
product to date have contracted for additional services.
INSTALLATION AND IMPLEMENTATION SERVICES. Installation and
implementation services assist the customers with the selection of
hardware and software systems and, if necessary, the initial installation
of the software on the customer's system. Implementation services include
assisting customers in analyzing work flow and standard operating
procedures ("SOPs"), developing tables, screen layouts, reports, and
installation specific requirements. Management estimates that it takes
from six to twelve months to implement the SAFETRACE(TM) software product
and a portion of Wyndgate's resources are used during that time.
Installation and implementation services are not considered part of the
SAFETRACE(TM) software product license fee or usage fee, and are typically
billed separately.
TRAINING SERVICES. Training services are provided to customers either
at the customer site or at Wyndgate's offices. Training includes hands-on
access to the applications software and usually includes building initial
tables and screens. All customers to date have purchased initial training
services which range from five to fifteen days depending on the customer
size and number of people to be trained. Wyndgate also offers follow-up
training services to assist customers in training new staff on new product
functions.
MAINTENANCE SERVICES. Fees for maintenance services are required to
be paid under certain of the relevant SAFETRACE(TM) software product
license agreements for the term of the license. Maintenance services are
optional under the other license agreements. Maintenance services include
"bug" fixing, enhancements and product upgrades. Wyndgate provides an 800-Help
Line number for customer service calls that permits access to
Wyndgate's technical resources directly during the working day and on a
paged call-back basis at all other times.
CONSULTING SERVICES. Consulting services are provided to customers
who want special features, assistance with system configurations, database
consulting, systems management, networking or additional capabilities
beyond those included in the applications software. Wyndgate also performs
special applications development projects under certain development
agreements. The Company has been contracted to provide consulting services
by some of its SAFETRACE(TM) software product customers.
PRODUCT DEVELOPMENT
SAFETRACETX(TM) - TRANSFUSION MANAGEMENT INFORMATION SYSTEM.
Wyndgate has begun the development of the SAFETRACETX(TM) software product,
a transfusion management information
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system that can be utilized by hospitals to help them ensure the safety of
the blood transfused into patients. If completely developed, it will
provide electronic cross-matching capabilities to help ensure blood
compatibility with the recipients and will track, inventory, bill and
document all activities with the blood product from the time it is received
in inventory to the time the blood product is used or sent back to the
blood center. The SAFETRACETX(TM) software product will complement the
SAFETRACE(TM) software product as it will integrate hospitals with blood
centers that supply blood products. The Company anticipates that the
SAFETRACETX(TM) software product will be released in 1997; however, there
can be no assurance that the software will be released as scheduled, if at
all.
EDEN-OA(R) DEVELOPMENT TOOL. EDEN-OA(R) is a software tool set and
methodology that the management of the Company believes enables programmers
to easily build and maintain information management systems. It runs on
different hardware, operating system and database management system
products. The EDEN-OA(R) tool set allows the programmer to focus on the
business logic and rules (how data relates and the formulas for
calculations) and on the presentation (viewing and printing) of the
information to the user. Management believes that EDEN-OA(R) (i) reduces
application product development time and cost; (ii) reduces application
software project risk; (iii) focuses the software developer on the user's
concerns, not on the hardware, operating system or database management
system; and (iv) reduces the time and cost for modifying and maintaining a
software application. EDEN-OA(R) is the basis for the SAFETRACE(TM)
software product, and it is planned that EDEN-OA(R) will be the basis for
future products from Wyndgate.
The Company believes that a major advantage of EDEN-OA(R) is that it
allows local user modifications to the application. Additionally, it
coordinates and tracks user modifications with upgrades, "bug" fixes or
enhancements made by Wyndgate, a feature that assisted Wyndgate in
documenting the SAFETRACE(TM) software product for FDA 510(k) review. The
entire maintenance process is integrated into the application, thereby
eliminating the common problem of user changes not integrating with vendor
supplied code, which often prevents upgrading applications because of the
high cost and risk. This maintenance feature permits the customers to make
changes dictated by business requirements as opposed to the ability of the
application to accommodate such changes. For example, adding a data
element such as a suffix for a zip code, adding a new table to track
service information or adding new FDA mandated blood tests would be a very
difficult and time consuming task with most applications.
EDEN-OA(R) includes an On-Line User-System Repository Manager which
consists of the following: an Active Data Dictionary; a Database
Maintenance Manager for automatic generation of database structure and I/O
procedures; a Panel (Screen) System Manager providing a Screen Definition
Language and GUI; use of a Procedural Language; and Interactive Utility
Programs and Procedures including a software maintenance system manager and
a systems development procedures manager. This combination of capabilities
makes EDEN-OA(T) portable and easy to tailor and maintain.
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EDEN-OA(R) facilitates application maintenance through the integrated
Active Data Dictionary, common applications functions and development and
maintenance tools. Each client organization has specific needs for
tailoring functions, screens, reports and processes. By making changes to
the Active Data Dictionary, the user invokes the Applications Manager tools
which generate the code. A single Active Data Dictionary entry modifies
all application modules, screens and reports impacted by that change.
Since the Active Data Dictionary separates the application from front-end
(screen generators) and the back-end (database manager and hardware
systems), development and on-going maintenance costs are often reduced.
Traditionally, on-going maintenance has been the most costly part of any
applications development and implementation. EDEN-OA(R) is modular and can
be used to replace or extend existing application systems and provides end-user
flexibility.
EDEN-OA(R) will continue to be developed and refined. It is currently
planned that EDEN-OA(R) will be the foundation to any new medical
applications developed by Wyndgate in the future.
DEVELOPMENT AGREEMENTS
Pursuant to the development agreement between Wyndgate and the Royalty
Group, pursuant to which Wyndgate developed the SAFETRACE(TM) software
product, Wyndgate must make royalty payments to the Royalty Group based on
a percentage of Wyndgate's SAFETRACE(TM) software product license sales,
measured by invoice amounts to purchasers of the software, net of certain
fees and charges. The time period under the royalty schedule is based upon
the first date of customer invoicing, which was September 14, 1995. The
Wyndgate royalty payment schedule is as follows:
Date Royalty Percentage
---- ------------------
September 1995 to September 1997 12%
September 1997 to September 1998 9%
September 1998 to September 1999 6%
After September 1999 3%
Pursuant to a Development Agreement ("Agreement") between the Company
and The Institute for Transfusion Medicine ("ITxM"), the Company has agreed
to develop Commercial Centralized Transfusion System Software ("Commercial
CTS Software"), which it is planned will become Wyndgate's SAFETRACETX(TM)
software product. This Agreement requires that the Commercial CTS Software
be completed by December 16, 1997. If not timely completed, the Company
would be subject to monetary penalties. The Agreement provides for a
royalty payment to ITxM for revenues received from the sale of the
Commercial CTS Software, net of certain fees and charges. The royalty
period starts with the first commercial transfer for value of the
Commercial CTS Software. The royalty that would be paid is as follows:
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Percentage of Percentage of
License Fee License Fee
if ItxM if Company
Initiates Sale Initiates Sale
-------------- --------------
1 Year 10% 5%
2 Year 10% 5%
3 Year 6% 3%
4 Year 6% 3%
5 Year 4% 2%
6 Year 4% 2%
7 Year 4% 2%
8 Year 4% 2%
9 Year 4% 2%
Thereafter 2% 1%
CUSTOMERS
Wyndgate currently has SAFETRACE(TM) software product contracts with
the following blood centers:
* Belle Bonfils Memorial Blood Center, Denver, CO
* Blood Bank of Alameda-Contra Costa Medical Association, Oakland, CA
* Blood Bank of San Bernardino and Riverside Counties, San Bernardino,
CA
* Blood Bank of the Redwoods, Santa Rosa, CA
* Coffee Memorial Blood Center, Albuquerque, NM
* Community Blood Bank of Erie County, Erie, PA
* Community Blood Bank of Lancaster County Medical Society, Lincoln, NE
* Community Blood Center of Appleton, Appleton, WI
* Gulf Coast Regional Blood Center, Houston, TX
* Institute For Transfusion Medicine, Pittsburgh, PA
* Irwin Memorial Blood Center, San Francisco, CA
* Peninsula Blood Bank, Inc., Burlingame, CA
* Sacramento Medical Foundation Blood Center, Sacramento, CA
* Samuel W. Miller Memorial Blood Center, Bethlehem, PA
* San Diego Blood Bank, San Diego, CA
* Siouxland Community Blood Bank, Sioux City, IA
* Stanford Medical School Blood Center, Palo Alto, CA
* The Blood Center of Central Iowa, Des Moines, IA
* The Blood Center for Southeast Louisiana, New Orleans, LA
* Tri-Counties Blood Bank, Santa Barbara, CA
* The Memorial Blood Centers of Minnesota, Inc., Minneapolis, MN
* Oklahoma Blood Institute, Oklahoma City, OK
See SERVICES, above, for a description of a typical license agreement.
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Management of the Company estimates that SAFETRACE(TM) software
product implementations take approximately six to twelve months depending
on the blood center's size and complexity of the blood center's standard
operations procedures ("SOPs"). All of the above blood centers are in
various stages of implementation, with the exception of Tri-Counties Blood
Bank in which the SAFETRACE(TM) software product is fully operational.
The potential customers for Wyndgate's products include community
blood centers ("CBC"), hospitals, out-patient centers and stand alone
transfusion sites. CBCs are able to utilize the SAFETRACE(TM) software
product to manage their business and comply with FDA regulations to help
ensure the safety of the blood supply. The SAFETRACE(TM) software
product allows the CBCs to enter the FDA guidelines, consistent with the
CBC's SOPs, into SAFETRACE(TM) software product tables which then provide
system control over the manufacture and processing of blood and blood
products. In the future, the Company plans to introduce a transfusion
management information system (which it is planned will be the
SAFETRACETX(TM) software product). All acute care hospitals and alternate
transfusion sites will be potential customers for the SAFETRACETX(TM)
software product.
In the transfusion market the potential customer base is easily
identified but presents a challenge in reaching the volume of clients for
product demonstrations. Customers will require a product demonstration
before making a commitment to purchase. In addition, the transfusion
product being developed will face severe competition from established
vendors in this market. Wyndgate believes that by penetrating blood
centers with the SAFETRACE(TM) software product, hospitals that receive
blood from these centers may want to link their existing transfusion
product to the blood center. There can be no assurance that hospitals will
desire to establish this link using Wyndgate's SAFETRACETX(TM) software
product.
AGREEMENTS WITH ORTHO DIAGNOSTIC SYSTEMS INC.
On November 14, 1996, the Company entered into an Exclusivity and
Software Development Agreement (the "Exclusivity Agreement") with Ortho
Diagnostic Systems Inc. ("ODSI"), a wholly-owned subsidiary of Johnson &
Johnson. The Exclusivity Agreement provides that until May 14, 1997 (the
"Exclusivity Period"), ODSI has 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 will not, directly or through any intermediary, accept,
encourage, solicit, entertain or otherwise discuss any acquisition of any
of the Company's Common Stock (other than in this Offering), business,
property or know-how, including the Technology, with any person or entity
other than ODSI or an affiliate thereof and will not otherwise encumber the
ability of ODSI or an affiliate thereof to enter into any arrangement with
the Company concerning the Technology. The Exclusivity Period is subject
to extension at the Company's option for up to 60 days in the event
approval of the transaction by the Company's shareholders is required to be
obtained.
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The Company also agreed to perform certain software development
services in consideration of the payment by ODSI of $500,000 on November
14, 1996, and $500,000 received in January, 1997. If the Company and ODSI
enter into a definitive agreement relating to the Technology, the Company's
other assets or Common Stock, then ODSI may elect to decline the software
development services and apply the payment to the Company towards any
consideration payable to the Company in connection with the definitive
agreement. If the parties are unable to come to terms with respect to a
definitive agreement, then the Company will provide the software
development services selected by ODSI and the parties will negotiate a
definitive software development agreement. If ODSI has not elected to
decline the Company's services and the Company fails to provide the
software development services, unless ODSI has breached its obligations
under the definitive agreement and is then in breach, the Company shall
have been deemed to have granted ODSI a non-exclusive license (with the
right to sub-license) to the Technology with a royalty rate not to exceed
4% of net sales, and the parties agreed they would negotiate a definitive
license agreement.
Pursuant to the Exclusivity Agreement, the Company has 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 the security interest with the Company's current lender) of any
kind or nature any of the Technology (the "Sale"). Prior to consummating
any Sale of any of the Technology, the Company has agreed to present ODSI
with a copy of the written offer by or agreement with any third party (the
"Third Party Offer"). ODSI shall have a period of 30 days from receipt of
a copy of the Third Party Offer to notify the Company of its intention to
enter into a similar transaction with the Company upon substantially the
same terms and conditions specified therein. If the purchase price
specified in the Third Party Offer is payable in property other than cash,
ODSI has the right to pay the purchase price in the form of cash equal in
amount to the value of such property. If ODSI chooses not to exercise its
right of first refusal, the Company has 60 days thereafter in which to sell
or otherwise dispose of the Technology upon terms and conditions (including
the purchase price) no less favorable to the Company than those specified
in the Third Party Offer. In the event the Company does not sell or
otherwise dispose of the Technology during such 60-day period, ODSI has a
right of first refusal with respect to any subsequent sale of the
Technology by the Company during the six-month period of the right of
first refusal.
The Company has agreed in the Exclusivity Agreement that in the event
(a) the Company breaches any covenant, agreement, representation or
warranty contained in the Exclusivity Agreement and the Company shall have
had contracts or entered into negotiations relating to a Business
Combination (as hereafter defined) at any time during the Exclusivity
Period, as such may be extended, and with respect to any person, entity or
group with whom such contacts or negotiations have occurred, a Business
Combination shall have occurred or the Company shall have entered into a
definitive agreement providing for a Business Combination; or (b) any
definitive agreement entered into between the Company and ODSI fails to
receive the requisite affirmative vote of the shareholders of the Company
at a shareholders' meeting called for the purpose of voting on such
agreement and at the time of such meeting there exists a Competing
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Transaction (as hereafter defined); or (c) (i) the Board of Directors of
the Company shall withdraw, modify or change its recommendation of the
Exclusivity Agreement or any subsequent agreement in a manner adverse to
ODSI, or shall have resolved to do any of the foregoing; (ii) if the Board
of Directors of the Company shall have recommended to the shareholders of
the Company a Competing Transaction; (iii) a tender offer or exchange offer
for 20% or more of the outstanding shares of Common Stock of the Company is
commenced and the Company's Board of Directors recommends that the
shareholders of the Company tender their shares in such tender or exchange
offer; or (iv) any person shall have acquired beneficial ownership or the
right to acquire beneficial ownership of or any "group" (as such term is
defined under Section 13(d) of the Securities Exchange Act of 1934, and the
rules and regulations promulgated thereunder) shall have been formed which
beneficially owns, or has the right to acquire "beneficial ownership" of
more than 20% of the then outstanding shares of the Company's Common Stock,
then the Company shall pay ODSI an amount equal to $2,000,000 plus ODSI's
expenses. For purposes of the Exclusivity Agreement, the term "Business
Combination" means (i) a merger, consolidation, share exchange, business
combination or similar transaction involving the Company; (ii) a sale,
lease, exchange, transfer or disposition of 20% or more of the assets of
the Company and its subsidiaries, if any, taken as a whole, in a single
transaction or series of transactions, including, without limitation, any
sale that would trigger ODSI's right of first refusal described in the
immediately preceding paragraph; or (iii) the acquisition by a person or
entity, or any "group" (as such term is defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) of "beneficial
ownership" of 20% or more of the Company's Common Stock whether by tender
offer or exchange offer or otherwise. A "Competing Transaction" means any
of the following involving the Company or any or its subsidiaries (either
existing or hereafter created): (i) any merger, consolidation, share
exchange, business combination, or other similar transaction; (ii) any
sale, lease, exchange, mortgage, pledge, transfer, license (except for a
non-exclusive license in the ordinary course of the Company's business) or
other disposition of 20% or more of the assets, taken as a whole, in a
single transaction or series of transactions, or any of the Technology;
(iii) any tender offer or exchange offer for 20% or more of the outstanding
shares of Common Stock of the Company or the filing of a registration
statement under the Securities Act of 1933 in connection therewith; (iv)
any person having acquired beneficial ownership or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under
Section 13(d) of the Securities Exchange Act of 1934 and the rules and
regulations promulgated thereunder) having been formed which beneficially
owns or has the right to acquire beneficial ownership of, 20% or more of
the then outstanding shares of the Common Stock of the Company; or (v) any
public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
Concurrently with executing the Exclusivity Agreement, ODSI and
Michael I. Ruxin, William J. Collard, Gerald F. Willman, Jr., Lori J.
Willman, Timothy J. Pellegrini and Gordon Segal (collectively, the
"Shareholders") entered into a Proxy and Right of First Refusal Agreement
(the "Shareholders Agreement"), dated November 14, 1996, pursuant to which
each of the Shareholders has granted an irrevocable proxy to ODSI to vote
their shares of the Company's Common Stock (i) in favor of a proposal to
approve any definitive agreement between the Company and ODSI relating to
the Technology, or (ii) on any other proposal relating to the sale of any
of the stock of the Company or all or substantially all of the assets of
the Company or any
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of the Technology, unless prior to the date of the shareholders' meeting,
the definitive agreement has been terminated for any reason other than the
occurrence of any event that would trigger the payment of the termination
fees pursuant to the Exclusivity Agreement or any similar provision in the
definitive agreement, or ODSI has materially breached any of its material
obligations under the definitive agreement, in any of which events the
proxy would terminate upon the termination of the definitive agreement.
Unless earlier terminated, the proxy granted by each of the Shareholders
expires November 14, 1997. Each of the Shareholders also agreed that until
November 14, 1997, such Shareholder will not transfer, dispose of, or
otherwise sell to any third party or grant to any third party an option or
other right to buy any shares of the Company's Common Stock held by the
Shareholder without having first offered ODSI the right to enter into a
similar transaction with the Shareholder on the same terms as proposed;
provided, that each Shareholder has the right to donate up to 6% of such
Shareholder's stock ownership to a non-profit institution without invoking
ODSI's right of first refusal. ODSI has 30 days to exercise its right of
first refusal after being notified of the proposed third party transaction.
In the event ODSI declines to enter into such transaction, then the
Shareholder has 90 days after the end of the 30 day acceptance period to
consummate the proposed transaction on the terms and conditions as
proposed. In the event the transaction is not consummated within 90 days,
then ODSI has the right of first refusal with respect to any future
proposed transactions by Shareholders to a third party. ODSI's right of
first refusal is not assignable except to an affiliate of ODSI.
COMPETITION
Currently, Wyndgate is aware of five primary competitors in the blood
bank industry segment including MAK from France, Blood Trac Systems, Inc.
from Canada, Information Data Management ("IDM"), Blood Bank Computer
Systems and Systec from the United States. Some of these competitors are
larger and have greater resources than the Company. The Company believes
it is able to compete on the basis of the capabilities of the technology in
its SAFETRACE(TM) software product; however, the Company can provide no
assurances in this regard.
DATAMED INTERNATIONAL DIVISION
Founded in 1989, DataMed manages and markets a variety of services
that are designed to assist companies with administering substance abuse
testing programs. Due to federal regulations, employers involved in
commercial transportation must comply with requirements mandating substance
abuse testing of employees in safety sensitive positions and substance
abuse awareness education for supervisors and employees. Additionally,
federal substance abuse testing requirements mandate the use of a Medical
Review Officer ("MRO") to evaluate the quality and accuracy of a testing
laboratory and determine legal versus illegal use of controlled substances.
DataMed provides customized substance abuse testing management services to
companies. DataMed coordinates and actively manages the specimen
collection process, the laboratory testing process, the MRO review process,
the process of random testing, the blind sample quality control process,
the substance abuse testing process and the data management process,
including compliance reporting and record storage. DataMed arranges for
specimens to be tested by a qualified laboratory and appropriately monitors
the performance of: testing laboratory(ies); urine collection providers;
the MRO; and the overall quality of information
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that is received, stored and reported. DataMed currently provides
substance abuse testing management services to a number of clients
worldwide.
INDUSTRY OVERVIEW
In the Company's experience, most substance abuse testing programs for
Fortune 1000 companies are internally managed. Companies contract with
laboratory and collection sites and utilize internal resources to manage
the process. However, the Company believes that some companies appear to
be shifting to outsourced substance abuse program management in an attempt
to reduce overall costs as well as to increase overall quality.
The current market for the substance abuse testing industry consists
of the regulated markets and the unregulated markets. The regulated
markets include all employees that fall under federal regulations for
commercial transportation, with the largest concentration in the motor
carrier industry. Additionally, regulated employees are subject to random
substance abuse testing, post-accident testing and "reasonable suspicion"
testing. The unregulated market primarily consists of companies testing
new employees.
Currently, the urine specimen substance abuse testing industry has
several large nationally known laboratories, such as Corning Clinical
Laboratories, Lab Corp. and SmithKline-Beecham, offering drug testing lab
analysis.
The U.S. Department of Transportation ("DOT") has ruled that
activities involving the management of MRO services or activities that give
the appearance of any type of financial arrangement between an MRO and a
laboratory are prohibited from being conducted by the laboratory. The net
effect of this ruling is to limit the laboratory's ability to provide drug
testing management services. Therefore, with respect to testing performed
under DOT regulations (which is the standard by which all substance abuse
testing programs are measured), the laboratory cannot provide full service
substance abuse testing program management and meet DOT requirements.
Companies that manage their own substance abuse testing programs are
required to remain abreast of changing DOT regulations and their
implications as well as maintain significant amounts of data that must be
processed, audited and stored. A significant amount of work is required in
administering substance abuse testing programs, and these programs are
complex to manage. The Company believes that these factors have created a
market opportunity for third- party administrators or program management
companies since it appears some companies are moving to outsource substance
abuse testing program management.
STRATEGY
The key elements of DataMed's strategy to address the market
opportunity include:
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EXPAND SALES AND MARKETING EFFORTS TO INCREASE ITS CUSTOMER BASE
NATIONALLY AND INTERNATIONALLY. The Company will continue to market
complete program management services principally to Fortune 1000 companies.
The Company's complete program management services (ProScreen Plus(TM))
typically provide higher profit margins for the Company. For the year
ended December 31, 1995, the Company's complete program management services
accounted for 48% of DataMed's revenues. For the nine months ended
September 30, 1996, DataMed's complete program management services
accounted for approximately 70% of DataMed's revenues.
EXPAND INTERNATIONAL MARKETS WITHIN THE TRANSPORTATION AND HEALTHCARE
INDUSTRIES. The Company has customers in international markets outside the
U.S. Many international customers have some local requirements for
substance abuse testing, primarily in the shipping industry. The Company
has dedicated personnel to continue to pursue these opportunities.
DEVELOP NEW HEALTHCARE MANAGEMENT SOFTWARE PRODUCTS AND SERVICES.
With federal regulations mandating substance abuse testing, the Company
will continue to provide additional products and services for complete
substance abuse testing management.
MAINTAIN ITS TECHNOLOGICAL ADVANTAGE IN DEVELOPING REGULATORY
COMPLIANCE TRACKING SOFTWARE AND QUALITY ASSURANCE SOFTWARE PRODUCTS. Since
the substance abuse testing management process is labor intensive due to
the amount of data that must be processed and audited, DataMed intends to
use Wyndgate's technology to attempt to develop an advanced system to
reduce the costs and increase the quality of its services. There can be no
assurance that the Company will be successful in developing an automated
test tracking system or that it will operate effectively.
SERVICES
DataMed's service allows a company that no longer wants to micro-manage
its substance abuse program to outsource the administration of its
entire substance abuse program. DataMed's goal is to help a company
increase total program quality and decrease total program costs. DataMed
can coordinate or actively manage the specimen collection process, the
laboratory testing process, the medical review process, random testing
process, the blind sample quality control process, the substance abuse
testing process and the data management process, including compliance
reporting and record storage. DataMed's services can be purchased
independently or as a management package. DataMed has two basic levels of
management services: ProScreen(TM) and ProScreen Plus(TM).
ProScreen(TM) is DataMed's program coordination service and is
designed to attract the medium to large customer operating in either a
regulated or unregulated environment. ProScreen(TM) is a solution for
clients that realize their programs are large enough to have become
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a burden, but small enough not to warrant a full time employee. DataMed,
through its ProScreen(TM) service, offers companies a limited range of
"pro-active" management services designed to ease the burden of an
internally managed program. ProScreen(TM) can also be an entry point for
a client that wants to eventually move to a ProScreen Plus(TM) level of
service.
ProScreen Plus(TM) is a customized service designed to attract Fortune
1000 clients who have decided to outsource the management of their entire
program. Through its ProScreen Plus(TM) product, DataMed focuses its
efforts on helping the large organization concentrate on its core business,
increase program quality and reduce total program costs. ProScreen
Plus(TM), in its truest form, allows DataMed to function as a company's
substance abuse department.
CUSTOMERS
A customer may have programs that are federally regulated, unregulated
or both. Fortune 1000 customers tend to have both regulated and
unregulated programs. The Federal Highway Administration oversees the
largest percentage of regulated testing. Companies regulated by the
Federal Aviation, Transit and Railroad Administrations (and other federal
organizations) are also subject to federally mandated programs.
Unregulated testing accounts for the largest market segment and is driven
by company policy, state and local laws.
International companies are also potential customers. DataMed
currently provides substance abuse testing management services to
approximately 40 companies internationally. However, the management of the
Company believes that the international market is expected to grow at a
slower rate due to lack of governmental regulations. Department of
Transportation regulations adopted after the passage of The North American
Free Trade Agreement require Mexican and Canadian transportation companies
using U.S. road systems in cross-border trade to comply with U.S.
Department of Transportation regulations, including substance abuse
testing.
DataMed believes it is ahead of its competition when it comes to
offering international substance abuse testing management services because
the Company has taken many years to develop an overseas collection site
network and has developed procedures to timely usher specimens through
customs for analysis.
COMPETITION
When examining competitors it is important to distinguish between
program coordination and program management. There are hundreds of
companies capable of providing program coordination services. Some of these
direct competitors are: Substance Abuse Management, Inc. ("SAMI"); Concord,
Inc.; National Safety Alliance ("NSA"); Drug Intervention Services of
America ("DISA"); First Lab; and University Services. If any of these
companies change their marketing and operational approach, they could
quickly become more of a presence in the program management marketplace.
The Company believes that DataMed's primary competitive advantage is
quality and name recognition. DataMed has established policies and
procedures in an attempt to achieve total quality management and continuous
quality improvement goals.
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The Company believes that corporate outsourcing trends and regulatory
burdens (e.g., substance abuse testing) will continue to increase and
DataMed will attempt to capitalize on these trends. Program management
companies are increasing in number. The Company believes that SAMI, DISA,
NSA, University Services, FirstLab and Concord, Inc. are the largest
competitors present in the marketplace.
LEGAL PROCEEDINGS
The Company currently is not involved in any legal proceedings.
MANAGEMENT
The following table sets forth the names and positions of the
director, executive officers and key employees of the Company:
Ofifcer
Name Age Positionor Director Since
- ---- --- -------------------- -----
Michael I. Ruxin, M.D. 51 Chairman of the Board 1989
and CEO
Joseph F. Dudziak 59 President and COO 1995
William J. Collard 55 Secretary/Treasurer, 1995
Director and Wyndgate
President
Gerald F. Willman, Jr. 39 Director and Wyndgate 1995
Vice-President
Gregory R. Huls 45 Chief Financial Officer 1996
and General Counsel
John D. Gleason 37 Director 1994
The directors of the Company are elected to hold office until the next
annual meeting of shareholders and until their respective successors have
been elected and qualified. Officers of the Company are elected annually
by the Board of Directors and hold office until their successors are
elected and qualified.
The following sets forth biographical information concerning the
Company's directors and executive officers for at least the past five
years. All of the following persons who are executive officers of the
Company are full time employees of the Company.
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MICHAEL I. RUXIN, M.D., the founder of the Company, has been an
officer and director of the Company since its incorporation in 1989 and is
currently the Chairman and Chief Executive Officer of the Company. From
1982 to 1994, Dr. Ruxin was a director of GeriMed of America, Inc., a
private company administering senior health care centers. From 1985 to
1993, Dr. Ruxin was an officer and director of CBL Medical, Inc. ("CBL"),
a public company which managed multiple medical groups, including Medcomp
Medical Group which was a group of small clinics owned by Dr. Ruxin. CBL
focused on providing second opinions on workers compensation claims. Dr.
Ruxin left CBL management in 1988 to found the Company although he remained
on the board of CBL due to his continued ownership of clinics until 1993.
Five years after Dr. Ruxin left CBL management, in 1993, CBL filed a
Petition under Chapter 7 of the Federal Bankruptcy Code to liquidate due to
a change in the workers compensation regulations in the State of
California. Dr. Ruxin received a B.A. degree from the University of
Pittsburgh and an M.D. degree from the University of Southern California.
Dr. Ruxin is a licensed physician in California and Colorado. He is a
member of the American Association of Medical Review Officers.
JOSEPH F. DUDZIAK has been President and Chief Operating Officer of
the Company since June 1995. From January 1993 to June 1995, he was
employed as a "site executive" with Analysts International Corporation, a
contract consulting firm engaged primarily in development and support of
software. From August 1991 to December 1992, he was a self-employed
executive consultant, during which time he provided consulting services
primarily to The Wyndgate Group, Ltd. in the areas of product development
and marketing and the development of a business plan. For the 30 years
prior to August 1991, Mr. Dudziak was employed in various capacities (most
recently as a group Vice President) by Control Data Corporation ("CDC"),
which was involved in the computer systems, software and information
management businesses.
WILLIAM J. COLLARD has been a director and the Secretary/Treasurer of
the Company and the President of the Wyndgate division since May 1995.
From 1984 to May 1995 he was president and a director of The Wyndgate
Group, Ltd., and responsible for directing the sales, operations and
research and development efforts of The Wyndgate Group, Ltd. From 1976 to
1984, Mr. Collard was the executive director of Sigma Systems, Inc., a
company that provides colleges and other institutions with administrative
computer applications. Mr. Collard received a B.S. degree in Business
Administration (Finance) and an M.S. degree in Business Administration
(Quantitative Methods) from California State University.
GERALD F. WILLMAN, JR. has been a director of the Company and the Vice
President of the Wyndgate division since May 1995. Mr. Willman was
director and then a Vice President of The Wyndgate Group, Ltd., from 1984
to 1995 and was responsible for the overall design and development of the
products developed by The Wyndgate Group, Ltd., including research of new
technologies. Prior to his employment at The Wyndgate Group, Ltd., he was
employed as a development team leader at Systems Research, Inc. Mr.
Willman received a B.S. degree from Hampden Sydney College and M.B.A.
degree from National University.
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GREGORY R. HULS has been the Chief Financial Officer and General
Counsel of the Company since October, 1996. From May, 1996 through
October, 1996, Mr. Huls was engaged in the private practice of law. From
1993 through 1995, Mr. Huls was a full time student at the University of
Denver, College of Law. From 1992 to 1993, Mr. Huls was Senior Vice
President and Chief Financial Officer for Comprecare Holdings, Inc., and
from 1987 to 1992, Vice President of Finance and Chief Financial Officer
for AMISUB (Comprecare), Inc. where he directed the financial, provider
contracting and information system functions of that health maintenance
organization (HMO). Mr. Huls received a B.S. degree in Business
(Accounting) from Indiana University and a J.D. degree from the University
of Denver, College of Law. He is also a certified public accountant. He
is a member of the American Institute of Certified Public Accountants, the
Colorado Society of Certified Public Accountants, and the Colorado and
American Bar Associations.
JOHN D. GLEASON has been a director of the Company since 1994. Since
November, 1990 he has been employed with MDS Inc., formerly MDS Health
Group Limited ("MDS"), a publicly held Canadian company that is engaged in
the business of medical laboratory testing, currently as Vice President of
Corporate Strategic Initiatives and previously as Chief Financial Officer
and Vice President of Finance. Mr. Gleason received an Honors degree (the
Canadian equivalent of a bachelors degree) from Queens University in
Ontario, Canada and a masters degree from the University of Toronto. Mr.
Gleason is a chartered accountant.
The Company's Audit/Systems Committee acts as the liaison between the
Company and its independent public accountants. Its members consist of Dr.
Ruxin and Mr. Gleason who were recently appointed in such capacity and have
not yet met as a committee. The Audit/Systems Committee is responsible for
reviewing and approving the scope of the annual audit undertaken by the
Company's independent accountants and will meet with the accountants to
review the progress and results of their work, as well as any
recommendations the accountants may offer. The Audit/Systems Committee
will also review the fees of the independent accountants and make
recommendations to the Board of Directors as to the appointment of the
accountants. In connection with the Company's internal accounting
controls, the Audit/Systems Committee will review the internal audit
procedures and reporting systems in place at the Company and review their
accuracy and adequacy with management and with the Company's independent
accountants.
The Company's Compensation Committee, which will recommend
compensation levels to the Board of Directors, consists of Dr. Ruxin and
Mr. Collard who were recently appointed in such capacity and have not yet
met as a committee. The Compensation Committee will review salaries,
bonuses, and other forms of compensation for officers and key employees of
the Company and its subsidiaries, and will establish salaries, benefits,
and other forms of compensation for new employees. Included in the
Compensation Committee's responsibility is the issuance of stock bonuses
and stock options under the Company's two stock option/bonus plans. In
addition, the Compensation Committee will review other matters concerning
compensation and personnel as the Board of Directors may request. The
Compensation Committee will design the Company's compensation to enable the
Company to attract, retain, and reward highly qualified executives, while
maintaining a strong and direct link between executive
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pay, the Company's financial performance, and total stockholder return.
The Compensation Committee believes that officers and certain other key
employees should have a significant stake in the Company's stock price
performance under programs which link executive compensation to stockholder
return.
SCIENTIFIC ADVISORY COMMITTEE
The Board of Directors has established a Scientific Advisory Committee
to advise and consult with the Board of Directors as may be requested by
the Board from time-to-time. Currently, the Scientific Advisory Committee
consists of William C. Dickey, M.D., Cathy Bryan and Ronald O. Gilcher,
M.D. It is not presently contemplated that the Scientific Advisory
Committee will have formal meetings as a group. The members of the
Scientific Advisory Committee will not receive any cash compensation from
the Company for serving in that capacity, but each will be reimbursed for
any expenditures incurred on behalf of the Company. In connection with
their appointment to the Scientific Advisory Committee, in January, 1996,
Dr. Dickey, Ms. Bryan and Dr. Gilcher were issued options to purchase
2,500, 1,000 and 1,000 shares, respectively, of the Company's Common Stock,
exercisable at $3.75 per share, which options vest over a five year period
and are exercisable until January, 2006.
WILLIAM C. DICKEY, M.D., Chairman of the Scientific Advisory
Committee, has been the Medical Director, Chief Executive Officer and
President of the Belle Bonfils Memorial Blood Center, Denver, Colorado
since July 1990. From 1972 to 1974, he was the Director of the Blood Bank
for Irwin Army Hospital, located in Texas, and from 1974 to 1991, he was
the Director of the Blood Bank for St. Anthony Hospital, Denver, Colorado.
He graduated from the University of Denver with a B.S. degree and received
his M.D. degree from the University of Colorado School of Medicine. He was
certified by the American Board of Pathology for Anatomic and Clinical
Pathology in 1972, and is licensed to practice medicine in Colorado and
Kansas.
CATHY BRYAN has been the Chief Executive Officer, Administrator and
FDA Responsible Head for the Blood Bank of the Redwoods, Santa Rosa,
California, since July 1987. She received a B.A. degree in social sciences
from San Jose State University. She was one of the founders of the Blood
Centers of California, of which she served as a Director (1987) and
President (1994), and is a member of the California Blood Bank Society, of
which she served as Chairman of the Administrator Program from 1992 - 1994,
and the American Association of Blood Banks.
RONALD O. GILCHER, M.D. has been the President and Chief Executive
Officer of the Sylvan N. Goldman Center, Oklahoma Blood Institute, Oklahoma
City, Oklahoma, since 1990 and was the director thereof from 1979 to 1990.
He served in the U.S. Army Medical Corps at Walter Reed Army Institute of
Research, Washington, D.C. from 1968 - 1971, and from 1971 to the present,
has been an assistant or associate professor at the University of
Pittsburgh School of Medicine (1971-1979) and an adjunct professor and
clinical associate professor at the University of Oklahoma School of
Medicine (1979 to present). Dr. Gilcher graduated from the University of
Pittsburgh with a B.S. degree in chemistry, and received his M.D. degree
from
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Jefferson Medical College. He was certified by the American Board of
Internal Medicine for Internal Medicine (1969 and 1977) and by the American
Board of Internal Medicine for Hematology (1972), and is licensed to
practice medicine in the states of Pennsylvania, Oklahoma and California.
SIGNIFICANT EMPLOYEES
The following employees make a significant contribution to the
business of the Company:
BART K. VALDEZ, age 33, has been the Director of Operations for
DataMed since October, 1996. He was Director of Finance and Operations and
also acted as the Principal Financial Officer for the Company from June
1995 through mid-October 1996. Mr. Valdez functions under the direct
supervision of the President and is accountable for the effective
operations of the account management team, medical review, data management,
vendor management and information systems departments. From 1989 to
joining the Company in 1995, he was employed by Baxter International, Inc.,
a medical supply and manufacturing company, most recently as
Regional Director of Operations for the Mountain Region. Mr. Valdez
received a B.S. degree in Management from Colorado State University and a
M.B.A. degree from the University of Colorado.
L.E. "GENE" MUNDT, age 57, has been the Senior Vice President for
Wyndgate since February, 1996, where he is responsible for medical
applications. Prior to joining Wyndgate, from 1967 to 1996, Mr. Mundt was
employed by Control Data Systems, Inc., a computer hardware and software
manufacturer, most recently as the Director, Integration and Consulting
Services, Central Region, North and South America Operations. Mr. Mundt
received a Bachelors degree in Math from the University of Iowa.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information regarding compensation paid
to the Company's CEO and the other executive officers of the Company who
received in excess of $100,000 of salary and bonus from the Company during
the year ended December 31, 1996:
<TABLE>
<CAPTION>
Annual Compensation ($$) Long Term Compensation
------------------------ ----------------------
Awards
------
Restricted
Name and Stock Options Other
Position Year Salary Bonus Awards & SARs Compensation
- -------- ---- ------ ----- ------- ------ -------------
($$) ($$) ($$) (##) ($$)
<S> <C> <C> <C> <C> <C> <C>
Michael I. Ruxin, 1996 $195,000 -0- -0- -0- $ 16,520(1)
Chairman and CEO 1995 $190,000 -0- -0- -0- $ 16,520(1)
1994 $180,000 -0- -0- -0- $ 8,216(2)
Joseph F. Dudziak, 1996 $110,000 -0- -0- 25,000(3) $ 4,800(4)
President and COO 1995 $105,000 -0- -0- 100,000(3) $ 4,800(4)
1994 -0- -0- -0- -0- $ -0-
William J. Collard, 1996 $100,000 -0- -0- -0- $180,400(5)
Secretary/Treasurer 1995 $100,000 -0- -0- -0- $ 30,400(5)
and Director, 1994 $ 75,000 $ 100(6) -0- -0- $ -0-
Wyndgate President
</TABLE>
(1) Dr. Ruxin receives $5,000 per annum in life insurance premiums and a
$960 per month car allowance.
(2) Dr. Ruxin received a car allowance of $368 per month, and $3,800 in
life insurance premiums.
(3) In June 1995, Mr. Dudziak received options to purchase 100,000 shares
exercisable at $2.45 per share. In September 1996, Mr. Dudziak
received options to purchase 25,000 shares exercisable at $2.50 per
share. These options vest at the rate of 20% per year. No value has
been attributed to these options since the exercise price was the
estimated fair value of the Company's shares at the time of grant.
(4) Mr. Dudziak receives $400 per month car allowance.
(5) Mr. Collard receives a $450 per month car allowance. In 1995, Mr.
Collard received $25,000 under his non-compete agreement. In 1996,
Mr. Collard received $175,000 under his non-compete agreement.
(6) In 1994, Mr. Collard received a performance bonus of $100.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Dr. Ruxin
for a period of five years commencing May 24, 1995. The initial term of
this agreement can be extended at the close of the second year for an
additional two years beyond the initial term (creating a term of seven
years from May 24, 1995). Under the agreement, Dr. Ruxin receives a salary
of $190,000 per year and certain other fringe benefits. Dr. Ruxin's
employment agreement includes a cost-of-living increase at the rate of 2
1/2% per annum, plus any other increase which may be determined from time
to time at the discretion of the Company's Board of Directors. Pursuant to
the employment agreement, Dr. Ruxin is provided with a car on such lease
terms to be determined by the Company, provided that the monthly operating
costs (including lease payments) to be paid by the Company will not exceed
$960. The agreement also includes a covenant not to compete
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for which Dr. Ruxin was to be paid a lump sum of $115,000 on January 1,
1996. No payments have been made in connection with the covenant not to
compete. The covenant not to compete will terminate the later of five
years from the date of the agreement or the term of the agreement; hence,
the Company will not receive any benefit from the covenant not to compete
unless the agreement is terminated prior to May 24, 2000. Dr. Ruxin has
now agreed that such payment will have to be made only if and when the
Company has sufficient cash flow, as determined by the Board of Directors.
Proceeds from this offering will not be used to make any payments in
connection with the covenant not to compete. Dr. Ruxin's employment under
the employment agreement may be terminated by Dr. Ruxin upon the sale by
the Company of substantially all of its assets, the sale, exchange or other
disposition of at least 40% of the outstanding voting shares of the
Company, a decision by the Company to terminate its business and liquidate
its assets, the merger or consolidation of the Company with another entity
or an agreement to such a merger or consolidation or any other type of
reorganization, or if the Company makes a general assignment for the
benefit of creditors, files for voluntary bankruptcy or if a petition for
the involuntary bankruptcy of the Company is filed in which an order for
relief is entered and remains in effect for a period of thirty days or
more, or if the Company seeks, consents to, or acquiesces in the
appointment of a trustee, receiver or liquidator of the Company or any
material part of its assets. Dr. Ruxin's employment under the employment
agreement also may be terminated by reason of Dr. Ruxin's death or
disability or for cause as set forth in the employment agreement. If the
agreement is terminated by the Company for any reason other than cause or
permanent disability, the Company must pay Dr. Ruxin a lump sum severance
payment of $2.5 million.
On May 24, 1995, the Company also entered into a five year employment
agreement with William J. Collard which contains the same extension
provision and reasons for termination as does Dr. Ruxin's agreement, and
provides for an annual salary of $100,000. Mr. Collard's employment
agreement includes a cost-of-living increase at the rate of 2 1/2% per
annum, plus any other increase which may be determined from time to time at
the discretion of the Company's Board of Directors. Mr. Collard's
agreement also contains a covenant not to compete, with payments of
$100,000 for the covenant to have been made on January 1, 1996 and May 24,
1996, respectively. Aggregate payments of $200,000 were made as follows:
$25,000 in December, 1995; $75,000 in January, 1996; and $100,000 in May,
1996. The covenant not to compete will terminate the later of five years
from the date of the agreement or the term of the agreement; hence, the
Company will not receive any benefit from the covenant not to compete
unless the agreement is terminated prior to May 24, 2000. If Mr. Collard's
agreement is terminated by the Company for any reason other than cause or
permanent disability, the Company must pay him a lump sum severance payment
of $2.5 million. Mr. Collard also receives a car allowance of $450 per
month.
The Company also has an employment agreement with Gerald F. Willman,
Jr. which contains an extension provision for the term of the agreement and
reasons for termination similar to those of Dr. Ruxin and Mr. Collard with
an annual salary of $95,000, except the initial term is for three years
commencing May 24, 1995 and the extension is for an additional two years.
Mr. Willman's employment agreement includes a cost-of-living increase at
the rate of 2 1/2% per
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annum, plus any other increase which may be determined from time to time in
the discretion of the Company's Board of Directors. The employment
agreement requires that if he is terminated by the Company for any reason
other than cause or permanent disability, the Company must pay Mr. Willman
a lump sum severance payment of $1.0 million.
