U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ X ] Annual report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required] for the fiscal year ended:
December 31, 1996
-----------------
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] for the transition period
from ___________ to __________
COMMISSION FILE NUMBER: 0 - 22083
-------------
GLOBAL MED TECHNOLOGIES, INC.
---------------------------------------------
(Name of small business issuer in its charter)
Colorado 84-116894
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12600 West Colfax
Suite A-500
Lakewood, Colorado 80215
--------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (303) 238-2000
-----------------
Securities to be registered under Section 12(b) of the Act: None
------
Securities registered under Section 12(g) of the Act:
Common Stock, $.01 par value
- ----------------------------
Class A Common Stock Purchase Warrants
- --------------------------------------
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing requirements
for at least the past 90 days. Yes No X
----- -----
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B contained herein, and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment
to this Form 10-KSB. [ X ]
Issuer's revenues for its most recent fiscal year: $11,034,000
-----------
Aggregate market value of voting stock held by non-affiliates as of March
26, 1997: $17,019,213
-----------
Shares of Common Stock, $.01 par value, outstanding as of March 26, 1997:
8,121,755
- ---------
Documents incorporated by reference: Exhibits to Issuer's Registration
Statement on Form SB-2, No. 333-11723.
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
FORM 10-KSB
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
- --------------------------------
(a)(b) BUSINESS DEVELOPMENT AND BUSINESS OF ISSUER.
Global Med Technologies, Inc. (the "Company") was organized under the
laws of the State of Colorado in December 1989. The Company completed its
initial public offering of securities in the first quarter of 1997, from
which it received net proceeds of approximately $8,620,000 from the sale of
1,456,988 Units, each of which consisted of two shares of Common Stock and
one Class A Common Stock Purchase Warrant (the "Warrants").
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
approximately $1.1 million 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 software),
which it believes to be the most comprehensive and flexible system of its
type available
2
<PAGE>
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 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 and
unregulated segments 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. The Company intends to increase its
sales and marketing efforts by hiring additional field sales and other
marketing personnel during the twelve months following its February 1997
public offering. The Company currently has 13 sales and marketing
personnel. The Company believes it can increase its penetration of the
U.S. blood
3
<PAGE>
bank information management market as well as the substance
abuse testing program management market through its planned increases in
its sales and marketing staff.
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 the
Company's February 1997 public 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.
4
<PAGE>
During the year ended December 31, 1996, one Data Med customer,
Laidlaw Transit, Inc. and one Wyndgate customer, Gulf Coast Regional Blood
Center, accounted for approximately 14% and 11.5%, respectively, of the
Company's revenues. During 1995, two DataMed customers, Laidlaw Transit,
Inc. and Chevron Corporation and one Wyndgate customer, the Royalty Group,
accounted for approximately 18%, 12% and 10%, respectively, of the
Company's revenues. See WYNDGATE TECHNOLOGIES DIVISION - DEVELOPMENT
AGREEMENTS. 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.
The Company currently has 23 (including the Royalty Group) 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, 1996 and 1995, the Company
expended approximately $1.87 million, and $655,000, respectively, for
research and development.
EMPLOYEES
As of December 31, 1996, the Company had 122 full-time employees,
consisting of 11 employees for the corporate office, 50 at Wyndgate and 61
at DataMed. Of the 122 full-time employees, 28 employees were in research
and development, 13 employees were in sales and marketing, 21 employees
were in administration, and 60 employees were in program management and
implementation. The Company has employment agreements with certain
personnel. See ITEM 10(g). 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.
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
5
<PAGE>
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 its software products. The majority of customers for
Wyndgate's software products use all or a portion of these services.
Historically, maintenance and product upgrades from Wyndgate's software
products 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 more accurate information.
With the spread of AIDS and Hepatitis-B, stringent FDA guidelines have
been imposed on blood banks in order to insure 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.
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
6
<PAGE>
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 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(R)
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.
7
<PAGE>
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 Maintains current inventories of all
AND DISTRIBUTION 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
8
<PAGE>
throughout the relationship. Services include complete installation and
implementation, training, consulting and maintenance. The license
agreements currently 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.
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 from the date of delivery of the software to the
customer 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 invoiced
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 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 request 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.
9
<PAGE>
PRODUCT DEVELOPMENT
SAFETRACETX(TM) - TRANSFUSION MANAGEMENT INFORMATION SYSTEM. Wyndgate
has begun the development of the SAFETRACETX(TM) software product, a
transfusion management information system that can be utilized by hospitals
to help them insure the safety of the blood transfused into patient-
recipients. If completely developed, it will provide electronic
cross-matching capabilities to help insure 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 operates
on various 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 relate 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 Wyndgate products.
The Company believes that a major advantage of EDEN-OA(R) is that it
allows local user modifications to that user's software programs.
Additionally, EDEN-OA(R) 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 might 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
10
<PAGE>
procedures manager. This combination of capabilities makes EDEN-OA(R)
portable and easy to tailor and maintain.
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, Wyndgate developed the SAFETRACE(TM) software product and 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 SAFETRACE(TM) software product, 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:
11
<PAGE>
Percentage of License Fee Percentage of License Fee
if ITxM Initiates Sale if Company 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%
12
<PAGE>
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
* Rhode Island Blood Center, Providence, Rhode Island
* 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.
Management of the Company estimates that SAFETRACE(TM) software
product implementations take approximately six to twelve months from the
date of delivery of the software to the customer 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,
Sacramento Medical Foundation Blood Center and the Blood Center for
Southeast Louisiana in which the SAFETRACE(TM) software product is fully
operational.
On February 13, 1997 the Wyndgate Technologies division ("Wyndgate")
of Global Med Technologies, Inc. entered into a multi-million dollar,
10-year contract with Haemonetics Corporation ("Haemonetics"), a New York
Stock Exchange listed company located in Braintree, Massachusetts.
Licensing and other fees are payable by Haemonetics over the life of the
contract. Under the contract, Wyndgate will provide the use of its
SAFETRACE(TM) blood bank information management software to Haemonetics for
its entry into the service side of blood banking in multiple locations,
including one of the blood banks listed above which was
13
<PAGE>
previously contracted by Wyndgate. Haemonetics has traditionally provided
blood separation products to blood banks and hospitals domestically and
internationally.
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
insure 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 manufacturing 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, 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.
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
14
<PAGE>
the software development services and apply the payments to the Company
towards any consideration payable to the Company in connection with a
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 a security interest with a bank which was in effect at the time
the Exclusivity Agreement was negotiated) 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
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
15
<PAGE>
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 $2 million 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 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
16
<PAGE>
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 monitors the
performance of: testing laboratories; specimen collection providers; MROs;
and the overall quality of information that is received, stored and
reported. DataMed currently provides substance abuse testing management
services to a number of clients worldwide.
