<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 13, 2000
REGISTRATION NO. 333-35258
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
OMNICELL.COM
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3571 94-3166458
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
incorporation or organization)
</TABLE>
------------------
1101 EAST MEADOW DRIVE
PALO ALTO, CALIFORNIA 94303
(650) 251-6100
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
------------------
Sheldon D. Asher
President and Chief Executive Officer
1101 East Meadow Drive
Palo Alto, California 94303
(650) 251-6100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------
Copies to:
<TABLE>
<S> <C>
James C. Gaither, Esq. Gary J. Kocher, Esq.
Robert J. Brigham, Esq. Christopher H. Cunningham, Esq.
COOLEY GODWARD LLP PRESTON GATES & ELLIS LLP
Five Palo Alto Square 701 Fifth Avenue, Suite 5000
3000 El Camino Real Seattle, Washington 98104-7078
Palo Alto, California 94306-2155 (206) 623-7580
(650) 843-5000
</TABLE>
------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE(1) REGISTRATION FEE(2)
<S> <C> <C> <C> <C>
Common Stock..................... 4,600,000 $14.00 $64,400,000 $17,002
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933, as amended.
(2) $15,180 has previously been paid.
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 13, 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
[OMNICELL.COM LOGO]
SHARES
COMMON STOCK
This is the initial public offering of Omnicell.com, and we are offering
4,000,000 shares of our common stock. We anticipate that the initial public
offering price will be between $12.00 and $14.00 per share.
We have applied for listing of our common stock on the Nasdaq National Market
under the symbol "OMCL."
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS OMNICELL.COM
<S> <C> <C> <C>
Per Share $ $ $
Total $ $ $
</TABLE>
We have granted the underwriters the right to purchase up to 600,000 additional
shares to cover over-allotments.
DEUTSCHE BANC ALEX. BROWN
DONALDSON, LUFKIN & JENRETTE
BANC OF AMERICA SECURITIES LLC
U.S. BANCORP PIPER JAFFRAY
The Date of this prospectus is , 2000
<PAGE>
INSIDE FRONT COVER
Supply Chain Management for Healthcare (header, centered)
Omnicell.com has a seven-year track record of helping healthcare facilities
gain control over their supply chains. We have installed over 14,000 automation
systems at over 1,300 customer facilities and have completed more than 1,250
interfaces with back-end information systems. In 1999, we generated more than
$50 million in revenue. In addition, Omnicell.com offers an e-procurement
solution, the Omnicell Commerce Network, that incorporates and extends Commerce
One's B2B e-commerce technology into healthcare. (upper half)
- Person and two automated dispensing cabinets (images)
- Map of southern Canada and the United States (images), annotated with
number of automation system facilities per state and symbols representing
Omnicell Commerce Network participants currently transacting
- Omnicell Commerce Network Logo image (lower left)
- Powered by Commerce One Logo image (lower left)
- OmniBuyer application screen shot image (lower right)
- Omnicell.com Logo image (footer, centered)
INSIDE FOLDOUT PANELS 1 AND 2
Linking the Healthcare Supply Chain, Starting with the Buyer (top left)
The Omnicell Commerce Network
The Omnicell Commerce Network is an e-commerce service that consists of two
Web-based applications, OmniBuyer and OmniSupplier.
OmniBuyer provides buyers:
- online automation of front-end business rules
- online access to customized multi-supplier catalogs
- reduced processing costs and pricing disputes
- integration with back-end information systems
- Web-enabled back-end information systems
- access to low-cost information services
OmniSupplier provides suppliers:
- a single point of connection with all buyers
- reduced transaction costs
- reduced customer service costs
- access to new markets and customers (lower left)
Omnicell.com Logo image (lower left corner)
- Healthcare facility image, including images of generic people and
automation systems (center)
- OmniBuyer application screen shot image (left center)
Commerce One Global Trading Web text within image (top right)
<PAGE>
Manufacturers, distributors, GPOs, online marketplaces, auction sites text
within image (upper right)
Omnicell Commerce Network Logo image (upper right)
Two movable automated dispensing cabinets image (lower right)
Automated dispensing cabinet image (lower right)
Automation Systems
Our automation systems manage and dispense medical supplies and
pharmaceuticals directly to healthcare professionals at the point of use
throughout the healthcare facility, reducing waste and inefficiency. (lower
right)
INSIDE BACK COVER
Supply Chain Management for Healthcare (header, centered)
Automation Systems (centered)
- Seven automated dispensing cabinet images (upper half)
Omnicell Commerce Network Logo image (centered)
- Three OmniBuyer application screen shot images (lower half)
Omnicell.com Logo image (footer, centered)
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES NOT
CONTAIN ALL OF THE INFORMATION YOU SHOULD CONSIDER BEFORE INVESTING IN OUR
COMMON STOCK. TO UNDERSTAND THE RISKS INVOLVED, YOU SHOULD CAREFULLY READ THE
ENTIRE PROSPECTUS, INCLUDING THE "RISK FACTORS" SECTION AND THE FINANCIAL
STATEMENTS, BEFORE MAKING AN INVESTMENT DECISION.
OMNICELL.COM
We provide a comprehensive, buyer-focused, supply chain management solution
that addresses the limitations of the traditional healthcare supply chain. We
target delivery of our solution to healthcare facilities, the buyers in the
healthcare supply chain. The Omnicell Commerce Network and our supply and
pharmacy automation systems streamline procurement and inventory management
processes for hospitals and alternate care facilities. We integrate these
functions with healthcare facilities' existing back-end information systems to
provide coordinated decision making and purchasing of medical and non-medical
supplies. These back-end information systems include enterprise resource
planning (ERP), healthcare information, materials management and purchasing
systems. Our systems improve efficiencies and generate substantial cost savings
throughout the healthcare enterprise. In addition, our position as a neutral and
unbiased electronic-commerce (e-commerce) facilitator enables healthcare buyers
to connect directly to suppliers without any channel management on our part. We
also provide suppliers (including manufacturers, distributors, group purchasing
organizations (GPOs), online marketplaces and online auction sites) an
attractive means to reduce their sales, marketing and customer support costs and
potentially grow their revenues.
The Omnicell Commerce Network consists of two Web-based applications,
OmniBuyer and OmniSupplier, that incorporate and extend Commerce One, Inc.'s
business-to-business e-commerce technology platform into healthcare. Commerce
One is a leading provider of solutions for businesses that link buyers and
sellers of goods and services into trading communities over the Internet. With
OmniBuyer and OmniSupplier, we connect buyers and suppliers to create a network
that provides healthcare buyers with access to medical and non-medical products
and services. The Omnicell Commerce Network provides a single online point of
entry for the procurement needs of healthcare buyers. We have structured the
network based on an application service provider (ASP) business model. As an
ASP, we host our software applications from a central site rather than selling
the software to each healthcare facility, and deliver our applications over
secured Internet connections for a monthly fee.
Our automation systems manage and dispense medical supplies and
pharmaceuticals directly to healthcare professionals throughout a healthcare
facility at the point of use. These automation systems consist of modular,
secured and computerized cabinets that track transaction data, inventory levels,
expenses and patient billing. Since 1993, we have installed over 14,000 cabinets
in over 1,300 healthcare facilities. We estimate that approximately
$600 million in medical supplies flowed through our installed automation systems
in 1999.
In 1999, we generated revenue of approximately $50.4 million, all of which
was derived from the sale and lease of our automation systems and related
services. We have received only minimal revenues from the Omnicell Commerce
Network in 2000.
1
<PAGE>
OUR PRODUCTS
OMNIBUYER
OmniBuyer is a secure Web-based procurement application that automates and
integrates healthcare buyers' front-end requisition and approval processes that
include buyer-specific business rules, such as spending limits, negotiated
pricing, approval routing and customized access profiles. OmniBuyer is based on
Commerce One's BuySite technology that we customize to meet the complex needs of
healthcare buyers. Our OmniBuyer service provides the following benefits to
healthcare buyers:
- online automation of front-end requisition and approval functions;
- online access to customized multi-supplier catalogs;
- reduced processing costs and pricing disputes;
- integration with back-end information systems;
- Web-enabled back-end information systems; and
- access to low-cost information services.
OMNISUPPLIER
OmniSupplier is a secure Web-based application that enables suppliers to
connect and transact with our OmniBuyer customers. OmniSupplier is based on
Commerce One's MarketSite technology that we customize to meet the complex needs
of healthcare suppliers. Our OmniSupplier service offers the following benefits
to suppliers:
- single point of connection with all buyers;
- reduced transaction costs;
- reduced customer service costs; and
- access to new markets and customers.
AUTOMATION SYSTEMS
Our automation systems consist of modular, secured and computerized cabinets
and related software technology that manage and dispense medical supplies and
pharmaceuticals. We have one line of supply cabinets and two lines of pharmacy
cabinets, OmniCell pharmacy systems and Sure-Med cabinets, which we acquired
from Baxter Healthcare Corporation in January 1999. Our automation systems
provide the following benefits to healthcare facilities:
- reduced consumption and expenses;
- improved tracking and management of inventory;
- increased data capture;
- improved security and regulatory compliance; and
- standardized interfaces and a single database.
2
<PAGE>
OUR STRATEGY
Our goal is to become the leading business-to-business e-commerce network
for the healthcare industry. Key elements of our strategy include:
- facilitating management of the healthcare supply chain;
- accelerating adoption and use of the Omnicell Commerce Network;
- leveraging our technical expertise;
- developing strategic relationships; and
- capitalizing on revenue opportunities generated by the Omnicell Commerce
Network.
Our principal executive offices are located at 1101 East Meadow Drive, Palo
Alto, California 94303, and our telephone number is (650) 251-6100. Our Web site
is located at www.omnicell.com. The information on our Web site is neither
incorporated by reference into nor a part of this prospectus. Our logo,
Omnicell.com-Registered Trademark-, OmniCenter-Registered Trademark-,
OmniReporter-Registered Trademark-, OmniRx-Registered Trademark-, See &
Touch-TM- and Sure-Med-Registered Trademark- are trademarks of Omnicell.com.
BuySite-TM- and MarketSite-TM- are trademarks of Commerce One. This prospectus
also includes trademarks of companies other than our own.
OUR HISTORY
We were incorporated in California in September 1992 under the name OmniCell
Technologies, Inc. In September 1999, we changed our name to Omnicell.com, and
we intend to reincorporate in Delaware in June 2000.
UNLESS OTHERWISE INDICATED, ALL SHARE AMOUNTS AND FINANCIAL INFORMATION
PRESENTED IN THIS PROSPECTUS:
- GIVE EFFECT TO THE CONVERSION OF ALL OF OUR REDEEMABLE CONVERTIBLE
PREFERRED STOCK, CONVERTIBLE PREFERRED STOCK AND CONVERTIBLE NOTE PAYABLE
INTO OUR COMMON STOCK, WHICH WILL OCCUR AUTOMATICALLY UPON COMPLETION OF
THIS OFFERING;
- ASSUME THE UNDERWRITER'S OVER-ALLOTMENT OPTION IS NOT EXERCISED;
- GIVE EFFECT TO OUR REINCORPORATION IN DELAWARE; AND
- GIVE EFFECT TO A 0.625 FOR 1 REVERSE STOCK SPLIT OF OUR COMMON STOCK WHICH
WE INTEND TO EFFECT IN JUNE 2000.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by us................... 4,000,000 shares
Common stock to be outstanding after the
offering................................... 17,911,639 shares
Use of proceeds.............................. To repay debt owed to Baxter Healthcare, to
expand sales, marketing and customer support
activities, to continue the development and
marketing of the Omnicell Commerce Network
and for working capital and other general
corporate purposes, including potential
acquisitions.
Proposed Nasdaq National Market symbol....... OMCL
</TABLE>
The number of shares of common stock to be outstanding after the offering is
based on 13,911,639 shares outstanding on May 31, 2000. This number assumes the
conversion into common stock of all of our redeemable convertible preferred
stock, convertible preferred stock and convertible note payable outstanding on
that date and excludes, as of May 31, 2000, 4,426,217 shares of common stock
issuable upon exercise of outstanding options or warrants or issuable in the
future under stock option or employee stock purchase plans. For a description of
these excluded shares, see the section entitled "Capitalization."
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OTHER DATA)
You should read the following summary consolidated financial data together
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and related notes included
in this prospectus.
The pro forma net loss per share data and the pro forma as adjusted balance
sheet data give effect to the conversion of all of our redeemable convertible
preferred stock, convertible preferred stock and convertible note payable into
shares of our common stock, which will occur automatically upon the completion
of this offering. The pro forma as adjusted balance sheet data also give effect
to the sale of 4,000,000 shares of common stock by us at an assumed initial
public offering price of $13.00 per share and the application of the net
proceeds from this offering as discussed in "Use of Proceeds."
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------ ----------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS AND OTHER DATA:
Revenues.................................................... $ 36,073 $48,212 $ 50,407 $12,052 $ 14,670
Cost of revenues............................................ 16,209 18,262 34,137 4,485 6,419
-------- ------- -------- ------- --------
Gross profit................................................ 19,864 29,950 16,270 7,567 8,251
Loss from operations........................................ (10,578) (329) (29,474) (2,400) (6,499)
Net income (loss)........................................... $ (9,826) $ 525 $(31,391) $(2,798) $ (6,845)
Net income (loss) available to common stockholders.......... $ (9,848) $ 503 $(31,391) $(2,798) $ (6,845)
======== ======= ======== ======= ========
Net income (loss) per common share:
Basic..................................................... $ (8.61) $ 0.39 $ (21.25) $ (2.03) $ (4.07)
======== ======= ======== ======= ========
Diluted................................................... $ (8.61) $ 0.05 $ (21.25) $ (2.03) $ (4.07)
======== ======= ======== ======= ========
Weighted average common shares outstanding:
Basic..................................................... 1,144 1,302 1,471 1,381 1,681
Diluted................................................... 1,144 11,013 1,471 1,381 1,681
Pro forma net loss per common share:
Basic and diluted......................................... $ (3.18) $ (.28) $ (0.59)
======== ======= ========
Pro forma weighted average common shares outstanding:
Basic and diluted......................................... 9,876 9,879 11,299
Cumulative number of sites of installed automation systems.. 624 1,030 1,306 1,170 1,345
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 2000
-----------------------
PRO FORMA
ACTUAL AS ADJUSTED
-------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 22,435 $ 69,395
Total assets................................................ 54,547 101,507
Deferred gross profit....................................... 28,322 28,322
Long-term obligations, net of current portion............... 9,302 838
Redeemable convertible preferred stock...................... 12,640 --
Total stockholders' equity (net capital deficiency)......... (18,154) 41,796
</TABLE>
------------
- Cost of revenues for the year ended December 31, 1999 includes special
charges related to the writedown of Sure-Med inventory--$9.7 million;
additional costs recorded due to sale of Sure-Med inventory which was
recorded at fair value upon acquisition--$1.1 million; and writedown of
inventory designated for a marketing program--$1.5 million.
- Loss from operations for the year ended December 31, 1999 includes
integration expenses associated with acquisition of Sure-Med product
line--$0.8 million; write off of equity investment--$0.6 million; and
write off of leasehold improvements and other equipment--$0.9 million.
- Net loss and pro forma net loss per common share for the year ended
December 31, 1999, excluding non-recurring charges and charges associated
with the Sure-Med product line acquisition would have been
$(16.6) million and $(1.69), respectively.
- Deferred gross profit on the balance sheet represents gross margin on
sales of automation products that have been shipped to, accepted and in
most instances paid for by our customer but not yet installed at the
customer site. The revenues and cost of revenues for such items will be
recorded upon completion of installation.
- The amounts shown for the year ended December 31, 1999 include the results
of the Sure-Med product line acquisition from January 29, 1999 to the end
of 1999.
5
<PAGE>
RISK FACTORS
BEFORE MAKING AN INVESTMENT DECISION, YOU SHOULD CAREFULLY CONSIDER THE
RISKS DESCRIBED BELOW, TOGETHER WITH ALL OF THE OTHER INFORMATION INCLUDED IN
THIS PROSPECTUS. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCURS, OUR BUSINESS,
FINANCIAL CONDITION OR OPERATING RESULTS COULD BE MATERIALLY ADVERSELY AFFECTED.
IN THIS CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE AND YOU MAY
LOSE ALL OR PART OF YOUR INVESTMENT. ADDITIONAL RISKS AND UNCERTAINTIES THAT WE
DO NOT CURRENTLY KNOW ABOUT OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR
OUR BUSINESS. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS."
RISKS RELATING TO OUR CURRENT BUSINESS
THE LAUNCH OF THE OMNICELL COMMERCE NETWORK WILL REQUIRE US TO DEVELOP
SIGNIFICANT NEW CAPABILITIES AND MAY NOT BE SUCCESSFUL.
Our business-to-business e-commerce model is based on the creation of a
Web-based procurement service for healthcare organizations for the purchase of
medical and non-medical products and services. Our business model is unproven
and depends on our ability to, among other things:
- accurately determine the features, functionality and services that our
customers require or desire in an e-commerce procurement solution;
- successfully design and implement a Web-based procurement system that
includes these features, functionality and services;
- install applications for and develop interfaces with healthcare
facilities' back-end information systems;
- enter into agreements with suppliers (including manufacturers,
distributors, GPOs, online marketplaces and online auction sites) of
healthcare products and services;
- create a critical mass of healthcare buyers and suppliers that regularly
transact on the Omnicell Commerce Network; and
- generate significant revenues from the Omnicell Commerce Network.
The Omnicell Commerce Network will compete against traditional,
well-established methods of procuring healthcare products and services. It may
not achieve broad market acceptance for a variety of reasons, including, but not
limited to:
- the reluctance of healthcare buyers to abandon current purchasing methods;
- the costs and resources required for healthcare buyers to switch
purchasing methods;
- the need for products and services not offered through the Omnicell
Commerce Network; and
- the partnerships between and among healthcare manufacturers, distributors,
GPOs, online marketplaces and online auction sites.
HEALTHCARE ORGANIZATIONS MAY NOT ADOPT THE INTERNET AS A MEDIUM FOR TRANSACTING
BUSINESS, WHICH MAY PREVENT THE ADOPTION OF THE OMNICELL COMMERCE NETWORK.
The market for healthcare business-to-business e-commerce products and
services is new and rapidly evolving. Our future revenues and any future profits
generated by the Omnicell Commerce Network depend not only upon the widespread
acceptance and use of the Internet for business-to-business commerce in general,
but also upon the acceptance and use of the
6
<PAGE>
Internet by healthcare organizations for the procurement of medical and
non-medical products and services. Historically, healthcare facilities have been
slow to adopt new technologies. The success of the Omnicell Commerce Network
depends on the willingness of healthcare organizations to abandon their current
purchasing methods and switch to a business-to-
business e-commerce solution. We cannot assure you that these organizations will
find it either cost-effective or worthwhile to implement our solution.
Healthcare organizations that have signed agreements subscribing to the
OmniBuyer service are not obligated to adopt, implement or use the service and
may terminate the agreements on thirty days' written notice. We do not collect
subscription fees from OmniBuyer customers until after they begin to transact
business over the Omnicell Commerce Network. There can be no assurance that
these healthcare organizations will transact business over the Omnicell Commerce
Network.
The acceptance and use of the Internet by healthcare organizations for
business-to-
business e-commerce could be limited by a number of factors, including:
- low adoption and utilization of the Internet by healthcare organizations
and suppliers in general;
- any real or perceived difficulty in conducting business over the Internet;
- any real or perceived limits to the efficiencies or advantages of
conducting business over the Internet;
- lack of integration with buyers' back-end information systems, such as
ERP, healthcare information, materials management and purchasing systems;
- inadequate training of personnel in new technologies; and
- concerns about the security or taxation of transactions conducted over the
Internet.
Failure to gain a significant customer base or achieve market acceptance for
the Omnicell Commerce Network would harm our business.
IF THE VOLUME OF TRANSACTIONS FOR MEDICAL PRODUCTS, SERVICES AND EQUIPMENT OVER
THE INTERNET DOES NOT GROW SIGNIFICANTLY, IT MAY HARM OUR BUSINESS.
Despite the recent publicity surrounding business-to-business e-commerce in
the healthcare industry, it is estimated that in 1999, the total value of
medical products, services and equipment purchased over the Internet was well
below one percent of the healthcare supply chain. This limited market adoption
can be attributed to a number of factors, including, but not limited to:
- conflict between the traditional healthcare supply chain and the new
Web-based healthcare marketplaces;
- lack of integration with buyers' back-end information systems, such as
ERP, healthcare information, materials management and purchasing systems;
- limited buyer technical resources; and
- buyer perception of limited manufacturer and distributor choices.
Failure of the market for the purchase and sale of medical products,
services and equipment over the Internet to expand could harm our business.
7
<PAGE>
ANY DETERIORATION IN OUR RELATIONSHIP WITH COMMERCE ONE WOULD ADVERSELY AFFECT
THE OMNICELL COMMERCE NETWORK.
