UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission file number O - 22083
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GLOBAL MED TECHNOLOGIES, INC.
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(Exact name of small business issuer as specified in its charter)
COLORADO 84-116894
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
12600 West Colfax, Suite A-500, Lakewood, Colorado 80215
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(Address of principal executive offices)
(303) 238-2000
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(Issuer's telephone number)
Not Applicable
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(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
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As of March 31, 1997, 7,908,752 shares of the issuer's Common Stock were
outstanding.
Transitional Small Business Disclosure Format Yes No X
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GLOBAL MED TECHNOLOGIES, INC.
FORM 10-QSB/A
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
TABLE OF CONTENTS
PAGE NO.
Part I. Financial Information
Item 1. Financial Statements
a. Consolidated Balance Sheets as of
March 31, 1997 (unaudited) and
December 31, 1996 . . . . . . . . . . . . . . . . . . . .3
b. Consolidated Statements of Operations for
the three months ended March 31, 1997
and March 31, 1996 (unaudited). . . . . . . . . . . . . .5
c. Consolidated Statements of Cash Flows for
the three months ended March 31, 1997
and March 31, 1996 (unaudited). . . . . . . . . . . . . .6
d. Notes to Unaudited Consolidated Financial Statements. . .8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . 10
Part II. Other Information. . . . . . . . . . . . . . . . . . . . . . 17
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 17
a. Exhibits. . . . . . . . . . . . . . . . . . . . . . . . 17
b. Reports on Form 8-K . . . . . . . . . . . . . . . . . . 17
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Global Med Technologies, Inc.
Consolidated Balance Sheets
(In thousands)
MARCH 31,
1997 DECEMBER 31,
(UNAUDITED) 1996
---------------------------
Assets
Current assets:
Cash and cash equivalents $ 6,219 $ 489
Accounts receivable-trade, net of
allowance for uncollectible accounts of
$220 and $150 at March 31, 1997 and
December 31, 1996, respectively 1,195 1,812
Unbilled revenues, net of allowance for
uncollectible accounts of $150 at
March 31, 1997 and December 31, 1996 804 411
Prepaid expenses and other assets 140 196
Deferred offering costs - 486
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Total current assets 8,358 3,394
Equipment and fixtures, at cost:
Furniture and fixtures 197 195
Machinery and equipment 390 361
Computer hardware and software 1,334 1,213
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1,921 1,769
Less accumulated depreciation
and amortization (669) (540)
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1,252 1,229
Capitalized software development costs,
less accumulated amortization of $223
and $163 at March 31, 1997 and
December 31, 1996, respectively 316 376
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Total assets $ 9,926 $ 4,999
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SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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Global Med Technologies, Inc.
Consolidated Balance Sheets (continued)
(In thousands, except par value amounts)
MARCH 31,
1997 DECEMBER 31,
(UNAUDITED) 1996
---------------------------
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 1,331 $ 1,967
Accrued expenses 1,225 1,278
Accrued payroll 283 362
Accrued compensated absences 415 382
Noncompete accrual 150 150
Unearned revenue 1,582 1,359
Short-term debt 39 1,097
Notes payable (including $50 and $181
to related parties at March 31, 1997
and December 31, 1996, respectively) 324 651
Current portion of capital lease
obligations 437 415
----------------------------
Total current liabilities 5,786 7,661
Capital lease obligations,
less current portion 605 698
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $.01 par value:
Authorized shares - 10,000
None issued or outstanding - -
Common stock, $.01 par value:
Authorized shares - 40,000
Issued and outstanding shares - 7,909
and 4,994 at March 31, 1997 and
December 31, 1996, respectively 79 50
Additional paid-in capital 12,745 4,282
Accumulated deficit (9,289) (7,692)
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Total stockholders' equity (deficit) 3,535 (3,360)
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Total liabilities and stockholders'
equity (deficit) $ 9,926 $ 4,999
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SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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Global Med Technologies, Inc.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except per common share information)
THREE MONTHS ENDED
MARCH 31,
1997 1996
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Revenue:
Substance abuse testing and other $ 1,418 $ 1,450
Software sales and consulting 1,000 189
Hardware and software, obtained