17
<PAGE>
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
substance abuse processes. 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 Quest Diagnostics,
Inc., 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 include:
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, 1996, DataMed's complete program management services
accounted for
18
<PAGE>
approximately 70% of DataMed's revenues. For the year ended December 31,
1995, the Company's complete program management services accounted for 48%
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 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 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) allows DataMed to function as a company's substance abuse
department.
19
<PAGE>
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.
International companies are also potential customers. DataMed
currently provides substance abuse testing management services to a number
of 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"); Equifax Services, Inc.; 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.
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.
20
<PAGE>
ITEM 2. 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 year ended December 31,
1996, office lease expenses per month were approximately $25,000.
Additional leased space will be required to accommodate the planned
personnel increases.
ITEM 3. LEGAL PROCEEDINGS.
- --------------------------
The Company is not a party to any legal proceedings which management
believes to be material, and there are no such proceedings which are known
to be contemplated.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------------------------------------------------------------
During the fourth quarter of the most recently completed fiscal year,
the Company did not submit any matter to a vote of its shareholders.
21
<PAGE>
PART II
ITEM 5. MARKET PRICE OF THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
- --------------------------------------------------------------------------
HOLDER MATTERS.
- --------------
(a) MARKET INFORMATION. The Units, each of which consisted of two
shares of Common Stock and one Warrant, commenced trading on the NASDAQ
Small-Cap Market on February 12, 1997. On March 13, 1997, the Common Stock
and Warrants included in the Units began to trade separately and the Units
ceased to trade.
The following table sets forth the high and low bid prices for the
Company's Common Stock since the Common Stock commenced trading on March
13, 1997. The quotations reflect inter-dealer prices, with retail mark-up,
mark-down or commissions, and may not represent actual transactions. The
information presented has been derived from the National Quotation Bureau,
Inc. Library.
1997 Fiscal Year High Bid Low Bid
---------------- -------- -------
First Quarter (from March 13
through March 25). . . . . . . . $ 3.875 $ 3.00
On March 25, 1997, the last reported bid and asked prices for the
Common Stock were $3.00 and $3.125, respectively, and the last reported
bid and asked prices for the Warrants were $.875 and $1.125, respectively.
(b) HOLDERS. As of March 26, 1997, the Company had approximately 134
holders of record of the Company's Common Stock.
(c) DIVIDENDS. 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.
ITEM 6. 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
22
<PAGE>
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 an estimated $535,000 of revenue
for the year ended December 31, 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 $1,000. 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.
RESULTS OF OPERATIONS
FISCAL 1996 COMPARED TO FISCAL 1995
REVENUES. Revenues increased by $4.3 million, or 64%, to $11.0
million for 1996 compared to $6.7 million for 1995. The increase was
primarily the result of the introduction of Wyndgate's SAFETRACE(TM)
software product and related sales of hardware and software obtained from
vendors which accounted for approximately $3.6 million of the increase. In
addition, substance abuse test volume increased approximately 6%, from
approximately 210,000 tests in 1995 to approximately 222,000 tests in 1996.
COST OF SALES AND PRODUCT DEVELOPMENT. Cost of sales and product
development as a percentage of revenues was 59% in 1996 compared to 48% in
1995. This increase was primarily a result of the following: increased
royalty fee expenses based on increased sales of Wyndgate's SAFETRACE(TM)
software product licenses; increased sales of hardware and software
obtained from vendors 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 was 41% in
1996 compared to 52% in 1995 as a result of the increased costs discussed
above.
PAYROLL AND OTHER. Payroll and other increased $726,000, or 36%, in
1996 compared to 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
23
<PAGE>
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 $294,000, or 24%, in 1996 compared to 1995. The increase in
general and administrative expenses was attributable primarily to increases
in outside contract services, product liability insurance, 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 $71,000
or 4% in 1996 compared to 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
$1.87 million in 1996 compared to $655,000 in 1995 representing an increase
of 185%. 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 year.
PROVISION FOR DOUBTFUL ACCOUNTS. The provision for doubtful accounts
decreased $137,000, or 56%, in 1996 compared to 1995. The provisions for
doubtful accounts in both 1996 and 1995 were generally consistent with
management's expectations.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization
increased $353,000, in 1996 compared to 1995. The increase in depreciation
and amortization is due to the increases in fixed assets.
INTEREST INCOME (EXPENSE), NET. Net interest expense increased
$233,000, or 380%, in 1996 compared to 1995. This increase was primarily
due to increases in capital lease financing, interest incurred related to
the 10% Notes, and increases in other short-term borrowings. Management
used a portion of the net proceeds from its February 1997 offering to repay
certain short-term borrowings and the 10% Notes not converted into Common
Stock.
OTHER. Other expenses increased $195,000, or 275%, in 1996 compared
to 1995. These expenses included $250,000 provided for potential
uncollectability of a note receivable. This $250,000 expense was offset by
a $55,000 decrease in losses on disposal of fixed assets.
24
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficit of approximately $4.3
million as of December 31, 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 $2.6 million during its fiscal year
ended December 31, 1996 compared to approximately $553,000 during its
fiscal year ended December 31, 1995. The increase in cash used in
operations during fiscal 1996 is attributable primarily to an increase of
approximately $1.3 million in accounts receivable and unbilled receivables
and an increase in prepaid expenses and other assets of $173,000, offset by
increases in accrued liabilities and deferred revenue. The Company used
cash in investing activities of approximately $242,000 during fiscal 1996
compared with approximately $191,000 during the comparable period in fiscal
1995. During fiscal 1996, 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 fiscal 1996 and received net short-term borrowings of
$597,000 for the same period. Additionally, the Company received proceeds
of approximately $1.74 million from the private placement of its Common
Stock after deducting commissions and expenses of $260,000 during the
fiscal 1996. During fiscal 1996, the Company also used cash from the
financing activities by making approximately $353,000 in principal payments
on capital leases and by payment of $486,000 of issuance and distribution
costs for the Company's Public Offering.
Cash provided by financing activities for fiscal 1995 included
proceeds from the issuance of common stock of approximately $735,000. Net
proceeds for this period from other sources were minimal.
During January, 1997, the Company borrowed $450,000 from two
individuals at 12% interest. These loans were repaid with accrued interest
of approximately $5,000 in February, 1997. The proceeds of the loans were
used for short-term working capital. In connection with the loans, the
Company issued two warrants to purchase 150,000 shares of the Company's
Common Stock, exercisable at 85% of the per share price of the shares of
Common Stock included in the Units.
