<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 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 000-20805
--------------------------------------------
APACHE MEDICAL SYSTEMS, INC.
- -------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 23-2476415
- ----------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1650 Tysons Boulevard, McLean, Virginia 22102
- --------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(703) 847-1400
------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 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
----- -----
6,871,353
---------
(Number of shares of common stock
outstanding as of May 9, 1997)
<PAGE> 2
APACHE MEDICAL SYSTEMS, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
Part I - Financial Information
Item 1 - Financial Statements
<S> <C> <C>
Consolidated Statements of Operations (unaudited) - three months ended March
31, 1997 and 1996 1
Consolidated Balance Sheets -- March 31, 1997 (unaudited) and December 31,
1996 2
Consolidated Statements of Changes in Stockholders' Equity (Deficit) - three
months ended March 31, 1997 (unaudited) and year ended December 31, 1996 3
Consolidated Statements of Cash Flows (unaudited) - three months ended March
31, 1997 and 1996 4
Notes to Consolidated Financial Statements (unaudited) 5-6
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of
Operations 7-9
Part II - Other Information
Item 2 - Changes in Securities 10
Item 5 - Other Information 10
Item 6 - Exhibits and Reports on Form 8--K 11-12
Signatures 13
</TABLE>
<PAGE> 3
APACHE MEDICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 31,
(in thousands, except per share data) 1997 1996
-------------- --------------
<S> <C> <C>
Revenue:
Systems and related products $ 1,445 $ 1,242
Support 476 330
Professional services 479 87
-------------- ------------
Total revenue 2,400 1,659
Expenses:
Cost of systems and related products 725 563
Cost of support 131 123
Cost of professional services 451 67
Research and development 672 364
Selling, general and administrative 2,818 1,445
Write-off of acquired in-process
research and development costs 1,112 -
-------------- ------------
Total expenses 5,909 2,562
Loss from operations (3,509) (903)
Other income (expense):
Interest income 234 58
Interest expense (7) (106)
-------------- ------------
Total other income (expense) 227 (48)
Net loss $ (3,282) $ (951)
============== ===========
Net loss per share $ (0.48) $ (0.19)
============== ===========
Weighted average number of shares used for calculation of net loss per share 6,871 4,628
============== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 4
APACHE MEDICAL SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(in thousands except share data) MARCH 31, DECEMBER 31,
1997 1996
--------------- --------------
ASSETS (unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 16,385 $ 20,671
Short-term investments 993 993
Accounts receivable, net of allowance for doubtful accounts of $234 3,089 3,117
in 1997 and $102 in 1996
Other trade receivables 147 205
Prepaid expenses and other 596 620
-------- --------
TOTAL CURRENT ASSETS 21,210 25,606
Other trade receivables, net of current maturities 95 104
Furniture and equipment 2,930 2,683
Less accumulated depreciation and amortization (1,643) (1,495)
-------- --------
1,287 1,188
Capitalized software development costs, net 479 374
Intangible assets, net 1,164 714
-------- --------
TOTAL ASSETS $ 24,235 $ 27,986
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 556 $ 607
Accrued expenses 2,602 2,476
Purchase acquisition costs - 1,565
Current maturities of obligations under capital leases 35 57
Current maturities of notes payable - other 90 90
Deferred revenue 1,832 1,017
-------- --------
TOTAL CURRENT LIABILITIES 5,115 5,812
Deferred rent benefit 150 159
Obligations under capital leases, net of current maturities - 2
Notes payable - stockholders, net of current maturities 100 100
Notes payable - other, net of current maturities 86 91
-------- --------
TOTAL LIABILITIES 5,451 6,164
STOCKHOLDERS' EQUITY :
Common stock, $.01 par value, authorized shares, 30,000,000 at March
31, 1997 and December 31, 1996; issued and outstanding shares,
6,871,353 at March 31, 1997 and December 31, 1996 69 69
Additional paid-in capital 45,566 45,322
Accumulated deficit (26,851) (23,569)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 18,784 21,822
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 24,235 $ 27,986
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE> 5
APACHE MEDICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------------- PAID-IN
(in thousands, except share data) SHARES AMOUNT CAPITAL
---------- ---------- -------------
<S> <C> <C> <C>
BALANCE AT JANUARY 1, 1996 1,075,458 $11 $ 1,363
Issuance of common stock 788 - 7
Issuance of common stock through initial public
offering 2,300,000 23 27,577
Accretion of cumulative dividends and issue costs
on redeemable preferred stock - - -
Conversion of convertible preferred stock 3,294,519 33 20,017
Conversion of convertible debt 122,257 1 999
Conversion of cumulative dividends on redeembable preferred stock 78,331 1 939
Reclass cumulative dividends on redeemable preferred stock to APIC - - (1,850)
Reclass accreted issue costs on redeemable preferred stock to APIC - - (608)
Reclass unaccreted issue costs on redeemable preferred stock to APIC - - (526)
Issuance costs of initial public offering - - (3,034)
Issuance of common stock options - - 438
Net loss - - -
--------- --------- ---------
BALANCE AT DECEMBER 31, 1996 6,871,353 69 45,322
Issuance of common stock options - - 244
Net loss - - -
========= ========= =========
BALANCE AT MARCH 31, 1997 (UNAUDITED) 6,871,353 $69 $45,566
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE
DIVIDENDS AND
ACCRETED ISSUE
COSTS ON
CUMULATIVE
REDEEMABLE ACCUMULATED
(in thousands, except share data) PREFERRED STOCK DEFICIT TOTAL
---------------- ----------- ---------
<S> <C> <C> <C>
BALANCE AT JANUARY 1, 1996 ($1,779) ($ 17,908) ($18,313)
Issuance of common stock - - 7
Issuance of common stock through initial public offering - - 27,600
Accretion of cumulative dividends and issue costs