On June 28, 1995, the Company entered into an employment agreement
with Joseph F. Dudziak for a two year term pursuant to which Mr. Dudziak
earns a salary of $105,000 per year. Mr. Dudziak's employment agreement
contains the same reasons for termination as the other employment
agreements described above, but does not include the same extension
provision or an annual cost-of-living increase. However, if increased, his
salary may not be decreased thereafter during the term of the agreement
without Mr. Dudziak's consent. If Mr. Dudziak's employment is terminated
by the Company for any reason other than for cause or permanent disability,
the Company is required to pay Mr. Dudziak his salary and benefits for the
full two years. Mr. Dudziak is entitled to certain incentive compensation
based on the Company's pre-tax profits for 1996. The agreement also grants
Mr. Dudziak options to purchase an aggregate of 100,000 shares of the
Company's common stock. Subject to early vesting in certain circumstances,
the options vest over a five year period at the rate of 20% per year and
are exercisable at $2.45 per share, which was the estimated fair value of
the shares at the time of grant. Mr. Dudziak receives a car allowance of
$400 per month. The Company has agreed to pay Mr. Dudziak approximately
$25,000 for moving expenses which have not been paid as of the date of this
Prospectus.
On February 8, 1996, the Company entered into an employment agreement
with L. E. "Gene" Mundt for a three year term pursuant to which Mr. Mundt
earns a salary of $95,000 per year. Mr. Mundt's employment agreement
contains the same reasons for termination as the other employment
agreements described above, but does not include an extension provision or
an annual cost-of-living increase. If Mr. Mundt's salary is increased, it
may not be decreased thereafter during the term of the agreement without
Mr. Mundt's consent. If Mr. Mundt's employment is terminated for any
reasons other than for cause or permanent disability, the Company is
required to pay Mr. Mundt his salary and benefits for the full three year
period. Mr. Mundt is entitled to certain incentive compensation based on
the Company's pre-tax profits for 1996. The agreement also grants Mr.
Mundt options to purchase an aggregate of 75,000 shares of the Company's
Common Stock at an exercise price of $3.75 per share which was the
estimated fair value of the shares at the time of grant. Under the terms
of the agreement, Mr. Mundt receives non-qualified stock options to
purchase 25,000 shares of Common Stock which are exercisable for ten years
from the date of the agreement and incentive stock options to purchase
50,000 shares of common stock which, subject to early vesting in certain
circumstances, vest over a five year period at the rate of 20% per year.
Mr. Mundt receives a car allowance of $400 per month. During 1996, the
Company paid Mr. Mundt approximately $42,000 for moving expenses.
The Company also has an employment agreement with Bradley V. Maberto
which contains an extension provision for the term of the agreement and
reasons for termination similar to those of Mr. Willman. The agreement
provides for an annual salary of $55,000. The initial term for
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<PAGE>
the agreement is three years commencing on May 24, 1995 and the extension
is for an additional two years. Mr. Maberto's employment agreement
includes a cost-of-living increase at the rate of 2 1/2% per annum, plus
any other increase which may be determined from time to time in the
discretion of the Company's Board of Directors. The agreement requires
that if Mr. Maberto is terminated by the Company for any reason other than
cause or permanent disability, the Company must pay Mr. Maberto a lump sum
severance payment of $1.0 million.
On October 14, 1996, the Company hired Gregory R. Huls as Chief
Financial Officer and General Counsel for the Company. According to the
terms of his employment arrangement, which has not yet been reduced to a
written employment agreement, Mr. Huls is to receive an annual salary of
$95,000 and an annual automobile allowance of $4,800. In addition, Mr.
Huls was granted incentive stock options to purchase 75,000 shares, which
vest over a five year period at 20% per year and are exercisable at $2.50
per share, and the Company agreed to pay the premium on a $15,000 life
insurance policy for Mr. Huls.
COMPENSATION OF DIRECTORS
Members of the Company's Board of Directors are not compensated in
their capacities as Board Members. However, the Company reimburses all of
its officers, directors and employees for accountable expenses incurred on
behalf of the Company.
STOCK OPTION PLAN
The Company has adopted its Amended and Restated Stock Option Plan
(the "Plan") which provides for the issuance of options or stock bonuses to
purchase up to 1,234,279 shares of Common Stock to employees, officers,
directors and consultants of the Company. The purposes of the Plan are to
encourage stock ownership by employees, officers, directors and consultants
of the Company so that they may acquire or increase their proprietary
interest in the Company, to (i) reward employees, officers, directors and
consultants for past services to the Company and (ii) encourage such
persons to become employed by or remain in the employ of or otherwise
continue their association with the Company and to put forth maximum
efforts for the success of the business of the Company.
The Plan is administered by a Committee consisting of the Board of
Directors or Compensation Committee, if appointed. At its discretion, the
Committee may determine the persons to whom Options may be granted and the
terms thereof. As noted above, the Committee may issue options to the
Board.
The terms of any Options granted under the Plan are not required to be
identical as long as they are not inconsistent with the express provisions
of the Plan. In addition, the Committee may interpret the Plan and may
adopt, amend and rescind rules and regulations for the administration of
the Plan.
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<PAGE>
Options may be granted as incentive stock options ("Incentive
Options") intended to qualify for special treatment under the Internal
Revenue Code of 1986, as amended (the "Code"), or as non-qualified stock
options ("Non-Qualified Options") which are not intended to so qualify.
Only employees of the Company are eligible to receive Incentive Options.
The period during which Options may be exercised may not exceed ten years.
The exercise price for Incentive Options may not be less than 100% of the
fair market value of the Common Stock on the date of grant; except that the
exercise price for Incentive Options granted to persons owning more than
10% of the total combined voting power of the Common Stock may not be less
than 110% of the fair market value of the Common Stock on the date of grant
and may not be exercisable for more than five years. The exercise price
for Non-Qualified Options may not be less than 85% of the fair market value
of the Common Stock on the date of grant. The Plan defines "fair market
value" as the last sale price of the Company's Common Stock as reported on
a national securities exchange or on the NASDAQ NMS or, if the quotation
for the last sale reported is not available for the Company's Common Stock,
the average of the closing bid and asked prices of the Company's Common
Stock as reported by NASDAQ or on the electronic bulletin board or, if
none, the National Quotation Bureau, Inc.'s "Pink Sheets" or, if such
quotations are unavailable, the value determined by the Committee in
accordance with its discretion in making a bona fide, good faith
determination of fair market value.
The Plan contains provisions for proportionate adjustment of the
number of shares issuable upon the exercise of outstanding Options and the
exercise price per share in the event of stock dividends, recapitalizations
resulting in stock splits or combinations or exchanges of shares.
In the event of the proposed dissolution or liquidation of the
Company, or any corporate separation or division, including, but not
limited to, split-up, split-off or spin-off, merger or consolidation of the
Company with another company in which the Company is not the survivor, or
any sale or transfer by the Company of all or substantially all its assets
or any tender offer or exchange offer for or the acquisition, directly or
indirectly, by any person or group for more than 50% of the then
outstanding voting securities of the Company, the Committee may provide
that the holder of each Option then exercisable will have the right to
exercise such Option (at its then current Option Price) solely for the kind
and amount of shares of stock and other securities, property, cash or any
combination thereof receivable upon such dissolution, liquidation,
corporate separation or division, merger or consolidation, sale or transfer
of assets or tender offer or exchange offer, by a holder of the number of
shares of Common Stock for which such Option might have been exercised
immediately prior to such dissolution, liquidation, or corporate separation
or division, merger or consolidation, sale or transfer of assets or tender
offer or exchange offer; or in the alternative the Committee may provide
that each Option granted under the Plan will terminate as of a date fixed
by the Committee; provided, however, that not less than 30 days written
notice of the date so fixed will be given to each recipient, who will have
the right, during the period of 30 days preceding such termination, to
exercise the Option to the extent then exercisable. To the extent that
Section 422(d) of the Code would not permit this provision to apply to any
outstanding Incentive Options, such Incentive Options will immediately upon
the occurrence of the dissolution or liquidation, etc., be treated for all
purposes of the Plan as Non-Qualified Options and shall be immediately
exercisable as such.
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Except as otherwise provided under the Plan, an Option may not be
exercised unless the recipient then is an employee, officer or director of
or consultant to the Company or a subsidiary of or parent to the Company,
and unless the recipient has remained continuously as an employee, officer
or director of or consultant to the Company since the date of grant of the
Option.
If the recipient ceases to be an employee, officer or director of, or
consultant to, the Company or a subsidiary or parent to the Company (other
than by reason of death, disability or retirement), other than for cause,
all Options theretofore granted to such recipient but not theretofore
exercised will terminate three months after the date the recipient ceased
to be an employee, officer or director of, or consultant to, the Company.
If the recipient ceases to be an employee, officer or director of, or
consultant to, the Company or a subsidiary or parent to the Company by
reason of termination for cause, all Options theretofore granted to such
recipient but not theretofore exercised will terminate thirty days after
the date the recipient ceases to be an employee, officer or director of, or
consultant to, the Company.
If a recipient dies while an employee, officer or director of or a
consultant to the Company, or if the recipient's employment, officer or
director status or consulting relationship, shall terminate by reason of
disability or retirement, all Options theretofore granted to such
recipient, whether or not otherwise exercisable, unless earlier terminated
in accordance with their terms, may be exercised by the recipient or by the
recipient's estate or by a person who acquired the right to exercise such
Options by bequest or inheritance or otherwise by reason of the death or
disability of the recipient, at any time within one year after the date of
death, disability or retirement of the recipient; provided, however, that
in the case of Incentive Options such one-year period will be limited to
three months in the case of retirement.
Options granted under the Plan are not transferable other than by will
or by the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act of 1974, or the rules thereunder. Options
may be exercised, during the lifetime of the recipient, only by the
recipient and thereafter only by his legal representative.
The Committee may suspend, terminate, modify or amend the Plan, but
without shareholder approval the Board may not materially increase the
number of shares as to which Options may be granted, change the eligibility
requirements for persons entitled to participate in the Plan or materially
increase the benefits to be received by any participant under the Plan.
The Board may not adversely affect any Option previously granted without
the consent of the participant. Unless sooner terminated, the Plan will
expire on May 31, 2000.
OPTION GRANTS
The following table sets forth certain information regarding options
to purchase shares of Common Stock issued to Executive Officers of the
Company during the fiscal year ended December 31, 1996:
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OPTION GRANTS IN 1996
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise Expiration
Name Granted in 1996 Price Date
---- ------- ------- ----- -----
Joseph F. Dudziak 25,000(1) 10.8% $2.50 09/30/06
____________
(1) Options to purchase 5,000 shares vest each year Mr. Dudziak remains in
the employ of the Company, beginning September 30, 1997 and continuing
each September 30 thereafter. Once vested, the options are
exercisable for a ten year period.
There were no options exercised during the last fiscal year by the
Company's executive officers, and no value has been ascribed to their
unexercised options at December 31, 1996 as there was and is no public
market for the Company's Common Stock.
LIMITATIONS ON DIRECTORS' AND OFFICERS' LIABILITY
The Company's Articles of Incorporation limit the liability of
directors to shareholders for monetary damages for breach of a fiduciary
duty except in the case of liability: (i) for any breach of their duty of
loyalty to the Company or its shareholders; (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) for unlawful distributions as provided in Section
7-108-403 of the Colorado Business Corporation Act; or (iv) for any
transaction from which the director derived an improper personal benefit.
The Company's Articles of Incorporation and Bylaws provide for the
indemnification of directors and officers of the Company to the maximum
extent permitted by law, including Section 7-109-102 of the Colorado
Business Corporation Act, against all liability and expense (including
attorneys' fees) incurred by reason of the fact that the officer or
director served in such capacity for the Company, or in a certain capacity
for another entity at the request of the Company. Section 7-109-102 of the
Colorado Business Corporation Act provides generally for indemnification of
directors against liability incurred as a result of actions, suits or
proceedings if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the Company. The
Company has entered into employment agreements with certain of its
employees which provide for indemnification in addition to the
indemnification provided for above. These agreements, among other things,
indemnify and hold harmless the employees against all claims, actions,
costs, expenses, damages and liabilities arising out of or in connection
with activities of the Company or its employees or other agents within the
scope of the employment agreements or as a result of being an officer or
director of the Company. Excluded is indemnification for matters resulting
from gross negligence or willful misconduct of
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the employee. The Company believes that these provisions and agreements
are necessary to attract and retain qualified persons as directors and
officers. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act") may be permitted to
directors, officers and controlling persons of the Company pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred
or paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the small business issuer will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
There is no pending litigation or proceeding involving a director,
officer, employee or other agent of the Company as to which indemnification
is being or may be sought, and the Company is not aware of any other
pending or threatened litigation that may result in claims for
indemnification by any director, officer, employee or other agent.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of the date hereof, the ownership
of the Company's Common Stock by (i) each director and executive officer of
the Company, (ii) all executive officers and directors of the Company as a
group, and (iii) all persons known by the Company to beneficially own more
than 5% of the Company's Common Stock prior to the Offering. The effect of
conversion of $516,200 of principal plus accrued interest of 10% Notes into
147,970 shares of Common Stock has been included in the percentages shown
below.
Amount and Percent of Class
Nature of
Name and Beneficial Before After
Address of Shareholder Ownership(1) Offering Offering
- ---------------------- ------------ -------- --------
Michael I. Ruxin, M.D.(1) (12) 913,417(2) 18.3% 11.5%
12600 W. Colfax
Suite A-500
Lakewood, CO 80215
Joseph F. Dudziak(1) 46,833(3) 0.9% 0.6%
12600 W. Colfax Ave.
Suite A-500
Lakewood, CO 80215
William J. Collard(1) (12) 630,206(4)(5) 12.6% 7.9%
11121 Sun Center Drive
Suite C
Rancho Cordova, CA 95670
Gerald F. Willman, Jr.(1) (12) 882,514(6) 17.8% 11.2%
11121 Sun Center Drive
Suite C
Rancho Cordova, CA 95670
Gregory R. Huls(1) -0-(7) -0-% -0-%
12600 W. Colfax Ave.
Suite A-500
Lakewood, CO 80215
Lori J. Willman(1) (12) 882,514(8) 17.8% 11.2%
11121 Sun Center Drive
Suite C
Rancho Cordova, CA 95670
Timothy J. Pellegrini(1)(9)(12) 343,480(9) 6.9% 4.3%
11121 Sun Center Drive
Suite C
Rancho Cordova, CA 95670
MDS (US) Inc.(1)(11) 325,000 6.5% 4.1%
100 International Blvd.
Etobicoke, Ontario
Canada M9W 6J6
Gordon Segal(10)(12) 263,417(10) 5.3% 3.3%
550 5th Ave.
New York, NY 10019
John D. Gleason -0- -0-% -0-%
100 International Blvd.
Etobicoke, Ontario
Canada M9W 6J6
All Directors and
Executive Officers
as a group (6 persons) 2,472,970 48.7% 30.9%
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____________________
(1) Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of
1934. Unless otherwise stated below, each such person has sole voting
and investment power with respect to all such shares. Under Rule
13d-3(d), shares not outstanding which are subject to options, warrants,
rights or conversion privileges exercisable within 60 days are deemed
outstanding for the purpose of calculating the number and percentage
owned by such person, but are not deemed outstanding for the purpose
of calculating the percentage owned by each other person listed.
(2) Includes 6,667 shares underlying 10% Notes purchased by Michael I.
Ruxin, M.D. in the principal amount of $25,000, an estimated 500
shares from accrued interest on the 10% Notes and 6,250 shares
underlying warrants issued in connection with the purchase of the 10%
Notes. Dr. Ruxin has advised the Company he does not intend to
convert his 10% Notes into shares and therefore the principal and
accrued interest will be paid from the proceeds of this offering. See
Use of Proceeds.
(3) Includes options exercisable from June 28, 1996 until June 27, 2006 to
purchase 20,000 shares at $2.45 per share, 13,333 shares underlying
10% Notes purchased by Joseph F. Dudziak in the principal amount of
$50,000, an estimated 1,000 shares from accrued interest on the 10%
Notes and 12,500 shares underlying warrants issued in connection with
the purchase of the 10% Notes. Does not include 130,000 shares
underlying the unvested portion of Mr. Dudziak's options.
(4) Includes 16,000 shares underlying 10% Notes purchased by William J.
Collard in the principal amount of $60,000, an estimated 1,200 shares
from accrued interest on the 10% Notes and 15,000 shares underlying
warrants issued in connection with the purchase of the 10% Notes. Mr.
Collard has advised the Company that he does not intend to convert his
10% Notes into shares and therefore the principal and accrued interest
will be paid from the proceeds of this offering. See Use of Proceeds.
(5) William J. Collard has granted individual options to an employee of
Wyndgate to purchase all or any part of 1,633 of his shares of the
Company, exercisable until September 21, 2005.
(6) Includes 346,481 shares owned by Lori J. Willman, the spouse of Gerald
F. Willman, Jr. Gerald F. Willman, Jr. has granted individual options
to certain employees of Wyndgate to purchase all or any part of
109,434 of his shares of the Company, exercisable until September 21,
2005.
(7) Does not include 75,000 shares underlying the unvested portion of Mr.
Huls' option.
(8) Includes 536,033 shares owned by Gerald F. Willman, Jr., the spouse of
Lori J. Willman.
(9) Includes 5,000 shares underlying an option owned by Catherine
Pellegrini, the spouse of Mr. Pellegrini.
(10) Includes 6,667 shares underlying 10% Notes purchased by Gordon Segal
in the principal amount of $25,000, an estimated 500 shares from
accrued interest on the 10% Notes and 6,250 shares underlying warrants
issued in connection with the purchase of the 10% Notes.
(11) MDS (US) Inc., formerly known as MDS Inc., is a wholly owned
subsidiary of MDS Health Group Limited. The directors of MDS (US)
Inc. are Wilfred G. Lewitt, John A. Rogers and Douglas M. Phillips,
and the officers are Wilfred G. Lewitt, John A. Rogers, Douglas M.
Phillips, E.K. Rygiel, R.H. Yamada and Peter E. Brent.
(12) On November 14, 1996, Michael I. Ruxin, William J. Collard, Gerald F.
Willman, Jr., Lori J. Willman, Timothy J. Pellegrini and Gordon Segal
(collectively, the "Shareholders") entered into a Proxy and Right of
First Refusal Agreement (the "Shareholders Agreement") with ODSI
pursuant to which each of the Shareholders granted an irrevocable
proxy to ODSI to vote their shares of the Company's Common Stock (i)
in favor of a proposal to approve any definitive agreement between the
Company and ODSI relating to the Technology, or (ii) on any other
proposal relating to the sale of any of the stock of the Company or
all or substantially all of the assets of the Company or any of the
Technology, unless prior to the date of the shareholders' meeting, the
definitive agreement has been terminated under certain conditions.
Unless earlier terminated, the proxy granted by each of the
Shareholders expires November 14, 1997. Each of the Shareholders also
granted ODSI a right of first refusal to purchase the Shareholder's
shares until November 14, 1997, in the event such Shareholder proposes
to transfer, dispose of, or otherwise sell such Shareholder's shares
to any third party or grant to any third party an option or other
right to buy any shares of the Company's Common Stock held by such
Shareholder. See THE COMPANY -WYNDGATE TECHNOLOGIES DIVISION -
AGREEMENTS WITH ORTHO DIAGNOSTIC SYSTEMS INC.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 5, 1995, the shareholders of the Company approved a loan in the
amount of $161,500, with interest at 8% per annum, made by the Company to
Sonya M. Levine, the wife of Michael I. Ruxin, in 1994, which had not
previously been approved by the shareholders in accordance with Colorado
corporate law. Effective June 30, 1995, the Company forgave Ms. Levine's
note in consideration of the forgiveness of a note payable by the Company
to Dr. Ruxin in the same amount and at the same interest rate as Ms.
Levine's note.
In May 1996, Gordon Segal, a beneficial owner of over 5% of the
outstanding Common Stock of the Company, and Michael I. Ruxin, William J.
Collard, Joseph F. Dudziak and Bart K. Valdez, officers and directors of
the Company, purchased 10% Notes in the principal amounts of $25,000,
$25,000, $60,000, $50,000 and $11,200, respectively, in the 10% Note
offering by the Company. The notes are convertible into 6,667, 6,667,
16,000, 13,333 and 2,986 shares of the Company's Common Stock,
respectively, ($3.75 of principal amount per share). Drs. Segal and Ruxin
and Messrs. Collard, Dudziak and Valdez were also issued warrants to
purchase 6,250, 6,250, 15,000, 12,500 and 2,800 shares of the Company's
Common Stock, respectively, at $3.75 per share in connection with their
purchase of the 10% Notes. The purchases of the 10% Notes were on the same
terms and conditions as purchases by non-affiliates.
The Board of Directors of the Company has adopted resolutions that no
business transaction, loan or advance will be made by the Company to any
officer, director or holder of more than 5% of the Company's Common Stock,
or any affiliate thereof, unless it has been established that a bona fide
business purpose exists, that all future transactions between the Company
and its officers, directors, or principal shareholders, or any affiliate of
any of such person, must be approved or ratified by a majority of the
disinterested directors of the Company, and the terms of such transaction
must be no less favorable to the Company than could have been realized by
the Company in an arms-length transaction with an unaffiliated person. The
Company believes that all ongoing transactions with the Company's
affiliates are on terms no less favorable than could be obtained from
unaffiliated third parties.
The Board of Directors of the Company has also adopted a resolution
that provides that the areas of business in which the Company shall be
interested for the purpose of the doctrine of corporate opportunities shall
be the business of information management software products and services.
Any business opportunity which falls within such areas of interest must be
brought to the attention of the Company for acceptance or rejection prior
to any officer or director of the Company taking advantage of such
opportunity. John D. Gleason has been excluded from such requirement. Any
business opportunity outside such areas of interest may be entered into by
any officer or director of the Company without the officer or director
first offering the business opportunity to the Company.
Dr. Ruxin has personally guaranteed the Company's $1 million line of
credit and various leases totaling approximately $1.2 million.
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In June 1995, the Company agreed to pay approximately $20,000 in tax
liability incurred by the shareholders of The Wyndgate Group, Ltd. (an "S"
corporation) in connection with the merger between The Wyndgate Group, Ltd.
and the Company.
DESCRIPTION OF SECURITIES
UNITS
Each Unit consists of two shares of Common Stock and one Warrant. The
Common Stock and Warrants must be purchased together. The Common Stock and
the Warrants will not be separately tradeable or transferrable for a period
of six months from the date of this Prospectus or earlier at the discretion
of the Representative.
COMMON STOCK
The Company is authorized to issue up to 40,000,000 shares of Common
Stock, $.01 par value. There are 4,966,626 shares presently outstanding.
All shares of Common Stock have equal voting rights and, when validly
issued and outstanding, have one vote per share in all matters to be voted
upon by shareholders. There are approximately 119 holders of record of the
Company's Common Stock. The shares of Common Stock have no preemptive,
subscription, conversion or redemption rights and may be issued only as
fully paid and non-assessable shares. Cumulative voting in the election of
directors is not allowed, which means that the holders of a majority of the
outstanding shares represented at any meeting at which a quorum is present
will be able to elect all of the directors if they choose to do so and, in
such event, the holders of the remaining shares will not be able to elect
any directors. On liquidation of the Company, each common shareholder is
entitled to receive a pro rata share of the Company's assets available for
distribution to common stockholders.
The Company has outstanding options and warrants to purchase an
aggregate of 927,929 shares of Common Stock, including 187,800 warrants
outstanding issued in conjunction with the 10% Notes, at exercise prices
ranging from $1.00 to $3.75 per share and expiration dates ranging from
October 15, 1997 to September 30, 2006. Additionally, there are 137,646
shares (plus approximately 10,324 shares issuable upon conversion of
accrued interest) issuable upon conversion of the 10% Notes. The Company
has no stock option plan or similar plan which may result in the issuance
of stock options, stock purchase warrants or stock bonuses other than: (i)
the Amended and Restated Stock Option Plan adopted by the Company pursuant
to which an aggregate of 1,234,279 shares of Common Stock have been
reserved for issuance pursuant to options or warrants; and (ii) the right
of shareholders of the Company who purchased shares in the Company's May
1995 private placement to receive a "share adjustment" to the extent the
public offering price per share of Common Stock is less than $4.90. Based
upon an anticipated offering price per share of $3.50, an additional
120,000 shares of Common Stock would be issuable to such shareholders.
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PREFERRED STOCK
The Company is authorized to issue up to a total of 10,000,000 shares
of preferred stock, $.01 par value, with the shares to be issued in series
by the Board of Directors. The Company's Board of Directors has designated
100,000 shares of preferred stock as Series A Preferred Stock, of which
66,667 were issued and subsequently converted into an equal number of
shares of the Company's Common Stock. The remaining shares of preferred
stock may be issued in one or more series from time to time with such
designations, rights, preferences and limitations as the Company's board of
directors may determine without approval of its shareholders. Series A
Preferred Stock has the same voting rights of Common Stock, except that
the holders of Series A Preferred Stock are entitled to elect as a class
one director to the Company's Board of Directors. The holders of the
Series A Preferred Stock shall be entitled to dividends when, as and if
declared on the same basis as the holders of the Company's Common Stock.
The rights, preferences and limitations of separate series of serial
preferred stock may differ with respect to such matters as may be
determined by the Company's Board of Directors, including without
limitation, the rate of dividends, method or nature or prepayment of
dividends, terms of redemption, amounts payable on liquidation, sinking
fund provisions, conversion rights and voting rights. The ability of the
Board to issue preferred stock could also be used by it as a means for
resisting a change of control of the Company and can therefore be
considered an "anti-takeover" device. The Company currently has no plans
to issue any shares of Preferred Stock.
10% NOTES
The $751,200 principal amount of outstanding 10% Notes accrue interest
at the rate of 10% per annum until maturity, which is 20 days after the
date of the closing of this Offering. See USE OF PROCEEDS. The dates of the
Notes vary from May 2, 1996 to June 25, 1996, depending upon the date funds
were received from subscribers. The 10% Notes may be prepaid in whole or in
part from time to time without penalty. The 10% Notes are convertible to
Common Stock at the rate of one share per $3.75 of interest and principal
due and payable. Holders of $516,200 in principal amount of 10% Notes have
advised the Company they wish to convert the principal and interest on their
10% Notes into an aggregate of 137,646 shares and approximately 10,324 shares,
respectively, of Common Stock upon the date hereof. In addition, 187,800
shares of Common Stock are issuable upon exercise of warrants issued in
conjunction with the 10% Note offering.
WARRANTS
Each Warrant entitles the holder hereof to purchase one share of
Common Stock at an exercise price of $_______(130% of the initial public
offering price of the Common Stock) per share, subject to adjustment in
certain events, at any time prior to ______, 2000.
Commencing on the date the Warrants are separately tradeable and
transferable, the Warrants are subject to redemption by the Company at $.55
per Warrant at any time until the end of the second year after the date of
this Prospectus and thereafter at $.75 per Warrant at any time until their
expiration, on 30 days' prior written notice to the holders of Warrants,
provided that the daily trading price per share of Common Stock has been as
least $________(120% of the
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Warrant exercise price) for a period of at least 20 consecutive trading
days ending within 10 days prior to the date upon which the notice of
redemption is given. For purposes of determining the daily trading price
of the Company's Common Stock, if the Common Stock is listed on a national
securities exchange, is admitted to unlisted trading privileges on national
securities exchange, or is listed for trading on a trading system of the
NASD such as the NASDAQ Small Cap Market or the NASDAQ/NMS, then the last
reported sale price of the Common Stock on such exchange or system each day
shall be used or if the Common Stock is not so listed on such exchange or
system or admitted to unlisted trading privileges then the average of the
last reported high bid prices reported by the National Quotation Bureau,
Inc. each day shall be used to determine such daily trading price. The
Warrants will be exercisable until the close of the business day preceding
the date fixed for redemption, if any.
The Warrants will be issued in registered form pursuant to the terms
of a Warrant Agreement dated as of _______, 1997, (the "Warrant Agreement")
between the Company and American Securities Transfer & Trust Inc., as
Warrant Agent. Reference is made to said Warrant Agreement (which has been
filed as an Exhibit to the Registration Statement of which this Prospectus
is a part) for a complete description of the terms and conditions thereof.
The description herein is qualified in its entirety by reference to the
Warrant Agreement.
The exercise prices and number of shares of Common Stock or other
securities issuable on exercise of the Warrants are subject to adjustment
in certain circumstances, including in the event of a stock dividend, stock
split, recapitalization, reorganization, merger or consolidation of the
Company. Fractional shares will not be issued and such shares will have no
value.
The Warrants may be exercised upon surrender of the Warrant
certificate on or prior to the expiration date at the offices of the
Warrant Agent, with the exercise form on the reverse side of the Warrant
certificate completed and executed as indicated, accompanied by full
payment of the exercise price (by cashier's or certified check payable to
the Company) to the Warrant Agent for the number of warrants being
exercised. The Warrant holders do not have the rights or privileges of
holders of Common Stock.
DIVIDEND POLICY
Dividends are payable on Common Stock when, as, and if declared by the
Board of Directors out of funds legally available to pay dividends, subject
to any preferences which may be given to holders of preferred stock. The
Company has paid no cash dividends to date and it does not anticipate
payment of cash dividends in the foreseeable future.
STOCK TRANSFER AGENT
The Company has designated American Securities Transfer & Trust, Inc.
as its transfer agent for the Common Stock and as its Warrant Agent.
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UNDERWRITING
The Underwriters named below, acting through the Representative, have
jointly and severally agreed, subject to the terms and conditions of the
Underwriting Agreement, to purchase from the Company and the Company has
agreed to sell to the Underwriters, the respective number of Units set
forth opposite their names below at the initial public offering price less
the underwriting discount set forth on the cover page of this Prospectus:
UNDERWRITERS NUMBER OF UNITS
R A F Financial Corporation ----------
Total 1,337,000
==========
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the securities offered
hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to
purchase 1,337,000 Units, if any are purchased.
The Underwriters propose to offer part of the Units offered hereby
directly to the public at the offering price and part of such Units to
certain dealers at a price that represents a concession within the
discretion of the Representative. The Underwriters do not intend to
confirm sales to accounts over which they exercise discretionary authority.
The Underwriters may allow, and such dealers may re-allow, a concession
within the discretion of the Representative. After the initial offering,
the offering price and the selling terms may be changed by the
Underwriters.
The Units offered by the Underwriters are subject to prior sale. The
Underwriters reserve the right to withdraw, cancel or modify such offer
(which may be done only by filing an amendment to the Registration
Statement) and to reject orders in whole or in part for the purchase of the
Units and to cancel any sale even after the purchase price has been paid if
such sale, in the opinion of the Underwriters, would violate federal or
state securities laws or a rule or policy of the NASD.
The Company and the Underwriters have agreed to indemnity each other
and related persons against certain liabilities, including liabilities
under the Securities Act, and, if such indemnifications are unavailable or
are insufficient, the Company and the Underwriters have agreed to damage
contribution arrangements between them based upon the relative benefits
received from the Offering and the relative fault resulting in such
damages. Such relative benefits and relative fault would be determined in
legal actions among the parties. Under such
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contribution arrangements, the maximum amount payable by any Underwriter
would be the public offering price of the Units underwritten and
distributed by such Underwriter.
Except for the outstanding securities described herein and except upon
the exercise of the options and warrants described herein, the Company has
agreed not to sell any additional securities for six months after the date
of this Prospectus without the Representative's prior written consent. The
officers and directors of the Company, holders of more than 5% of the
Company's outstanding Common Stock prior to the Offering, and their
affiliates have entered into agreements which provide that such persons,
who own an aggregate of 3,333,933 shares of Common Stock, may not sell any
of such shares during a 13 month period commencing on the closing date of
the Offering. This restriction does not apply to nine persons who have
received options to purchase 111,067 shares of the Company's Common Stock
from William J. Collard and Gerald F. Willman, Jr. The agreements also
provide that any sales of Common Stock by such persons pursuant to Rule 144
will be executed through the Representative. See SHARES ELIGIBLE FOR
FUTURE SALE.
The Company has granted to the Underwriters an option exercisable for
30 days from the date of this Prospectus to purchase up to 200,550
additional Units from the Company at the respective Prices to Public less
the Underwriting Discounts solely to cover over-allotments, if any. In
addition, the Company has agreed to pay to the Representative at the
closing of the Offering, a non-accountable expense allowance of 3% of the
aggregate initial public offering price of the Units to cover expenses
incurred by the Representative in connection with the Offering, reduced by
$40,000 previously advanced by the Company.
The Company has agreed to issue for $100.00, warrants to the
Representative and its designees to purchase 133,700 Units (the
"Representative's Warrants). The Warrants are exercisable at any time
during the forty nine month period commencing 11 months after the date of
their issuance, at $_____ per Unit (165% of the initial public offering price).
The Representative's Warrants are not transferable except (i) to an
Underwriter or a partner or officer of an Underwriter or (ii) by will or
operation of law. Any profit realized on the sale of the Representative's
Warrants or the underlying securities may be deemed additional underwriting
compensation. Commencing one year and ending five years from the date
hereof, holders of the Representative's Warrants and the securities
underlying the Representative's Warrants will have a one time right to
demand registration of the securities underlying the Representative's
Warrants at the Company's expense. The Representative's Warrants, the
Units issuable upon exercise of the Representative's Warrants and the
shares of Common Stock underlying the Warrants included in such Units have
been registered under the Securities Act by means of the Registration
Statement of which this Prospectus is a part.
Each of the Units issuable upon exercise of the Representative's
Warrants consists of two shares of Common Stock and one Warrant. Each of
such Warrants contains the same terms and conditions as the Warrants except
that (i) the exercise price of the Warrants included in the Units
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issuable upon exercise of the Underwriter's Warrants will be 165% of the
exercise price of the Warrants, and (ii) these Warrants will not be
transferable except (i) to an Underwriter or a partner or officer of an
Underwriter, or (ii) by will or operation of law.
If any of the Representative's Warrants are exercised during the first
year after the date of this Prospectus, the Units and any underlying
securities acquired as a result of any such exercise may not be transferred
or assigned except to an Underwriter or a partner or an officer of an
Underwriter, or by will or operation of law until after the expiration of
such one year period.
For a period of three years from the date hereof, the Representative
has a preferential right to purchase for its account or to sell for the
account of the Company, or any parent or subsidiaries of the Company, any
securities with respect to which any of them may seek to sell, publicly or
privately, for cash.
The Price to Public of the Units has been determined by negotiations
between the Company and the Representative, with consideration being given
to the current status of the Company's business, its financial condition,
its present and prospective operations, the general status of the
securities market, and the market conditions for new offerings of
securities. The price bears no relationship to the assets, net worth, book
value, sales price of securities issued to shareholders of the Company, or
any other criteria of value.
The Company has agreed to give the Representative notice of meetings
of its Board of Directors and to grant access to such meetings to a
representative of the Representative. Any such representative will have no
official status or voting rights at any such meeting.
For a period of five years after the date of this Prospectus, the
Company has agreed to pay the Representative a consulting fee in connection
with any merger, consolidation, stock exchange or acquisition or sale of
all or a material part of the assets or business of any entity, if such
transaction involves the Company, its parent company, or any of its
subsidiaries, if such transaction was initiated by the Representative. The
total fee will be from 1% to 5% of the value of the transaction. In
connection with any such transaction, the Representative has agreed to
provide consulting services which are customary in the industry. If the
Company, its parent company, or any of its subsidiaries, proposes to engage
in any such type of transaction which is not initiated by the
Representative, but in connection with which the Company, its parent
company, or any of its subsidiaries, proposes to obtain services from an
investment banker, the Company has agreed that the Representative will have
the first opportunity to provide consulting services which are customary in
the industry, in connection therewith. In such event, the fee to be paid
to the Representative will be 50% of the total fee described above.
If the Representative, at its election, at any time one year after the
date of this Prospectus, solicits the exercise of the Warrants, the Company
will be obligated, subject to certain conditions, to pay the Representative
a solicitation fee equal to 10% of the aggregate proceeds received by the
Company as a result of the solicitation. No solicitation fee will be paid
within
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one year after the date of this Prospectus, no solicitation fee will be
paid if the market price of the Common Stock is lower than the then
exercise price of the Warrants, no solicitation fee will be paid if the
Warrants being exercised are held in a discretionary account at the time of
exercise, except where prior specific approval for exercise is received
from the person exercising the Warrants, and no solicitation fee will be
paid unless the person exercising the Warrants states in writing that the
exercise was solicited and designates in writing the Representative or
other broker-dealer to receive compensation in connection with the
exercise. The Representative may reallow a portion of the fee to
soliciting broker-dealers.
LEGAL MATTERS
Legal matters in connection with the shares of Common Stock and
Warrants being offered hereby have been passed on for the Company by the
law firm of Brenman Key & Bromberg, P.C., Denver, Colorado. Members of the
firm of Brenman Key & Bromberg, P.C. own 50,000 shares of the Company's
Common Stock. The law firm of Smith, McCullough & Ferguson, P.C., Denver,
Colorado has acted as legal counsel to the Representative in connection
with certain legal matters relating to the Offering.
EXPERTS
The consolidated financial statements of Global Med Technologies, Inc.
as of December 31, 1995 and 1994 and for the years then ended included in
this Prospectus and Registration Statement have been audited by Ernst &
Young, LLP, independent auditors, as set forth in their reports appearing
elsewhere herein, and are included in reliance upon such reports given upon
the authority of such firm as experts in accounting and auditing.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
7,908,596 shares of Common Stock, which includes 137,646 shares (plus an
estimated additional 10,324 shares issuable upon conversion of accrued
interest) which are to be issued upon conversion of $516,200 principal
amount of 10% Notes and 120,000 shares of Common Stock issuable to certain
shareholders of the Company pursuant to the terms of a private placement
which provided for a share adjustment in the event the price per share in
the Company's initial public offering is less than $4.90 per share. The
shares of Common Stock offered hereby (other than those which may be
acquired by affiliates of the Company) will be freely tradeable, without
restrictions, under the Securities Act of 1933, as amended (the "Act").
Approximately 1,659,221 shares are "restricted securities" within the
meaning of Rule 144 under the Act, have been held in excess of two years,
and, as a result, will be able to be publicly sold 90 days after the date
hereof in the event a public market for the Company's Common Stock
develops. Holders of 4,133,933 shares have entered into a lock up
agreements with the Representative. See UNDERWRITING.
In general, under Rule 144, as currently in effect, any person (or
persons whose shares are aggregated), including persons deemed to be
affiliates, whose restricted securities have been
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<PAGE>
fully paid for and held for at least two years from the later of the date
of payment therefor to the Company or acquisition thereof from an
affiliate, may sell such securities in brokers' transactions or directly to
market makers, provided that the number of shares sold in any three month
period may not exceed the greater of 1% of the then outstanding Common
Stock or the average weekly trading volume of the Common Stock during the
four calendar weeks preceding such sale. Sales under Rule 144 are also
subject to certain notice requirements and the availability of current
public information about the Company. After three years have elapsed from
the later of the issuance of restricted securities by the Company or their
acquisition from an affiliate, such securities may be sold without
limitation by persons who are not affiliates under Rule 144.
Sales of substantial amounts of Common Stock by shareholders of the
Company under Rule 144 or otherwise, or even the potential for such sales,
are likely to have a depressive effect on the market price of the Units,
Common Stock and Warrants and could impair the Company's ability to raise
capital through the sale of its equity securities.
CONCURRENT REGISTRATION BY SELLING SHAREHOLDERS
The Company has registered under the Registration Statement of which
this Prospectus is a part, 1,135,770 shares of Common Stock which includes
(i) 800,000 shares which the Company has agreed to register on behalf of
purchasers in the Company's Private Placement completed in September, 1996,
(ii) 137,646 shares to be issued to holders of the 10% Notes who have
elected to convert their 10% Notes to shares of Common Stock, plus
approximately 10,324 shares to be issued in exchange for interest on such
10% Notes and (iii) 187,800 shares of Common Stock underlying warrants
issued in connection with the sale of the 10% Notes. The shares of Common
Stock and warrants are held by 87 persons. Included in the persons who
hold securities to be sold under the Registration Statement are Joseph F.
Dudziak, President of the Company, Bart K. Valdez, Director of Operations
of DataMed and LMU & Company, a consultant to the Company. After the
completion of this offering, the Company will amend its Registration
Statement and this Prospectus to permit such persons to publicly offer and
sell all such shares of Common Stock.
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<PAGE>
ADDITIONAL INFORMATION
The Company has filed a Registration Statement under the Securities
Act of 1933, as amended with respect to the securities offered hereby with
the United States Securities and Exchange Commission ("SEC"), 450 Fifth
Street, N.W., Washington, D.C. 20549. This Prospectus, which is a part of
the Registration Statement, does not contain all of the information
contained in the Registration Statement and the exhibits and schedules
thereto, certain items of which are omitted in accordance with the rules
and regulations of the SEC. For further information with respect to the
Company and the securities offered hereby, reference is made to the
Registration Statement, including all exhibits and schedules therein, which
may be examined at the SEC's Washington, D.C. office, 450 Fifth Street,
N.W., Washington, D.C. 20549 without charge, or copies of which may be
obtained from the SEC upon request and payment of the prescribed fee.
Statements made in this Prospectus as to the contents of any contract,
agreement or document are not necessarily complete, and in each instance
reference is made to the copy of such contract, agreement or other document
filed as an exhibit to the Registration Statement, and each such statement
is qualified in its entirety by such reference. As of the date of this
Prospectus, the Company became a reporting company under the Securities
Exchange Act of 1934, as amended, and in accordance therewith in the future
will file reports and other information with the SEC. All of such reports
and other information may be inspected and copied at the public reference
facilities maintained by the SEC at the address set forth above in
Washington, D.C. and at regional offices of the SEC located at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, Suite 1300, New York, New York 10048. In addition, the Company
intends to provide its shareholders with annual reports, including audited
financial statements, unaudited semi-annual reports and such other reports
as the Company may determine. The SEC maintains a Web site that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC at http://www.secgov.
-73-
<PAGE>
GLOSSARY
COMMUNITY BLOOD CENTERS - Community Blood Centers or CBCs are the not for
profit blood centers usually affiliated with the local city or community.
These are different from the American Red Cross Blood Centers that maintain
national affiliation.
DONOR IDENTIFICATION AND LABORATORY COMPONENT LABELING AND RELEASE SITE-BASED
LOGIC - Multiple-occurring program logic that is designed to help
control and help manage those areas of a blood center's operation in which
the hazard potential of the purity, potency and safety of the blood and
blood products effects a recognized level of concern.
EDEN-OA(R) - EDEN-OA(R) (OA is for Open Architecture) is the proprietary
Wyndgate application development product and environment used as a basis
for the SAFETRACE(TM) software product. It provides basic functions
common to applications plus maintenance management features and processes.
FDA 510(k) - FDA 510(k) refers to the Federal Drug Administration process
number 510(k) which governs a clearance letter distributed by the FDA.
Software such as the SAFETRACE(TM) software product is classified as a
medical device. The 510(k) process is a stringent set of testing,
verification and review of products like the SAFETRACE(TM) software
product.
GUI - GUI refers to the Graphical User Interface, most commonly seen as the
icon driven windows on PC's. Special tools are needed to develop GUI
windows.
HELP LINE - Help Line refers to the service line number provided by
Wyndgate for use of its customers to receive assistance regarding Wyndgate
products. Wyndgate provides a 1-800 number for its customers who have a
maintenance contract.
MODULE - Refers to pieces of applications computer code used to perform a
certain set of tasks or functions. Generally, modules have a name
commensurate with the major function of that set of computer code, e.g.,
Billing Module refers to handling the processing of invoices.
MRO - Medical Review Officer
SAFETRACE(TM) Software Product - The SAFETRACE(TM) software product is the
blood bank information management system developed by Wyndgate using EDEN-OA(R)
in conjunction with eight California blood centers. The
SAFETRACE(TM) software product contains the following application modules:
Donor Recruitment; Donor Management; Laboratory Management; Special
Procedures; Inventory-Distribution; and Billing.