We have entered into a Vertical Hosted License Agreement with Commerce One,
a provider of business-to-business e-commerce solutions that link buyers and
suppliers of indirect goods and services to trading communities over the
Internet. Our agreement with Commerce One enables us to implement a customized
version of Commerce One's BuySite software at customer sites to provide a direct
link to Commerce One's MarketSite where our customers can interact with
manufacturers, distributors and suppliers. Until August 21, 2000, Commerce One
is prohibited from soliciting or entering into agreements to license its BuySite
technology with certain of our competitors. We cannot be sure that after
August 21, 2000, Commerce One will not license its BuySite technology to our
competitors.
We rely on Commerce One to expand, manage, maintain and secure the computer
and communications equipment and software needed for the day-to-day operation of
the Omnicell Commerce Network. Commerce One provides us with services, including
management of our network Web server and maintenance of our communications
lines, and through its subcontractor, management of our network data centers
(the locations on our network where data is stored). We cannot guarantee that
Commerce One will be able to develop and introduce enhancements to its products
that keep pace with emerging technological developments and emerging industry
standards. The failure by Commerce One in any of these areas could harm our
business. Moreover, we cannot guarantee that the Commerce One network will not
experience performance problems or delays.
IF WE ARE UNABLE TO DEVELOP RELATIONSHIPS WITH SUPPLIERS OF HEALTHCARE PRODUCTS
AND SERVICES, THE ADOPTION AND USE OF THE OMNICELL COMMERCE NETWORK BY
HEALTHCARE ORGANIZATIONS MAY BE LIMITED AND OUR BUSINESS MAY SUFFER.
We believe that the success of the Omnicell Commerce Network depends in
large part upon our ability to offer and deliver a substantial mix of healthcare
products and services. The task of bringing suppliers online can be both
difficult and time-consuming. If we cannot persuade a significant number of
suppliers to participate in the Omnicell Commerce Network, our solution will be
less attractive to our OmniBuyer customers.
We cannot assure you that we will be able to establish the necessary
relationships with suppliers to successfully implement our e-commerce business
model. Some suppliers may view us as a threat to their business models and their
ability to control access to customers. Some suppliers may sell their products
directly to customers at a cost lower than through the Omnicell Commerce
Network. We do not know what terms and conditions potential suppliers will
require from us in future contracts. We cannot assure you that any of these
suppliers will elect to use the Omnicell Commerce Network.
Even if we enter into supplier agreements in connection with the Omnicell
Commerce Network, these agreements are typically terminable on short notice and
we cannot assure you that they will be renewed beyond their initial term or that
they will be renewed on terms favorable to us. In addition, there are
significant costs, difficulties and risks associated with adding new product
offerings to our procurement service. Any limit in the variety and number of
products we are able to offer could result in decreased adoption and limited use
of the Omnicell Commerce Network, which would harm our business.
8
<PAGE>
ANY DECREASE IN REVENUES FROM THE SALE OF OUR AUTOMATION SYSTEMS AND RELATED
SERVICES WOULD HARM OUR BUSINESS.
Substantially all of our revenue to date has been attributable to sales of
automation systems and related services. We expect such sales to continue to
account for a majority of our revenue for at least the next few years. We cannot
assure you that we will continue to be successful in marketing our automation
systems or that the level of market acceptance of such systems will be
sufficient to generate operating income. As a result, any factors adversely
affecting the pricing or demand for our automation systems, such as competition
or technological change, would harm our business. In addition, a significant
amount of management effort and focus is being devoted to establishing the
Omnicell Commerce Network. This could harm our automation systems business by
diminishing management's attention to such business.
Our automation systems represent a relatively new approach to managing the
distribution of supplies and pharmaceuticals at healthcare facilities. Many
hospitals and other healthcare facilities still use traditional approaches that
do not include automated methods of supply and pharmacy distribution. As a
result, we must continuously educate existing and prospective customers about
the advantages of our products. Our automation systems typically represent a
sizeable initial capital expenditure for healthcare organizations. Changes in
the budgets of these organizations and the timing of spending under these
budgets can have a significant effect on the demand for our automation systems
and related services. In addition, these budgets are characterized by limited
resources and conflicting spending priorities among different departments. Any
decrease in expenditures by these healthcare facilities could harm our business.
Sun Healthcare Group, Inc., a customer that has accounted for a significant
percentage of our sales over the past five years, has filed for Chapter 11
bankruptcy protection. Accordingly, we do not expect any significant purchases
of our automation systems from Sun Healthcare in the future.
THE ONLINE PROCUREMENT AND AUTOMATION SYSTEMS MARKETS ARE HIGHLY COMPETITIVE AND
WE MAY BE UNABLE TO COMPETE SUCCESSFULLY AGAINST NEW ENTRANTS AND ESTABLISHED
COMPANIES WITH GREATER RESOURCES.
The market for online procurement of medical and non-medical supplies for
the healthcare supply chain is new, rapidly evolving and competitive. While we
maintain an open stance regarding the connection of a wide range of suppliers to
the Omnicell Commerce Network, we face competition from online marketplaces such
as Medibuy.com and Neoforma.com. We expect competition to intensify as current
competitors establish strategic relationships and expand their product offerings
and new competitors enter the market. We anticipate competition from current
providers of e-commerce solutions and suppliers of healthcare products and
services. Our own customer base may compete against us as they search for and
develop their own solutions or decide they are unwilling to change existing
systems and processes. We cannot be certain that our strategy of establishing
the Omnicell Commerce Network will be successful, that it will be executed
effectively by us and Commerce One or that our service will be widely adopted by
healthcare buyers or suppliers of healthcare products and services.
There are a number of companies currently developing and marketing
business-to-business e-commerce solutions targeted at specific vertical markets.
Because there are relatively low barriers to entry in the online market,
competition from other established and emerging companies may develop in the
future. These competitors may include
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healthcare companies with established customer bases that could integrate online
procurement solutions into their existing products or services. Many of our
competitors have, and new potential competitors may have, more experience
developing Web-based software and end-to-end purchasing solutions, larger
technical staffs, larger customer bases, more established distribution channels,
greater brand recognition, access to capital and greater financial, marketing
and other resources. In addition, competitors may be able to develop products
and services that are superior to our products and services, that achieve
greater customer acceptance or that have significantly improved functionality as
compared to our existing and future products and services. We cannot assure you
that we will be able to compete successfully against current and future
competitors and expand our buyer and supplier base or even retain our current
buyer and supplier customers. The failure to do so would harm our business.
We have experienced, and expect to continue to experience, increased
competition from current and potential automation systems competitors, many of
whom have significantly greater financial, technical, marketing and other
resources than do we. Our current direct competitors in the automation systems
market include Cardinal Healthcare (Pyxis), McKessonHBOC (AcuDose-Rx) and
Diebold (MedSelect).
The competitive challenges we face in our automation systems business
include, but are not limited to:
- our competitors may develop, license or incorporate new or emerging
technologies or devote greater resources to the development, promotion and
sale of their products and services;
- certain competitors have greater name recognition and a more extensive
installed base of automation systems or other products and services, and
such advantages could be used to increase their market share;
- other established or emerging companies may enter the automation systems
market;
- current and potential competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with third
parties, including larger, more established healthcare supply companies,
thereby increasing their ability to develop and offer products and
services to address the needs of our prospective customers; and
- our competitors may secure services and products from suppliers on more
favorable terms or secure exclusive arrangements with suppliers or buyers
that may impede the sales of our services.
Competitive pressures could result in price reductions of our products and
services, fewer customer orders and reduced gross margins, any of which could
harm our business.
IF WE ARE UNABLE TO SUCCESSFULLY INTEGRATE THE OMNICELL COMMERCE NETWORK WITH
THE EXISTING INFORMATION SYSTEMS OF OUR CUSTOMERS, THEY MAY CHOOSE NOT TO USE
OUR SERVICE.
In order for healthcare buyers and suppliers to fully benefit from our
e-commerce services, our systems must integrate with their systems. This may
require substantial cooperation, investment and coordination on the part of our
customers to integrate their existing information systems. There is little
uniformity in the systems currently used by our customers, which complicates the
integration process. If these systems are not successfully integrated, our
customers could choose to not use or reduce their use of the Omnicell Commerce
Network, which would harm our business.
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WE EXPECT TO INCUR NET LOSSES FOR AT LEAST THE NEXT TWO YEARS AND CANNOT ASSURE
YOU THAT WE WILL BE PROFITABLE.
For 1996 and 1997, we incurred net losses of approximately $10.5 million and
$9.8 million, respectively, and had net income of approximately $0.5 million in
1998 and a net loss of $31.4 million in 1999. As of March 31, 2000, we had an
accumulated deficit of approximately $83.8 million. We expect to have increasing
net losses in, and negative cash flows for, at least the next two years as we
continue to develop the Omnicell Commerce Network. We cannot assure you that the
Omnicell Commerce Network will be successful or that we will be able to achieve
or sustain revenue growth or generate profits. We expect that our operating
expenses will increase significantly for the foreseeable future and it is
possible that we may never achieve profitability. Even if we do achieve
profitability, we may not sustain or increase profitability on a quarterly or
annual basis in the future. If we do not achieve or sustain profitability in the
future, then we will be unable to continue our operations or will need to raise
additional funding.
IF WE FAIL TO MANAGE OUR GROWING AND CHANGING OPERATIONS, OUR BUSINESS COULD BE
HARMED.
We have recently experienced a period of significant expansion in the number
of our employees and the scope of our operating and financial systems. This
growth has resulted in new and increased responsibilities for management
personnel. To accommodate our recent growth, compete effectively and manage
potential future growth, we must continue to implement and improve our
information systems, procedures and controls, and we must hire competent and
qualified personnel. In addition, we must train, motivate and manage our
work-force to meet the increasing challenge of simultaneously developing the
Omnicell Commerce Network and expanding our automation systems business. These
demands will require the addition of new management personnel and the training
of existing management personnel, including information systems, sales,
technical, service and support personnel. We cannot assure you that our
personnel, systems, procedures and controls will be adequate to support our
future operations.
SECURITY CONCERNS AND PROBLEMS WITH THE INTERNET OR TRANSACTING BUSINESS OVER
THE INTERNET MAY INHIBIT THE GROWTH OF THE OMNICELL COMMERCE NETWORK.
The secured transmission of confidential information over the Internet is
essential to maintaining customer confidence in the Omnicell Commerce Network.
Customers generally are concerned with security and privacy on the Internet, and
any publicized security problems could inhibit the growth of e-commerce over the
Internet, and therefore negatively affect the acceptance of the Omnicell
Commerce Network as a means of conducting transactions. Any substantial security
breach of our system would significantly harm our reputation and the
attractiveness of our service. A party that is able to circumvent our security
systems could misappropriate proprietary information and expose us to a risk of
loss or litigation and potential liability. A security breach may also cause
interruptions in our operations. We will continue to leverage security
enhancements made by Commerce One to its MarketSite and BuySite technologies. We
will also expend significant effort and incur substantial expense to protect
against security breaches and their consequences. Despite our implementation of
security measures, our networks may be vulnerable to unauthorized and illegal
access, computer viruses and other disruptive problems. Eliminating computer
viruses and alleviating other security problems may require interruptions,
delays or temporary cessation of service to customers using our service. Damage
to our reputation and the attractiveness of our service from security concerns
or problems could result in the loss of suppliers and customers and could have a
material adverse effect on our business. While we will have access to upgrades
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and enhancements implemented by Commerce One to protect its MarketSite and
BuySite technologies from security breaches, viruses and other disruptive
problems, our agreements with Commerce One do not obligate them to safeguard the
Omnicell Commerce Network from such risks or to indemnify us should damages
occur resulting from these risks. Moreover, while we possess insurance which may
cover damages resulting from security breaches, computer viruses and other
disruptive occurrences, specific terms, conditions and exclusions under such
insurance policies make recovery for such claims difficult to guarantee.
IF THE OMNICELL COMMERCE NETWORK BECOMES UNAVAILABLE FOR EXTENDED PERIODS OF
TIME OR IS NOT ABLE TO ADEQUATELY SERVICE INCREASING TRAFFIC LEVELS, OUR
REPUTATION AND BUSINESS MAY SUFFER.
The Omnicell Commerce Network must be able to service increasing traffic
while maintaining adequate customer service. Users will depend on Internet
service providers, telecommunications companies and their own computer networks
and equipment for accessing the Omnicell Commerce Network. Each of these could
experience outages, delays and other difficulties due to system failures
unrelated to our systems. Any performance problems or delays in response time
could cause users to perceive problems with the Omnicell Commerce Network
causing them to switch to other procurement methods. Any significant
interruptions or delays in our systems would reduce the volume of transactions
on the Omnicell Commerce Network and could harm our reputation and business.
Substantial increases in the volume of traffic or the number of transactions
taking place on the Omnicell Commerce Network may require expansion and
outsourcing of, and upgrades to, our technology infrastructure. We cannot assure
you that our systems will be able to accommodate increased traffic in the
future. Any failure of our systems could result in fewer transactions and, if
sustained or repeated, could impair our reputation and the attractiveness of our
services or prevent us from providing our services entirely. Damage to our
reputation from service disruptions could result in the loss of customers and
could harm our business. Moreover, our current insurance policies may not be
adequate to reimburse us for losses caused by service disruptions.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY, AND THESE
FLUCTUATIONS MAY IMPACT OUR STOCK PRICE.
Our quarterly operating results have varied significantly in the past and
may vary significantly in the future depending on many factors that may include,
but are not limited to, the following:
- the success of the Omnicell Commerce Network;
- the timing of additional customers transacting on the Omnicell Commerce
Network;
- the size and timing of orders for our automation systems, and their
fulfillment and integration;
- changes in pricing policies by us or our competitors;
- the number, timing and significance of product enhancements and new
product announcements by us and our competitors;
- changes in the level of our operating expenses, particularly related to
the development of the Omnicell Commerce Network;
- our customers' budget cycles;
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- changes in our business strategy; and
- economic and political conditions, including fluctuation of interest rates
and tax increases.
Due to the foregoing factors, our quarterly revenues and operating results
are difficult to forecast. Revenues are also difficult to forecast because the
online procurement and automation systems markets are rapidly evolving.
The purchase of our automation systems is often part of a customer's larger
initiative to re-engineer their distribution and materials management systems.
As a result, the purchase of our automation systems generally involves a
significant commitment of management attention and resources by prospective
customers and often requires the input and approval of many decision makers,
including nurse managers, materials managers, pharmacy directors, financial
managers, information systems managers, administrators and boards of directors.
For these and other reasons, the sales cycle associated with the sale or lease
of our automation systems is often lengthy and subject to a number of delays
that we have little or no control over. We cannot assure you that we will not
experience delays in the future. A delay in, or loss of, the sale of our
automation systems could cause our operating results to vary significantly from
quarter to quarter and could harm our business. Accordingly, we believe that
period-to-period comparisons of our operating results are not necessarily
indicative of our future performance. Although we recently experienced revenue
growth, this growth should not be considered indicative of future revenue
growth, if any, or of future operating results.
OUR BUSINESS COULD BE HARMED IF WE ARE UNABLE TO RECRUIT AND RETAIN PERSONNEL.
Our success is highly dependent upon the continuing contributions of our key
management, sales, technical and engineering staff. We believe that our future
success will depend in a large part upon our ability to attract, train and
retain highly skilled and motivated personnel. In particular, we will need to
hire a number of information technology, research and development, programming
and engineering personnel to assist in the continued development of our
business. As our products are installed in increasingly complex environments,
greater technical expertise will be required. As our installed base of customers
increases, we will also face additional demands on our customer service and
support personnel, requiring additional resources to meet these demands. We may
experience difficulty in recruiting qualified personnel. Competition for
qualified technical, engineering, managerial, sales, marketing and other
personnel is intense and we cannot assure you that we will be successful in
attracting and retaining qualified personnel. Competitors have in the past
attempted, and may in the future attempt, to recruit our employees. Failure to
attract and retain key personnel could harm our business, results of operations
and financial condition.
IF WE ARE UNABLE TO MAINTAIN OUR RELATIONSHIPS WITH GPOS OR OTHER SIMILAR
ORGANIZATIONS, WE MAY HAVE DIFFICULTY SELLING OUR PRODUCTS AND SERVICES.
We have agreements with various hospital purchasing organizations, such as
Premier Purchasing Partners, L.P., University Health System Consortium Services
Corporation and the Department of Veterans Affairs, that enable us to more
readily sell our products and services to customers represented by these
purchasing organizations. Our relationships with these purchasing organizations
are terminable at the convenience of either party. The loss of our relationship
with Premier, for example, could impact the breadth of our customer base and
could impair our ability to increase our revenues. In addition, the launch of
the Omnicell Commerce Network may harm our relationships with some or all of
these purchasing
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organizations. Although the Omnicell Commerce Network is not structured to
compete against these purchasing organizations, we cannot be certain that they
will not perceive our online procurement business as a threat to their short and
long-term competitiveness. We cannot guarantee that these purchasing
organizations will renew our contracts on similar terms, if at all, and we
cannot guarantee that they will not terminate our contracts before they expire.
WE DEPEND ON A LIMITED NUMBER OF SUPPLIERS FOR OUR AUTOMATION SYSTEMS AND OUR
BUSINESS MAY SUFFER IF WE ARE UNABLE TO OBTAIN AN ADEQUATE SUPPLY OF COMPONENTS
AND EQUIPMENT ON A TIMELY BASIS.
Our production strategy for our automation systems is to work closely with
several key subassembly manufacturers and utilize lower cost manufacturers
whenever possible. Although many of the components of our systems are
standardized and available from multiple sources, certain components or
subsystems are fabricated according to our specifications. At any given point in
time, we may only use a single source of supply for certain components. Our
failure to obtain alternative vendors, if required, for any of the numerous
components used to manufacture our products would limit our ability to
manufacture our products and could harm our business. In addition, any failure
of a maintenance contractor to perform adequately could harm our business.
OUR FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS COULD ADVERSELY AFFECT
OUR ABILITY TO COMPETE.
We believe that our success will depend in part on our ability to obtain
patent protection for products and processes and our ability to preserve our
trademarks, copyrights and trade secrets. We have pursued patent protection in
the United States and foreign jurisdictions for technology that we believed to
be proprietary and for technology that offers us a potential competitive
advantage for our products and intend to do so in the future. We currently own
nine United States patents. In addition, we currently have two United States
patents allowed and awaiting issue and four United States patents in
application. The issued patents relate to various features of our automation
systems. We also own four patents in Australia and three patents in Europe, each
of which are enforceable in Germany, France, Sweden and Great Britain. There are
other applications in process in Australia, Japan, Canada and European Community
countries based on issued and pending applications in the United States. There
can be no assurance that we will file any patent applications in the future,
that any of our patent applications will result in issued patents or that, if
issued, such patents will provide significant protection for our technology and
processes. Furthermore, there can be no assurance that others will not develop
technologies that are similar or superior to our technology or that others will
not design around the patents we own. All of our operating system software is
copyrighted and subject to the protection of applicable copyright laws. Despite
our efforts to protect our proprietary rights, unauthorized parties may attempt
to copy aspects of our products or obtain and use information that we regard as
proprietary.
INTELLECTUAL PROPERTY OR PRODUCT LIABILITY CLAIMS AGAINST US COULD CAUSE OUR
BUSINESS TO SUFFER.
We do not believe that any of our products infringe upon the proprietary
rights of third parties. We cannot assure you, however, that third parties will
not claim that we have infringed their intellectual property rights with respect
to current or future products. We expect that developers of automation systems
will be increasingly subject to infringement claims as the number of products
and competitors in our industry grows and the functionality of products in
different industry segments overlaps. We do not possess special insurance that
covers intellectual property infringement claims; however, such claims may be
covered under
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our traditional insurance policies. These policies contain terms, conditions and
exclusions that make recovery for intellectual infringement claims difficult to
guarantee. Any infringement claims, with or without merit, could be
time-consuming to defend, result in costly litigation, divert management's
attention and resources, cause product shipment delays or require us to enter
into royalty or licensing agreements. These royalty or licensing agreements, if
required, may not be available on terms acceptable to us, or at all, which could
harm our business.
Despite the presence of healthcare professionals as intermediaries between
our automation systems and patients, we may face exposure to product liability
claims brought by patients. Also, in the event that any of our products proves
to be defective, we may be required to recall or redesign such products.
Although we have not experienced any product liability claims to date, the sale
and support of our products may entail the risk of product liability claims,
which could be substantial in light of the use of our products in hospitals and
other medical environments. We possess a variety of insurance policies that
include coverage for general commercial liability and technology errors and
omissions liability. However, these policies may not be adequate against product
liability claims. A successful claim brought against us, or any claim or product
recall that results in negative publicity about us, could harm our business.
WE MAY NOT BE ABLE TO SECURE ADDITIONAL FINANCING TO MEET OUR FUTURE CAPITAL
NEEDS, WHICH COULD HARM OUR BUSINESS.
We plan to continue to expend substantial funds for research and development
activities, product development, integration efforts and expansion of sales and
marketing activities. We may be required to expend greater than anticipated
funds if unforeseen difficulties arise in the course of completing the
development and marketing of our products or services or in other aspects of our
business. Our future liquidity and capital requirements will depend upon
numerous factors, including:
- the success and adoption of the Omnicell Commerce Network;
- our ability to integrate buyers' front-end requisition and approval
functions and back-end information systems;
- the receipt of and timing of orders for our automation systems; and
- the cost of developing increased manufacturing and sales capacity.
