FORM 10-QSB/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission file number 0-22083
GLOBAL MED TECHNOLOGIES, INC.
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(Exact name of small business issuer as specified in its charter)
COLORADO 84-1116894
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
12600 West Colfax, Suite C-420, Lakewood, Colorado 80215
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(Address of principal executive offices)
(303) 238-2000
-------------------------
(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 [ ]
As of March 31, 1999, 8,851,879 shares of the issuer's Common Stock were
outstanding.
Transitional Small Business Disclosure Format Yes [ ] No [X]
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
FORM 10-QSB/A
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
TABLE OF CONTENTS
PAGE NO.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
a. Balance Sheets as of March 31, 1999 (Unaudited) and
December 31, 1998 .............................................. 3
b. Unaudited Statements of Operations for the three months
ended March 31, 1999 and 1998 .................................. 5
c. Unaudited Statement of Stockholders'(Deficit) Equity for the
three months ended March 31, 1999 .............................. 6
d. Unaudited Statements of Cash Flows for the three months ended
March 31, 1999 and 1998 ........................................ 7
e. Notes to Unaudited Financial Statements ........................ 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ......................................... 13
PART II - OTHER INFORMATION
Item 5. Other Information ............................................. 17
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits ...................................................... 17
b. Reports on Form 8-K ........................................... 17
Signatures ................................................................. 17
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
GLOBAL MED TECHNOLOGIES, INC.
BALANCE SHEETS
(In thousands)
March 31, December 31,
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................................. $ 353 821
Accounts receivable-trade, net of allowance for uncollectible accounts
of $55 and $50 at March 31, 1999 and December 31, 1998, ............... 415 413
respectively
Accrued revenues, net of allowance for uncollectible accounts of
$15 at March 31, 1999 and December 31, 1998 ........................... 288 43
Prepaid expenses and other assets ......................................... 42 118
------- -------
Total current assets ......................................................... 1,098 1,395
EQUIPMENT, FURNITURE AND FIXTURES, AT COST:
Furniture and fixtures .................................................... 120 229
Machinery and equipment ................................................... 308 308
Computer hardware and software ............................................ 1,202 1,145
------- -------
1,630 1,682
Less accumulated depreciation and amortization ............................ (1,182) (1,117)
------- -------
Net equipment, furniture and fixtures ........................................ 448 565
DEFERRED FINANCING COSTS,
net of accumulated amortization of $10,016 and $6,031 at
March 31, 1999 and December 31, 1998, respectively ........................ 664 4,649
CAPITALIZED SOFTWARE DEVELOPMENT COSTS,
net of accumulated amortization of $701 and $653 at March 31, 1999
and December 31, 1998, respectively ....................................... 1,217 920
OTHER ASSETS ................................................................. 60 60
------- -------
Total assets ................................................................. $ 3,487 7,589
======= =======
See accompanying notes to unaudited financial statements.
3
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<CAPTION>
GLOBAL MED TECHNOLOGIES, INC.
BALANCE SHEETS (CONTINUED)
(In thousands)
March 31, December 31,
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Accounts payable .......................................................... $ 218 234
Accrued expenses .......................................................... 466 637
Accrued payroll ........................................................... 122 53
Accrued compensated absences .............................................. 452 438
Noncompete accrual ........................................................ 35 35
Deferred revenue .......................................................... 1,849 1,935
Current portion of financing agreement .................................... 500 500
Current portion of capital lease obligations .............................. 64 91
-------- --------
Total current liabilities .................................................... 3,706 3,923
CAPITAL LEASE OBLIGATIONS, less current portion .............................. 95 105
FINANCING AGREEMENTS, less current portion ................................... 2,650 2,200
-------- --------
Total liabilities ............................................................ 6,451 6,228
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' (DEFICIT) EQUITY:
Preferred stock, $.01 par value: Authorized shares - 10,000;
none issued or outstanding ............................................. -- --
Common stock, $.01 par value: Authorized shares - 40,000;
issued and outstanding shares - 8,852 and 8,882 at March 31, 1999
and December 31, 1998, respectively .................................... 89 89
Additional paid-in capital ................................................ 24,864 24,884
Accumulated deficit ....................................................... (27,917) (23,612)
-------- --------
Total stockholders' (deficit) equity ......................................... (2,964) 1,361
-------- --------
Total liabilities and stockholders' (deficit) equity ......................... $ 3,487 7,589
======== ========
</TABLE>
See accompanying notes to unaudited financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
GLOBAL MED TECHNOLOGIES, INC.