from vendors 170 50
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TOTAL REVENUE 2,588 1,689
Cost of revenue and product development:
Substance abuse testing and other 1,089 865
Software sales and consulting 301 161
Hardware and software, obtained
from vendors 143 45
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TOTAL COST OF REVENUE AND
PRODUCT DEVELOPMENT 1,533 1,071
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Gross profit 1,055 618
Operating expenses:
Payroll and other 818 438
General and administrative 418 259
Sales and marketing 609 502
Research and development 507 451
Provision for doubtful accounts 84 27
Depreciation and amortization 129 93
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LOSS FROM OPERATIONS (1,510) (1,152)
Interest income 50 -
Interest expense (58) (43)
Other (79) (14)
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Loss before provision for income taxes (1,597) (1,209)
Provision for income taxes - -
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NET LOSS $ (1,597) $ (1,209)
============================
NET LOSS PER COMMON SHARE $ (0.26) $ (0.28)
Common shares used in computing net
loss per common share 6,203 4,384
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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Global Med Technologies, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
THREE MONTHS ENDED
MARCH 31,
1997 1996
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OPERATING ACTIVITIES
Net loss $ (1,597) $ (1,209)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 189 108
Loss on disposal of assets - 14
Stock option grants 155 -
Warrant issuance 79 -
Changes in operating assets and
liabilities:
Accounts receivable-trade, net 617 (314)
Unbilled revenues, net (393) 237
Note receivable - (210)
Prepaid expenses and other assets 56 (44)
Accounts payable (636) 200
Accrued expenses (53) (139)
Accrued payroll (79) (71)
Accrued compensated absences 33 (21)
Noncompete accrual - (75)
Unearned revenue 223 669
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Net cash used in operating activities (1,406) (855)
INVESTING ACTIVITIES
Purchases of equipment and fixtures (125) (39)
----------------------------
Net cash used in investing activities (125) (39)
FINANCING ACTIVITIES
Borrowings on short-term debt - 425
Principal payments on short-term debt (1,058) (50)
Principal payments under capital
lease obligations (98) (71)
Principal payments on notes payable (327) -
Issuance of common stock 8,258 700
Deferred offering costs 486 -
----------------------------
Net cash provided by financing activities 7,261 1,004
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Global Med Technologies, Inc.
Consolidated Statements of Cash Flows (continued)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
1997 1996
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(IN THOUSANDS)
Net increase in cash and
cash equivalents $ 5,730 $ 110
Cash and cash equivalents at
beginning of period 489 422
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Cash and cash equivalents at
end of period $ 6,219 $ 532
============================
Supplemental disclosures:
The Company entered into capital lease obligations of approximately
$27,000 and $293,000 during the three months ended March 31, 1997 and
1996, respectively.
Interest expense approximates interest paid.
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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Notes to Unaudited Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Global Med
Technologies, Inc. (the "Company") have been prepared by management in
accordance with generally accepted accounting principles for interim
financial information and with the regulations of the Securities and
Exchange Commission. Accordingly, they do not include all information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of only normal recurring adjustments) considered necessary for
a fair presentation of its financial position at March 31, 1997 and the
results of its operations for the three months ended March 31, 1997 and
1996 have been included.
While management believes the disclosures presented are adequate to prevent
misleading information, it is suggested that the accompanying unaudited
consolidated financial statements be read in conjunction with the audited
consolidated financial statements and the notes thereto contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996,
as filed with the Securities and Exchange Commission. The interim results
of operations for the three months ended March 31, 1997 are not necessarily
indicative of the results that may be expected for any other interim period
of 1997 or for the year ending December 31, 1997.
2. INITIAL PUBLIC OFFERING AND LIQUIDITY AND MANAGEMENT'S PLANS
In the three months ended March 31, 1997, the Company completed an initial
public offering in which approximately 2,914,000 shares of common stock
were issued (including approximately 240,000 shares issued in connection
with the exercise of the underwriter's over-allotment option) which
provided the Company with approximately $8.3 million, net of expenses.