The Company's cash flows have historically been used primarily in
investing in software development and working capital needs. The Company
is using proceeds from the Company's February 1997 public 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.
The Company maintained a $1 million line of credit with a bank which
matured February 12, 1997. The amount drawn on this line of credit at
December 31, 1996 was $970,000. During February 1997, the Company used net
proceeds from the Company's February 1997 public offering to repay
approximately $970,000 for the $1 million line of credit plus accrued interest
25
<PAGE>
of approximately $4,000. A principal stockholder of the Company had
personally guaranteed the repayment of 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 year ended December 31, 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 incurred a loss of approximately $4.5 million during
fiscal 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. Management expects that the
net proceeds of the Company's February 1997 public 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 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.
ITEM 7. FINANCIAL STATEMENTS.
- -----------------------------
The Company's audited financial statements follow the signature page
of this report.
26
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE.
- --------------------
None.
27
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
- -------------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
- -------------------------------------------------
(a)(b) IDENTIFICATION OF DIRECTORS, EXECUTIVE OFFICERS AND
SIGNIFICANT EMPLOYEES.
The following sets forth certain information with respect to the
officers and directors of the Company.
Name Age Position
- ---- --- --------
Michael I. Ruxin 51 Chairman of the Board, Chief Executive
Officer and a Director since 1989
Joseph F. Dudziak 59 President and Chief Operating Officer
William J. Collard 55 Secretary, Treasurer, Director since
1995 and Wyndgate President
Gerald F. Willman, Jr. 39 Director since 1995 and Wyndgate
Vice-President
Gregory R. Huls 45 Chief Financial Officer and General
Counsel
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 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.
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
28
<PAGE>
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.
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, who served as a director of the Company since 1994,
resigned on March 24, 1997.
29
<PAGE>
COMMITTEES
The Company's Audit/Systems Committee acts as the liaison between the
Company and its independent public accountants. Its members consisted of
Dr. Ruxin and Mr. Gleason, who recently resigned. The Company will seek to
replace Mr. Gleason with another independent director, who will also be
appointed to the Audit Committee. The Audit Committee did not hold any
meetings during 1996. 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 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.
30
<PAGE>
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 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
31
<PAGE>
in Management from Colorado State University and a M.B.A. degree from the
University of Colorado.
L.E. "GENE" MUNDT, age 58, 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.
(c) FAMILY RELATIONSHIPS.
There are no family relationships among any of the Company's officers
and directors.
(d) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
Other than as discussed above with respect to Michael I. Ruxin, no
officer, director, significant employee, promoter or control person of the
Company has been involved in any event of the type described in Item 401(d)
of Regulation S-B during the past five years.
(e) COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company, during the fiscal year ended December 31, 1996,
no officer, director or beneficial owner of more than ten percent of the
Company's Common Stock failed to file reports on Forms 3 or 4 on a timely
basis. These reports were not required to be filed during the Company's
most recent fiscal year because the Company did not become a reporting
company under the Securities Exchange Act of 1934 until February 1997.
32
<PAGE>
ITEM 10. 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 $100,000 of salary and bonus from the Company during
the year ended December 31, 1996:
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
----------------------------- ---------------------------------------
Name and Principal Year Salary Bonuses($) Restricted Options/ All Other
Position ---- ------ --------- Stock 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- $188,400(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 and
reimbursement for a vacation in the approximate amount of $8,000.
(6) In 1994, Mr. Collard received a performance bonus of $100.
STOCK OPTION PLAN
The Company has adopted an Amended and Restated Stock Option Plan (the
"Plan") which 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 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
33
<PAGE>
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.
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
34
<PAGE>
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.
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.
35
<PAGE>
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.
(c) OPTION/SAR GRANTS TABLE.
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:
OPTION GRANTS IN 1996
Number of % of Total
Securities Options
Underlying Granted to
Options Exployees 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 no public market for
the Company's Common Stock.
(d) AGGREGATED OPTION/SAR EXERCISE AND FISCAL YEAR-END OPTION/SAR
VALUE TABLE.
Not applicable.
(e) TERM INCENTIVE PLAN ("LTIP") AWARDS TABLE.
Not applicable.
36
<PAGE>
(f) COMPENSATION OF DIRECTORS.
STANDARD ARRANGEMENTS.
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. Currently, the Company does not pay any directors
fees for attendance at board meetings.
OTHER ARRANGEMENTS. The Company has no other arrangements pursuant to
which any director of the Company was compensated during the year ended
December 31, 1996, for services as a director.
(g) EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS.
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 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
37
<PAGE>
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 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
38
<PAGE>
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 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.
(h) REPORTING ON REPRICING OF OPTIONS/SARS.
Not Applicable.
39
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- ------------------------------------------------------------------------
(a)(b) 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.
Name and Address Amount and Nature of
of Shareholder Beneficial Ownership (1) Percent of Class
- -------------- ------------------------ ----------------
Michael I. Ruxin, M.D.(1) (9) 906,250(2) 11.1%
12600 W. Colfax
Suite A-500
Lakewood, CO 80215
Joseph F. Dudziak(1) 46,914(3) 0.6%
12600 W. Colfax Ave.
Suite A-500
Lakewood, CO 80215
William J. Collard(1) (9) 613,006(4)(5) 7.5%
11121 Sun Center Drive
Suite C
Rancho Cordova, CA 95670
Gerald F. Willman, Jr.(1) (9) 882,514(6) 10.9%
11121 Sun Center Drive
Suite C
Rancho Cordova, CA 95670
Gregory R. Huls(1) -0-(7) -0-%
12600 W. Colfax Ave.
Suite A-500
Lakewood, CO 80215
Lori J. Willman(1) (9) 882,514(8) 10.9%
11121 Sun Center Drive
Suite C
Rancho Cordova, CA 95670
All Directors and
Executive Officers as
a group (5 persons) 2,448,684 29.9%
40
<PAGE>
____________________
(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 6,250 shares underlying warrants issued in connection with
the purchase of the 10% Notes.
(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, and 1,081 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 105,000 shares underlying
the unvested portion of Mr. Dudziak's options.
(4) Includes 15,000 shares underlying warrants issued in connection with
the purchase of the 10% Notes.
(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) 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 ITEM 1. DESCRIPTION OF BUSINESS - WYNDGATE
TECHNOLOGIES DIVISION - AGREEMENTS WITH ORTHO DIAGNOSTIC SYSTEMS INC.
(c) CHANGES IN CONTROL.
With the exception of the ODSI agreements, there are no
understandings, arrangements or agreements known by management at this time
which would result in a change in control of the Company. See ITEM 1.