UNAUDITED STATEMENTS OF OPERATIONS
(In thousands, except per share information)
Three months ended
March 31,
1999 1998
---- ----
<S> <C> <C>
REVENUES:
Software sales and consulting ......................... $ 1,236 768
Hardware and software sales, obtained from vendors .... -- 40
------- --------
1,236 808
------- --------
COST OF REVENUES:
Software sales and consulting ......................... 544 471
Hardware and software sales, obtained from vendors .... -- 38
------- --------
544 509
------- --------
Gross profit ............................................. 692 299
OPERATING EXPENSES:
General and administrative ............................ 589 638
Sales and marketing ................................... 155 290
Research and development .............................. 16 1,047
Depreciation and amortization ......................... 128 144
Restructuring charges ................................. -- 138
------- --------
Loss from operations before other income (expense) ....... (196) (1,958)
OTHER INCOME (EXPENSE):
Interest income ....................................... 3 12
Interest expense ...................................... (127) (17)
Financing costs ....................................... (3,985) --
------- ---------
Net loss ................................................. $(4,305) (1,963)
======= =========
Basic and diluted loss per common share .................. $ (0.49) (0.24)
======= =========
Weighted average number of common shares outstanding--
basic and diluted ..................................... 8,868 8,148
======= =========
</TABLE>
See accompanying notes to unaudited financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
GLOBAL MED TECHNOLOGIES, INC.
UNAUDITED STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY
(In thousands)
Common Stock Additional
----------------- paid-in Accumulated
Shares Amount capital Deficit Total
------ ------ ---------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1998 ......................................... 8,882 $ 89 24,884 (23,612) 1,361
Stock options granted to employees ............................... -- -- 3 -- 3
Cancellation of common stock issued for services ................. (30) -- (23) -- (23)
Net loss ......................................................... -- -- -- (4,305) (4,305)
------- ------- ------- ------- -------
Balances, March 31, 1999 ............................................ 8,852 $ 89 24,864 (27,917) (2,964)
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to unaudited financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
GLOBAL MED TECHNOLOGIES, INC.
UNAUDITED STATEMENTS OF CASH FLOWS
(In thousands)
Three months ended
March 31,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................ $(4,305) (1,963)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization ...................... 128 144
Amortization of software development costs ......... 48 66
Amortization of financing costs .................... 3,985 --
Changes in allowances for uncollectible amounts .... 5 --
Loss on disposal of assets ......................... 38 --
Common stock, options and warrants issued
for services and other, net ...................... (20) --
Changes in operating assets and liabilities:
Accounts receivable-trade ....................... (7) (91)
Accrued revenues, net ........................... (245) 125
Prepaid expenses and other assets ............... 76 (74)
Accounts payable ................................ (16) 163
Accrued expenses ................................ (171) 114
Accrued payroll ................................. 69 (171)
Accrued compensated absences .................... 14 (4)
Noncompete accrual .............................. -- (115)
Deferred revenue ................................ (86) 732
------- -------
Net cash used in continuing operations .................. (487) (1,074)
Net cash used in discontinued operations ................ -- (209)
------- -------
Net cash used in operating activities ................... (487) (1,283)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment, furniture and fixtures .......... (54) (45)
Proceeds from sales of equipment ........................ 5 --
Increase in software development costs .................. (345) (200)
------- -------
Net cash used in investing activities ................... (394) (245)
------- -------
See accompanying notes to the financial statements.
7
<PAGE>
<CAPTION>
GLOBAL MED TECHNOLOGIES, INC.