From inception to March 31, 1997, the Company incurred cumulative net
losses of approximately $9.3 million. The Company expects to continue
to incur losses until 1998, and possible thereafter, until its
existing SAFETRACE(TM) software product is fully implemented and fully
operational within the Company's customers information system
environment and until its transfusion management information system
software product, which is currently under development, is established
in its markets.
Management recently became aware of the now expected delays in the
previously anticipated increase in future software license fee revenues
expected from certain large internationally based blood centers and
hospital organizations. These delays are expected to cause a greater
use of liquidity and capital resources during the remainder of 1997 than
originally anticipated. Based on this recent information, management
anticipates that the Company's current and anticipated cash balances will
not be sufficient to meet the Company's capital requirements as presently
structured. Management recognizes that the Company must generate additional
capital resources or consider modifications to its software development
programs or sharply curtail its operating costs to enable it to continue
operations with available resources. Management's plans include
consideration of the sale of additional equity securities or other business
transactions regarding the sale of the DataMed division which would
provide sufficient resources to attempt to assure the continuation of the
Company's operations and its software development programs.
The Company is currently evaluating potential investment banking
relationships to assist it on the possible sale of equity securities.
The Company also continues to receive indications of interest from others
regarding the possible sale of the DataMed division. 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. Management expects that these efforts may result in the
introduction of other parties with interests and resources which
may be compatible with that of the Company. However, no assurances
can be given that the Company will be successful in raising additional
capital or entering into a business transaction regarding the sale of the
DataMed division. Further, there can be no assurance, assuming the
Company successfully raises additional funds or enters into a business
transaction regarding the sale of the DataMed division, that the Company
will achieve profitability or positive cash flow. If the Company is
unable to obtain adequate financing or enter into such business
transaction, management will be required to sharply curtail the Company's
software development programs and all of its operating expense categories.
3. RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform with the
current period presentation.
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4. COMMITMENTS AND CONTINGENCIES
During November 1996, the Company (through its Wyndgate division) entered
into an Exclusivity and Software Development Agreement (Agreement) with
Ortho Diagnostic Systems, Inc. (ODSI), a subsidiary of Johnson & Johnson.
This Agreement requires the Company to perform certain software development
services in consideration of the payment by ODSI of $500,000 received by
the Company in November 1996, and an additional payment of $500,000
received by the Company in January 1997. Both payments received by the
Company are included in unearned revenue at March 31, 1997. The Agreement
provided that until May 14, 1997 (the "Exclusivity Period"), ODSI had the
exclusive right to negotiate with the Company with respect to the Company's
activities and developments in information technology and intellectual
property relating to donor and transfusion medicine (the "Technology") and
that, during the Exclusivity Period, the Company would not, directly or
through any intermediary, accept, encourage, solicit, entertain or
otherwise discuss any acquisition of any of the Company's common stock,
business, property or know-how, including the Technology, with any person
or entity other than ODSI or an affiliate thereof and would not otherwise
encumber the ability of ODSI or an affiliate thereof to enter into any
arrangement with the Company concerning the Technology.
Prior to the expiration of the Exclusivity Period, the Company received
communication from ODSI that it had not yet completed an internal
evaluation of the Company's Technology and would not be prepared at the
conclusion of the Exclusivity Period to discuss any form of proposed
transaction between the Company and ODSI. ODSI requested, and the Company
agreed, that ODSI be permitted to continue its evaluation of the Company's
Technology, on a non-exclusive basis, with the intent of responding to the
Company by July 14, 1997 regarding whether or not they would propose some
form of transaction with the Company.
5. SHORT-TERM DEBT
As of December 31, 1996, the Company owed $1,097,000 in short-term debt.
Of this amount, $1,058,000 plus accrued interest, was paid in full out of
the net proceeds of the initial public offering during the three months
ended March 31, 1997.
6. NOTES PAYABLE
As of December 31, 1996, the Company owed $651,000 related to a 1996 10%
note offering. Of the $651,000, $327,000, plus accrued interest, was paid
in full during the three months ended March 1997 out of the net proceeds of
the initial public offering. The remaining balance of $324,000 at March
31, 1997, plus accrued interest, was converted into approximately 93,000
shares of common stock in April 1997.