DESCRIPTION OF BUSINESS - WYNDGATE TECHNOLOGIES DIVISION - AGREEMENTS WITH
ORTHO DIAGNOSTIC SYSTEMS, INC.
41
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------
(a)(b) TRANSACTIONS WITH MANAGEMENT AND OTHERS.
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. 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. In March 1997, Drs. Segal and Ruxin, and
Messrs. Collard and Valdez were repaid the principal amounts of their 10%
Notes, plus interest thereon. Joseph F. Dudziak converted his 10% Note,
plus the accrued interest thereon, into a total of 14,414 shares of Common
Stock ($3.75 per share).
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. 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.
42
<PAGE>
Dr. Ruxin personally guaranteed the Company's $1 million line of
credit which was repaid from proceeds of the Company's February 1997 public
offering and various leases totaling approximately $1.2 million.
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.
(c) PARENTS OF THE COMPANY.
The parents of the Company are Michael I. Ruxin, William J. Collard,
Gerald F. Willman, Jr. and Lori J. Willman. See ITEM II (a)(b) for the
percentage of securities owned by each such person.
(d) TRANSACTIONS WITH PROMOTERS.
See (a) (b) above.
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.
- ----------------------------------------------------------------
(a) The following documents are filed as a part of this Form 10-KSB:
Consolidated Financial Statements of Global Med Technologies,
Inc.:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets - December 31, 1996 and 1995
Consolidated Statement of Operations - Years ended December 31,
1996 and 1995
Consolidated Statement of Changes in Stockholders' Equity -
Years ended December 31, 1996 and 1995
Consolidated Statement of Cash Flows - Years ended December 31,
1996 and 1995
Notes to Consolidated Financial Statements - December 31, 1996
and 1995
Exhibits required to be filed are listed below and, except where
incorporated by reference, immediately follow the Financial Statements.
43
<PAGE>
Number Description
- ------ -----------
3.1 Amended and Restated Articles of Incorporation, filed June 2,
1995 (1)
3.2 Articles of Amendment to the Articles of Incorporation, filed
March 5, 1996 (1)
3.3 Articles of Amendment to the Articles of Incorporation, filed May
30, 1996 (1)
3.4 Bylaws, as amended (1)
4.1 Form of Representative's Warrants to Purchase Units (1)
4.2 Form of Class A Common Stock Purchase Warrant Certificate (1)
4.3 Specimen copy of stock certificate for Common Stock, $.01 par
value (1)
10.1 Lease Agreement, dated April 15, 1992, and Lease Addendums, dated
April 8, 1992 and October 21, 1994 (1)
10.2 Lease Agreement, dated July 19, 1995, and Lease Addendum (1)
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 (1)
10.4 Employment Agreement, dated May 24, 1995, between the Registrant
and William J. Collard, as amended July 22, 1996 (1)
10.5 Employment Agreement, dated June 28, 1995, between the Registrant
and Joseph F. Dudziak (1)
10.6 Employment Agreement, dated February 8, 1996, between the
Registrant and L.E. "Gene" Mundt (1)
10.7 Amended and Restated Stock Option Plan, as amended on May 5,
1995, May 29, 1996 and December 11, 1996 (1)
10.8 Voting Agreement, dated May 23, 1995 (1)
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 (1)
44
<PAGE>
10.10 Agreement dated April 8, 1996, between the Registrant and LMU &
Company, and Stock Purchase Option, dated April 8, 1996 (1)
10.11 Form of Drug Testing Service Contract (1)
10.12 Form of License Agreements (1)
10.13 Warrant Agreement, dated February 11, 1997, between Global Med
Technologies, Inc. and American Securities Transfer & Trust, Inc.
(1)
10.14 Exclusivity and Software Development Agreement, dated November
14, 1996, between and among Global Med Technologies, Inc. and
Ortho Diagnostic Systems Inc. (1)
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 (1)
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 (1)
11 Statement re: Computation of Per Share Earnings (1)
21 Subsidiaries of the Company (1)
27 Financial Data Schedule (1)
99 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 (1)
________________
(1) The documents identified are incorporated by reference from the
Company's Registration Statement on Form SB-2 (No. 333-11723).
(b) During the last quarter of the period covered by this report,
the Company did not file any Reports on Form 8-K.
(c) Required exhibits are attached hereto or are incorporated by
reference and are listed in Item 13(a)(3) of this Report.
(d) Required financial statements are attached hereto and are listed
in Item 13 of this Report.
45
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
Date: March 27, 1997 GLOBAL MED TECHNOLOGIES, INC.
By /s/ Michael I. Ruxin
------------------------------------
Michael I. Ruxin, Chairman and
Principal Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ Michael I. Ruxin Chairman of the Board March 27, 1997
- --------------------------- of Directors, Principal
Michael I. Ruxin Executive Officer and
Director
/s/ Joseph F. Dudziak President and Chief March 27, 1997
- --------------------------- Operating Officer
Joseph F. Dudziak
/s/ Gregory R. Huls Chief Financial Officer March 27, 1997
- --------------------------- and General Counsel
Gregory R. Huls
/s/ William J. Collard Secretary/Treasurer and March 27, 1997
- --------------------------- Director
William J. Collard
/s/ Gerald F. Willman, Jr. Director March 27, 1997
- ---------------------------
Gerald F. Willman, Jr.
46
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
GLOBAL MED TECHNOLOGIES, INC.
(FORMERLY GLOBAL DATA TECHNOLOGIES, INC.)
YEARS ENDED DECEMBER 31, 1996 AND 1995
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
Global Med Technologies, Inc.
Consolidated Financial Statements
Years ended December 31, 1996 and 1995
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.) as of December
31, 1996 and 1995, 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.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Global Med
Technologies, Inc. at December 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
----------------------------
Ernst & Young LLP
Denver, Colorado
March 11, 1997
F-1
<PAGE>
Global Med Technologies, Inc.
Consolidated Balance Sheets
(In thousands)
DECEMBER 31
1996 1995
------------------------
Assets
Current assets:
Cash and cash equivalents $ 489 $ 422
Accounts receivable-trade, net of
allowance for uncollectible
accounts of $150 and $200 in 1996
and 1995, respectively 1,812 608
Unbilled receivables, net of
allowance for uncollectible
accounts of $150 and $100 in 1996
and 1995, respectively 411 307
Prepaid expenses and other assets 196 23
Deferred offering costs 486 -
------------------------
Total current assets 3,394 1,360
Equipment and fixtures, at cost:
Furniture and fixtures 195 206
Machinery and equipment 361 432
Computer hardware and software 1,213 724
------------------------
1,769 1,362
Less accumulated depreciation and
amortization (540) (404)
------------------------
1,229 958
Capitalized software development costs,
less accumulated amortization of $163
and $66 in 1996 and 1995, respectively 376 403
------------------------
Total assets $ 4,999 $ 2,721
========================
F-2
<PAGE>
Global Med Technologies, Inc.