UNAUDITED STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands)
Three months ended
March 31,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on financing agreements ...................... $ 850 --
Principal payments on short-term debt ................... (400) --
Principal payments under capital lease obligations ...... (37) (60)
------ ------
Net cash provided by (used in) financing activities ..... 413 (60)
------ ------
NET DECREASE IN CASH AND CASH EQUIVALENTS ............... (468) (1,588)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ........ 821 2,370
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .............. $ 353 782
====== ======
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest in 1999 and 1998 was $127 and $17, respectively.
</TABLE>
See accompanying notes to unaudited financial statements.
8
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 1999
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of Global Med Technologies, Inc.
(the "Company" or "Global") 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, 1999 and the results of its operations for the three months ended March 31,
1999 and 1998 have been included.
While management believes the disclosures presented are adequate to prevent
misleading information, it is suggested that the accompanying unaudited
financial statements be read in conjunction with the audited financial
statements and the notes thereto contained in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1998, as filed with the Securities
and Exchange Commission. The interim results of operations for the three months
ended March 31, 1999 are not necessarily indicative of the results that may be
expected for any other interim period of 1999 or for the year ending December
31, 1999.
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 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. FINANCING AGREEMENTS
1999 AGREEMENTS
In March 1999, the Company entered into agreements for a comprehensive financing
package (March 1999 Financing Agreements) that includes: (1) an $8,000,000
preferred stock private placement through American Fronteer Financial
Corporation (AFFC), a wholly owned subsidiary of eVision USA.Com, Inc., formerly
known as Fronteer Financial Holdings Ltd. (eVision); (2) exercise of 2,000,000
warrants at $0.25 per warrant; (3) extending the balance on the line of credit
with eBanker USA.com, Inc. (eBanker), formerly Fronteer Development Finance,
Inc., a majority owned subsidiary of eVision, until April 15, 2000, with a
change in the default conversion rate from $0.05 per share contained in the
original loan agreement to $0.25 per share; and (4) a $750,000 bridge loan,
which bears interest at 12% per annum.
The Company executed a letter agreement with AFFC for an $8,000,000 convertible
preferred stock private placement. The convertible preferred stock will be
convertible into common stock at $2.50 per share any time after twelve months of
the closing date of the sale of the stock. There will be a forced conversion of
the convertible preferred stock into common stock if the closing bid market
price of the common stock is at $4.00 or more for at least 15 business days. The
convertible preferred stock will carry a 15% coupon paid semi-annually in the
Company's common stock.
9
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
Heng Fung Finance Company Limited (Heng Fung Finance) has surrendered a
promissory note in the amount of $500,000 in exercise of the warrants to acquire
2,000,000 shares of common stock of the Company. This transaction was completed
on April 29, 1999.
The $2,650,000 loan from eBanker was extended until April 15, 2000, with the
previous conversion price of $0.05 per share increased to $0.25 per share. In
consideration for the extension, the Company will pay a 2% fee to eBanker of
$53,000, payable in 42,400 shares of the Company's common stock.
The $750,000 bridge loan, as revised on May 7, 1999, bears interest at 12% and
is convertible into shares of common stock of the Company at the 15-day average
closing bid price prior to the date of conversion. The loan must be drawn on or
before October 15, 1999 and is due and payable December 31, 1999. In
consideration of the commitment for the bridge loan, the Company agreed to pay a
fee of 2% or $15,000 payable in 13,275 shares of common stock of the Company.
In April 1999, the Company entered into an agreement with Heng Fung Finance for
a bridge loan in the amount of $2,000,000 (April 1999 Financing Agreement). The
agreement provides for a line of credit, with interest at 12% per annum payable
monthly, due April 12, 2000. As consideration for the line of credit, the
Company agreed to pay a fee equal to 5% of the total line of credit in 86,957
shares of common stock of the Company, payable as of April 13, 1999. The line of
credit will be convertible, at Heng Fung's option, into shares of the Company's
common stock at a price based on the average closing bid price of the Company's
common stock for a period of 15 business days prior to April 13, 1999, which was
$1.15.