on redeemable preferred stock (679) - (679)
Conversion of convertible preferred stock - - 20,050
Conversion of convertible debt - - 1,000
Conversion of cumulative dividends on redeembable preferred stock - - 940
Reclass cumulative dividends on redeemable preferred stock to APIC 1,850 - -
Reclass accreted issue costs on redeemable preferred stock to APIC 608 - -
Reclass unaccreted issue costs on redeemable preferred stock to APIC - - (526)
Issuance costs of initial public offering - - (3,034)
Issuance of common stock options - - 438
Net loss - (5,661) (5,661)
---------- --------- --------
BALANCE AT DECEMBER 31, 1996 (23,569) 21,822
Issuance of common stock options - - 244
Net loss - (3,282) (3,282)
========== ========= ========
BALANCE AT MARCH 31, 1997 (UNAUDITED) - ($26,851) $18,784
========== ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
APACHE MEDICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 31,
(in thousands) 1997 1996
-------------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (3,282) $ (951)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 255 216
Provision for doubtful accounts 153 25
Accretion of interest - 66
Stock options issued 21 -
Write-off of acquired in-process research and development costs 1,112 -
Changes in operating assets and liabilities:
Accounts receivable (126) (807)
Other trade receivables 67 54
Other current assets (8) (26)
Intangible assets (35) -
Accounts payable and accrued expenses 75 (94)
Deferred rent (9) (5)
Deferred revenue 814 267
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (963) (1,255)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalized software development costs (127) (42)
Purchase of furniture and equipment, net of disposals (253) (6)
Purchase acquisitions (2,915) -
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (3,295) (48)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obligations (23) (42)
Principal payments on borrowings (5) (28)
Proceeds from issuance of preferred stock, net of issuance costs - (37)
Proceeds from issuance of common stock upon exercise of options - 1
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES (28) (106)
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,286) (1,409)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 20,671 4,036
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 16,385 $ 2,627
========= =========
SUPPLEMENTAL INFORMATION:
Cash payments for interest $ 8 $ 15
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 7
APACHE MEDICAL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). The financial information included herein is unaudited,
however, in the opinion of management, all adjustments (which include normal
recurring adjustments) considered necessary for a fair presentation have been
made. Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, but the Company believes that the disclosures made are adequate to
make the information presented not misleading. For more complete financial
information, these financial statements should be read in conjunction with the
audited financial statements and notes thereto for the year ended December 31,
1996 included in the Company's annual report. Results for interim periods are
not necessarily indicative of the results for any other interim period or for
the full fiscal year.
2. ACQUISITION
In January 1997, the Company acquired the assets of CardioMac, a point-of-care
data collection and reporting tool for the cardiac catheterization laboratory
and cardiovascular operating room from Iowa Health Centers, P.C. d/b/a Iowa
Heart Center, P.C., Mercy Hospital Medical Center, Mark A. Tannenbaum, M.D. and
Iowa Heart Institute. The purchase price for this acquisition was $1.35 million
in cash and options to purchase 150,000 shares of APACHE Common Stock for a
total value of $1.57 million. These assets have unique capabilities including
the provision of standard and customized individual patient and group reports
for PTCA and CABG patients.
The acquisition has been accounted for using the purchase method of accounting
and resulted in intangible assets totaling $482,000. The intangible assets
consist of software technology of $271,000, assembled workforce of $15,000 and
goodwill of $196,000. These assets are being amortized over 5 to 15 years. In
connection with the acquisition, the Company also acquired and recorded a
non-recurring charge related to acquired in-process research and development
costs of approximately $1.1 million during the first quarter of 1997. The
purchase price allocation and lives of assets were determined by an independent
appraiser.
5
<PAGE> 8
3. LOSS PER SHARE
Loss per share is computed based on the weighted average number of shares of
common stock and dilutive common stock equivalents outstanding during the
period. Stock options and warrants were excluded because the effects would be
antidilutive.
4. NEW ACCOUNTING PRONOUNCEMENT
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
changes the reporting requirements for earnings per share ("EPS") for publicly
traded companies by replacing primary EPS with basic EPS. The Company is
required to adopt this standard for its December 31, 1997 year-end. Since the
effect of outstanding options and warrants is antidilutive, management does not
believe that statement No. 128 will have an impact on net loss per share as
reported.
6
<PAGE> 9
APACHE MEDICAL SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - THREE MONTHS ENDED
MARCH 31, 1997 AND 1996
RESULTS OF OPERATIONS
CONSOLIDATED REVENUE. Revenue for the quarter ended March 31, 1997 increased
45% to $2.4 million from $1.7 million in the prior year period.
SYSTEMS AND RELATED PRODUCTS REVENUE. Systems and related products revenue for
the quarter ended March 31, 1997, increased 16% to $1.4 million from $1.2
million in the prior year period. The increase in revenue was due primarily to
the recording of revenue relating to the percentage of completion method of
accounting for 1996 system and benchmark sales. This was partially offset by a
decrease in system sales for the quarter ended March 31, 1997 compared to the
same period in the prior year.