7. NET LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share, which is required to be adopted on December
31, 1997. At that time, the Company will be required to change the method
currently used to compute net loss per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. The impact
of Statement 128 on the calculation of primary and fully diluted net loss
per share for the three months ended March 31, 1997 and March 31, 1996 is
not expected to be material.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
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Global Med Technologies, Inc. is comprised of two operating divisions,
Wyndgate Technologies (Wyndgate) and DataMed International (DataMed).
Wyndgate designs, develops, markets and supports health care information
management software products for blood banks, hospitals and other facilities.
Revenues are derived from the licensing of software, the provision of
consulting and other value-added support services and the sale of related
hardware and software obtained from vendors. DataMed is in the business of
substance abuse testing and medical surveillance management services,
including medical review function, data management, record storage and
coordination of all substance abuse testing program elements. Revenues for
DataMed are derived from the provision of substance abuse testing
management services and the coordination of laboratory and collection site
services for substance abuse tests. The Company, through its operating
divisions, serves international, national and regional clients in a variety
of industries.
During the three months ended March 31, 1997, the Company completed an
initial public offering in which approximately 2,914,000 shares of common
stock were issued and provided the Company with approximately $8.3 million,
net of expenses. Through April 27, 1997 the Company has used approximately
$3.6 million of the net proceeds from the initial public offering. The use
of proceeds, to date, have been principally expended to repay certain debt
and the payment of accounts payable and other accrued expenses. Management
anticipates that the remaining funds will not be sufficient to fund
Wyndgate's software development and the continued expected losses of the
DataMed division.
From inception to March 31, 1997, the Company incurred cumulative net losses
of approximately $9.3 million. The Company expects to continue to incur
losses until 1998, and possibly thereafter, until its existing SAFETRACE(TM)
software product is fully implemented and fully operational within the
Company's customers information system environment and until its transfusion
management information system software product, which is currently under
development, is established in its markets.
Management recently became aware of the now expected delays in the previously
anticipated increase in future software license fee revenues expected from
certain large internationally based blood centers and hospital organizations.
See Liquidity and Capital Resources below for further discussion of the
Company's cash requirements and management's plans.
The Company's Wyndgate division has historically incurred, and expects to
continue to incur, losses related to its operations, including the
continued costs for research and development of new software products by
Wyndgate and the expansion of sales and marketing resources. The timing
and amounts of the Company's expenditures will depend upon a number of
factors, including the progress of the Company's research and development
process, the status and timing of regulatory approval, the timing of market
acceptance of the Company's products, the level of support needed by the
Company's customers to implement the software products they license from
Wyndgate, and the efforts required to develop the Company's sales and
marketing organization. The Company's DataMed division has incurred
cumulative losses from inception of approximately $5.2 million through
March 31, 1997.
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This Quarterly Report contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
including, without limitation, statements regarding the sufficiency of the
Company's liquidity and sources of capital. Any statements contained
herein which are not historical facts or which contain the words expect,
believe or anticipate, or words of similar import shall be deemed to be
forward-looking statements. These forward-looking statements are subject
to certain risks, uncertainties and other factors which could cause actual
results to differ materially. Additional information regarding factors
that could potentially affect the Company or its financial results may be
included in the Company's other filings with the Securities and Exchange
Commission.
The results of operations for the three months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for any other
interim period of 1997 or for the year ending December 31, 1997.
Results of Operations for the three months ended March 31, 1997 and 1996
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REVENUES. Revenues are comprised of substance abuse testing and other
revenue, software sales and consulting revenues, and sales of hardware and
software obtained from vendors.
Revenues from substance abuse testing and other services decreased $32,000,
or 2%, for the three months ended March 31, 1997 compared to the same three
months in 1996. This decrease in substance abuse testing and other revenue
was primarily the result of decreased average price per donor record during
the three months ended March 31, 1997. While the Company earned increased
substance abuse testing revenues from new clients during the three months
ended March 31, 1997, these increases were offset by the termination of
contracts with certain smaller accounts in late 1996 and early 1997.