As a result of the foregoing factors, it is possible that we will be
required to raise additional funds through public or private financing,
collaborative relationships or other arrangements. We cannot assure you that
this additional funding, if needed, will be available on terms attractive to us,
if at all. Furthermore, any additional equity financing may be dilutive to
stockholders, and debt financing, if available, may involve restrictive
covenants that could affect our ability to pay dividends or raise additional
capital. Collaborative arrangements, if necessary to raise additional funds, may
require us to relinquish our rights to certain of our technologies, products or
marketing territories. Our failure to raise capital when needed could harm our
business.
GOVERNMENT REGULATION OF PRIVACY, SECURITY, TAXATION AND OTHER CONCERNS
REGARDING THE INTERNET AND REGULATION OF THE HEALTHCARE INDUSTRY COULD HARM OUR
BUSINESS.
Our online services may be subject to regulation at federal, state and local
levels. The laws governing Internet transactions remain largely unsettled, even
in areas where there has been some legislative action, such as the federal
Internet Tax Freedom Act. The adoption or modification of laws or regulations
relating to the Internet or its related technologies could
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have a material adverse effect on the Omnicell Commerce Network and also
adversely affect our business by increasing our costs and administrative
burdens. It may take years to determine whether and how existing laws such as
those governing intellectual property, privacy, libel, consumer protection and
taxation apply to the Internet. We cannot assure you that the recent privacy
initiative of the Federal Trade Commission will not negatively affect our
business. Compliance with any newly adopted laws may prove difficult for us and
could harm our business.
While we have implemented a Privacy and Use of Information Policy and
strictly adhere to established privacy principles, use of customer information
guidelines and federal and state statutes and regulations regarding privacy and
confidentiality, we cannot assure you that we will be in compliance with the
Health Insurance Portability and Accountability Act of 1996.
While the manufacture and sale of our current products are not regulated by
the United States Food and Drug Administration (FDA), we cannot assure you that
these products, or our future products, if any, will not be regulated in the
future. A requirement for FDA approval could have a material adverse effect on
our business. Pharmacies are regulated by individual state boards of pharmacy
that issue rules for pharmacy licensure in their jurisdiction. State boards of
pharmacy do not license or approve our automation systems; however, pharmacies
using our equipment are subject to state board approval. The failure of such
pharmacies to meet differing requirements from a significant number of state
pharmacy boards could harm our business, results of operations and financial
condition. Similarly, hospitals must be accredited by the Joint Commission on
Healthcare Accreditation Organization (JCHAO) in order to be eligible for
Medicaid and Medicare funds. JCHAO does not approve or accredit automation
systems; however, disapproval of our customers' supply management methods and
their failure to meet JCHAO requirements could harm our business.
RISKS RELATING TO THIS OFFERING
OUR STOCK PRICE MAY BE EXTREMELY VOLATILE AND YOU MAY NOT BE ABLE TO RESELL YOUR
SHARES AT OR ABOVE THE INITIAL PUBLIC OFFERING PRICE.
Prior to the offering, there has been no public market for our common stock.
The initial public offering price will be determined by negotiations between the
underwriters and us and may not be indicative of the market price for our common
stock after the offering. We do not know the extent to which investor interest
will lead to the development of an active public market. As a consequence, you
may not be able to sell the common stock you purchase at or above the initial
public offering price. In particular, the trading prices of many stocks of
Internet-related companies have experienced extreme price and volume
fluctuations. Because we are an Internet-related company, we expect our stock
price to be similarly volatile. These fluctuations often have been unrelated or
disproportionate to the operating performance of Internet-related companies.
These fluctuations may continue and could harm our stock price. Any negative
change in the public's perception of the prospects of Internet-related companies
could also depress our stock price, regardless of our results.
In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market price of their
securities. If brought against us, regardless of the outcome, litigation could
result in substantial costs and a diversion of our management's attention and
resources and could harm our business.
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IF WE FAIL TO MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS AND INVESTORS, THE
MARKET PRICE OF OUR COMMON STOCK MAY DECREASE SIGNIFICANTLY.
We may fail to meet the revenue and profitability expectations of public
market analysts and investors which could harm our stock price. In addition,
public market analysts and investors have not been able to develop consistent
financial models for the Internet market because of the unpredictable rate of
growth of Internet users, the rapidly changing models of doing business on the
Internet and the Internet's relatively low barriers to entry. As a result, and
because of the other risks discussed in this prospectus, our actual results may
not meet the expectations of public market analysts and investors in future
periods. If this occurs, the price of our common stock will likely fall.
AFTER THIS OFFERING, OUR OFFICERS AND DIRECTORS WILL OWN A LARGE PERCENTAGE OF
OUR COMMON STOCK AND WILL BE ABLE TO CONTROL THE OUTCOME OF MATTERS REQUIRING
STOCKHOLDER APPROVAL THAT MAY BE FAVORABLE TO OUR STOCKHOLDERS.
Upon the completion of this offering, executive officers, directors and
current holders of five percent (5%) or more of our outstanding common stock
will, in the aggregate, beneficially own approximately 45.7% of our outstanding
common stock. As a result, these stockholders will be able to effectively
control all matters requiring approval of our stockholders, including the
election of directors and approval of significant corporate transactions. This
concentration of ownership may also delay, deter or prevent a change in control
and may make some transactions more difficult or impossible to complete without
the support of these stockholders, even if the transaction is favorable to our
stockholders. In addition, because of their ownership of our common stock, these
stockholders will be in a position to significantly affect our corporate actions
in a manner that could conflict with the interests of our public stockholders.
SUBSTANTIAL SALES OF COMMON STOCK BY OUR EXISTING STOCKHOLDERS COULD CAUSE OUR
STOCK PRICE TO FALL.
The market price of our common stock could decline if our existing
stockholders sell substantial amounts of our common stock in the public market
after this offering. These sales also might make it more difficult for us to
sell equity securities in the future at a time and at a price that we deem
appropriate. Upon completion of this offering, assuming the number of
outstanding shares as of May 31, 2000, we will have 17,911,639 outstanding
shares of common stock, 18,511,639 shares if the underwriters exercise their
over-allotment option in full. Of these shares, shares, plus an
additional 600,000 shares if the underwriters exercise their over-allotment
option in full, will be freely tradeable without restriction or further
registration under the Securities Act of 1933, as amended. Of the remaining
shares, a total of approximately shares held by our directors,
executive officers and our existing stockholders are subject to lock-up
agreements providing that these stockholders will not sell or otherwise dispose
of any of their shares for a period of 180 days following the date of the final
prospectus for this offering without the prior written consent of Deutsche Bank
Securities Inc. Deutsche Bank Securities Inc. can release these lock-up
agreements at any time. In addition, options to purchase 3,371,627 shares of our
common stock are outstanding as of May 31, 2000, under our 1992 Equity Incentive
Plan, our 1995 Management Stock Option Plan and our 1999 Equity Incentive Plan.
Following this offering, we expect to register the shares underlying these
options. Subject to the exercise of these options, shares included in such
registration will be available for sale in the open market immediately after the
180-day lock-up period expires. See "Shares Eligible For Future Sale" for a more
detailed discussion.
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After this offering, the holders of approximately 11,689,174 shares of
common stock will be entitled to rights with respect to registration of such
shares under the Securities Act. If such holders, by exercising their
registration rights, cause a large number of securities to be registered and
sold in the public market, these sales could have an adverse effect on the
market price for our common stock. If we were to initiate a registration and
include shares held by these holders pursuant to the exercise of their
registration rights, these sales may impair our ability to raise capital.
OUR CERTIFICATE OF INCORPORATION AND BYLAWS CONTAIN PROVISIONS THAT COULD DELAY
OR PREVENT A CHANGE IN CONTROL THAT MAY BE FAVORABLE TO OUR STOCKHOLDERS.
Upon the completion of this offering, we will be subject to the Delaware
anti-takeover laws. These laws prevent us from engaging in a merger or sale of
more than 10% of our assets with any stockholder, including all affiliates and
associates of any stockholder, who owns 15% or more of our outstanding voting
stock, for three years following the date that such stockholder acquired 15% or
more of our assets unless:
- our Board of Directors approves the transaction where the stockholder
acquires 15% or more of our assets;
- after the transaction where the stockholder acquires 15% or more of our
assets, the stockholder owns at least 85% of our outstanding voting stock,
excluding shares owned by directors, officers and employee stock plans in
which employee participants do not have the right to determine
confidentially whether shares held under the plan will be tendered in a
tender or exchange offer; or
- on or after this date, the merger or sale is approved by the Board of
Directors and the holders of at least two-thirds of the outstanding voting
stock that is not owned by the stockholder.
A Delaware corporation may opt out of the Delaware anti-takeover laws in its
original certificate of incorporation, amended certificate of incorporation or
bylaws. We have not opted out of the anti-takeover laws, which could prohibit or
delay mergers or other takeovers or changes of control and may discourage
attempts by other companies to acquire us.
In addition, our Certificate of Incorporation and Bylaws include a number of
provisions that may deter or impede hostile takeovers or changes of control or
management. These provisions include:
- a Board of Directors classified into three classes of directors with
staggered three-year terms;
- the authority of the Board of Directors to issue up to 5,000,000 shares of
preferred stock and to determine the price, rights, preferences and
privileges of these shares, without stockholder approval;
- all stockholder actions must be effected at a duly called meeting of
stockholders and not by written consent;
- the elimination of cumulative voting; and
- the indemnification of officers and directors against losses incurred
during investigations and legal proceedings resulting from their service
to us.
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YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION OF YOUR SHARES.
The initial public offering price is substantially higher than the pro forma
net tangible book value of each outstanding share of our common stock. As a
result, investors participating in this offering will suffer immediate and
substantial dilution. The dilution will be $10.60 per share in the pro forma net
tangible book value of the common stock from the assumed initial public offering
price of $13.00 (or $10.27 per share if the underwriters' option to purchase
additional shares is exercised in full). This dilution is described in greater
detail under "Dilution" in this prospectus. If outstanding options or warrants
to purchase shares of common stock are exercised, there will be further
dilution.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements relate
to future events or our future financial performance. We have attempted to
identify forward-looking statements by terminology including, "anticipates,"
"believes," "can," "continue," "could," "estimates," "expects," "intends,"
"may," "plans," "potential," "predicts," "should" or "will" or the negative of
these terms or other comparable terminology. These statements are only
predictions and involve known and unknown risks, uncertainties and other
factors, including the risks outlined under "Risk Factors," that may cause our
or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements.
Although we believe that our expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We are not under any duty to update any
of the forward-looking statements after the date of this prospectus to conform
these statements to actual results, unless required by law.
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the 4,000,000 shares of
common stock we are offering, assuming an initial public offering price of
$13.00 per share, will be approximately $46,960,000, or $54,214,000 if the
underwriters' over-allotment option is exercised in full, after deducting the
estimated underwriting discounts and commissions and estimated offering expenses
payable by us.
We intend to use approximately $8.1 million of the net proceeds to repay the
outstanding principal and interest related to the note held by Baxter Healthcare
incurred in connection with our acquisition of the Sure-Med product line in
January 1999. The Baxter Healthcare note accrues interest at a rate of 8.0% from
January 1999 through January 2001 and 13.0% for the succeeding three years. In
addition, the principal under the note is repayable in twelve equal quarterly
installments beginning in March 2001.
In addition, we expect to use a portion of the net proceeds for the
expansion of sales, marketing and customer support activities and to continue
the development and marketing of the Omnicell Commerce Network. We expect to use
the remainder of the net proceeds for working capital and other general
corporate purposes, including potential acquisitions. We currently have no
commitments or agreements and are not involved in any negotiations for
acquisitions of complementary products, technologies or businesses.
The amounts that we actually expend on these matters will vary
significantly, depending on a number of factors, including future revenue
growth, if any, and the amount of cash we generate from operations. As a result,
we will retain broad discretion in the allocation of the net proceeds of this
offering. Pending use of the net proceeds of this offering, we intend to invest
the net proceeds in interest bearing, investment-grade securities.
DIVIDEND POLICY
We currently intend to retain future earnings, if any, to finance the
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future. The terms of our line of credit prohibit the payment of cash
dividends on our capital stock without the consent of our lender.
20
<PAGE>
CAPITALIZATION
The table below presents the following information:
- our actual capitalization as of March 31, 2000; and
- our pro forma as adjusted capitalization as of March 31, 2000 after giving
effect to the conversion of all outstanding shares of our redeemable
convertible preferred stock, convertible preferred stock and convertible
note payable into shares of our common stock upon completion of this
offering and to reflect the receipt of the net proceeds from our sale of
4,000,000 shares of common stock at an assumed initial public offering
price of $13.00 per share in this offering, less underwriting discounts
and commissions and estimated offering expenses payable by us as discussed
in "Use of Proceeds." Each share of our preferred stock will automatically
be converted into shares of our common stock upon the completion of this
offering, provided that the price per share to the public (prior to
deducting the underwriter commissions and offering expenses) is not less
than $11.78 per share and the aggregate price to the public is not less
than $10,000,000.
You should read this table in conjunction with the financial statements and
the other financial information included in this prospectus.
<TABLE>
<CAPTION>
MARCH 31, 2000
----------------------
PRO FORMA
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash, cash equivalents and short-term investments........... $ 22,435 $ 69,395
======== ========
Long-term debt, net of current portion...................... $ 8,464 $ 8,114
Redeemable convertible preferred stock, no par value;
3,604,000 shares authorized, 901,000 shares issued and
outstanding, actual; none, pro forma as adjusted.......... 12,640 --
Stockholders' equity (net capital deficiency):
Convertible preferred stock, no par value; 18,500,000
shares authorized (including 3,604,000 shares designated
as redeemable convertible preferred stock); 14,538,376
shares issued and outstanding, actual; 5,000,000 shares
authorized, no shares issued and outstanding, pro forma
as adjusted.............................................. 62,454 --
Common stock, no par value, 35,000,000 shares authorized,
1,710,064 shares issued and outstanding, actual;
50,000,000 shares authorized, 17,393,379 shares issued
and outstanding, pro forma as adjusted................... 3,235 134,219
Accumulated deficit....................................... (83,845) (92,425)
Accumulated other comprehensive income (loss)............. 2 2
-------- --------
Total stockholders' equity (net capital deficiency)..... (18,154) 41,796
-------- --------
Total capitalization.................................. $ 9,690 $ 49,910
======== ========
</TABLE>
This table excludes the following shares issued or issuable as of May 31,
2000:
- 3,371,627 shares of common stock that may be issued upon exercise of
options;
- 66,175 shares of common stock that may be issued upon exercise of
warrants;
- 988,415 shares of common stock reserved for future issuance under our
stock option and employee stock purchase plans.
Upon completion of the offering, the 901,000 shares of redeemable
convertible preferred stock will convert into 751,328 shares of common stock,
and the 14,538,376 shares of convertible preferred stock will convert into
9,086,485 shares of common stock (after giving effect to the 0.625 for 1 reverse
stock split and the conversion price adjustments to the Series J and Series K
Preferred Stock).
21
<PAGE>
DILUTION
Our pro forma net tangible book value (net capital deficiency) as of
March 31, 2000, was approximately $(5.2) million, or $(0.39) per share. Pro
forma net tangible book value per share represents the amount of pro forma
stockholders' equity (or net capital deficiency), assuming conversion of all of
our redeemable convertible preferred stock and convertible note payable into
common stock, less intangible assets, divided by the pro forma number of shares
of common stock outstanding as of March 31, 2000. Dilution per share represents
the difference between the amount per share paid by purchasers of shares of
common stock in this offering and the pro forma net tangible book value per
share of common stock immediately after completion of this offering.
Pro forma net tangible book value as of March 31, 2000, after giving effect
to the sale of 4,000,000 shares of common stock offered by us at an initial
public offering price of $13.00 per share and after deducting underwriting
discounts and commissions and estimated offering expenses payable by us, would
have been approximately $41.8 million, or approximately $2.40 per share. This
represents an immediate increase in pro forma net tangible book value of $2.79
per share to existing stockholders and an immediate dilution in pro forma net
tangible book value of $10.60 per share to investors purchasing our common stock
in this offering, as illustrated in the following table:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share............. $13.00
Pro forma net tangible book value per share as of
March 31, 2000.......................................... (0.39)
Increase per share attributable to new investors.......... 2.79
------
Pro forma net tangible book value per share after this
offering.................................................. 2.40
------
Pro forma dilution per share to new investors............... $10.60
======
</TABLE>
The table below summarizes, on a pro forma basis, the differences between
our existing stockholders and the new investors purchasing our common stock in
this offering with respect to the total number of shares purchased from us, the
total consideration paid and the average price per share paid, based upon an
initial public offering price of $13.00 per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------- ------------------------ AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.............. 13,393,379 77% $ 77,546,000 60% $ 5.79
New investors...................... 4,000,000 23 52,000,000 40 13.00
---------- --- ------------ --- ------
Total............................ 17,393,379 100% $142,190,000 100%
========== === ============ ===
</TABLE>
The above discussion and tables assume no exercise of stock options after
March 31, 2000.
If the underwriters exercise their over-allotment in full, the following
will occur:
- the number of shares of common stock held by existing stockholders will
decrease to approximately 74% of the total number of shares of our common
stock outstanding; and
- the number of shares held by new investors will increase to 4,600,000
shares, or approximately 26% of the total number of our common stock
outstanding after this offering.
22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
To aid you in your analysis, we are providing the following information. We
derived the selected consolidated financial data as of December 31, 1998 and
1999 and for the years ended December 31, 1997, 1998 and 1999 from our audited
consolidated financial statements included elsewhere in this prospectus. The
selected consolidated financial data as of December 31, 1995, 1996 and 1997 and
for the year ended December 31, 1996 are derived from audited financial
statements (with adjustments made to reflect the requirements of Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements,"
issued by the Securities and Exchange Commission in December 1999) not included
in this prospectus. The selected consolidated financial data for the year ended
December 31, 1995 are derived from unaudited financial statements not included
in this prospectus. The statement of operations data set forth below for the
three month periods ended March 31, 1999 and 2000 and the balance sheet data as
of March 31, 2000 are derived from, and are qualified by reference to, our
unaudited financial statements included elsewhere in this prospectus. The
unaudited financial statements include all normal recurring adjustments that we
consider necessary for a fair presentation of our financial position and results
of operations. The results of operations for the three months ended March 31,
2000 are not necessarily indicative of the results that may be expected for the
full fiscal year ending December 31, 2000, or any other future period. The pro
forma net loss per common share and shares used in computing pro forma net loss
per share are calculated as if all of our redeemable convertible preferred
stock, convertible preferred stock and convertible notes payable were converted
into shares of our common stock on the date of their issuance. The cumulative
number of sites of installed automation systems was not derived from our
financial statements.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------------------------- ----------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND OTHER DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Product revenues......................... $ 7,263 $ 20,509 $ 33,547 $44,088 $ 43,373 $ 10,713 $ 12,638
Service and other revenues............... 465 1,045 2,526 4,124 7,034 1,339 2,032
-------- -------- -------- ------- -------- -------- --------
Total revenues....................... 7,728 21,554 36,073 48,212 50,407 12,052 14,670
Cost of product revenues................. 4,807 9,883 14,792 16,461 28,760 3,584 4,509
Cost of service and other revenues....... 228 760 1,417 1,801 5,377 901 1,910
-------- -------- -------- ------- -------- -------- --------
Total cost of revenues............... 5,035 10,643 16,209 18,262 34,137 4,485 6,419
Gross profit............................. 2,693 10,911 19,864 29,950 16,270 7,567 8,251
-------- -------- -------- ------- -------- -------- --------
Operating expenses:
Research and development............... 3,353 4,052 5,922 5,987 8,977 1,819 3,210
Selling, general and administrative.... 11,645 18,013 24,520 24,292 35,982 7,862 11,540
Integration expenses................... -- -- -- -- 785 286 --
-------- -------- -------- ------- -------- -------- --------
Total operating expenses............. 14,998 22,065 30,442 30,279 45,744 9,967 14,750
-------- -------- -------- ------- -------- -------- --------
Loss from operations..................... (12,305) (11,154) (10,578) (329) (29,474) (2,400) (6,499)
Interest income (expense), net........... 38 694 953 1,039 (1,767) (374) (321)
-------- -------- -------- ------- -------- -------- --------
Income (loss) before income taxes........ (12,267) (10,460) (9,625) 710 (31,241) (2,774) (6,820)
Provision for income taxes............... (1) -- 201 185 150 24 25
-------- -------- -------- ------- -------- -------- --------
Net income (loss)........................ (12,268) (10,460) (9,826) 525 (31,391) (2,798) (6,845)
Preferred stock accretion................ -- (11) (22) (22) --
-------- -------- -------- ------- -------- -------- --------
Net income (loss) available to common
stockholders........................... $(12,268) $(10,471) $ (9,848) $ 503 $(31,391) $ (2,798) $ (6,845)
======== ======== ======== ======= ======== ======== ========
Net income (loss) per common share:
Basic.................................. $ (14.00) $ (10.39) $ (8.61) $ .39 $ (21.34) $ (2.03) $ (4.07)
Diluted................................ $ (14.00) $ (10.39) $ (8.61) $ .05 $ (21.34) $ (2.03) $ (4.07)
Weighted average common shares
outstanding:
Basic.................................. 876 1,008 1,144 1,302 1,471 1,381 1,681
Diluted................................ 876 1,008 1,144 11,013 1,471 1,381 1,681
Pro forma net loss per common share:
Basic and diluted...................... $ (3.18) $ (0.59)
======== ========
Pro forma weighted average common shares
outstanding:
Basic and diluted...................... 9,876 11,621
OTHER DATA:
Cumulative number of sites of installed
automation systems..................... 116 372 624 1,030 1,306 1,170 1,345
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------------------------------------- ---------
1995 1996 1997 1998 1999 2000
-------- -------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
short-term investments....... $ 7,865 $20,821 $ 16,540 $ 22,072 $ 6,698 $ 22,435
Total assets................... 15,274 37,246 43,149 46,361 34,553 54,547
Deferred gross profit.......... 2,425 7,883 17,390 20,227 28,727 28,322
Long-term obligations, net of
current portion.............. 826 160 117 67 9,309 9,302
Redeemable convertible
preferred stock.............. -- 25,238 25,260 25,282 15,166 12,640
Total stockholders' equity (net
capital deficiency).......... 8,053 (2,295) (11,738) (10,344) (40,842) (18,154)
</TABLE>
------------
- Cost of revenues for the year ended December 31, 1999 includes special
charges related to the writedown of Sure-Med inventory--$9.7 million;
additional costs recorded due to sale of Sure-Med inventory which was
recorded at fair value upon acquisition--$1.1 million and writedown of
inventory designated for a marketing program--$1.5 million.