SUPPORT REVENUE. Support revenue for the quarter ended March 31, 1997 increased
44% to $476,000 from $330,000 in the prior year period due to the increase in
the number of clients utilizing the Company's systems.
PROFESSIONAL SERVICES REVENUE. Professional services revenue for the quarter
ended March 31, 1997 increased 451% to $479,000 from $87,000 for the prior year
period. The increase is due primarily to the services and studies provided by
Health Research Network (HRN), acquired by APACHE in December 1996. HRN manages
an ongoing epidemiological study under a cooperative agreement with the Centers
for Disease Control and provides HIV-related information services and studies
distributed through IMS America to the pharmaceutical industry.
COST OF SYSTEMS AND RELATED PRODUCTS. Cost of systems and related products for
the quarter ended March 31, 1997 increased 29% to $725,000 from $563,000 in the
prior year period, due to the additional staffing requirements needed to
support the Company's growth in systems and benchmark revenue. Cost of systems
and related products for the first quarter increased to 50% of systems and
related products revenue from 45% in the prior year period, due to the same
factors as noted above, which were only partially offset by an increase in
revenue.
COST OF SUPPORT. Cost of support for the quarter ended March 31, 1997 increased
7% to $131,000 from $123,000 in the prior year period, due to the additional
staffing requirements needed to support the Company's larger client base. Cost
of support for the first quarter decreased to 28% of support revenue from 37%
in the prior year period, due to the increase in revenue, which more than
offset the increase in cost of support.
7
<PAGE> 10
COST OF PROFESSIONAL SERVICES. Cost of professional services for the quarter
ended March 31, 1997 increased 573% to $451,000 from $67,000 in the prior year
period, due to the costs associated with the services and studies provided by
HRN, as explained above, and the additional staffing required to support the
anticipated sales in customized consulting and disease management services.
Cost of professional services for the first quarter increased to 94% of
professional services revenue from 77% in the prior year period, due to the
same factors as noted above, partially offset by an increase in revenue.
RESEARCH AND DEVELOPMENT. Research and development expenses for the quarter
ended March 31, 1997 increased 85% to $672,000 from $364,000 in the prior year
period, due primarily to an increase in staffing requirements related to the
enhancement of current product lines as well as development activities for new
products and services. During the first quarter of 1997, $128,000 of product
development costs were capitalized, compared to $42,000 in the prior year
period. Research and development expenses for the first quarter of 1997
increased to 28% of revenue from 22% in the prior year period, due to the same
factors as noted above, which were only partially offset by an increase in
revenue.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the quarter ended March 31, 1997 increased 95% to $2.8 million
from $1.4 million in the prior year period, due primarily to overhead costs
associated with the increase in staffing throughout the Company, an increase in
sales and marketing related activities and an increase in expenses associated
with public reporting requirements. Selling, general and administrative
expenses for the first quarter of 1997 increased to 117% of revenue from 87%
for the prior year period, due primarily to the same factors as noted above,
which were only partially offset by an increase in revenue.
WRITE-OFF OF ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT COSTS. In January
1997, the Company acquired the assets of CardioMac, a point-of-care data
collection and reporting tool for the cardiac catheterization laboratory and
cardiovascular operating room from Iowa Health Centers, P.C. d/b/a Iowa Heart
Center, P.C., Mercy Hospital Medical Center, Mark A. Tannenbaum, M.D. and Iowa
Heart Institute. At the time of the acquisition, the Company recorded a
non-recurring charge resulting from the write-off of the acquired in-process
research and development costs. This charge totaled $1.1 million or 46% of the
Company's revenue for the first quarter of 1997.
OTHER INCOME(EXPENSE). Other income (expense) increased from ($48,000) for the
quarter ended March 31, 1996 to $227,000 for the quarter ended March 31, 1997.
The increase is attributable to interest income earned from the investment of
the net proceeds from the initial public offering of the Company's Common Stock
in July 1996 and a decrease in interest-bearing notes payable.
8
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
Cash and short-term investments were $17.4 million as of March 31, 1997
compared to $21.7 million as of December 31, 1996.
In December 1996, the Company completed the acquisition of the assets and
certain liabilities of Health Research Network for $1.57 million in cash paid
in January 1997. In January 1997, the Company acquired the assets of CardioMac
from Iowa Health Centers, P.C. d/b/a Iowa Heart Center, P.C., Mercy Hospital
Medical Center, Mark A. Tannenbaum, M.D. and Iowa Heart Institute for a payment
of $1.35 million in cash and options to purchase 150,000 shares of APACHE
Common Stock. Each of these acquisitions has been accounted for using the
purchase method of accounting and, accordingly, the assets have been valued at
their estimated fair value. Funding for the acquisitions was provided by the
proceeds of the Company's public offering completed in July 1996.
In April 1997, the Company entered into a secured revolving line of credit from
Crestar Bank providing for a borrowing capacity of $2.0 million. Borrowings
bear interest at a fluctuating rate equal to the Bank's prime rate plus 0.25%.
The Company also pays an annual fee on the total borrowing capacity of $2.0
million at a rate of 0.75% per annum. Borrowings are collateralized by the
Company's accounts receivable and all other uncommitted assets. The line of
credit expires on May 31, 1997 and contains an automatic renewal that expires
on May 31, 1998, subject to the borrowers compliance with all terms and
conditions of the agreement. There are currently no borrowings under the line
of credit.
