FORM 10-K/A. - ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Amendment #2
(Mark One)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________________ to _____________________
Commission file number 333-07643
PATIENT INFOSYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 16-1476509
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
46 Prince Street, Rochester, NY 14607
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 242-7200
Securities registered pursuant to Section 12(b) of the Act:
Title of each class registered Name of each exchange on which
registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value Per Share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((delta)229.405 of this chapter) is not contained herein,
and will not be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X]
As of March 31, 1998, 8,017,162 shares of common stock were outstanding,
and the aggregate market value of the common shares of Patient Infosystems, Inc.
held by non-affiliates was approximately $15 million.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART III
Item 10. Directors, Executive Officers and Significant Employees of the
Registrant.
The following table sets forth certain information concerning the Company's
directors, executive officers and significant employees as of March 31, 1998.
Name Age Position
- ---- --- --------
Derace L. Schaffer, M.D................ 50 Chairman of the Board
Donald A. Carlberg..................... 45 Director, President and
Chief Executive Officer
Kent A. Tapper......................... 41 Vice President, Systems
Engineering
Marion B. LaVigne, Ph.D................ 35 Vice President, Clinical
Services
Victoria Nelson Neidigh................ 38 Vice President, Sales
John Pappajohn......................... 69 Director
Barbara J. McNeil, M.D., Ph.D.......... 57 Director
Carl F. Kohrt, Ph.D.................... 54 Director
Derace L. Schaffer, M.D. has been Chairman of the Board and a Director of
the Company since its inception in February 1995. Since 1980, Dr. Schaffer has
been the President of The Ide Group, P.C., a group of physicians providing
radiological services at multiple locations in New York State, and since 1990 he
has also been President of The Lan Group, a venture capital firm specializing in
health care investments. He serves as a Clinical Professor at the University of
Rochester School of Medicine and a Director of NeuralTech, Inc., NeuralMed,
Inc., Preferred Oncology Networks of America, Inc., American Physician Partners,
Inc., The Care Group, Inc., Oncor, Inc. and Medifax, Inc. as well as several
not-for-profit corporations.
Donald A. Carlberg has been President, Chief Executive Officer and a
Director of the Company since its inception. From February 1993 to December 1994
Mr. Carlberg served as Chief Executive Officer of Patient Management
Technologies, Inc., a medical services consulting company, which he founded.
From 1992 to 1994 Mr. Carlberg served as Senior Vice President Sales and
Marketing for Neurocare, Inc./Paradigm Health Corp. From 1990 to 1992 Mr.
Carlberg served as Director of Managed Care for Baxter Healthcare International
where he started managed care initiatives for its Caremark Division. From 1985
to 1990 Mr. Carlberg held several senior level positions in managed care at Blue
Cross/Blue Shield of Rochester, New York and Independence Blue Cross in
Philadelphia, Pennsylvania.
Kent A. Tapper has been Vice President, Systems Engineering of the Company
since July 1995. Prior to joining the Company and since 1992, Mr. Tapper was
Product Manager, Audio Response and Call Center Platforms for Northern Telecom,
Inc. From 1983 to 1992 Mr. Tapper held Product Manager, Systems Engineering
Manager and various engineering management positions with Northern Telecom.
Marion B. LaVigne, Ph.D. has been Vice President, Clinical Services of the
Company since March 1998. Prior to this, she was the Director of Clinical
Research since February 1995. She is responsible for outcomes research and
behavorial design for Patient Infosystems programs. Dr. LaVigne holds a
doctorate in Clinical Psychology from the University of Rochester. She is a
member of the American Psychological Association and the Society of Behavorial
Medicine. Prior to joining the Company and since 1993, Ms. LaVigne was Director,
Clinical Programs for Health Information Technologies.
Victoria Nelson Neidigh has been Vice President, Sales of the Company since
January 1998. Ms Neidigh served most recently as Vice President, Managed Care
and National Accounts where she managed the Company's Managed Care sales staff,
developing strategies that have resulted in enrollment growth of over 100,000
lives through the Company's managed care clients. Prior to joining Patient
Infosystems in 1997, Ms. Neidigh was Regional Account Manager at Apria
Healthcare, Folcroft, PA.
John Pappajohn has been a Director of the Company since its inception, and
served as its Secretary and Treasurer from inception through May 1995. Since
1969 Mr. Pappajohn has been the sole owner of Pappajohn Capital Resources, a
venture capital firm specializing in health care investments, and President of
Equity Dynamics, Inc., a financial consulting firm, both located in Des Moines,
Iowa. He serves as a Director for the following public companies: CORE, Inc.,
Drug Screening Systems, Inc., Fuisz Technologies, Ltd., GalaGen, Inc., OncorMed,
Inc., The Care Group, Inc., HealthDesk Corporation, United Systems Technology,
Inc. and Pace Health Management Systems, Inc.