Revenues from software sales and consulting increased $811,000 or 429%, for
the three months ended March 31, 1997 compared to the same three months in
1996. This increase in software sales and consulting revenue is primarily
the result of approximately $700,000 of software revenue recognized in
conjunction with certain deliveries of Wyndgate's SAFETRACE(TM) software
products sold during the three months ended March 31, 1997.
Revenues from hardware and software, obtained from vendors increased
$120,000, or 240%, for the three months ended March 31, 1997 compared to
the same three months in 1996. This increase was primarily due to an
increase in the average price per order and in the number of Wyndgate
customers which ordered third party hardware and software through Wyndgate.
Because the Company's marketing and sales efforts will continue to be
focused primarily on its current and future Wyndgate products and services,
revenues from the Company's substance abuse testing services are expected
to become a smaller portion of revenues in relation to the total. If,
however, future sales of Wyndgate's SAFETRACE(TM) software product licenses
are less than management anticipates, the Company's revenues, gross
margins, and liquidity may be materially adversely affected.
COST OF REVENUE AND PRODUCT DEVELOPMENT. Cost of revenue and product
development as a percentage of revenues was 59% for the three months ended
March 31, 1997 compared to 63% for the same three months in 1996.
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Cost of substance abuse testing and other services as a percentage of the
related revenue was 77% for the three months ended March 31, 1997 compared
to 60% for the same three months in 1996. This increase was primarily due
to increases in average cost per donor record during the three months ended
March 31, 1997.
Cost of software sales and consulting as a percentage of the related
revenue was 30% for the three months ended March 31, 1997 compared to 85%
for the same three months in 1996. This decrease was primarily a result of
increased sales of Wyndgate's SAFETRACE(TM) software product licenses which
are typically priced at higher profit margins than revenues from consulting
and implementation related services. These higher profit margin sales were
offset by an increase in amortization of capitalized software development
costs. Amortization of capitalized software development costs was $60,000
for the three months ended March 31, 1997 and $15,000 for the same three
months in 1996.
Cost of hardware and software, obtained from vendors as a percentage of the
related revenue was 84% for the three months ended March 31, 1997 compared
to 90% for the same three months in 1996.
GROSS PROFIT. Gross profit as a percentage of revenues was 41% for the
three months ended March 31, 1997 compared to 37% for the same three months
in 1996 as a result of the increased sales of higher margin products
discussed above.
PAYROLL AND OTHER. Payroll and other increased $380,000, or 87%, for the
three months ended March 31, 1997 compared to the same three months in
1996. The increase in payroll and other was primarily due to increased
salary and employee benefit costs incurred as a result of the hiring of
additional client service personnel necessary to manage the Company's new
customers and increased management personnel.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
$159,000, or 61%, for the three months ended March 31, 1997 compared to the
same three months in 1996. The increase in general and administrative
expenses was attributable primarily to increases in outside contract
services, insurance related expenses, leased office space expenses and
other general and administrative expenses which were related to the
increase in the number of employees.
SALES AND MARKETING. Sales and marketing expenses increased $107,000, or
21%, for the three months ended March 31, 1997 compared to the same three
months in 1996. The increase in sales and marketing expenses was primarily
due to $155,000 of expenses related to certain stock options granted to a
business advisory enterprise. This increase was partially offset by
decreased activity in trade shows and direct sales 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.
RESEARCH AND DEVELOPMENT. Research and development expenses increased
$56,000, or 12%, for the three months ended March 31, 1997 compared to the
same three months in 1996. The increase in research and development
expenses was primarily due to an increase in the number of employees
assigned to software development at Wyndgate. Management expects research
and development expenses to increase as additional software development
related to Wyndgate's transfusion management information system software
product is planned within 1997.
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<PAGE>
PROVISION FOR DOUBTFUL ACCOUNTS. The provision for doubtful accounts
increased $57,000, or 211% for the three months ended March 31, 1997
compared to the same three months in 1996. The provision for doubtful
accounts for the three months ended March 31, 1997 included $70,000
provided for potential uncollectability of certain accounts receivable.