Consolidated Balance Sheets (continued)
(In thousands, except par value amounts)
DECEMBER 31
1996 1995
------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 1,967 $ 1,457
Accrued expenses 1,278 297
Accrued payroll 362 188
Accrued compensated absences 382 261
Noncompete accrual 150 325
Unearned revenue 1,359 271
Short-term debt 1,097 500
Notes payable (including $181 to
related parties) 651 -
Current portion of capital lease
obligations 415 233
------------------------
Total current liabilities 7,661 3,532
Capital lease obligations,
less current portion 698 648
Commitments and contingencies
Stockholders' deficit
Preferred stock, $.01 par value:
Authorized shares - 10,000
None issued or outstanding - -
Common stock, $.01 par value:
Authorized shares - 40,000
Issued and outstanding shares - 4,994
and 3,949 at December 31,
1996 and 1995, respectively 50 39
Additional paid-in capital 4,282 1,702
Accumulated deficit (7,692) (3,200)
------------------------
Total stockholders' deficit (3,360) (1,459)
------------------------
Total liabilities and
stockholders' deficit $ 4,999 $ 2,721
========================
SEE ACCOMPANYING NOTES.
F-3
<PAGE>
Global Med Technologies, Inc.
Consolidated Statements of Operations
(In thousands)
YEAR ENDED DECEMBER 31
1996 1995
------------------------
Revenues:
Drug testing and other $ 6,458 $ 5,740
Software sales and consulting 3,648 934
Hardware and software,
obtained from vendors 928 -
------------------------
11,034 6,674
Cost of sales and product development 6,470 3,218
------------------------
Gross profit 4,564 3,456
Operating expenses:
Payroll and other 2,724 1,998
General and administrative 1,528 1,234
Sales and marketing 1,803 1,732
Research and development 1,865 655
Provision for doubtful accounts 107 244
Depreciation and amortization 470 117
------------------------
Loss from operations (3,933) (2,524)
Other expense:
Interest income (expense), net (293) (61)
Other (266) (71)
------------------------
Loss before provision for income taxes (4,492) (2,656)
Provision for income taxes - 29
------------------------
Net loss $ (4,492) $ (2,685)
========================
Net loss per common share $ (1.02) $ (.64)
Common shares used in computing net
loss per common share 4,384 4,211
SEE ACCOMPANYING NOTES.
F-4
<PAGE>
Global Med Technologies, Inc.
Consolidated Statements of Stockholders' Equity (Deficit)
(In thousands)
Common Stock Additional
--------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
----------------------------------------------
Balance, December 31, 1994 3,619 $36 $ 719 $ (478) $ 277
Issuance of common stock 300 3 732 - 735
Issuance of common stock-
finder's fee 30 - 74 - 74
Issuance of common stock
warrants - - 15 - 15
Compensation related to
issuance of common stock
options by principal
stockholders - - 162 - 162
Distribution to stockholders
(Wyndgate) - - - (37) (37)
Net loss - - - (2,685) (2,685)
----------------------------------------------
Balance, December 31, 1995 3,949 39 1,702 (3,200) (1,459)
Issuance of common stock-
exercise of common
stock warrants 150 2 448 - 450
Issuance of preferred
stock converted to
common stock 67 1 249 - 250
Issuance of common stock
under employees' stock
option plan - - 1 - 1
Issuance of common stock 800 8 1,732 - 1,740
Issuance of common stock
options to a business
advisory enterprise - - 45 - 45
Issuance of common stock-
note conversion 28 105 - 105
Net loss - - - (4,492) (4,492)
----------------------------------------------
Balance, December 31, 1996 4,994 $50 $4,282 $(7,692) $(3,360)
==============================================
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
Global Med Technologies, Inc.
Consolidated Statements of Cash Flows
(In thousands)
YEAR ENDED DECEMBER 31
1996 1995
------------------------
OPERATING ACTIVITIES
Net loss $ (4,492) $ (2,685)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 567 167
Loss on disposal of assets 16 47
Deferred income taxes - 29
Issuance of common stock options 45 162
Issuance of common stock-finder's fee - 74
Changes in operating assets and
liabilities:
Accounts receivable-trade, net (1,204) 63
Unbilled receivables, net (104) (49)
Prepaid expenses and other assets (173) 24
Accounts payable 510 871
Accrued payroll 174 136
Accrued expenses 981 145
Accrued compensated absences 121 171
Noncompete accrual (175) 325
Unearned revenue 1,088 (33)
------------------------
Net cash used in operating activities (2,646) (553)
INVESTING ACTIVITIES
Purchases of equipment and fixtures (172) (32)
Increase in software development costs (70) (159)
------------------------
Net cash used in investing activities (242) (191)
FINANCING ACTIVITIES
Borrowings on short-term debt 715 1,355
Principal payments on short-term debt (118) (1,105)
Principal payments under capital
lease obligations (353) (108)
Issuance of notes payable 651 -
Issuance of common stock 2,546 735
Deferred offering costs (486) -
Issuance of common stock warrants - 15
Distribution to stockholders (Wyndgate) - (37)
------------------------
Net cash provided by financing activities 2,955 855
------------------------
F-6
<PAGE>
Global Med Technologies, Inc.
Consolidated Statements of Cash Flows (continued)
YEAR ENDED DECEMBER 31
1996 1995
------------------------
(IN THOUSANDS)
Net increase in cash and cash equivalents $ 67 $ 111
Cash and cash equivalents at beginning
of year 422 311
------------------------
Cash and cash equivalents at end of year $ 489 $ 422
========================
Supplemental disclosures:
The Company entered into capital lease obligations of $585,000 and
$941,000 in 1996 and 1995, respectively.
Interest expense approximates interest paid.
During 1994, the Company loaned approximately $162,000 to a related
party in exchange for a note receivable which accrued interest at an
annual rate of 8%. During 1995, the Company forgave the note
receivable in consideration of the forgiveness of a note payable by
the Company to a principal stockholder which also was for
approximately $162,000 and which also accrued interest at an annual
rate of 8%.
During 1996, convertible 10% notes payable of $105,000 including
accrued interest of $5,000 were converted into 28,000 shares of common
stock (see Note 7).
SEE ACCOMPANYING NOTES.
F-7
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements
December 31, 1996
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 (Wyndgate), respectively. All shares of Wyndgate
common stock were exchanged for a total of 1,960,000 shares of common stock
of the Company. This merger transaction was accounted for as a pooling of
interests; therefore, the Company's 1995 financial statements include the
results of operations as if the merger had been consummated on January 1,
1995. 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 $164,000 which included a
$130,000 finder's fee, which consisted of $75,000 in common stock of the
Company and $55,000 in cash, and $34,000 related to legal and other fees.