The Company anticipates that net proceeds from the initial public offering and
funds generated from operations will be sufficient to meet its planned ongoing
working capital requirements and to finance planned product development, sales
and marketing activities and capital acquisitions for the next twelve months.
9
<PAGE> 12
PART II - OTHER INFORMATION
Item 2: Changes in Securities
The Company acquired certain assets of Iowa Health Centers, P.C. d/b/a
Iowa Heart Center, P.C. ("IHC"), Mercy Hospital Medical Center ("Mercy"), Mark
A. Tannenbaum, M.D. and Iowa Heart Institute pursuant to an Asset Purchase
Agreement dated as of January 7, 1997. As part of the consideration for the
acquired assets, the Company granted an option to purchase 50,000 shares of
Common Stock, par value $.01 per share, to each of IHC, Mercy and Dr.
Tannenbaum. The options are fully exercisable and the exercise price of the
options is $7.75 per share, the fair market value of the Company's Common Stock
on January 7, 1997, the date of grant.
The shares issuable upon the exercise of the options will be issued
without the benefit of an effective registration statement under the Securities
Act of 1933, as amended (the "Act") in reliance upon the private placement
exemption under Section 4(2) of the Act in that they did not involve a public
offering or sale of the Company's securities. The parties, however, have
entered into a Registration Agreement, dated as of January 7, 1997, pursuant to
which IHC, Mercy and Dr. Tannenbaum have certain rights to participate in
certain registrations by the Company of its Common Stock.
Item 5: Other Information
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, the Company believes that a number of important
factors could cause the Company's actual results to differ from those that may
have been or may be projected in forward-looking statements made by or on
behalf of the Company from time to time. These factors are described under the
heading "Risk Factors" in the Company's Annual Report on Form 10-K, filed with
the Securities and Exchange Commission on March 20, 1997. Specific reference is
made to the Risk Factors set forth therein entitled "History of Operating
Losses and Accumulated Deficit; Expected Losses; Uncertainty of Future
Profitability", "Fluctuations in Quarterly Operating Results", "Uncertainty of
Market Acceptance" and "State and Federal Government Regulation".
10
<PAGE> 13
Item 6: Exhibits and Reports on Form 8--K
- ------- ---------------------------------
(a) Exhibits --
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
2.1 Asset Purchase Agreement by and among the Company and
Dun & Bradstreet HealthCare Information, Inc. and Cognizant
Corporation dated as of December 30, 1996*
2.2 Asset Purchase Agreement by and among the Company and
Iowa Health Centers, P.C. d/b/a Iowa Heart Center, P.C.,
Mercy Hospital Medical Center, Mark A. Tannenbaum, M.D. and
Iowa Heart Institute dated as of January 7, 1997*
3.1 Amended and Restated Certificate of Incorporation**
3.2 By-Laws**
4.1 Specimen Common Stock Certificate**
10.1 APACHE Medical Systems, Inc. Employee Stock Option Plan+**
10.2 APACHE Medical Systems, Inc. Non-Employee Director Option
Plan+**
10.3 Sublease Agreement between the Company and First Union
National Bank of Virginia, dated March 17, 1994**
10.4 Registration Agreement between the Company and Certain
Stockholders, dated December 28, 1995**
10.5 Form of Warrant Agreement relating to warrants issued in
1995**
10.6 Warrant Agreement between the Company and Venture Fund of
Washington, dated May 13, 1991**
10.7 Licensing Agreement between the Company and Cerner
Corporation, dated February 2, 1995**
10.8 Nonqualified Stock Option Agreement between the Company and
The Cleveland Clinic Foundation, dated August 19, 1994**
10.9 Agreement between the Company and The George Washington
University, dated August 19, 1994**
10.10 Letter Agreement between the Company and the Northern New
England Cardiovascular Disease Study Group, dated March 13,
1995**
</TABLE>
11
<PAGE> 14
10.11 Licensing Agreement between the Company and Quality
Information Management Corporation, dated March 24, 1994**
10.12 Marketing Agreement between the Company and American
Healthcare Systems Purchasing Partners, L.P., dated as of
June 3, 1996**
10.13 Registration Agreement between the Company and each of Iowa
Health Centers, P.C. d/b/a Iowa Heart Center, P.C., Mercy
Hospital Medical Center, Mark A. Tannenbaum, M.D. and Iowa
Heart Institute dated January 7, 1997*
10.14 Nonqualified Stock Option Agreements between the Company and
each of Iowa Health Centers, P.C. d/b/a Iowa Heart Center,
P.C., Mercy Hospital Medical Center and Mark A. Tannenbaum,
M.D., dated January 7, 1997.
11.1 Computation of Earnings Per Share
21.1 List of Subsidiaries of the Company**
27.1 Financial Data Schedule
- -------------
+ Denotes compensatory plan.
* Incorporated herein by reference from the Company's Report
on Form 8-K filed on January 14, 1997.
** Incorporated herein by reference from the Company's
Registration Statement on Form S-1, SEC file no. 333-4106,
initially filed on April 26, 1996.
(b) Reports on Form 8--K --
December 30, 1996 (filed January 14, 1997) - Item 2.
Acquisition or Disposition of Assets. Re: Acquisition of
assets of Dun & Bradstreet HealthCare Information, Inc. and
of Iowa Health Centers, P.C. d/b/a Iowa Heart Center, P.C.,
Mercy Hospital Medical Center, Mark A. Tannenbaum, M.D. and
Iowa Heart Institute.