Barbara J. McNeil, M.D., Ph.D. has been a Director of the Company since May
1995. Dr. McNeil is Head of the Department of Health Care Policy and a Professor
of Radiology at Harvard Medical School where she has served in various
capacities since 1971. For four years she has served as Chair of the Blue Cross
Massachusetts Hospital Association Fund for Cooperative Innovation and currently
she is a member of the National Council on Radiation Protection, the American
College of Radiology and its Board of Chancellors, the Society of Nuclear
Medicine, the Advisory Council for the Agency for Health Care Policy and
Research, and the National Academy of Sciences' Institute of Medicine where she
is a Council member. She also serves as a Director of CV Therapeutics, Inc.
Carl F. Kohrt, Ph.D. has been a Director of the Company since April 1996.
Dr. Kohrt is Executive Vice President and Assistant Chief Operating Officer of
the Eastman Kodak Company, where he has served in various capacities since 1971.
Dr. Kohrt is a recipient of a Sloan Fellowship for study at Massachusetts
Institute of Technology.
No family relationship exists between any of the above directors or
executive officers. The normal term of office for all executive officers listed
above runs from one Annual Meeting of Stockholders of the Company to the next,
or approximately one year.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors, and persons who own more than
10% of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Based on a review of the copies of reports furnished to the Company, the Company
believes that during the year ended December 31, 1997 all filing requirements
applicable to its officers, directors and ten percent beneficial owners were
met, except that initial reports of beneficial ownership on Form 3 were file
late for Leonard M. Serafino, the former Chief Operating Officer of the Company.
Committees of the Board of Directors
- ------------------------------------
The Board of Directors of the Company has appointed two committees: the
Audit Committee and the Compensation Committee. The Audit Committee periodically
reviews the Company's auditing practices and procedures, makes recommendations
to management or to the Board of Directors as to any changes to such practices
and procedures deemed necessary from time to time to comply with applicable
auditing rules, regulations and practices, and recommends independent auditors
for the Company to be elected by the stockholders. The Compensation Committee
meets periodically to make recommendations to the Board of Directors concerning
the compensation and benefits payable to the Company's executive officers and
other senior executives. The Company reimburses directors for their
out-of-pocket expenses incurred in attending Board and Committee meetings.
During the year ended December 31, 1997, the Board of Directors met five times,
the Audit Committee met one time and the Compensation Committee met one time.
<PAGE>
Item 11. Executive Compensation.
Director Compensation
- ---------------------
During 1997 no separate cash compensation or fees were payable to directors
of the Company, other than reimbursement of expenses incurred in connection with
attending meetings.
Executive Compensation
- ----------------------
The following table sets forth the compensation paid or accrued by the
Company for services rendered in all capacities for the Company's Chief
Executive Officer and for all executive officers of the Company who received
compensation in excess of $100,000 during the years ended December 31, 1997 and
1996 and during the period from inception on February 22, 1995 to December 31,
1995.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual Compensation Securities
Name and Principal Position Year Salary Bonus Underlying Options (#)
- --------------------------- ---- ------ ----- ----------------------
<S> <C> <C> <C> <C>
Donald A. Carlberg, President and Chief 1997 $161,538 $25,000 0
Executive Officer 1996 $131,731 $25,000 18,000
1995 (1) $96,417 $15,000 216,000
Kent Tapper, Vice President, Systems 1997 $101,923 $10,000 0
Engineering 1996 $86,298 $5,000 0
1995 (1) $32,308 $0 36,000
</TABLE>
(1) Reflects compensation paid from inception on February 22, 1995 to December
31, 1995.
Marion B. Lavigne, Ph.D. and Victoria Nelson Neidigh were not executive
officers during the year ended December 31, 1997. However, Ms. Neidigh received
salary of $101,754 during the year ended December 31, 1997. Ms. LaVigne and Ms.
Neidigh are each currently compensated at the rate of $115,000 annually.
No options were granted during 1997 to either of the named executive
officers. No stock options were exercised by the Chief Executive Officer or
other named executive officers of the Company during 1997. The following table
sets forth certain information regarding unexercised options held by the Chief
Executive Officer and the named other executive officers of the Company at
December 31, 1997.