The related merger costs are included in general and administrative
expenses in the accompanying consolidated statements 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
TO
JUNE 30, 1995
---------------
(In thousands)
Net sales:
National MRO $ 2,381
Wyndgate 883
----------
Combined $ 3,264
==========
Net income (loss):
National MRO $ (93)
Wyndgate 76
----------
Combined $ (17)
==========
F-8
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
LIQUIDITY AND MANAGEMENT'S PLANS
The development of the Company's divisions has resulted in losses, which
aggregated approximately $7.7 million and $3.2 million at December 31, 1996
and 1995, respectively. In addition, the Company had working capital
deficits of approximately $4.3 million and $2.2 million at December 31,
1996 and 1995, respectively. While management anticipates that its software
revenues will continue to increase in future periods, management expects to
continue to incur losses until 1998. Management expects that the net
proceeds of approximately $7.9 million from its initial public offering
which was completed in February 1997, will enable the Company to meet its
liquidity and capital requirements for approximately twelve to eighteen
months (see Note 11).
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its divisions. All significant interdivision 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)
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
Unbilled amounts at December 31, 1996 and 1995 have been reduced by an
allowance for doubtful accounts of $150,000 and $100,000, respectively, and
are generally billable and collectible within one year.
UNEARNED REVENUE
Included in unearned revenue at December 31, 1996 and 1995 is approximately
$52,000 and $200,000, respectively, of unperformed professional services
related to an agreement between the Royalty Group and Wyndgate (see Note
9). At December 31, 1996, $500,000 of the unearned revenue balance is
related to an agreement between the Company (through its Wyndgate division)
and Ortho Diagnostic Systems, Inc., a subsidiary of Johnson & Johnson (see
Note 9). The remaining balance of $807,000 at December 31, 1996 primarily
consists of unearned software maintenance revenue, sales of software
licenses and related postcontract customer support, and sales of hardware
obtained from vendors which are not recognizable as revenue at December 31,
1996 pursuant to the Company's revenue recognition accounting policies
discussed above.
SIGNIFICANT CUSTOMERS
During 1996, one DataMed customer-Laidlaw Transit, Inc. and one Wyndgate
customer-Gulf Coast Regional Blood Center, each accounted for approximately
14% and 11.5%, respectively, of the Company's revenues.
F-10
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
During 1995, two DataMed customers-Laidlaw Transit, Inc. and Chevron
Corporation and one Wyndgate customer-the Royalty Group (see Note 9), each
accounted for approximately 18%, 12% and 10%, respectively, of the
Company's revenues.
Accounts receivable from the above customers were approximately $325,000
and $516,000 at December 31, 1996 and 1995, respectively. Unbilled
receivables from the above customers were approximately $34,000 and
$198,000 at December 31, 1996 and 1995, respectively. In order to reduce
credit risk, the Company requires substantial down payments and progress
payments during the course of an installation of 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
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.
Losses, allowances and accounts receivable turnover trends have generally
been within management's expectations. The provision for doubtful accounts
was $107,000 and $244,000 for the years ended December 31, 1996 and 1995,
respectively.
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.
NOTE RECEIVABLE
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
F-11
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
conditions, be further extended until June 30, 1998. The Note accrues
interest at an annual rate of prime plus two percent and is primarily
collateralized by the Development Company's technology. At December 31,
1996, the Company has offset the Note with an allowance in the amount of
$250,000 and the related expense is included in other expenses in the
accompanying consolidated statements of operations. The Company believes
it prudent to fully reserve for the Note based on the current financial
position of the Development Company.
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
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 adopted SFAS No. 121
during 1996, with no impact on its financial statements.
SOFTWARE DEVELOPMENT COSTS
Certain software development costs incurred after the determination of
technological feasibility of the related software product 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
F-12
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 $97,000 and $50,000 for the
years ended December 31, 1996 and 1995, respectively, and is included in
cost of sales in the accompanying consolidated statements of operations.
MALPRACTICE INSURANCE
The Company maintains 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.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For purposes of the accompanying consolidated statements 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 supplemental net loss after elimination of the $150,000
one-time charge was ($2,835,000) for the year ended December 31, 1995.
F-13
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET 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 initial public offering
price for the Company's common stock).
In February 1997, the Company completed an initial public offering of
1,337,000 units, each consisting of two shares of common stock and one
Class A common stock purchase warrant (the Offering). Management intends
to use a portion of the net proceeds from the Offering of approximately
$7.9 million to repay borrowings under the Company's $1 million revolving
line of credit and certain notes payable. If the Offering had occurred on
January 1, 1995, the loss per common share would have been ($.92) and
($.64) for the years ended December 31, 1996 and 1995, respectively (see
Note 11).
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.
2. NONCOMPETE AGREEMENTS
During 1995, the Company entered into noncompete agreements with three 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 1997 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 statements of operations.
F-14
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
3. INCOME TAXES
The components of income tax expense for the years ended December 31, 1996
and 1995 are as follows:
1996 1995
------------------------
(IN THOUSANDS)
Provision for income taxes:
Current:
State $ - $ -
Deferred:
Federal - 25
State - 4
------------------------
Total deferred - 29
------------------------
Provision for income taxes $ - $29
========================
The Company has net operating loss carryforwards of approximately
$4,408,000 which expire in the years 2006 to 2011. Such net operating loss
carryforwards may be subject to separate return limitation laws.