March 21, 1997 (filed March 28, 1997, amending Form 8-K
filed February 20, 1997) - Item 4. Changes in Registrant's
Certifying Accountant. Re: Termination of KPMG Peat Marwick
as the Company's principal accountants and engagement of
Arthur Andersen LLP as the Company's new principal
accountants.
12
<PAGE> 15
SIGNATURES
Pursuant to the requirements 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.
APACHE MEDICAL SYSTEMS, INC.
Date: May 9, 1997 /s/Gerald E. Bisbee, Jr.
------------ -------------------------
Gerald E. Bisbee, Jr.
Chairman, Chief Executive
Officer and President
Date: May 9, 1997 /s/Brion D. Umidi
------------- ------------------
Brion D. Umidi
Vice President, Finance and
Administration, Treasurer and Chief
Financial Officer (Chief
Financial and Accounting Officer)
Date: May 9, 1997 /s/Lisa M. Clements
------------- --------------------
Lisa M. Clements
Controller and Assistant Treasurer
13
<PAGE> 1
EXHIBIT 10.14
APACHE MEDICAL SYSTEMS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
APACHE MEDICAL SYSTEMS, INC., a Delaware corporation (the "Company"),
hereby grants to Iowa Health Centers, P.C., an Iowa professional corporation
d/b/a Iowa Heart Center, P.C. ("Optionee"), an option (the "Option") to
purchase a total of Fifty Thousand (50,000) shares (the "Shares") of Common
Stock of the Company, at the price provided herein.
1. Nature of the Option. This Option is a non-statutory option
and is not intended to qualify for any special tax benefits to Optionee.
2. Exercise Price. This exercise price is $7.75 for each share
of Common Stock.
3. Exercise of Option. Subject to Section 6 hereof, this Option
shall be exercisable during its term as follows:
(i) Right to Exercise. This Option may be exercised in
one or more tranches at any time from the date hereof through the tenth
anniversary hereof. This Option may not be exercised for a fraction of a
share.
(ii) Method of Exercise. This Option shall be exercisable
from time to time by written notice which shall state the number of Shares in
respect of which this Option is being exercised. Such written notice shall be
signed by Optionee or an authorized officer thereof, as the case may be, and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price.
No Shares will be issued pursuant to the exercise of this Option
unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which the
Shares may then be listed.
(iii) Number of Shares Exercisable. Each exercise of this
Option hereunder shall reduce the total number of Shares that may thereafter be
purchased under this Option.
4. Representations. In the event the Shares purchasable pursuant
to the exercise of this Option have not been registered under the Securities
Act of 1933, as amended ("Securities Act"), at the time this Option is
exercised, Optionee or an authorized officer thereof, as the case may be,
shall, concurrently with the exercise of all or any portion of this Option,
deliver to the Company his or its Investment Representation Statement in the
form attached hereto as Exhibit 1.
5. Method of Payment. Payment of the exercise price shall be by
cash or check.
6. Restrictions on Exercise. This Option may not be exercised if
the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation,
<PAGE> 2
including any rule under Part 207 of Title 12 of the Code of Federal
Regulations ("Regulation G") as promulgated by the Federal Reserve Board. As a
condition to the exercise of this Option, the Company may require Optionee or
an officer thereof, as the case may be, to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
7. Non-Transferability of Option. This Option may not be sold,
pledged, assigned, hypothecated, transferred or disposed of by Optionee in any
manner other than by will or by the laws of descent or distribution and, in the
case of an individual Optionee, may be exercised during the lifetime of
Optionee only by him. The terms of this Option shall be binding upon the
executors, administrators, heirs and successors of Optionee.
8. Stock Split. In the event of a stock split, stock dividend,
recapitalization, reclassification or combination of shares or other similar
event, the number of shares subject to outstanding options, the appropriate
exercise price and other price determinations applicable to the options shall
be adjusted to appropriately reflect such event.
DATE OF GRANT: January 7, 1997
APACHE Medical Systems, Inc.
a Delaware corporation
By: /s/ Gerald E. Bisbee, Jr.
------------------------------
Name: Gerald E. Bisbee, Jr.
----------------------------
Title: Chairman and CEO
---------------------------
By: /s/ Elizabeth A. Draper
------------------------------
Name: Elizabeth A. Draper
---------------------------
Title: Secretary
--------------------------
Agreed to this 7th day of
January, 1997
Iowa Health Centers, P.C. d/b/a Iowa Heart Center, P.C.
By: /s/ David F. Gordon, M.D., its President
-------------------------------------------
By: /s/ Daniel C. Aten, its Administrator
-------------------------------------------
-2-
<PAGE> 3
EXHIBIT 1
INVESTMENT REPRESENTATION STATEMENT
PURCHASER: Iowa Health Centers, P.C. d/b/a Iowa Heart Center, P.C.
SELLER: APACHE MEDICAL SYSTEMS, INC.
COMPANY: APACHE MEDICAL SYSTEMS, INC.