1998 AGREEMENTS
On April 14, 1998, Fronteer Capital, Inc. (Fronteer Capital), a wholly owned
subsidiary of eVision, and Heng Fung Finance committed to provide to the Company
lines of credit for up to $1,650,000 and $1,500,000, respectively, for a total
combined loan commitment of $3,150,000 over the following twelve months (April
1998 Financing Agreements). The loans bear interest calculated at a rate of 12%
per annum, and were originally due on April 15, 1999 but have been extended to
April 15, 2000.
For issuing the $1,500,000 loan commitment, Heng Fung Finance earned warrants to
purchase 6,000,000 shares of Global common stock at $0.25 per share. For issuing
the $1,650,000 loan commitment, Fronteer Capital earned warrants to purchase
1,000,000 shares of Global common stock at $0.25 per share and when the loan was
drawn upon, would receive an additional warrant to purchase 5,000,000 shares of
Global common stock at $0.25 per share.
During the fourth quarter of 1998, the $1,650,000 loan commitment and the
unearned warrant rights to purchase 5,000,000 shares of Global common stock of
Fronteer Capital were assigned to eBanker. The $1,500,000 loan commitment of
Heng Fung Finance, $1,000,000 of the balance outstanding to Heng Fung Finance,
and 4,000,000 warrants held by Heng Fung Finance were sold to eBanker during the
last quarter of 1998. In October 1998, eBanker received the warrant to purchase
the 5,000,000 shares of Global common stock at $0.25 per share.
10
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
3. DEFERRED FINANCING COSTS
For issuing the $1,500,000 loan commitment, Heng Fung Finance received warrants
to purchase 6,000,000 shares of the Company's common stock. The warrants are
exercisable at $0.25 per share for up to 10 years and the Company registered the
Warrants and the underlying shares for resale under the Securities Act of 1933,
as amended (1933 Act). Using the Black-Scholes model for estimating the fair
value of the warrants to purchase 6,000,000 shares of the Company's common
stock, the Company recorded $5,340,000 as deferred financing costs as of April
14, 1998, to be amortized straight-line over the term of the loan. For issuing
its commitment, Fronteer Capital received warrants to purchase 1,000,000 shares
of the Company's common stock. When the line of credit was drawn upon in October
1998, eBanker received the additional warrants to purchase 5,000,000 shares of
the Company's common stock. The warrants are exercisable at $0.25 per share for
up to 10 years and the Company registered the warrants and the underlying shares
for resale under the 1933 Act. Using the Black-Scholes model for estimating the
fair value of the warrants to purchase 1,000,000 shares of the Company's common
stock, the Company recorded $890,000 as deferred financing costs as of April 14,
1998, to be amortized straight-line over the term of the loan. Using the
Black-Scholes model for estimating the fair value of the warrants to purchase
5,000,000 shares of the Company's common stock, the Company recorded an
additional $4,450,000 as deferred financing costs as of October 30, 1998, to be
amortized straight-line over the remaining term of the loan. The Company's
Registration Statement which included the 12,000,000 warrants and the underlying
shares became effective February 16, 1999.
4. STOCKHOLDERS' EQUITY
On January 4, 1999, the board of directors authorized incentive stock option
grants to purchase a total of 45,000 shares of the Company's common stock to
three employees at $0.78 per share. The options are for ten years and 25,000
vest at 20% per year beginning in September 1999 and the remaining options for
20,000 shares vest at the rate of 50% immediately and 50% on March 28, 1999.
Also on January 4, 1999, non-qualified options to purchase 60,000 shares of the
Company's common stock at $.78 per share were granted to two employees, one of
which is an officer, and non-qualified options to purchase 500 shares of the
Company's common stock at $.78 per share were granted to a consultant. The
employee grants vest at the rate of 20% per year beginning in 1999, and the
consultant options were 100% vested on the grant date. All of the options are
for a term of ten years.