- Loss from operations for the year ended December 31, 1999 includes
integration expenses associated with acquisition of Sure-Med product
line--$0.8 million; write off of equity investment--$0.6 million; and
write off of leasehold improvements and other equipment--$0.9 million.
- Net loss and pro forma net loss per common share for the year ended
December 31, 1999, excluding non-recurring charges and charges associated
with the Sure-Med product line acquisition would have been
$(16.6) million and $(1.69), respectively.
- Deferred gross profit on the balance sheet represents gross margin on
sales of automation products that have been shipped to, accepted and in
most instances paid for by our customer but not yet installed at the
customer site. The revenues and cost of revenues for such items will be
recorded upon completion of installation.
- The amounts shown for the year ended December 31, 1999 include the results
of the Sure-Med product line acquisition from January 29, 1999 to the end
of 1999. When you read this selected consolidated financial data, it is
important that you also read the historical consolidated financial
statements and related Notes included in this prospectus, as well as the
section of this prospectus entitled "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE NOTES
TO THOSE STATEMENTS INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION AND
ANALYSIS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISK, UNCERTAINTIES
AND ASSUMPTIONS. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED
IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF MANY FACTORS, INCLUDING BUT
NOT LIMITED TO THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS
PROSPECTUS.
OVERVIEW
We were formed in 1992 and began offering our supply automation systems for
sale in 1993. In late 1996, we introduced our first pharmacy automation system.
In January 1999, we expanded our pharmacy product line and customer base with
the acquisition of the Sure-Med product line from Baxter Healthcare. In November
1999, we launched the Omnicell Commerce Network. We installed our first
OmniBuyer site in November 1999 at Rush Presbyterian-St. Luke's Medical Center
in Chicago, Illinois. Through May 31, 2000, six additional buyers and seven
suppliers have begun transacting on the Omnicell Commerce Network.
We have installed over 14,000 of our automation systems in over 1,300
hospitals and other healthcare facilities. Our automation systems are sold
primarily in the United States. We also sell our automation systems in Canada
and Europe. We manufacture the majority of our systems in our production
facility in Palo Alto, California. In addition, we maintain a refurbishment and
spare parts facility in Waukegan, Illinois. Our sales activities are conducted
through a dedicated direct sales and field operations organization located in
the United States, Canada and Europe. We also have an agreement with an
international distributor located in Australia. To date, sales through
distributors have not been significant.
REVENUES
Our revenues have increased significantly since our inception. From 1996 to
1999, we experienced compound annual revenue growth of 35%. The increase in our
revenues has been due to several factors, including: the increased market
acceptance of our supply automation systems; the introduction and increased
market acceptance of our pharmacy automation systems; and the expansion of our
direct sales and field operations organization.
The growth rate of revenues for 1999 compared to 1998 was lower than
preceding years due in part to customer concerns over Year 2000 issues and
customer decisions to delay purchases and installations in the second half of
1999 and to decreases in purchases by our largest customer. Sun Healthcare was
our largest customer, representing 19.7% of our revenues in 1997, 20.5% in 1998,
25.6% in the three months ended March 31, 1999 and 8.3% in 1999. Sun Healthcare
filed for Chapter 11 bankruptcy protection in the third quarter of 1999.
Accordingly, we do not anticipate any significant revenue from Sun Healthcare in
future quarters. However, we anticipate that the growth rate of revenues from
our automation systems business over the next few years will be higher than the
growth rate in 1999.
Customers acquire our automation systems either through an outright purchase
or a non-cancelable long-term lease, which typically has a term of 60 months. We
bill our customers upon delivery and acceptance of our automation systems and
recognize revenue when the systems are installed. Deferred gross profit on our
balance sheet represents automation systems that have been shipped to and, in
most instances, paid for by our customers but not yet installed at the customer
site. We record these shipments as deferred
25
<PAGE>
gross profit because title to the inventory has passed to the customer. Our
installation process typically takes a week or less to complete. Generally, we
try to install our automation systems within six to nine months after shipment,
but installation, at the customer's request, can be delayed for a year or more.
Some customers experience delays in installation due to site construction and
delays in receiving interfaces from third parties. Deferred gross profit is not
equal to gross margin because it does not include installation costs, which are
incurred in the period when revenue is recognized.
Typically, we will sell our customer lease agreements to third-party leasing
companies. Lease revenue is recognized only to the extent of the amounts funded
by the leasing company. As part of the initial sale of our automation systems,
customers typically sign a one-year service agreement, and service revenues are
recognized over the term of these agreements. Service and other revenues include
month to month rentals, license fees and service and maintenance contract
revenue. On occasion, a customer will rent certain equipment on a month-to-month
basis. Fees from such rentals are recognized monthly. Service and other revenue
should continue to grow modestly as a percentage of total revenue consistent
with the growth of our installed base of automation systems.
Revenues from our automation business are difficult to forecast because the
sales cycle, from initial assessment to product installation involves a
significant commitment of capital and time, varies substantially from customer
to customer and can take more than one year. Specifically, the order approval
process of our customers is subject to internal procedures associated with large
capital expenditures and the time associated with accepting new technologies
that affect mission critical operations. For these and other reasons, the sales
cycle associated with the purchase of our automation products is typically
lengthy and subject to a number of significant risks, including customers'
budgetary constraints and internal acceptance reviews over which we have little
or no control.
As of March 31, 2000, we have generated only minimal revenues from the
Omnicell Commerce Network. In the future, we expect to generate such revenue
from multiple sources, including OmniBuyer subscription fees from healthcare
facility customers and OmniSupplier connection and transaction fees from
suppliers. Revenue growth from the Omnicell Commerce Network will be dependent
upon realizing significant subscription, connection and transaction fees. We
also intend to pursue revenue opportunities from data collected on the Omnicell
Commerce Network and to generate fees from a percentage of transaction volume
with suppliers who want to co-market Internet services with us to Web-enable
their customers.
Revenues from the Omnicell Commerce Network are difficult to forecast due to
its early stage of implementation. Healthcare facilities have been slow to adopt
new technologies and historically have not allocated as large a percentage of
their budget to information technologies as corporations in other service
industries. In addition, while we believe there are significant benefits in
adopting our Web-based procurement solution, demand from our potential
healthcare facility and supplier customers may not develop as rapidly as we
expect.
COSTS AND EXPENSES
Our expense levels are based, in part, on our expectations of future revenue
levels. If revenue levels are below expectations, operating results are likely
to be negatively impacted. In particular, operating results may be
disproportionately affected by a reduction in revenue. In addition, we have
never achieved profitability on an operating basis, and our current revenues and
gross margin are not sufficient to cover our operating expenses, especially in
26
<PAGE>
light of our ongoing investment in the Omnicell Commerce Network. Based on the
foregoing, we believe that period to period comparisons of our results of
operations are not necessarily meaningful and should not be relied upon as
indications of future performance.
Product cost of revenues consists primarily of direct materials, labor and
overhead required to manufacture automation systems and also includes costs
required to install our systems at the customer location. Costs of service and
other revenue include spare parts required to maintain and support installed
systems and service and maintenance expense. Direct materials and installation
costs are mostly variable. Manufacturing labor and overhead remain relatively
fixed over ranges of production volume. The cost of service and spare parts
tends to increase as the size of the installed base of customers increases.
Product cost of sales also includes the amortization of software license fees.
Our research and development expenses include engineering and development
salaries, wages and benefits, prototyping and laboratory expenses, consulting
expenses and engineering-related facilities and overhead charges. Most of the
research and development expenses are personnel or facilities related and as
such are relatively fixed. Prototyping and consulting expenses will vary
depending on the stage of completion of various engineering and development
projects.
Selling, general and administrative expenses include costs to support the
sales, marketing, field operations and customer support and administration
organizations. Most of these costs are personnel or facilities related and are
relatively fixed. Bonuses and sales commissions will typically change in
proportion to revenue or profitability. Other expenditures, such as advertising,
promotions and consulting, are neither fixed nor variable and will fluctuate
depending on product introductions, promotional programs and trade shows.
We anticipate incurring significant incremental development and selling,
general and administrative expenses as we launch, support and promote the
Omnicell Commerce Network. We expect these expenses to include such items as:
Commerce One support fees, project management services, catalog development and
management fees, hosting charges, recruiting and training costs, marketing,
advertising, promotion and selling initiatives.
Stock compensation expense is a result of us granting stock options to our
employees, directors or consultants with purchase or exercise prices per share
subsequently determined to be below the deemed fair value per share of our
common stock for accounting purposes at the dates of purchase or grant. We are
amortizing deferred stock compensation over the vesting period of the applicable
options. We expect to record additional deferred stock compensation expense for
the quarter ended June 30, 2000.
In connection with the sale of Series K preferred stock in the first quarter
of 2000, we calculated $8.6 million of contingent preferred stock accretion to
reflect the value of the Series K embedded beneficial conversion feature. This
amount will be recognized as an increase to accumulated deficit with a
corresponding credit to preferred stock and will be recognized in earnings as a
non-cash charge (preferred stock accretion) upon completion of the proposed
initial public offering of common stock.
27
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain items included in our results of
operations for the three years ended December 31, 1997, 1998 and 1999, and the
three months ended March 31, 1999 and 2000 expressed as a percentage of our
total revenue for these periods:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------ ------------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Product revenues...................... 93.0% 91.4% 86.0% 88.9% 86.1%
Service and other revenues............ 7.0 8.6 14.0 11.1 13.9
----- ----- ----- ----- -----
Total revenues.................... 100.0 100.0 100.0 100.0 100.0
Cost of product revenues.............. 41.0 34.1 57.1 29.7 30.7
Cost of service and other revenues.... 3.9 3.7 10.7 7.5 13.0
----- ----- ----- ----- -----
Total cost of revenues............ 44.9 37.9 67.7 37.2 43.8
Gross profit.......................... 55.1 62.1 32.3 62.8 56.2
Operating expenses:
Research and development............ 16.4 12.4 17.8 15.1 21.9
Selling, general and
administrative..................... 68.0 50.4 71.4 65.2 78.7
Integration expenses................ -- -- 1.6 2.4 --
----- ----- ----- ----- -----
Total operating expenses........ 84.4 62.8 90.7 82.7 100.5
Loss from operations.................. (29.3) (0.7) (58.5) (19.9) (44.3)
Interest income (expense), net........ 2.6 2.2 (3.5) (3.1) (2.2)
----- ----- ----- ----- -----
Income (loss) before provision for
income taxes........................ (26.7) 1.5 (62.0) (23.0) (46.5)
Provision for income taxes............ 0.6 0.4 0.3 0.2 0.2
----- ----- ----- ----- -----
Net income (loss)..................... (27.2) 1.1 (62.3) (23.2) (46.7)
----- ----- ----- ----- -----
Net income (loss) available to common
stockholders........................ (27.3) 1.1 (62.3) (23.2) (46.7)
===== ===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1999 AND 2000
REVENUE. Total revenues increased 21.7% from $12.1 million for the three
months ended March 31, 1999 to $14.7 million for the three months ended March
31, 2000. For the three months ended March 31, 1999, product revenues and
service and other revenues accounted for 88.9% and 11.1% of total revenues,
respectively. For the three months ended March 31, 2000, product revenues and
service and other revenues accounted for 86.1% and 13.9% of total revenues,
respectively.
Product revenues increased by 18% from $10.7 million in 1999 to $12.6
million in 2000, due primarily to an 8.5% increase in the number of automation
systems installed partially offset by a slight decrease in average selling
prices. Since Sun Healthcare represented 24.7% of our product revenues for the
three months ended March 31, 1999 and none of our product revenues for the three
months ended March 31, 2000, product revenues excluding sales to Sun Healthcare
grew 42.6% from $9.4 million for the three months ended March 31, 1999 to
28
<PAGE>
$12.6 million for the three months ended March 31, 2000. Product revenues
included $2,000 in monthly subscription fees from hospital customers connected
to the Omnicell Commerce Network.
Service and other revenues include revenues from service and maintenance
contracts, short term rentals of automation systems and amortization of a
distributor license fee. Service and other revenues increased by 51.8% from $1.3
million for the three months ended March 31, 1999 to $2.0 million for the three
months ended March 31, 2000. The increase in service and other revenues was due
primarily to the increase in our installed base of automation systems. We
anticipate that service and other revenues will continue to grow in absolute
dollars and as a percentage of our total revenues due to continued growth in our
installed base of automation systems.
COST OF REVENUES. Cost of product revenues increased by 25.8% from $3.6
million for the three months ended March 31, 1999 to $4.5 million for the three
months ended March 31, 2000. Gross profit on product sales was $7.1 million or
66.5% of product revenues, in the first quarter of 1999 compared to $8.1
million, or 64.3% of product revenues, in the first quarter of 2000. The change
in gross profit was due in part to amortization of the Commerce One license fee
in the three months ended March 31, 2000 partially offset by the benefit of
selling approximately $145,000 of Sure-Med product previously written off.
Cost of service revenues consists of service parts and spares and contracted
service and maintenance expense. Cost of service revenues increased by 112.0%
from $0.9 million for the three months ended March 31, 1999 to $2.0 million for
the three months ended March 31, 2000. For the same periods, gross margin on
service revenues was $0.4 million, or 32.7% of service revenues in 1999 compared
to $0.1 million, or 6.0% of service revenues, in 2000. The higher level of cost
of service revenues for the three months ended March 31, 2000 was due to a high
level of expenses for service parts and spares. Sure-Med pharmacy systems
require more costly installation kits than Omnicell automation systems. The
three month period ending March 31, 2000 had an unusually large percentage of
Sure-Med units to be installed including units which had been shipped by Baxter
Healthcare prior to January 1999. We were responsible for installing these
Sure-Med systems and for providing the required installation kits. This
unusually high level of expenses for service cost of revenues should not
continue beyond the next few quarters as most Sure-Med systems shipped by Baxter
Healthcare will be installed over the remainder of this year.
RESEARCH AND DEVELOPMENT. Research and development expenses increased by
76.5% from $1.8 million for the three months ended March 31, 1999 to $3.2
million for the three months ended March 31, 2000. The increase in research and
development expenses was primarily the result of increased spending for
development of the Omnicell Commerce Network due to additional staff for
cataloging, integration and modification of the Commerce One technology to meet
the needs of healthcare customers. To date we have capitalized $0.2 million in
software development costs. We anticipate that research and development expenses
will continue to increase in absolute dollars.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
costs increased by 46.8% from $7.9 million for the three months ended March 31,
1999 to $11.5 million for the three months ended March 31, 2000. The increase in
selling, general and administrative expenses was primarily the result of
increased spending in sales and marketing for the Omnicell Commerce Network,
including increased staffing for sales and marketing, and increases in marketing
expenses for advertising and trade shows. We anticipate that selling,
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general and administrative expenses will continue to increase in absolute
dollars. Included in the quarter ending March 31, 2000 was compensation expense
of $0.7 million due to the extension of option terms for consultants.
INTEREST INCOME (EXPENSE). Net interest expense decreased from $370,000 for
the three months ended March 31, 1999 to $320,000 for the three months ended
March 31, 2000. The modest decrease was due primarily to increased earnings from
higher invested cash balances partially offset by higher interest expense.
INTEGRATION EXPENSES. Integration expenses of $0.3 million in 1999 consists
of costs associated with the integration of Omnicell and Sure-Med engineering
efforts, product lines, and marketing efforts.
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
REVENUES. Total revenues increased 4.6% from $48.2 million for the year
ended December 31, 1998 to $50.4 million for the year ended December 31, 1999.
For the year ended December 31, 1999, product sales and service and other
revenue accounted for 86.0% and 14.0% of total revenues, respectively. For the
year ended December 31, 1998, product sales and service and other revenues
accounted for 91.5% and 8.5% of total revenues, respectively.
Product revenues decreased by 1.6% from $44.1 million in 1998 to
$43.3 million in 1999, due primarily to a 4.9% decrease in average selling
prices from 1998 to 1999 partially offset by a 3.5% increase in the number of
automation systems installed from 1998 to 1999. Our product revenue decline in
1999 was fostered by a decline in purchases by our largest customer, Sun
Healthcare, due to its financial difficulties and by delays in purchase
decisions by other customers over concerns related to Year 2000. Many healthcare
facilities directed a significant portion of their internal administrative and
information technology resources toward correcting deficiencies in their Year
2000 compliance programs and consequently, were not receptive to implementing
additional systems such as ours in the second half of 1999.
Service and other revenue increased by 70.6% from $4.1 million for the year
ended December 31, 1998 to $7.0 million for the year ended December 31, 1999.
The increase in service and other revenue was due primarily to the increase in
our installed base of automation systems. We anticipate that service and other
revenue will continue to grow in dollar terms and as a percentage of our total
revenue due to continued growth in our installed base of automation systems.
Deferred gross profit increased by 42.0% from $20.2 million in 1998 to $28.7
million in 1999 due to more shipments of automation systems than installations
during 1999. We anticipate that deferred gross profit will increase modestly due
to shipments exceeding installations in reporting periods. Customers can
experience delays in installation for a variety of reasons, including
construction delays and delays in receiving software from third party vendors.
We recognize deferred gross profit when installation is complete.
Revenues increased by 33.6% from $36.1 million in 1997 to $48.2 million in
1998, due primarily to increases in unit volumes reflecting continued market
acceptance of our automation systems. Revenues also increased due to an increase
in selling prices resulting from a continued higher mix of our pharmacy systems
which have higher per unit prices than our supply systems.
COST OF REVENUES. Product cost of revenues increased by 73.9% from
$16.5 million for the year ended December 31, 1998 to $28.8 million for the year
ended December 31, 1999. Gross margin on product sales was $27.6 million or
62.7% as a percent of product sales in
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1998 compared to $14.7 million or 33.9% as a percent of sales in 1999. The
increase in product cost of revenues was due primarily to a $9.7 million
writedown of Sure-Med product line inventory to net realizable value in the
fourth quarter of 1999 because of dramatically lower than anticipated demand for
Sure-Med products following the acquisition. The Company was confronted with
solving several issues regarding Sure-Med product. With the acquisition, issues
of product integration arose which slowed the sales force's ability to
effectively sell the new product. The Company anticipates that Sure-Med sales
will continue to decline. An additional special charge included in cost of
revenues in the fourth quarter of 1999 was a $1.5 million writedown of systems
inventory committed to certain customers at no charge under a marketing program.
Cost of revenues also includes $1.1 million of purchase accounting adjustment
due to the sale of Sure-Med inventories that had been written up to fair value.
Excluding the impact of the Sure-Med inventory and other writedowns, cost of
product revenues remained the same at $18.3 million, reflecting an increase in
the number of systems installed partially offset by a decrease in manufacturing
costs per unit. As a percent of product sales, cost of product revenues,
excluding the impact of the Sure-Med inventory and other write offs, decreased
slightly from 38% to 36.3%.
Service cost of revenues increased by 200% from $1.8 million for the year
ended December 31, 1998 to $5.4 million for the year ended December 31, 1999.
For the same periods, gross margin on service revenues was $2.3 million or 56.1%
as a percent of service revenue in 1998 compared to $1.6 million or 22.9% as a
percent of service revenue in 1999. The lower gross margin on service revenue in
1999 compared to 1998 was due in part to the acquisition of the Sure-Med product
line and a higher level of service required for pharmacy automation systems.
Cost of revenues increased by 13% from $16.2 million in 1997 to $18.3
million in 1998. As a percent of revenues, cost of revenues decreased from 44.9%
to 38.0%. The decrease in cost of revenues as a percent of revenues is due to a
reduction in materials costs per unit, increases in manufacturing productivity
and lower overhead per unit due to the sales increase from 1997 to 1998.