SECURITY: COMMON STOCK
AMOUNT: [Number of Shares exercised]
DATE: [Date of exercise]
In connection with the purchase of the above-listed Securities, the Purchaser
represents to the Seller and to the Company, the following:
(a) The Purchaser is aware of the Company's business affairs and
financial condition, and has acquired all such information about the Company as
it deems necessary and appropriate to enable it to reach an informed and
knowledgeable decision to acquire the Securities. The Purchaser is purchasing
these Securities for its own account for investment and not with a view to, or
for the resale in connection with, any "distribution" thereof for purposes of
the Securities Act of 1933, as amended ("Securities Act").
(b) The Purchaser understands that the Securities have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of its investment intent as expressed herein.
(c) The Purchaser further understands that the Securities may not
be sold publicly and must be held indefinitely unless they are subsequently
registered under the Securities Act or unless an exemption from registration is
available. The Purchaser is able, without impairing its financial condition,
to hold the Securities for an indefinite period of time and to suffer a
complete loss on its investment. The Purchaser understands that the Company is
under no obligation to it to register the Securities except as set forth in the
Registration Agreement between Optionee and the Company dated January 7, 1997.
In addition, the Purchaser understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel for the Company.
(d) The Purchaser is familiar with the provisions of Rule 144,
promulgated under the Securities Act, which, in substance, permits limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof (or from an affiliate of such issuer), in a non-public
offering subject to the satisfaction of certain conditions, including, among
other things: (i) the availability of certain public information about the
Company; (ii) the resale
-3-
<PAGE> 4
occurring not less than two years after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and, in
the case of an affiliate, or of a non-affiliate who has held the securities
less than three (3) years the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934) and
the amount of securities being sold during any three month period not exceeding
the specified limitations stated therein, if applicable.
(e) The Purchaser further understands that at the time it wishes
to sell the Securities there may be no public market upon which to make such a
sale, and that, even if such a public market then exists, the Company may not
be satisfying the current public information requirements of Rule 144, and
that, in such event, it would be precluded from selling the Securities under
Rule 144 even if the two-year minimum holding period had been satisfied. It
understands that the Company is under no obligation to it to make Rule 144
available.
(f) The Purchaser further understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 is
not exclusive, the Staff of the Securities and Exchange Commission has
expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available from such offers or sales, and that
such persons and their respective brokers who participate in such transactions
do so at their own risk.
Iowa Health Centers, P.C.
d/b/a Iowa Heart Center, P.C.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
Date:
------------------------------
[Date of execution by Optionee]
-4-
<PAGE> 5
APACHE MEDICAL SYSTEMS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
APACHE MEDICAL SYSTEMS, INC., a Delaware corporation (the "Company"),
hereby grants to Mark A. Tannenbaum, M.D. ("Optionee"), an option (the
"Option") to purchase a total of Fifty Thousand (50,000) shares (the "Shares")
of Common Stock of the Company, at the price provided herein.
1. Nature of the Option. This Option is a non-statutory option
and is not intended to qualify for any special tax benefits to Optionee.
2. Exercise Price. This exercise price is $7.75 for each share
of Common Stock.
3. Exercise of Option. Subject to Section 6 hereof, this Option
shall be exercisable during its term as follows:
(i) Right to Exercise. This Option may be exercised in
one or more tranches at any time from the date hereof through the tenth
anniversary hereof. This Option may not be exercised for a fraction of a
share.
(ii) Method of Exercise. This Option shall be exercisable
from time to time by written notice which shall state the number of Shares in
respect of which this Option is being exercised. Such written notice shall be
signed by Optionee or an authorized officer thereof, as the case may be, and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price.
No Shares will be issued pursuant to the exercise of this Option
unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which the
Shares may then be listed.
(iii) Number of Shares Exercisable. Each exercise of this
Option hereunder shall reduce the total number of Shares that may thereafter be
purchased under this Option.
4. Representations. In the event the Shares purchasable pursuant
to the exercise of this Option have not been registered under the Securities
Act of 1933, as amended ("Securities Act"), at the time this Option is
exercised, Optionee or an authorized officer thereof, as the case may be,
shall, concurrently with the exercise of all or any portion of this Option,
deliver to the Company his or its Investment Representation Statement in the
form attached hereto as Exhibit 1.
5. Method of Payment. Payment of the exercise price shall be by
cash or check.
6. Restrictions on Exercise. This Option may not be exercised if
the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation,
<PAGE> 6
including any rule under Part 207 of Title 12 of the Code of Federal
Regulations ("Regulation G") as promulgated by the Federal Reserve Board. As a
condition to the exercise of this Option, the Company may require Optionee or
an officer thereof, as the case may be, to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
7. Non-Transferability of Option. This Option may not be sold,
pledged, assigned, hypothecated, transferred or disposed of by Optionee in any
manner other than by will or by the laws of descent or distribution and, in the
case of an individual Optionee, may be exercised during the lifetime of
Optionee only by him. The terms of this Option shall be binding upon the
executors, administrators, heirs and successors of Optionee.
8. Stock Split. In the event of a stock split, stock dividend,
recapitalization, reclassification or combination of shares or other similar
event, the number of shares subject to outstanding options, the appropriate
exercise price and other price determinations applicable to the options shall
be adjusted to appropriately reflect such event.
DATE OF GRANT: January 7, 1997
APACHE Medical Systems, Inc.
a Delaware corporation
By: /s/ Gerald E. Bisbee, Jr.
-----------------------------
Name: Gerald E. Bisbee, Jr.
---------------------------
Title: Chairman and CEO
--------------------------
By: /s/ Elizabeth A. Draper
-----------------------------
Name: Elizabeth A. Draper
---------------------------
Title: Secretary
--------------------------
Agreed to this 7th day of
January, 1997
Mark A. Tannenbaum, M.D.