On February 16, 1999, the board of directors approved a resolution to authorize
registration of 1,829,788 shares of the Company's common stock which underlie
outstanding Class A Warrants (1,456,988 shares at $4.55), 10% Note Warrants
(187,800 shares at $3.75), and specified non-qualified stock options (185,000
shares at $2.50 and $1.81). As an incentive to exercise the aforementioned
warrants and options, the board of directors agreed to discount the exercise
price per share by an amount up to 33-1/3% of the bid price on the common stock
on the effective date of the registration statement. Should the Company complete
such registration, under current accounting guidance, this transaction would
result in a significant non-cash charge to the statement of operations on the
effective date of the registration statement. However, it could also result in a
significant infusion of cash to the Company for its operations.
11
<PAGE>
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
5. RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform with the current
period presentation.
6. SUBSEQUENT EVENT
In April 1999, the Company received $350,000 in cash for payment of a note and
accrued interest receivable which had been written off in a prior period. The
entire amount will be recognized as income during the second quarter of the year
ending December 31, 1999.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
Global Med Technologies, Inc. (the "Company" or "Global"), designs, develops,
markets and supports information management software products for blood banks,
hospitals, centralized transfusion centers and other healthcare related
facilities. Revenues are derived from the licensing of software, the provision
of consulting and other value-added support services and the resale of hardware
and software obtained from vendors.
On April 14, 1998, the Company entered into two debt financing agreements which
provided the Company up to $3,150,000 in gross proceeds in exchange for up to
12,000,000 warrants convertible into common stock at $0.25 per share. Had the
Company not repaid or extended the financing proceeds and accrued interest
thereon on or before April 15, 1999, the convertible financing proceeds,
including interest thereon, would have been convertible into approximately
70,000,000 shares of common stock at $0.05 per share.
Heng Fung Finance has surrendered the promissory note in the amount of $500,000
in exercise of the warrants to acquire 2,000,000 shares of common stock of the
Company. This transaction was completed on April 29, 1999.
As of December 31, 1998, the Company owed $500,000 to Heng Fung Finance and
$2,200,000 to eBanker. On March 19, 1999, the Company drew the remaining
$450,000 available on the line of credit with eBanker USA.com, Inc. (eBanker),
formerly Fronteer Development Finance, Inc., a majority owned subsidiary of
eVision USA.Com, Inc., formerly known as Fronteer Financial Holdings, Ltd.,
thereby owing eBanker a total of $2,650,000.
The remaining $2,650,000 loan from eBanker was extended until April 15, 2000,
with the previous conversion price of $0.05 per share increased to $0.25 per
share. In consideration for the extension, the Company paid a 2% fee to eBanker
of $53,000, payable in 42,400 shares of the Company's common stock.
In March 1999, the Company entered into agreements for a comprehensive financing
package that includes: (1) an $8,000,000 preferred stock private placement
through AFFC; (2) exercise of 2,000,000 warrants at $0.25 per warrant; (3)
extending the balance on the line of credit with eBanker until April 15, 2000,
with a change in the default conversion rate from $0.05 per share contained in
the original loan agreement to $0.25 per share; and (4) a $750,000 bridge loan
which bears interest at 12% per annum.
The $750,000 bridge loan, as revised on May 7, 1999, bears interest at 12% and
is convertible into shares of common stock of the Company at the 15-day average
closing bid price prior to the date of conversion. The loan must be drawn on or
before October 15, 1999 and is due and payable December 31, 1999. In
consideration of the commitment for the bridge loan, the Company agreed to pay a
fee of 2% or $15,000 payable in 13,275 shares of common stock of the Company.
In April 1999, the Company entered into an agreement with Heng Fung Finance for
a bridge loan in the amount of $2,000,000 (April 1999 Financing Agreement). The
agreement provides a line of credit, with interest at 12% per annum payable
monthly, due April 12, 2000. As consideration for the line of credit, the
Company agreed to pay a fee equal to 5% of the total line of credit in 86,957
shares of common stock of the Company. The line of credit will be convertible,
at Heng Fung's option, into shares of the Company's common stock at a price
based on the average closing bid price of the Company's common stock for a
period of 15 business days prior to April 13, 1999, $1.15 per share.