<TABLE>
<CAPTION>
Option Values on December 31, 1997
----------------------------------
Number of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
December 31, 1997(#) December 31, 1997($)(1)
-------------------- -----------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Donald A. Carlberg 111,600 122,400 $295,740 $324,360
Kent A. Tapper 14,400 21,600 $38,160 $57,240
</TABLE>
(1) Calculated based upon $2.65 market value of the underlying securities as of
December 31, 1997.
Stock Option Plan
- -----------------
The Company's Stock Option Plan (the "Plan") was originally adopted by the
Board of Directors and stockholders in June 1995. Up to 1,080,000 shares of
Common Stock have been authorized and reserved for issuance under the Plan.
Under the Plan, options may be granted in the form of incentive stock options
("ISOs") or non-qualified stock options ("NQOs") from time to time to salaried
employees, officers, directors and consultants of the Company, as determined by
the Compensation Committee of the Board of Directors. The Compensation Committee
determines the terms and conditions of options granted under the Plan, including
the exercise price. The Plan provides that the Committee must establish an
exercise price for ISOs that is not less than the fair market value per share at
the date of the grant. However, if ISOs are granted to persons owning more than
10% of the voting stock of the Company, the Plan provides that the exercise
price must not be less than 110% of the fair market value per share at the date
of the grant. The Plan also provides for a non-employee director to be entitled
to receive a one-time grant of a NQO to purchase 36,000 shares at an exercise
price equal to fair market value per share on the date of their initial election
to the Company's Board of Directors. Such NQO is exercisable only during the
non-employee director's term and automatically expires on the date such
director's service terminates. Each option, whether an ISO or NQO, must expire
within ten years of the date of the grant.
As of December 31, 1997 there were 798,060 options outstanding under the
Plan, the following table sets forth information regarding the number of options
outstanding and the exercise price of these options.
Number of Options
Outstanding at
December 31, 1997 Exercise Price
----------------- --------------
282,480 $0.14
108,000 $0.69
10,800 $1.04
33,840 $1.74
60,840 $2.08
150,000 $2.88
62,000 $4.00
13,000 $5.13
3,000 $6.00
36,300 $8.50
37,800 $10.00
Of these options, 36,000 were granted as of March 1, 1995 to Mr. Carlberg
and vested immediately. The remainder of Mr. Carlberg's options and all other
options granted under the plan vest as to 20% of the option grant on the first
anniversary of the grant, and 20% on each subsequent anniversary.
Employment Agreement
- --------------------
The Company has entered into an employment agreement with Mr. Carlberg as
its President and Chief Executive Officer dated March 1, 1995, which has a term
of one year and is automatically renewed for successive one-year periods unless
either party receives written notice from the other party of such party's
intention not to renew within 60 days of the agreement's expiration date. The
agreement calls for Mr. Carlberg to receive a base salary of $125,000 per year,
which was increased to $150,000 per year in September 1996 and $175,000 in June
1997. Upon execution of the agreement, Mr. Carlberg received a $15,000 signing
bonus and an option to purchase up to 180,000 shares of Common Stock of the
Company at an exercise price of $.14 per share, and in March of 1996 and 1997 he
received bonuses of $25,000. The option has a ten-year term, vests over five
years and was 20% vested upon grant. The remainder of the option vests at a rate
of 20% per year, and the option is therefore fully exercisable after the first
five years of employment. Mr. Carlberg is eligible for any discretionary bonuses
and additional option grants in amounts to be determined by the Company's Board
of Directors based upon the performance of the Company and Mr. Carlberg. The
agreement prohibits Mr. Carlberg from engaging in any business activity
involving the measurement of clinical outcomes for patients with acute or
chronic diseases, or the measurement of patient compliance with prescribed
treatments for acute or chronic diseases within one year of the termination of
his employment with the Company.
Board Compensation Committee Report on Executive Compensation
- -------------------------------------------------------------
Compensation for the Company's Executive Officers was determined in light
of the responsibilities involved in commencing the Company's business
operations, developing its initial and ongoing customer relationships,
commencing patient information programs and negotiating with the Company's
investment bankers. During 1997, Mr. Carlberg received a bonus of $25,000
reflecting Mr. Carlberg's effors in connection with the expansion of the
Company's operations and the substantial roll-out of the Company's patient
information systems.
The Compensation Committee evaluates the performance of each executive
officer of the Company in the context of the goals and challenges that the
Company faces over the next year.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding the beneficial
ownership of the shares of the Company's Common Stock as of December 31, 1997,
(i) by each person the Company knows to be the beneficial owner of 5% or more of
the outstanding shares of Common Stock, (ii) each named executive officer listed
in the Summary Compensation Table, (iii) each director of the Company and (iv)
all executive officers and directors of the Company as a group.