By: /s/ Mark A. Tannenbaum, M.D.
--------------------------------
-2-
<PAGE> 7
EXHIBIT 1
INVESTMENT REPRESENTATION STATEMENT
PURCHASER: Mark A. Tannenbaum, M.D.
SELLER: APACHE MEDICAL SYSTEMS, INC.
COMPANY: APACHE MEDICAL SYSTEMS, INC.
SECURITY: COMMON STOCK
AMOUNT: [Number of Shares exercised]
DATE: [Date of exercise]
In connection with the purchase of the above-listed Securities, the Purchaser
represents to the Seller and to the Company, the following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired all such information about the Company as I deem
necessary and appropriate to enable me to reach an informed and knowledgeable
decision to acquire the Securities. I am purchasing these Securities for my
own account for investment and not with a view to, or for the resale in
connection with, any "distribution" thereof for purposes of the Securities Act
of 1933, as amended ("Securities Act").
(b) I understand that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein.
(c) I further understand that the Securities may not be sold
publicly and must be held indefinitely unless they are subsequently registered
under the Securities Act or unless an exemption from registration is available.
I am able, without impairing my financial condition, to hold the Securities for
an indefinite period of time and to suffer a complete loss on my investment. I
understand that the Company is under no obligation to me to register the
Securities except as set forth in the Registration Agreement between Optionee
and the Company dated January 7, 1997. In addition, I understand that the
certificate evidencing the Securities will be imprinted with a legend which
prohibits the transfer of the Securities unless they are registered or such
registration is not required in the opinion of counsel for the Company.
(d) I am familiar with the provisions of Rule 144, promulgated
under the Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, including, among other things: (i)
the availability of certain public information about the Company; (ii) the
resale occurring not less than two years after the party has purchased, and
made full payment for, within the meaning of Rule 144, the
-3-
<PAGE> 8
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than three (3) years the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934) and the amount of securities being sold during any
three-month period not exceeding the specified limitations stated therein, if
applicable.
(e) I further understand that at the time I wish to sell the
Securities there may be no public market upon which to make such a sale, and
that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144, and that,
in such event, I would be precluded from selling the Securities under Rule 144
even if the two-year minimum holding period had been satisfied. I understand
that the Company is under no obligation to me to make Rule 144 available.
(f) I further understand that in the event all of the applicable
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive,
the Staff of the Securities and Exchange Commission has expressed its opinion
that persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from registration
is available from such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own
risk.
By:
------------------------------
Mark A. Tannenbaum, M.D.
Date:
---------------------------------
[Date of execution by Optionee]
-4-
<PAGE> 9
APACHE MEDICAL SYSTEMS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
APACHE MEDICAL SYSTEMS, INC., a Delaware corporation (the "Company"),
hereby grants to Mercy Hospital Medical Center, an Iowa not-for-profit
corporation ("Optionee"), an option (the "Option") to purchase a total of Fifty
Thousand (50,000) shares (the "Shares") of Common Stock of the Company, at the
price provided herein.
1. Nature of the Option. This Option is a non-statutory option
and is not intended to qualify for any special tax benefits to Optionee.
2. Exercise Price. This exercise price is $7.75 for each share
of Common Stock.
3. Exercise of Option. Subject to Section 6 hereof, this Option
shall be exercisable during its term as follows:
(i) Right to Exercise. This Option may be exercised in
one or more tranches at any time from the date hereof through the tenth
anniversary hereof. This Option may not be exercised for a fraction of a
share.
(ii) Method of Exercise. This Option shall be exercisable
from time to time by written notice which shall state the number of Shares in
respect of which this Option is being exercised. Such written notice shall be
signed by Optionee or an authorized officer thereof, as the case may be, and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price.
No Shares will be issued pursuant to the exercise of this Option
unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which the
Shares may then be listed.
(iii) Number of Shares Exercisable. Each exercise of this
Option hereunder shall reduce the total number of Shares that may thereafter be
purchased under this Option.
4. Representations. In the event the Shares purchasable pursuant
to the exercise of this Option have not been registered under the Securities
Act of 1933, as amended ("Securities Act"), at the time this Option is
exercised, Optionee or an authorized officer thereof, as the case may be,
shall, concurrently with the exercise of all or any portion of this Option,
deliver to the Company his or its Investment Representation Statement in the
form attached hereto as Exhibit 1.
5. Method of Payment. Payment of the exercise price shall be by
cash or check.
6. Restrictions on Exercise. This Option may not be exercised if
the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation,
<PAGE> 10
including any rule under Part 207 of Title 12 of the Code of Federal
Regulations ("Regulation G") as promulgated by the Federal Reserve Board. As a
condition to the exercise of this Option, the Company may require Optionee or
an officer thereof, as the case may be, to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
7. Non-Transferability of Option. This Option may not be sold,
pledged, assigned, hypothecated, transferred or disposed of by Optionee in any
manner other than by will or by the laws of descent or distribution and, in the
case of an individual Optionee, may be exercised during the lifetime of
Optionee only by him. The terms of this Option shall be binding upon the
executors, administrators, heirs and successors of Optionee.
8. Stock Split. In the event of a stock split, stock dividend,
recapitalization, reclassification or combination of shares or other similar
event, the number of shares subject to outstanding options, the appropriate
exercise price and other price determinations applicable to the options shall
be adjusted to appropriately reflect such event.