SAFETRACETX(TM) SOFTWARE PRODUCT - The SAFETRACETX(TM) software product is
the transfusion management software system under development. This
transfusion system, if fully developed,
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<PAGE>
will service hospitals and those blood centers that not only supply blood
or blood components to a hospital but also manage the transfusion process.
SUBSTANCE ABUSE - Substance abuse refers to the use of chemical products
which may have an adverse effect on humans. Classified under substance
abuse are drugs such as cocaine and heroin and chemicals such as alcohol.
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<PAGE>
Consolidated Financial Statements
GLOBAL MED TECHNOLOGIES, INC.
(formerly Global Data Technologies, Inc.)
Nine months ended September 30, 1996 and 1995
(unaudited) and years ended December 31, 1995 and
1994 with Report of Independent Auditors
<PAGE>
Global Med Technologies, Inc.
Consolidated Financial Statements
Nine months ended September 30, 1996 and 1995 (unaudited)
and years ended December 31, 1995 and 1994
CONTENTS
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . .F-1
Consolidated Financial Statements
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . .F-2
Consolidated Statements of Operations. . . . . . . . . . . . . . . . .F-4
Consolidated Statements of Stockholders' Equity (Deficit) . . . . . .F-5
Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . .F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . .F-8
<PAGE>
Report of Independent Auditors
Board of Directors
Global Med Technologies, Inc.
We have audited the accompanying consolidated balance sheets of Global Med
Technologies, Inc. (formerly Global Data Technologies, Inc.) and divisions
as of December 31, 1995 and 1994, and the related consolidated statements
of operations, stockholders' equity (deficit), and cash flows for the years
then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
Since the date of completion of our audit of the accompanying financial
statements and initial issuance of our report thereon dated May 15, 1996,
the Company, as discussed in Note 1, has experienced losses and working
capital deficiencies that adversely affect the Company's current results of
operations and liquidity. Note 1 describes management's plan to address
these issues.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Global Med
Technologies, Inc. and divisions at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
---------------------------
Ernst & Young LLP
Denver, Colorado
May 15, 1996,
except for Note 1, as
to which the date is
November 13, 1996
F-1
<PAGE>
Global Med Technologies, Inc.
Consolidated Balance Sheets
DECEMBER 31 SEPTEMBER 30
1995 1994 1996
---------------------------------------
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents $ 421,743 $ 309,851 $ 587,724
Accounts receivable-trade,
net of allowance for
uncollectible accounts
of $200,000, $56,000
and $200,000 at December
31, 1995 and 1994 and
September 30, 1996,
respectively 607,987 671,218 2,420,327
Unbilled receivables, net 306,975 257,677 1,084,490
Prepaid expenses and
other assets 23,316 47,020 104,320
Deferred offering costs - - 350,000
Deferred income taxes - 36,229 -
---------------------------------------
Total current assets 1,360,021 1,321,995 4,546,861
Note receivable - - 250,000
Equipment and fixtures, at cost:
Furniture and fixtures 206,471 70,000 193,117
Machinery and equipment 432,162 259,435 384,349
Computer and software 723,536 133,042 1,139,627
---------------------------------------
1,362,169 462,477 1,717,093
Less accumulated depreciation
and amortization (404,556) (311,105) (428,860)
---------------------------------------
957,613 151,372 1,288,233
Capitalized software development
costs, less accumulated
amortization of $65,852,
$15,502 and $114,582 at
December 31, 1995 and 1994
and September 30, 1996,
respectively 403,228 294,627 424,498
---------------------------------------
Total assets $2,720,862 $1,767,994 $6,509,592
=======================================
F-2
<PAGE>
Global Med Technologies, Inc.
Consolidated Balance Sheets
DECEMBER 31 SEPTEMBER 30
1995 1994 1996
---------------------------------------
LIABILITIES AND STOCKHOLDERS' (UNAUDITED)
EQUITY (DEFICIT)
Current liabilities:
Accounts payable $1,457,263 $ 586,215 $1,779,905
Accrued expenses 296,293 151,445 1,244,860
Accrued payroll and other 187,661 53,050 408,978
Accrued vacation 261,100 90,342 420,000
Noncompete accrual 325,000 - 150,000
Unearned revenue 271,188 304,408 669,158
Short-term debt 500,100 250,100 970,100
Notes payable - - 751,200
Current portion of capital
lease obligations 232,813 24,151 402,968
---------------------------------------
Total current liabilities 3,531,418 1,459,711 6,797,169
Capital lease obligations,
less current portion 647,929 23,059 804,517
Deferred income taxes - 7,498 -
Commitments and contingencies
Stockholders' equity (deficit):
Common stock, $.01 par value:
Authorized shares - 40,000,000
Issued and outstanding shares
- 3,949,629, 3,619,221 and
4,966,626 at December 31, 1995
and 1994 and September 30,
1996, respectively 39,496 36,192 49,666
Preferred stock, $.01 par value:
Authorized shares - 10,000,000
None issued or outstanding - - -
Additional paid-in capital 1,701,629 719,386 4,131,967
Accumulated deficit (3,199,610) (477,852) (5,273,727)
---------------------------------------
Total stockholders' equity
(deficit) (1,458,485) 277,726 (1,092,094)
---------------------------------------
Total liabilities and
stockholders' equity (deficit) $2,720,862 $1,767,994 $6,509,592
=======================================
See accompanying notes.
F-3
<PAGE>
Global Med Technologies, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
YEAR ENDED DECEMBER 31 (UNAUDITED)
1995 1994 1996 1995
-----------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Drug testing and other $ 5,740,487 $ 3,836,136 $ 4,680,448 $ 3,957,936
Software sales and consulting 933,631 1,140,119 4,249,101 883,578
-----------------------------------------------------
6,674,118 4,976,255 8,929,549 4,841,514
Cost of sales and product
development 3,217,595 2,429,789 5,016,101 2,308,078
-----------------------------------------------------
Gross profit 3,456,523 2,546,466 3,913,448 2,533,436
Operating expenses:
Payroll and other 1,998,452 708,718 1,574,799 1,431,242
General and administrative 1,478,666 605,459 1,418,894 1,240,230
Sales and marketing 1,731,533 657,988 1,903,569 1,471,986
Research and development 654,500 403,714 547,387 442,342
Depreciation and amortization 116,979 51,504 347,399 72,218
-----------------------------------------------------
Income (loss) from operations (2,523,607) 119,083 (1,878,600) (2,124,582)
Other income (expense):
Interest income (expense), net (61,112) 6,339 (179,464) (20,581)
Other (70,608) - (16,053) (4,943)
-----------------------------------------------------
Income (loss) before provision
for (benefit from)
income taxes (2,655,327) 125,422 (2,074,117) (2,150,106)
Provision for (benefit from)
income taxes 29,531 (46,825) - (108,758)
-----------------------------------------------------
Net income (loss) $(2,684,858) $ 172,247 $(2,074,117) $(2,041,348)
=====================================================
Net income (loss) per
common share $(.59) $.04 $(.44) $(.45)
Common shares used in computing
net income (loss) per
common share 4,579,848 4,379,028 4,679,028 4,546,547
</TABLE>
See accompanying notes.
F-4
<PAGE>
Global Med Technologies, Inc.
Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Common Stock Additional
--------------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 3,619,221 $36,192 $ 719,386 $ (650,099) $ 105,479
Net income - - - 172,247 172,247
---------------------------------------------------------------
Balance, December 31, 1994 3,619,221 36,192 719,386 (477,852) 277,726
Issuance of common stock 300,000 3,000 732,000 - 735,000
Issuance of common stock-
finder's fee 30,408 304 74,196 - 74,500
Issuance of common stock
warrants - - 15,000 - 15,000
Compensation related to
issuance of common stock
options by principal
stockholders - - 161,047 - 161,047
Distribution to stockholders
(Wyndgate) - - - (36,900) (36,900)
Net loss - - - (2,684,858) (2,684,858)
---------------------------------------------------------------
Balance, December 31, 1995 3,949,629 39,496 1,701,629 (3,199,610) (1,458,485)
Issuance of common stock-
exercise of common stock
warrants (unaudited) 150,000 1,500 448,500 - 450,000
Issuance of preferred stock
converted to common stock
(unaudited) 66,667 667 249,333 - 250,000
Issuance of common stock
under employee's stock
option plan (unaudited) 330 3 505 - 508
Issuance of common stock
(unaudited) 800,000 8,000 1,732,000 1,740,000
Net loss (unaudited) - - - (2,074,117) (2,074,117)
---------------------------------------------------------------
Balance, September 30, 1996
(unaudited) 4,966,626 $49,666 $4,131,967 $(5,273,727) $(1,092,094)
===============================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
Global Med Technologies, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
YEAR ENDED DECEMBER 31 (UNAUDITED)
1995 1994 1996 1995
-----------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(2,684,858) $ 172,247 $(2,074,117) $(2,041,348)
Adjustments to reconcile net
income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization 167,329 51,504 396,129 107,893
Loss on disposal of assets 49,857 - 16,053 4,943
Issuance of common stock options
by principal stockholders 161,047 - - 161,047
Issuance of common stock-finder's fee 74,500 - - 74,500
Changes in operating assets and
liabilities:
Accounts receivable-trade, net 63,231 (29,479) (1,812,340) (120,603)
Unbilled receivables, net (49,298) (14,744) (777,515) 77,932
Note receivable - - (250,000) -
Short-term investments - 98,450 - -
Prepaid expenses and other assets 23,704 (18,572) (81,004) 14,541
Deferred income taxes 28,731 (47,625) - 121,376
Accounts payable 871,048 191,099 322,642 414,495
Accrued payroll and other 134,611 17,294 221,317 90,413
Accrued expenses 144,848 49,369 948,567 107,387
Accrued vacation 170,758 29,451 158,900 170,758
Noncompete accrual 325,000 - (175,000) 350,000
Unearned revenue (33,220) (160,236) 397,970 34,239
--------------------------------------------------
Net cash provided by (used in)
operating activities (552,712) 338,758 (2,708,398) (432,427)
INVESTING ACTIVITIES
Purchases of equipment and fixtures (31,653) (26,990) (113,754) (109,012)
Increase in software development costs (158,951) (271,058) (70,000) (158,951)
--------------------------------------------------
Net cash used in investing activities (190,604) (298,048) (183,754) (267,963)
FINANCING ACTIVITIES
Borrowings on short-term debt 1,354,500 820,000 575,000 1,204,500
Principal payments on short-term
debt (1,104,500) (731,150) (105,000) (1,104,500)
Principal payments under capital
lease obligations (107,892) (30,391) (253,575) (44,166)
Issuance of notes payable - - 751,200 -
Issuance of common stock 735,000 - 2,440,508 735,000
Deferred offering costs - - (350,000) -
Issuance of common stock warrants 15,000 - - 15,000
Distribution to stockholders (Wyndgate) (36,900) - - (36,900)
--------------------------------------------------
Net cash provided by financing
activities 855,208 58,459 3,058,133 768,934
--------------------------------------------------
</TABLE>
F-6
<PAGE>
Global Med Technologies, Inc.
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
YEAR ENDED DECEMBER 31 (UNAUDITED)
1995 1994 1996 1995
------------------------------------------------
<S> <C> <C> <C> <C>
Net increase in cash and
cash equivalents $111,892 $ 99,169 $165,981 $ 68,544
Cash and cash equivalents at
beginning of period 309,851 210,682 421,743 309,851
------------------------------------------------
Cash and cash equivalents at
end of period $421,743 $309,851 $587,724 $378,395
================================================
</TABLE>
Supplemental disclosures:
The Company entered into capital lease obligations of $941,424 and
$51,653 in 1995 and 1994, respectively, and entered into capital lease
obligations of $580,318 and $335,944 during the nine months ended
September 30, 1996 and 1995, respectively. The Company paid income
taxes of $800 in both 1995 and 1994. Interest expense approximates
interest paid. During 1996, the Company completed a private placement
whereby it issued 66,667 shares of Series A convertible preferred
stock at $3.75 per share which were converted into 66,667 shares of
common stock (See Note 11). During 1994, the Company paid $161,500 to
a related party in exchange for a note receivable which accrued
interest at 8% per year. During 1995, the Company forgave the note
receivable in consideration of the forgiveness of a note payable from
the Company to a principal stockholder which also was for $161,500 and
which also accrued interest at 8% per year.
See accompanying notes.
F-7
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements
(Information subsequent to December 31, 1995 is unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
On May 23, 1995, The Wyndgate Group, Limited (Wyndgate) merged with
National MRO, Inc. (National MRO) in accordance with the terms and
provisions of an Agreement of Merger and National MRO changed its name to
Global Data Technologies, Inc., which subsequently changed its name to
Global Med Technologies, Inc. (the Company). Also, the National MRO and
Wyndgate divisions are now referred to as DataMed International (DataMed)
and Wyndgate Technologies, respectively. All shares of Wyndgate common
stock were exchanged for a total of 1,960,000 common shares of the Company.
This merger transaction was accounted for as a pooling of interests;
therefore, the Company's financial statements include the results of
operations as if the merger had been consummated at the beginning of all
periods presented. Subsequent to the merger, the businesses of both
Wyndgate and DataMed have been operated as divisions of the Company. The
Company incurred expenses related to the merger of $164,500, which included
a $130,000 finder's fee, which consisted of $74,500 in common stock of the
Company and $55,500 in cash, and $34,500 related to legal and other fees.
The related merger costs are included in general and administrative
expenses in the accompanying consolidated statement of operations.
Separate results of operations for the periods up to the date of the merger
are as follows (operating results for the period ended May 23, 1995
approximate the results for the period ended June 30, 1995, as shown):
JANUARY 1, 1995 JANUARY 1, 1994
TO TO
JUNE 30, 1995 DECEMBER 31, 1994
---------------------------------
Net sales:
National MRO $2,380,790 $3,836,136
Wyndgate 883,578 1,140,119
--------------------------------
Combined $3,264,368 $4,976,255
================================
Net income (loss):
National MRO $ (93,344) $ (140,141)
Wyndgate 76,266 312,388
--------------------------------
Combined $ (17,078) $ 172,247
================================
F-8
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LIQUIDITY AND MANAGEMENT'S PLANS
The Company is involved in the development of certain software products for
the blood bank industry as well as in the operation of substance abuse
testing and medical surveillance management services, including medical
review functions, data management, record storage and coordination of all
substance abuse testing program elements.
The development of the businesses has resulted in losses, which aggregated
$3,199,610 and $5,273,727 at December 31, 1995 and September 30, 1996,
respectively. In addition, the Company had working capital deficits of
$2,171,397 and $2,250,308 at December 31, 1995 and September 30, 1996,
respectively. Management intends to fund these deficiencies from the
proceeds of an initial public offering.
DESCRIPTION OF BUSINESS
The Company and its two divisions are in the business of providing
information management software products and substance abuse testing and
medical surveillance management services, including medical review
functions, data management, record storage and coordination of all
substance abuse testing program elements. The Company serves
international, national and regional clients in a variety of industries.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its divisions. All significant intercompany accounts and
transactions have been eliminated.
REVENUE RECOGNITION
Revenue from substance abuse testing services is recognized as services are
provided.
Revenue from sales of software licenses is recognized upon delivery of the
software product to the customer, unless the Company has significant
related vendor obligations remaining. When significant obligations remain
after the software product has been delivered, revenue is not recognized
until such obligations have been completed or are no longer significant.
The costs of any insignificant obligations are accrued when the related
revenue is recognized.
F-9
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)REVENUE
RECOGNITION
Revenue from postcontract customer support is recognized over the period
the customer support services are provided, and software services revenue
is recognized as services are performed.
Revenue from software development contracts is recognized on a
percentage-of-completion method with progress to completion measured based
upon labor costs incurred or achievement of contract milestones.
Revenue from the sale of hardware and software, obtained from vendors, is
recognized at the time the hardware and software are delivered to the
customer.
UNBILLED RECEIVABLES, NET
Unbilled amounts at December 31, 1995 and 1994 and September 30, 1996 have
been reduced by an allowance for doubtful accounts of $100,000, $0 and
$100,000, respectively, and are generally billable and collectible within
one year.
UNEARNED REVENUE
Included in unearned revenue at December 31, 1995 and September 30, 1996 is
approximately $200,000 and $70,000, respectively, of unperformed
professional services related to an agreement between the Royalty Group and
Wyndgate (see Note 9).
SIGNIFICANT CUSTOMERS
During 1995, three of the Company's customers-Laidlaw Transit, Inc.,
Chevron Corporation, and the Royalty Group (see Note 9)-accounted for
approximately 18%, 12% and 10% respectively, of the Company's revenues.
During 1994, two of the Company's customers-Chevron Corporation and the
Royalty Group-accounted for approximately 19% and 18% respectively, of the
Company's revenues.
During the nine months ended September 30, 1996, two of the Company's
customers-Laidlaw Transit, Inc. and Gulf Coast Regional Blood Center-each
accounted for approximately 13% and 13.5% respectively, of the Company's
revenues.
Accounts receivable from principal customers were approximately, $516,000,
$119,000 and $855,000 at December 31, 1995, December 31, 1994, and
September 30, 1996, respectively. Unbilled receivables from principal
customers were approximately $198,000, $68,000 and $314,000, at December
31, 1995, December 31, 1994 and
F-10
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
September 30, 1996, respectively. In order to reduce credit risk, the
Company requires substantial down payments and progress payments during the
course of an installation of Wyndgate's software products. See further
discussion of credit and market risks below.
CREDIT AND MARKET RISK
Accounts receivable from the sale of substance abuse testing program
services are due from customers primarily located throughout the United
States in transportation and other various industries. Accounts receivable
from the sale of software licenses and other postcontract support are
derived entirely from sales to blood banks and universities. The Company
performs ongoing credit evaluations of its customers' financial conditions
and maintains allowances for potential credit losses. The Company
generally does not require collateral or other security to support customer
receivables. The Company establishes allowances for doubtful accounts
based upon factors surrounding the credit risk specific to customers,
historical trends and other information. Actual losses, allowances and
accounts receivable turnover trends generally have been within management's
expectations. The provision for doubtful accounts included in general and
administrative expenses was $244,000 in the year ended December 31, 1995
and $156,000 during the nine months ended September 30, 1996.
FOREIGN CURRENCY AND INFLATION RISK
The Company believes sales to customers in foreign countries and operations
located in foreign countries have not been material. Additionally, the
Company believes foreign currency translation gains (losses) and domestic
inflation have not had a material effect on the Company's financial
position or results of operations.
EQUIPMENT AND FIXTURES
Equipment and fixtures are stated at cost. Depreciation and amortization,
which includes amortization of assets under capital leases (see Note 4), is
based on the straight-line method over the following estimated useful
lives:
Furniture and fixtures 3 - 5 years
Machinery and equipment 3 - 5 years
Computer and software 3 - 5 years
F-11
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments approximate
fair value due to the short maturity of these items.
LONG-LIVED ASSETS
In March 1995, the FASB issued Statement of Financial Accounting Standard
No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF (SFAS No. 121), which requires impairment
losses to be recorded on long-lived assets used in operations when
indications of impairment are present. The Company is required to adopt
SFAS No. 121 in the year ended December 31, 1996 and, based on current
circumstances, does not believe the effect of adoption will be material.
SOFTWARE DEVELOPMENT COSTS
Certain software development costs incurred after the technological
feasibility of the related software development product has been
established are capitalized and amortized on a straight-line basis over the
life of the related software product. Costs incurred prior to the
establishment of the technological feasibility of the related software
product are expensed as incurred as research and development. Costs of
maintenance and customer support are expensed as incurred. Amortization of
capitalized costs commences when the product is available for general
release to the public or when software development revenue has begun to be
recognized. Amortization of capitalized software development costs was
$50,350 and $15,282 for the years ended December 31, 1995 and 1994,
respectively, and is included in cost of sales in the accompanying
consolidated statements of operations.
MALPRACTICE INSURANCE
The Company maintains its malpractice insurance coverage on a claims made
basis through a commercial insurance carrier. Should the current claims
made policy not be renewed or replaced with equivalent insurance at a
future date, claims based on occurrences during its term but subsequently
reported will be uninsured. Based upon historical experience, the
Company's management believes the Company has adequately provided for the
ultimate liability, if any, from the settlement of such potential claims.
F-12
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
In October 1995, the FASB issued Statement of Financial Accounting Standard
No. 123, ACCOUNTING AND DISCLOSURE OF STOCK-BASED COMPENSATION (SFAS No.
123). SFAS No. 123 is applicable for fiscal years beginning after December
15, 1995 and gives the option to follow either fair value accounting or
Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES (APB No. 25), and related Interpretations.
The Company has elected to continue to follow APB No. 25 and related
Interpretations in accounting for outstanding stock options. Under APB No.
25, because the exercise price of the Company's stock options equals or
exceeds the market price of the underlying stock on the date of grant, no
compensation is recognized. However, the Company will be required to
provide fair value disclosures relating to stock options effective with the
year ended December 31, 1996.
STATEMENTS OF CASH FLOWS
For purposes of the statement of cash flows, the Company considers all
highly liquid investments with original maturities of three months or less
when purchased to be cash equivalents.
INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standard No. 109, ACCOUNTING FOR INCOME TAXES (SFAS
No. 109), which requires that the Company account for income taxes using
the liability method. Under SFAS No. 109, deferred income taxes are
provided for temporary differences in recognizing certain income and
expense items for financial reporting and tax reporting purposes. Upon
completion of the merger in May 1995, Wyndgate terminated its S corporation
status and began providing for current and deferred income taxes as a C
corporation as part of the Company. Accordingly, Wyndgate adopted SFAS No.
109 in May 1995, and the statement of operations for the year ended
December 31, 1995 includes a one-time charge (included in the provision for
income taxes) of approximately $150,000 to record the related deferred tax
liability. The following supplemental net income (loss) eliminates the
one-time charge and reflects income tax expense in all periods presented.
Supplemental net income (loss) is ($2,834,771) and $46,979 for the years
ended December 31, 1995 and 1994, respectively.
F-13
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET INCOME (LOSS) PER COMMON SHARE
Earnings per common share is based upon the weighted average of common and
common equivalent shares outstanding during the period. Primary and fully
diluted earnings per share are the same. Pursuant to Securities and
Exchange Commission Staff Accounting Bulletins and Staff Policy, common and
common equivalent shares issued during the 12-month period prior to an
initial public offering at prices below the public offering price are
presumed to have been issued in contemplation of the public offering, even
if antidilutive, and have been included in the calculation as if these
common and common equivalent shares were outstanding for all periods
presented (using the treasury stock method, and the estimated initial
public offering price for the Company's common stock).
The Company has filed a Registration Statement under Form SB-2 covering the
proposed sale of 1,337,000 Units, each consisting of two shares of common
stock and one Class A common stock purchase warrant in an initial public
offering (the Offering). Management intends to use a portion of the
proceeds from the Offering to repay borrowings under the Company's
revolving line of credit and notes payable. If the Offering had occurred
on January 1, 1995, the loss per common share would have been ($.56) and
($.42) for the year ended December 31, 1995 and the nine months ended
September 30, 1996, respectively.
ACCOUNTING ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
RECLASSIFICATION
Beginning in 1996, certain expenses which were previously classified as
general and administrative expenses and as payroll and other expenses have
been reclassified to cost of sales and product development and to sales and
marketing expenses to more accurately reflect the Company's cost structure.
All prior year amounts have been reclassified to conform with the current
period's presentation.
F-14
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Certain other prior year amounts have been reclassified to conform with the
current period's presentation.
2. NONCOMPETE AGREEMENTS
During 1995, the Company entered into noncompete agreements with certain
key employees for $350,000. The terms of the agreements are for the
greater of five years or the term of the related employee's employment
contract. Of the $350,000, $25,000 was paid in 1995, $175,000 was paid in
1996, with the remaining $150,000 payable in 1996 or whenever cash is
available. The entire amount of $350,000 was expensed in the second half
of 1995 and is included in general and administrative expenses in the
accompanying consolidated statement of operations.
3. INCOME TAXES
The components of income tax expense for the years ended December 31, 1995
and 1994 are as follows:
1995 1994
-------------------------
Provision for (benefit from) income taxes:
Current:
State $ 800 $ 800
Deferred:
Federal 25,048 (42,612)
State 3,683 (5,013)
-------------------------
Total deferred 28,731 (47,625)
-------------------------
Provision for (benefit from) income taxes $29,531 $(46,825)
=========================
The Company has net operating loss carryforwards of approximately
$1,253,000 which expire in the years 2006 to 2010. Such net operating loss
carryforwards may be subject to separate return limitation laws.
F-15
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
3. INCOME TAXES (CONTINUED)
The components of the deferred tax provision (benefit), which arise from
timing differences between financial and tax reporting, are presented
below:
1995 1994
-------------------------
Cash to accrual adjustment $(250,208) $ (48,534)
Allowance for uncollectible
accounts receivable (96,380) (1,900)
Accelerated depreciation 12,141 3,800
Noncompete accrual (128,375) -
Accrued vacation (67,450) (991)
Net operating loss carryforward (449,872) (27,101)
Valuation allowance 1,008,875 27,101
-------------------------
Total deferred provision (benefit) $ 28,731 $(47,625)
=========================
Variations from the federal statutory rate are as follows:
1995 1994
--------------------------
Expected provision for (benefit from)
federal income taxes at statutory rate
of 34% $(902,811) $ 42,643
Termination of S corporation election
by Wyndgate 149,913 -
Wyndgate income nontaxable due to S
corporation status (77,199) $(119,011)
Valuation allowance 1,008,875 27,101
State tax expense (benefit), net of
federal expense (benefit) (146,043) 6,898
Other (3,204) (4,456)
--------------------------
$ 29,531 $ (46,825)
==========================
Income (loss) before provision for
(benefit from) income taxes $(2,655,327) $ 125,422
==========================
Effective rate (1.1)% (37)%
==========================
F-16
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
3. INCOME TAXES (CONTINUED)
The components of the net accumulated deferred income tax asset as of
December 31, 1995 and 1994 are as follows:
1995 1994
-------------------------
Deferred tax assets:
Cash to accrual adjustment $ 873,899 $ 254,542
Excess of capital losses over
capital gains 79,000 79,000
Net operating loss carryforward 495,031 45,159
Allowance for uncollectible
accounts receivable 118,500 22,120
Noncompete accrual 128,375 -
Accrued vacation 103,135 35,685
Valuation allowance (1,130,034) (121,159)
---------------------------
667,906 315,347
Deferred tax liabilities:
Cash to accrual adjustment 648,395 279,246
Accelerated depreciation 19,511 7,370
---------------------------
667,906 286,616
---------------------------
Deferred tax asset, net $ - $ 28,731
===========================
4. LEASES
The Company primarily leases equipment and office space. An operating
lease expiring in 2000 is personally guaranteed by a principal stockholder.
Rental expense under operating leases, included in general and
administrative expenses, for the years ended December 31, 1995 and 1994 was
$216,795 and $139,000, respectively. Certain leases for furniture and
fixtures and machinery and equipment are classified as capital leases. A
principal stockholder of the Company has personally guaranteed repayment of
substantially all capital lease obligations. Included in equipment and
fixtures in the accompanying consolidated balance sheets are the following
assets held under capital leases:
DECEMBER 31
1995 1994
-------------------------
Furniture and fixtures $143,658 $ 10,433
Machinery and equipment 294,530 28,323
Computer and software 549,891 54,201
-------------------------
Assets under capital lease 988,079 92,957
Less accumulated amortization (92,926) (26,873)
-------------------------
Assets under capital lease, net $895,153 $ 66,084
=========================
F-17
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
4. LEASES (CONTINUED)
The following represents the minimum lease payments remaining under capital
leases and the future minimum lease payments for all noncancelable
operating leases at December 31, 1995:
CAPITAL OPERATING
LEASES LEASES
--------------------------
1996 $ 345,690 $ 275,725
1997 329,662 275,725
1998 318,577 247,353
1999 69,592 203,117
2000 67,903 203,117
--------------------------
Total minimum lease payments 1,131,424 $1,205,037
============
Less amount representing interest (250,682)
----------
Present value of minimum lease payments 880,742
Less current portion of obligations under
capital lease (232,813)
----------
Obligations under capital lease, less
current portion $ 647,929
==========
5. SHORT-TERM DEBT
The Company maintains an unsecured revolving credit line of $25,000 which
bears interest at prime (8.5% at December 31, 1995) plus one percent and
matures on January 1, 1997. Amounts outstanding under this revolving line
of credit were $100 at December 31, 1995 and 1994.
In addition, the Company maintains a $1,000,000 line of credit with a bank
secured by substantially all of the Company's assets except for those
assets under lease agreements (see Note 4), which bears interest at prime
(8.5% at December 31, 1995) plus two percent and which matured on November
14, 1996. Amounts outstanding under this line of credit were $970,000,
$500,000 and $250,000 at September 30, 1996 and December 31, 1995 and 1994,
respectively. A principal stockholder of the Company has personally
guaranteed the repayment of any amounts outstanding under the line of
credit. At December 31, 1995, the Company was in violation of a certain
bank covenant, which requires the Company to maintain positive net worth of
at least $1,000,000. Under the terms of the agreement, upon violation of
this covenant, amounts outstanding may become due and payable in full at
the bank's request.
F-18
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
5. SHORT-TERM DEBT (CONTINUED)
During the nine month period ended September 30, 1996, the Company obtained
covenant relief through an amendment to the original borrowing agreement.
The covenant, which requires the Company to maintain a positive net worth
of at least $1,000,000, has been waived effective June 1, 1996 through
November 30, 1996. The Company is in the process of extending both the
maturity date and the covenant waiver through January 31, 1997. The bank
has notified the Company in writing that the bank does not consider the
line of credit to be in default. (See also Note 11 for updated terms on
the line of credit).
The Company incurred interest expense on outstanding borrowings of
approximately $43,000 and $13,400 for the years ended December 31, 1995 and
1994, respectively.
6. STOCK OPTION PLANS
During 1990, the Company adopted an incentive stock option plan and a
nonqualified stock option plan, and in 1995 consolidated these plans by
adopting the Company's Amended and Restated Stock Option Plan (the Plan).
The Plan provides for the issuance of options to purchase up to 1,234,279
shares of common stock to employees, officers, directors and consultants of
the Company.
The terms of any options granted under the Plan are not required to be
identical as long as they are not inconsistent with the express provisions
of the Plan. Options may be granted as incentive options or as
nonqualified options; however, only employees of the Company are eligible
to receive incentive options. The period during which options vest may not
exceed ten years; however, the majority of the options granted under the
Plan vest over five years at the rate of twenty percent per year. The
exercise price for incentive options may not be less than 100% of the fair
market value of the common stock on the grant date, except that the
exercise price for incentive options granted to persons owning more than
ten percent of the total combined voting power of the common stock may not
be less than 110% of the fair market value of the common stock on the grant
date and may not be exercisable for more than five years. The exercise
price for nonqualified options may not be less than eighty percent of the
fair market value of the common stock on the grant date.
F-19
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
6. STOCK OPTION PLANS (CONTINUED)
Activity and price information regarding the Plan are as follows:
<TABLE>
<CAPTION>
INCENTIVE STOCK NONQUALIFIED STOCK
OPTION PLAN OPTION PLAN
---------------------------------------------------
STOCK STOCK
NUMBER OF OPTION NUMBER OF OPTION
STOCK PRICE STOCK PRICE
OPTIONS RANGE OPTIONS RANGE
---------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding, December 31, 1993 81,300 $1.00-$1.54 38,029 $1.54
Granted 15,400 1.54 - -
---------------------------------------------------
Outstanding, December 31, 1994 96,700 1.00-1.54 38,029 1.54
Granted 206,050 1.54-3.75 - -
Forfeited - - (6,000) 1.54
---------------------------------------------------
Outstanding, December 31, 1995 302,750 1.00-3.75 32,029 1.54
Granted 206,750 2.50-3.75 31,500 3.75
Exercised (330) 1.54
Forfeited (2,570)
---------------------------------------------------
Outstanding, September 30, 1996 506,600 $1.00-$3.75 63,529 $1.54-$3.75
===================================================
</TABLE>
During 1995, certain of the Company's principal stockholders granted
personal stock options to certain employees for the right to buy shares
from the principal stockholders at an exercise price of $1.00 per share.
This transaction has been accounted for as if the options were issued to
the employees directly from the Company. The Company recorded compensation
expense related to this transaction of $161,047, as such options were
issued for prior service and are fully vested. The related compensation
expense is included in general and administrative expenses in the
accompanying consolidated statement of operations.
During the second quarter of 1996, the Company entered into an agreement
with a business advisory enterprise. As part of the agreement, the Company
granted 160,000 stock options at an exercise price of $2.50 per share. To
date, no options have been exercised as a result of this agreement.
Certain members of the Company's Scientific Advisory Committee serve as
officers and directors of certain of the Company's significant customers.
In addition, these members also are beneficial owners of the Company
through grants of stock options and through the Company's ten percent note
offering (see Note 11).
F-20
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
7. COMMON STOCK WARRANTS
In May 1995, the Company completed a private placement of 150,000 units at
$5 per unit. Each unit consisted of two shares of common stock ($2.45
each) and one common stock warrant ($.10 each), exercisable at $3.00 per
share for a period of three years from the closing date of the offering.
The Company has the right to call the common stock warrants at $.12 per
warrant at any time during the period commencing six months from the date
of issuance and terminating on the expiration date of such warrants. In
addition, the Company has outstanding an additional 12,000 warrants to a
nonrelated investor which are convertible into common stock at an exercise
price of $1.54 per share. Of these warrants, 2,000 expired in July 1996
with the remaining 10,000 warrants expiring in October 1997.
During the first quarter of 1996, 150,000 common stock warrants issued in
conjunction with the May 1995 private placement were exercised for
$450,000.
8. CONTRIBUTIONS TO RETIREMENT PLAN
During April 1992, the Company established a 401(k) retirement plan which
covers eligible employees, as defined, of the Company. Employees may defer
up to sixteen percent of their annual compensation up to the maximum amount
as determined by the Internal Revenue Service. Under the retirement plan
agreement, the Company, at its discretion, may make contributions to the
plan. No contributions were made to the plan in 1995 or 1994. Retirement
plan administrative expense was approximately $8,000 and $3,000 for the
years ended December 31, 1995 and 1994, respectively.
9. COMMITMENTS AND CONTINGENCIES
The Company has entered into nine employment agreements with certain
management employees; the initial terms are generally for three to five
years. Certain of the agreements may be extended for two additional years.
Such agreements, which can be revised from time to time, provide for
minimum salary levels as adjusted for cost-of-living changes, as well as
for incentive bonuses which are payable when specified management goals are
attained. At December 31, 1995, the aggregate commitment for future
salaries payable through May 2000, excluding bonuses, is approximately
$2,600,000. If all agreements are extended, the additional commitment for
future salaries will be approximately $1,400,000.
F-21
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company maintains product liability insurance for Wyndgate's
software-related products. To date, no claims have been filed against the
Company related to its Wyndgate software products. In addition, the Company
applied for certain regulatory approval of its blood bank software. The
Company has not received regulatory approval to date.
In January 1993, Wyndgate entered into an agreement with the EDEN-OA Blood
Bank Users Group (the Royalty Group) to develop Blood Bank Management
Information System Software (BBMIS). As part of the consideration for
funding the development of the BBMIS, Wyndgate agreed to pay to the Royalty
Group certain royalty payments on future software license fees. All
payments are due 30 days after each quarter and are based on software
license fees collected. The Company did not incur any royalty expenses
related to this agreement in 1995. Royalty expense related to this
agreement, included in cost of sales in the nine months ended September 30,
1996 was approximately $320,000. The time period under the royalty
schedule is based upon the first date of customer invoicing, which was
September 14, 1995. The royalty payment schedule is as follows:
From September:
1995 - 1997 12 percent
1997 - 1998 9 percent
1998 - 1999 6 percent
1999 - thereafter 3 percent
In July 1996, the Company (through its Wyndgate division) entered into a
Development Agreement (Agreement) with The Institute for Transfusion
Medicine (ITxM), to develop Commercial Centralized Transfusion System
Software (Commercial CTS Software). This Agreement requires that the
Commercial CTS Software be completed by December 16, 1997. If not timely
completed, the Company would be subject to certain monetary penalties. The
Agreement provides for a royalty payment to ITxM from the Company for
revenues received from the eventual sale of the Commercial CTS Software,
net of certain fees and charges. The royalty period starts with the first
commercial transfer for value of the Commercial CTS Software by the
Company. The royalty amounts for each year are higher if the sales of the
Commercial CTS Software are initiated by ITxM. The royalty payments range
from 10% or 5% in year one to 2% or 1% in year 10 and thereafter. To date,
the Company has not incurred any royalty expenses related to this
agreement.
F-22
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
As of September 30, 1996, the Company had 1,074,775 shares of common stock
reserved for future issuance as a result of the following: 506,600 and
63,529 shares issuable from the Company's incentive and nonqualified stock
option plans, respectively (see Note 6); 187,800 shares issuable upon the
exercise of certain warrants outstanding as a result of the 1996 10% note
offering (see Note 11); 146,846 shares issuable upon conversion of certain
of the 10% notes, including principal and accrued interest, related to
certain noteholders who have given the Company notice of their intent to
convert their 10% notes to shares of common stock (see Note 11); 10,000
shares issuable upon the exercise of certain warrants granted to a
nonrelated investor (see Note 7), and 160,000 shares underlying certain
stock options granted to a business advisory enterprise during the second
quarter of 1996 (see Note 6).
10. SEGMENT INFORMATION
The Company's major operations are in information management software
products for the blood bank industry (Wyndgate), and substance abuse
testing program management services for transportation and other various
industries (DataMed).
Revenue, income (loss) from operations, identifiable assets, depreciation
and amortization, and capital expenditures pertaining to the segments are
presented below. Revenues by segment include sales to unaffiliated
customers. In addition, there were no intersegment sales for any period
presented.
YEAR ENDED DECEMBER 31, 1995
------------------------------------------
WYNDGATE DATAMED CONSOLIDATED
------------------------------------------
Revenues $ 933,631 $5,740,487 $6,674,118
Income (loss) from operations (1,706,751) (816,856) (2,523,607)
Identifiable assets 1,015,623 1,705,239 2,720,862
Depreciation and amortization 85,184 82,145 167,329
YEAR ENDED DECEMBER 31, 1994
------------------------------------------
WYNDGATE DATAMED CONSOLIDATED
------------------------------------------
Revenues $ 1,140,119 $3,836,136 $4,976,255
Income (loss) from operations 299,491 (180,408) 119,083
Identifiable assets 606,391 1,161,603 1,767,994
Depreciation and amortization 19,542 31,962 51,504
F-23
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
10. SEGMENT INFORMATION (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1996
------------------------------------------
WYNDGATE DATAMED CONSOLIDATED
------------------------------------------
Revenues $4,249,101 $4,680,448 $8,929,549
Income (loss) from operations (630,935) (1,247,665) (1,878,600)
Identifiable assets 4,225,729 2,283,863 6,509,592
Depreciation and amortization 164,788 231,341 396,129
NINE MONTHS ENDED SEPTEMBER 30, 1995
------------------------------------------
WYNDGATE DATAMED CONSOLIDATED
------------------------------------------
Revenues $ 883,578 $3,957,936 $4,841,514
Income (loss) from operations (1,456,761) (667,821) (2,124,582)
Identifiable assets 860,435 1,495,975 2,356,410
Depreciation and amortization 55,628 52,265 107,893
11. UNAUDITED INTERIM FINANCIAL INFORMATION
The Company, in its opinion, has included all adjustments, consisting only
of normal recurring accruals, necessary for a fair presentation of its
financial position at September 30, 1996 and the results of its operations
for the nine months then ended. The results of operations for the nine
months ended September 30, 1996 are not necessarily indicative of the
results for a full year.
During the first quarter of 1996, the Company completed a private placement
whereby it issued 66,667 shares of Series A convertible preferred stock at
$3.75 per share. During 1996, the preferred shares were converted into
66,667 shares of common stock.
During the first quarter of 1996, the Company advanced $250,000 to a
development company in California (the Development Company), in exchange
for a convertible promissory note (the Note), due February 26, 1997.
During the fourth quarter of 1996, the maturity date of the Note was
extended to December 31, 1997 and can, upon certain conditions, be further
extended until June 30, 1998. The Note accrues interest at the prime rate
plus two percent and is primarily collateralized by the Development
Company's technology.
During the second quarter of 1996, the Company conducted an offering
consisting of convertible notes with detachable common stock warrants. The
notes accrue interest at ten percent per annum, mature in three years from
the date of issuance and are convertible
F-24
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
(Information subsequent to December 31, 1995 is unaudited)
11. UNAUDITED INTERIM FINANCIAL INFORMATION (CONTINUED)
into common stock of the Company at $3.75 per share. In addition, each
investor received one common stock warrant for the right to purchase one
share of common stock at $3.75 per share for each $4 invested. The
warrants are exercisable over a period of three years. Total proceeds from
the note offering amounted to $751,200. Common stock issuable upon
conversion of the notes, including principal and accrued interest, amounts
to 146,846 shares. Common stock issuable related to the warrants provided
in conjunction with the note offering amounts to 187,800 shares.
During the third quarter of 1996, the Company completed a private placement
whereby it issued 800,000 shares of common stock at $2.50 per share. Net
proceeds from the private placement were approximately $1,740,000.
During the third quarter of 1996, two former employees of the Company
exercised certain stock options through the Company's employee stock option
plan for 330 shares of common stock at $1.54 per share.
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.
During January 1997, the Company extended the maturity date on its
$1,000,000 line of credit through February 12, 1997. In addition, the
positive net worth covenant was eliminated by the bank.
F-25
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
1,337,000 UNITS
_________________________
PROSPECTUS
_________________________
RAF FINANCIAL CORPORATION
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
A. The Colorado Business Corporation Act (the "Act") allows
indemnification of directors, officers, employees and agents of the Company
against liabilities incurred in any proceeding in which an individual is
made a party because he was a director, officer, employee or agent of the
Company if such person conducted himself in good faith and reasonable
believed his actions were in, or not opposed to, the best interests of the
Company, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. A person must be
found to be entitled to indemnification under this statutory standard by
procedures designed to assure that disinterested members of the Board of
Directors have approved indemnification or that, absent the ability to
obtain sufficient numbers of disinterested directors, independent counsel
or shareholders have approved the indemnification based on a finding that
the person has met the standard. Indemnification is limited to reasonable
expenses. In addition, the Company's By-Laws provide that the Company
shall have the power to indemnify its officers, directors, employees and
agents to the extent permitted by the Act.
Specifically, the Act provides as follows:
"7-109-102. AUTHORITY TO INDEMNIFY DIRECTORS
(1) Except as provided in subsection (4) of this section, a
corporation may indemnify a person made a party to a proceeding
because the person is or was a director against liability incurred in
the proceeding if:
(a) The person conducted himself or herself in good faith;
and
(b) The person reasonably believed:
(I) In the case of conduct in an official capacity
with the corporation, that his or her conduct was in the corporation's
best interests; and
(II) In all other cases, that his or her conduct was at
least not opposed to the corporation's best interests; and
(c) In the case of any criminal proceeding, the person had
no reasonable cause to believe his or her conduct was unlawful.
(2) A director's conduct with respect to an employee benefit
plan for a purpose the director reasonably believed to be in the
interests of the participants in or beneficiaries
II-1
<PAGE>
of the plan is conduct that satisfies the requirement of subparagraph
(II) of paragraph (b) of subsection (1) of this section. A
director's conduct with respect to an employee benefit plan for a
purpose that the director did not reasonably believe to be in the
interests of the participants in or beneficiaries of the plan shall be
deemed not to satisfy the requirements of paragraph (a) of subsection
(1) of this section.
(3) The termination of a proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent is not, of itself, determinative that the director did not
meet the standard of conduct described in this section.
(4) A corporation may not indemnify a director under this
section:
(a) In connection with a proceeding by or in the right of
the corporation in which the director was adjudged liable to the
corporation; or
(b) In connection with any other proceeding charging that
the director derived an improper personal benefit, whether or not
involving action in an official capacity, in which proceeding the
director was adjudged liable on the basis that he or she derived an
improper personal benefit.