13
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The following discussion of the Company's results of operations and of its
liquidity and capital resources is derived from and should be read in
conjunction with the unaudited financial statements and the related notes
herein.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
Revenues. Revenues are comprised of software sales and consulting revenues, and
the resale of hardware and software obtained from vendors.
Revenues from software sales and consulting increased by $468,000, or 61%, for
the three months ended March 31, 1999 compared to the same three months in 1998.
This increase in software sales and consulting revenue is primarily the result
of substantially increased SAFETRACE(R) software revenue and initial sales of
SAFETRACE TX(TM).
Revenues from the resale of hardware and software, obtained from vendors
decreased during the three months ended March 31, 1999 compared to the same
three months in 1998. This decrease was primarily due to decreases in the number
of customers which ordered third party hardware and software through the
Company.
Cost of revenue. Cost of revenue as a percentage of total revenues was 44% and
63% for the three months ended March 31, 1999 and 1998, respectively.
Cost of software sales and consulting as a percentage of the related revenue was
44% and 61% for the three months ended March 31, 1999 and 1998, respectively.
This cost decrease was primarily a result of increased revenues derived from
sales of SAFETRACE(R) software product licenses which are typically priced at
higher profit margins than revenues from consulting and implementation related
services.
Gross profit. Gross profit as a percentage of total revenue was 56% and 37% for
the three months ended March 31, 1999 and 1998, respectively. This increase in
gross profit was primarily a result of the increased revenues derived from sales
of the higher margin SAFETRACE(R) software products discussed above.
Additionally, reductions in costs associated with service revenues also
contributed to the increase in gross profit experienced by the Company during
the three months ended March 31, 1999.
General and administrative. General and administrative expenses decreased
$49,000, or 8%, for the three months ended March 31, 1999 compared to the same
three months in 1998. This decrease was attributable primarily to the
restructuring and reorganization in March 1998 which significantly reduced
payroll, outside contract services, various insurance related items, leased
office space and other general and administrative activities.
Sales and marketing. Sales and marketing expenses decreased $135,000, or 47%,
for the three months ended March 31, 1999 compared to the same three months in
1998. This decrease in sales and marketing expenses was primarily due to the
restructuring and cost reduction activities undertaken in March 1998.
Research and development. Research and development expenses decreased $1,031,000
to $16,000, for the three months ended March 31, 1999 compared to the same three
months in 1998. The decrease in research and development expenses was primarily
due to an increase in capitalized software development costs of $345,000 for the
quarter ended March 31, 1999; for a total of capitalized software development
costs of $1,249,000 through March 31, 1999, resulting from SAFETRACE TX(TM)
achieving technological feasibility during 1998.
Restructuring charges. Restructuring charges were $138,000 for the three months
ended March 31, 1998. During the three months ended March 31, 1998, management
proposed and the Company's board of directors approved a substantial cost
14
<PAGE>
reduction program which initially resulted in a decrease of over 30 full time
employees in addition to a decrease in the number of contracted developers. This
cost reduction program assisted in the reduction of the Company's operating
expenses. Restructuring charges incurred during the three months ended March 31,
1998 are primarily attributable to costs associated with future outlays related
to individuals no longer employed by the Company, fees related to restructuring
Wyndgate's office leases and other costs. All of these expenses had been paid as
of December 31, 1998.
Interest expense. Interest expense increased $110,000 for the three months ended
March 31, 1999 compared to the same three months in 1998. This increase was
primarily due to the borrowings on the financing agreements.
Loss from operations before other income (expense). The Company's loss from
operations during the three months ended March 31, 1999 of $196,000 is
$1,762,000 less than the loss for the same three months in 1998 of $1,958,000.
The decreased loss experienced during the three months ended March 31, 1999 was
primarily attributable to an increase in revenues derived from sales of
SAFETRACE(R) and SAFETRACE TX(TM), decreased research and development expenses
incurred for SAFETRACE TX(TM) development due to capitalization of SAFETRACE
TX(TM) costs, and management's cost reduction program implemented during the
first quarter of 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $353,000 as of March 31, 1999
compared to $821,000 at December 31, 1998, none of which was restricted. In
light of the Company's current cash position, financing activities, and
projected cash flow, management believes the Company has the financial
resources, or can obtain the financial resources, to maintain its planned level
of operations for the next twelve months, although the Company anticipates that
it will continue to incur operating losses, negative cash flows and capital
expenditures during that period.