RESEARCH AND DEVELOPMENT. Research and development expenses increased by
50.0% from $6.0 million in 1998 to $9.0 million in 1999. The increase in
research and development expenses was primarily attributable to higher costs
associated with additional engineering personnel retained as part of the
acquisition of the Sure-Med product line from Baxter Healthcare. We anticipate
that we will continue to commit significant resources to research and
development in future periods to enhance and extend our automation systems and
to customize Commerce One's technology for Omnicell Commerce Network customers.
We expect that research and development expenses will increase in dollar terms
and as a percentage of sales from current levels, particularly as we add
engineering resources for integration, cataloging and modifying OmniBuyer and
OmniSupplier to meet the needs of our customers. To date, we have not
capitalized any software development costs.
Research and development expenses increased by 1.1% from $5.9 million in
1997 to $6.0 million in 1998. The increase in research and development expenses
reflects costs associated with the introduction of our Web-enabled DataCenter.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
costs increased by 48.2% from $24.3 million in 1998 to $36.0 million in 1999.
The increase in selling, general and administrative expenses is due to staffing
increases necessary to manage and support our growth in revenue, as well as
increased staffing as a result of the acquisition of the Sure-Med product line
from Baxter Healthcare. Also included in selling, general and
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administrative costs are special charges of $0.9 million relating to the write
off of leasehold improvements and other equipment and $0.6 million relating to
the write off of an equity investment. We anticipate that we will continue to
commit significant resources to our sales, customer support, marketing, finance
and administration organizations, and have accelerated hiring to support the
Omnicell Commerce Network. We expect that selling, general and administrative
expenses will continue to increase in dollar terms. However, we do not
anticipate that selling, general and administrative expenses will increase
significantly, if at all, as a percentage of revenues.
Selling, general and administrative expenses decreased by 1.0% from $24.5
million in 1997 to $24.3 million in 1998. Increased efficiency in the customer
support organization contributed to our ability to limit increases in selling,
general and administrative costs in 1998.
INTEGRATION EXPENSES. Integration expenses of $0.8 million in 1999 consists
of costs associated with the integration of Omnicell and Sure-Med engineering
efforts, product lines and marketing efforts.
INTEREST INCOME (EXPENSE). Net interest income was $1.0 million in 1998
compared to net interest expense of $1.8 million in 1999, reflecting a reduction
in interest income due to a decrease in cash, cash equivalents and short-term
investments balances and an increase in interest expense due to debt obligations
incurred as part of the Sure-Med acquisition, as well as interest paid to Sun
Healthcare with redemption of its redeemable preferred stock.
Net interest income was $1.0 million during both 1997 and 1998.
QUARTERLY RESULTS OF OPERATIONS
In any given quarter, it is common for a few customers to make up a
substantial percentage of our automation systems revenue, although the identity
of such customers generally varies from quarter to quarter. The timing of
purchase decisions by large hospital customers has a material impact on our
deferred gross profit position but a less significant impact on quarterly
results of operations which depend on our ability to install systems that have
already been shipped to customers.
Our quarterly operating results have varied significantly in the past and
may vary significantly in the future depending on many factors that may include,
but are not limited to, the following:
- the success of the Omnicell Commerce Network;
- timing of additional customers transacting on the Omnicell Commerce
Network;
- the size and timing of significant orders and their fulfillment and
integration;
- changes in pricing policies by us or our competitors;
- the number, timing and significance of product enhancements and new
product announcements by us and our competitors;
- changes in the level of our operating expenses, particularly related to
the development of the Omnicell Commerce Network;
- our customers' budgeting cycles; and
- changes in our strategy and general domestic and international economic
and political conditions.
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The following tables present certain unaudited statement of operations data
for each quarter of 1999 and for the first quarter of 2000, and express this as
a percentage of the Company's revenues for the periods indicated. This data has
been derived from unaudited consolidated financial statements and has been
prepared on the same basis as the Company's audited consolidated financial
statements which appear elsewhere in this prospectus. In the opinion of our
management, this data includes all adjustments, consisting only of normal
recurring adjustments and, in the fourth quarter of 1999, special charges
described below, necessary for a fair presentation of such data.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------
MAR 31, JUN 30, SEP 30, DEC 31, MAR 31,
1999 1999 1999 1999 2000
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Product revenues............................................ $10,713 $ 9,667 $11,086 $ 11,906 $ 12,638
Service and other revenues.................................. 1,339 1,784 2,098 1,813 2,032
------- ------- ------- -------- --------
Total revenues.......................................... 12,052 11,451 13,184 13,719 14,670
Cost of product revenues(1)................................. 3,584 3,779 3,889 17,508 4,509
Cost of service and other revenues.......................... 901 731 1,317 2,428 1,910
------- ------- ------- -------- --------
Total cost of revenues.................................. 4,485 4,510 5,206 19,936 6,419
Gross profit................................................ 7,567 6,941 7,978 (6,217) 8,251
Operating expenses:
Research and development.................................. 1,819 2,078 2,505 2,575 3,210
Selling, general and administrative(2).................... 7,862 8,400 9,426 10,295 11,540
Integration expenses...................................... 286 362 137 -- --
------- ------- ------- -------- --------
Total operating expenses................................ 9,967 10,840 12,068 12,870 14,750
Loss from operations........................................ (2,400) (3,899) (4,090) (19,087) (6,499)
Interest income (expense), net.............................. (374) (521) (569) (303) (321)
------- ------- ------- -------- --------
Loss before provision for income taxes...................... (2,774) (4,420) (4,659) (19,390) (6,820)
Provision for income taxes.................................. 24 40 -- 85 25
------- ------- ------- -------- --------
Net loss.................................................... $(2,798) $(4,460) $(4,659) $(19,475) $ (6,845)
======= ======= ======= ======== ========
Net income (loss) available to common shareholders.......... $(2,798) $(4,460) $(4,659) $(19,475) $ (6,845)
AS A PERCENTAGE OF REVENUES:
Cost of revenues............................................ 37.2% 39.4% 39.5% 145.3% 43.8%
Gross profit (loss)......................................... 62.8 60.6 60.5 (45.3) 56.2
Operating expenses:
Research and development.................................. 15.1 18.1 19.0 18.8 21.9
Selling, general and administrative....................... 65.2 73.4 71.5 75.0 78.7
Integration expenses...................................... 2.4 3.2 1.0 -- --
------- ------- ------- -------- --------
Total operating expenses................................ 82.7 94.7 91.5 93.8 100.5
Loss from operations........................................ (19.9) (34.0) (31.0) (139.17) (44.3)
Interest income (expense), net.............................. (3.1) (4.5) (4.3) (2.2) (2.2)
------- ------- ------- -------- --------
Loss before provision for income taxes...................... (23.0) (38.6) (35.3) (141.3) (46.5)
Provision for income taxes.................................. 0.2 0.4 -- 0.6 0.2
------- ------- ------- -------- --------
Net loss.................................................... (23.2) (39.0) (35.3) (141.9) (46.7)
======= ======= ======= ======== ========
Preferred stock accretion................................... -- -- -- -- --
------- ------- ------- -------- --------
(23.2) (39.0) (35.3) (141.9) (46.7)
======= ======= ======= ======== ========
</TABLE>
------------
(1) Includes special charges in the fourth quarter of 1999 related to writedown
of Sure-Med inventory--$12.5 million; additional costs recorded due to sale
of Sure-Med inventory which was recorded at fair value upon acquisition--
$1.1 million and writedown of inventory designated for a marketing
program--$1.5 million.
(2) Includes special charge in the second quarter of 1999 related to write-off
of leasehold improvements and other equipment--$0.9 million and a special
charge in the fourth quarter of 1999 related to write-off of equity
investment--$0.6 million.
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LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations since inception primarily through the
private placement of equity securities, as well as through equipment financing
and secured loan arrangements. Through March 31, 2000, we have raised
approximately $77.5 million from the private placement of equity securities, net
of redemptions. This includes net proceeds of approximately $28.6 million from
the issuance of Series K convertible preferred stock during the first quarter of
2000.
As of March 31, 2000, our principal sources of liquidity included $22.4
million in cash, cash equivalents and short-term investments and an undrawn
$10.0 million revolving credit facility. Our funds are currently invested in
U.S. Treasury and government agency obligations, investment grade commercial
paper and short-term interest-bearing securities.
In connection with the acquisition of the Sure-Med product line, we incurred
a note payable to Baxter Healthcare of approximately $7.9 million. The note is
secured by substantially all of the assets supporting the Sure-Med product line.
The note is for a term of five years and is repayable in twelve equal quarterly
installments beginning in 2001. Interest payments are due quarterly at a rate of
8.0% for the first two years and 13.0% for the succeeding three years. We expect
to utilize a portion of the proceeds from this offering to repay the Baxter
Healthcare note in full.
In March 1999, in connection with the acquisition of the Sure-Med product
line, we established a revolving credit facility of $10.0 million with Silicon
Valley Bank that we have not utilized. Any advances under the credit facility
would be secured by substantially all of our assets. Interest under the credit
agreement is payable at an annual rate equal to our lender's prime rate plus
2.25%. Our credit agreement contains covenants that include limitations on
indebtedness and liens, in addition to thresholds relating to net capital
deficiencies and ratios that define borrowing availability and restrictions on
the payment of dividends.
We used cash of $5.2 million in operating activities in 1999 compared to
$6.7 million provided by operating activities in 1998 and $3.1 million used in
operating activities in 1997. The net loss of $33.2 million for 1999 was
partially offset by non-cash charges for depreciation and amortization of $2.0
million, Sure-Med product line inventory and related fixed asset write offs of
$14.5 million and an investment writedown of $0.5 million, and an increase in
deferred gross profit of $8.2 million. In 1998, cash was provided by net income
of $0.5 million, decreases in accounts receivable of $2.1 million and an
increase in deferred gross profit of $4.3 million. In 1997, cash was used by the
net loss of $9.8 million and increases in accounts receivable of $7.4 million
partially offset by increases in accrued liabilities of $6.3 million and
deferred gross profit of $11.8 million.
We generated cash of $12,000 from investing activities in 1999 compared to
$7.3 million used in investing activities in 1998 and $5.9 million generated
from investing activities in 1997. Net maturities of short-term investments were
$6.4 million in 1999 compared to net purchases of $5.5 million in 1998 and net
maturities of $7.8 million in 1997. Our 1999 expenditures for property and
equipment of $6.0 million exceeded the $1.8 million expended in 1998 and $1.9
million expended in 1997.
We used cash of $3.8 million in financing activities in 1999 due primarily
to redemption of redeemable preferred stock compared to cash provided by
financing activities through the issuance of common stock of $0.6 million in
1998 and $0.5 million in 1997.
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Through March 2000, we redeemed 901,000 shares of Series J redeemable
convertible preferred stock from Sun Healthcare for $12.6 million plus interest
of $2.3 million. Cash of $10.8 million was used to satisfy this redemption, with
the balance was paid by offsetting Sun Healthcare's outstanding accounts
receivable balances.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET AND INTEREST RATE RISK
The following discusses our exposure to market risk related to changes in
interest rates, foreign currency exchange rates and equity prices. We reduce the
sensitivity of our results of operations to these risks by maintaining an
investment portfolio which is comprised solely of highly rated, short-term
investments. We do not hold or issue derivative, derivative commodity
instruments or other financial instruments for trading purposes. We are exposed
to currency exchange fluctuations, as we sell our products internationally. We
manage the sensitivity of our international sales by denominating all
transactions in U.S. dollars.
We are exposed to interest rate risk, as we use additional debt financing
periodically to fund capital expenditures. The interest rate that we may be able
to obtain on debt financings will depend on market conditions at that time and
may differ from the rates we have secured in the past.
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BUSINESS
OVERVIEW
We provide a Web-based, end-to-end supply chain management solution
targeting hospitals and other healthcare facilities and their suppliers. The
Omnicell Commerce Network and our supply and pharmacy automation systems enable
customers to procure and manage a wide range of medical and non-medical supplies
and pharmaceuticals. Currently, many procurement and inventory management
processes at healthcare facilities, including ordering, record keeping and
billing procedures, are costly, highly inefficient and predominantly manual. The
Omnicell Commerce Network streamlines these processes, and our automation
systems significantly reduce waste and inefficiencies, thereby improving the
speed and cost-effectiveness of the overall healthcare supply chain.
Our end-to-end solution is designed to give customers broad access to both
vertical (medical and pharmaceutical) and horizontal (non-medical) online
marketplaces. We have experienced integration teams working directly with each
individual department within healthcare facilities (including hospitals and
alternate care facilities) to determine their internal ordering processes and
systems. We then customize and integrate our applications to enable proper
accounting and coordination of the procurement and inventory management process.
These applications automate the healthcare facilities' front-end operations,
such as the requisition and approval functions, and link them with their
existing back-end information systems, such as the ERP, healthcare information,
materials management and purchasing systems.
The Omnicell Commerce Network is an e-commerce service that consists of two
Web-based applications, OmniBuyer and OmniSupplier, that incorporate and extend
Commerce One's business-to-business e-commerce technology platform into
healthcare. With these two applications, we connect buyers and suppliers to
create a network that provides healthcare buyers with broad access to medical
and non-medical products and services. The Omnicell Commerce Network is a secure
and integrated network that is buyer-focused and provides a single online point
of entry for the procurement needs of healthcare buyers. It establishes,
maintains and enhances buyer-supplier relationships. The network's hosted
Web-based procurement application provides healthcare buyers with the following
advantages:
- online automation of front-end requisition and approval functions;
- online access to customized multi-supplier catalogs;
- reduced processing costs and pricing disputes;
- integration with back-end information systems;
- Web-enabled back-end information systems; and
- access to low-cost information services.
Rush Presbyterian-St. Luke's Medical Center in Chicago, Illinois began
transacting on the Omnicell Commerce Network in November 1999 using a prior
version of OmniBuyer. The current version was made available on February 29,
2000, and through May 31, 2000, six additional buyers and seven suppliers had
transacted business on the Omnicell Commerce Network. We intend to continue to
aggressively add more buyers and suppliers to the Omnicell Commerce Network. We
have structured the network based on an ASP business model that provides clear
economic benefits for all participants. We intend to generate revenues through
subscription fees from buyers and connection and transaction fees from
suppliers. In addition, because we are not exclusively affiliated or aligned
with any medical
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<PAGE>
supply or pharmaceutical manufacturer, distributor or GPO, we are able to serve
as a neutral and unbiased e-commerce facilitator, thereby enabling, rather than
constricting, the relationship between buyers and suppliers.
Our automation systems manage and dispense medical supplies and
pharmaceuticals directly to healthcare professionals throughout a healthcare
facility at the point of use. These automation systems consist of modular,
secured and computerized cabinets that collect and share data with healthcare
facilities' existing information systems. They allow our customers to track
transaction data, inventory levels, expenses and patient billing. Since 1993, we
have installed over 14,000 cabinets in over 1,300 healthcare facilities. We
estimate that approximately $600 million in medical supplies flowed through our
installed automation systems in 1999. We generated revenue of approximately
$50.4 million in 1999 from the sale and lease of our automation systems and
related services.
INDUSTRY BACKGROUND
THE HEALTHCARE SUPPLY CHAIN
The U.S. healthcare industry has been undergoing significant changes as
third-party payors, such as Medicare, Medicaid and insurers, increase their
efforts to control the cost of healthcare services and related reimbursements.
As a result, healthcare organizations are beginning to focus on improving
internal technologies and operations management, including procurement and
inventory management processes, as they seek to reduce costs. However, the high
degree of buyer and supplier fragmentation in the healthcare supply chain and
its associated inefficiencies present significant obstacles to achieving this
goal. The U.S. healthcare market alone includes approximately 6,000 hospitals,
17,000 alternate care facilities and 600 GPOs. We estimate that total
U.S. healthcare supply chain annual expenditures exceed $200 billion, which
includes medical and non-medical supplies, pharmaceuticals, services and
equipment. We also estimate that medical and non-medical supplies and
pharmaceuticals represent approximately 20% of a typical hospital's
expenditures.
LIMITATIONS OF THE TRADITIONAL HEALTHCARE SUPPLY CHAIN
The traditional healthcare supply chain is highly fragmented and inefficient
and fails to adequately address the comprehensive needs of buyers and suppliers.
A study conducted by Computer Sciences Corporation for the Efficient Healthcare
Consumer Response, an association of healthcare manufacturers, distributors and
providers, estimated that in 1996 the total annual supply chain process costs in
the U.S. for consumable medical/surgical devices, non-retail pharmaceuticals and
non-capital diagnostics were $23 billion. The study estimated that $11 billion
could be eliminated through more efficient supply chain management.
Healthcare organizations typically must coordinate the purchase, delivery
and management of thousands of medical and non-medical products from hundreds of
suppliers on a regular basis. In addition, these organizations must track
inventory usage and cost. Their efforts are limited by a number of factors,
including:
- TIME-CONSUMING AND COMPLEX PROCUREMENT PROCESSES. A typical healthcare
facility's procurement process is built along departmental lines and
consists of a lengthy, paper-based requisition and approval sequence
involving many individuals at different levels of authority. This sequence
must be followed to maintain GPO compliance to ensure benefits from
contracted pricing, whether it be a first-time order or the re-ordering of
an existing product.
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- UNCOORDINATED PURCHASE DECISION MAKING. Funneling purchasing decisions to
a centralized authority often leads to a bottleneck as requisitions await
approval. To avoid delays, buyers often make purchases outside of this
centralized process. This makes it difficult to monitor and coordinate
purchases and often results in higher prices on purchases made without the
benefit of contracted prices.
- INEFFICIENT CONNECTIVITY TO SUPPLIERS. Healthcare buyers utilize a variety
of manual and automated processes for their procurement needs. Manual
processes, involving phone, fax and e-mail, are time-consuming, expensive
and prone to error. More automated processes, involving electronic data
interchange (EDI), are point-to-point connections with significant
up-front and on-going costs, limiting their adoption and the benefits of
automation. Accordingly, the lack of real-time connectivity results in
invoice discrepancies that require further reconciliation between buyers
and suppliers, often wasting time and money.
- LACK OF INTEGRATION BETWEEN THE PURCHASING FUNCTION AND THE ERP
SYSTEM. Healthcare buyers typically place orders based on usage reports
from materials management systems. These orders are often generated
independent of the buyer's ERP system and often lack current pricing
information. This can result in a mismatch between invoices received from
suppliers and purchase orders, leading to time-consuming and expensive
reconciliation of pricing disputes.
- LIMITED PRODUCT AND PRICING INFORMATION. Distributors have incentives to
sell their own products and those of certain manufacturers. They typically
exercise control over buyers' access to competing products, product
information and comparative pricing information. There are no
comprehensive product catalogs available to buyers for sourcing and
purchasing healthcare supplies, making it difficult to make value-based
purchasing decisions.
- INABILITY TO CAPTURE CHARGES AND TRACK USAGE AND INVENTORY. Because
supplies are retrieved and not used, or supplies are used but not recorded
properly, healthcare facilities are unable to accurately track usage and
inventory. This leads to product waste, imprecise capture of patient
billing data, stock-outs and the inability to efficiently manage inventory
levels.
GROWTH OF BUSINESS-TO-BUSINESS E-COMMERCE IN THE HEALTHCARE SUPPLY CHAIN
The inefficiencies associated with the healthcare supply chain have created
significant opportunities for business-to-business e-commerce. According to
Forrester Research, an industry research organization, U.S. pharmaceutical and
medical transaction volume processed through business-to-business e-commerce is
expected to increase from $1 billion in 1999 to $44 billion in 2003. We believe
that in order for e-commerce solutions to supplant the healthcare industry's
current methods of transacting business, seamless integration with buyers'
information systems and effective coordination of buyers' and suppliers' actions
will be required.
To date, horizontal and vertical online marketplaces that have been offered
as solutions have experienced only limited adoption by healthcare buyers due to
several limitations. First, they have difficulty integrating with healthcare
facilities' existing ERP, healthcare information, materials management and
purchasing systems. Second, online marketplaces do not have automated rules
engines that incorporate users' procurement approval processes to facilitate
approval and ensure compliance with internal buying rules.
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THE OMNICELL.COM SOLUTION
The Omnicell Commerce Network and our automation systems provide a
comprehensive, buyer-focused, supply chain management solution that addresses
the limitations of the traditional healthcare supply chain. We target delivery
of our solution to healthcare facilities, the buyers in the healthcare supply
chain. We streamline procurement and inventory management processes and
integrate these functions with back-end information systems to provide
coordinated decision making and purchasing of medical and non-medical supplies.
We work with healthcare facilities and their existing information systems to
improve efficiencies and generate cost savings throughout the healthcare
enterprise. In addition, our position as a neutral and unbiased e-commerce
facilitator enables healthcare buyers to connect directly with suppliers without
any channel management on our part and provides suppliers with an attractive
means to reduce their sales, marketing and customer support costs and
potentially grow their revenues.