(5) Indemnification permitted under this section in connection
with a proceeding by or in the right of the corporation is limited to
reasonable expenses incurred in connection with the proceeding.
7-109-103. MANDATORY INDEMNIFICATION OF DIRECTORS
Unless limited by its articles of incorporation, a corporation
shall indemnify a person who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which the person was a
party because the person is or was a director, against reasonable
expenses incurred by him or her in connection with the proceeding.
7-109-105 COURT-ORDERED INDEMNIFICATION OF DIRECTORS
(1) Unless otherwise provided in the articles of incorporation,
a director who is or was a party to a proceeding may apply for
indemnification to the court conducting the proceeding or to another
court of competent jurisdiction. On receipt of an application, the
court, after giving any notice the court considers necessary, may
order indemnification in the following manner:
(a) If it determines that the director is entitled to
mandatory indemnification under section 7-109-103, the court shall
order indemnification, in which case the court shall also order the
corporation to pay the director's reasonable expenses incurred to
obtain court-ordered indemnification.
II-2
<PAGE>
(b) If it determines that the director is fairly and
reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not the director met the standard of conduct
set forth in section 7-109-102(1) or was adjudged liable in the
circumstances described in section 7-109-102(4), the court may order
such indemnification as the court deems proper; except that the
indemnification with respect to any proceeding in which liability
shall have been adjudged in the circumstances described in section
7-109-102(4) is limited to reasonable expenses incurred in connection
with the proceeding and reasonable expenses incurred to obtain
court-ordered indemnification.
7-109-106. DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION OF
DIRECTORS
(1) A corporation may not indemnify a director under section
7-109-102 unless authorized in the specific case after a determination
has been made that indemnification of the director is permissible in
the circumstances because the director has met the standard of conduct
set forth in section 7-109-102. A corporation shall not advance
expenses to a director under section 7-109-104 unless authorized in
the specific case after the written affirmation and undertaking
required by section 7-109-104(1)(a) and (1)(b) are received and the
determination required by section 7-109-104(1)(c) has been made.
(2) The determinations required by subsection (1) of this
section shall be made:
(a) By the board of directors by a majority vote of those
present at a meeting at which a quorum is present, and only those
directors not parties to the proceeding shall be counted in satisfying
the quorum; or
(b) If a quorum cannot be obtained, by a majority vote of
a committee of the board of directors designated by the board of
directors, which committee shall consist of two or more directors not
parties to the proceeding; except that directors who are parties to
the proceeding may participate in the designation of directors for the
committee.
(3) If a quorum cannot be obtained as contemplated in paragraph
(a) of subsection (2) of this section, and a committee cannot be
established under paragraph (b) of subsection (2) of this section, or,
even if a quorum is obtained or a committee is designated, if a
majority of the directors constituting such quorum or such committee
so directs, the determination required to be made by subsection (1)of
this section shall be made:
(a) By independent legal counsel selected by a vote of the
board of directors or the committee in the manner specified in
paragraph (a) or (b) of subsection (2) of this section or, if a
quorum of the full board cannot be obtained and a committee cannot be
established, by independent legal counsel selected by a majority vote
of the full board of directors; or
(b) By the shareholders.
II-3
<PAGE>
(4) Authorization of indemnification and advance of expenses
shall be made in the same manner as the determination that
indemnification or advance of expenses is permissible; except that, if
the determination that indemnification or advance of expenses is
permissible is made by independent legal counsel, authorization of
indemnification and advance of expenses shall be made by the body that
selected such counsel.
7-109-107. INDEMNIFICATION OF OFFICERS, EMPLOYEES, FIDUCIARIES, AND
AGENTS
(1) Unless otherwise provided in the articles of incorporation:
(a) An officer is entitled to mandatory indemnification
under section 7-109-103, and is entitled to apply for court-ordered
indemnification under section 7-109-105, in each case to the same
extent as a director;
(b) A corporation may indemnify and advance expenses to an
officer, employee, fiduciary, or agent of the corporation to the same
extent as to a director; and
(c) A corporation may also indemnify and advance expenses
to an officer, employee, fiduciary, or agent who is not a director to
a greater extent, if not inconsistent with public policy, and if
provided for by its bylaws, general or specific action of its board
of directors or shareholders, or contract.
7-109-109. LIMITATION OF INDEMNIFICATION OF DIRECTORS
(1) A provision treating a corporation's indemnification of, or
advance of expenses to, directors that is contained in its articles of
incorporation or bylaws, in a resolution of its shareholders or board
of directors, or in a contract, except an insurance policy, or
otherwise, is valid only to the extent the provision is not
inconsistent with sections 7-109-101 to 7-109-108. If the articles
of incorporation limit indemnification or advance of expenses,
indemnification and advance of expenses are valid only to the extent
not inconsistent with the articles of incorporation.
(2) Sections 7-109-101 to 7-109-108 do not limit a corporation's
power to pay or reimburse expenses incurred by a director in
connection with an appearance as a witness in a proceeding at a time
when he or she has not been made a named defendant or respondent in
the proceeding.
7-109-108. INSURANCE
A corporation may purchase and maintain insurance on behalf of a
person who is or was a director, officer, employee, fiduciary, or
agent of the corporation, or who, while a director, officer, employee,
fiduciary, or agent of the corporation, is or was serving at the
request of the corporation as a director, officer, partner, trustee,
employee, fiduciary, or agent
II-4
<PAGE>
of another domestic or foreign corporation or other person or of an
employee benefit plan, against liability asserted against or incurred
by the person in that capacity or arising from his or her status as a
director, officer, employee, fiduciary, or agent, whether or not the
corporation would have power to indemnify the person against the same
liability under section 7-109-102, 7-109-103, or 7-109-107. Any such
insurance may be procured from any insurance company designated by the
board of directors, whether such insurance company is formed under the
laws of this state or any other jurisdiction of the United States or
elsewhere, including any insurance company in which the corporation
has an equity or any other interest through stock ownership or
otherwise.
7-109-110. NOTICE TO SHAREHOLDERS OF INDEMNIFICATION OF DIRECTOR
If a corporation indemnifies or advances expenses to a director
under this article in connection with a proceeding by or in the right
of the corporation, the corporation shall give written notice of the
indemnification or advance to the shareholders with or before the
notice of the next shareholders' meeting. If the next shareholder
action is taken without a meeting at the instigation of the board of
directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consenting to such
action."
B. Article VI of the Registrant's Amended and Restated Articles of
Incorporation provides for the elimination of personal liability for
monetary damages for the breach of fiduciary duty as a director except for
liability (i) resulting from a breach of the director's duty of loyalty to
the Registrant or its shareholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the
law; (iii) for approving payment of distributions to shareholders to the
extent that any such actions are illegal under the Act; or (iv) for any
transaction from which a director derives an improper personal benefit.
This Article further provides that the personal liability of the
Registrant's directors shall be eliminated or limited to the fullest extent
permitted by the Act.
C. The Underwriting Agreement between the Registrant and the Underwriters
provides that the Underwriters will indemnify and hold harmless the
Registrant, the directors of the Registrant, and each person, if any, who
controls the Registrant within the meaning of Section 15 of the Securities
Act of 1933, as amended (the "1933 Act"), against any and all losses,
claims, demands, liabilities and expenses (including reasonable legal or
other expenses) to which it may become subject, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or in any Blue Sky Application or
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, resulting from the use of written information furnished to the
Registrant by the Underwriters or any participating dealer for use in the
preparation of the Registration Statement or in any Blue Sky Application.
II-5
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all expenses (subject to future
contingencies) incurred or to be incurred by the Registrant in connection
with the issuance and distribution of the securities being offered. All
expenses are estimated except the registration fee.
Registration and filing fee . . . . . . . . . . . . . $ 11,303
NASD filing fee . . . . . . . . . . . . . . . . . . . 3,777
Printing . . . . . . . . . . . . . . . . . . . . . . 25,000*
Accounting fees and expenses . . . . . . . . . . . . 25,000*
Representative's expense allowance . . . . . . . . . 280,770*
Legal fees and expenses . . . . . . . . . . . . . . . 100,000*
Blue Sky fees and filing fees . . . . . . . . . . . . 65,000*
Transfer and Warrant Agent fees . . . . . . . . . . . 5,000*
Miscellaneous . . . . . . . . . . . . . . . . . . . . 4,920*
---------
Total . . . . . . . . . . . . . . . . . . . . . . . . $520,770
=========
___________
* Estimated
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the Registrant has issued its securities
to the following persons for the cash or other consideration indicated in
transactions that were not registered under the 1933 Act.
II-6
<PAGE>
I.
May 1995 Private Placement
--------------------------
Name No. of Units* Consideration
---- ------------- -------------
Elizabeth Kitchen &
Guy B. Nutter 10,000 $ 50,000.00
I. Stephen Davis, MD 10,000 50,000.00
William C. Dickey, MD 1,000 5,000.00
Metropolitan Pathologists
Profit Sharing Trust
FBO Gary D. Dickey, MD 5,000 25,000.00
Metropolitan Pathologists
Profit Sharing Trust
FBO William C. Dickey, MD 19,000 95,000.00
Herbert H. Maruyama, MD 10,000 50,000.00
Wilshire Center Geriatrics
Medical Group, Inc. DBPP
FBO Eugene Seymour, MD 10,000 50,000.00
Resources Trust Company
FBO Nancy S. Rogers
IRA dtd 3/22/84 # I ###-##-#### 10,000 50,000.00
Robert L. Messenbaugh, MD 10,000 50,000.00
Herbert L. Jacobs, MD 15,000 75,000.00
Stewart Weinerman, MD 10,000 50,000.00
Patrick A. Zoellner, MD 5,000 25,000.00
Hal Cohn, MD 5,000 25,000.00
Susan H. Sipf 10,000 50,000.00
Kenneth Manfre, MD 20,000 100,000.00
------- ----------
TOTAL 150,000 $750,000.00
======= ==========
_____________
* Each unit consisted of two shares of Common Stock and one Common Stock
Purchase Warrant exercisable at $3.00 per share until June 1, 1998.
II-7
<PAGE>
The offers and sales set forth in I above were made in reliance upon
the exemption from registration provided by Section 4(2) of the 1933 Act
and/or Regulation D and Rule 506 adopted thereunder. All of the purchasers
are known to the Registrant's president, Michael I. Ruxin, or were referred
to him by other purchasers in this offering or by clients of the
Registrant. Based upon Dr. Ruxin's knowledge of the purchasers and upon
written representations made by the purchasers, the Registrant believes all
but four of the purchasers were accredited investors at the time of their
purchases. The four non-accredited purchasers are medical doctors and,
therefore, based upon their knowledge of Registrants's business and their
representations, the Registrant believes each was capable of evaluating the
merits and risks of an investment in the Registrant. No broker/dealers were
involved in the sale and no commissions were paid. All purchasers
represented that they purchased the securities for investment, and all
certificates issued to the purchasers were impressed with a restrictive
legend advising that the shares represented by the certificates may not be
sold, transferred, pledged or hypothecated without having first been
registered or the availability of an exemption from registration
established. The Registrant's transfer agent will be advised to place
"stop transfer" instructions against the transfer of these certificates.
II.
May 1995 Wyndgate Merger
------------------------
Consideration
(No. of
Name No. of Shares* Wyndgate Shares)
---- ------------- -------------
William J. Collard 653,006 1,999
Gerald F. Willman, Jr. 570,033 1,745
Lori J. Willman 368,481 1,128
Timothy J. Pellegrini 368,480 1,128
--------- -----
TOTAL 1,960,000 6,000
========= =====
_____________
* Based upon the conversion factor of 326.6667 multiplied by the number
of Wyndgate shares.
The offers and sales set forth in II above were made in reliance upon
the exemption from registration provided by Section 4(2) of the 1933 Act.
No broker/dealers were involved in the sale and no commissions were paid.
All such persons represented that they acquired the securities for
investment, and all certificates issued to the persons were impressed with
a restrictive legend advising that the shares represented by the
certificates may not be sold, transferred, pledged or hypothecated without
having first been registered or the availability of an exemption from
registration established. The Registrant's transfer agent will be advised
to place "stop transfer" instructions against the transfer of these
certificates.
II-8
<PAGE>
III.
In June, 1995, in connection with Joseph F. Dudziak being employed as
the president of the Registrant, the Registrant issued Mr. Dudziak an
Incentive Stock Option to purchase 100,000 shares exercisable at $2.45 per
share until June 2005. The Registrant relied on Section 4(2) of the
Securities Act of 1933, as amended, in connection with the issuance of the
option to Mr. Dudziak.
IV.
January 1996 Warrant Exercises
------------------------------
Name No. of Shares Consideration*
---- ------------- -------------
William C. Dickey, MD
& Karen N. Dickey 1,000 $ 3,000
Metropolitan Pathologists
Profit Sharing Trust 19,000 57,000
Robert L. Messenbaugh, MD 10,000 30,000
Metropolitan Pathologists
Profit Sharing Trust
FBO Gary D. Dickey, MD 5,000 15,000
Resources Trust Company
FBO Nancy S. Rogers
IRA dtd 3/22/84 #I ###-##-#### 10,000 30,000
Patrick A. Zoellner, MD 5,000 15,000
Eric D. Sipf 10,000 30,000
Herbert H. Maruyama, MD 10,000 30,000
Stewart Weinerman, MD 10,000 30,000
Eugene Seymour, MD 3,333 9,999
Wilshire Center Geriatrics
Medical Group DBPP, Inc.FBO
Eugene Seymour, M.D. 6,667 20,001
Herbert L. Jacobs, MD 15,000 $ 45,000
Kenneth Manfre, MD 20,000 60,000
II-9
<PAGE>
Hal Cohn, MD 15,000 45,000
Charles Citrin 10,000 30,000
------- -------
TOTAL 150,000 $450,000
======= =======
_____________
* Based upon an exercise price of $3.00 per share.
The offers and sales set forth in IV above were made in reliance upon
the exemption from registration provided by Section 4(2) of the 1933 Act
and/or Regulation D and Rule 506 adopted thereunder. The purchasers set
forth in this section IV are the same purchasers as set forth under I above
who exercised the warrants they acquired as part of the units sold
described under I above. All but four of the purchasers were accredited
investors. See the description under I above. No broker/dealers were
involved in the sale and no commissions were paid. All purchasers
represented that they purchased the securities for investment, and all
certificates issued to the purchasers were impressed with a restrictive
legend advising that the shares represented by the certificates may not be
sold, transferred, pledged or hypothecated without having first been
registered or the availability of an exemption from registration
established. The Registrant's transfer agent will be advised to place
"stop transfer" instructions against the transfer of these certificates.
V.
January 1996 Series A Preferred Stock Offering
----------------------------------------------
Name No. of Shares* Consideration
---- ------------- -------------
Ronald O. Gilcher, MD 66,667 $250,000
_____________
* Initially issued as Series A Preferred Stock, but converted into a
like number of shares of Common Stock in May, 1996.
The offer and sale to Dr. Gilcher was made in reliance upon the
exemption from registration provided by Section 4(2) of the 1933 Act. No
broker/dealers were involved in the sale and no commissions were paid. Dr.
Gilcher represented that he purchased the securities for investment, and
the certificate issued to him was impressed with a restrictive legend
advising that the shares represented by the certificate may not be sold,
transferred, pledged or hypothecated without having first been registered
or the availability of an exemption from registration established. The
Registrant's transfer agent will be advised to place "stop transfer"
instructions against the transfer of his stock certificate.
II-10
<PAGE>
VI.
Shares issued pursuant to Settlement Agreements
-----------------------------------------------
Name No. of Shares Consideration
---- ------------- -------------
Frontline Marketing, Inc. 20,408 Release of Claims
(shares issued Oct.
1995)
Robert S. Verhey 10,000 Release of Claims
------ (shares issued May
1996)
TOTAL 30,408
======
The issuances set forth in VI above were made in reliance upon the
exemption from registration provided by Section 4(2) of the 1933 Act. No
broker/dealers were involved in the sale and no commissions were paid. The
persons represented that they acquired the securities for investment, and
the certificates issued to the persons were impressed with a restrictive
legend advising that the shares represented by the certificates may not be
sold, transferred, pledged or hypothecated without having first been
registered or the availability of an exemption from registration
established. The Registrant's transfer agent will be advised to place
"stop transfer" instructions against the transfer of these certificates.
VII.
Options issued to Scientific Advisory Committee
-----------------------------------------------
Name No. of Options Expiration Date
---- ------------- -------------
William C. Dickey, MD 2,500 January, 2006
Cathy Bryan 1,000 January, 2006
Ronald O. Gilcher, MD 1,000 January, 2006
The options issued to the members of the Registrant's Scientific
Advisory Committee were made in reliance upon the exemption from
registration provided by Section 4(2) of the 1933 Act. The consideration
for the issuance of the options was the agreement by the named individuals
to serve on the Registrant's Scientific Advisory Committee. The options
were issued pursuant to the Registrant's nonqualified stock option plan and
are exercisable at $3.75 per share, and vest over a five year period. No
broker/dealers were involved in the sale and no commissions were paid. All
option certificates were impressed with a restrictive legend advising that
the options represented by the certificates may not be sold, transferred,
pledged or hypothecated without having first been registered or the
availability of an exemption from registration established.
II-11
<PAGE>
VIII.
In April, 1996, the Registrant entered into an agreement with LMU &
Company ("LMU"), which was amended in November, 1996. As partial
consideration for LMU's services under the agreement, the Registrant issued
LMU an option to purchase 160,000 shares of the Registrant's common stock,
exercisable at $2.50 per share. The option becomes exercisable in the
event that the average bid price for the Registrant's common stock is at
least $5.00 for five consecutive trading days prior to January 31, 1997 as
quoted on NASDAQ. The issuance of the option to LMU was made in reliance
upon the exemption from registration provided by Section 4(2) of the 1933
Act. No broker/dealers were involved in the sale and no commissions were
paid. LMU represented that LMU acquired the option for investment and not
with a view to distribution.
IX.
1996 10% 3-Year Convertible Notes*
----------------------------------
Name Consideration No. of Warrants*
---- ------------- ----------------
Arnold E. Prince $25,000 6,250
Richard Sher 50,000 12,500
Bart Valdez 11,200 2,800
Wilshire Center Geriatrics
Medical Group, Inc.
Eugene Seymour, M.D. Trustee 50,000 12,500
Eugene H. Seymour, M.D. 50,000 12,500
Underwood Family Partners 100,000 25,000
Jeffrey Appel 25,000 6,250
Benjamin R. Budraitis 10,000 2,500
Joseph F. Dudziak 50,000 12,500
Neill and Nita Freeman 25,000 6,250
Thomas R. Sakaguchi 20,000 5,000
James Sakaguchi 27,500 6,875
Ellen Sakaguchi 12,500 3,125
Michael Lipkin 35,000 8,750
Thomas R. Ulie 50,000 12,500
William J. Collard 60,000 15,000
II-12
<PAGE>
Michael I. Ruxin, M.D. 25,000 6,250
Ralph Grills, Jr. 50,000 12,500
Gordon Segal, MD 25,000 6,250
Harris A. Cahn 25,000 6,250
Joel C. Newman, MD 25,000 6,250
------- -------
Total $751,200 187,800
======= =======
__________________
* Convertible at $3.75 per share.
** One warrant for each $4 purchase exercisable over a three year
period commencing June 26, 1996 at $3.75 per share.
The offers and sales set forth in IX above were made in reliance upon
the exemption from registration provided by Section 4(2) of the 1933 Act
and/or Regulation D and Rule 506 adopted thereunder. Based upon
information known to the Registrant, and representations made by each of
the purchasers, the Registrant believes that all but three of the
purchasers were accredited investors. The three non-accredited purchasers
are family members of one of the Registrant's employees. Based upon such
relationship, upon information known to the Registrant and representations
made by each of these three purchasers, the Registrant believes that they
were able to evaluate the merits and risks of an investment in the
Registrant. No broker/dealers were involved in the sale and no commissions
were paid. All of such purchasers represented that they purchased the
securities for investment, and all Notes issued to the purchasers were
impressed with a restrictive legend advising that the Notes may not be
sold, transferred, pledged or hypothecated without having first been
registered or the availability of an exemption from registration
established.
X.
July 1996 Private Placement
---------------------------
Name Number of Consideration
---- Shares Paid
------------- -------------
Hugo Brooks 10,000 $ 25,000
Lawrence M. Underwood 5,000 12,500
Paul R. Hoover &
Janet F. Hoover, JTWROS 10,000 25,000
Battersea Capital, Inc. 10,000 25,000
ESN Financial, LP 20,000 50,000
Anil & Bina Patel, JTWROS 10,000 25,000
Michal & Renata Pivonka, JTWROS 50,000 125,000
II-13
<PAGE>
William B. &
Cheryl A. Bacon, JTWROS 10,000 25,000
Vannette F. Poole 20,000 50,000
John L. Moran 20,000 50,000
William R. Teele 10,000 25,000
Alan David Cohen 10,000 25,000
Peter & Luba Bondra, JTWROS 40,000 100,000
Harvey D. Rhoads 2,500 6,250
E. Pat Manuel 25,000 62,500
Allen E. Hoyt 10,000 25,000
Richard Kay 20,000 50,000
Mildred J. Geiss 7,000 17,500
Clyde William &
Valerie J. Pray, JTWROS 10,000 25,000
Barry Slosberg 10,000 25,000
Bradley Subler 2,000 5,000
Andrew E. Kauders 6,000 15,000
Richard J. N. Leonard 6,000 15,000
David Hickey 10,000 25,000
Georgia M. Dunston 10,000 25,000
TradeLink, L.L.C. 10,000 25,000
Robert M. Kassenbrock 40,000 100,000
Laurence P. Emrie 4,000 10,000
Larry & Michelle
Weinstein, JTWROS 5,000 12,500
Underwood Family Partners, LTD 20,000 50,000
Amar & Vangie Romero, JTWROS 6,000 15,000
Consulting on Government
Procurement-FBO J.S. Sansome 10,000 25,000
Lawrence E. &
Jeanne R. Keith, JTWROS 10,000 25,000
Riley Wilson - dba RW Enterprises 20,000 50,000
II-14
<PAGE>
John Solomita 10,000 25,000
William Vasey 10,000 25,000
Tadahiko Nakamura 30,000 75,000
Robert W. &
Rhonda W. Braun, JTWROS 4,000 10,000
Donald H. &
Mary Lou Wilbois, JTWROS 2,000 5,000
Jon and Laurie Lindvall 4,000 10,000
Maurice S. Cohen 10,000 25,000
Wilbert D. Pearson 10,000 25,000
Georgina S. Caslavka 10,000 25,000
Lynne D. Caslavka 6,000 15,000
Voss Boreta 10,000 25,000
Keith D. &
Carolyn P. McDonald, JTWROS 10,000 25,000
Howard I. Saiontz 10,000 25,000
James A. Newsham III &
Vivian M. Newsham, JTWROS 5,000 12,500
William C. &
Mary Claire McCormick, JTWROS 10,000 25,000
Patrick M. Sheridan 4,000 10,000
Thomas D. Fiorino 20,000 50,000
Richard G. Belcher 10,000 25,000
Scot C. Irwin 5,000 12,500
Alan Goldstein 10,000 25,000
Maurice and Stacy Gozlan, JTWROS 10,000 25,000
Howard Wall 20,000 50,000
William C. Meyer 4,000 10,000
Jeffrey M. Savell 7,000 17,500
James A. &
Joann Wiedenhoeft, JTWROS 15,000 37,500
A. Thomas Tenenbaum 6,000 15,000
II-15
<PAGE>
Brenman Key & Bromberg
401K Profit Sharing Plan
FBO Thomas R. Bromberg 10,000 25,000
Brenman Key & Bromberg
401K Profit Sharing Plan
FBO Albert Brenman 20,000 50,000
Stuart McNab 1,000 2,500
George Thompson 9,500 23,750
Brenman Key & Bromberg
401K Profit Sharing Plan
FBO A. Thomas Tenenbaum 14,000 35,000
Kenneth Higgins 5,000 12,500
Richard T. Baldwin 20,000 50,000
------- ---------
Total 800,000 $2,000,000
======= =========
The offers and sales set forth in X above were made in reliance upon
the exemption from registration provided by Section 4(2) of the 1933 Act
and/or Regulation D and Rule 506 adopted thereunder. RAF Financial
Corporation acted as the Placement Agent for the offering for which it
received a commission of 10% of the amount of securities sold in the
offering and a 3% expense allowance. Based upon representations made by
each of the purchasers in the offering, the Registrant believes that all
but four of the purchasers are "accredited investors" as that term is
defined in Rule 501 of Regulation D. With respect to the four non-accredited
investors, the Registrant believes, based upon each investor's
representations, that each non-accredited investor was capable of
evaluating the merits and risks of their investment in the Registrant. All
of such purchasers represented that they purchased the securities for
investment, and all certificates issued to purchasers were impressed with
a restrictive legend advising that the shares represented by the
certificates may not be sold, transferred, pledged or hypothecated without
having first been registered or the availability of an exemption from
registration established. The Registrant's transfer agent will be advised
to place "stop transfer" instructions against the transfer of these
certificates.
XI.
Employee Stock Options
----------------------
During the past three years, the Registrant has granted approximately
432,550 incentive stock options and approximately 31,500 non-qualified
stock options to approximately 66 employees of the Registrant and others
pursuant to the Registrant's Amended and Restated Stock Option Plan not
shown elsewhere within Item 26. The options are exercisable at prices
ranging from $1.54 to $3.75 over a ten year period. No consideration was
paid by the employees of the Registrant or others in connection with the
issuance of the options. Only two employees have exercised their options,
for 180 and 150 shares. The issuance of the options and sales of the shares
were made in reliance upon the exemption from registration provided by
Section 3(b) of the
II-16
<PAGE>
Securities Act of 1933, as amended, and Rule 701 adopted thereunder. No
broker/dealers were involved in the sale and no commissions were paid. All
purchasers purchased the securities for investment, and all option
certificates issued to purchasers were impressed with a restrictive legend
advising that the shares represented by the certificates may not be sold,
transferred, pledged or hypothecated without having first been registered
or the availability of an exemption from registration established.
ITEM 27. EXHIBITS AND FINANCIAL SCHEDULES
The following is a complete list of exhibits filed as part of this
Registration Statement, which Exhibits are incorporated herein.
Exhibit
Number Description
- ------- -----------
1.1 Form of Underwriting Agreement, as revised
3.1 Amended and Restated Articles of Incorporation, filed June 2,
1995*
3.2 Articles of Amendment to the Articles of Incorporation, filed
March 5, 1996*
3.3 Articles of Amendment to the Articles of Incorporation, filed May
30, 1996*
3.4 Bylaws, as amended*
4.1 Form of Representative's Warrants to Purchase Units
4.2 Form of Class A Common Stock Purchase Warrant Certificate
4.3 Specimen copy of stock certificate for Common Stock, $.01 par
value*
4.4 Form of Unit Certificate*
5.1 Opinion of Brenman Key & Bromberg, P.C.
10.1 Lease Agreement, dated April 15, 1992, and Lease Addendums, dated
April 8, 1992 and October 21, 1994*
10.2 Lease Agreement, dated July 19, 1995, and Lease Addendum*
10.3 Employment Agreement, dated May 24, 1995. between the Registrant
and Michael I. Ruxin, as amended July 8, 1995, August 1, 1995,
September 21, 1995 and July 15, 1996*
II-17
<PAGE>
10.4 Employment Agreement, dated May 24, 1995, between the Registrant
and William J. Collard, as amended July 22, 1996*
10.5 Employment Agreement, dated June 28, 1995, between the Registrant
and Joseph F. Dudziak*
10.6 Employment Agreement, dated February 8, 1996, between the
Registrant and L.E. "Gene" Mundt*
10.7 Amended and Restated Stock Option Plan, as amended on May 5,
1995, May 29, 1996 and December 11, 1996
10.8 Voting Agreement, dated May 23, 1995*
10.9 Shareholders' Agreement dated August 16, 1991, as amended on May
5, 1995 September 1996, June 24, 1996, July 25, 1996, Consent and
Waiver, dated July 12, 1996, and Rescission of Shareholder's
Agreement, dated June 22, 1996*
10.10 Agreement dated April 8, 1996, between the Registrant and LMU &
Company, and Stock Purchase Option, dated April 8, 1996*
10.11 Form of Drug Testing Service Contract*
10.12 Form of License Agreements*
10.13 Warrant Agreement, dated _____, 1997, between Global Med
Technologies, Inc.and American Securities Transfer & Trust, Inc.
10.14 Exclusivity and Software Development Agreement, dated November
14, 1996, between and among Global Med Technologies, Inc. and
Ortho Diagnostic Systems Inc.*
10.15 Amendment, dated November 14, 1996, to Agreement dated April 8,
1996, between the Registrant and LMU & Company, and Stock
Purchase Option, dated April 8, 1996*
10.16 Amendment, dated January 14, 1997, to Agreement dated April 8,
1996, between the Registrant and LMU & Company, and Stock
Purchase Option, dated April 8, 1996
11 Statement re: Computation of Per Share Earnings*
21 Subsidiaries of the Company*
24.1 Consent of Brenman Key & Bromberg, P.C. (included in Exhibit 5)
II-18
<PAGE>
24.2 Consent of Ernst & Young LLP
27.1 Financial Data Schedule*
99.1 Proxy and Right of First Refusal Agreement, dated November 14,
1996, between and among Ortho Diagnostic Systems Inc. and
Michael I. Ruxin, William J. Collard, Gerald F. Willman, Jr.,
Lori J. Willman, Timothy J. Pellegrini and Gordon Segal*
_____________
* Previously filed.
ITEM 28. UNDERTAKINGS
The undersigned Registrant will:
(a)(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(i) include any prospectus required by Section 10(a)(3) of the Securities
Act; (ii) reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement; and (iii) include any additional or changed
material information on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
The undersigned Registrant will provide to the Underwriters at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the Underwriters
to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate
II-19
<PAGE>
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-20
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City and County of Denver, State of
Colorado on January 16, 1997.
GLOBAL MED TECHNOLOGIES, INC.
By: /s/ Michael I. Ruxin
-------------------------------
Michael I. Ruxin, Chairman
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement was signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ Michael I. Ruxin Chairman of the Board January 16, 1997
- -------------------------- of Directors, Principal
Michael I. Ruxin Executive Officer and
Director
/s/ Joseph F. Dudziak President and Chief January 16, 1997
- -------------------------- Operating Officer
Joseph F. Dudziak
/s/ Gregory R. Huls Chief Financial Officer January 16, 1997
- -------------------------- and General Counsel
Gregory R. Huls
/s/ William J. Collard Secretary/Treasurer and January 16, 1997
- -------------------------- Director
William J. Collard
/s/ John D. Gleason Director January 16, 1997
- --------------------------
John D. Gleason
/s/ Gerald F. Willman, Jr. Director January 16, 1997
- --------------------------
Gerald F. Willman, Jr.
II-21
EXHIBIT 1.1
UA/UTS
------
11/19/96
GLOBAL MED TECHNOLOGIES, INC.
UNDERWRITING AGREEMENT
----------------------
_______________, 1997
RAF Financial Corporation
One Norwest Center
1700 Lincoln Street, 32nd Floor
Denver, Colorado 80203
Gentlemen:
GLOBAL MED TECHNOLOGIES, INC. ("Company"), a Colorado corporation,
hereby confirms its agreement with you, as Representative, and with the
other members of the Underwriting Group as follows:
SECTION 1
---------
DESCRIPTION OF OFFERING AND SECURITIES
--------------------------------------
The Underwriting Group proposes to purchase from the Company a total
of ____Units ("Firm Units"), each Unit consisting of two shares of Common
Stock of the Company ("Shares") and one Class A Common Stock Purchase
Warrant. The Class A Common Stock Purchase Warrants will be referred to as
"Class A Warrants" in this Agreement and in the Agreement Among
Underwriters. The Representative, either on its own behalf or on behalf of
the members of the Underwriting Group, will have an overallotment option to
purchase up to an additional ____ Units ("Overallotment Units") to cover
overallotments. Except as otherwise stated, the Firm Units and the
Overallotment Units are collectively referred to herein as the
"Securities." The Company agrees to sell to the Underwriting Group all of
the Firm Units, and the Company agrees to sell to the Representative all of
the Overallotment Units. The Units will initially be offered and sold to
the public at a price of $_____ per Unit. Such price is referred to herein
as the "Public Offering Price." The Company's authorized and outstanding
capitalization when the offering of the Firm Securities is permitted to
commence and at the Closing Date (hereinafter defined) and at the Option
Closing Date (hereinafter defined) will be as set forth in the Registration
Statement (hereinafter defined) and the Prospectus (hereinafter defined)
included therein.
The Shares and Class A Warrants comprising the Units will not be
separately tradeable or transferable for a period of six months after the
effective date (hereinafter defined) or earlier
<PAGE>
at the discretion of the Representative. The date upon which the Shares
and Class A Warrants become separately tradeable and transferable will be
referred to herein as the "Detachment Date."
One Class A Warrant entitles the holder to purchase one share of the
Company's Common Stock ("Warrant Share") at $_____ per share ("Exercise
Price") at any time after the Detachment Date and until ___________, 1999.
Commencing on the Detachment Date, the Company has the right to call all of
the Class A Warrants for redemption at a price $.55 per Class A Warrant at
any time until the end of the second year after the date of the Prospectus
and at a price of $.75 per Class A Warrant at any time until the expiration
of the Class A Warrants. The Class A Warrants may be redeemed upon 30 days
prior written notice given at any time after the Common Stock of the
Company has traded for at least $______ for at least 20 consecutive trading
days ending within 10 days prior to the date of the notice of redemption.
For purposes of determining the daily trading price of the Company's Common
Stock: (i) if the Common Stock is listed on a national stock exchange or
admitted to unlisted trading privileges on any such exchange or quoted on
a trading system of the National Association of Securities Dealers, Inc.
("NASD") such as the NASDAQ Small Cap Market or the NASDAQ National Market
System ("NASDAQ/NMS"), then the last reported sale price of the Common
Stock each day shall be used, but if no such sale has occurred on any of
such days or if the last sale price is not reported, then the average of
the closing bid prices for the Common Stock for such day on such exchange
or system shall be used; or (ii) if the Common Stock is not then traded on
any such exchange or system then the average of the daily bid prices for
the Company's Common Stock reported by the National Quotation Bureau, Inc.
shall be used if the Company's Common Stock is included in the National
Quotation System.
On the effective date, only the Units will be listed for quotation on
the NASDAQ Small Cap Market. The Company will use its best efforts to have
the Shares and Class A Warrants listed for quotation on the NASDAQ Small
Cap Market on the Detachment Date and thereafter, and the Company will use
its best efforts to delist the Units from quotation on the NASDAQ Small Cap
Market at the same time as the Shares and Class A Warrants become listed
for quotation on the NASDAQ Small Cap Market. The foregoing agreements by
the Company are subject to the Company s ability to meet the NASDAQ Small
Cap Market maintenance requirements on the Detachment Date.
The Class A Warrants contain adjustment provisions protecting the
holders thereof against dilution of their interests represented by the
Warrant Shares upon the occurrence of certain events. Holders of the Class
A Warrants have no voting power and are not entitled to dividends. In the
event of liquidation, dissolution, or winding up of the Company, holders of
the Class A Warrants are not be entitled to participate in the Company's
assets. The Company agrees to take whatever actions are necessary so that
during the period that the Class A Warrants are exercisable a registration
statement relating to the Warrant Shares will be effective and current with
the Securities and Exchange Commission ("Commission") and the Company
agrees to use its best efforts so that during such period the Class A
Warrants may be exercised by the holders thereof under the securities laws
in those states in which any of the Securities are sold in the public
offering under the Registration Statement and in those states in which
registered holders reside who in the aggregate own at least 2% of the Class
A Warrants
-3-
<PAGE>
outstanding during the period that such Class A Warrants are exercisable.
The Company agrees that its obligations set forth in the preceding sentence
shall remain in full force and effect regardless of whether or not the
"market price" of the Company's Common Stock is less than the Exercise
Price under the Class A Warrants. The Company agrees not to call the Class
A Warrants for redemption at any time that such registration statement is
not effective and current with the Commission and the states described in
the previous sentence.
SECTION 2
---------
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
In order to induce the members of the Underwriting Group to enter into
this Agreement, the Company hereby represents and warrants to and agrees
with the members of the Underwriting Group as follows:
2.01. REGISTRATION STATEMENT AND PROSPECTUS. A registration
statement on Form SB-2 (File No. 333-11723) ("Registration Statement") with
respect to the Securities, the Warrant Shares, and the Representative's
Warrants and Representative's Class A Warrants (hereinafter defined),
including the related Prospectus, copies of which have heretofore been
delivered by the Company to the Representative, has been prepared by the
Company in conformity with the requirements of the Securities Act of 1933,
as amended ("Act"), and the rules and regulations ("Rules and Regulations")
of the Commission thereunder, and said Registration Statement has been
filed with the Commission under the Act; one or more amendments to said
Registration Statement, copies of which have heretofore been delivered to
the Representative, has or have heretofore been filed with the Commission;
and the Company may file with the Commission on or prior to the effective
date additional amendments to said Registration Statement, including the
final Prospectus. As used in this Agreement, the term "Registration
Statement" refers to and means said Registration Statement and all
amendments thereto, including the Prospectus, all exhibits and all
financial statements, as it becomes effective; the term "Prospectus" refers
to and means the Prospectus included in the Registration Statement when it
becomes effective; and the term "Preliminary Prospectus" refers to and
means any Prospectus included in said Registration Statement before it
becomes effective. The terms "effective date" and "effective" refer to the
date the Commission declares effective, pursuant to Section 8 of the Act,
the Registration Statement.
2.02. ACCURACY OF REGISTRATION STATEMENT AND PROSPECTUS. The
Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus with respect to the Securities and each Preliminary
Prospectus has conformed in all material respects with the requirements of
the Act and the applicable Rules and Regulations of the Commission
thereunder and to the best of the Company's knowledge has not included at
the time of filing any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein not
misleading. When the Registration Statement becomes effective and on the
Closing Date and on the Option Closing Date, the Registration Statement and
Prospectus and any further amendments or supplements thereto will contain
all statements which are required to be stated therein in accordance with
the Act and the Rules and Regulations thereunder for the purposes of the
proposed public offering of the Securities, all statements of
-4-
<PAGE>
material fact contained in the Registration Statement and Prospectus will
be true and correct and neither the Registration Statement nor the
Prospectus will include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, the Company does
not make any representations or warranties as to information contained in
or omitted from the Registration Statement or the Prospectus in reliance
upon written information furnished on behalf of the members of the
Underwriting Group specifically for use therein.
2.03. FINANCIAL STATEMENTS. The financial statements of the Company
together with related schedules and notes as set forth in the Registration
Statement and Prospectus present fairly the financial position of the
Company and the results of its operations and the changes in its financial
position at the respective dates and for the respective periods for which
they apply. Such financial statements have been prepared in accordance with
generally accepted principles of accounting consistently applied throughout
the periods concerned except as otherwise stated therein.
2.04. INDEPENDENT PUBLIC ACCOUNTANTS. The accountants which have
audited the financial statements filed or to be filed with the Commission
as part of the Registration Statement and Prospectus, are independent
certified public accountants with respect to the Company within the meaning
of the Act and the Rules and Regulations thereunder.
2.05. NO CONTINGENT LIABILITIES AND NO MATERIAL ADVERSE CHANGE.
Except as disclosed in the Registration Statement and Prospectus, neither
the Company nor any of its subsidiaries, if any, have any contingent
liabilities, obligations or claims nor have they received threats of claims
or regulatory action. Except as may be reflected in or contemplated by the
Registration Statement or the Prospectus, subsequent to the dates as of
which information is given in the Registration Statement and Prospectus and
prior to the Closing Date and the Option Closing Date, (i) there shall not
have been any material adverse change in the condition, financial or
otherwise, of the Company or its subsidiaries, if any, or in the business
of the Company or its subsidiaries; (ii) there shall not have been any
material adverse transaction entered into by the Company or any of its
subsidiaries, if any; (iii) neither the Company nor any of its
subsidiaries, if any, shall have incurred any material obligations,
contingent or otherwise, which are not disclosed in the Prospectus; (iv)
there shall not have been any change in the outstanding securities or long
term debt (except current payments) of the Company or any of its
subsidiaries, if any; (v) the Company has not and will not have paid or
declared any dividends or other distributions on its Common Stock or other
securities; and (vi) there shall not have been any change in the officers
or directors of the Company.
2.06. NO DEFAULTS. Neither the Company nor any of its subsidiaries,
if any, is in default under any of the contracts, leases, subleases,
licenses or agreements to which they are a party. Except as disclosed in
the Prospectus, neither the Company nor any of its subsidiaries, if any, is
in default, which has not been waived, in the performance of any
obligation, agreement or condition contained in any debenture, note or
other evidence of indebtedness or any indenture or loan agreement. The
execution and delivery of this Agreement, the consummation of the
transactions herein contemplated and the compliance with the terms of this
Agreement will not conflict with or result in a breach of any of the terms,
conditions or
-5-
<PAGE>
provisions of, or constitute a default under, the articles of
incorporation, as amended, or bylaws of the Company or any of its
subsidiaries, if any, any note, indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any of its subsidiaries, if
any, is a party or by which it, its subsidiaries, if any, or any of their
property is bound, or any existing law, order, rule, regulation, writ,
injunction or decree of any government, governmental instrumentality,
agency or body, arbitration tribunal or court, domestic or foreign, having
jurisdiction over the Company, its subsidiaries, if any, or their property.
The consent, approval, authorization or order of any court or governmental
instrumentality, agency or body is not required for the consummation of the
transactions herein contemplated except such as may be required under the
Act or under the blue sky or securities laws of any state or jurisdiction.
2.07. INCORPORATION AND STANDING. The Company is and at the Closing
Date and at the Option Closing Date will be duly incorporated and validly
existing in good standing as a corporation under the state law of the
Company's state of incorporation with authorized and outstanding capital
stock as set forth in the Registration Statement and the Prospectus and
with full power and authority (corporate and other) to own its property and
conduct its business, present and proposed, as described in the
Registration Statement and Prospectus; the Company has full power and
authority to enter into this Agreement; and the Company is duly qualified
and in good standing as a foreign corporation in each jurisdiction in which
it owns or leases real property or transacts business requiring such
qualification. All of the Company's subsidiaries, if any, are identified
and described in the Registration Statement. Each of the Company's
subsidiaries, if any, is and at the Closing Date and at the Option Closing
Date will be duly incorporated and validly existing in good standing as a
corporation under the state law of their respective state of incorporation
with authorized and outstanding capital stock as set forth in the
Registration Statement and the Prospectus and with full power and authority
(corporate and other) to own its property and conduct its business, present
and proposed, as described in the Registration Statement and Prospectus,
and is duly qualified and in good standing as a foreign corporation in each
jurisdiction in which it owns or leases real property or transacts business
requiring such qualification, except where the failure to so qualify would
not be materially adverse to the Company's business taken as a whole.
2.08. LEGALITY OF OUTSTANDING SECURITIES. The outstanding shares of
Common Stock of the Company and each of its subsidiaries, if any, have been
duly and validly authorized and issued, are fully paid and nonassessable
and conform to all statements with regard thereto contained in the
Registration Statement and Prospectus. No sales of securities have been
made by the Company in violation of the registration provisions of the Act
or in violation of any other federal or state laws.
2.09. LEGALITY OF SECURITIES. The Securities, the Warrant Shares,
and the Representative's Warrant (described in Section 3.04 hereof) have
been duly and validly authorized and, when issued and delivered against
payment as provided in this Agreement, will be validly issued, fully paid
and nonassessable. The Securities, the Warrant Shares, and the
Representative's Warrant, upon issuance, will not be subject to the
preemptive rights of any shareholders of the Company. The Class A Warrants
and the Representative's Warrant, when sold and delivered, will constitute
valid and binding obligations of the Company enforceable in accordance with
their terms. A sufficient number of shares of Common Stock have been
-6-
<PAGE>
reserved for issuance upon exercise of the Class A Warrants and the
Representative's Warrant. The Securities, the Warrant Shares, and the
Representative's Warrant will conform to all statements in the Registration
Statement and Prospectus made with respect thereto. Upon delivery of and
payment for the Securities and the Representative's Warrant to be sold by
the Company as set forth in this Agreement, the persons paying therefor
will receive good and marketable title thereto, free and clear of all
liens, encumbrances, charges and claims. The Company will have on the
effective date of the Registration Statement and at the time of delivery of
the Securities and the Representative's Warrant full legal right and power
and all authorizations and approvals required by law to sell and deliver
the Securities and Representative's Warrant in the manner provided
hereunder.