This $70,000 expense was offset by a $13,000 decrease in write-offs of
accounts receivable.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
$36,000, for the three months ended March 31, 1997 compared to the same
three months in 1996. The increase in depreciation and amortization is due
to the increases in fixed assets.
INTEREST INCOME. Interest income increased $50,000 for the three months
ended March 31, 1997 compared to the same three months in 1996. The
increase was primarily due to interest income on the net proceeds received
from the Company's initial public offering.
INTEREST EXPENSE. Interest expense increased $15,000 for the three months
ended March 31, 1997 compared to the same three months in 1996. This
increase was primarily due to increases in interest expense on capital
lease obligations and notes payable.
OTHER. Other expenses increased $65,000, or 464%, for the three months
ended March 31, 1997 compared to the same three months in 1996. This
increase was primarily due to $79,000 of expenses incurred during the first
quarter in 1997 in conjunction with the issuance and registration of
warrants to two individuals.
Liquidity and Capital Resources
- -------------------------------
The Company had cash and cash equivalents of $6,219,000 at March 31, 1997,
none of which is restricted. Management recently became aware of the now
expected delays in the previously anticipated increase in future software
license fee revenues expected from certain large internationally based blood
centers and hospital organizations. These delays are expected to cause a
greater use of liquidity and capital resources during the remainder of 1997
than originally anticipated. Based on this recent information, management
anticipates that the Company's current and anticipated cash balances will
not be sufficient to meet the Company's capital requirements as presently
structured. Management recognizes that the Company must generate additional
capital resources or consider modifications to its software development
programs or sharply curtail its operating costs to enable it to continue
operations with available resources. Management's plans include
consideration of the sale of additional equity securities or other business
transactions regarding the sale of the DataMed division which would provide
sufficient resources to attempt to assure the continuation of the Company's
operations and its software development programs.
The Company had working capital of $2,572,000 at March 31, 1997 compared to
a working capital deficit of $4,267,000 at December 31, 1996. The change
in working capital during the three months ended March 31, 1997 was
primarily due to the completion of the Company's initial public offering
which generated approximately $8.3 million in net proceeds offset by
changes in operating assets and liabilities.
The Company used $1,406,000 in net cash for operating activities for the
three months ended March 31, 1997, compared to $855,000 for the same three
months in 1996. The cash used in operations for the three months ended
March 31, 1997 consisted primarily of the net loss for the period offset by
depreciation and amortization expense, other non-cash expenses and
decreases in accounts receivable balances, accounts payable and other
accrued expenses and increases in unbilled revenues, net, and unearned
revenue.
Net cash used in investing activities was $125,000 and $39,000 for the
three months ended March 31, 1997 and 1996, respectively. For both
periods, net cash used in investing activities consisted entirely of
purchases of equipment and fixtures related to the increase in the number
of employees of the Company and occupation of additional office space.
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<PAGE>
Net cash provided by financing activities was $7,261,000 and $1,004,000 for
the three months ended March 31, 1997 and 1996, respectively. During the
three months ended March 31, 1997, the Company completed its initial public
offering and received approximately $8.3 million in net proceeds. The
Company used a portion of these net proceeds to repay approximately $1.4
million in short term debt and notes payable, and also to pay certain
offering and distribution costs related to the initial public offering. In
addition, the Company paid $98,000 in principal payments on its capital
lease obligations during the three months ended March 31, 1997.
The implementation cycle of Wyndgate's SAFETRACE(TM) software products is
taking longer than originally anticipated. Based on recent experience,
management now anticipates that the implementation cycle will typically take
an average of approximately two months longer per customer than originally
expected. The implementation cycles are dependent on various items including
the clients' size and the complexity of the clients' standard operating
procedures. Four of the current twenty-five SAFETRACE(TM) software product
clients are fully implemented and are fully operational on the SAFETRACE(TM)
software product. The results of the implementation cycle delays are
expected to delay future SAFETRACE(TM) software product maintenance revenues,
future milestone payments from clients as defined in the SAFETRACE(TM)
software product license agreements, the anticipated increase in future
software license fee revenue from further sales of the SAFETRACE(TM) software
product, and cause a greater use of liquidity and capital resources than
originally anticipated.