It is expected that the net proceeds generated by the March 1999, April 1999 and
April 1998 Financing Agreements, as discussed above, a customer contract
settlement for $1,019,000 to be received in 1999, and the $350,000 received in
April 1999 in payment of a note and accrued interest receivable previously
written off are sufficient to fund the Company's liquidity and capital
requirements in the short term excluding acquisitions or major new product
development initiatives. Management anticipates that the net proceeds from the
1999 and April 1998 financing agreements, proceeds from the exercise of
warrants, and any future financing activities will be used to fund the Company's
anticipated research and software development costs, sales and marketing
efforts, and negative cash flows during the remainder of 1999 and for general
working capital purposes.
The Company had a net working capital deficit of $2,608,000 as of March 31, 1999
and $2,528,000 at December 31, 1998.
The Company used $487,000 in net cash for operating activities during the
quarter ended March 31, 1999. The cash used during the quarter consisted
primarily of the net loss from continuing operations of $4,305,000, net of the
amortization of non-cash deferred financing costs of $3,985,000.
Net cash used by investing activities was $394,000 during the quarter ended
March 31, 1999 compared to $245,000 during the same period of 1998. The Company
invested $345,000 in software development during the quarter ended March 31,
1999.
Net cash provided by financing activities was $413,000 during the quarter ended
March 31,1999 compared to net cash used in financing activities of $60,000
during the quarter ended March 31, 1998. These amounts primarily include
proceeds from the April 1998 Financing Agreements.
15
<PAGE>
YEAR 2000 DISCLOSURE
The Company has continued with the plans in place as included in the Company's
Annual Report on Form 10-KSB as of the year ended December 31, 1998. The Company
has continued working with third-party suppliers of software and related
services in resolving Year 2000 issues and anticipates testing will be completed
by the end of the third quarter of calendar year 1999. No matters have come to
the attention of management of the Company which would indicate that the
estimated total cost of the program for compliance should be revised. No
unanticipated amounts were expended during the quarter ended March 31, 1999. If
the Company and the third parties on which it relies are unable to address this
issue in a timely manner, it could result in a material financial risk to the
Company.
All statements contained herein, as well as statements made in press releases
and oral statements that may be made by the Company or its officers, directors,
or employees acting on its behalf, that are not statements of historical fact
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
could cause the actual results of the Company to be materially different from
historical results or from any future results expressed or implied by such
forward-looking statements and risk factors described from time to time in the
Company's reports filed with the Commission. In addition to statements that
explicitly describe such risks and uncertainties, readers are urged to consider
statements that include the terms "believes," "belief," "expects," "plans,"
"anticipates," "intends," or the like to be uncertain and forward-looking. All
cautionary statements made herein should be read as being applicable to all
forward-looking statements wherever they appear.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. Description
---------- -----------
10.1 Bridge Loan Agreement, dated April 13, 1999, between
the Company and Heng Fung Finance Company Limited
10.2 Revised Bridge Loan Agreement, dated May 7, 1999,
between the Company and eBanker USA.com, Inc.
27.1 Financial Data Schedule for March 31, 1999
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the three months
ended March 31, 1999.
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.
GLOBAL MED TECHNOLOGIES, INC.
A Colorado Corporation
Date: May 28, 1999 By /s/ Michael I. Ruxin
---------------------------------------
Michael I. Ruxin, Chairman of the Board
and Chief Executive Officer
Date: May 28, 1999 By /s/ Alan K. Geddes
---------------------------------------
Alan K. Geddes Vice President, Finance,
Chief Financial Officer and Treasurer
17
Exhibit 10.1 - $2,000,000 Bridge Loan Agreement,
dated April 13, 1999, between the Company and Heng
Fung Finance Company Limited
Heng Fung Finance Company Limited
10th Floor, Lippo Protective Tower
231-235 Gloucester Road, Wanchai, H.K.