2.10. OUTSTANDING SECURITIES AND LONG TERM DEBT ON EFFECTIVE DATE.
Immediately prior to the effective date, the only shares of capital stock,
warrants, options, or other convertible securities which have been issued
by the Company and which will be outstanding on the effective date will be
as described in the Prospectus, and the Company will not be obligated on
any long term debt, whether or not recorded on the books, records, or
accounts of the Company and will not be obligated to issue any capital
stock, warrants, options, or other convertible securities except as
described in the Prospectus. Unless the Representative has approved in
writing a different maximum number of fully diluted shares, immediately
prior to the effective date of the Registration Statement the number of
shares of Common Stock of the Company outstanding on a fully diluted basis
will not exceed 5,955,655 shares plus the number of shares underlying
options which were issued after May 28, 1996, under the Company's Amended
and Restated Stock Option Plan the last amendment to which was approved by
the Company's shareholders on May 29, 1996 ("Plan"). For purposes of this
Underwriting Agreement, the term "fully diluted basis" shall mean the
number of shares of Common Stock actually issued and outstanding plus the
number of shares of Common Stock underlying all issued and outstanding
convertible or excisable securities.
2.11. CUSIP NUMBER. The Company has obtained a CUSIP number for its
Units, Common Stock, and Class A Warrants.
2.12. OPTIONS AND TREASURY SHARES. There are no outstanding options,
warrants or other rights to purchase securities of the Company, however
characterized, except as described in the Registration Statement. Except as
described in the Registration Statement, there are no securities of the
Company, however characterized, held in its treasury. Except as described
in the Registration Statement, the Company has not offered or agreed to
purchase or issue any shares of Common Stock or any convertible securities
in the future.
2.13. SUBSIDIARIES. Except as described herein and in the
Registration Statement, the Company has no subsidiaries and does not
currently intend to acquire any subsidiaries or engage in mergers with or
the acquisition of any entity.
2.14. PRIOR SALES. No securities of the Company, or of a predecessor
of the Company, have been sold except as described in the Registration
Statement or as disclosed in writing to the Representative.
-7-
<PAGE>
2.15. LITIGATION. Except as set forth in the Registration Statement
or except for nonmaterial actions, suits, or proceedings disclosed in
writing to the Representative, there is and at the Closing Date and at the
Option Closing Date there will be no action, suit or proceeding before any
court or governmental agency, authority or body pending or to the knowledge
of the Company threatened against the Company or any of its subsidiaries.
2.16. FINDER. Except as set forth in the Registration Statement, the
Company knows of no outstanding claims against it for compensation for
services in the nature of a finder's fee, origination fee, or financial
consulting fee with respect to the offer and sale of the Securities and
Warrant Shares hereunder.
2.17. EXHIBITS. There are no contracts or other documents which are
required to be filed as exhibits to the Registration Statement by the Act
or by the Rules and Regulations thereunder, which have not been so filed
and each contract to which the Company or any of its subsidiaries is a
party and to which reference is made in the Prospectus has been duly and
validly executed, is in full force and effect in all material respects in
accordance with its terms, and none of such contracts has been assigned and
the Company knows of no present situation or condition or fact which would
prevent compliance with the terms of such contracts. Except for amendments
or modifications of such contracts in the ordinary course of business, the
Company has not been advised that any party to any such contract intends to
exercise any right which it may have to cancel any of its obligations under
any of such contracts and has no knowledge that any other party to any such
contracts has any intention not to render full performance under such
contracts.
2.18. TAX RETURNS. The Company has filed all tax returns which are
required to be filed by it and has paid all taxes shown on such returns and
on all assessments received by it to the extent such taxes have become due.
All taxes with respect to which the Company is obligated have been paid or
adequate accruals have been set up to cover any such unpaid taxes.
2.19. NO PREEMPTIVE RIGHTS. The Company's securities, however
characterized, are not subject to preemptive rights.
2.20. USE OF FORM SB-2. The Company is eligible to use Form SB-2 for
the offering of the Securities, the Representative's Warrant and the
Warrant Shares.
2.21. NO SECURITIES BEING OFFERED. Except as described in the
Registration Statement, neither the Company nor any of its subsidiaries, if
any, is currently offering any securities of which it is the issuer.
2.22. CERTIFICATES, PERMITS, LICENSES, APPROVALS, PATENTS AND
TRADEMARKS. The Company and each of its subsidiaries, if any, possess
adequate certificates, permits, licenses, or approvals, issued by the
appropriate federal, state and local regulatory authorities necessary to
conduct its business and to retain possession of its properties. The
Company and its subsidiaries, if any, have not received any notice of any
proceeding relating to the revocation or modification of any of these
certificates, permits, licenses, or approvals. The Company and each of its
subsidiaries, if any, has sufficient trademarks, patent rights and
copyright protection to conduct
-8-
<PAGE>
its business as now being conducted; and except as described in the
Prospectus, the Company has no knowledge of any use by it or any of its
subsidiaries, if any, of the trade secrets of others, of infringement by it
or them of trademarks, patent rights or copyrights of others, or of any
claim being made against the Company or any of its subsidiaries, if any,
regarding trademark, patent or copyright infringement or use of trade
secrets of others.
2.23. TITLE TO PROPERTIES. The Company and each of its subsidiaries,
if any, has marketable title to all properties, including patents, patent
applications, trademarks, trademark applications, service marks, service
mark applications, copyrights, equipment, and technology, described in the
Registration Statement as owned by it or them. The properties are free and
clear of all liens, charges, encumbrances or restrictions, however
characterized, except as described in the Registration Statement. All of
the contracts, leases, subleases, patents, patent applications, trademarks,
trademark applications, service marks, service mark applications,
copyrights, licenses and agreements, however characterized, under which the
Company and each of its subsidiaries, if any, holds its properties, as
described in the Registration Statement, are in full force and effect.
2.24. NO DIRECTED SALES. The Company has not made any
representation, whether oral or in writing, to any person, whether an
existing shareholder or not, that any of the Securities will be reserved or
directed to such person during the proposed public offering.
2.25. RESTRICTED SECURITIES. The Company has caused each of its
current shareholders who holds "restricted securities" as such term is
defined in Rule 144 under the Act to acknowledge that they hold "restricted
securities" as defined in Rule 144.
2.26. NEGOTIATIONS. During the period from the effective date to the
Closing Date or the Option Closing Date, the Company will notify the
Representative in writing from time to time of the status of any
negotiations involving the Company or any of its subsidiaries, if any,
relating to any transaction which would, if consummated, have a material
effect upon the Company or any of its subsidiaries, if any. Also, the
Company will consult with its legal counsel concerning the need to disclose
any such negotiations.
2.27. AUTHORITY. The execution and delivery by the Company of this
Agreement has been duly authorized by all necessary corporate action and
this Agreement is the valid, binding and legally enforceable obligation of
the Company.
2.28. 1940 ACT. The Company has been advised of the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and
regulations thereunder, and has in the past conducted, and intends in the
future to conduct, its affairs in such a manner as to ensure that it will
not become an "investment company" within the meaning of the 1940 Act and
such rules and regulations.
2.29. CAMPAIGN CONTRIBUTIONS. The Company has not at any time during
the last five years made any unlawful contribution to any candidate for
foreign office, or failed to disclose fully any contribution in violation
of law, or made any payment to any federal or state governmental officer or
official, or other person charged with similar public or quasipublic
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<PAGE>
duties, other than payments required or permitted by the laws of the United
States of any jurisdiction thereof.
2.30. SECURITIES ACTIVITIES. The Company has not taken and will not
take, directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or manipulation of
the price of any security to facilitate the sale or resale of the
Securities.
2.31. ENVIRONMENTAL. Except as specifically described in the
Prospectus, the Company is in compliance with all federal, state, and local
rules, regulations, and policies relating to the use, treatment, storage,
transportation, discharge, emission, or disposal of, or exposure of others
to, toxic substances and protection of health, safety or the environment
("Environmental Laws") which are applicable to its business; there is no
pending or asserted claim, liability, or investigation by any third party
or governmental authority against the Company under Environmental Laws; no
substances which are prohibited or regulated by any Environmental Law or
designated to be radioactive, toxic, hazardous or otherwise a danger to
health or the environment by any governmental agency ("Hazardous Material")
are present or likely to become present on any property which is owned,
leased, or occupied by the Company and no such property has been designated
as a SuperFund site, pursuant to the Comprehensive Response, Compensation,
and Liability Act of 1980, as amended, or otherwise designated as a
contaminated site under applicable federal, state or local law; and the
Company has received all permits, licenses, or other approvals required of
it under Environmental Laws to conduct its business as presently conducted
and is in compliance with all terms and conditions of such permits,
licenses, or approvals.
2.32. FDA AND DOT COMPLIANCE. The Company's business and the
business of each of the Company's subsidiaries, if any, is being conducted
in compliance with the applicable rules and regulations of the United
States Food & Drug Administration ("FDA") and the United States Department
of Transportation ("DOT"). Neither the Company, nor any subsidiary of the
Company, if any, received any notice of any claim by the FDA or DOT or any
other governmental agency that its business is not being conducted in
compliance with all applicable rules and regulations of the FDA or DOT or
any other governmental agency.
If the Company has any subsidiaries, the parties agree that the
representations and warranties contained in subsections 2.05, 2.06, 2.07,
2.08, 2.15, 2.22, 2.23, 2.26, 2.31, and 2.32, hereof shall be deemed to
have been made by the Company on its own behalf and on behalf of each of
its subsidiaries.
All of the above representations and warranties shall survive the
performance or termination of this Agreement.
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SECTION 3
---------
PURCHASE AND SALE OF THE SECURITIES
-----------------------------------
3.01. PURCHASE OF SECURITIES. The Company hereby agrees to sell to
the members of the Underwriting Group named in Schedule I hereto (for all
of whom the Representative is acting), severally and not jointly, and each
member of the Underwriting Group, upon the basis of the representations and
warranties herein contained, but subject to the conditions hereinafter
stated, agrees to purchase from the Company, severally and not jointly, the
number of Firm Units set forth opposite the name of each member of the
Underwriting Group as set forth in Schedule I hereto at a purchase price of
$_____ per Unit. The Company hereby grants to the Representative and the
members of the Underwriting Group an option for a period of 30 days after
the effective date to purchase up to ______ Overallotment Units in order to
cover overallotments. The purchase price of Overallotment Units is $_____
per Unit. Any Overallotment Units purchased shall be purchased for the
account of the Representative and/or for the accounts of the members of the
Underwriting Group as determined by the Representative.
3.01.01. DEFAULT BY MEMBER OF UNDERWRITING GROUP. If for any
reason one or more of the Underwriters shall fail or refuse (otherwise
than for a reason sufficient to justify the termination of this
Agreement under the provisions of Section 9 hereof) to purchase and
pay for the number of Firm Units agreed to be purchased by such
Underwriter, the Company shall immediately give notice thereof to the
Representative, and the nondefaulting Underwriters shall have the
right within 24 hours after the receipt by the Representative of such
notice, to purchase or procure one or more other Underwriters to
purchase, in such proportions as may be agreed upon among the
Representative and such purchasing Underwriter or Underwriters and
upon the terms herein set forth, the Firm Units which such defaulting
Underwriter or Underwriters agreed to purchase. If the nondefaulting
Underwriters fail so to make such arrangements with respect to all
such Firm Units, the number of Firm Units which each nondefaulting
Underwriter is otherwise obligated to purchase under this Agreement
shall be automatically increased pro rata to absorb the remaining Firm
Units which the defaulting Underwriter or Underwriters agreed to
purchase; provided, however, that the nondefaulting Underwriters shall
not be obligated to purchase any of the Firm Units if the aggregate
Public Offering Price of the Firm Units which the defaulting
Underwriter or Underwriters agreed to purchase exceeds 10% of the
Public Offering Price of the total Firm Units which all Underwriters
agreed to purchase hereunder. If the total number of Firm Units which
the defaulting Underwriter or Underwriters agreed to purchase shall
not be purchased or absorbed in accordance with this subsection
3.01.01, then the Company shall have the right, within 24 hours next
succeeding the 24 hour period above referred to, to make arrangements
with other underwriters or purchasers satisfactory to the
Representative for the purchase of all of the Firm Units which the
defaulting Underwriter or Underwriters agreed to purchase hereunder on
the terms herein set forth. In any such case, either the
Representative or the Company shall have the right to postpone the
Closing Date determined as provided in subsection 3.02.02. hereof for
not more than seven business days after the date originally fixed as
the Closing Date
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pursuant to said subsection 3.02.02. in order that any necessary
changes in the Registration Statement, the Prospectus or any other
documents or arrangements may be made. If neither the nondefaulting
Underwriters nor the Company shall make arrangements within the 24
hour periods stated above for the purchase of all the Firm Units which
the defaulting Underwriter or Underwriters agreed to purchase
hereunder, this Agreement shall be terminated without further act or
deed and without any liability on the part of the Company to any
nondefaulting Underwriter and without any liability on the part of any
nondefaulting Underwriter to the Company.
3.01.02. LIABILITY OF DEFAULTING MEMBERS OF THE UNDERWRITING
GROUP. Nothing contained in this Section 3.01 shall relieve any
defaulting member of the Underwriting Group of its liability, if any,
to the Company or to the remaining members of the Underwriting Group
for damages occasioned by its default hereunder.
3.02. PUBLIC OFFERING PRICE. After the Commission notifies the
Company that the Registration Statement has become effective and after this
Agreement becomes effective, the members of the Underwriting Group propose
to initially offer the Units to the public at the Public Offering Price.
The members of the Underwriting Group may allow such concessions and
discounts upon sales to selected dealers as may be determined from time to
time by the Representative.
3.02.01. PAYMENT FOR FIRM UNITS. Payment for the Firm Units
shall be made to the Company by regular check or checks at the offices
of the Representative set forth above in Denver, Colorado, upon
delivery to the Representative of certificates for the Firm Units in
definitive form in such numbers and registered in such names as the
Representative requests in writing at least two full business days
prior to such delivery. The Company agrees not to seek to obtain (i)
certification of the Representative's closing check or checks from the
Representative's bank or banks or (ii) a cashier's check or checks
from the Representative's bank or banks in substitution for the
Representative's closing check or checks. The Company agrees to
deposit the Representative's closing check or checks into the
Company's bank account and to allow such check or checks to clear
through the banking system on a "regular way" basis. Nothing contained
in this Section 3.02.01 shall be construed to relieve the
Representative from its obligations created as a result of the
issuance of the Representative's regular check or checks at the
Closing.
3.02.02. CLOSING. The time and date of delivery and payment
hereunder for the Firm Units is herein called the "Closing Date" and
shall take place at the office of the Representative at the address
set forth above in Denver, Colorado, at 10:00 A.M. on the third
business day following the effective date of this Agreement; provided,
however, the Company and the Representative may agree, on the date
that this Agreement becomes legally effective, to an alternative
Closing Date and such alternative Closing Date shall become the
Closing Date under this Agreement. Should the Representative elect to
exercise any part of the overallotment option pursuant to Section 3.01
hereof, the time, date of delivery and payment for the Overallotment
Securities being purchased shall be as mutually agreed between the
Company and the Representative, but not later
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<PAGE>
than the thirtieth calendar day after the effective date. Said date is
hereinafter referred to as the "Option Closing Date."
3.02.03. INSPECTION OF CERTIFICATES. For the purpose of
expediting the checking and packaging of the certificates for the
Units, the Company agrees to make the certificates available for
inspection by the Representative at the place designated by the
Representative at least one full business day prior to the proposed
delivery date.
3.03. REPRESENTATIVE'S NONACCOUNTABLE EXPENSE ALLOWANCE. It is
understood that the Company shall reimburse the Representative for its
expenses on a nonaccountable basis in the amount of 3% of the Public
Offering Price of the Firm Units and Overallotment Units purchased by the
Underwriters. The Representative acknowledges that it has received $40,000
of the nonaccountable expense allowance, which amount will be credited
against the unpaid balance of such nonaccountable expense allowance. On
the Closing Date and the Option Closing Date, the Company shall pay to the
Representative the unpaid balance of such nonaccountable expense allowance
then due.
3.04. REPRESENTATIVE'S WARRANT. On the Closing Date, the Company
will sell a warrant to the Representative and its designees
("Representative's Warrant") entitling the Representative to purchase a
total of ______ Units. The Representative's Warrant will be in the form of
the Representative's Warrant to Purchase Units filed as an exhibit to the
Registration Statement. The total amount that the Representative shall pay
the Company for the Representative's Warrant is $100. The Company and the
Representative agree that the Representative's Warrant may not be sold,
transferred, assigned, pledged, or hypothecated for a period of one year
after the effective date of the Registration Statement except to officers
of the Representative, to members of the Underwriting Group, and to
officers of members of the Underwriting Group and except by will or
operation of law. After such one year period, the Representative's Warrant
may be sold, transferred, assigned, pledged, or hypothecated provided that
any such transaction is in accordance with the registration or exemption
from registration provisions of the Act and any applicable state securities
laws. If the Representative's Warrant is exercised during the first year
after the effective date of the Registration Statement, then any shares of
Common Stock of the Company acquired as a result of any such exercise may
not be sold, transferred, assigned, pledged, or hypothecated until after
expiration of such one year period.
3.05. REPRESENTATIONS OF THE PARTIES. The parties hereto
respectively represent that as of the Closing Date and as of the Option
Closing Date the representations herein contained and the statements
contained in all the certificates theretofore or simultaneously delivered
by any party to another, pursuant to this Agreement, shall in all material
respects be true and correct.
3.06. POSTCLOSING INFORMATION. The Representative covenants that
reasonably promptly after the Closing Date and after the Option Closing
date, the Representative will supply the Company with all information that
the Company may reasonably request which must be supplied to the Commission
or securities authorities of states in which the Securities have been
qualified for sale.
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<PAGE>
3.07. REOFFERS BY SELECTED DEALERS. On each sale by the members of
the Underwriting Group of any of the Securities to selected dealers, the
members of the Underwriting Group shall require the selected dealers
purchasing any such Securities to agree to reoffer such Securities on the
terms and conditions of the offering set forth in the Registration
Statement and Prospectus.
SECTION 4
---------
REGISTRATION STATEMENT AND PROSPECTUS
-------------------------------------
4.01. DELIVERY OF REGISTRATION STATEMENT. The Company has delivered
to the Representative without charge two signed printed copies of the
Registration Statement, including all financial statements and exhibits
filed therewith and any amendments or supplements thereto, and shall
deliver without charge to the Representative such number of conformed
printed copies of the Registration Statement as the Representative shall
request, including all financial statements and exhibits filed therewith
and any amendments or supplements thereto. The signed copies of the
Registration Statement furnished to the Representative include signed
copies of any and all opinions and consents of the independent public
accountants certifying to the financial statements included in the
Registration Statement and Prospectus and signed copies of any and all
opinions, consents and certificates of any other persons whose profession
gives authority to statements made by them and who are named in the
Registration Statement or Prospectus as having prepared, certified or
reviewed any part thereof.
4.02. DELIVERY OF PRELIMINARY PROSPECTUS AND AGREEMENTS. The Company
will have caused to be delivered, at its expense, to the members of the
Underwriting Group and to other broker dealers specified by the
Representative prior to the effective date of the Registration Statement as
many printed copies of (i) each Preliminary Prospectus filed with the
Commission bearing in red ink the statements required by Item 501 of
Regulation S-B, and (ii) each Agreement Among Underwriters, Underwriting
Agreement, and Selected Dealer Agreement, all as may have been requested by
the Representative. The Company consents to the use of such documents by
the members of the Underwriting Group and by prospective dealers prior to
the effective date of the Registration Statement, so long as such use is in
accordance with the applicable provisions of the Act, the applicable Rules
and Regulations thereunder and the applicable state blue sky or securities
laws.
4.03. DELIVERY OF PROSPECTUS. The Company will deliver, at its
expense, to the members of the Underwriting Group and to other broker
dealers specified by the Representative, as many printed copies of the
Prospectus as the Representative may request and will deliver said printed
copies of the Prospectus to the members of the Underwriting Group and such
other persons on the effective date and for such period of time thereafter
as the Prospectus is required by law to be delivered in connection with
offers and sales of the Securities.
4.04. FURTHER AMENDMENTS AND SUPPLEMENTS. If during the period of
time that the Company's Prospectus is required to be delivered under the
Act, any event occurs or any event known to the Company relating to or
affecting the Company shall occur, as a result of which the Prospectus as
then amended or supplemented would include an untrue statement of a
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material fact, or omit to state any material fact necessary to make the
statements made therein, in light of the circumstances under which they
were made, not misleading or if it is necessary at any time after the
effective date to amend or supplement the Prospectus to comply with the
Act, the Company agrees to immediately notify the Representative thereof
and prepare and file with the Commission such further amendment to the
Registration Statement or supplemental or amended Prospectus as may be
required and furnish and deliver to the Representative and to others
designated by the Representative, all at the Company's expense, a
reasonable number of copies of the amended or supplemented Prospectus which
as so amended or supplemented will not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading when it is delivered to a purchaser or
prospective purchaser, and which will comply in all respects with the Act;
and in the event the Representative is required to deliver a Prospectus
after the date specified in Rule 174 of the Rules and Regulations, the
Company upon request will prepare promptly such Prospectus or Prospectuses
as may be necessary to permit compliance with the requirements of Section
10 of the Act.
4.05. USE OF PROSPECTUS. The Company authorizes the members of the
Underwriting Group in connection with the distribution of the Securities
and all dealers who may distribute any of the Securities to use the
Prospectus, as from time to time amended or supplemented, in connection
with the offering and sale of the Securities so long as such use is in
accordance with the applicable provisions of the Act, the applicable Rules
and Regulations thereunder and applicable state blue sky or securities
laws.
SECTION 5
---------
COVENANTS OF THE COMPANY
------------------------
The Company covenants and agrees with the members of the Underwriting
Group that:
5.01. OBJECTION OF REPRESENTATIVE TO AMENDMENTS OR SUPPLEMENTS.
After the date hereof, the Company will not at any time, whether before or
after the effective date of the Registration Statement, file any amendment
or supplement to the Registration Statement or Prospectus (i) unless and
until a copy of such amendment or supplement has been previously furnished
to the Representative within a reasonable time period prior to the proposed
filing thereof or (ii) to which the Representative or legal counsel to the
Representative has reasonably objected, in writing, on the ground that such
amendment or supplement is not in compliance with the Act or the Rules and
Regulations.
5.02. COMPANY'S BEST EFFORTS TO CAUSE REGISTRATION STATEMENT TO
BECOME EFFECTIVE. The Company agrees to use its best efforts to cause the
Registration Statement and any amendment thereto to become effective as
promptly as reasonably practicable and will promptly advise the
Representative and will confirm such advice in writing (i) when the
Registration Statement shall have become effective and when any amendment
thereto shall have become effective and when any amendment of or supplement
to the Prospectus shall be filed with the Commission, (ii) when the
Commission shall make, either orally or in writing, a request or suggestion
for any amendment to the Registration Statement or the Prospectus or for
any
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<PAGE>
additional information and the nature and substance thereof, (iii) of the
issuance by the Commission of an order suspending the effectiveness of the
Registration Statement pursuant to Section 8 of the Act or of the
initiation of any proceedings for that purpose, (iv) of the happening of
any event which in the judgment of the Company makes any material statement
in the Registration Statement or Prospectus untrue or which requires the
making of any changes in the Registration Statement or Prospectus in order
to make the statements therein not misleading, and (v) of the refusal to
qualify or the suspension of the qualification of the Securities for
offering or sale in any jurisdiction or of the institution of any
proceedings for any of such purposes. The Company will use every reasonable
effort to prevent the issuance of any such order or of any order preventing
or suspending such use, to prevent any such refusal to qualify or any such
suspension, and to obtain as soon as possible a lifting of any such order,
the reversal of any such refusal and the termination of any such
suspension.
5.03. PREPARATION AND FILING OF AMENDMENTS AND SUPPLEMENTS. The
Company agrees to prepare and file promptly with the Commission, upon
request of the Representative, such amendments or supplements to the
Registration Statement or Prospectus, in form satisfactory to legal counsel
to the Representative, as in the opinion of the Representative and of legal
counsel to the Company, may be necessary in connection with the offering or
distribution of the Securities and will use its best efforts to cause the
same to become effective as promptly as possible.
5.04. BLUE SKY QUALIFICATION. The Company agrees to use its best
efforts to register or qualify the Securities or such part thereof as the
Representative may determine for sale under the blue sky laws of such
states as are requested by the Representative. The Company will be
assisted by legal counsel for the Company in registering or qualifying the
Securities for sale under such blue sky laws. The Company will pay all of
the filing fees and legal fees, costs and expenses incurred by such legal
counsel in so registering or qualifying such Securities. The Company's
legal counsel will forward to legal counsel for the Representative copies
of all documents and correspondence sent to or received from such states in
connection with such registrations and qualifications at the time such
documents and correspondence are sent or received by legal counsel for the
Company. On the effective date of the Registration Statement, legal
counsel for the Company will issue to the Company and the Underwriting
Group a Blue Sky Legal Opinion in form and content satisfactory to the
Representative. The Company understands that one of the factors considered
by the Representative and the Underwriting Group in deciding to execute
this Underwriting Agreement was the states in which the Securities have
been registered or qualified for resale.
5.05. FINANCIAL STATEMENTS. The Company at its own expense agrees to
prepare and give and will continue to give such financial statements and
other information and reports to and as may be required by the Commission
or the proper public bodies of the states in which the Securities may be
registered or qualified.
5.06. REPORTS AND FINANCIAL STATEMENTS TO THE REPRESENTATIVE. For a
period of five years from the Closing Date, the Company agrees to deliver
to the Representative copies of each annual report of the Company and
copies of all reports it is required to file or make available pursuant to
the Securities Exchange Act of 1934, as amended ("Exchange Act"), and will
deliver
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to the Representative: (i) within 90 days (plus any extensions of time that
the Commission grants to the Company to file its annual report on the
appropriate Form) after the close of each fiscal year of the Company, a
financial report of the Company and its subsidiaries, if any, on a
consolidated basis, and a similar financial report of all of the Company's
unconsolidated subsidiaries, if any, all such reports to include a balance
sheet as of the end of the preceding fiscal year, a statement of
operations, a statement of stockholders' equity and statement of cash flows
covering such fiscal year, and all to be in reasonable detail and certified
by independent public accountants for the Company; (ii) within 45 days
(plus any extensions of time that the Commission grants to the Company to
file its quarterly report on the appropriate Form) after the end of each
quarterly fiscal period of the Company other than the last quarterly fiscal
period in any fiscal year, copies of the consolidated statements of
operations, stockholders' equity and cash flows for the quarterly fiscal
period and the fiscal year to the end of such quarterly fiscal period, and
the balance sheet as of the end of that period of the Company and its
subsidiaries, if any, and the equivalent financial statements of all of the
Company's unconsolidated subsidiaries, if any, for that period, all subject
to year end adjustment, certified by the principal financial or accounting
officer of the Company; (iii) copies of all other statements, documents or
other information which the Company mails or otherwise makes available to
any class of its security holders or files with the Commission; (vi) copies
of all news, press or public information releases when made; (v) copies of
all letters to the Company from its independent certified public
accountants concerning actual or potential deficiencies in the Company's
accounting procedures or internal control of funds; and (vi) upon request
in writing from the Representative, such other information as may
reasonably be requested and which may be properly disclosed to the
Representative with reference to the property, business and affairs of the
Company and its subsidiaries, if any. If the Company fails to furnish the
Representative with financial statements as herein provided, within the
times specified herein, the Representative shall have the right to have
such financial statements prepared by independent public accountants of
such Representative's own choosing and the Company agrees to furnish such
independent public accountants such data and assistance and access to such
records as they may reasonably require to enable them to prepare such
statements and to pay their reasonable fees and expenses in preparing the
same; provided, however, the Company shall have the right to furnish the
financial statements to the Representative at any time after the
Representative retains independent public accountants to prepare the
financial statements in which event the amount of fees that the Company
shall be obligated to pay to the independent public accountants selected by
the Representative will be limited to those fees (including any retainer
paid) actually incurred to the point in time that the Company furnishes the
required financial statements.
5.07. EXPENSES PAID BY THE COMPANY. The Company agrees to pay,
whether or not the transactions contemplated hereunder are consummated or
this Agreement is prevented from becoming effective or is terminated, all
costs and expenses incident to the performance of its obligations under
this Agreement, including all expenses incident to the authorization,
issuance, and delivery of the Securities, Representative's Warrants, and
the Representative's Class A Warrants, any original issue taxes in
connection therewith, all transfer taxes, if any, incident to the initial
sale of the Securities to the public, the fees and expenses of the
Company's personnel in connection with the offering, the costs, fees, and
expenses incident to the preparation, printing and filing under the Act and
with the NASD of the Registration Statement, or supplements thereto, the
cost of printing, reproducing and filing all exhibits to the Registration
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Statement, the Agreement Among Underwriters, this Agreement, the Selected
Dealer Agreement and any other underwriting documents, the cost of printing
and delivering to the Representative, the members of the Underwriting
Group, and selected dealers copies of the Registration Statement and copies
of the Agreement Among Underwriters, this Agreement and the Selected Dealer
Agreement, and any other underwriting documents, the Preliminary Prospectus
and the Prospectus as herein provided, the costs and legal counsel fees of
qualifying the Securities and Warrant Shares under the state securities or
blue sky laws as provided in Section 5.04 herein, the cost of providing the
Representative with two bound volumes of the Registration Statement, as
amended, all exhibits thereto, all state filings and all correspondence
relating to the Registration Statement and all state filings, the expenses
of Company representatives in attending a reasonable number of "due
diligence" meetings (which shall include all presentations specified by the
Representative) held by the Representative and the cost, not to exceed
$3,000, of tombstone advertising relating to the proposed Public Offering,
and any other expenses customarily paid by an issuer.
5.08. REPORTS TO SHAREHOLDERS. For so long as the Company's Common
Stock is registered under the Exchange Act, the Company agrees to hold an
annual meeting of shareholders for the election of directors within 180
days after the end of each of the Company's fiscal years and, within 180
days after the end of each of the Company's fiscal years to send to each of
the Company's shareholders the audited financial statements of the Company
as of the end of the fiscal year just completed prior thereto. Such
financial statements shall be those required by Rule 14a-3 under the
Exchange Act and shall be included in an annual report meeting the
requirements of such Rule. Further, the Company agrees, so long as such
Common Stock is so registered:
(i) to send, within 30 days after the Closing Date, a letter
to shareholders of the Company which welcomes them as
shareholders and discusses the business conducted by the
Company since the effective date.
(ii) to send, as least every 60 days for a period of three
years after the effective date, a letter or report to
shareholders of the Company and to broker dealers which
are then market markers of Securities of the Company on
NASDAQ ("market makers"), which contains a narrative
discussion of the Company s financial status and results
of operations and a narrative discussion of the business
conducted by the Company since the last report or letter
to shareholders and market markers.
(iii) during the period after three years from the effective
date, to send to each of the Company s shareholders and
market markers in printed form within 60 days after the
end of each fiscal quarter just ended and a narrative
discussion of such financial statements and the business
conducted by the Company during such quarter.
If the Company breaches any of its agreements set forth in this Section
5.08, the parties agree that any such breach will result in irreparable
harm to the Representative for which an adequate remedy for damages will
not exist and therefor the Representative shall be entitled to seek and
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obtain a court injunction in equity which orders the Company to comply with
its agreements set forth in this Section 5.08 and which requires the
Company to reimburse the Representative for its costs, including reasonable
attorney fees, incurred in obtaining such injunctive order.
5.09. SECTION 11(A) FINANCIALS. The Company agrees to send to each
of its security holders and agrees to deliver to the Representative, as
soon as practicable, but in no event later than the first day of the
sixteenth full calendar month following the effective date, an earnings
statement (as to which no opinion need be rendered but which will satisfy
the provisions of Section 11(a) of the Act) covering a period of at least
12 months beginning after the effective date.
5.10. POSTEFFECTIVE AVAILABILITY OF PROSPECTUS. Within the time
during which the Prospectus is required to be delivered under the Act, the
Company agrees to comply, at its own expense, with all requirements imposed
upon it by the Act, as now or hereafter amended, by the Rules and
Regulations, as from time to time may be in force, and by any order of the
Commission, so far as necessary to permit the continuance of sales of the
Securities.
5.11. APPLICATION OF PROCEEDS. The Company intends to apply the net
proceeds from the sale of the Securities substantially in the manner set
forth in the Registration Statement. Except for cumulative changes of less
than 10% in each specific item set forth in the "Use of Proceeds" section
of the definitive Prospectus, the Company will not deviate from such use
without giving written notice of such proposed deviation to the
Representative at least 10 business days prior to any such deviation.
Pending utilization of the net proceeds by the Company for business
purposes, all of the unused net proceeds from the sale of the Securities
will be invested in short term United States government securities
purchased through a bank or in a nondiscretionary account of the Company
with the Representative.
5.12. DELIVERY OF DOCUMENTS. Prior to the Closing Date, the Company
agrees to deliver to the Representative true and correct copies of the
articles of incorporation and certificate of incorporation of the Company
and all amendments thereto, all such copies to be certified by the
secretary of state of the state of incorporation of the Company; true and
correct copies of the bylaws of the Company and of the minutes of all
meetings of the directors and shareholders of the Company held prior to the
Closing Date; and true and correct copies of all material contracts to
which the Company or any of its subsidiaries, if any, is a party.
5.13. COOPERATION WITH REPRESENTATIVE'S DUE DILIGENCE. At all times
prior to the Closing Date, the Company agrees to cooperate with the
Representative, legal counsel to the Representative, and the
Representative's consultants in such investigation as the Representative
may make or cause to be made of the Company and its affiliates and the
Company agrees to make available to the Representative in connection
therewith such information and documents relating to the Company and its
affiliates as the Representative may reasonably request.
5.14. ANNUAL MEETINGS. The Company will, at its expense, so long as
its Common Stock is registered under the Exchange Act, hold an annual
meeting of shareholders for the election of directors within 180 days after
the end of each of the Company's fiscal years.
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5.15. LIMITATIONS ON COMPANY. Except with the Representative's prior
written consent, the Company agrees that the Company will not do the
following until (a) the termination of this Agreement or (b) the number of
days after the effective date for which the Prospectus is required to be
used pursuant to Rule 174 of the Rules and Regulations, whichever occurs
first:
(i) Undertake or authorize any change in its capital
structure;
(ii) Borrow any funds other than in the ordinary course of
business and as contemplated by the Prospectus;
(iii) Consolidate or merge with or into any other corporation;
or
(iv) Create any mortgage or any lien upon any of its properties
or assets other than in the ordinary course of business
and as contemplated by the Prospectus.
5.16. APPOINTMENT OF TRANSFER AGENT AND WARRANT AGENT. Prior to the
effective date, the Company will have appointed American Securities
Transfer & Trust, Inc., Denver, Colorado, as transfer agent for the
Company's Units and Common Stock and as warrant agent for the Company's
Class A Warrants.
5.17. CERTIFICATES. The Company agrees to make arrangements to have
available at the office of the transfer agent sufficient quantities of the
Company's certificates as may be needed for the quick and efficient
transfer of the Units and Common Stock. The Company agrees to make
arrangements to have available at the office of the warrant agent
sufficient quantities of the Company's Class A Warrant Certificates has may
be needed for quick and efficient transfer of Class A Warrants.
5.18. COMPLIANCE WITH CONDITIONS PRECEDENT. The Company agrees to
use all reasonable efforts to comply or cause to be complied with the
conditions precedent to the obligations of the members of the Underwriting
Group in Section 8 hereof.
5.19. FILINGS OF FORMS. The Company agrees to file with the
Commission all required reports on Form SR in accordance with the
provisions of Rule 463 of the Rules and Regulations and will file with the
appropriate state securities authorities any sales and other reports
required by the rules and regulations of such agencies and will provide
copies of such reports to the Representative and to the legal counsel to
the members of the Underwriting Group.
5.20. REGISTRATION UNDER THE EXCHANGE ACT. Prior to the effective
date of the Registration Statement, the Company will have made a filing
under Section 12(g) of the Exchange Act with respect to the Company's
Common Stock and Class A Warrants. The Company agrees to deliver a copy of
such filing to the Representative and to legal counsel for the
Representative when filed. On the effective date of the Registration
Statement, the Company will cause the Company's filing under Section 12(g)
of the Exchange Act to become effective with the Commission.
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5.21. LISTING IN MANUALS. As soon as possible prior to the effective
date, the Company agrees to use its best efforts to have the Company listed
in Moody's Over-the-Counter Manual and Standard & Poor's Standard
Corporation Records and such other Manuals as are reasonably requested by
the Representative.
5.22. NASDAQ/NMS. The Company agrees to have Units listed and
available for quotation on the NASDAQ Small Cap Market on the effective
date of the Registration Statement. Subject to the Company s ability to
meet the maintenance requirements of the NASDAQ Small Cap Market on the
Detachment Date, the Company agrees to have its Common Stock and the Class
A Warrants listed and available for quotation on the NASDAQ Small Cap
Market on the Detachment Date and to delist the Units from quotation on the
NASDAQ Small Cap Market at the same time as the Common Stock and Class A
Warrants become listed for quotation on the NASDAQ Small Cap Market. The
trading symbols shall be mutually agreeable to the Company and the
Representative. As soon as the Company meets the qualifications required
with respect thereto, the Company will designate its securities for
inclusion on the NASDAQ/NMS or, in the alternative, such national stock
exchange as is agreed to between the Company and the Representative.
5.23. SECONDARY TRADING QUALIFICATION. The Company agrees to qualify
its securities for secondary trading, as soon as legally possible, in
California and such other states as are reasonably requested by the
Representative from time to time.
5.24. LEGENDS ON STOCK CERTIFICATES. The Company agrees to cause the
stock certificates of its current shareholders that represent "restricted
securities," and the stock and warrant certificates held by officers,
directors, or controlling persons of the Company to be clearly legended as
being restricted against transfer without compliance with the Act and to
cause the Company's transfer agent and warrant agent to put stop transfer
instructions against such certificates.
5.25. UNITHOLDERS, STOCKHOLDERS, AND CLASS A WARRANTHOLDERS LISTS AND
TRANSFER SUMMARIES. Within 10 business days after the Closing Date and
within 10 business days after the Option Closing Date, the Company will
deliver to the Representative complete lists of all holders of the Units
and Common Stock of the Company as of the Closing Date and as of the Option
Closing Date, respectively. Each such list shall include the name and
address of each such holder and the number of Units and shares of Common
Stock owned by each such person as of such date. Within 10 business days
after the end of each of the first 24 calendar months after the Closing
Date, the Company will provide the Representative with a new list
containing the information described above with respect to the Units,
Common Stock, and Class A Warrants as of the end of each such month and a
list which shows each transaction involving a transfer of a Unit or Common
Stock certificate or Class A Warrant certificate during such month. This
transfer list shall include the name and address of the transferor and the
transferee and the number of shares of Units, Common Stock, or Class A
Warrants transferred.
5.26. DIRECTORS, OFFICERS AND COMMITTEES. The Company agrees that
the persons comprising the board of directors and officers of the Company
on the effective date must be acceptable to the Representative. Such
acceptance will only be withheld by the Representative
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if material adverse information is discovered by the Representative. The
Company agrees that for a period of three years after the effective date,
at the request of the Representative, the Company will permit a
representative of the Representative to be present at all meetings of the
board of directors of the Company. The Representative shall be provided
with the same notice of each meeting of the board of directors as is
provided to the board of directors. No compensation shall be paid to such
observer. However, the Company will reimburse out of pocket expenses
incurred by such observer to attend meetings. Such observer shall have no
vote at such meetings; such observer shall be required, prior to attending
any such meeting, to represent in writing to the Company that such observer
is familiar with and will comply with all requirements of the federal
securities laws applicable to a person who comes into possession of
material nonpublic information concerning the Company; and such observer
may be excluded from attendance at any such meeting during the discussion
of information which is subject to the attorney client or accountant client
privilege. The board of directors of the Company will establish an audit
and a management compensation committee and will maintain such committees
so long as the Common Stock of the Company is registered under the Exchange
Act.
5.27. RIGHT OF INSPECTION. The Company agrees that for a period of
five years after the effective date, the Representative, at the
Representative's expense, will have the right to have a person or persons
selected by the Representative review the books and records of the Company
if at any time the audited or unaudited financial statements of the Company
indicate that the Company has realized a net loss after taxes or if a
material adverse change occurs in the Company, provided that the
Representative may cause such review no more than once in any 12 month
period.
5.28. PUBLIC RELATIONS FIRM. For a period of at least 36 months
after the effective date, the Company will use a public relations firm
which is mutually acceptable to the Company and the Representative. The
Company shall have sole authority to determine the compensation and the
utilization of such public relations firm. Such public relations firm
shall not be a member of the Underwriting Group or a "related person" of
any such member of the Underwriting Group. The term "related person" is
described in Section 5.30 of this Agreement.
5.29. MANAGEMENT REFERRALS. Persons whom management of the Company
believe may be interested in purchasing Securities in the public offering
will be referred only to Representative and management of the Company will
purchase Securities in the public offering only through the Representative.
The Representative will have complete control of the distribution of the
Securities in the public offering.
5.30. NO NASD MEMBER PAYMENTS. For purposes of this Section and
Section 5.28 hereof, a related person of an NASD member is a person who has
any of the following relationships with any NASD member: legal counsel,
financial consultant or advisor, finder, associated person, or member of
the immediate family of any such person. The Company represents to the
Representative that the Company has not paid and will not pay, except as
described in the Registration Statement or the next sentence, or agreed to
pay or deliver any item of value, including securities, to any member of
the NASD or to any person associated with a member of the NASD or to any
related person of an NASD member during the period
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beginning on the 366th day prior to the filing of the Registration
Statement with the Commission and ending on the 45th day after the
effective date of the Registration Statement. The representation contained
in the foregoing sentence shall not include cash discounts or commissions
paid by the Company in connection with a distribution of the Company's
securities which occurs prior to the filing of the Registration Statement
with the Commission and shall not include payments made to Brenner
Securities Corporation pursuant to the letter dated September 22, 1995, as
amended by letters dated February 7 and March 7, 1996.
5.31. FUTURE SALES.
5.31.01. COMPANY SALES TO OTHERS. During the period of six
months after the effective date of the Registration Statement, the
Company will not sell any securities (other than debt securities
issued to financial institutions) not covered by the Registration
Statement without the Representative's prior written consent.
Excepted from this provision shall be sales of Excluded Securities.
The term "Excluded Securities" shall mean options and warrants which
are issued and outstanding on the effective date of the Registration
Statement or which are issued pursuant to a plan ("Plan") which has
been approved in writing by the board of directors of the Company and
the Representative prior to the effective date of the Registration
Statement.
5.31.02. COVERED PERSONS. Prior to the effective date of the
Registration Statement, the Company will cause each of its officers,
directors, 5% or more shareholders, and their affiliates ("Covered
Persons) to agree in writing with the Representative that, without the
prior written consent of the Representative, each such Covered Person
will not sell for a period of 13 months after the Closing Date any of
the Company's shares of Common Stock owned by him or it prior to the
Closing Date. Such agreement will also provide that if a Covered
Person who is an officer or director of the Company on the effective
date of the Registration Statement ceases to be an officer or director
of the Company during the period of 13 months after the Closing Date,
then such Covered Person and the affiliates of such Covered Person
will agree not to sell any of the Company's shares of Common Stock
owned by such Covered Person and such Covered Person's affiliates
prior to the Closing Date of such Registration Statement until the
expiration of 13 months after the Closing Date. The agreements with
Covered Persons William J. Collard and Gerald F. Willman, Jr. will
exclude from such restriction on future sales the sale by such persons
collectively of a maximum of 111,067 shares of Common Stock pursuant
to the exercise of options granted by such persons to nine persons.