The Omnicell Commerce Network is an e-commerce service that consists of two
Web-based applications, OmniBuyer and OmniSupplier, that incorporate and extend
Commerce One's business-to-business e-commerce technology platform into
healthcare. Our network facilitates e-commerce between participants in the
healthcare supply chain, including healthcare facilities, manufacturers,
distributors, GPOs, online marketplaces and auction sites. Both OmniBuyer and
OmniSupplier employ an ASP business model with low up-front costs and minimal
hardware requirements. As an ASP, we host our software applications from a
central site rather than selling the software to each healthcare facility, and
deliver our applications over secured Internet connections for a monthly fee. We
believe that this facilitates better matching of costs and benefits and should
encourage adoption of the Omnicell Commerce Network.
Our automation systems consist of modular, secured and computerized cabinets
and related software technology that manage and dispense medical supplies and
pharmaceuticals. Our systems are designed to address many of the inefficiencies
and problems associated with traditional methods of pharmacy and medical supply
chain management. The systems allow our customers to track transaction data,
inventory levels, expenses and patient billing, as well as link this data to our
customers' existing information systems. We estimate that our automation systems
typically reduce annual supply consumption costs of our customers by
approximately 15% to 20%.
In addition to cost reduction, our automation systems have several features
that are important to our customers. Our systems are designed to integrate
easily with a healthcare facility's existing information systems. We have
written over 1,250 live, proprietary software interfaces to integrate our
automation systems with healthcare facilities' back-end systems. We were an
early adopter of the Windows NT platform, which facilitates integration between
our automation systems and our customers' legacy systems. Our automation systems
are available in modularized cabinets that are designed to fit in any area of
the hospital and are flexible in design, accommodating any type of supply or
pharmaceutical. In addition, our automation systems facilitate the management of
both medical supply and pharmacy distribution using a single database, allowing
for coordinated billing and reporting.
The Omnicell Commerce Network and our automation systems have been designed
to address the following limitations posed by the traditional healthcare supply
chain:
- TIME-CONSUMING AND COMPLEX PROCUREMENT PROCESS. Our rules-based front-end
systems streamline the procurement process so that each user within a
healthcare facility can access only predetermined suppliers' products and
pricing information. For routinely ordered items, OmniBuyer is designed to
enable healthcare facilities to automatically
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reorder items once they reach a pre-determined inventory level. This
automation will eliminate the need for manual ordering. Based on
established requisition rules, purchase orders are electronically routed
to the appropriate decision makers before they are delivered to the
supplier. By limiting access at the procurement level, and automating the
routing of the requisition, bottlenecks are alleviated. In addition, the
combination of limiting the product views of buyers to pre-determined
suppliers and simplifying the re-order process encourages greater levels
of contract compliance.
- UNCOORDINATED PURCHASE DECISION MAKING. We work with each individual
department of the healthcare facility to determine the purchasing and
approval flows, determine the desired supplier connections, create
individual catalogs for each user and interface the procurement
application to all relevant information systems.
- INEFFICIENT CONNECTIVITY TO SUPPLIERS. OmniBuyer provides a single online
point of entry to connect all of the suppliers on our network, eliminating
the need for phone, fax, e-mail and EDI connections to these suppliers.
Our Web-enabled front-end systems provide real-time connectivity to
suppliers, allowing the facility to access updated product pricing and
availability.
- LACK OF INTEGRATION BETWEEN THE PURCHASING FUNCTION AND THE ERP
SYSTEM. The front-end purchase and back-end information applications of
OmniBuyer work together to generate accurate purchase orders. We enable
the ERP system to create a purchase order only after pricing is confirmed
over the Omnicell Commerce Network with the supplier. By linking the
purchasing and purchase order creation functions, we eliminate
time-consuming purchase order reconciliation efforts. In addition, we
reduce the need for manual entry or intervention.
- LIMITED PRODUCT AND PRICING INFORMATION. As more suppliers connect to
OmniSupplier, we will be able to provide our customers with direct access
to an expanded range of products and pricing information. This information
will not be restricted in any way. Instead, customers will have the
ability to look at all the information that they choose. This enables
buyers to make value-based purchasing decisions with greater ease and in
less time than current systems allow.
- INABILITY TO CAPTURE CHARGES AND TRACK USAGE AND INVENTORY. Our automation
systems enable healthcare facilities to accurately capture and track their
transaction data, inventory levels, expenses and patient billing. Entering
the patient's name at the point of use and exchanging data through
interfaces between our central server and the facility's billing and
inventory systems allows the facility to trace supply from the warehouse
to the patient.
STRATEGY
Our goal is to become the leading business-to-business e-commerce network
for the healthcare industry. We intend to achieve this goal through the
following strategies:
- FACILITATE MANAGEMENT OF THE HEALTHCARE SUPPLY CHAIN. We intend to enable
better management of the healthcare supply chain by providing a single
online point of entry for healthcare procurement and to continue to
aggressively market our automation systems. We intend to accomplish this
by (1) providing a customized application that incorporates and automates
the buyer's existing requisition and approval process, (2) delivering a
hosted Web-based solution with a low-cost ASP business model, (3) not
restricting or dictating from whom buyers may purchase, (4) enabling
suppliers to provide a unique and confidential price list for each buyer,
(5) ensuring private and secure transactions, (6) continuing to improve
the capabilities of our automation
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systems and (7) expanding the Omnicell Commerce Network's service
offerings and capabilities to meet our customers' needs. We believe that
the combination of OmniBuyer and our automation systems creates a valuable
supply chain management solution from the supplier all the way to the
point of use.
- ACCELERATE ADOPTION AND USE OF THE OMNICELL COMMERCE NETWORK. We intend to
continue to leverage our extensive healthcare industry experience and
relationships as well as our installed base of automation systems
customers to rapidly increase adoption and use of the Omnicell Commerce
Network. We will also continue to aggressively market OmniBuyer to
prospective new customers and believe that as market acceptance of
OmniBuyer accelerates, the number of suppliers using OmniSupplier will
increase.
- LEVERAGE OUR TECHNICAL EXPERTISE. We are employing our interface expertise
and our understanding of healthcare facilities' operating processes to
integrate OmniBuyer with healthcare facilities' existing front-end and
back-end information systems. We intend to continue to incorporate and
extend Commerce One's business-to-business e-commerce technology platform
into healthcare. In addition, we will continue to draw on our healthcare
experience to optimize the Omnicell Commerce Network to provide additional
features, functionality and services to meet our customers' needs.
- DEVELOP STRATEGIC RELATIONSHIPS. We expect to continue to enter into
strategic relationships with medical and non-medical products distributors
and manufacturers, online marketplaces, online auction sites, GPOs,
service providers and technology vendors to enhance the Omnicell Commerce
Network's breadth and depth. We expect this will speed its market adoption
and increase transaction volumes flowing through our network. We currently
have a strategic relationship with Commerce One that allows for
co-marketing and co-development efforts and enables us to utilize their
e-commerce technology platform and access their Global Trading Web.
Commerce One's Global Trading Web, of which the Omnicell Commerce Network
is a part, is made-up of all companies that use the MarketSite or BuySite
technology platform. We also have a strategic relationship with
PricewaterhouseCoopers in which it has agreed to deploy its healthcare
consulting practice to assist healthcare buyers and suppliers with the
implementation of the Omnicell Commerce Network.
- CAPITALIZE ON REVENUE OPPORTUNITIES GENERATED BY THE OMNICELL COMMERCE
NETWORK. We anticipate that as participation in the Omnicell Commerce
Network increases, a substantial portion of our revenue growth will be
generated by the services offered by the Omnicell Commerce Network. We
intend to achieve this revenue growth by collecting subscription fees from
buyers and connection and transaction fees from suppliers. We also intend
to pursue revenue opportunities from the data collected by the Omnicell
Commerce Network.
OMNICELL.COM SERVICES AND PRODUCTS
OMNICELL COMMERCE NETWORK
OMNIBUYER. OmniBuyer is a secure Web-based procurement application that
automates and integrates healthcare requisition and approval processes by
incorporating buyer-specific business rules, such as spending limits, negotiated
pricing, approval routing and customized access profiles on the front-end with
back-end information systems integration. OmniBuyer is based on Commerce One's
BuySite technology that we customize to meet the complex needs of healthcare
buyers. BuySite uses content management tools and extensible mark-up language
(XML), a software technology designed to standardize e-commerce documentation.
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OmniBuyer employs an ASP business model and is designed to become a single
online point of entry to meet the procurement needs of healthcare buyers. The
buyer's desktop can have access to any requested supplier, including many
suppliers connected to the combination of the Omnicell Commerce Network and,
with the parties' agreement, Commerce One's Global Trading Web. We charge our
customers monthly user subscription fees for the OmniBuyer service.
BENEFITS OF OMNIBUYER. The OmniBuyer application provides the following
benefits to healthcare buyers:
- ONLINE AUTOMATION OF FRONT-END REQUISITION AND APPROVAL FUNCTIONS. We work
directly with each individual department in a healthcare facility to build
systems that incorporate and automate their requisition and approval
processes, and user-specific business rules such as spending limits.
- ONLINE ACCESS TO CUSTOMIZED MULTI-SUPPLIER CATALOGS. Healthcare buyers can
request access to any supplier connected to the Omnicell Commerce Network
and Commerce One's Global Trading Web. OmniBuyer also allows healthcare
facilities to customize individual access to different suppliers' products
and services. Access to specific suppliers allows for greater levels of
contract compliance.
- REDUCED PROCESSING COSTS AND PRICING DISPUTES. We automate the purchase
requisition, approval and order processes and reduce errors caused by
manual processes, saving time and expense. By maintaining buyer-specific
pricing files and automating review of pricing, we reduce buyer-supplier
pricing discrepancies and invoice reconciliation disputes.
- INTEGRATION WITH BACK-END INFORMATION SYSTEMS. Our experienced and
dedicated interface teams utilize our 1,250 live, proprietary software
interfaces built for our automation systems to expedite the integration of
healthcare facilities' back-end information systems. This allows for
proper accounting, coordination and management of the procurement process.
- WEB-ENABLED BACK-END INFORMATION SYSTEMS. Our OmniBuyer application is
compatible with healthcare facilities' existing back-end information
systems. By interfacing OmniBuyer with these systems, we enable healthcare
facilities to implement a complete online procurement solution without
having to invest in upgrades to their back-end information systems.
- ACCESS TO LOW-COST INFORMATION SERVICES. We expect to develop online data
analysis and reporting applications to help buyers monitor and review
purchasing activity, perform benchmarking analysis and develop improved
purchasing strategies.
OMNISUPPLIER. OmniSupplier is a secure Web-based application that enables
suppliers (including manufacturers, distributors, GPOs, online marketplaces and
online auction sites) to connect and transact with our OmniBuyer customers.
OmniSupplier is based on Commerce One's MarketSite technology that we customize
to meet the complex needs of healthcare suppliers. MarketSite is the enabling
technology that facilitates the creation and management of open, interactive
marketplaces. We believe that MarketSite and OmniSupplier provide a
comprehensive supplier solution that should serve to accelerate the adoption of
the Omnicell Commerce Network.
OmniSupplier is designed to offer three different technologies that enable
real-time connection between suppliers and our OmniBuyer customers. Each of
these offerings will
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deliver the buyer's order directly into the back-end information systems of the
supplier. The supplier's choice on how to best connect to OmniSupplier will be
based on its technological capabilities:
- MANAGED CONTENT. For suppliers that do not have e-commerce functionality,
OmniSupplier includes hosted services and integration that provide a
low-cost, low-risk online access to a population of buyers. At the
supplier's request, we will manage their content at OmniSupplier and the
supplier needs only a Web browser to receive orders from buyers. Suppliers
with more advanced technological capabilities may still choose to have
their content hosted and managed at OmniSupplier, connecting and receiving
real-time orders from OmniSupplier.
- SUPPLIER-HOSTED CONTENT. For suppliers that have a commerce-enabled Web
site with specific features and functionality, we intend to offer Commerce
One's RoundTrip service that is currently being tested. This service is
designed to take the OmniBuyer customer directly into the supplier's Web
site. The buyer receives the user experience of the supplier's Web site
while retaining the buyer's specific business rules, administrative
workflow and back-end information systems integration.
- PORTAL CONTENT. For suppliers that have ERP systems that maintain detailed
customer price files and catalogs, but do not have commerce-enabled Web
sites, we plan to offer a solution from Commerce One that will allow the
supplier to host raw content and enable us to extract the relevant
information from the supplier's site. This technology will perform a
search, take the data to OmniSupplier, organize it and present it in a
common form to the buyer. This technology will allow us to fully leverage
the existing capabilities and initiatives of the suppliers, while
maintaining the buyer's rules engine and customized view.
Our goal is to connect all of our suppliers to OmniSupplier in a real-time
fashion that will maximize the benefit of the application to both buyers and
suppliers. We are adding functionality that will enable OmniSupplier to
integrate with suppliers' ERP systems to provide our buyers with real-time
inventory availability and shipping status. We believe this will reduce customer
inquiries and associated expenditures and improve customer service. In addition,
we will develop and incorporate online data analysis and reporting applications
to enable suppliers to more effectively monitor and analyze sales activity,
manage customer accounts and collect market intelligence. This information can
be used to improve pricing and discount strategies, product planning and product
development.
BENEFITS OF OMNISUPPLIER. The OmniSupplier application offers the following
benefits to suppliers:
- SINGLE POINT OF CONNECTION. OmniSupplier provides a single integration
point to all OmniBuyer customers, eliminating the need for suppliers to
maintain expensive direct and point to point connections across their
buyer network.
- REDUCED TRANSACTION COSTS. Purchase orders received through OmniSupplier
tend to be more accurate and less costly than orders transmitted by mail,
phone or fax. OmniSupplier may reduce the costs required for suppliers to
maintain their own fully functional e-commerce Web sites.
- REDUCED CUSTOMER SERVICE COSTS. We believe that our maintenance of
buyer-specific pricing files and automated review of pricing will reduce
customer service costs associated with resolving buyer-supplier pricing
disputes.
- ACCESS TO NEW MARKETS AND CUSTOMERS. OmniSupplier allows suppliers to
reach new buyers, while reducing the incremental sales, marketing and
customer support costs of
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traditional approaches. In addition, OmniSupplier provides an efficient
mechanism for product updates and pricing changes, enabling suppliers to
quickly and easily implement changes in their respective product lines and
respond to changing market requirements.
AUTOMATION SYSTEMS
Our automation systems consist of modular, secured and computerized cabinets
and related software technology that manage and dispense medical supplies and
pharmaceuticals. The information gathered by our automation systems is
downloaded by phone line or local area network to a central server. Our cabinets
are highly configurable and are designed to accommodate a wide variety of
dispensing modules, including drawers, shelves and racks. As a result, they are
easily configured to meet the particular needs of each patient care area.
SUPPLY CABINETS. Medical supplies are accessed from our supply cabinets
using our patented "See & Touch" technology. Users enter their identification
number on a console and select the appropriate patient name. Specific doors then
open based on the security level of the user. Locked transparent doors restrict
access to the supplies contained in our cabinets. To record supply utilization,
the user visually identifies and selects the item by pushing a dedicated reorder
button on the shelf in front of each item's location.
The main supply cabinet is comprised of one, two or three vertical "cells",
each approximately two feet wide and six feet high. Each cabinet houses a
processor and user interface. Auxiliary cabinets can be attached to the main
cabinet to provide additional storage capacity. Various shelf, drawer and rack
modules facilitate a wide array of storage configurations.
PHARMACY CABINETS. We have two lines of pharmacy cabinets, the OmniCell
pharmacy systems and the Sure-Med cabinets, which we acquired from Baxter
Healthcare in January 1999. The OmniCell pharmacy systems are highly
configurable and are available with color-touch screens. In addition, the
OmniCell pharmacy systems have dispensing drawers that facilitate high, medium
and low security levels by utilizing single-dose lids, locking lids, sensing
lids and patented guiding lights. The OmniRx Table Top unit is a 12-inch high
main cabinet with three pharmacy drawers, typically used where relatively small
volumes of pharmaceuticals need to be stored in a secure manner.
The Sure-Med pharmacy cabinets incorporate a variety of storage compartments
and have software that is compatible with all of our automation systems. The
Sure-Med cabinets offer a wide range of dispensing technologies, including
unit-dose dispensers and multiple drawer sizes. The unit-dose module dispenses
only the requested medication dose and is best suited for medications where
regulatory guidelines mandate a highly controlled environment. Clinicians prefer
this technology in high-security situations because it automates much of the
logistical and documentation burden and responsibility associated with
dispensing and documenting controlled medications.
COMBINATION SYSTEMS. Combination cabinet systems allow healthcare
organizations to integrate medical supplies and pharmaceuticals into a single
cabinet. Our system architecture enables each operating department to manage its
products independently of other operating departments, yet allows healthcare
facilities to track transaction data, inventory levels, expenses and patient
billing through a single database.
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BENEFITS OF AUTOMATION SYSTEMS. Our automation systems provide the
following benefits to healthcare facilities:
- REDUCED CONSUMPTION AND EXPENSES. Our automation systems house medical
supplies and pharmaceuticals in a closed environment. By requiring the
clinician to enter their identification code and the patient's name before
removing a supply or pharmaceutical, only the items needed for each
particular procedure are removed and properly billed to the patient. We
estimate that our automation systems typically reduce our customers'
annual supply consumption costs by approximately 15% to 20%.
- IMPROVED TRACKING AND MANAGEMENT OF INVENTORY. Our automation systems
capture data at the point of use and track transaction data, inventory
levels, expenses and patient billing, thus improving inventory management.
In addition, by receiving real-time information from our automation
systems, the purchasing department can avoid shortages and excess
inventory.
- INCREASED DATA CAPTURE. Our automation systems capture inventory usage
data by patient, physician, location and diagnostic code. These systems
interface with the facility's ERP, healthcare information and materials
management systems to initiate patient billing and inventory
replenishment. Facility personnel can immediately access this data,
facilitating real-time operations management.
- IMPROVED SECURITY AND REGULATORY COMPLIANCE. Our pharmacy cabinets offer
varying levels of security depending on the needs of the healthcare
facility. The reporting and security functions of our pharmacy cabinets
are designed to facilitate and document regulatory compliance for certain
pharmaceuticals.
- STANDARDIZED INTERFACES AND A SINGLE DATABASE. Our automation systems can
be customized to meet the needs of many specialized care departments
within healthcare facilities. The data captured from each cabinet enables
more efficient and centralized administration of procurement and inventory
management processes.
OTHER SOFTWARE AND RELATED SYSTEMS
OMNICENTER. The OmniCenter is the computerized central server that
processes the transaction data to and from our automation system cabinets,
recording each transaction by user, patient, item quantity, cost and time. The
OmniCenter enables the materials management department to run reports
periodically and on demand, indicating when to restock the cabinets and when to
reorder supplies. In addition to the wide range of standard reports provided by
the OmniCenter, a custom report writer also allows the user to add to their
suite of information. As a diagnostic service, we are able to remotely access
the OmniCenter from our help desk to monitor the status of each cabinet.
SYSTEM INTERFACES. Since 1993, we have been developing an interface engine
that is able to accommodate almost any interface record format and a variety of
communication protocols. These development tools also allow for rapid
development of interfaces for each customer site. We guarantee the delivery of
interfaces to the customer for on-site testing within 30 days of receiving the
interface specifications. To date, we have developed and implemented at customer
sites more than 1,250 interfaces for automation systems. In addition, we are a
member of Health Level Seven (HL7), the interfacing standards group for the
healthcare industry. We follow the HL7 standard for interfacing whenever it is
requested by the customer or another vendor, which is about 50% of the time.
The Partner PC is the host server for our interfaces, communicating with the
healthcare facility's information systems. This configuration allows the
OmniCenter to process
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transactions and be dedicated to communicating with our automation systems. The
Partner PC is where our proprietary interface software resides, allowing the
data captured at the point of use by the cabinets to flow to the healthcare
facilities' ERP, healthcare information, materials management and purchasing
systems. In the same manner, information is passed from the facility's ERP,
healthcare information, materials management and purchasing systems through the
OmniCenter back to the cabinets.
INFORMATION MANAGEMENT. The DataCenter 5000 and DecisionCenter are
Web-enabled, decision support products and services that provide secured trend
analysis, decision support and regulatory compliance reports based on data from
our automation systems. They consolidate information from one or more
OmniCenters into one large database. The data are not only stored in a raw
format, but also aggregated for rapid response to queries. We have developed the
"My-Omni" Web page that allows users to configure frequently requested
information from a short menu. In addition, we offer sophisticated graphical
tools that allow users to make detailed queries across all data fields. These
systems are typically interfaced with the healthcare facility's medical records
system in order to augment the database with correctly associated diagnosis
codes by physician and by patient. Data can be viewed by authorized users and
personnel at any time, allowing for easy, yet comprehensive, analysis for
improved decision making.
MEDCENTERCITY.COM. We own and operate MedCenterCity.com, an online
healthcare community, which provides news, information and services for
healthcare professionals.