April 13, 1999
Michael I. Ruxin, M.D.
Global Med Technologies, Inc.
12600 West Colfax
Suite C-420
Lakewood, CO 80215
Re: Bridge Loan $2,000,000 Convertible into Common Stock of Global Med
Technologies, Inc.
Dear Mick:
This letter confirms our understanding that Heng Fung Finance Company
Limited, a Hong Kong corporation ("Heng Fung"), will provide a line of credit of
up to Two Million Dollars ($2,000,000) to Global Med Technologies, Inc.
("Global") with interest at the rate of 12% per annum payable monthly. Principal
on all loans made pursuant to the line of credit shall be due and payable on
April 12, 2000. However, loans made pursuant to the line of credit shall be
repaid to Heng Fung immediately from proceeds of any offering of Global's
securities prior to April 12, 2000 and thereafter, this credit facility will
lapse.
Each loan drawn on the line of credit will be no more than $250,000 and
will be represented by a promissory note made by Global for the benefit of Heng
Fung. The promissory note(s) will be convertible, at Heng Fung's option, into
shares of common stock of Global at a price based on the average closing bid
price of Global's common stock for a period of 15 business days prior to April
13, 1999.
On or before April 13, 1999, as consideration for the line of credit,
Global agrees to pay Heng Fung, a fee equal to 5% of the total line of credit in
shares of Global common stock at a price based on the average bid price of
Global's Common Stock for the 15 days prior to April 13, 1999.
Very truly yours,
For and on behalf of
HENG FUNG FINANCE COMPANY LIMITED
By: /s/ Fai H. Chan
--------------------------------
Fai H. Chan
Chairman
ACCEPTED:
GLOBAL MED TECHNOLOGIES, INC.
By: /s/ Michael I. Ruxin
----------------------------------
Michael I. Ruxin, M.D.
Chairman and CEO
Exhibit 10.2 - Revised Bridge Loan
Agreement, dated May 7, 1999,
between the Company and eBanker
USA.com, Inc.
eBanker USA.com, Inc.
1700 Lincoln Street
32nd Floor
Denver, Colorado 80203
May 7, 1999
Michael I. Ruxin, M.D.
Global Med Technologies, Inc.
12600 West Colfax
Suite C-420
Lakewood, CO 80215
Re: Revised $750,000 Bridge Loan - Convertible into Common Stock of Global
Med Technologies, Inc.
Dear Mick:
This agreement supersedes, in its entirety, my letter dated March 18, 1999, to
you relating to a $750,000 Bridge Loan and confirms our oral extension of our
commitment.
eBanker hereby commits to loan to Global Med Technologies, Inc. (Global) Seven
Hundred Fifty Thousand Dollars ($750,000) on or before October 15, 1999. The
loan will bear interest at the rate of 12% per annum which shall be payable
monthly.
The full amount of principal and any unpaid accrued interest will be due and
payable on or before December 31, 1999. Until paid in full, the principal
balance of and any unpaid accrued interest on the loan may be converted, at the
option of eBanker, into Global Common Stock at the average closing bid price of
Global common stock for 15 days prior to the date of conversion.
As consideration for the commitment for the Bridge Loan, Global shall pay
eBanker a 2% commitment fee of $15,000 payable in 13,275 shares of Global common
stock, which was determined using the $1.13 average closing bid price for 15
days prior to April 15, 1999.
Any amounts outstanding under this Bridge Loan at the time of the closing of any
future Global private or public offering of securities shall be paid, including
outstanding interest, from proceeds from the private or public offering of
securities, although, this may be prior to December 31, 1999.
Very truly yours, For and on behalf of eBanker USA.com, Inc.
By: /s/ Fai H. Chan /s/ Robert H. Trapp
------------------------- --------------------------------
Fai H. Chan Robert H. Trapp
Chairman Secretary
Accepted:
Global Med Technologies, Inc.
By: /s/ Michael I. Ruxin
-------------------------
Michael I. Ruxin, M.D.
Chairman and CEO
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