For purposes of this Agreement, the term "affiliate" shall have the
meaning ascribed to it in Rule 405 of the Act. Such agreements between
the Representative and the Covered Persons will also provide that any
sales of shares of Common Stock of the Company by such persons during
the three year period after the Closing Date, under Rule 144
promulgated by the SEC under the Act ("Rule 144 Sales"), will be
executed only through the Representative acting as a broker or dealer.
In such agreement the Representative will agree to execute such Rule
144 Sales on a competitive basis. If any person required to execute an
agreement under
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this subsection 5.31.02. has pledged, or during the applicable period
pledges, any of the Company's shares of Common Stock which are covered
by such agreement; such person shall cause his pledgee to also agree
in writing to comply with the pledgor's agreement with the
Representative. A copy of any such written agreement from the pledgee
shall be promptly delivered by the pledgor to the Representative after
execution thereof by the pledgee.
SECTION 6
---------
INDEMNIFICATION
---------------
6.01. INDEMNIFICATION BY COMPANY. The Company agrees to indemnify
and hold harmless the members of the Underwriting Group and each person who
controls any member of the Underwriting Group within the meaning of Section
15 of the Act against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject under the
Act or any other statute or at common law and to reimburse the persons
indemnified for any legal or other expenses (including the cost of any
investigation and preparation) incurred by them in connection with any
litigation, whether or not resulting in any liability, but only insofar as
such losses, claims, damages, liabilities and litigation arise out of or
are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment
thereto or any application or other document filed in order to qualify the
Securities under the blue sky or securities laws of the states where
filings were made, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, all as of the date when the Registration
Statement or such amendment, as the case may be, becomes effective, or any
untrue statement or alleged untrue statement of a material fact contained
in the Prospectus (as amended or supplemented if the Company shall have
filed with the Commission any amendments thereof or supplements thereto),
or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, that the indemnity agreement contained in this subsection 6.01
shall not apply to the members of the Underwriting Group or any person
controlling a member of the Underwriting Group in respect of any such
losses, claims, damages, liabilities or actions arising out of or based
upon any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in
reliance upon information peculiarly within the knowledge of a member of
the Underwriting Group and furnished in writing to the Company by a member
of the Underwriting Group specifically for use in connection with the
preparation of the Registration Statement and Prospectus or any such
amendment or supplement thereto. This indemnity agreement is in addition to
any other liability which the Company may otherwise have to the members of
the Underwriting Group or to any person controlling a member of the
Underwriting Group. Each member of the Underwriting Group agrees within 10
days after the receipt by it of written notice of the commencement of any
action against it or against any person controlling it as aforesaid, in
respect of which indemnity may be sought from the Company on account of the
indemnity agreement contained in this subsection 6.01 to notify the Company
in writing of the commencement thereof. The failure of such a member of the
Underwriting Group so to notify the Company of any such action shall
relieve the person to whom such
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notice was not given from any liability which it may have to that member of
the Underwriting Group or any person controlling it as aforesaid on account
of the indemnity agreement contained in this subsection 6.01, but shall not
relieve the Company from any other liability which it may have to that
member of the Underwriting Group or such controlling person. In case any
such action shall be brought against a member of the Underwriting Group or
any such controlling person and the member of the Underwriting Group shall
notify the Company of the commencement thereof, the Company shall be
entitled to participate in (and, to the extent that it shall wish, to
direct) the defense thereof at its own expense, but such defense shall be
conducted by legal counsel of recognized standing and reasonably
satisfactory to such member of the Underwriting Group or such controlling
person or persons, which is a defendant or which are defendants in such
litigation. The Company shall not be liable for amounts paid in settlement
of any such litigation if such settlement was effected without the written
consent of the Company. If the Company elects to direct such defense, the
Company agrees to furnish to the involved member of the Underwriting Group
at its request, copies of all pleadings therein and to apprise the involved
member of the Underwriting Group of all developments therein, all at the
Company's expense, and to permit the member of the Underwriting Group to be
an observer therein.
6.02. INDEMNIFICATION BY THE MEMBERS OF THE UNDERWRITING GROUP. The
members of the Underwriting Group agree, in the same manner as set forth in
subsection 6.01. above, to indemnify and hold harmless the Company, the
directors and officers of the Company and each person, if any, who controls
the Company within the meaning of Section 15 of the Act, with respect to
any statement in or omission from the Registration Statement or any
amendment thereto, or the Prospectus (as amended or as supplemented, if
amended or supplemented as aforesaid) or any application or other document
filed in any state or jurisdiction in order to qualify the Securities under
the blue sky or securities laws thereof, or any information furnished
pursuant to subsection 3.06 hereof, if such statement or omission was made
in reliance upon information peculiarly within the knowledge of a member of
the Underwriting Group and furnished in writing to the Company by a member
of the Underwriting Group or on its behalf specifically for use in
connection with the preparation thereof or supplement thereto. No member of
the Underwriting Group shall be liable for amounts paid in settlement of
any such litigation if such settlement was effected without the written
consent of the member of the Underwriting Group. In case of commencement of
any action in respect of which indemnity may be sought from a member of the
Underwriting Group on account of the indemnity agreement contained in this
subsection 6.02., each person to be indemnified by the member of the
Underwriting Group shall have the same obligation to notify the member of
the Underwriting Group as the members of the Underwriting Group have toward
the Company in subsection 6.01. above, subject to the same loss of
indemnity in the event such notice is not given, and the member of the
Underwriting Group shall have the same right to participate in (and, to the
extent that the member of the Underwriting Group shall wish, to direct) the
defense of such action at the expense of the member of the Underwriting
Group, but such defense shall be conducted by legal counsel of recognized
standing and reasonably satisfactory to the Company. If the member of the
Underwriting Group elects to direct such defense, the member of the
Underwriting Group agrees to furnish to the Company at its request copies
of all pleadings therein and apprise it of all the developments therein,
all at the expense of the member of the Underwriting Group, and permit the
Company to be an observer therein.
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6.03. CONTRIBUTION. If the indemnification provided for in this
Section 6 is unavailable to or insufficient to hold harmless an indemnified
party under subsections 6.01. and 6.02. above in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall in lieu of indemnifying such
indemnified party contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect not only (i) the relative benefits received by the
Company on the one hand and the member of the Underwriting Group on the
other from the offering of the Securities, but also (ii) the relative fault
of the Company and the member of the Underwriting Group in connection with
the statements or omissions which resulted in such losses, claims, damages,
or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the member of the Underwriting Group on the
other shall be deemed to be in the same proportion as the total net
proceeds from the public offering of the Securities (before deducting
expenses) received by the Company bears to the total underwriting discount
received by the members of the Underwriting Group, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or the member of the Underwriting Group and the person's relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the members of the
Underwriting Group agree that it would not be just and equitable if
contribution pursuant to this subsection 6.03. were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to
above in this subsection 6.03. shall be deemed to include any legal or
other expenses to which such indemnified party would be entitled if
subsections 6.01. and 6.02. hereof were applied. Notwithstanding the
provisions of this subsection 6.03., no member of the Underwriting Group
shall be required to contribute any amount in excess of the amount equal to
the total price of the Securities underwritten and distributed by it to the
public. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11 of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
6.04. THREAT OF REGULATORY ACTION. The Company and the
Representative agree to advise each other immediately and confirm in
writing the receipt of any threat of or the initiation of any steps or
procedures which would impair or prevent the right to offer the Securities
or the issuance of any "suspension orders" or other prohibitions preventing
or impairing the proposed offering of the Securities. In the case of the
happening of any such event, neither the Company nor the members of the
Underwriting Group will acquiesce in such steps, procedures or suspension
orders and each party agrees to actively defend any such actions or orders
unless all parties agree in writing to acquiesce in such actions or orders.
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SECTION 7
---------
EFFECTIVENESS OF AGREEMENT
--------------------------
After this Agreement has been executed by the Company and the
Representative, this Agreement shall become effective (i) at 10:00 A.M.,
Denver, Colorado Time, on the first full business day after the effective
date of the Registration Statement or (ii) upon release by the
Representative of the Securities for offering after the effective date,
whichever shall first occur. The time of the release by the Representative
of the Securities for offering, for the purposes of this Section 7, shall
mean the time of release by the Representative for publication of the first
newspaper advertisement which is subsequently published relating to the
Securities or the time of the first mailing of copies of the Prospectus
relating to the Securities in connection with a confirmation of a sale of
Securities by an Underwriter or Dealer whichever shall first occur.
SECTION 8
---------
CONDITIONS OF THE OBLIGATIONS OF THE
------------------------------------
MEMBERS OF THE UNDERWRITING GROUP
--------------------------------
After execution of this Agreement by the Company and the
Representative, the obligations of the members of the Underwriting Group to
purchase the Securities and to make payment therefor on the Closing Date
and on the Option Closing Date shall be subject to the accuracy, as of the
Closing Date and as of the Option Closing Date, of the representations and
warranties on the part of the Company herein contained, to the performance
by the Company of all of its agreements and obligations herein contained,
to the fulfillment of or compliance by the Company with all covenants and
conditions hereof, and to the following additional conditions, any of which
may be waived or modified by the Representative:
8.01. EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement shall have become effective and no order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission or be pending; any request for additional information on the
part of the Commission (to be included in the Registration Statement or
Prospectus or otherwise) shall have been complied with to the satisfaction
of the Commission; and neither the Registration Statement nor the
Prospectus nor any amendment thereto shall have been filed to which legal
counsel to the members of the Underwriting Group shall have reasonably
objected in writing or have not given its consent.
8.02. ACCURACY OF REGISTRATION STATEMENT. The Representative shall
not have disclosed in writing to the Company that the Registration
Statement or the Prospectus or any amendment thereof or supplement thereto
contains an untrue statement of a fact which, in the opinion of legal
counsel to the members of the Underwriting Group is material, or omits to
state a fact which, in the opinion of such legal counsel, is material and
is required to be stated therein, or is necessary to make the statements
therein not misleading.
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8.03. NO MATERIAL ADVERSE CHANGES. No material adverse changes shall
have occurred in or with respect to the officers or directors of the
Company. No material adverse changes shall have occurred in or with respect
to the business, properties, financial condition or credit of the Company
or in or with respect to any conditions affecting the prospects of its
business.
8.04. CASUALTY AND OTHER CALAMITY. The Company shall not have
sustained any loss on account of fire, explosion, flood, accident, calamity
or any other cause, of such character as materially adversely affects its
business or property considered as an entire entity, whether or not such
loss is covered by insurance, and no officer or director of the Company
shall have suffered any injury, sickness or disability of a nature which
would materially adversely affect his or her ability to properly function
as an officer or director of the Company.
8.05. LITIGATION AND OTHER PROCEEDINGS. Except as disclosed in the
Prospectus, there shall be no litigation instituted or threatened against
the Company and there shall be no proceeding instituted or threatened
against the Company before or by any federal or state commission,
regulatory body or administrative agency or other governmental body,
domestic or foreign.
8.06. LACK OF MATERIAL CHANGE. Except as contemplated herein or as
set forth in the Registration Statement and Prospectus, during the period
subsequent to the date of the last audited balance sheet included in the
Registration Statement, the Company (i) shall have conducted its business
in the usual and ordinary manner as the same was being conducted on the
date of the last audited balance sheet included in the Registration
Statement, and (ii) except in the ordinary course of its business, the
Company shall not have incurred any liabilities or obligations (direct or
contingent) or disposed of any of its assets, or entered into any material
transaction or suffered or experienced any materially adverse change in its
condition, financial or otherwise. The capital stock and surplus accounts
of the Company shall be substantially the same as at the date of the last
balance sheet included in the Registration Statement, without considering
the proceeds from the sale of the Securities, other than as may be set
forth in the Prospectus.
8.07. REVIEW BY LEGAL COUNSEL TO THE MEMBERS OF THE UNDERWRITING
GROUP. The authorization of the Securities, Representative's Warrant,
Warrant Shares, Registration Statement, Prospectus and all corporate
proceedings and other legal matters incident thereto and to this Agreement
shall be reasonably satisfactory in all respects to legal counsel to the
members of the Underwriting Group.
8.08. OPINIONS OF LEGAL COUNSEL.
8.08.01. BRENMAN KEY & BROMBERG, P.C., LEGAL OPINION. The
Company shall have furnished to the members of the Underwriting Group
an opinion, dated the Closing Date, addressed to the members of the
Underwriting Group, from Brenman Key & Bromberg, P.C., legal counsel
to the Company, to the effect that based upon a review by them of the
Registration Statement, Prospectus, the Company's certificate of
incorporation, bylaws and relevant corporate proceedings and
contracts, an examination
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of such statutes they deem necessary and based upon such other
investigation by such legal counsel as they deem necessary to express
such opinion:
(i) The Company and each of its subsidiaries, if any, have
been duly incorporated and are validly existing corporations in
good corporate standing under the laws of the state in which it
was incorporated, with full corporate power and authority to own
and operate its properties and to carry on its business as set
forth in the Registration Statement and Prospectus.
(ii) The Company has authorized and outstanding securities
as set forth in the Registration Statement and Prospectus; the
outstanding securities of the Company and each of its
subsidiaries, if any, and the Securities conform to the
statements concerning them in the Registration Statement and
Prospectus; the outstanding securities of the Company and each of
its subsidiaries, if any, have been duly and validly issued and
are fully paid and nonassessable and contain no preemptive
rights; the Securities being sold by the Company to the
Underwriting Group and the Representative's Warrant have been
duly and validly authorized and, upon issuance thereof and
payment therefor in accordance with this Agreement and the
Representative's Warrant will be duly and validly issued, fully
paid and nonassessable and will not be subject to the preemptive
rights of any shareholder of the Company.
(iii) To legal counsel's knowledge, no consents, approvals,
authorizations or orders of agencies, officers or other
regulatory authorities are known to such legal counsel which are
necessary for the valid authorization, issue or sale of the
Securities being sold by the Company to the Underwriting Group
hereunder, except as required under the Act or the securities
laws of the states in which the Securities are qualified or
except as required by the NASD.
(iv) To legal counsel's knowledge, the issuance and sale of
the Securities being sold by the Company to the Underwriting
Group and the consummation of the transactions herein
contemplated and compliance with the terms of this Agreement will
not conflict with or result in a breach of any of the terms,
conditions, or provisions of or constitute a default under the
certificate of incorporation or bylaws of the Company, or any
note, indenture, mortgage, deed of trust, or other agreement or
instrument known to such counsel to which the Company is a party
or by which the Company or any of its property is bound or any
existing law (provided this Section 8.08 (iv) shall not relate to
federal or state securities laws), order, rule, regulation, writ,
injunction, or decree of any government, governmental
instrumentality, agency, body, arbitration tribunal, or court,
domestic or foreign, having jurisdiction over the Company or its
property and which is known to such counsel.
(v) No preemptive rights exist with respect to the
Company's securities.
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(vi) The Company has authorized capitalization as described
in the Registration Statement.
(vii) Based upon written or oral communications from the
Commission, the Registration Statement has become effective under
the Act and, to the knowledge of such legal counsel, no stop
order suspending the effectiveness of the Registration Statement
has been issued and no proceeding for that purpose has been
instituted or is pending or contemplated; legal counsel has
participated in the preparation of the Registration Statement and
Prospectus and each amendment and supplement thereto, and no
facts have come to the attention of legal counsel to lead counsel
to believe that either the Registration Statement or the
Prospectus or any amendment or supplement thereto contains any
untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances
under which made (except for the financial statements and other
financial data included therein, as to which legal counsel
expresses no opinion); and such counsel is familiar with all
contracts referred to in the Registration Statement or Prospectus
and such contracts are sufficiently summarized or disclosed
therein or filed as exhibits thereto as required, and such legal
counsel does not know of any other contracts that are required to
be summarized or disclosed or filed, and such legal counsel does
not know of any legal or governmental proceedings pending or
threatened to which the Company is subject of such a character
required to be disclosed in the Registration Statement or the
Prospectus which are not disclosed and properly described
therein.
(viii) This Agreement has been duly authorized by the
Company and is a valid and binding agreement of the Company
enforceable according to its terms subject to equitable
principles and to applicable bankruptcy, insolvency and other
laws concerning the enforceability of creditors' rights
generally; provided that such counsel need express no opinion as
to the enforceability of any indemnification or contribution
provisions contained in this Agreement. A sufficient number of
shares of the Company's Common Stock have been duly reserved for
issuance upon exercise of the Class A Warrants, the
Representative's Warrant, and the Representative s Class A
Warrants issuable upon exercise of the Representative's Warrant.
(ix) Except as disclosed in the Registration Statement and
Prospectus, to the knowledge of legal counsel, the Company is not
in default under any of the contracts, licenses, leases or
agreements to which it is a party and which are described in the
Registration Statement or attached thereto as exhibits and the
offering of the Securities being sold by the Company to the
Underwriting Group will not cause the Company to become in
default of any of such contracts, licenses, leases or agreements.
(x) Except as disclosed in the Registration Statement and
Prospectus and subject to equitable principles, to the knowledge
of legal counsel, the properties
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owned by the Company and its subsidiaries, if any, described in
the Registration Statement are free and clear of all liens,
charges, encumbrances or restrictions; all of the leases,
subleases and other agreements known to such counsel under which
the Company and each of its subsidiaries, if any, holds its
properties and conducts its business are in full force and
effect; neither the Company nor any of its subsidiaries, if any,
is in default under any of the material terms or provisions of
any of such leases, subleases or other agreements known to such
counsel; and there are no claims against the Company or any of
its subsidiaries, if any, concerning its rights under such
leases, subleases and other agreements and concerning its right
to continued possession of its properties.
(xi) Legal counsel is unaware of any affiliate, parent or
subsidiaries of the Company except as are described in the
Registration Statement and Prospectus.
(xii) Such counsel has not received and is not aware of the
Company having received any notice of any claim from any third
party which notice would cause such counsel to conclude that the
Company does not own or possess adequate rights with respect to
the U.S. Patents, the U.S. Trademarks, or other material patents,
patent rights, trademarks, service marks, trade names, copyrights
described or referred to in the Prospectus as owned or used by
the Company or which are necessary for the conduct of the
Company's business or proposed business as described in the
Prospectus.
(xiii) To such counsel's knowledge, except as set forth in
the Registration Statement and Prospectus, no holders of Common
Stock or other securities of the Company have registration rights
with respect to securities of the Company and, except as set
forth in the Registration Statement and Prospectus, all holders
of securities of the Company having rights to registration of
such Common Stock, or other securities, because of the filing of
the Registration Statement by the Company have, with respect to
the offering contemplated thereby, waived such rights or such
rights have expired by reason of lapse of time following
notification of the Company's intent to file the Registration
Statement, or have included securities in the Registration
Statement pursuant to the exercise of such rights.
In rendering such opinions, such legal counsel shall be entitled
to rely upon Public Authority Documents and upon information provided
by client officials in written Certificates provided that copies of
such Public Authority Documents and Certificates are attached as
exhibits to the written opinion of legal counsel. The term "Public
Authority Documents" shall have the meaning ascribed to it in the
Legal Opinion Accord of the ABA Section of Business Law (1991). Such
opinions may be subject to such qualifications, exceptions,
definitions, limitations as are normally included in similar opinions.
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8.08.02. The Company shall furnish to the members of the
Underwriting Group an opinion, dated the Closing Date, addressed to
the members of the Underwriting Group, from ________________________
to the effect that:
(i) To the knowledge of such counsel, the Company's business
and the business of each of the Company's subsidiaries, if any,
is in compliance with all laws applicable to the FDA and DOT, all
applicable rules and regulations of the FDA and DOT and all laws
and regulations of any states in which such business is
conducted.
(ii) Such counsel has not received and is not aware of the
Company having received any notice of any claim by the FDA or DOT
or any other governmental agency that the products and services
being marketed by the Company are not in compliance with all
applicable rules and regulations of the FDA and DOT and any laws
and regulations of any states in which such products and services
are marketed.
In rendering such opinion, such legal counsel shall be entitled
to rely upon Public Authority Documents and upon information provided
by client officials in written Certificates provided that copies of
such Public Authority Documents and Certificates are attached as
exhibits to the written opinion of legal counsel. The term "Public
Authority Documents" shall have the meaning ascribed to it in the
Legal Opinion Accord of the ABA Section of Business Law (1991). Such
opinions may be subject to such qualifications, exceptions,
definitions, limitations as are normally included in similar opinions.
8.09. ACCOUNTANT'S LETTER. The Representative shall have received a
letter addressed to the Representative and dated the Closing Date from
Ernst & Young LLP, independent public accountants for the Company, stating
that with respect to the Company they are independent public accountants
within the meaning of the Act and the applicable published Rules and
Regulations thereunder; in their opinion, the financial statements audited
by them of the Company at all dates and for all periods referred to in
their opinion and included in the Registration Statement and Prospectus,
comply in all material respects with the applicable accounting requirements
of the Act and the published Rules and Regulations thereunder with respect
to registration statements on Form SB-2; on the basis of certain indicated
procedures (but not an audit in accordance with generally accepted
accounting principles), including reading of the instruments of the Company
set forth in the Prospectus, a reading of the latest available interim
unaudited financial statements of the Company, whether or not appearing in
the Prospectus, inquiries of the officers of the Company or other persons
responsible for its financial and accounting matters regarding the specific
items for which representations are requested below and a reading of the
minute book of the Company, nothing has come to their attention, except as
disclosed in their letter, which would cause them to believe that during
the period from the last audited balance sheet included in the Registration
Statement to a specified date not more than two days prior to the date of
such letter:
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(i) there has been any material change in the financial
position of the Company other than as contemplated by disclosures
contained in the Prospectus;
(ii) there has been any material change in the capital
stock or surplus accounts of the Company or any payment or
declaration of any dividend or other distribution in respect
thereof or exchange therefor or in the debt of the Company from
that shown in the Company's last audited balance sheet included
in the Prospectus, other than as contemplated by disclosures
contained in the Prospectus;
(iii) there have been any material decreases in working
capital or net worth as compared with amounts shown in the
Company's last audited balance sheet included in the Prospectus
other than as contemplated by disclosures contained in the
Prospectus;
(iv) there have been any material decreases, as compared
with amounts shown in the Company's last audited balance sheet
included in the Prospectus, in the cash balances other than as
contemplated by disclosures contained in the Prospectus;
(v) the financial statements and schedules set forth in the
Registration Statement and Prospectus do not present fairly the
financial position and results of operations of the Company for
the periods indicated in conformity with generally accepted
accounting principles applied on a consistent basis, and are not
in all material respects a fair presentation of the information
purported to be shown; and
(vi) the dollar amounts, percentages and other financial
information set forth in the Registration Statement and
Prospectus under the captions "Summary," "The Offering,"
"Selected Financial Information," "Risk Factors," "Use of
Proceeds," "Capitalization," "Dilution," "Management's Discussion
and Analysis of Financial Condition and Results of Operations,"
"The Company," "Executive Compensation," and "Certain
Relationships and Related Transactions" are not in agreement with
the Company's general ledger, financial records or computations
made by the Company therefrom.
Such letter shall also cover such other matters incident to the
transactions contemplated by this Agreement in form satisfactory to
the Representative as the Representative reasonably requests.
8.10. CONFORMED COPIES OF ACCOUNTANT'S LETTER. The Representative
shall be furnished without charge, in addition to the original signed
copies, such number of signed or photostatic or conformed copies of such
letters as the Representative shall reasonably request.
8.11. OFFICER'S CERTIFICATES. The Company shall have furnished to
the Representative two certificates each signed by the chairman of the
board, by the president and by the chief
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financial officer of the Company, one dated the date of this Agreement and
one dated as of the Closing Date, to the effect that:
(i) The representations and warranties of the Company in
this Agreement are true and correct at and as of the date of the
certificate and the Company has complied with all the agreements
and has satisfied all the conditions on its part to be performed
or satisfied at or prior to the date of the certificate.
(ii) The Registration Statement has become effective and no
order suspending the effectiveness of the Registration Statement
has been issued and to the best of the knowledge of the
respective signers, after such respective signers have made
inquiry, no proceeding for that purpose has been initiated or is
threatened by the Commission.
(iii) The respective signers have each carefully examined
the Registration Statement and Prospectus and any amendments and
supplements thereto, and the Registration Statement and the
Prospectus and any amendments and supplements thereto contain all
statements required to be stated therein, and all statements
contained therein are true and correct, and neither the
Registration Statement nor Prospectus nor any amendment or
supplement thereto includes any untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading and, since the effective date of the Registration
Statement, there has occurred no event required to be set forth
in an amended or a supplemented Prospectus which has not been so
set forth.
(iv) This Agreement has been, and, as of the Closing Date,
the Representatives Warrant and the Representative's Class A
Warrants issuable upon the exercise of the Representative s
Warrant will have been, duly authorized and executed by the
Company.
(v) The respective signers have each reviewed the
questionnaires provided to the Representative by each officer,
director, and 5% or more shareholder of the Company and, to the
best of their knowledge, the statements made in such
questionnaires are true and correct.
(vi) Except as set forth in the Registration Statement and
Prospectus, since the respective dates as of which information is
given in the Registration Statement and Prospectus and prior to
the date of such certificate, (i) there has not been any change
in the officers or directors of the Company or any substantially
adverse change, financial or otherwise, in the affairs or
condition of the Company, and (ii) the Company has not incurred
any liabilities, direct or contingent, or entered into any
transactions, otherwise than in the ordinary course of business.
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(vii) Subsequent to the respective dates as of which
information is given in the Registration Statement and
Prospectus, no dividends or distributions whatever have been
declared and/or paid on or with respect to the securities of the
Company.
8.12. TENDER FOR DELIVERY. All of the Securities being offered by
the Company which have been sold in the offering shall be tendered for
delivery in accordance with the terms and provisions of this Agreement.
8.13. BLUE SKY QUALIFICATION. The Securities shall be qualified in
such states as are reasonably designated by the Representative as set forth
in Section 5.04 hereof and each such qualification shall be in effect and
not subject to any stop order or other proceeding on the Closing Date or
Option Closing Date. On both the effective date of the Registration
Statement and on the Closing Date, the Company and the Representative shall
receive from Brenman Key & Bromberg, P.C., a written opinion which contains
the following:
(i) The names of the states in which applications to
register or qualify the Securities have been filed;
(ii) The status of such registrations or qualifications in
such states as of the date thereof;
(iii) A list containing the name of each such state in
which the Securities may be legally offered and sold by a dealer
licensed in such state and the number of each which may be
legally offered and sold in each such state as of the date
thereof;
(iv) With respect to the written opinion dated on the
effective date, a representation that such legal counsel will
continuously update such written information if any changes occur
in the information provided therein between the effective date
and the Closing Date and Option Closing Date; and
(v) A statement that the Company, the members of the
Underwriting Group and selected dealers in the offering may rely
upon the opinions contained therein.
8.14. APPROVAL OF LEGAL COUNSEL TO THE REPRESENTATIVE. All opinions,
letters, certificates and evidence mentioned above or elsewhere in this
Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance satisfactory to legal counsel to the
Representative. The suggested form of such documents shall be provided to
the legal counsel to the Representative at least three business days before
the Closing Date.
8.15. OFFICER'S CERTIFICATE AS A COMPANY REPRESENTATIVE. Any
certificate signed by an officer of the Company and delivered to the
Representative or to legal counsel to the members of the Underwriting Group
will be deemed a representation and warranty by the Company to the members
of the Underwriting Group as to the statements made therein.
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SECTION 9
---------
TERMINATION
-----------
9.01. TERMINATION BECAUSE OF NONCOMPLIANCE. This Agreement may be
terminated by the members of the Underwriting Group by notice to the
Company in the event that the Company shall have failed or been unable to
comply with any of the terms, conditions or provisions of this Agreement on
the part of the Company to be performed, complied with or fulfilled within
the respective times herein provided for, unless compliance therewith or
performance or satisfaction thereof shall have been expressly waived by the
Representative in writing. This Agreement may be terminated by the Company
by notice to the Representative in the event the members of the
Underwriting Group shall have failed or been unable to comply with any of
the terms, conditions or provisions of this Agreement on the part of the
members of the Underwriting Group to be performed, complied with or
fulfilled within the respective times herein provided for, unless
compliance therewith or performance or satisfaction thereof shall have been
expressly waived by the Company in writing.
9.02. TERMINATION BECAUSE OF CHANGES. This Agreement may be
terminated by the members of the Underwriting Group by notice to the
Company if the Representative believes in its sole judgment that any
changes have occurred in or with respect to the management of the Company,
that material adverse changes have occurred in or with respect to the
condition or obligations of the Company, or if the Company shall have
sustained a loss or anticipated loss as a result of a strike, governmental
action, fire, flood, accident, contract termination, or other calamity of
such a character as, in the sole judgment of the Representative, may
interfere materially with the conduct of the Company's business and
operations regardless of whether or not such loss or anticipated loss shall
have been insured.
9.03. MARKET OUT TERMINATION. This Agreement may be terminated by
the members of the Underwriting Group by notice to the Company at any time
if, in the judgment of the Representative, payment for and delivery of the
Securities is rendered impracticable or inadvisable because (i) additional
material governmental restrictions not in force and effect on the date
hereof shall have been imposed upon the trading in securities generally, or
minimum or maximum prices shall have been generally established on the New
York or American Stock Exchange, or trading in securities generally on
either such Exchange shall have been suspended, or a general moratorium
shall have been established by federal or state authorities, or (ii) a war
or other national calamity or emergency shall have occurred, or (iii) of
any suspension of trading of the Common Stock of the Company in the over
the counter market, or (iv) the occurrence of a material adverse event
affecting the Company which materially impairs the investment quality of
the Securities or (v) substantial and material adverse changes in the
condition of the securities markets beyond normal fluctuations have
occurred.
9.04. EFFECT OF TERMINATION HEREUNDER. If the members of the
Underwriting Group decide to terminate this Agreement pursuant to this
Section 9 or the Company decides to terminate this Agreement pursuant to
Section 10 hereof, such party shall provide notice of such termination to
the other party. In such event, the Representative shall provide the
Company with a statement of the Underwriting Group's actual accountable out
of pocket expenses, which shall
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include but are not limited to, fees of legal counsel to the members of the
Underwriting Group and the fees of independent consultants who are not
directly or indirectly affiliated or associated with a member of the NASD
and who are retained by the Underwriting Group to provide a service in
connection with the due diligence investigation of the proposed offering,
entertainment expenses, travel expenses, postage expenses, advertising
costs, duplication expenses, long distance telephone expenses, and any
other actual out of pocket accountable expense incurred by the Underwriting
Group in connection with the proposed offering. The Representative shall
not be required to include in such accountable expenses any of the expenses
to be paid by the Company under Section 5.07 hereof, and, if the
Underwriting Group has paid any of such expenses on behalf of the Company,
the Company shall separately reimburse the Underwriting Group for such
advances immediately upon receipt of a statement therefor from the
Representative. If such actual accountable out of pocket expenses are more
than the amount of the nonaccountable expense payments the Company has made
to the Underwriting Group, the Underwriting Group will be entitled to keep
the amount of the nonaccountable expense payments the Company has made to
the Underwriting Group and, within 10 days after receipt by the Company of
such statement, the Company will pay to the Representative the excess
expenses the Underwriting Group has incurred, but if the actual accountable
out of pocket expenses are less than the amount of nonaccountable expense
payments the Underwriting Group has received from the Company, the
Underwriting Group will return the difference to the Company. The Company
and the members of the Underwriting Group shall not have any liabilities to
each other if the Company or the members of the Underwriting Group decide
not to proceed with the proposed offering for any reason set forth in this
Section 9 or in Section 10 hereof, except that the Company shall remain
obligated to pay the costs and expenses provided to be paid by it as
specified in Sections 5.07 and 9.04 hereof; and the Company, and the
members of the Underwriting Group shall be obligated to pay, respectively,
all losses, claims, damages or liabilities, joint or several, under Section
6 hereof.
SECTION 10
----------
REPRESENTATIONS AND WARRANTIES OF
---------------------------------
THE MEMBERS OF THE UNDERWRITING GROUP
-------------------------------------
The members of the Underwriting Group represent and warrant to and
agree with the Company that:
10.01. REGISTRATION AS BROKER DEALER AND MEMBER OF NASD. The members
of the Underwriting Group are registered as broker dealers with the
Commission and are members in good standing of the NASD and are licensed as
a dealer in all states in which they will sell the Securities.
10.02. NO PENDING PROCEEDINGS. There is not now pending against the
Representative any action or proceeding of which it has been advised,
either in any court of competent jurisdiction, before the Commission or any
state securities commission, concerning its activities as a broker or
dealer that, in the opinion of the Representative, would prevent it from
acting as such under federal securities laws or under the laws of the
states in which it intends to offer the Securities.
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10.03. COMPANY'S RIGHT TO TERMINATE. In the event any action or
proceeding of the type referred to in Section 10.02 above shall be
instituted against the Representative at any time prior to the Closing Date
hereunder, or in the event there shall be filed by or against the
Representative in any court pursuant to any federal, state, local or
municipal statute, a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of assets of
the Representative or if the Representative makes an assignment for the
benefit of creditors, the Company shall have the right on written notice to
the Representative to terminate this Agreement without any liability to the
members of the Underwriting Group of any kind except for the payment of
expenses as provided in Section 5.07 hereof.
10.4. FINDER. The members of the Underwriting Group know of no
outstanding claims against them for compensation for services in the nature
of a finder's fee, origination fee or financial consulting fee with respect
to the offer and sale of the Securities hereunder.
10.5 COMPLIANCE. The members of the Underwriting Group, severally
and not jointly, agree to offer and sell the Securities being purchased
hereunder in accordance with the requirements of federal and state
securities laws and the rules of the NASD.
SECTION 11
----------
RIGHT OF FIRST REFUSAL
----------------------
For a period of three years after the effective date of the
Registration Statement, the Representative shall have a preferential right
to purchase for its account or to sell for any account of the Company, its
parent company, if any, or the Company's subsidiaries, if any, any
securities with respect to which the Company, its parent company, or its
subsidiaries may seek a public or private offering within the United States
for cash. The Company will consult the Representative with regard to any
such covered offering for cash and will offer the Representative the
opportunity to purchase or sell any such securities on terms not less
favorable to the Company, its parent company, or its subsidiaries than it
or they can secure elsewhere. The Representative will have 20 days in which
to accept such offer. If the Representative rejects such offer, the
Company, its parent company, or its subsidiaries may sell such securities
on terms not less favorable than those offered to the Representative. If
such securities are not sold within a period of 270 days, the
Representative will once again have the rights specified herein with
respect to the sale or purchase of such securities. The Company has
informed the Representative that it has not previously granted a similar
right of first refusal to any other person which is currently binding on
the Company.
SECTION 12
----------
FEE PAYABLE ON OCCURRENCE OF CERTAIN EVENTS
-------------------------------------------
12.01 MERGERS AND ACQUISITIONS. Subject to the purchase of the Firm
Units by the members of the Underwriting Group, for a period of five years
after the effective date, the Representative will provide consulting
services which are customary in the industry in connection with, and the
Representative will be paid a consulting fee in connection with any
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transaction initiated by the Representative involving, a merger,
consolidation, stock exchange, or the acquisition or sale of all or a
material part of the assets or business of any entity, if such transaction
involves the Company, its parent company, or its subsidiaries. A
transaction will be deemed initiated by the Representative if it is
suggested by the Representative to either party to the transaction. The
consulting fee will be computed as follows:
Amount of Transaction Fee
----------------------- --------
$1.00 - $1,000,000 5% plus
$1,000,001 - $2,000,000 4% plus
$2,000,001 - $3,000,000 3% plus
$3,000,001 - $4,000,000 2% plus
$4,000,001 and over 1%
Amount of the transaction includes:
(i) the total proceeds and other consideration being
received by the Company, its parent company, or its subsidiaries
and/or any of their stockholders upon the consummation of the
transaction (including payments made in installments) inclusive
of cash, securities, notes, liabilities assumed, consulting
agreements and agreements not to compete;
(ii) if a portion of such consideration includes contingent
payments (whether or not related to future earnings or
operations), 50% of the maximum amount of such payments; and
(iii) in the event that the aggregate consideration for a
transaction consists in whole or in part of securities, for the
purposes of calculating the amount of the consideration, the
value of such securities will be, in the case of the existence of
a public trading market thereof, the average of the closing sale
prices for the five days preceding the consummation of the
transaction or, in the absence of a public trading market
thereof, the fair market value thereof as agreed to by the
parties on the day preceding the consummation of the transaction.
If the Company, its parent company, or any of its subsidiaries
proposes to engage in any such type of transaction which was not initiated
by the Representative, but in connection with which the Company, its parent
company, or any of its subsidiaries proposes to obtain services from an
investment banker, the Company, its parent company, or such Subsidiary
shall provide the Representative with the first opportunity to provide
consulting services which are customary in the industry in connection
therewith. The Representative shall have 10 days within which to accept
such offer. If the Representative does not accept such offer within such 10
days, the Company and/or its subsidiary shall be free to obtain such
services for such proposed transaction from any investment banker selected
by the Company and/or its subsidiary. If the Representative accepts such
offer, the fee for such services shall be
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determined by using 50% of the full 5% to 1% scale set forth above. The
Company has not previously granted similar rights to any other person.
12.02 WARRANT EXERCISE FEE. If the Representative provides written
notice to the Company, at any time after 12 months from the effective date
of the Registration Statement, that the Representative is electing to
solicit the exercise of the Class A Warrants by the holders thereof, the
Company will pay to the Representative a fee of 10% of the aggregate
exercise price received by the Company as a result of the Representative s
solicitation of such holders, if (i) the market price of the Company's
Common Stock on the date a Class A Warrant is exercised is greater than the
exercise price of the Class A Warrant, (ii) the Class A Warrant being
solicited is not held in a discretionary account at the time of exercise,
except where prior specific approval for exercise is received from the
person exercising the Class A Warrant, (iii) the person exercising the
Class A Warrant states in writing that the exercise was solicited and
designates in writing the Representative or another broker-dealer to
receive compensation in connection with the exercise and (iv) the
solicitation of the exercise of the Class A Warrant is not in violation of
Rule 10b-6 promulgated under the Exchange Act. The Representative may
reallow a portion of the fee to soliciting broker-dealers.
SECTION 13
----------
NOTICE
------
Except as otherwise expressly provided in this Agreement:
13.01. NOTICE TO THE COMPANY. Whenever notice is required by the
provisions of this Agreement to be given to the Company, such notice shall
be in writing addressed as follows:
Global Med Technologies, Inc.
12600 West Colfax
Suite A-500
Lakewood, Colorado 80215
13.02. NOTICES. Whenever notice is required by the provisions of
this Agreement to be given to the members of the Underwriting Group, such
notice shall be given in writing addressed to the Representative at the
address set out at the beginning of this Agreement.
SECTION 14
----------
MISCELLANEOUS
-------------
14.01. BENEFIT. This Agreement is made solely for the benefit of the
members of the Underwriting Group, the Company, their respective officers
and directors and any controlling person referred to in Section 15 of the
Act, and their respective successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. The term
"successor" or the term "successors and assigns" as used in this Agreement
shall not include any purchasers, as such, of any of the Securities. In
addition, the indemnity, defense and contribution obligations of the
Company included in Section 6 of this Agreement also inure to the benefit
of the selected dealers and any person who controls the selected dealers
within the meaning of Section 15 of the Act.
-40-
<PAGE>
14.02. SURVIVAL. The respective indemnities, agreements,
representations, warranties, covenants and other statements as set forth in
or made pursuant to this Agreement and the indemnity and contribution
agreements contained in Section 6 hereof shall survive and remain in full
force and effect, regardless of (i) any investigation made by or on behalf
of the Company, or the members of the Underwriting Group or any such
officer or director thereof or any controlling person of the Company or of
any member of the Underwriting Group, (ii) delivery of or payment for the
Securities, and (iii) the occurrence of Closing Date and the Option Closing
Date; and any successor of the Company, any member of the Underwriting
Group or any controlling person, officer or director thereof, shall be
entitled to the benefits hereof.
14.03. GOVERNING LAW. The validity, interpretation and construction
of this Agreement and of each part hereof will be governed by the laws of
the state of Colorado.
14.04. THE INFORMATION OF THE MEMBERS OF THE UNDERWRITING GROUP.
Notwithstanding any participation by the legal counsel of the members of
the Underwriting Group in the reorganization and/or revision of the
Prospectus, the statements with respect to the public offering of the
Securities on the cover page of the Prospectus and the Notes thereto and
under the caption "Underwriting" in the Prospectus constitute the only
written information furnished by or on behalf of the members of the
Underwriting Group referred to in Sections 2.02, 6.01 and 6.02 hereof.
14.05. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which may be deemed an original and all of which
together will constitute one and the same instrument.
-41-
<PAGE>
Please confirm that the foregoing correctly sets forth the Agreement
between the members of the Underwriting Group and the Company.
Very truly yours,
GLOBAL MED TECHNOLOGIES, INC.
By:_____________________________________
Michael I. Ruxin,
Chairman of the Board
By:_____________________________________
William J. Collard, Secretary
THE REPRESENTATIVE, ON BEHALF OF THE UNDERWRITING GROUP, HEREBY CONFIRMS AS
OF THE DATE HEREOF THAT THE ABOVE LETTER SETS FORTH THE AGREEMENT BETWEEN
THE COMPANY AND THE UNDERWRITING GROUP.
RAF FINANCIAL CORPORATION
By:_____________________________________
Robert L. Long, Senior Vice
President of RAF Financial
Corporation, as Attorney in
Fact for the several Underwriters
named in Schedule I to the
Underwriting Agreement
-42-
<PAGE>
SCHEDULE I
UNDERWRITERS
Underwriter Number of Units Purchased
- ---------------------- --------------------------
RAF Financial Corporation
-43-
EXHIBIT 4.1
RW-1 RW/CS
11/18/96
Void After 3:30 P.M., Mountain Time, on__________________, 2002
REPRESENTATIVE'S WARRANTS TO PURCHASE UNITS
GLOBAL MED TECHNOLOGIES, INC.
This is to Certify That, FOR VALUE RECEIVED, R A F FINANCIAL
CORPORATION, 1700 Lincoln Street, 32nd Floor, Denver, Colorado 80203
("Holder") is entitled to purchase, subject to the provisions of this
Warrant, from GLOBAL MED TECHNOLOGIES, INC. ("Company"), at any time on or
after ____________, 1998, until 3:30 P.M., Mountain Time, on _____________,
2002 ("Expiration Date"), _______ Units (each of which consists of two
Common Shares and one Class A Redeemable Common Stock Purchase Warrant) of
the Company at a purchase price per share of $____ during the period this
Warrant is exercisable. The number of Units to be received upon the
exercise of this Warrant and the price to be paid for a Unit may be
adjusted from time to time as hereinafter set forth. The purchase price of
a Unit in effect at any time and as adjusted from time to time is
hereinafter sometimes referred to as the "Exercise Price." This Warrant is
or may be one of a series of warrants identical in form issued by the
Company to purchase an aggregate of _______ Units of the Company and the
term "Warrants" as used herein means all such Warrants (including this
Warrant). The Common Shares, as adjusted from time to time, included in the
Units underlying the Warrants and underlying the Class A Redeemable Common
Stock Purchase Warrants ("Class A Warrants") included in the Units
underlying the Warrants are hereinafter sometimes referred to as "Warrant
Shares." The Warrant Shares also includes all Common Shares that have been
issued upon the exercise of the Warrants and all Common Shares issued upon
the exercise the Class A Warrants underlying the Warrants. The Class A
Warrants will be exactly the same as the Class A Redeemable Stock Purchase
Warrants included in the Units issued by the Company pursuant to
Registration Statement No. 333-11723 except that the initial exercise price
of the Class A Warrants will be $_____.