Shares Percentage
Beneficially Beneficially
Beneficial Owner (1) Owned Owned
- -------------------- ----- -----
Derace L. Schaffer (2)....................... 1,718,900 21.3%
John Pappajohn (3)........................... 1,456,880 18.0%
Edgewater Private Equity Fund II, L.P., 970,000 12.1%
666 Grand Avenue, Suite 200
Des Moines, IA 50309
Donald A. Carlberg (4)....................... 140,400 *
Kent A. Tapper (5)........................... 14,500 *
Barbara J. McNeil (5)....................... 14,400 *
Carl F. Kohrt (6)............................ 7,200 *
All directors and executive officers as a
group (6 persons) (6)........................ 3,352,280 39.3%
* Less than one percent.
(1) Unless otherwise noted, the address of each of the listed persons is c/o the
Company at 46 Prince Street, Rochester, New York 14607.
(2) Includes 288,000 shares held by Dr. Schaffer's minor children. Also includes
14,400 shares which are issuable upon the exercise of options that are either
currently exercisable or which become exercisable within 60 days of December 31,
1997. Does not include 21,600 shares subject to outstanding options which are
not exercisable within 60 days of December 31, 1997.
(3) Includes 360,000 shares held by Halkis, Ltd., a sole proprietorship owned by
Mr. Pappajohn, 360,000 shares held by Thebes, Ltd., a sole proprietorship owned
by Mr. Pappajohn's spouse and 360,000 shares held directly by Mr. Pappajohn's
spouse. Mr. Pappajohn disclaims beneficial ownership of the shares owned by
Thebes, Ltd. and by his spouse. Includes options to purchase 14,400 shares which
are either currently exercisable or which become exercisable within 60 days of
December 31, 1997. Does not include 21,600 shares subject to outstanding options
which are not exercisable within 60 days of December 31, 1997.
(4) Inckudes options to purchase 140,400 shares which are either currently
exercisable or which become exercisable within 60 days of the date of December
31, 1997. Does not include 93,600 shares subject to outstanding options which
are not exercisable within 60 days of December 31, 1997.
(5) Includes options to purchase 14,400 shares which are either currently
exercisable or which become exercisable within 60 days of December 31, 1997.
Does not include 21,600 shares subject to outstanding options which are not
exercisable within 60 days of December 31, 1997.
(6) Includes options to purchase 7,200 shares which are either currently
exercisable or which become exercisable within 60 days of December 31, 1997.
Does not include 28,800 shares subject to outstanding options which are not
exercisable within 60 days of December 31, 1997.
(7) Includes options to purchase 205,200 shares which are either currently
exercisable or which become exercisable within 60 days of December 31, 1997.
Does not include 358,800 shares subject to outstanding options which are not
exercisable within 60 days of December 31, 1997.
Item 13. Certain Relationships and Related Transactions
The Company was initially capitalized on February 22, 1995 through the sale
of 3,600,000 shares of its Common Stock for $.14 per share. Included among the
participants in that transaction were Dr. Derace Schaffer, Chairman of the
Board, who purchased 1,656,000 shares, Dr. Schaffer's spouse who purchased
144,000 shares, John Pappajohn, a director, who purchased 541,800 shares, a sole
proprietorship owned by Mr. Pappajohn which purchased 360,000 shares. Mr.
Pappajohn's spouse, who purchased 360,000 shares, and a sole proprietorship
owned by Mr. Pappajohn's spouse which purchased 360,000 shares.
In August and September of 1995 the Company sold 1,800,000 shares of its
Series A Preferred Stock in a private placement for $1.00 per share. Included
among the participants in that transaction were Gregory D. Brown, who was at
such time, the Company's Sr. Vice President, Chief Financial Officer, Secretary
and Treasurer, who purchased 10,000 shares, and Mr. Pappajohn who purchased
10,000 shares. In addition, Edgewater Private Equity Fund II, L.P.,
("Edgewater"), a five percent owner of the Common Stock of the Company, acquired
1,000,000 shares of Series A Preferred Stock in the Series A Preferred Stock
offering.
In May and June of 1996, the Company sold 600,000 shares of its Series B
Preferred Stock in a private placement for $5.00 per share. Included among the
participants in that transaction were Dr. Schaffer, who purchased 20,000 shares,
Mr. Pappajohn, who purchased 40,000 shares, and Edgewater which purchased
200,000 shares.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
PATIENT INFOSYSTEMS, INC.
/s/ Donald A. Carlberg
- -------------------------
Donald A. Carlberg, President
and Chief Executive Officer
April 30, 1998
- --------------
Dated