The components of the deferred tax provision, which arise from temporary
differences between financial and tax reporting, are presented below:
1996 1995
------------------------
(IN THOUSANDS)
Cash to accrual adjustment $ 59 $ (239)
Allowance for uncollectible
accounts receivable (98) (96)
Accelerated depreciation 46 12
Deferred revenue and accrued expenses (435) (195)
Capitalized software 10 (11)
Net operating loss carryforward (1,236) (450)
Valuation allowance 1,654 1,008
------------------------
Total deferred provision $ - $ 29
========================
F-15
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
3. INCOME TAXES (CONTINUED)
Variations from the federal statutory rate are as follows:
1996 1995
------------------------
(IN THOUSANDS)
Expected benefit from federal income
taxes at statutory rate of 34% $ (1,527) $ (903)
Termination of S corporation election
by Wyndgate - 150
Wyndgate income nontaxable due to
S corporation status - (77)
Valuation allowance 1,780 1,008
State tax benefit, net of federal
benefit (247) (146)
Other (6) (3)
------------------------
$ - $ 29
========================
Loss before benefit from
income taxes $(4,492) $(2,656)
========================
Effective rate - (1.1)%
========================
F-16
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
3. INCOME TAXES (CONTINUED)
The components of the net accumulated deferred income tax asset as of
December 31, 1996 and 1995 are as follows:
1996 1995
------------------------
(IN THOUSANDS)
Deferred tax assets:
Cash to accrual adjustment $ 296 $ 874
Excess of capital losses over
capital gains 79 79
Net operating loss carryforward 1,731 495
Allowance for uncollectible
accounts receivable 217 119
Deferred revenue and accrued expenses 666 231
Valuation allowance (2,784) (1,130)
------------------------
205 668
Deferred tax liabilities:
Cash to accrual adjustment - 489
Capitalized software 149 159
Accelerated depreciation 56 20
------------------------
205 668
------------------------
Deferred tax asset, net $ - $ -
========================
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 in the accompanying statements of operations, for
the years ended December 31, 1996 and 1995 was $294,000 and $217,000,
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
F-17
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
4. LEASES (CONTINUED)
equipment and fixtures in the accompanying consolidated balance sheets are
the following assets held under capital leases (in thousands):
DECEMBER 31
1996 1995
------------------------
Furniture and fixtures $ 180 $ 144
Machinery and equipment 338 294
Computer hardware and software 1,028 550
------------------------
Assets under capital lease 1,546 988
Less accumulated amortization (502) (93)
------------------------
Assets under capital lease, net $ 1,044 $ 895
========================
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, 1996 (in thousands):
CAPITAL OPERATING
LEASES LEASES
------------------------
1997 $ 561 $ 335
1998 542 297
1999 172 243
2000 77 237
2001 2 -
------------------------
Total minimum lease payments 1,354 $ 1,112
==========
Less amount representing interest (241)
----------
Present value of minimum lease payments 1,113
Less current portion of obligations
under capital lease (415)
----------
Obligations under capital lease,
less current portion $ 698
==========
5. SHORT-TERM DEBT
The Company maintains a $25,000 unsecured revolving credit line with a bank
which bears interest at an annual rate of prime plus one percent or a
minimum of ten percent and matured on March 1, 1997. Although the Company
has not yet repaid this amount, the bank has not called the credit line.
Amounts outstanding under this revolving line of credit were $25,000 and
$100 at December 31, 1996 and 1995, respectively.
F-18
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
5. SHORT-TERM DEBT (CONTINUED)
The Company maintains a $1 million 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 an annual rate of
prime plus two percent and which matured on February 12, 1997. Amounts
outstanding under this line of credit were $970,000 and $500,000 at
December 31, 1996 and 1995, respectively. The balance under the line was
repaid in February 1997.
The Company maintains a $55,000 unsecured line of credit with a bank which
bears interest at an annual rate of 14.75 percent. Amounts outstanding
under this line of credit were $50,000 and $0 at December 31, 1996 and
1995, respectively.
During 1996, the Company entered into a $25,000 unsecured promissory note
with an individual which bears interest at an annual rate of twelve
percent. At December 31, 1996, $25,000 was outstanding under this
promissory note. The note was repaid in February 1997.
The Company incurred interest expense on outstanding borrowings of
approximately $151,000 and $43,000 for the years ended December 31, 1996
and 1995, 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 one-hundred
percent 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 one-hundred and ten percent of the fair
market
F-19
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
6. STOCK OPTION PLANS (CONTINUED)
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-five percent of the fair market value of the common
stock on the grant date.
The Company has elected to continue to follow Accounting Principles Board
Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES (APB 25), and
related Interpretations in accounting for its stock options because, as
discussed below, the alternative fair value accounting provided for by
Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION (Statement No. 123), requires use of option valuation models
that were not developed for use in valuing the stock options. Under APB
25, because the exercise price of the Company's stock options equals or
exceeds the estimated market price of the underlying stock on the date of
grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by Statement No. 123, which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted subsequent to December 31, 1994 under the fair value method of that
Statement. The fair value of these options was estimated at the date of
grant using the minimum value method available to nonpublic companies under
Statement No. 123. Under this method, option value is determined as the
excess of the fair value of the stock at the date of grant over the present
value of both the exercise price and the expected dividend payments, each
discounted at the risk-free rate, over the expected exercise life of the
option. A risk-free rate of 5.3%, a weighted-average expected life of ten
years and a dividend yield of 0% were used for the years ended December 31,
1996 and 1995. As a result of the Company's initial public offering, which
was completed in February 1997, the Company will use the Black Scholes
option pricing model to determine the fair value of options granted
subsequent to December 31, 1996.
For the purposes of pro forma disclosures, the estimated fair value of the
employee options is amortized to expense over the options' vesting period.
The Company's pro forma information follows (in thousands, except per share
amounts):
1996 1995
------------------------
Pro forma net loss $(4,582) $(2,703)
Pro forma net loss per share $ (1.05) $ (0.64)
F-20
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
6. STOCK OPTION PLANS (CONTINUED)
Because Statement No. 123 is applicable only to options granted subsequent
to December 31, 1994, its pro forma effect will not be fully reflected
until 2001.
A summary of the Company's stock option activity and related information
regarding the Plan are as follows:
INCENTIVE STOCK NONQUALIFIED STOCK
OPTION PLAN OPTION PLAN
-----------------------------------------------------
STOCK STOCK
NUMBER OF OPTION NUMBER OF OPTION
STOCK PRICE STOCK PRICE
OPTIONS RANGE OPTIONS RANGE
-----------------------------------------------------
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 (480) 1.54 - -
Forfeited (4,920) 1.54 - 2.50 - -
-----------------------------------------------------
Outstanding,
December 31, 1996 504,100 $1.00 - $3.75 63,529 $1.54 - $3.75
=====================================================
During 1995, certain of the Company's principal stockholders granted
options to certain employees for the right to buy 111,067 shares of the
Company's common stock from the principal stockholders at an exercise price
of $1.00 per share. This transaction has been accounted for as if the
options were granted to the employees directly from the Company. The
Company recorded compensation expense related to this transaction of
$162,000 as such options were issued for prior service, were fully vested
at the grant date, and were granted at an exercise price which was less
than the estimated fair market value of the underlying shares of common
stock of the Company at the grant date. The related compensation expense
is included in general and administrative expenses in the accompanying
consolidated statements of operations. To date, no options have been
exercised as a result of these agreements.
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. The
Company recognized expense in 1996 related to these options of $45,000.
This amount is included in general and administrative expenses in the
accompanying consolidated statements of operations. To date, no options
have been exercised as a result of this agreement.