(a) EXERCISE OF WARRANT. This Warrant may be exercised in whole or
in part at any time or from time to time on or after ________________,
1998, until the Expiration Date or if the Expiration Date is a day on which
banking institutions are authorized by law to close, then on the next
succeeding day which shall not be such a day, by presentation and surrender
hereof to the Company or at the office of its stock transfer agent, if any,
with the Purchase Form annexed hereto duly executed and accompanied by
payment of the Exercise Price for the number of shares specified in such
Form, together with all federal and state taxes applicable upon such
exercise. The Company agrees not to merge, reorganize or take any action
that would terminate this Warrant unless provisions are made as part of
such merger, reorganization or other action which would provide the holders
of this Warrant with an equivalent of this Warrant as specified in Section
(i) hereof. The Company agrees to provide notice to the Holder
<PAGE>
that any tender offer is being made for the Company's Common Shares no
later than three business days after the day the Company becomes aware that
any tender offer is being made for outstanding Common Shares of the
Company. If this Warrant should be exercised in part only, the Company
shall, upon surrender of this Warrant for cancellation, execute and deliver
a new Warrant evidencing the right of the Holder to purchase the balance of
the Units purchasable hereunder. Upon receipt by the Company of this
Warrant at the office of the Company or at the office of the Company's
stock transfer agent, in proper form for exercise and accompanied by the
Exercise Price, the Holder shall be deemed to be the holder of record of
the Units issuable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such Units shall not then be actually delivered to the Holder.
(b) RESERVATION OF COMMON SHARES AND CLASS A WARRANTS. The Company
hereby agrees that at all times there shall be reserved for issuance and/or
delivery upon exercise of this Warrant such number of Common Shares and
Class A Warrants as shall be required for issuance or delivery upon
exercise of this Warrant.
(c) FRACTIONAL SHARES AND CLASS A WARRANTS. No fractional Common
Shares or Class A Warrants or scrip representing fractional Common Shares
or Class A Warrants shall be issued upon the exercise of this Warrant. With
respect to any fraction of a Common Share or Class A Warrant called for
upon any exercise hereof, the Company shall, upon receipt by the Company or
the Company's stock transfer agent of the Exercise Price, pay to the Holder
an amount in cash equal to such fraction multiplied by the current market
value of such fractional Common Share and Class A Warrant, determined as
follows:
(1) If the Common Shares or Class A Warrants are listed on a
national securities exchange, are admitted to unlisted trading
privileges on such an exchange, or are listed for trading on a trading
system of the National Association of Securities Dealers, Inc.
("NASD") such as the NASDAQ Small Cap Market or NASDAQ National Market
System ("NMS"), then the current value shall be the last reported sale
price of the Common Shares or Class A Warrants on such an exchange or
system on the last business day prior to the date of exercise of this
Warrant or if no such sale is made on such day, the average of the
closing bid prices for the Common Shares or Class A Warrants for such
day on such exchange or such system shall be used; or
(2) If the Common Shares or Class A Warrants are not so listed
on such exchange or system or admitted to unlisted trading privileges,
the current value shall be the average of the last reported bid prices
reported by the National Quotation Bureau, Inc. on the last business
day prior to the date of the exercise of this Warrant; or
(3) If the Common Shares or Class A Warrants are not so listed
or admitted to unlisted trading privileges and if bid and asked prices
are not so reported, the current
3
<PAGE>
value shall be an amount, not less than book value, determined in such
reasonable manner as may be prescribed by the board of directors of
the Company.
(d) EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company or at the office of its
stock transfer agent, if any, for other Warrants of different denominations
entitling the Holder thereof to purchase (under the same terms and
conditions as provided by this Warrant) in the aggregate the same number of
Units purchasable hereunder. This Warrant may not be sold, transferred,
assigned or hypothecated, except that it may be transferred or assigned in
whole or in part to the officers of R A F Financial Corporation, to other
securities brokers and dealers who participated in the offering of
securities of the Company with respect to which this Warrant was issued
("Offering"), to the officers of such other securities brokers and dealers,
or by will or operation of law. Any such transfer or assignment shall be
made by surrender of this Warrant to the Company or at the office of its
stock transfer agent, if any, with the Assignment Form annexed hereto duly
executed and with funds sufficient to pay any transfer tax; whereupon the
Company shall, without charge, execute and deliver a new Warrant in the
name of the assignee named in such instrument of assignment and this
Warrant shall promptly be canceled. This Warrant may be divided or combined
with other Warrants which carry the same rights upon presentation hereof at
the office of the Company or at the office of its stock transfer agent, if
any, together with a written notice specifying the names and denominations
in which new Warrants are to be issued and signed by the Holder hereof. The
term "Warrant" as used herein includes any warrants issued in substitution
for or replacement of this Warrant, or into which this Warrant may be
divided or exchanged. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and
(in the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Warrant, if
mutilated, the Company will execute and deliver a new Warrant of like tenor
and date. Subject to such right of indemnification, any such new Warrant
executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not this Warrant so lost,
stolen, destroyed, or mutilated shall be at any time enforceable by anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or
equity, and the rights of the Holder are limited to those expressed in the
Warrant and are not enforceable against the Company except to the extent
set forth herein.
(f) ADJUSTMENT PROVISIONS.
(1) ADJUSTMENTS OF THE EXERCISE PRICE.
(A) If the Company subdivides its outstanding Common Shares
into a greater number of Common Shares, the Exercise Price in
effect immediately
4
<PAGE>
prior to such subdivision shall be proportionately reduced.
Conversely, if the Company combines its outstanding Common Shares
into a lesser number of Common Shares, the Exercise Price in
effect immediately prior to such combination shall be
proportionally increased. In case of a subdivision or
combination, the adjustment of the Exercise Price shall be made
as of the effective date of the applicable event. A distribution
on Common Shares, including a distribution of Convertible
Securities, to shareholders of the Company on a pro rata basis
shall be considered a subdivision of Common Shares for the
purposes of this subsection (1)(A) of this Section, except that
the adjustment will be made as of the record date for such
distribution and any such distribution of Convertible Securities
shall be deemed to be a distribution of the Common Shares
underlying such Convertible Securities.
(B) If the Company shall at any time distribute or cause to
be distributed to its shareholders, on a pro rata basis, cash,
assets, or securities of any entity other than the Company, then
the Exercise Price in effect immediately prior to such
distribution shall automatically be reduced by an amount
determined by dividing (x) the amount (if cash) or the value (if
assets or securities) of the holders' of Warrants (as such term
is defined in the first paragraph hereof) pro rata share of such
distribution determined assuming that all holders of Warrants had
exercised their Warrants and the Class A Warrants underlying the
Warrants on the day prior to such distribution, by (y) the number
of Common Shares included in the Units and the Class A Warrants
issuable upon the exercise of this Warrant and the Class A
Warrants underlying this Warrant on the day prior to such
distribution.
(3) NO ADJUSTMENT FOR SMALL AMOUNTS. Anything in this Section
(f) to the contrary notwithstanding, the Company shall not be required
to give effect to any adjustment in the Exercise Price unless and
until the net effect of one or more adjustments, determined as above
provided, shall have required a change of the Exercise Price by at
least one cent, but when the cumulative net effect of more than one
adjustment so determined shall be to change the actual Exercise Price
by at least one cent, such change in the Exercise Price shall
thereupon be given effect.
(4) NUMBER OF SHARES ADJUSTED. Upon any adjustment of the
Exercise Price, the Holder of this Warrant shall thereafter (until
another such adjustment) be entitled to purchase, at the new Exercise
Price, the number of Units, calculated to the nearest full Unit,
obtained by multiplying the number of Units initially issuable upon
exercise of this Warrant by the Exercise Price specified in the first
paragraph hereof and dividing the product so obtained by the new
Exercise Price.
5
<PAGE>
(5) DEFINITIONS.
(A) Whenever reference is made in this Section (f) to the
distribution of Common Shares, the term "Common Shares" shall
mean the Common Shares of the Company authorized as of the date
hereof and any other class of stock ranking on a parity with such
Common Shares. However, subject to the provisions of Section (i)
hereof, Common Shares included in the Units issuable upon
exercise hereof shall include only Common Shares of the class
designated as Common Shares of the Company as of the date hereof.
(B) Whenever reference is made in this Section (f) to the
distribution of Convertible Securities, the term "Convertible
Securities" shall mean options or warrants or rights for the
purchase of Common Shares of the Company or for the purchase of
any stock or other securities convertible into or exchangeable
for Common Shares of the Company.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of Section (f) hereof, the Company
shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office, and with its stock transfer and warrant
agent, if any, an officer's certificate showing the adjusted Exercise Price
determined as herein provided and setting forth in reasonable detail the
facts requiring such adjustment. Each such officer's certificate shall be
made available at all reasonable times for inspection by the Holder and the
Company shall, forthwith after each such adjustment, deliver a copy of such
certificate to the Holder.
(h) NOTICES TO HOLDERS. So long as this Warrant shall be outstanding
and unexercised (i) if the Company shall pay any dividend or make any
distribution upon the Common Shares or (ii) if the Company shall offer to
the holders of Common Shares for subscription or purchase by them any
shares of stock of any class or any other rights or (iii) if any capital
reorganization of the Company, reclassification of the capital stock of the
Company, consolidation or merger of the Company with or into another
corporation, sale, lease or transfer of all or substantially all of the
property and assets of the Company to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected, then, in any such case, the Company shall cause to be delivered
to the Holder, at least 10 days prior to the date specified in (x) or (y)
below, as the case may be, a notice containing a brief description of the
proposed action and stating the date on which (x) a record is to be taken
for the purpose of such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the date, if
any is to be fixed, as of which the holders of Common Shares of record
shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation or winding up.
6
<PAGE>
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding
Common Shares of the Company (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of
an issuance of Common Shares by way of dividend or other distribution or of
a subdivision or combination), or in case of any consolidation or merger of
the Company with or into another corporation (other than a merger with a
subsidiary in which merger the Company is the continuing corporation and
which does not result in any reclassification, capital reorganization or
other change of outstanding Common Shares of the class issuable upon
exercise of this Warrant) or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially
as an entirety, the Company shall cause effective provision to be made so
that the Holder shall have the right thereafter, by exercising this
Warrant, to purchase the kind and amount of shares of stock and other
securities and property which the Holder would have received upon such
reclassification, capital reorganization or other change, consolidation,
merger, sale or conveyance had this Warrant been exercised prior to the
consummation of such transaction. Any such provision shall include
provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Warrant. The foregoing
provisions of this Section (i) shall similarly apply to successive
reclassifications, capital reorganizations and changes of Common Shares and
to successive consolidations, mergers, sales or conveyances. In the event
the Company spins off a subsidiary by distributing to the shareholders of
the Company as a dividend or otherwise the stock of the subsidiary, the
Company shall reserve for the life of this Warrant, shares of the
subsidiary to be delivered to the Holders of the Warrants upon exercise to
the same extent as if they were owners of record of the Warrant Shares on
the record date for payment of the shares of the subsidiary.
(j) REGISTRATION UNDER THE SECURITIES ACT OF 1933.
(1) Within 45 days after receipt of a written request by the
then Holder(s) of Warrants or Warrant Shares representing at least 51%
of the total Warrant Shares made at any time within the period
commencing _____________, 1998, and ending __________, 2002, the
Company will file, no more than once, a registration statement under
the Securities Act of 1933, as amended, registering the Warrant Shares
and the Class A Warrants. The Company will use its best efforts to
cause such registration statement to become effective. As an
alternative to filing such registration statement, the Company may
file a posteffective amendment to Registration Statement No. 333-11723
which contains the information required in order to permit the offer
and sale of the Warrant Shares and the Class A Warrants, under
Registration Statement No. 333-11723. The Company will use its best
efforts to cause such amendment to become effective.
7
<PAGE>
(2) In addition, the Company will cooperate with the then
Holder(s) of the Warrant Shares and the Class A Warrants in preparing
and signing any registration statement, in addition to the
registration statement discussed above, required in order to sell or
transfer the Warrant Shares and the Class A Warrants and will sign and
supply all information required therefor, but such additional
registration shall be at the then Holder(s) cost and expense.
(3) When, pursuant to subsection (1) or (2) of this Section, the
Company shall take any action to permit a public offering or sale or
other distribution of the Warrant Shares and the Class A Warrants, the
Company shall:
(A) Supply to each selling Holder a reasonable number of
copies of the preliminary, final and other prospectus in
conformity with the requirements of the Act and the Rules and
Regulations promulgated thereunder and such other documents as
the Holders shall reasonably request.
(B) Use its best efforts to register or qualify for sale
the Warrant Shares and the Class A Warrants in those states in
which any of the securities were sold in the Offering. The
Company shall bear the complete cost and expense (other than any
selling commissions and expense allowances payable to broker
dealers which relate to the sale of the Warrant Shares and the
Class A Warrants, which shall be paid by the sellers thereof)
8
<PAGE>
of such registrations or qualifications except those filed under
subsection (j)(2) which shall be at the Holder(s)' cost and
expense.
(C) Keep effective such registration statement until the
first of the following events occur: (i) 36 months have elapsed
after the effective date of such registration statement or (ii)
all of the registered Warrant Shares and Class A Warrants,
including Warrant Shares issued by the Company after the
effective date of such registration statement, have been publicly
sold under such registration statement.
(D) Indemnify and hold harmless each such Holder and each
underwriter, within the meaning of the Act, who may purchase from
or sell for any such Holder, any Warrant Shares or Class A
Warrants from and against any and all losses, claims, damages,
and liabilities (including but not limited to, any and all
expenses whatsoever reasonably incurred in investigating,
preparing, defending or settling any claim) arising from (i) any
untrue or alleged untrue statement of a material fact contained
in any registration statement furnished pursuant to clause (A) of
this subsection, or any prospectus included therein or (ii) any
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading (unless such untrue statement or omission
or such alleged untrue statement or omission was based upon
information furnished or required to be furnished in writing to
the Company by such Holder or underwriter expressly for use
therein), which indemnification shall include each person, if
any, who controls any such Holder or underwriter within the
meaning of the Act; provided, however, that the Company shall not
be so obligated to indemnify any such Holder or underwriter or
controlling person unless such Holder and underwriter shall at
the same time indemnify the Company, its directors, each officer
signing any registration statement or any amendment to any
registration statement and each person, if any, who controls the
Company within the meaning of the Act, from and against any and
all losses, claims, damages and liabilities (including, but not
limited to, any and all expenses whatsoever reasonably incurred
in investigating, preparing, defending or settling any claim)
arising from (iii) any untrue or alleged untrue statement of a
material fact contained in any registration statement or
prospectus furnished pursuant to Clause (A) of this subsection,
or (iv) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, but the indemnity of such
Holder, underwriter or controlling person shall be limited to
liability based upon information furnished, or required to be
furnished, in writing to the Company by such Holder or
underwriter or controlling person expressly for use therein. The
Company shall not be liable for amounts paid in settlement of any
such litigation if such settlement was effected without the
consent of the Company. The
9
<PAGE>
indemnity agreement of the Company herein shall not inure to the
benefit of any such underwriter (or to the benefit of any person
who controls such underwriter) on account of any losses, claims,
damages, liabilities (or actions or proceedings in respect
thereof) arising from the sale of any of such Warrant Shares or
Class A Warrants by such underwriter to a person if such
underwriter failed to send or give a copy of the prospectus
furnished pursuant to Clause (A) of this subsection, as the same
may then be supplemented or amended (if such supplement or
amendment shall have been furnished to the Holders pursuant to
said Clause (A)), to such person with or prior to the written
confirmation of the sale involved.
(4) Each Holder shall supply such information as the Company may
reasonably require from such Holder, or any underwriter for such
Holder, for inclusion in such registration statement or posteffective
amendment.
(5) The Company's agreements with respect to the Warrant Shares
and Class A Warrants in this Section will continue in effect
regardless of the exercise or surrender of this Warrant.
(6) Any notices or certificates by the Company to the Holder and
by the Holder to the Company shall be deemed delivered if in writing
and delivered personally or sent by certified mail, return receipt
requested, to the Holder, addressed to the Holder at the Holder's
address as set forth on the Warrant or stockholder register of the
Company, or, if the Holder has designated, by notice in writing to the
Company, any other address, to such other address, and, if to the
Company, addressed to it at 12600 West Colfax Avenue, Suite A-500,
Lakewood, Colorado 80215-3735. The Company may change its address by
written notice to Holders.
(k) TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933. The Company
may cause the following legend, or one similar thereto, to be set forth on
the Warrants and on each certificate representing Units, Class A Warrants,
Warrant Shares or any other security issued or issuable upon exercise of
this Warrant not theretofore distributed to the public or sold to
underwriters for distribution to the public pursuant to Section (j) hereof;
unless legal counsel for the Company is of the opinion as to any such
certificate that such legend, or one similar thereto, is unnecessary:
"The securities represented by this certificate may not be
offered for sale, sold or otherwise transferred except pursuant
to an effective registration statement made under the Securities
Act of 1933 (the "Act") and under any applicable state securities
law, or pursuant to an exemption from registration under the Act
and under any applicable state securities law, the availability
of which is to be established to the satisfaction of the
Company."
10
<PAGE>
(l) ADDITIONAL LEGEND. In the event this Warrant is exercised prior
to ___________, 1998, the following legend shall be set forth on the
certificates representing the Units, Warrant Shares, and Class A Warrants
so acquired:
"The securities represented by this certificate are subject to
restrictions on transfer set forth in the Representative's
Warrants to Purchase Units (the "Warrant") issued by the Company.
A copy of the Warrant is available for inspection without charge
at the principal office of the Company."
(m) APPLICABLE LAW. This Warrant shall be governed by, and construed
in accordance with, the laws of the state of Colorado.
(n) EXCHANGE PROVISIONS.
(1) For purposes of this Section (n), this Warrant shall be
deemed to represent the same number of Warrants as there are Warrant
Shares underlying this Warrant. For example, if there are 10,000
Warrant Shares underlying this Warrant, then for purposes of this
Section (n) the Holder shall be deemed to hold 10,000 Warrants.
(2) For purposes of this Section (n), the following terms shall
have the following meanings:
(A) "Current Market Value of a Warrant Share and of Class
A Warrant" shall be the value as determined under Section (c)(1)
or (2) hereof except that the time of the determination
thereunder shall be the last business day prior to the day the
Company receives a notice from the Holder under this Section (n).
(B) "Warrant Value" shall mean the Current Market Value of
a Warrant Share and of a Class A Warrant underlying each Warrant
minus or less the Exercise Price payable under this Warrant as of
the close of business on the last business day prior to the day
the Company receives a notice from the Holder under this Section
(n).
(3) The Holder shall have the right to exchange, in a cashless
transaction, all or part of the Holder's Warrants for Common Shares
issued by the Company at any time after _______________________, and
prior to the Expiration Date of such Warrants by providing written
notice ("Notice") to the Company. Such Notice may only be provided at
a time when the Company's Common Shares are listed or approved for
trading or quotation on an exchange, interdealer communications
system, or national quotation bureau. Such
11
<PAGE>
Notice shall set forth the number of Warrants which the Holder elects to
exchange for Common Shares.
(4) Within 10 days after receipt of such Notice by the Company,
the Company shall issue the number of Common Shares of the Company to
the Holder which is determined by dividing the Warrant Value of the
Warrants being exchanged by the combined Current Market Value of a
Warrant Share and of a Class A Warrant as of the date the Notice is
received by the Company.
(5) The Holder shall surrender the Warrant which the Holder is
exchanging for Common Shares upon receipt thereof. If the entire
Warrant is being exchanged by the Holder for Common Shares, the
Company shall cancel the entire Warrant. If less than the entire
Warrant is being exchanged for Common Shares, the Company shall issue
a new Warrant to the Holder representing the portion of this Warrant
which was not exchanged for Common Shares.
(6) At such time as the Common Shares and Class A Warrants
comprising the Units become separately tradeable or transferable
pursuant to the terms of Registration Statement No. 333-11723, the
Holder shall have the right to exchange this Warrant for warrants to
purchase Common Shares and Class A Warrants which represent a pass
through of the same rights and obligations contained in this Warrant.
Dated: _________________, 1997.
GLOBAL MED TECHNOLOGIES, INC.
By:______________________________
MICHAEL I. RUXIN,
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
12
<PAGE>
PURCHASE FORM
-------------
Dated: __________________, 19_____
The undersigned hereby irrevocably elects to exercise the Warrant to
the extent of purchasing ____________ Units and hereby makes payment of
$_______________ in payment of the actual exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF SHARES
---------------------------------------
Name:__________________________________________________________________
(Please typewrite or print in block letters)
Address:_______________________________________________________________
Signature:_____________________________________________________________
ASSIGNMENT FORM
---------------
Dated: __________________, 19_____
FOR VALUE RECEIVED,_______________________________________________
hereby sells, assigns and transfers unto ______________________________
Name:__________________________________________________________________
(Please typewrite or print in block letters)
Address:_______________________________________________________________
the right to purchase Units represented by this Warrant to the extent of
__________ Units as to which such right is exercisable and does hereby
irrevocably constitute and appoint _________________________________,
attorney, to transfer the same on the books of the Company with full power
of substitution in the premises.
Signature:___________________________
13
EXHIBIT 4.2
GLOBAL MED TECHNOLOGIES, INC.
Incorporated Under the Laws of the State of Colorado
No. W- _____ Class A Common Stock
Purchase Warrants
CUSIP 37935E 11 9
CERTIFICATE FOR (See Reverse
CLASS A COMMON STOCK For Certain
PURCHASE WARRANTS Definitions)
This Warrant Certificate certifies that ___________________, or
registered assigns ("the Warrant Holder"), is the registered owner of the
above indicated number of Class A Common Stock Purchase Warrants (the
"Warrants") expiring on __________, 2000 (the "Expiration Date"). One
Warrant entitles the Warrant Holder to purchase one share of common stock
("Share") from Global Med Technologies, Inc., a Colorado corporation (the
"Company"), at a purchase price of $____ (the "Exercise Price"), commencing
on __________, 1997, and terminating on the Expiration Date ("Exercise
Period"), upon surrender of this Warrant Certificate with the exercise form
hereon duly completed and executed with payment of the Exercise Price at
the office of American Securities Transfer & Trust, Inc. (the "Warrant
Agent"), but only subject to the conditions set forth herein and in a
Warrant Agreement dated as of _________, 1997 (the "Warrant Agreement")
between the Company and the Warrant Agent. The Exercise Price, the number
of shares purchasable upon exercise of each Warrant, the number of Warrants
outstanding and the Expiration Date are subject to adjustments upon the
occurrence of certain events. The Warrant Holder may exercise all or any
number of Warrants. Reference hereby is made to the provisions on the
reverse side of this Warrant Certificate and to the provisions of the
Warrant Agreement, all of which are incorporated by reference in and made
a part of this Warrant Certificate and shall for all purposes have the same
effect as though fully set forth at this place.
Upon due presentment for transfer of this Warrant Certificate at the
office of the Warrant Agent, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants, subject to any adjustments made in accordance with the provisions
of the Warrant Agreement, shall be issued to the transferee in exchange for
this Warrant Certificate, subject to the limitations provided in the
Warrant Agreement, upon payment of $_____ per Warrant Certificate and any
tax or governmental charge imposed in connection with such transfer.
The Warrant Holder of the Warrants evidenced by this Warrant
Certificate may exercise all or any whole number of such Warrants during
the period and in the manner stated hereon. The Exercise Price shall be
payable in lawful money of the United States of America and in cash or by
certified or bank cashier's check or bank draft payable to the order of the
Company. If upon exercise of any Warrants evidenced by this Warrant
Certificate the number of Warrants exercised shall be less
<PAGE>
than the total number of Warrants so evidenced, there shall be issued to
the Warrant Holder a new Warrant Certificate evidencing the number of
Warrants not so exercised.
Subject to the following paragraph, no Warrant may be exercised after
5:00 p.m. Mountain Time on the Expiration Date and any Warrant not
exercised by such time shall become void, unless extended by the Company.
Commencing on the date the Warrants are separately tradeable and
transferable, the Warrants are subject to redemption by the Company at $.55
per Warrant, at any time until _________, 1999, and, thereafter, at $.75
per Warrant at any time prior to their expiration, on not less than 30
days' prior written notice to the holders of Warrants, provided that the
daily trading price per share of Common Stock has been at least $______
(120% of the Warrant exercise price) for a period of at least 20
consecutive trading days ending within 10 days prior to the date upon which
the notice of redemption is given. During the 30-day period immediately
following the giving of such notice, the Warrant Holders shall have the
right to exercise the Warrants so held by them. Upon expiration of such
30-day period, all rights of the Warrant Holders shall terminate, other
than the rights to receive the redemption price, without interest, and the
right to receive the redemption price shall itself expire on the Warrant
Expiration Date.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its President and by its Secretary, each by a facsimile of his/her
signature, and has caused a facsimile of its corporate seal to be imprinted
hereon.
Dated: ______________________
GLOBAL MED TECHNOLOGIES, INC.
_____________________________ By________________________________
William J. Collard, Secretary Michael I. Ruxin, President
AMERICAN SECURITIES TRANSFER &
TRUST, INC.
Warrant Agent
By________________________________
Charles R. Harrison, President
-2-
<PAGE>
Form of Reverse Side of Warrant
This Warrant Certificate, when surrendered to the Warrant Agent at its
principal office by the Warrant Holder, in person or by attorney duly
authorized in writing, may be exchanged in the manner and subject to the
limitations provided in the Warrant Agreement, upon the payment of any tax
or other governmental charge imposed in connection with such exchange, for
another Warrant Certificate or Warrant Certificates of like tenor and
evidencing a like number of Warrants, subject to any adjustments made in
accordance with the provisions of the Warrant Agreement.
The Company and the Warrant Agent may deem and treat the registered
holder hereof as the absolute owner of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone) for all proposes and neither the Company nor the Warrant Agent
shall be affected by any notice to the contrary. No Warrant Holder, as
such, shall have any rights of a holder of the Common Stock of the Company,
either at law or at equity, and the rights of the Warrant holder, as such,
are limited to those rights expressly provided in the Warrant Agreement and
in the Warrant Certificate.
Under the Warrant Agreement the Exercise Price is subject to
adjustment if the Company shall effect any stock split or stock combination
with respect to the Common Stock. Any such adjustment of the Exercise
Price will also result in an adjustment of the number of shares of Common
Stock purchasable upon exercise of a Warrant or, if the Company should
elect, an adjustment of each outstanding Warrant into a different number of
Warrants.
The Company shall not be required to issue fractions of Warrants upon
any such adjustment or to issue fractions of shares upon the exercise of
any Warrants upon any such adjustment, in accordance with the Warrant
Agreement.
The Warrant Agreement is subject to amendment upon the approval of
holders of at least two-thirds of the outstanding Warrants as a group,
except that no such approval is required for the reduction of the Exercise
Price or extension of the Expiration Date. No amendment shall accelerate
the Expiration Date or increase the Exercise Price without the approval of
all the holders of all outstanding Warrants. A copy of the Warrant
Agreement will be available at all reasonable times at the office of the
Warrant Agent for inspection by any Warrant Holder. As a condition of such
inspection, the Warrant Agent may require any Warrant Holder to submit the
Warrant Holder's Warrant Certificate for inspection.
IMPORTANT: The Warrants represented by this Certificate may not be
exercised by a Warrant Holder unless at the time of exercise the underlying
shares of Common Stock are qualified for sale by registration or otherwise
in the state where the Warrant Holder resides or unless the issuance of the
shares of Common Stock would be exempt under the applicable state
securities laws. Further, a registration statement under the Securities
Act of 1933, as amended, covering the issuance of shares of Common Stock
upon the exercise of this Warrant must be in effect and current at the time
of exercise unless the issuance of shares of Common Stock upon any exercise
is exempt from the registration requirements of the Securities Act of 1933.
Unless such registration statement is in effect and current at the time of
exercise, or unless such an exemption is available the Company may decline
to permit the exercise of this Warrant.
-3-
<PAGE>
TRANSFER FEE $_____ PER CERTIFICATE
GLOBAL MED TECHNOLOGIES, INC.
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -
TEN ENT - as tenants by the entireties Custodian
JT TEN - as joint tenants with right ------------------
of survivorship and not as (Cust) (Minor)
Tenanta in common under Uniform Gifts
to Minors Act _______
(State)
Additional abbreviations may also be used though not in the above list.
FORM OF ASSIGNMENT
(To Be Executed by the Registered Holder if the Registered Holder
Desires to Assign Class A Warrants Evidenced by the
Within Warrant Certificate)
FOR VALUE RECEIVED __________________________ hereby sells, assigns
and transfers unto ____________________ Class A Warrants, evidenced by the
within Warrant Certificate, and does hereby irrevocably constitute and
appoint ________________________________ Attorney to transfer the said
Warrants evidenced by the within Warrant Certificate on the books of the
Company, with full power of substitution.
Dated: _________________ ________________________________
Signature
NOTICE: The above signature must correspond with the name as written upon
the face of the within Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever.
Signature Guaranteed: _________________________________________
-4-
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be Executed by the Holder if the Registered Holder Desires to
Exercise Warrants Evidenced by the Within Warrant Certificate)
To Global Med Technologies, Inc.:
The undersigned hereby irrevocably elects to exercise
______________ Class A Warrants, evidenced by the within Warrant
Certificate for, and to purchase thereunder, ___________ full shares of
Common Stock issuable upon exercise of said Warrants and delivery of
$___________ and any applicable taxes.
The undersigned requests that certificates for such shares be
issued in the name of:
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
_______________________________ _________________________________
(Please print name and address)
_______________________________ _________________________________
_______________________________ _________________________________
If said number of Class A Warrants shall not be all the Warrants
evidenced by the within Warrant Certificate, the undersigned requests that
a new Warrant Certificate evidencing the Warrants not so exercised be
issued in the name of and delivered to:
________________________________________________________________________
(Please print name and address)
________________________________________________________________________
__________________________________________________________________________
Dated: ____________________ Signature: __________________________
NOTICE: The above signature must correspond with the name as written upon
the face of the within Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever, or if
signed by any other person the Form of Assignment hereon must be
duly executed and if the certificate representing the shares or
any Warrant Certificate representing Warrants not exercised is to
be registered in a name other than that in which the within
Warrant Certificate is registered, the signature of the holder
hereof must be guaranteed.
Signature Guaranteed: ____________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT
TO S.E.C. RULE 17Ad-15.
-5-
EXHIBIT 5.1
Brenman Key & Bromberg, P.C.
Attorneys at Law
Mellon Financial Center * 1775 Sherman Street * Suite 1001
Denver, Colorado 80203-4313
303-894-0234 * Fax 303-839-1633
January 16, 1997
Global Med Technologies, Inc.
12600 West Colfax Avenue
Suite A-500
Lakewood, CO 80215
Gentlemen:
Reference is made to the registration statement (the "Registration
Statement") on Form SB-2 relating to the proposed public offering by Global
Med Technologies, Inc. (the "Company") (Registration No. 333-11723) filed
with the Securities and Exchange Commission under the Securities Act of
1933, as amended. The Registration Statement relates to (i) up to
1,537,550 Units each consisting of two shares of Common Stock and one
Common Stock Purchase Warrant, (ii) up to 3,075,100 shares of Common Stock,
(iii) up to 1,537,550 Class A Common Stock Purchase Warrants (the
"Warrants"), (iv) up to 1,537,550 shares of Common Stock underlying the
Warrants, (v) 1,135,770 shares of Common Stock being registered on behalf
of certain shareholders of the Company ("Selling Shareholders") and (v)
warrants to be issued to RAF Financial Corporation, the Representative of
the Underwriters, and the shares and warrants underlying the
Representative's warrant. At your request, this opinion is being furnished
to you for filing as Exhibit 5 to the Registration Statement.
We have acted as counsel to the Company in connection with the
preparation of the Registration Statement relating to the proposed sale of
Units by the Company and the proposed sale of shares of Common Stock by the
Selling Shareholders. In such capacity, we have examined the originals or
copies, certified or otherwise identified, of the Articles of
Incorporation, as restated and amended, and Bylaws, as amended, of the
Company, corporate records of the Company, including minute books of the
Company as furnished to us by the Company, certificates of public officials
and of representatives of the Company, statutes and other records,
instruments and documents pertaining to the Company as a basis for the
opinions hereinafter expressed. In giving such opinions, we have relied
upon certificates of officers of the Company with respect to the accuracy
of the factual matters contained in such certificates.
Based upon the foregoing and subject to the other qualifications and
limitations stated in this letter, we are of the opinion that:
<PAGE>
Global Med Technologies, Inc.
January 16, 1997
Page 2
(1) The Company is a corporation duly incorporated and validly
existing in good standing under the laws of the State of
Colorado; and
(2) The Units, and the shares of Common Stock and Warrants underlying
the Units, to be issued by the Company pursuant to the
Registration Statement have been duly authorized. Upon payment
of the price per share and price per Warrant set forth in the
final Prospectus, the shares of Common Stock will be validly
issued, fully paid and non-assessable.
(3) The shares of Common Stock to be sold by the Selling Shareholders
have been duly authorized and are validly issued, fully paid and
non-assessable.
(4) The shares of Common Stock to be issued to holders of the
Warrants and the Selling Shareholders, upon exercise and payment
of the exercise price stated in the Warrants and warrants held by
the Selling Shareholders, will have been duly authorized, validly
issued, fully paid and non-assessable.
This opinion is a legal opinion and not an opinion as to matters of
fact. This opinion is limited to the laws of the State of Colorado and the
federal law of the United States of America, and to the matters stated
herein. This opinion is made as of the date hereof, and after the date
hereof, we undertake no, and disclaim any, obligation to advise you of any
change in any matters set forth herein, and we express no opinion as to the
effect of any subsequent course of dealing or conduct between the parties.
This opinion is furnished to you solely in connection with the transactions
referred to herein, and may not be relied on, quoted by or otherwise
referred to by any other person, firm or entity without our prior written
consent.
We hereby consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement and to
the reference to our firm under "Legal Matters" in the Prospectus.
Very truly yours,
/s/ Brenman Key & Bromberg, P.C.
----------------------------------
Brenman Key & Bromberg, P.C.
Enclosures
DEW/sms
EXHIBIT 10.7
THIRD AMENDMENT TO THE GLOBAL MED TECHNOLOGIES, INC.
AMENDED AND RESTATED STOCK OPTION PLAN
Section 6(c)(2) of the Global Med Technologies, Inc. Stock Option
Plan hereby is amended to read as follows:
Any Non-qualified Stock Option granted under the Plan shall be at a
price no less than 85% of the Fair Market Value per share on the
date of grant thereof.
This amendment was approved by the Board of Directors of the
Corporation on December 11, 1996.
GLOBAL MED TECHNOLOGIES, INC
By:/s/ Michael I. Ruxin
-----------------------------------
Michael I. Ruxin
EXHIBIT 10.13
WARRANT AGREEMENT
________________________________________
GLOBAL MED TECHNOLOGIES, INC.
AND
AMERICAN SECURITIES TRANSFER & TRUST, INC.
Warrant Agent
______________, 1997
________________________________________
<PAGE>
THIS AGREEMENT (the "Agreement") is dated as of ______________, 1997,
between GLOBAL MED TECHNOLOGIES, INC., a Colorado corporation (the
"Company"), and AMERICAN SECURITIES TRANSFER & TRUST, INC., a Colorado
corporation (the "Warrant Agent").
WHEREAS, the Company proposes to offer to the public up to 1,537,550
Units (the "Units"), consisting of 3,075,100 shares of Common Stock and
1,537,550 Class A Common Stock Purchase Warrants (the "Warrants"), each of
which is exercisable to purchase shares of Common Stock on the basis of one
Warrant to purchase one share of Common Stock;
WHEREAS, upon exercise of the Representative's Warrants to Purchase
Units, the Company further proposes to issue 133,700 warrants (the "RAF
Warrants") to RAF Financial Corporation ("RAF") or its designees;
WHEREAS, the Company desires to provide for issuance of warrant
certificates (the "Warrant Certificates") representing the Warrants and the
RAF Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance, registration, transfer and exchange of Warrant Certificates and
exercise of the Warrants and the RAF Warrants,
NOW, THEREFORE, in consideration of the promises and the mutual
agreements hereinafter set forth, it is agreed that:
1. WARRANTS/WARRANT CERTIFICATES. Each Warrant will entitle the
registered holder of such Warrant to purchase from the Company one share of
Common Stock at $______ per share (the "Exercise Price"). Each RAF Warrant
will entitle the registered holder of such RAF Warrant ("RAF Warrant
Holder") to purchase from the Company one share of Common Stock at $______
per share (the "RAF Exercise Price"). Hereinafter, unless the context
indicates otherwise, as used herein the words "Registered Warrant Holders"
will mean the holders of the Warrants and the RAF Warrants, the word
"Warrants" will mean the Warrants and the RAF Warrants and the words
"Warrant Shares" will mean the Company's securities issuable upon exercise
of the Warrants. Unless changed pursuant to Section 8 hereof, the Warrant
Shares will consist of the Company's Common Stock. A copy of the form of
Warrant Certificate for the Warrants is attached hereto as Exhibit A and
a copy of the form of Warrant Certificate for the RAF Warrants is attached
hereto as Exhibit B.
Warrant Certificates representing the right to purchase Warrant
Shares shall be executed by the Company's President and attested to by the
Company's Secretary or Assistant Secretary and delivered to the Warrant
Agent upon execution of this Agreement. The Warrant Certificates shall be
distributed to the purchasers of Units in the Company's initial public
offering pursuant to Registration Statement No. 333-11723.
-1-
<PAGE>
Subject to the provisions of Sections 3, 5, 6,7 and 8, the
Warrant Agent shall deliver Warrant Certificates in required whole number
denominations to Registered Holders in connection with any transfer or
exchange permitted under this Agreement. No Warrant Certificates shall be
issued except (i) Warrant Certificates initially issued hereunder, (ii)
Warrant Certificates issued on or after the initial issuance date, upon the
exercise of any Warrants, to evidence the unexercised Warrants held by the
exercising Registered Holder, and (iii) Warrant Certificates issued after
the initial issuance date, upon any transfer or exchange of Warrant
Certificates or replacements of lost or mutilated Warrant Certificates.
2. FORM AND EXECUTION OF WARRANT CERTIFICATES. The Warrant
Certificates shall be substantially in the form attached as Exhibits A and
B. The Warrant Certificates shall be dated as of the date of their
issuance, whether on initial issuance, transfer or exchange or in lieu of
mutilated, lost, stolen or destroyed Warrant Certificates.
Each such Warrant Certificate shall be numbered serially with the
letter "W" appearing on each Warrant Certificate.
The Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so
countersigned. In the event any officer of the Company who executed the
Warrant Certificates shall cease to be an officer of the Company before the
date of issuance of the Warrant Certificates or before countersignature and
delivery by the Warrant Agent, such Warrant Certificates may be
countersigned, issued and delivered by the Warrant Agent with the same
force and effect as though the person who signed such Warrant Certificates
had not ceased to be an officer of the Company.
3. EXERCISE. Subject to the provisions of Sections 4, 7 and 8, the
Warrants, when evidenced by a Warrant Certificate, may be exercised at a
price (the "Exercise Price") set forth in Section 1 hereof, on the basis of
one Warrant for one share of Common Stock in whole or in part at any time
during the period (the "Exercise Period") commencing on _______,1997, or
earlier if so determined by RAF (the "Initial Exercise Date") and
terminating on ______________, 2000 (the "Expiration Date"), unless
extended by a majority vote of the Company's Board of Directors at its
discretion. Notwithstanding the foregoing, the RAF Warrants will be
exercisable commencing on the date of their issuance and terminating on the
Expiration Date. The Company shall promptly notify the Warrant Agent of
any such extension of the Exercise Period of the Warrants. A Warrant shall
be deemed to have been exercised immediately prior to the close of business
on the date (the "Exercise Date") of the surrender for exercise of the
Warrant Certificate. The exercise form shall be executed by the Registered
Holder thereof or his attorney duly authorized in writing and will be
delivered together with payment to the Warrant Agent at 1825 Lawrence
Street, Suite 444, Denver, CO 80202 (the "Corporate Office"), in cash or
by official bank or certified check, of an amount equal to the aggregate
Exercise Price, in lawful money of the United States of America.
Unless Warrant Shares may not be issued as provided herein, the
person entitled to receive the number of Warrant Shares deliverable on such
exercise shall be treated for all purposes as the holder of such Warrant
Shares as of the close of business on the Exercise Date. In addition,
-2-
<PAGE>
the Warrant Agent shall also, at such time, verify that all of the
conditions precedent to the issuance of Warrant Shares set forth in Section
4 are satisfied as of the Exercise Date. If any one of the conditions
precedent set forth in Section 4 is not satisfied as of the Exercise Date,
the Warrant Agent shall request written instructions from the Company as to
whether to return the Warrant and Exercise Price to the exercising
Registered Holder or to hold the same until all such conditions have been
satisfied. The Company shall not be obligated to issue any fractional share
interests in Warrant Shares issuable or deliverable on the exercise of any
Warrant or scrip or cash therefor and such fractional shares shall be of no
value whatsoever. If more than one Warrant shall be exercised at one time
by the same Registered Holder, the number of full Warrant Shares which
shall be issuable on exercise thereof shall be computed on the basis of the
aggregate number of full Warrant Shares issuable on such exercise.
Within thirty days after the Exercise Date and in any event prior
to the pertinent Expiration Date, pursuant to a Stock Transfer Agreement
between the Company and theWarrant Agent, the Warrant Agent shall cause to
be issued and delivered to the person or persons entitled to receive the
same, a certificate or certificates for the number of Warrant Shares
deliverable on such exercise. No adjustment shall be made in respect of
cash dividends on Warrant Shares delivered on exercise of any Warrant. The
Warrant Agent shall promptly notify the Company in writing of any exercise
and of the number of Warrant Shares delivered and shall cause payment of an
amount in cash equal to the Exercise Price to be promptly made to the order
of the Company.
Expenses incurred by the Warrant Agent while acting in the
capacity as Warrant Agent will be paid by the Company. These expenses,
including delivery of exercised share certificates to the shareholder, will
be deducted from the exercise fee submitted prior to distribution of funds
to the Company.
A detailed accounting statement relating to the number of
Warrants exercised and the net amount of exercised funds remitted will be
given to the Company with the payment of each exercise amount. This will
serve as an interim accounting for the Company's use during the Exercise
Period. A complete accounting will be made by the Warrant Agent to the
Company concerning all persons exercising Warrants, the number of Warrant
Shares issued and the amounts paid at the completion of the Exercise
Period.
The Company may deem and treat the Registered Holder of the
Warrants at any time as the absolute owner thereof for all purposes, and
the Company shall not be affected by any notice to the contrary. The
Warrants shall not entitle the holder thereof to any of the rights of
shareholders or to any dividend declared on the Common Stock unless the
holder shall have exercised the Warrants and purchased the Warrant Shares
prior to the record date fixed by the Board of Directors of the Company for
the determination of holders of Common Stock entitled to such dividend or
other right.
4. RESERVATION OF SHARES AND PAYMENT OF TAXES. The Company
covenants that it will at all times reserve and have available from its
authorized Common Stock such number of Warrant Shares as shall then be
issuable on the exercise of all outstanding Warrants. The Company
-3-
<PAGE>
covenants that all Warrant Shares which shall be so issuable shall be duly
and validly issued, fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issue thereof.
The Company and the Warrant Agent acknowledge that the Company
will be required, pursuant to the Securities Act of 1933, as amended (the
"Act"), to deliver to each Registered Holder, upon the exercise of Warrants
and delivery of Warrant Shares, a prospectus covering the issuance of the
Warrant Shares which meets the requirements of the Act, which prospectus
must be a part of an effective registration statement under the Act at the
time that the Warrants are exercised.
The Company agrees to use its best efforts to maintain, to the
extent required by the Act, a currently effective registration statement
under the Act covering the issuance of the Warrant Shares during the period
the Warrants are exercisable. The Company further agrees, from time to
time, to furnish the Warrant Agent with copies of the Company's prospectus
to be delivered to exercising Registered Holders, as set forth above. If
any Warrant Shares require any other registration with or approval of any
government authority under any federal or state law before such Warrant
Shares may be validly issued or delivered, then the Company covenants that
it will in good faith and as expeditiously as possible endeavor to secure
such registration or approval, as the case may be. No Warrant Shares shall
be issued unless and until any such registration requirements have been
satisfied.