The Company is currently evaluating potential investment banking relationships
to assist it on the possible sale of equity securities. The Company also
continues to receive indications of interest from others regarding the
possible sale of the DataMed division. 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. Management expects that
these efforts may result in the introduction of other parties with
interest and resources which may be compatible with that of the Company.
However, no assurances can be given that the Company will be successful in
raising additional capital or entering into a business transaction regarding
the sale of the DataMed division. Further, there can be no assurance,
assuming the Company successfully raises additional funds or enters into a
business transaction regarding the sale of the DataMed division, that the
Company will achieve profitability or positive cash flow. If the Company is
unable to obtain adequate financing or enter into such business transaction,
management will be required to sharply curtail the Company's software
development programs and all of its operating expense categories. If the
Company is successful in raising additional funds through the sale of
additional equity securities, such a change in capitalization could also
increase shares outstanding, thus diluting ownership of current shareholders
in the Company.
In April 1997, the Company committed to incurring certain costs related to
relocation of Wyndgate's offices to another location within the Sacramento,
California metropolitan area. The purpose of this relocation is to
accommodate the increased office space requirements as a result of the
increase in the number of employees at Wyndgate. These costs, include,
without limitation, approximately $250,000 in additional equipment and
fixtures which may be purchased or financed via capital leases,
approximately $50,000 in leasehold improvements, approximately $40,000 in
deposits on the new facility's leased space, and approximately $60,000
related to estimated moving expenses and other expenses related to the
relocation of Wyndgate's offices. Completion of this move is expected
during the third quarter of 1997. The result of the above and additional
relocation costs are expected to adversely affect future operating results
due to increased depreciation and amortization expense, increased interest
cost, increased office rent expense, and increased losses on disposal of
fixed assets during 1997. In addition, cash used to fund the relocation
costs will not be available to fund operations, which is expected to
adversely affect the Company's liquidity and working capital during 1997.
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CERTAIN FACTORS BEARING ON FUTURE RESULTS
CERTAIN OF THE STATEMENTS ABOVE ARE FORWARD-LOOKING STATEMENTS.
FURTHER, THE COMPANY MAY FROM TIME TO TIME MAKE ORAL FORWARD-LOOKING
STATEMENTS. THE FOLLOWING ARE IMPORTANT FACTORS THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED IN ANY FORWARD-LOOKING
STATEMENTS.
HISTORY OF OPERATING LOSSES
From inception to March 31, 1997, the Company incurred cumulative net
losses of approximately $9.3 million. The Company expects to continue to
incur losses until 1998, and possibly thereafter, until its software
products are better established in its markets. Thus, there can be no
assurance that the Company will achieve or sustain profitability in the
future. The Company's failure to achieve significant commercial revenues
or profitability would materially and adversely affect the Company's
business, financial condition and results of operation.
NO ASSURANCE OF FDA OR OTHER REQUIRED GOVERNMENTAL APPROVALS
The Company recently obtained premarket notification clearance from the FDA
permitting the Company to continue marketing its SAFETRACE(TM) software
product. The Company, however, has other software products, including its
transfusion management information system, currently in development which
may, or may not, require FDA approval.
If the Company's software products are determined to be regulated in the U.S.
as medical devices by the FDA under the Federal Food, Drug, and Cosmetic Act
they would require FDA clearance of premarket notification prior to commercial
sale in the U.S. The process of obtaining required regulatory approvals from
the FDA and other regulatory authorities is lengthy, expensive, inherently
uncertain, generally takes several years or longer to complete, if approval
is obtained at all, and requires the submission of extensive data and
supporting information to the FDA. There can be no assurance that FDA
approval of software products developed by the Company will be obtained on a
timely basis, if at all. Failure to obtain FDA approval on a timely basis
would materially and adversely affect the Company's business, financial
condition and results of operations.