F-21
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
7. STOCKHOLDER'S EQUITY AND NOTES PAYABLE
Certain members of the Company's Scientific Advisory Committee serve as
officers and directors of certain of the Company's 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
7).
In May 1995, the Company completed a private placement of 150,000 units at
$5 per unit (the May 1995 Private Placement). 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 May 1995 Private Placement. 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. In addition, the May
1995 Private Placement provided for a share adjustment of 120,000 shares in
the event the price per common share in the Company's initial public
offering was less than $4.90 per share (see Note 9).
The Company has 10,000 warrants outstanding to a nonrelated investor which
are convertible into common stock at an exercise price of $1.54 per share
and which expire in October 1997.
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 second quarter of 1996, the Company conducted an offering
consisting of convertible notes with detachable common stock warrants and
which accrue interest at an annual rate of ten percent (the 10% Notes).
The 10% Notes mature in three years from the date of issuance and are
convertible into common stock of the Company at $3.75 per share. In
addition, each investor received one detachable 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 10% Note offering amounted to approximately
$751,000. Approximately $181,000 of the proceeds from the 10% Notes
issuance were received from a beneficial owner of over 5% of the
outstanding common stock of the Company and other officers, directors and
employees of the Company on the same terms and conditions as nonaffiliates.
Common stock 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% Note
amounts to 93,003 shares (see Note 9). Common stock issuable related to
the detachable warrants provided in conjunction with the 10% Notes
F-22
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
7. STOCKHOLDER'S EQUITY AND NOTES PAYABLE (CONTINUED)
amounts to 187,800 shares (see Note 9). During the fourth quarter of 1996,
certain noteholders converted $100,000 of principal and $5,000 of related
accrued interest into 28,000 shares of common stock. Interest expense
related to the 10% Notes was approximately $43,000 in 1996.
The Company intends to pay approximately $355,000 related to certain
noteholders who have given the Company notice of their intent not to
convert their 10% Notes from a portion of the net proceeds of approximately
$7.9 million from its initial public offering which was completed in
February 1997 (see Note 11).
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 $1.74 million.
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 1996 or 1995. Retirement
plan administrative expenses were approximately $4,000 and $8,000 for the
years ended December 31, 1996 and 1995, respectively, and are included in
general and administrative expenses in the accompanying consolidated
statements of operations.
9. COMMITMENTS AND CONTINGENCIES
The Company has entered into ten 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, 1996, the aggregate commitment for future
salaries payable through May 2000, excluding bonuses, is approximately $1.9
million. If all agreements are extended, the additional commitment for
future salaries will be approximately $1.5 million.
F-23
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
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. While the Company
has not yet received regulatory approval for its blood bank software, it
has no reason to believe it will not receive such approval in the future.
In the meantime, the Company is permitted by the appropriate federal agency
to market certain of its blood bank software products pursuant to previous
arrangements made with the appropriate federal agency.
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 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. Royalty expenses related to this agreement were
approximately $323,000 and $0 for the years ended December 31, 1996 and
1995, respectively, and are included in cost of sales and product
development in the accompanying consolidated statements of operations. 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 ten or five percent in year one to two or one percent in year ten and
F-24
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
thereafter. To date, the Company has not incurred any royalty expenses
related to this agreement.
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 (see Note 1). The 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 development 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, business,
property or know-how, including 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.
As of December 31, 1996, the Company had 1,805,082 shares of common stock
reserved for future issuance as a result of the following: 1,234,279
shares issuable from the Company's Amended and Restated Stock Option Plan
(see Note 6); 187,800 shares issuable upon the exercise of certain
detachable warrants outstanding as a result of the 1996 10% Note offering
(see Note 7); 93,003 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 7); 10,000 shares
issuable upon the exercise of certain warrants granted to a nonrelated
investor (see Note 7); 160,000 shares underlying certain stock options
granted to a business advisory enterprise during the second quarter of 1996
(see Note 6); and 120,000 shares pursuant to the terms of the May 1995
Private Placement which provided for a share adjustment in the event the
price per common share of the Company's initial public offering was less
than $4.90 per share (see Note 7). See Note 11 for additional shares
reserved for future issuance as a result of certain transactions which
occurred subsequent to December 31, 1996.
F-25
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
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, 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, 1996
-----------------------------------
WYNDGATE DATAMED CONSOLIDATED
-----------------------------------
(IN THOUSANDS)
Revenues $4,576 $6,458 $11,034
Loss from operations (1,479) (2,454) (3,933)
Identifiable assets 2,724 2,275 4,999
Depreciation and amortization 259 308 567
Capital expenditures 417 340 757
YEAR ENDED DECEMBER 31, 1995
-----------------------------------
WYNDGATE DATAMED CONSOLIDATED
-----------------------------------
(IN THOUSANDS)
Revenues $ 934 $5,740 $6,674
Loss from operations (1,707) (817) (2,524)
Identifiable assets 1,016 1,705 2,721
Depreciation and amortization 85 82 167
Capital expenditures 602 371 973
F-26
<PAGE>
Global Med Technologies, Inc.
Notes to Consolidated Financial Statements (continued)
11. SUBSEQUENT EVENTS
During February 1997, the Company completed an initial public offering (the
Offering) whereby it issued 1,337,000 units at $7.00 per unit. Net
proceeds from the Offering were approximately $7.9 million. The Offering
consisted of 1,337,000 units, each consisting of two shares of common stock
and one Class A Common Stock Purchase Warrant (the Units).
During January 1997, the Company received $450,000 from two nonrelated
investors related to an offering consisting of notes which accrued interest
at an annual rate of twelve percent (the 12% Notes). In connection with
the 12% Notes, the Company issued 150,000 common stock warrants which are
exercisable at eighty-five percent of the price per share of the Company's
common stock included in the Units of the Offering. During February 1997,
the Company used a portion of the net proceeds from the Offering to repay
$450,000 plus accrued interest of approximately $5,000 related to the 12%
Notes. In addition, the Company used net proceeds from the Offering to
repay approximately $970,000 plus accrued interest of approximately $5,000
on its $1 million line of credit (see Note 5).
On February 13, 1997, the Wyndgate Technologies division (Wyndgate) of
Global Med Technologies, Inc. entered into a multimillion dollar, 10-year
contract with Haemonetics Corporation (Haemonetics), a New York Stock
Exchange listed company located in Braintree, Massachusetts. Licensing and
other fees are payable by Haemonetics over the life of the contract. Under
the contract, Wyndgate will provide the use of its Blood Bank Information
Management Software to Haemonetics for its entry into the service side of
blood banking in multiple locations, including one of the blood banks
previously contracted by Wyndgate. Haemonetics has traditionally provided
blood separation products to blood banks and hospitals domestically and
internationally.
F-27