The Company shall have the authority to suspend the exercise of
all Warrants, until such registration or approval shall have been obtained;
but all Warrants, the exercise of which are requested during any such
suspension, shall be exercisable at the Exercise Price. If any such period
of suspension continues past the Expiration Date, all Warrants, the
exercise of which have been requested on or prior to the Expiration Date,
shall be exercisable upon the removal of such suspension until the close of
the business day immediately following the expiration of such suspension.
The Registered Holder shall pay all documentary, stamp or similar
taxes and other government charges that may be imposed with respect of the
issuance of the Warrants, or the issuance, transfer or delivery of any
Warrant Shares on exercise of the Warrants. In the event the Warrant
Shares are to be delivered in a name other than the name of the Registered
Holder of the Warrant Certificate, no such delivery shall be made unless
the person requesting the same has paid to the Warrant Agent the amount of
any such taxes or charges incident thereto.
In the event the Warrant Agent ceases to also serve as the stock
transfer agent for the Company, the Warrant Agent is irrevocably authorized
to requisition the Company's new transfer agent from time to time for
Certificates of Warrant Shares required upon exercise of the Warrants, and
the Company will authorize such transfer agent to comply with all such
requisitions. The Company will file with the Warrant Agent a statement
setting forth the name and address of its new transfer agent, for shares of
Common Stock or other capital stock issuable upon exercise of the Warrants
and of each successor transfer agent.
-4-
<PAGE>
5. REGISTRATION OF TRANSFER. Except for the RAF Warrants as
provided below, the Warrants may not be separately tradeable or
transferable for a period of six months from the effective date of the
Company's Registration Statement or earlier at the discretion of RAF. Once
the Warrants are separated from the Common Stock, and other than as
provided below with respect to the RAF Warrants, the Warrant Certificates
may be transferred in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its Corporate
Office. The Company shall execute and the Warrant Agent shall countersign,
issue and deliver in exchange therefor the Warrant Certificate or
Certificates which the holder making the transfer shall be entitled to
receive.
The RAF Warrants may not be sold, transferred, assigned, pledged,
or hypothecated until __________, 1998 except to officers of RAF, except to
the underwriters of the Company's initial public offering pursuant to
Registration Statement No. 333-11723, and except by will or operation of
law. After such date, the RAF Warrants may be sold, transferred, assigned,
pledged, or hypothecated provided that any such transaction is in
accordance with the registration or exemption from registration provisions
of the Act and any applicable state securities laws. If the RAF Warrants
are exercised by ___________, 1998, then any Warrant Shares acquired as a
result of any such exercise may not be sold, transferred, assigned,
pledged, or hypothecated until __________, 1998, except to officers of RAF,
except to the underwriters of the Company's initial public offering
pursuant to Registration Statement No. 333-11723, and except by will or
operation of law.
The Warrant Agent shall keep transfer books at its Corporate
Office which shall register Warrant Certificates and the transfer thereof.
On due presentment for registration of transfer of any Warrant Certificate
at such office, the Company shall execute and the Warrant Agent shall issue
and deliver to the transferee or transferees a new Warrant Certificate or
Certificates representing an equal aggregate number of Warrants. All
Warrant Certificates presented for registration of transfer or exercise
shall be duly endorsed or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company and the Warrant
Agent. At the time of exercise, the transfer fee shall be paid by the
Holder. The Company may require payment of a sum sufficient to cover any
tax or other government charge that may be imposed in connection therewith.
All Warrant Certificates so surrendered, or surrendered for
exercise, or for exchange in case of mutilated Warrant Certificates, shall
be promptly cancelled by the Warrant Agent and thereafter retained by the
Warrant Agent until termination of the agency created by this Agreement.
Prior to due presentment for registration of transfer thereof, the Company
and the Warrant Agent may treat the Registered Holder of any Warrant
Certificate as the absolute owner thereof (notwithstanding any notations of
ownership or writing thereon made by anyone other than the Company or the
Warrant Agent), and the parties hereto shall not be affected by any notice
to the contrary.
6. LOSS OR MUTILATION. On receipt by the Company and the Warrant
Agent of evidence satisfactory as to the ownership of and the loss, theft,
destruction or mutilation of any Warrant
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Certificate, the Company shall execute, and the Warrant Agent shall
countersign and deliver in lieu thereof, a new Warrant Certificate
representing an equal aggregate number of Warrants. In the case of loss,
theft or destruction of any Warrant Certificate, the individual requesting
issuance of a new Warrant Certificate shall be required to indemnify the
Company and Warrant Agent in an amount satisfactory to each of them. In
the event a Warrant Certificate is mutilated, such Certificate shall be
surrendered and cancelled by the Warrant Agent prior to delivery of a new
Warrant Certificate. Applicants for a new Warrant Certificate shall also
comply with such other regulations and pay such other reasonable charges as
the Company may prescribe.
7. REDEMPTION OF WARRANTS. (a) Commencing on the date the Warrants
are separately tradeable and transferable, the Warrants are subject to
redemption by the Company at $.55 per Warrant, at any time until
_________, 1999, and, thereafter, at $.75 per Warrant at any time prior to
their expiration, on not less than 30 days' prior written notice to the
holders of Warrants, provided that the daily trading price per share of
Common Stock has been at least $______ (120% of the Warrant exercise price)
for a period of at least 20 consecutive trading days ending within 10 days
prior to the date upon which the notice of redemption is given. For
purposes of determining the daily trading price of the Company's Common
Stock, (i) if the Common Stock is listed on a national securities exchange,
is admitted to unlisted trading privileges on a national securities
exchange, or is quoted on a trading system of the National Association of
Securities Dealers, Inc. such as the NASDAQ Small Cap Market or the
NASDAQ/NMS, then the last reported sale price of the Common Stock on such
exchange or system each day shall be used, but if no such sale has occurred
on such day or if the last sale price is not reported, then the average of
the closing bid prices for the Common Stock for such day on such exchange
or system shall be used; or (ii) if the Common Stock is not then traded on
any such exchange or system, then the average of the daily bid prices for
the Company's Common Stock reported by the National Quotation Bureau, Inc.
each day shall be used if the Company's Common Stock is included in the
National Quotation System. The Warrants will be exercisable until the
close of the business day preceding the date fixed for redemption, if any.
Notwithstanding the foregoing, the Company will not be entitled to call any
of the Warrants for redemption or redeem any of the Warrants at a time when
the Warrants are not exercisable because the Company has not maintained a
current registration statement as described in Section 4 hereof. On the
redemption date, the Warrant Holders of record of redeemed Warrants shall
be entitled to payment of the Redemption price upon surrender of such
redeemed Warrants to the Company at the principal office of the Warrant
Agent.
(b) Notice of redemption of any Warrants shall be given by mailing,
by registered or certified mail, return receipt requested, a copy of such
notice to all of the affected Warrant Holders of record as of two days
prior to the mailing date at their respective addresses appearing on the
books or transfer records of the Company or such other address designated
in writing by the Warrant Holder of record to the Warrant Agent not less
than seventy-five (75) days prior to the redemption date and shall be
effective upon receipt.
(c) Notwithstanding any other provision of this Agreement, from and
after the redemption date, all rights of the affected Warrant Holders
(except the right to receive the Redemption Price) shall terminate, but
only if (i) on or prior to the redemption date the Company
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shall have irrevocably deposited with the Warrant Agent, as paying agent,
a sufficient amount to pay on the redemption date the Redemption Price for
all Warrants called for redemption and (ii) the notice of redemption shall
have stated the name and address of the Warrant Agent and the intention of
the Company to deposit such amount with the Warrant Agent on or before the
redemption date.
(d) The Warrant Agent shall pay to the Warrant Holders of record of
redeemed Warrants all monies received by the Warrant Agent for the
redemption of Warrants to which the Warrant Holders of record of such
redeemed Warrants are entitled under the provisions of this Agreement.
(e) Any amounts deposited with the Warrant Agent which are not
required for redemption of the Warrants may be withdrawn by the Company.
Any amounts deposited with the Warrant Agent which shall be unclaimed after
six (6) months after the redemption date may be withdrawn by the Company,
and thereafter the Warrant Holders of the Warrants called for redemption
for which such funds were deposited shall look solely to the Company for
payment. The Company shall be entitled to the interest , if any, on funds
deposited with the Warrant Agent, and the Warrant Holders of redeemed
Warrants shall have no right to any such interest.
(f) If the Company fails to make a sufficient deposit with the
Warrant Agent as provided above, the Warrant Holders of any Warrants called
for redemption may at the option of the Warrant Holder (i) by notice to the
Company declare the notice of redemption a nullity, or (ii) maintain an
action against the Company for the Redemption Price. If the Warrant Holder
brings such an action the Company will pay reasonable attorneys' fees of
the Warrant Holder. If the Warrant Holder fails to bring an action against
the Company for Redemption Price within ninety (90) days after the
redemption date, the Warrant holder shall be deemed to have elected to
declare the notice of redemption to be a nullity and such notice shall be
without any force or effect.
8. ADJUSTMENT OF EXERCISE PRICE AND WARRANT SHARES. After each
adjustment of the Exercise Price pursuant to this Section 8, the number of
Warrant Shares purchasable upon the exercise of each Warrant shall be the
number receivable upon exercise thereof prior to such adjustment multiplied
by a fraction, the numerator of which shall be the original Exercise Price
as defined in Section 3 above and the denominator of which shall be such
adjusted Exercise Price. The Exercise Price shall be subject to adjustment
as set forth below:
(a)(i) In case the Company shall hereafter (A) pay a dividend or
make a distribution on its Common Stock in shares of its capital stock
(whether shares of Common Stock or of capital stock of any other class),
(B) subdivide its outstanding shares of Common Stock, (C) combine its
outstanding shares of Common Stock into a smaller number of shares, or (D)
issue by reclassification of its shares of Common Stock any shares of
capital stock of the Company, the Exercise Price in effect immediately
prior to such action shall be adjusted so that the Registered Holder of any
Warrant thereafter exercised shall be entitled to receive the number of
shares of capital stock of the Company which he would have owned
immediately following such action had such Warrant been exercised
immediately prior thereto. An adjustment made pursuant to this subsection
shall become effective immediately after the record date in the case of a
dividend and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification. If,
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as a result of an adjustment made pursuant to this subsection, the
Registered Holder of any Warrant thereafter exercised shall become entitled
to receive shares of two or more classes of capital stock of the Company,
the Board of Directors (whose determination shall be conclusive and shall
be described in a statement filed with the Warrant Agent) shall determine
the allocation of the adjusted Exercise Price between or among shares of
such classes of capital stock.
(ii) In any case in which this Section 8(a) shall require that
an adjustment to the Exercise Price be made immediately following a record
date, the Company may elect to defer (but only until five business days
following the filing by the Company with the Warrant Agent of the
certificate of independent public accountants described in subsection (i)
of Section 8(d)) issuing to the holder of any Warrants exercised after such
record date the shares of Common Stock and other capital stock of the
Company issuable upon such exercise over and above the shares of Common
Stock and other capital stock of the Company issuable upon such exercise on
the basis of the Exercise Price prior to adjustment.
(iii) No adjustment in the Exercise Price shall be required to be
made unless such adjustment would require an increase or decrease of at
least $.05; PROVIDED, HOWEVER, that any adjustments which by reason of this
subsection are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this
Section 8 shall be made to the nearest cent or to the nearest one tenth of
a share, as the case may be, but in no event shall the Company be obligated
to issue fractional shares upon the exercise of any Warrant.
(b) In case of any reclassification or change of Warrant Shares
(other than a change in par value or from par value to no par value or from
no par value to par value or as a result of a subdivision or combination),
or in case of any consolidation or merger of the Company with or into
another corporation (other than a merger with a Subsidiary in which merger
the Company is the continuing corporation and which does not result in any
reclassification or change of the then Warrant Shares (other than a change
in par value or from par value to no par value or from no par value to par
value) or in the case of any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially as an entirety,
then, as a condition of such reclassification, change, consolidation,
merger, sale or conveyance, the Company, or such successor or purchasing
corporation, as the case may be, shall make lawful and adequate provision
whereby the Registered Holder of each Warrant then outstanding shall have
the right thereafter to receive on exercise of such Warrant the kind and
amount of shares of stock and other securities and property receivable upon
such reclassification, change, consolidation, merger, sale or conveyance by
a holder of the number of Warrant Shares issuable upon exercise of such
Warrant immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance and the Company or its successors shall
forthwith file at the Corporate Office of the Warrant Agent a statement
setting forth such provisions signed by (1) its Chairman of the Board or
Vice Chairman of the Board or President or a Vice President and (2) by its
Treasurer or an Assistant Treasurer or its Secretary or an Assistant
Secretary evidencing such provisions. Such provisions shall include
provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in Section 8(a). The above
provisions of this Section 8(b) shall similarly apply to successive
reclassification and changes of Warrant Shares and to successive
consolidations, mergers, sales or conveyances.
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(c) Before taking any action which could cause an adjustment
reducing the Exercise Price below the then par value of the Warrant Shares,
the Company will take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable Warrant Shares at such adjusted Exercise
Price.
(d)(i) Upon any adjustment of the Exercise Price required to be
made pursuant to this Section 8, the Company within 30 days thereafter
shall (A) cause to be filed with the Warrant Agent a certificate of a firm
of independent accountants setting forth the Exercise Price after such
adjustment and setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based, which certificate shall
be conclusive evidence of the correctness of such adjustment, and (B) cause
to be mailed to each of the Registered Holders of the Warrant Certificates
written notice of such adjustment. Where appropriate, such notice may be
given in advance and included as a part of the notice required to be mailed
under the provisions of subsection 8(d)(ii).
(ii) In case at any time:
(A) The Company shall declare any dividend upon its
Common Stock payable otherwise than in cash; or
(B) The Company shall offer for subscription to the
holders of its Common Stock any additional shares of stock of any class or
any other securities convertible into shares of stock or any rights to
subscribe thereto; or
(C) There shall be any capital reorganization or
reclassification of the capital stock of the Company, or a sale of all or
substantially all of the shares of the assets of the Company, or a
consolidation or merger of the Company with another corporation (other than
a merger with a subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification or change of
the then Warrant Shares issuable upon exercise of the Warrants other than
a change in par value or from par value to no par value or from no par
value to par value); or
(D) There shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall cause to be
mailed to each of the Registered Holders of the Warrant Certificates, at
the earliest practicable time (and, in any event, not less than 20 days
before any record date or other date set for definitive action), written
notice of the date on which the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription
rights or such reorganization, reclassification, sale, consolidation,
merger, dissolution, liquidation or winding up shall take place, as the
case may be. Such notice shall also set forth such facts as shall indicate
the effect of such action (to the extent such effect may be known at the
date of such notice) on the Exercise Price and the kind and amount of the
shares of stock and other securities and property deliverable upon exercise
of the Warrants. Such notice shall also specify the date as of which the
holders of the Common Stock of record shall participate in said
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<PAGE>
dividend, distribution or subscription rights or shall be entitled to
exchange their Common Stock for securities or other property deliverable
upon such reorganization, reclassification, sale, consolidation, merger,
dissolution, liquidation or winding up, as the case may be (on which date,
in the event of voluntary or involuntary dissolution, liquidation or
winding up of the Company, the right to exercise the Warrants shall
terminate).
(iii) Without limiting the obligation of the Company to provide
notice to the Registered Holders of the Warrant Certificates of corporate
actions hereunder, is agreed that failure of the Company to give notice
shall not invalidate such corporate action of the Company.
9. REDUCTION IN EXERCISE PRICE AT COMPANY'S OPTION. In addition to
any adjustments made to the Exercise Price pursuant to Section 8, the
Company's Board of Directors may, at its sole discretion, reduce the
Exercise Price of the Warrants in effect at any time either for the life of
the Warrants or any shorter period of time determined by the Company's
Board of Directors. The Company shall promptly notify the Warrant Agent
and the Registered Holders of any such reductions in the Exercise Price.
10. DUTIES, COMPENSATION AND TERMINATION OF WARRANT AGENT. The
Warrant Agent shall act hereunder as agent and in a ministerial capacity
for the Company, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not, by issuing and delivering
Warrant Certificates or by any other act hereunder, be deemed to make any
representations as to the validity, value or authorization of the Warrant
Certificates or the Warrants represented thereby or of the Warrant Shares
or other property delivered on exercise of any Warrant. The Warrant Agent
shall not at any time be under any duty or responsibility to any holder of
the Warrant Certificates to make or cause to be made any adjustment of the
Exercise Price or to determine whether any fact exists which may require
any such adjustments.
The Warrant Agent shall not (i) be liable for any recital or
statement of fact contained herein or for any action taken or omitted by it
in reliance on any Warrant Certificate or other document or instrument
believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties, (ii) be responsible for any
failure on the part of the Company to comply with any of its covenants and
obligations contained in this Agreement except for its own negligence or
willful misconduct, or (iii) be liable for any act or omission in
connection with this Agreement except for its own negligence or willful
misconduct.
The Company agrees to indemnify the Warrant Agent against any and
all losses, expenses and liabilities which the Warrant Agent may incur in
connection with the delivery of copies of the Company's prospectus to
exercising Registered Holders upon the exercise of any Warrants as set
forth in Section 3.
The Warrant Agent may at any time consult with counsel
satisfactory to it (which may be counsel for the Company) and shall incur
no liability or responsibility for any action taken or omitted by it in
good faith in accordance with the opinion or advice of such counsel. Any
notice, statement, instruction, request, direction, order or demand of the
Company shall be sufficiently
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<PAGE>
evidenced by an instrument signed by its President and attested by its
Secretary or Assistant Secretary. The Warrant Agent shall not be liable
for any action taken or omitted by it in accordance with such notice,
statement, instruction, request, order or demand.
The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse the Warrant Agent
for its reasonable expenses as per the fee schedule attached hereto as
Exhibit C. The Company further agrees to indemnify the Warrant Agent
against any and all losses, expenses and liabilities, including judgments,
costs and counsel fees, for any action taken or omitted by the Warrant
Agent in the execution of its duties and powers hereunder, excepting
losses, expenses and liabilities arising as a result of the Warrant Agent's
negligence or willful misconduct.
The Warrant Agent may resign its duties or the Company may
terminate the Warrant Agent and the Warrant Agent shall be discharged from
all further duties and liabilities hereunder (except liabilities arising as
a result of the Warrant Agent's own negligence or willful misconduct), on
30 days' prior written notice to the other party. At least 15 days prior
to the date such resignation is to become effective, the Warrant Agent
shall cause a copy of such notice of resignation to be mailed to the
Registered Holder of each Warrant Certificate. On such resignation or
termination the Company shall appoint a new warrant agent. If the Company
shall fail to make such appointment within a period of 30 days after it has
been notified in writing of the resignation by the Warrant Agent, then the
registered holder of any Warrant Certificate may apply to any court of
competent jurisdiction for the appointment of a new warrant agent.
After acceptance in writing of an appointment of a new warrant
agent is received by the Company, such new warrant agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; provided, however, if it shall be
necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the
Company and shall be legally and validly executed. The Company shall file
a notice of appointment of a new warrant agent with the resigning Warrant
Agent and shall forthwith cause a copy of such notice to be mailed to the
Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant
agent may be converted or merged, or any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be
a party, or any corporation succeeding to the corporate trust business of
the Warrant Agent shall be a successor Warrant Agent under this Agreement,
provided that such corporation is eligible for appointment as a successor
to the Warrant Agent under the provisions of the preceding paragraph. Any
such successor Warrant Agent shall promptly cause notice of its succession
as Warrant Agent to be mailed to the Company and to the Registered Holder
of each Warrant Certificate. No further action shall be required for
establishment and authorization of such successor warrant agent.
The Warrant Agent, its officers or directors and its subsidiaries
or affiliates may buy, hold or sell Warrants or other securities of the
Company and otherwise deal with the Company in
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the same manner and to the same extent and with like effect as though it
were not Warrant Agent. Nothing herein shall preclude the Warrant Agent
from acting in any other capacity for the Company or for any other legal
entity.
11. MODIFICATION OF AGREEMENT. The Warrant Agent and the Company may
by supplemental agreement make any changes or corrections in this Agreement
(i) that they shall deem appropriate to cure any ambiguity or to correct
any defective or inconsistent provision or mistake or error herein
contained; or (ii) that they may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Warrant
Certificates; provided, however, this Agreement shall not otherwise be
modified, supplemented or altered in any respect except with the consent in
writing of the Registered Holders of Warrant Certificates representing not
less than two-thirds of the Warrants outstanding. Additionally, except as
provided in Section 8, no change in the number or nature of the Warrant
Shares purchasable on exercise of a Warrant, increase in the purchase price
therefor, or the acceleration of the Expiration Date of a Warrant shall be
made without the consent in writing of the Registered Holder of the Warrant
Certificate representing such Warrant, other than such changes as are
specifically prescribed or allowed by this Agreement.
12. NOTICES. All notices, demands, elections, opinions or requests
(however characterized or described) required or authorized hereunder shall
be deemed given sufficiently if in writing and sent by registered or
certified mail, return receipt requested and postage prepaid, or by tested
telex, telegram or cable to, in the case of the Company:
Global Med Technologies, Inc.
12600 West Colfax
Suite A500
Lakewood, CO 80215
with a copy to:
Brenman Key & Bromberg, P.C.
Mellon Financial Center
1775 Sherman Street
Suite 1001
Denver, Colorado 80203
and in the case of the Warrant Agent:
American Securities Transfer and Trust, Inc.
1825 Lawrence Street, Suite 444
Denver, CO 80202
and if to the Registered Holder of a Warrant Certificate, at the address of
such holder as set forth on the books maintained by the Warrant Agent.
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<PAGE>
13. BINDING AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of the Company, the Warrant Agent and their respective
successors and assigns, and the holders from time to time of Warrant
Certificates. Nothing in this Agreement is intended or shall be construed
to confer upon any other person any right, remedy or claim or to impose on
any other person any duty, liability or obligation.
14. FURTHER INSTRUMENTS. The parties shall execute and deliver any
and all such other instruments and shall take any and all other actions as
may be reasonably necessary to carry out the intention of this Agreement.
15. SEVERABILITY. If any provision of this Agreement shall be held,
declared or pronounced void, voidable, invalid, unenforceable, or
inoperative for any reason by any court of competent jurisdiction,
government authority or otherwise, such holding, declaration or
pronouncement shall not affect adversely any other provision of this
Agreement, which shall otherwise remain in full force and effect and be
enforced in accordance with its terms, and the effect of such holding,
declaration or pronouncement shall be limited to the territory or
jurisdiction in which made.
16. WAIVER. All the rights and remedies of either party under this
Agreement are cumulative and not exclusive of any other rights and remedies
as provided by law. No delay or failure on the part of either party in the
exercise of any right or remedy arising from a breach of this Agreement
shall operate as a waiver of any subsequent right or remedy arising from a
subsequent breach of this Agreement. The consent of any party where
required hereunder to act or occurrence shall not be deemed to be a consent
to any other action or occurrence.
17. GENERAL PROVISIONS. This Agreement shall be construed and
enforced in accordance with, and governed by, the laws of the State of
Colorado. Except as otherwise expressly stated herein, time is of the
essence in performing hereunder. This Agreement embodies the entire
agreement and understanding between the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof, and
this Agreement may not be modified or amended or any term or provisions
hereof waived or discharged except in writing signed by the party against
whom such amendment, modification, waiver or discharge is sought to be
enforced. The headings of this Agreement are for convenience in reference
only and shall not limit or otherwise affect the meaning hereof. This
Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
GLOBAL MED TECHNOLOGIES, INC.
ATTEST:
_______________________________ By_________________________________
William J. Collard, Secretary Michael I. Ruxin, President
AMERICAN SECURITIES TRANSFER AND TRUST, INC.
Warrant Agent
By_________________________________
Charles R. Harrison, President
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Exhibit A
GLOBAL MED TECHNOLOGIES, INC.
Incorporated Under the Laws of the State of Colorado
No. W- _____Class A Common Stock
Purchase Warrants
CUSIP 37935E 11 9
CERTIFICATE FOR (See Reverse
CLASS A COMMON STOCK For Certain
PURCHASE WARRANTS Definitions)
This Warrant Certificate certifies that ___________________, or
registered assigns ("the Warrant Holder"), is the registered owner of the
above indicated number of Class A Common Stock Purchase Warrants (the
"Warrants") expiring on __________, 2000 (the "Expiration Date"). One
Warrant entitles the Warrant Holder to purchase one share of common stock
("Share") from Global Med Technologies, Inc., a Colorado corporation (the
"Company"), at a purchase price of $____ (the "Exercise Price"), commencing
on __________, 1997, and terminating on the Expiration Date ("Exercise
Period"), upon surrender of this Warrant Certificate with the exercise form
hereon duly completed and executed with payment of the Exercise Price at
the office of American Securities Transfer & Trust, Inc. (the "Warrant
Agent"), but only subject to the conditions set forth herein and in a
Warrant Agreement dated as of _________, 1997 (the "Warrant Agreement")
between the Company and the Warrant Agent. The Exercise Price, the number
of shares purchasable upon exercise of each Warrant, the number of Warrants
outstanding and the Expiration Date are subject to adjustments upon the
occurrence of certain events. The Warrant Holder may exercise all or any
number of Warrants. Reference hereby is made to the provisions on the
reverse side of this Warrant Certificate and to the provisions of the
Warrant Agreement, all of which are incorporated by reference in and made
a part of this Warrant Certificate and shall for all purposes have the same
effect as though fully set forth at this place.
Upon due presentment for transfer of this Warrant Certificate at the
office of the Warrant Agent, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants, subject to any adjustments made in accordance with the provisions
of the Warrant Agreement, shall be issued to the transferee in exchange for
this Warrant Certificate, subject to the limitations provided in the
Warrant Agreement, upon payment of $_____ per Warrant Certificate and any
tax or governmental charge imposed in connection with such transfer.
The Warrant Holder of the Warrants evidenced by this Warrant
Certificate may exercise all or any whole number of such Warrants during
the period and in the manner stated hereon. The Exercise Price shall be
payable in lawful money of the United States of America and in cash or by
<PAGE>
certified or bank cashier's check or bank draft payable to the order of the
Company. If upon exercise of any Warrants evidenced by this Warrant
Certificate the number of Warrants exercised shall be less than the total
number of Warrants so evidenced, there shall be issued to the Warrant
Holder a new Warrant Certificate evidencing the number of Warrants not so
exercised.
Subject to the following paragraph, no Warrant may be exercised after
5:00 p.m. Mountain Time on the Expiration Date and any Warrant not
exercised by such time shall become void, unless extended by the Company.
Commencing on the date the Warrants are separately tradeable and
transferable, the Warrants are subject to redemption by the Company at $.55
per Warrant, at any time until _________, 1999, and, thereafter, at $.75
per Warrant at any time prior to their expiration, on not less than 30
days' prior written notice to the holders of Warrants, provided that the
daily trading price per share of Common Stock has been at least $______
(120% of the Warrant exercise price) for a period of at least 20
consecutive trading days ending within 10 days prior to the date upon which
the notice of redemption is given. During the 30-day period immediately
following the giving of such notice, the Warrant Holders shall have the
right to exercise the Warrants so held by them. Upon expiration of such
30-day period, all rights of the Warrant Holders shall terminate, other
than the rights to receive the redemption price, without interest, and the
right to receive the redemption price shall itself expire on the Warrant
Expiration Date.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its President and by its Secretary, each by a facsimile of his/her
signature, and has caused a facsimile of its corporate seal to be imprinted
hereon.
Dated: ______________________
GLOBAL MED TECHNOLOGIES, INC.
_____________________________ By________________________________
William J. Collard, Secretary Michael I. Ruxin, President
AMERICAN SECURITIES TRANSFER &
TRUST, INC.
Warrant Agent
By_________________________________
Charles R. Harrison, President
-2-
<PAGE>
FORM OF REVERSE SIDE OF WARRANT
This Warrant Certificate, when surrendered to the Warrant Agent at its
principal office by the Warrant Holder, in person or by attorney duly
authorized in writing, may be exchanged in the manner and subject to the
limitations provided in the Warrant Agreement, upon the payment of any tax
or other governmental charge imposed in connection with such exchange, for
another Warrant Certificate or Warrant Certificates of like tenor and
evidencing a like number of Warrants, subject to any adjustments made in
accordance with the provisions of the Warrant Agreement.
The Company and the Warrant Agent may deem and treat the registered
holder hereof as the absolute owner of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone) for all proposes and neither the Company nor the Warrant Agent
shall be affected by any notice to the contrary. No Warrant Holder, as
such, shall have any rights of a holder of the Common Stock of the Company,
either at law or at equity, and the rights of the Warrant holder, as such,
are limited to those rights expressly provided in the Warrant Agreement and
in the Warrant Certificate.
Under the Warrant Agreement the Exercise Price is subject to
adjustment if the Company shall effect any stock split or stock combination
with respect to the Common Stock. Any such adjustment of the Exercise
Price will also result in an adjustment of the number of shares of Common
Stock purchasable upon exercise of a Warrant or, if the Company should
elect, an adjustment of each outstanding Warrant into a different number of
Warrants.
The Company shall not be required to issue fractions of Warrants upon
any such adjustment or to issue fractions of shares upon the exercise of
any Warrants upon any such adjustment, in accordance with the Warrant
Agreement.
The Warrant Agreement is subject to amendment upon the approval of
holders of at least two-thirds of the outstanding Warrants as a group,
except that no such approval is required for the reduction of the Exercise
Price or extension of the Expiration Date. No amendment shall accelerate
the Expiration Date or increase the Exercise Price without the approval of
all the holders of all outstanding Warrants. A copy of the Warrant
Agreement will be available at all reasonable times at the office of the
Warrant Agent for inspection by any Warrant Holder. As a condition of such
inspection, the Warrant Agent may require any Warrant Holder to submit the
Warrant Holder's Warrant Certificate for inspection.
IMPORTANT: The Warrants represented by this Certificate may not be
exercised by a Warrant Holder unless at the time of exercise the underlying
shares of Common Stock are qualified for sale by registration or otherwise
in the state where the Warrant Holder resides or unless the issuance of the
shares of Common Stock would be exempt under the applicable state
securities laws. Further, a registration statement under the Securities
Act of 1933, as amended, covering the issuance of shares of Common Stock
upon the exercise of this Warrant must be in effect and current at the time
of exercise unless the issuance of shares of Common Stock upon any exercise
is exempt from the registration requirements of the Securities Act of 1933.
Unless such registration statement is in effect and current at the time of
exercise, or unless such an exemption is available the Company may decline
to permit the exercise of this Warrant.
-3-
<PAGE>
TRANSFER FEE $_____ PER CERTIFICATE
GLOBAL MED TECHNOLOGIES, INC.
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -
TEN ENT - as tenants by the entireties Custodian
JT TEN - as joint tenants with right ------------------
of survivorship and not as (Cust) (Minor)
Tenanta in common under Uniform Gifts
to Minors Act _______
(State)
Additional abbreviations may also be used though not in the above list.
FORM OF ASSIGNMENT
(To Be Executed by the Registered Holder if the Registered Holder
Desires to Assign Class A Warrants Evidenced by the
Within Warrant Certificate)
FOR VALUE RECEIVED __________________________ hereby sells, assigns
and transfers unto ____________________ Class A Warrants, evidenced by the
within Warrant Certificate, and does hereby irrevocably constitute and
appoint ________________________________ Attorney to transfer the said
Warrants evidenced by the within Warrant Certificate on the books of the
Company, with full power of substitution.
Dated: _________________ ________________________________
Signature
NOTICE: The above signature must correspond with the name as written upon
the face of the within Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever.
Signature Guaranteed: _________________________________________
-4-
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be Executed by the Holder if the Registered Holder Desires to
Exercise Warrants Evidenced by the Within Warrant Certificate)
To Global Med Technologies, Inc.:
The undersigned hereby irrevocably elects to exercise
______________ Class A Warrants, evidenced by the within Warrant
Certificate for, and to purchase thereunder, ___________ full shares of
Common Stock issuable upon exercise of said Warrants and delivery of
$___________ and any applicable taxes.
The undersigned requests that certificates for such shares be
issued in the name of:
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
_______________________________ _________________________________
(Please print name and address)
_______________________________ _________________________________
_______________________________ _________________________________
If said number of Class A Warrants shall not be all the Warrants
evidenced by the within Warrant Certificate, the undersigned requests that
a new Warrant Certificate evidencing the Warrants not so exercised be
issued in the name of and delivered to:
________________________________________________________________________
(Please print name and address)
________________________________________________________________________
__________________________________________________________________________
Dated: ____________________ Signature: __________________________
NOTICE: The above signature must correspond with the name as written upon
the face of the within Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever, or if
signed by any other person the Form of Assignment hereon must be
duly executed and if the certificate representing the shares or
any Warrant Certificate representing Warrants not exercised is to
be registered in a name other than that in which the within
Warrant Certificate is registered, the signature of the holder
hereof must be guaranteed.
Signature Guaranteed: ____________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT
TO S.E.C. RULE 17Ad-15.
-5-
<PAGE>
Exhibit B
GLOBAL MED TECHNOLOGIES, INC.
Incorporated Under the Laws of the State of Colorado
No. W- _____Class A Common Stock
Purchase Warrants
CUSIP 37935E 11 9
CERTIFICATE FOR (See Reverse
CLASS A COMMON STOCK For Certain
PURCHASE WARRANTS Definitions)
This Warrant Certificate certifies that RAF Financial Corporation, or
registered assigns ("the Warrant Holder"), is the registered owner of the
above indicated number of Class A Common Stock Purchase Warrants (the
"Warrants") expiring on __________, 2000 (the "Expiration Date"). One
Warrant entitles the Warrant Holder to purchase one share of common stock
("Share") from Global Med Technologies, Inc., a Colorado corporation (the
"Company"), at a purchase price of $____ (the "Exercise Price"), commencing
on __________, 1997, and terminating on the Expiration Date ("Exercise
Period"), upon surrender of this Warrant Certificate with the exercise form
hereon duly completed and executed with payment of the Exercise Price at
the office of American Securities Transfer & Trust, Inc. (the "Warrant
Agent"), but only subject to the conditions set forth herein and in a
Warrant Agreement dated as of _________, 1997 (the "Warrant Agreement")
between the Company and the Warrant Agent. The Exercise Price, the number
of shares purchasable upon exercise of each Warrant, the number of Warrants
outstanding and the Expiration Date are subject to adjustments upon the
occurrence of certain events. The Warrant Holder may exercise all or any
number of Warrants. Reference hereby is made to the provisions on the
reverse side of this Warrant Certificate and to the provisions of the
Warrant Agreement, all of which are incorporated by reference in and made
a part of this Warrant Certificate and shall for all purposes have the same
effect as though fully set forth at this place.
Until _____, 1998, this Warrant Certificate is not transferrable
except to an underwriter that participated in the public offering by the
Company that resulted in the original issuance of the Warrants, to a
partner or an officer of such an underwriter or by will on operation of
law. Upon due presentment for transfer of this Warrant Certificate at the
office of the Warrant Agent, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants, subject to any adjustments made in accordance with the provisions
of the Warrant Agreement, shall be issued to the transferee in exchange for
this Warrant Certificate, subject to the limitations provided in the
Warrant Agreement, upon payment of $_____ per Warrant Certificate and any
tax or governmental charge imposed in connection with such transfer.
<PAGE>
The Warrant Holder of the Warrants evidenced by this Warrant
Certificate may exercise all or any whole number of such Warrants during
the period and in the manner stated hereon. The Exercise Price shall be
payable in lawful money of the United States of America and in cash or by
certified or bank cashier's check or bank draft payable to the order of the
Company. If upon exercise of any Warrants evidenced by this Warrant
Certificate the number of Warrants exercised shall be less than the total
number of Warrants so evidenced, there shall be issued to the Warrant
Holder a new Warrant Certificate evidencing the number of Warrants not so
exercised.
Subject to the following paragraph, no Warrant may be exercised after
5:00 p.m. Mountain Time on the Expiration Date and any Warrant not
exercised by such time shall become void, unless extended by the Company.
Commencing on the date the Warrants are separately tradeable and
transferable, the Warrants are subject to redemption by the Company at $.55
per Warrant, at any time until _________, 1999, and, thereafter, at $.75
per Warrant at any time prior to their expiration, on not less than 30
days' prior written notice to the holders of Warrants, provided that the
daily trading price per share of Common Stock has been at least $______
(120% of the Warrant exercise price) for a period of at least 20
consecutive trading days ending within 10 days prior to the date upon which
the notice of redemption is given. During the 30-day period immediately
following the giving of such notice, the Warrant Holders shall have the
right to exercise the Warrants so held by them. Upon expiration of such
30-day period, all rights of the Warrant Holders shall terminate, other
than the rights to receive the redemption price, without interest, and the
right to receive the redemption price shall itself expire on the Warrant
Expiration Date.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent.
-2-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its President and by its Secretary, each by a facsimile of his/her
signature, and has caused a facsimile of its corporate seal to be imprinted
hereon.
Dated: ______________________
GLOBAL MED TECHNOLOGIES, INC.
_____________________________ By________________________________
William J. Collard, Secretary Michael I. Ruxin, President
AMERICAN SECURITIES TRANSFER & TRUST, INC.
Warrant Agent
By_________________________________
Charles R. Harrison, President
-3-
<PAGE>
FORM OF REVERSE SIDE OF WARRANT
This Warrant Certificate, when surrendered to the Warrant Agent at its
principal office by the Warrant Holder, in person or by attorney duly
authorized in writing, may be exchanged in the manner and subject to the
limitations provided in the Warrant Agreement, upon the payment of any tax
or other governmental charge imposed in connection with such exchange, for
another Warrant Certificate or Warrant Certificates of like tenor and
evidencing a like number of Warrants, subject to any adjustments made in
accordance with the provisions of the Warrant Agreement.
The Company and the Warrant Agent may deem and treat the registered
holder hereof as the absolute owner of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone) for all proposes and neither the Company nor the Warrant Agent
shall be affected by any notice to the contrary. No Warrant Holder, as
such, shall have any rights of a holder of the Common Stock of the Company,
either at law or at equity, and the rights of the Warrant holder, as such,
are limited to those rights expressly provided in the Warrant Agreement and
in the Warrant Certificate.
Under the Warrant Agreement the Exercise Price is subject to
adjustment if the Company shall effect any stock split or stock combination
with respect to the Common Stock. Any such adjustment of the Exercise
Price will also result in an adjustment of the number of shares of Common
Stock purchasable upon exercise of a Warrant or, if the Company should
elect, an adjustment of each outstanding Warrant into a different number of
Warrants.
The Company shall not be required to issue fractions of Warrants upon
any such adjustment or to issue fractions of shares upon the exercise of
any Warrants upon any such adjustment, in accordance with the Warrant
Agreement.
The Warrant Agreement is subject to amendment upon the approval of
holders of at least two-thirds of the outstanding Warrants as a group,
except that no such approval is required for the reduction of the Exercise
Price or extension of the Expiration Date. No amendment shall accelerate
the Expiration Date or increase the Exercise Price without the approval of
all the holders of all outstanding Warrants. A copy of the Warrant
Agreement will be available at all reasonable times at the office of the
Warrant Agent for inspection by any Warrant Holder. As a condition of such
inspection, the Warrant Agent may require any Warrant Holder to submit the
Warrant Holder's Warrant Certificate for inspection.
IMPORTANT: The Warrants represented by this Certificate may not be
exercised by a Warrant Holder unless at the time of exercise the underlying
shares of Common Stock are qualified for sale by registration or otherwise
in the state where the Warrant Holder resides or unless the issuance of the
shares of Common Stock would be exempt under the applicable state
securities laws. Further, a registration statement under the Securities
Act of 1933, as amended, covering the issuance of shares of Common Stock
upon the exercise of this Warrant must be in effect and current at the time
of exercise unless the issuance of shares of Common Stock upon any exercise
is exempt from the registration requirements of the Securities Act of 1933.
Unless such registration statement is in effect and current at the time of
exercise, or unless such an exemption is available the Company may decline
to permit the exercise of this Warrant.
-4-
<PAGE>
TRANSFER FEE $_____ PER CERTIFICATE
GLOBAL MED TECHNOLOGIES, INC.
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -
TEN ENT - as tenants by the entireties Custodian
JT TEN - as joint tenants with right ------------------
of survivorship and not as (Cust) (Minor)
Tenanta in common under Uniform Gifts
to Minors Act _______
(State)
Additional abbreviations may also be used though not in the above list.
FORM OF ASSIGNMENT
(To Be Executed by the Registered Holder if the Registered Holder
Desires to Assign Class A Warrants Evidenced by the
Within Warrant Certificate)
FOR VALUE RECEIVED __________________________ hereby sells, assigns
and transfers unto ____________________ Class A Warrants, evidenced by the
within Warrant Certificate, and does hereby irrevocably constitute and
appoint ________________________________ Attorney to transfer the said
Warrants evidenced by the within Warrant Certificate on the books of the
Company, with full power of substitution.
Dated: _________________ ________________________________
Signature
NOTICE: The above signature must correspond with the name as written upon
the face of the within Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever.
Signature Guaranteed: _________________________________________
-4-
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be Executed by the Holder if the Registered Holder Desires to
Exercise Warrants Evidenced by the Within Warrant Certificate)
To Global Med Technologies, Inc.:
The undersigned hereby irrevocably elects to exercise
______________ Class A Warrants, evidenced by the within Warrant
Certificate for, and to purchase thereunder, ___________ full shares of
Common Stock issuable upon exercise of said Warrants and delivery of
$___________ and any applicable taxes.
The undersigned requests that certificates for such shares be
issued in the name of:
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
_______________________________ _________________________________
(Please print name and address)
_______________________________ _________________________________
_______________________________ _________________________________
If said number of Class A Warrants shall not be all the Warrants
evidenced by the within Warrant Certificate, the undersigned requests that
a new Warrant Certificate evidencing the Warrants not so exercised be
issued in the name of and delivered to:
________________________________________________________________________
(Please print name and address)
________________________________________________________________________
__________________________________________________________________________
Dated: ____________________ Signature: __________________________
NOTICE: The above signature must correspond with the name as written upon
the face of the within Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever, or if
signed by any other person the Form of Assignment hereon must be
duly executed and if the certificate representing the shares or
any Warrant Certificate representing Warrants not exercised is to
be registered in a name other than that in which the within
Warrant Certificate is registered, the signature of the holder
hereof must be guaranteed.
Signature Guaranteed: ____________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT
TO S.E.C. RULE 17Ad-15.
-5-
EXHIBIT 10.16
SECOND AMENDMENT TO STOCK PURCHASE OPTION
-----------------------------------------
For good and valuable consideration the sufficiency of which is hereby
acknowledged, the Stock Purchase Option granted by Global Med Technologies,
Inc., formerly Global Data Technologies, Inc., ("Grantor") to LMU & Company
("LMU") and its successors and assigns pursuant to that certain agreement
between LMU and the Grantor dated April 8, 1996 (Exhibit A thereto), as
amended by that certain Amendment to Stock Purchase Option, dated November
14, 1996, (the "Amendment") is hereby amended as follows:
The date January 31, 1997 set forth in the Amendment is amended to
June 30, 1997. All other terms and conditions of the Stock Purchase
Option and the Amendment remain as originally stated.
GLOBAL MED TECHNOLOGIES, INC.
Date: January 14, 1997 By /s/ Michael I. Ruxin
---------------------------
Michael I. Ruxin
Chief Executive Officer
Accepted and Agreed to
LMU & COMPANY
By /s/ L. Michael Underwood
- ---------------------------------
L. Michael Underwood
President
EXHIBIT 24.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Summary
Financial Information," "Selected Financial Information", and "Experts"
and to the use of our report dated May 15, 1996, except for Note 1, as to
which the date is November 13, 1996, in Amendment No. 1 to the
Registration Statement (Form SB-2 No. 333-11723) and related Prospectus
of Global Med Technologies, Inc. dated January 17, 1997
/s/ ERNST & YOUNG LLP
----------------------------
ERNST & YOUNG LLP
Denver, Colorado
January 16, 1997