The Company will also be required to follow applicable Good Manufacturing
Practices ("GMP") regulations of the FDA, which include testing, control
and documentation requirements, as well as similar requirements in other
countries, including International Standards Organization ("ISO") 9001
standards. Failure to meet these requirements would preclude the Company
from marketing its products on a commercial basis, and therefore would
materially and adversely affect the Company's business, financial condition
and results of operations.
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<PAGE>
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS
Results of operations are expected to fluctuate significantly from quarter
to quarter depending upon numerous factors, including demand for the
Company's products; the timing of new software license agreements with
Wyndgate customers; the ability of the Company to develop, introduce and
market new and enhanced versions of the Company's products on a timely
basis; personnel changes; changes in Company strategy; and the level of
international sales. Quarter to quarter operating results could also be
affected by the timing of the receipt of individual customer orders and also
the decision on whether or not to recognize revenue based upon the length of
time the Company's customers take to implement the Company's software
products. Further, special development projects required by customers
concurrent with licensing of the Company's software products could result in
revenue recognition delays.
LIMITED SALES, MARKETING AND DISTRIBUTION SYSTEMS
The Company's Wyndgate division has made limited sales of its SAFETRACE(TM)
software product to date. The Company currently markets its SAFETRACE(TM)
software product through a small direct sales force, both in the U.S. and
internationally. Establishment of a complete sales force capable of
effectively commercializing the Company's SAFETRACE(TM) software product,
and other software products currently under development, will require
substantial efforts and require significant management and financial
resources. The Company has also been evaluating other strategic business
alliances, which may assist in the development of a national and
international sales, marketing and distribution system. Any alliance which
is developed by the Company could require substantial capital and financial
resources. There can be no assurance that the Company will be able to
establish such a sales capability on a timely basis, if at all. Moreover,
there can be no assurance that any business alliance entered into by the
Company would be successful in such commercialization efforts.
POTENTIAL DIFFICULTIES IN MANAGING BUSINESS UNDERGOING RAPID GROWTH
The Company's future success will depend to a significant extent on the
ability of its current and future management personnel to operate
effectively, both independently and as a group. Certain members of such
management team have limited experience as a senior executive of a public
corporation. There can be no assurance that the management team will
operate together effectively. To compete successfully against current and
future competitors, complete research and development in progress and
develop future products, the Company believes that it must continue to
expand its operations, particularly in the areas of research and
development, sales and marketing, and training. If the Company were to
experience significant growth in the future, such growth would likely
result in new and increased responsibilities for management personnel and
place significant strain upon the Company's management, operating and
financial systems and resources. To accommodate such growth and compete
effectively, the Company must continue to implement and improve information
systems, procedures and controls, and to expand, train, motivate and manage
its work force. There can be no assurance that the Company's personnel,
systems, procedures and controls will be adequate to support the Company's
future operations. Any failure to implement and improve the Company's
operational, financial and management systems or to expand, train, motivate
or manage employees could materially and adversely affect the Company's
business, financial condition and results of operations.
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PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
Gregory R. Huls, Chief Financial Officer and General Counsel to the
Company, has resigned effective June 6, 1997. The Company is evaluating
whether to seek a Chief Financial Officer to replace Mr. Huls; in the
interim, Bart K. Valdez, who previously acted as Director of Finance and
Operations for the Company, will perform the duties of Chief Financial Officer.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit No. Description
----------- -----------
11.1 Statement re: Computation of Per Share Loss Over
the Period February 11, 1997 to March 31, 1997*
11.2 Statement re: Computation of Per Share Loss Over
the Period January 1, 1997 to March 31, 1997*
27 Financial Data Schedule*
* previously filed
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended
March 31, 1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GLOBAL MED TECHNOLOGIES, INC.
Date June 16, 1997 By /s/ MICHAEL I. RUXIN
---------------------------------
Michael I. Ruxin
Chief Executive Officer
Date June 16, 1997 By /s/ BART K. VALDEZ
---------------------------------
Bart K. Valdez
Chief Financial Officer