CUSTOMERS
OMNIBUYER
Our target customers for OmniBuyer are healthcare institutions, including
hospitals, physician clinics and alternate care facilities. As of May 31, 2000,
over 225 healthcare organizations have signed agreements subscribing to the
OmniBuyer service, of which the following have transacted business on the
Omnicell Commerce Network:
<TABLE>
<S> <C>
- Loyola University Health System Chicago, IL
- Madigan Army Medical Center Tacoma, WA
- MedCath, Inc. Charlotte, NC
- Rush Presbyterian-St. Luke's Medical
Center Chicago, IL
- Salina Regional Health Center Salina, KS
- Veteran's Administration Mountain Home Johnson City, TN
- Veteran's Affairs Medical Center Washington, D.C.
</TABLE>
The subscription agreement provides the basic terms and conditions of the
OmniBuyer service and the respective obligations of Omnicell.com and the
OmniBuyer customer. Either party may terminate the subscription agreement on
thirty days' written notice.
We have implemented the first phase of our end-to-end procurement solution
in the cath lab of Rush Presbyterian-St. Luke's Medical Center in Chicago,
Illinois. In addition, Rush Presbyterian uses our automation systems throughout
its facility, including the cath lab. Within the cath lab, we have automated the
procurement process from the point of use all the way to the supplier. The
automation process begins when a catheter is removed from our automation
systems, with the user pushing a button for each item removed. These usage data
are captured at our OmniCenter, which interfaces with our OmniBuyer application.
The manager of the cath lab receives an e-mail, notifying him to log on to the
OmniBuyer application, where he views a requisition prepared by OmniBuyer
detailing the products to be reordered. The manager is then able to edit and
approve the requisition. Once approved,
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OmniBuyer transmits the requisition to the supplier, accessing current pricing
information from the supplier, and sends the order to the facility's ERP system
in order to generate an accurate purchase order. If the supplier is unable to
fulfill the request, it is communicated back over our system, and the buyer can
find alternative sources for the item. Integrating OmniBuyer with the facility's
information systems and our automation systems has streamlined Rush
Presbyterian's procurement process.
OMNISUPPLIER
Our target customers for OmniSupplier include manufacturers, distributors,
online marketplaces and online auction sites. Through the participation of
suppliers in OmniSupplier and the Global Trading Web maintained by Commerce One,
the Omnicell Commerce Network, as of May 31, 2000, offers healthcare buyers
access to approximately 30,000 medical products and over two million non-medical
products.
As of May 31, 2000, we had contracts with 24 healthcare manufacturers and
distributors to sell their products on the Omnicell Commerce Network to
OmniBuyer customers. The following suppliers have transacted business on the
Omnicell Commerce Network:
<TABLE>
<S> <C>
- C.R. Bard, Inc. - Medline Industries
- Fisher Scientific Company LLC - Retiou
- IKON Office Solutions, Inc. - Tri-anim Health Services, Inc.
- U.S. Office Products, Inc.
</TABLE>
In addition, the Omnicell Commerce Network includes over 25 healthcare
suppliers and over 400 non-healthcare suppliers that participate in Commerce
One's Global Trading Web. OmniBuyer customers will have access to these
suppliers through the Global Trading Web, which includes the following selected
suppliers:
<TABLE>
<S> <C>
Healthcare Non-Healthcare
--------------------------------------------- ---------------------------------------------
- B. Braun - Boise Cascade Office Products Corporation
- Dade Behring Inc. - BT Office Products International, Inc.
- Mead Johnson Nutritionals - Lucent Technologies Inc.
- Professional Hospital Supply - Office Depot, Inc.
- VWR Scientific Products Corporation - Staples, Inc.
- Xerox Medical Systems - W.W. Grainger, Inc.
</TABLE>
AUTOMATION SYSTEMS
Our target customers for our automation systems are healthcare institutions,
including hospitals, clinics and alternate care facilities. As of May 31, 2000,
over 1,300 hospitals and other healthcare facilities have purchased or leased
our automation systems.
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The following entities are representative of our largest hospital customers
based on supply and pharmacy automation products purchased or leased:
<TABLE>
<S> <C>
- Bellevue Hospital Center New York, NY
- Christ Hospital and Medical Center Oak Lawn, IL
- Children's Medical Center of Dallas Dallas, TX
- Good Samaritan Hospital Los Angeles, CA
- Jackson Memorial Hospital Miami, FL
- Massachusetts General Hospital Boston, MA
- Northwestern Memorial Hospital Chicago, IL
- Rush Presbyterian-St. Luke's Medical Center Chicago, IL
- UCSF Stanford Healthcare San Francisco, CA
- University of Iowa Hospitals and Clinics Iowa City, IA
- University of Texas Medical Branch Galveston, TX
- Walter Reed Army Medical Center Washington, D.C.
</TABLE>
STRATEGIC RELATIONSHIPS
We establish and maintain relationships with firms whose products, services,
technologies and/or market presence enhance our ability to deliver value to our
customers. We have entered into strategic relationships with a wide variety of
companies. Among the most significant relationships are the following:
COMMERCE ONE
Commerce One is a leading provider of e-commerce solutions that dynamically
link buying and supplying organizations to form real-time trading communities.
In August 1999, we entered into a Vertical Hosted License Agreement with
Commerce One and paid a license fee, pursuant to which we received a perpetual
license to Commerce One's Hosted BuySite and Branded MarketSite software for use
in developing OmniBuyer and OmniSupplier, respectively. The agreement also
provides for program management services and ongoing maintenance and support of
the software for additional fees. In addition, we have agreed to share a portion
of the transaction fees collected from suppliers when purchases are made using
the Omnicell Commerce Network. The terms and conditions of the maintenance and
support, and of the revenue share terms, have been formally renewed and extended
by the parties until August 21, 2005. In addition, Commerce One, pursuant to our
agreement, may not solicit business from, or enter into agreements with,
selected companies in the healthcare market with respect to the hosted BuySite
and/or branded MarketSite software at any time prior to August 21, 2000. The
agreement continues perpetually unless otherwise terminated by either party
pursuant to the termination provisions of the agreement. In addition, our
strategic relationship with Commerce One allows for co-marketing and
co-development efforts and enables us to utilize their e-commerce technology
platform and access their Global Trading Web. In March 2000, Commerce One made
an equity investment in our company.
The Global Trading Web is a business-to-business trading community formed by
Commerce One. The Global Trading Web is the accumulation of all the companies
that have purchased or use Commerce One's MarketSite and BuySite. These
companies bring together buying organizations, suppliers, and service providers
worldwide to form a virtual marketplace across a number of industries. We
operate MarketSite and host BuySite for healthcare, and are both part of and
connected to this community. However, the success of the Omnicell Commerce
Network in the healthcare marketplace is independent of the overall success of
Commerce One's Global Trading Web. For the Omnicell Commerce Network to grow, we
will need to continue to increase the number of suppliers that use OmniSupplier.
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PRICEWATERHOUSECOOPERS
In April 2000, we entered into a Strategic Alliance Agreement with
PricewaterhouseCoopers LLP, the world's largest professional services
organization. This agreement engages PricewaterhouseCoopers' healthcare
consulting practice to help healthcare buyers and suppliers effectively
implement and participate in the Omnicell Commerce Network. Under the terms of
the three-year agreement, PricewaterhouseCoopers is the preferred global systems
integrator for Omnicell.com, and Omnicell.com is a PricewaterhouseCoopers
preferred e-business healthcare alliance partner. We also plan to engage in
joint sales and marketing activities with PricewaterhouseCoopers.
PROMEDIX
In June 2000, we entered into a Strategic Alliance Agreement with Promedix,
a leading provider of specialty medical products to the healthcare market and a
division of Ventro Corporation. Under the terms of the agreement, Omnicell will
connect the Promedix Web site to healthcare facilities using OmniBuyer. Our
OmniBuyer customers will have access to Promedix's over 400 specialty medical
product suppliers. In addition, our strategic relationship with Promedix allows
for the deployment of our automation systems in Promedix customer accounts.
OTHER STRATEGIC RELATIONSHIPS
We also have strategic relationships for our automation systems with Ariel
Distributing, Clinical Pharmacology and ScrubAvail. For MedCenterCity.com, we
have strategic relationships with barnesandnoble.com, CareerMosaic and Materials
Management in Health Care.
RESEARCH & DEVELOPMENT AND TECHNOLOGY
RESEARCH AND DEVELOPMENT
Since our inception, we have focused our research and development efforts on
developing new products and technologies and reducing the costs of manufacturing
our system components. We have 57 employees in research and development.
OMNICELL COMMERCE NETWORK. Our strategic relationship with Commerce One
allows us to incorporate and extend Commerce One's technology platforms,
applications, source code and documentation into healthcare. Their tools allow
us to modify Commerce One's BuySite and MarketSite software so that the effort
to port specific software changes to the latest Commerce One release is
minimized. These tools allow us to more easily adopt the latest Commerce One
releases as we add healthcare-specific features and functionality to optimize
the Omnicell Commerce Network to meet the needs of the healthcare market.
The Commerce One and Omnicell.com product development teams employ object-
oriented analysis and design principles to guide the development of an
object-oriented system of software code. Our methodology allows us to exploit
the capabilities of object-oriented programming languages like C++ and Java to
build reusable components and designs. This methodology also helps reduce the
risks inherent in developing complex systems and helps us design our solutions
to meet the needs of the participants in the Omnicell Commerce Network.
AUTOMATION SYSTEMS. The software architecture for our automation systems
business is based on database products and development tools centered around the
Microsoft Windows NT platform, the Internet Information Server and Web tools. We
develop application software that is generally applicable to all customers,
while retaining broad customization functionality.
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We maintain a release for each major product, with each new release level
containing an increasing number of configurable options as new features are
added, while retaining previous functionality for backward compatibility.
Interfacing with the customer's other computer systems often requires custom
interface software. This is kept separate from the main software release.
Communication between the central server product and cabinets and any custom
interface software is through an application programming interface (API). Each
new release of server software maintains backward compatibility with this API,
so that previous versions of interfaces and cabinets continue to operate when
the main server software is upgraded. Our products currently do not require
rigorous approvals beyond standard Underwriters Laboratories or Canadian Safety
Association equivalent certification.
SCALABLE ARCHITECTURE
We are a Microsoft Certified Solutions Provider and are able to leverage
Commerce One's Microsoft Windows distributed Internet applications framework
into a unified architecture. This enables us to focus on creating additional
business functionality for OmniBuyer and OmniSupplier, rather than building and
maintaining complex infrastructure code. Additionally, Commerce One's solution
has been designed so that we can grow our infrastructure through the simple
addition of low-cost systems that utilize Intel microprocessors and the
Microsoft Windows NT operating system. The Commerce One framework allows us to
leverage technologies such as message queueing, security services, and
coordination and distribution of transactions, components and services.
SOFTWARE TECHNOLOGY PLATFORM
Commerce One's solution utilizes XML software technology platform servers to
generate and securely transmit XML documents over the Internet. Commerce One has
also created a common business library designed to enable a common
language-based framework for uniting disparate business document types. While we
believe that XML software technology is emerging as an industry standard for
business-to-business electronic commerce, we have also developed translation
technology which converts XML documents into other document formats. This
translation technology allows us to deliver purchase orders to suppliers in a
wide variety of document formats, including EDI, Open Buying on the Internet,
ASCII flat file, e-mail, Microsoft Excel and facsimile.
SECURITY & PRIVACY
Our OmniBuyer application uses 128-bit encryption, HTTPS-SSL and
password-protected user access. Our servers are located behind corporate
firewalls and access is multiple password-protected.
We recognize our obligations to safeguard patient information and other
customers' proprietary or confidential information to which we may have access
through the use of the Omnicell Commerce Network and our automation systems. We
have implemented a Privacy and Use of Information Policy and strictly adhere to
established privacy principles, use of customer information guidelines and
federal and state statutes and regulations regarding privacy and
confidentiality, including those measures and practices required under the
Health Insurance Portability and Accountability Act of 1996.
SALES, MARKETING AND CUSTOMER SUPPORT
We market and sell our products and services to a variety of healthcare
institutions, including hospitals and alternate care facilities. We have a
direct sales force organized into six regions, with dedicated teams for the
alternate care and European markets. Each of the members of our direct sales
force sells both our automation systems and our e-commerce
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service. Our sales representatives have on average over eight years of sales
experience in the healthcare industry. We target hospitals with greater than
100 beds, long-term care facilities and clinics. A regional vice president
coordinates both the sales and field service operations activities in each
region.
Our marketing group is responsible for product marketing, marketing
communications, Web site development, public relations, sales support and
training. They generate leads through a variety of means, including advertising,
direct marketing and participation in trade shows and conferences covering such
areas as the Internet, electronic commerce, supply chain management, hospital
administration, pharmacy, nursing, materials management and alternate care.
We leverage our sales and field service organizations, along with our
technical support desk to sell, implement and service the OmniBuyer application.
In addition, we have added specialists who will work solely with healthcare
facilities to sell and implement OmniBuyer, and a separate team that recruits
and implements suppliers onto our OmniSupplier platform. We have initially
focused on signing customers from our installed base of automation systems to
OmniBuyer. This has allowed us to rapidly gain 200 customers who have
independently elected to implement our application. The OmniBuyer implementation
process is done in phases. We work with each individual department of the health
care facility to determine the purchasing and approval flows, determine the
desired supplier connections, create individual catalogs for each user and
interface the procurement application to all relevant information systems.
The sales cycle for our automation systems has proven to be long in nature
and can take in excess of twelve months. This is due in part to the cost of our
systems and the number of people within a healthcare facility involved in the
purchasing decision. To initiate the selling process, the sales representative
generally targets the director of materials management or other decision makers
and is responsible for educating each group within the healthcare facility about
the benefits of automation. To assist hospitals in the acquisition of our
systems, we offer multi-year, non-cancelable leases, to reduce the up-front
costs. Typically, we sell our customers' lease agreements to a third-party
leasing company. We have contracts with several GPOs that enable us to sell our
automation systems to GPO-member healthcare facilities without going through a
lengthy request for proposal and bidding process. These GPO contracts are
typically for multiple years with options to renew or extend for up to two
years. Our current GPO contracts include Premier, Tenet Healthcare, University
Healthcare Consortium and the Department of Veterans Affairs.
Our field service operations representatives directly support the sales
force, provide operational and clinical expertise prior to the close of a sale
and install our automation systems. This group assists the customer with the
technical implementation of our automation systems, including configuring our
systems to address the specific needs of each individual customer. After the
systems are installed, on-site support is provided by a combination of our field
service operations team, technical support group and a third-party service
company.
We offer technical support through our Technical Support Desk in Waukegan,
Illinois. Our team utilizes the Siebel software package, an industry standard
for call centers, to field calls from customers. We have found that two-thirds
of all service issues can be addressed with remote diagnostics. In addition, we
have developed remote dial-in software that monitors customer conditions on a
daily basis.
MANUFACTURING OF AUTOMATION SYSTEMS
Our automation systems manufacturing strategy is to produce custom
configured systems with fast order turnaround in a high-quality and
cost-effective manner. We currently conduct
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our manufacturing operation in a 23,000 square feet facility in Palo Alto,
California operating on one shift. We operate on a continuous flow, just-in-time
basis to perform final assembly, configuration and system test of all products.
Our customer service personnel work closely with the end user to determine
specific customer requirements for each installation. The detailed customer
requirements are transmitted electronically to our manufacturing facility where
they are used to custom configure each unit. Our operating software is installed
as a part of the assembly process. Once assembled, every unit undergoes
mechanical and systems testing in our Palo Alto, California facility prior to
shipping.
Our production activities consist primarily of final assembly of mechanical
components and electronic sub-systems outsourced to key suppliers. While many
components of our systems are standardized and available from multiple sources,
certain components or subsystems are fabricated according to our specifications.
We endeavor to obtain multiple sources of supply for certain components. We
believe we could obtain alternative sources of supplies within two to four
months if our current suppliers were unable to provide us with adequate
quantities of such components.
Our products are designed with a high degree of modularity that facilitates
manufacturing assembly and configuration and enables rapid deployment of new
products and product enhancements. We have automated much of the software
quality assurance process and have streamlined key steps in the mechanical
prototyping process in order to minimize the time from design prototype to
volume production. We work closely with several key fabricators and subassembly
manufacturers on new products and utilize lower-cost manufacturers whenever
possible while maintaining product quality and availability. We are continuously
re-engineering our products to reduce manufacturing costs while improving
product reliability and serviceability.
Our quality assurance team reports to our customer service group and works
directly with our manufacturing team. Team members inspect and create an
electronic record for every product before it is shipped using personal digital
assistants. This information is used to monitor workmanship by recording the
number of defects per thousand units. Each manufacturing employee is part of an
incentive program tied to reducing defects per thousand units. Quality issues
are gathered though weekly field updates and direct calls from our sales and
customer support groups. These issues are addressed in weekly reliability
meetings, which bring together our engineering, manufacturing and quality
assurance teams.
COMPETITION
E-COMMERCE
The market for online procurement of medical and non-medical supplies for
the healthcare supply chain is new, rapidly evolving and competitive. We believe
we face competition in three general market categories:
- TRADITIONAL HEALTHCARE SUPPLY CHAIN PARTICIPANTS. Traditional medical
supply manufacturers, distributors and GPOs such as GE Medical Systems,
McKessonHBOC and Columbia/HCA have well-established businesses, customer
relationships and infrastructures. A number of these companies have
established or may in the future seek to establish their own e-commerce
initiatives for the purchase and sale of healthcare supplies or seek to
contract or partner with other providers for those services.
- ONLINE HEALTHCARE MARKETPLACES AND EXCHANGES. While we desire to attract
online healthcare marketplaces and exchanges to be participants on the
Omnicell Commerce
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Network, we face indirect competition from marketplaces and exchanges such
as Medibuy.com and Neoforma.com. However, many of these competitors do not
provide an end-to-end, fully integrated solution.
- OTHER COMPANIES PROVIDING WEB-BASED HEALTHCARE APPLICATIONS AND
CONNECTIVITY. Many companies such as Healtheon/WebMD have created
Web-based healthcare connectivity technology platforms which target the
service, information and transaction needs of healthcare professionals,
providing medical information, practice management applications,
electronic medical claims processing and online prescription capabilities.
Many of these companies are introducing e-commerce functions that may
compete with our services.
We believe that companies in the healthcare e-commerce market compete based
on:
- Breadth, depth and quality of product offerings;
- Ease of use and convenience;
- Ability to incorporate the buying organization's requisition and approval
process;
- Ability to integrate their services with the buying organization's
existing systems and software;
- Quality and reliability of their services;
- Customer service;
- Number of buying organizations and transaction volume;
- Brand recognition; and
- Amount of fees charged to buyers and suppliers.
We face indirect competition from all of the above-mentioned companies in
the market for online procurement of medical and non-medical supplies. While we
will compete for market share with all of the companies that are building online
marketplaces, our main focus is on the healthcare buyer. We believe we are
unique among our competitors in our focus on building an end-to-end solution to
enable healthcare buyers to go to any marketplace to purchase goods and
services, whether it is from our marketplace or that of another company.
AUTOMATION SYSTEMS
The market for automation systems is competitive and characterized by
rapidly evolving technology, evolving industry standards, frequent new product
introductions and rapidly changing customer requirements. Many hospitals and
other healthcare facilities still use and may continue to use existing
approaches that utilize no automated methods of distribution or inventory
tracking. As a result, we must continuously educate existing and prospective
customers regarding the advantages of our products.
We expect continued and increased competition from current and future
competitors, many of whom have greater financial, technical, marketing and other
resources than us. Our current direct competitors in the automation systems
market include Cardinal Healthcare (Pyxis), McKessonHBOC (AcuDose-Rx) and
Diebold (MedSelect).
We believe that companies in the healthcare automation systems market
compete based on:
- Breadth and depth of product offerings;
- Ease of use and efficiency;
- Ability to integrate their services with the healthcare facility's
existing systems;
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- Quality and reliability of product offerings;
- Customer service; and
- Price.
We believe our automation products and services compare favorably with those
offered by our competitors.
EMPLOYEES
As of May 31, 2000, we had a total of 338 employees, including 65 in
research and development, 73 in sales, 25 in marketing, 98 in customer support,
32 in administration and 45 in manufacturing. We also employ independent
contractors and temporary personnel to support our development, marketing,
customer support, field service and administration organizations. None of our
employees is represented by a collective bargaining agreement, nor have we
experienced any work stoppage. We consider our relations with our employees to
be good.
FACILITIES
We lease approximately 113,000 square feet of office, development and
manufacturing space in Palo Alto, California and Waukegan, Illinois. Our
principal administrative, marketing and research and development facilities are
located in approximately 34,000 square feet of leased office space in Palo Alto,
California under leases expiring in January 2002 and June 2004. Our principal
manufacturing facility is located in approximately 23,000 square feet of leased
space in Palo Alto, California under a lease expiring in June 2003, with an
option to renew for an additional five years. We also maintain an
administrative, marketing, development and customer service facility located in
approximately 38,000 square feet of leased office space in Waukegan, Illinois
under a lease expiring in June 2006, with an option to renew for an additional
five years.
GOVERNMENT REGULATION
The manufacture and sale of our current products are not regulated by the
FDA. There can be no assurance, however, that these products, or future
products, if any, will not be regulated in the future. A requirement for FDA
approval could harm our business, results of operations and financial condition.