DATE OF GRANT: January 7, 1997
APACHE Medical Systems, Inc.
a Delaware corporation
By: /s/ Gerald E. Bisbee, Jr.
-----------------------------
Name: Gerald E. Bisbee, Jr.
---------------------------
Title: Chairman and CEO
--------------------------
By: /s/ Elizabeth A. Draper
-----------------------------
Name: Elizabeth A. Draper
---------------------------
Title: Secretary
--------------------------
Agreed to this 7th day of
January, 1997
Mercy Hospital Medical Center
By: /s/ Thomas A. Reitinger, its President and CEO
-----------------------------------------------
-2-
<PAGE> 11
EXHIBIT 1
INVESTMENT REPRESENTATION STATEMENT
PURCHASER: Mercy Hospital Medical Center
SELLER: APACHE MEDICAL SYSTEMS, INC.
COMPANY: APACHE MEDICAL SYSTEMS, INC.
SECURITY: COMMON STOCK
AMOUNT: [Number of Shares exercised]
DATE: [Date of exercise]
In connection with the purchase of the above-listed Securities, the Purchaser
represents to the Seller and to the Company, the following:
(a) The Purchaser is aware of the Company's business affairs and
financial condition, and has acquired all such information about the Company as
it deems necessary and appropriate to enable it to reach an informed and
knowledgeable decision to acquire the Securities. The Purchaser is purchasing
these Securities for its own account for investment and not with a view to, or
for the resale in connection with, any "distribution" thereof for purposes of
the Securities Act of 1933, as amended ("Securities Act").
(b) The Purchaser understands that the Securities have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of its investment intent as expressed herein.
(c) The Purchaser further understands that the Securities may not
be sold publicly and must be held indefinitely unless they are subsequently
registered under the Securities Act or unless an exemption from registration is
available. The Purchaser is able, without impairing its financial condition,
to hold the Securities for an indefinite period of time and to suffer a
complete loss on its investment. The Purchaser understands that the Company is
under no obligation to it to register the Securities except as set forth in the
Registration Agreement between Optionee and the Company dated January 7, 1997.
In addition, the Purchaser understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel for the Company.
(d) The Purchaser is familiar with the provisions of Rule 144,
promulgated under the Securities Act, which, in substance, permits limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof (or from an affiliate of such issuer), in a non-public
offering subject to the satisfaction of certain conditions, including, among
other things: (i) the availability of certain public information about the
Company; (ii) the resale
-3-
<PAGE> 12
occurring not less than two years after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and, in
the case of an affiliate, or of a non-affiliate who has held the securities
less than three (3) years the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934) and
the amount of securities being sold during any three-month period not exceeding
the specified limitations stated therein, if applicable.
(e) The Purchaser further understands that at the time it wishes
to sell the Securities there may be no public market upon which to make such a
sale, and that, even if such a public market then exists, the Company may not
be satisfying the current public information requirements of Rule 144, and
that, in such event, it would be precluded from selling the Securities under
Rule 144 even if the two-year minimum holding period had been satisfied. It
understands that the Company is under no obligation to it to make Rule 144
available.
(f) The Purchaser further understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 is
not exclusive, the Staff of the Securities and Exchange Commission has
expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available from such offers or sales, and that
such persons and their respective brokers who participate in such transactions
do so at their own risk.
Mercy Hospital Medical Center
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
Date:
------------------------------
[Date of execution by Optionee]
-4-
<PAGE> 1
APACHE MEDICAL SYSTEMS, INC.
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
------------ ------------
Income applicable to common shares:
<S> <C> <C>
Net loss $(3,282) $(951)
Increase in earnings resulting from conversion of convertible debt (1) - 78
------- -------
Loss applicable to common shares $(3,282) $(873)
======= =======
Weighted average number of common shares outstanding 6,871 1,076
Conversion of preferred shares and convertible debt (2) - 3,478
Cheap stock options and warrants (2) - 74
------- -------
Weighted average common shares 6,871 4,628
======= =======
Loss per common share $(0.48) $(0.19)
======= =======
</TABLE>
(1) Assumes the conversion took place January 1, 1996.
(2) Pursuant with the Securities and Exchange Commission Staff Accounting
Bulletin No. 83, all common and common equivalent shares issued during the
twelve-month period prior to the filing of the initial public offering,
even when antidilutive, have been included in the calculation as if they
were outstanding for all periods, using the treasury stock method and the
expected initital public offering price of $12.00 per share.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 16,385
<SECURITIES> 993
<RECEIVABLES> 3,323
<ALLOWANCES> (234)
<INVENTORY> 0
<CURRENT-ASSETS> 21,210
<PP&E> 2,930
<DEPRECIATION> (1,643)
<TOTAL-ASSETS> 24,235
<CURRENT-LIABILITIES> 5,115
<BONDS> 186
0
0
<COMMON> 69
<OTHER-SE> 18,715
<TOTAL-LIABILITY-AND-EQUITY> 24,235
<SALES> 2,400
<TOTAL-REVENUES> 2,400
<CGS> 0
<TOTAL-COSTS> 1,307
<OTHER-EXPENSES> 4,602
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> (3,282)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,282)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,282)
<EPS-PRIMARY> (0.48)
<EPS-DILUTED> (0.48)
</TABLE>