The practice of pharmacy is governed by individual state boards of pharmacy that
issues rules for pharmacy licensure in their jurisdiction. State boards of
pharmacy do not license or approve our distribution systems. However, pharmacies
using our equipment are subject to state board approval. Similarly, hospitals
must be accredited by the JCHAO in order to be eligible for Medicaid and
Medicare funds. JCHAO does not approve or accredit distribution systems.
Our online services may be subject to a number of laws and regulations that
may be adopted or interpreted in the United States and abroad with particular
applicability to the Internet. The laws governing Internet transactions remain
largely unsettled, even in areas where there has been some legislative action,
such as the federal Internet Tax Freedom Act. It is possible that U.S. and
foreign governments will enact legislation that may be applicable to us in areas
including content, product distribution, network security, encryption, the use
of measures for data and privacy protection, electronic authentication, access
charges and re-transmission activities. The adoption or modification of laws or
regulations relating to the Internet or its related technologies could have a
material adverse effect on the Omnicell Commerce Network and also adversely
affect our business by increasing our costs and administrative burdens. It may
take years to determine whether and how existing laws such as those governing
intellectual property, privacy, libel, consumer protection and taxation apply
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to the Internet. We cannot assure you that the recent privacy initiative of the
Federal Trade Commission will not negatively affect our business. Compliance
with any newly adopted laws may prove difficult for us and could harm our
business.
While we have implemented a Privacy and Use of Information Policy and
strictly adhere to established privacy principles, use of customer information
guidelines and federal and state statutes and regulations regarding privacy and
confidentiality, we cannot assure you that we will be in compliance with the
Health Insurance Portability and Accountability Act of 1996.
PROPRIETARY RIGHTS AND LICENSING
Our success depends in part upon a combination of copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to
protect our proprietary rights. We pursue patent protection in the United States
and foreign jurisdictions for technology that we believe to be proprietary and
that offers a potential competitive advantage for our products. We currently own
nine United States patents that will expire between 2010 and 2017. In addition,
we currently have two United States patents allowed and awaiting issue and have
filed four United States patent applications. The issued patents relate to our
"See & Touch" methodology used in the OmniSupplier dispensing cabinets, the use
of guiding lights in the open matrix pharmacy drawers, the use of locking and
sensing lids with pharmacy drawers and the methods of restocking these drawers.
The above referenced patents also apply to our unit-dose mechanism and methods,
the single-dose dispensing mechanism and the methods for restocking the
single-dose drawers using exchange liners. We also own four patents in Australia
and three patents in Europe that will expire between 2014 and 2015. Each
European patent is enforceable in Germany, France, Sweden and Great Britain.
There are other applications in process in Australia, Japan, Canada and European
countries based on issued and pending applications in the United States. We are
not aware that any of our products infringes the proprietary rights of third
parties.
All of our operating system software is copyrighted and subject to the
protection of applicable copyright laws. We have also obtained registration of
our OmniCell logo, OmniCell, OmniCenter, OmniSupplier, OmniRx and Sure-Med
trademarks through the United States Patent and Trademark Office. We are in the
process of registering Omnicell.com and the Omnicell.com logo, as well as other
trademarks, in the United States and internationally. We seek to protect and
enforce our rights in our patents, copyrights, service marks, trademarks, trade
dress and trade secrets through a combination of laws and contractual
restrictions, such as confidentiality and licensing agreements.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
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MANAGEMENT
DIRECTORS AND OFFICERS
The following table sets forth certain information as of May 31, 2000, about
our officers and members of our board of directors:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- -------- -----------------------------------------------------
<S> <C> <C>
Randall A. Lipps....................... 42 Founder, Chairman of the Board and Director
Sheldon D. Asher....................... 46 President, Chief Executive Officer and Director
Robert Y. Newell, IV................... 52 Vice President of Finance and Chief Financial Officer
S. Michael Hanna....................... 49 Vice President of Sales and Field Operations
John D. Higham......................... 57 Vice President of Engineering and Chief Technical
Officer
Jeffrey L. Arbuckle.................... 43 Vice President of e-Commerce Market Development
Herbert J. Bellucci.................... 50 Vice President of Manufacturing
Joseph E. Coyne........................ 37 Vice President of Customer Service
William R. Dimmer...................... 56 Vice President of Human Resources
Kenneth E. Perez....................... 39 Vice President of e-Strategies
Gary E. Wright......................... 46 Vice President of e-Commerce Supplier Relationships
Gordon V. Clemons(1)................... 46 Director
Frederick J. Dotzler(2)................ 54 Director
Christopher J. Dunn, M.D.(2)........... 48 Director
Randall A. Hack(1)..................... 52 Director
Benjamin A. Horowitz................... 33 Director
Kevin L. Roberg........................ 49 Director
John D. Stobo, Jr.(1).................. 34 Director
William H. Younger, Jr.(1)(2).......... 50 Director
James C. Gaither....................... 62 Secretary
</TABLE>
---------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
RANDALL A. LIPPS has served as Chairman of the Board and a Director of
Omnicell.com since founding Omnicell.com in September 1992. From 1989 to 1992,
Mr. Lipps served as the President of Moxie Technologies, Inc., a direct
marketing firm specializing in travel and long distance communications sales.
Mr. Lipps received both a B.S. in economics and a B.B.A. from Southern Methodist
University.
SHELDON D. ASHER has served as President and Chief Executive Officer and a
Director of Omnicell.com since December 1993. From May 1991 to August 1993, Mr.
Asher served as President and Chief Executive Officer of Option Care, Inc., a
home infusion therapy company. Mr. Asher received a B.S. in finance from the
University of Illinois.
ROBERT Y. NEWELL, IV has served as Vice President of Finance and Chief
Financial Officer of Omnicell.com since January 2000. From October 1997 to
January 2000, Mr. Newell was a partner in the Beta Group, a business development
firm. From August 1992 to August 1997, he was Vice President and Chief Financial
Officer of Cardiometrics, Inc., a medical device company. Mr. Newell received a
B.A. in mathematics from the College of William & Mary and an M.B.A. from
Harvard Business School.
S. MICHAEL HANNA has served as Vice President of Sales and Field Operations
of Omnicell.com since July 1998. From July 1996 to July 1998, Mr. Hanna served
as a Regional Vice President of Omnicell.com. From 1981 to July 1996, Mr. Hanna
was employed by Air
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Shields, Inc., a medical equipment manufacturer, in a variety of sales
positions, most recently as Director of North American Sales. Mr. Hanna received
a B.S. in business administration from Shepard College.
JOHN D. HIGHAM has served as Vice President of Engineering and Chief
Technical Officer of Omnicell.com since June 1993. From 1989 to 1993, Mr. Higham
served as Vice President of Engineering of Octel Communications, Inc., a
supplier of voice mail systems. Mr. Higham received engineering and industrial
management degrees from Cambridge University, England, and a master's degree in
electrical engineering from Columbia University.
JEFFREY L. ARBUCKLE has served as Vice President of e-Commerce Market
Development of Omnicell.com since June 1999. From July 1997 to June 1999, Mr.
Arbuckle served as Vice President of Marketing of Omnicell.com. From February
1994 to June 1997, Mr. Arbuckle served as a Regional Vice President of
Omnicell.com. From 1991 to 1994, Mr. Arbuckle served as Regional Manager of
Siemens Infusion, a marketer of drug delivery systems. Mr. Arbuckle received a
B.A. from Indiana University.
HERBERT J. BELLUCCI has served as Vice President of Manufacturing of
Omnicell.com since April 1994. From August 1993 to March 1994, Mr. Bellucci
served as Vice President of Operations of VidaMed, Inc., a medical device
company. Mr. Bellucci received a B.S. in engineering from Brown University and
an M.B.A. from the Stanford Graduate School of Business.
JOSEPH E. COYNE has served as Vice President of Customer Service of
Omnicell.com since August 1997. From May 1994 to August 1997, Mr. Coyne served
as Director of Interface Development of Omnicell.com. From 1984 to May 1994, Mr.
Coyne was employed by HBO & Company, a healthcare information systems company,
in various technical capacities, including Technical Manager and Software
Interface Team Manager. Mr. Coyne received a B.S. in chemical engineering from
Stanford University and an M.B.A. from the Anderson Graduate School of
Management at the University of California, Los Angeles.
WILLIAM R. DIMMER has served as Vice President of Human Resources of
Omnicell.com since March 2000. From July 1998 to March 2000, Mr. Dimmer served
as Vice President of Human Resources and Administrative Services for Collagen
Aesthetics, Inc., a healthcare dermatology products company. From June 1994 to
July 1998, Mr. Dimmer was a Principal and Senior Consultant for Pragma,
International, an international management and consulting firm. Mr. Dimmer
received a B.A. in liberal arts and an advanced management degree from the
University of Chicago, C.R.C.
KENNETH E. PEREZ has served as Vice President of e-Strategies of
Omnicell.com since September 1999. From November 1998 to August 1999, Mr. Perez
served as Senior Vice President of Marketing for CyberCash, Inc., an electronic
commerce payment solutions company. From 1992 to 1998, Mr. Perez held a number
of positions at Hewlett-Packard Company, including Director of Business
Development, Financial Operations Manager of the Channel Products Support
Division and the Finance Department Supervisor for the Commercial Systems
Division. Mr. Perez received a B.A. in international relations from Stanford
University and an M.B.A. from the Anderson Graduate School of Management at the
University of California, Los Angeles.
GARY E. WRIGHT has served as Vice President of e-Commerce Supplier
Relationships of Omnicell.com since September 1999. From July 1998 until August
1999, Mr. Wright served as Vice President of Business Development of
Omnicell.com and from June 1994 until June 1998
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Mr. Wright served as Vice President of Sales and Field Operations of
Omnicell.com. From September 1993 to May 1994, Mr. Wright served as a Vice
President of PCS Health Systems, a managed healthcare company. Mr. Wright
received a B.S. from Northern Illinois University.
GORDON V. CLEMONS has served as a Director of Omnicell.com since December
1995. He has been the President, Chief Executive Officer and Chairman of the
Board of CorVel Corp., a provider of managed healthcare services, since 1991.
Mr. Clemons received a B.S. in business and technology from Oregon State
University and an M.B.A. from the University of Oregon.
FREDERICK J. DOTZLER has served as a Director of Omnicell.com since December
1993. He has been a partner with Medicus Venture Partners, a venture capital
firm, since 1989. Mr. Dotzler received a B.S. in industrial engineering from
Iowa State University, an M.B.A. from the University of Chicago and an advanced
degree in economics from Louvain University, Belgium.
CHRISTOPHER J. DUNN, M.D. has served as a Director of Omnicell.com since
September 1992. Dr. Dunn has been in private medical practice since 1984. Dr.
Dunn received an M.D. and a master's degree in health service administration
from Stanford University. Dr. Dunn is also Director of the Respiratory Care Unit
at Care West Gateway, Director of Subacute Care at Care West Burlingame and
Medical Director of Critical Care Transport for American Medical
Response--Sacramento Valley. He is a fellow of the American College of Chest
Physicians and is an Associate Clinical Professor of Medicine at Stanford
University School of Medicine.
RANDALL A. HACK has served as a Director of Omnicell.com since September
1995. Mr. Hack has been a partner of Nassau Capital L.L.C., a private investment
management firm, since January 1995. From 1990 to 1994, Mr. Hack served as
President and Chief Executive Officer of the Princeton University Investment
Company, Princeton's portfolio of public and private assets. Mr. Hack received a
B.A. from Princeton University and an M.B.A. from Harvard University. Mr. Hack
serves as a director of Cornerstone Properties Inc., a real estate company, and
Cypress Communications, Inc., a communications service provider.
BENJAMIN A. HOROWITZ has served as a Director of Omnicell.com since
September 1999. Mr. Horowitz has been President and Chief Executive Officer of
Loudcloud, Inc., an Internet company, since September 1999. From March 1999 to
September 1999, he served as Vice President of AOL E-commerce Technology
Platform for America On-Line, an Internet service provider. From July 1995 to
March 1999, Mr. Horowitz was employed by Netscape Communications, an Internet
company, in various capacities, including Vice President of the directory and
security product line from 1997 to 1998. From 1994 to 1995, Mr. Horowitz was
employed by Lotus Development Corporation, a software company. Mr. Horowitz
received a B.S. from Columbia University and a M.S. in computer science from the
University of California, Los Angeles.
KEVIN L. ROBERG has served as a Director of Omnicell.com since June 1997.
From December 1995 to June 1998, Mr. Roberg served as Chief Executive Officer
and President of ValueRx, a pharmacy benefit and medication management company
and a former subsidiary of Value Health, Inc., a healthcare benefit and
information service provider. From April 1995 until it was acquired by ValueRx
in December 1995, Mr. Roberg served as President and Chief Executive of
Medintell Systems Corporation, a pharmaceutical information management company.
From June 1994 to April 1995, Mr. Roberg served as President--Western Health
Plans and President--PRIMExtra, Inc. for EBP Health Plans, Inc., a third party
administrator. Mr. Roberg is also a director of Duane Reade, Inc., a retail
pharmacy company, Accredo Health, Inc., a bio-pharmaceutical company, and the
American Society of Health System
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Pharmacists Foundation. Mr. Roberg is also a director and the immediate past
chairman of Children's Hospitals and Clinics of Minneapolis/St. Paul.
Mr. Roberg received a B.S. from the University of Iowa.
JOHN D. STOBO, JR. has served as a Director of Omnicell.com since February
2000. Since November 1998, he has been a managing member of ABS Partners III,
LLC, which is the general partner of ABS Capital Partners III, L.P., a venture
capital firm. From December 1993 to November 1998, Mr. Stobo was a principal of
ABS Capital Partners and related entities. Prior to joining ABS Capital
Partners, Mr. Stobo worked in the healthcare investment banking group at Alex.
Brown & Sons Incorporated, an investment banking firm. Mr. Stobo received a B.A.
from the University of California, San Diego, and an M.B.A. from Cornell
University. Mr. Stobo is also a director of Pointshare Corporation., an Internet
healthcare information forum.
WILLIAM H. YOUNGER, JR. has served as a Director of Omnicell.com since
September 1992. Mr. Younger is a managing director of the general partner of
Sutter Hill Ventures, a venture capital firm, where he has been employed since
1981. Mr. Younger holds a B.S. in electrical engineering from the University of
Michigan and an M.B.A. from Stanford University. Mr. Younger is also a director
of Vitria Technology, Inc., an Internet platform provider.
JAMES C. GAITHER, has served as Secretary of Omnicell.com since November
1995. Mr. Gaither has been a partner of the law firm of Cooley Godward LLP since
1971. Mr. Gaither received a B.A. in economics from Princeton University and a
J.D. from Stanford University. Mr. Gaither currently serves on the Board of
Directors of Amylin Pharmaceuticals, Inc., a biotechnology company, Basic
America, Inc., a food processing company, and Siebel Systems, Inc., an
information software systems company.
There are no family relationships between any of the directors and officers
of Omnicell.com.
BOARD COMMITTEES
The Board of Directors has a Compensation Committee and an Audit Committee.
The Compensation Committee makes recommendations to the Board concerning
salaries and incentive compensation for our officers and employees and
administers our stock option plans. The Audit Committee makes recommendations to
the Board of Directors regarding the selection of independent auditors, reviews
the results and scope of the audit and other services provided by our
independent auditors, and reviews and evaluates our audit and control functions.
Members of these committees will serve until their successors are appointed.
Members of the Compensation Committee are Mr. Dotzler, Dr. Dunn and Mr. Younger.
Members of the Audit Committee are Messrs. Clemons, Hack and Younger.
DIRECTOR COMPENSATION
The members of the Board of Directors do not currently receive compensation
for their services as directors, but are reimbursed for travel expenses in
connection with attendance at Board and committee meetings. We have typically
granted non-employee directors options to purchase 15,625 shares of common stock
at the then fair market value upon election to the Board of Directors. In
February 1998, Dr. Dunn received a non-qualified stock option to purchase 15,625
shares of common stock at an exercise price of $10.40 per share. In September
1999, Mr. Horowitz received a non-qualified stock option to purchase 15,625
shares of common stock at an exercise price of $10.40 per share. These options
vest over a five-year period. In addition, in September 1999, the Board granted
to each of Messrs. Younger, Hack and Dotzler options to purchase 9,375 shares of
common stock at an exercise price of $10.40 per share which vest over a
three-year period. In April 2000, Mr. Horowitz received a non-
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qualified stock option to purchase 6,250 shares of common stock at an exercise
price of $10.40 per share which vests over a thirty month period. Following this
offering, each member of our Board of Directors who is not an employee will be
eligible to receive initial and annual stock option grants to purchase our
common stock. These grants are more fully described below.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to our Chief Executive Officer, our Chairman of the Board and our four next
most highly compensated officers whose annual compensation exceeded $100,000 for
the year ended December 31, 1999. These individuals are referred to as the named
executive officers in this prospectus.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
------------------------------------ ---------------------
OTHER ANNUAL SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS(2)
--------------------------- --------- --------- ------------ ---------------------
<S> <C> <C> <C> <C>
Sheldon D. Asher ..................... $298,000 $129,619 $ 48,000(4) 133,950
President, Chief Executive
Officer and Director
Randall A. Lipps ..................... 298,000 79,619 -- 134,375
Chairman of the Board
and Director
John D. Higham ....................... 187,000 51,578 -- 81,875
Vice President of Engineering
and Chief Technical Officer
S. Michael Hanna ..................... 145,000 88,079 -- 81,875
Vice President of Sales and
Field Operations
Earl E. Fry(3) ....................... 188,000 47,440 10,611(4) 106,250
Vice President and
Chief Financial Officer
</TABLE>
---------
(1) In accordance with Securities and Exchange Commission rules, Other Annual
Compensation in the form of perquisites and other personal benefits has been
omitted where the aggregate amount of such perquisites and other personal
benefits constitutes less than the lesser of $50,000 or 10% of the total
annual salary and bonus for the named executive officer for the fiscal year.
(2) These shares are subject to exercise under stock options granted under our
stock option plans.
(3) Mr. Fry resigned in January 2000.
(4) Represents a loan forgiven by Omnicell.com.
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STOCK OPTION GRANTS
The following table sets forth information regarding options granted to each
of the named executive officers during the year ended December 31, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENTAGE ASSUMED ANNUAL RATES OF
SECURITIES OF TOTAL STOCK PRICE APPRECIATION FOR
UNDERLYING OPTIONS OPTION TERM(1)
OPTIONS GRANTED IN EXERCISE EXPIRATION ------------------------------
NAME GRANTED(2) FISCAL 1999(3) PRICE(4) DATE 5% 10%
---- ---------- -------------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sheldon D. Asher....... 58,950 5.25% $10.40 02/15/09 $ 635,481 $1,374,714
75,000 6.63 10.40 08/31/09 808,500 1,749,000
Randall A. Lipps....... 59,375 5.21 10.40 02/15/09 640,062 1,384,625
75,000 6.63 10.40 08/31/09 808,500 1,749,000
John D. Higham......... 9,375 0.83 10.40 02/15/09 101,062 218,625
12,500 1.11 10.40 08/31/09 134,750 291,500
S. Michael Hanna....... 9,375 0.83 10.40 02/15/09 101,062 218,625
12,500 1.11 10.40 08/31/09 134,750 291,500
Earl E. Fry(5)......... 12,500 1.11 10.40 02/15/09 134,750 291,500
93,750 8.29 10.40 08/31/09 1,010,625 2,186,250
</TABLE>
---------
(1) Potential realizable values are computed by multiplying the number of shares
of common stock subject to a given option by the initial public offering
price of $13.00 per share, assuming that the aggregate stock value derived
from that calculation compounds at the annual 5% or 10% rate shown in the
table for the entire ten-year term of the option and subtracting from that
result the aggregate option exercise price. The 5% and 10% assumed annual
rates of stock appreciation are mandated by the rules of the SEC and do not
reflect our estimate or projection of future stock price growth.
(2) These options were issued under our 1995 Management Stock Option Plan and
our 1999 Equity Incentive Plan. Vesting and exercise terms are as follows:
(a) Options vest over a four year period as follows: 10% in equal monthly
installments during the first year, 20% in equal monthly installments during
the second year, 30% in equal monthly installments during the third year and
40% in equal monthly installments during the fourth year, so that the grant
is fully vested at the end of four years; and (b) Options vest over 30
months at a rate of 1/30 of the total amount vesting each month thereafter.
(3) Based on an aggregate of 1,127,630 shares subject to options granted to
employees (not counting grants to non-employees) of the Company in the year
ended December 31, 1999, including options granted to the named executive
officers.
(4) Options were granted at an exercise price equal to the fair market value of
our Common Stock, as determined by the Board of Directors at the date of the
grant.
(5) At the time of Mr. Fry's resignation, options to purchase 73,704 shares had
vested. Pursuant to the terms of a consulting agreement between Mr. Fry and
us, these options remain outstanding with the same expiration date they had
at the time of grant. The options that had not vested prior to Mr. Fry's
resignation have expired.
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AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth for each of the named executive officers the
shares acquired and the value realized on each exercise of stock options during
the year ended December 31, 1999 and number and value of securities underlying
unexercised options held by the named executive officers at December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 1999(1) DECEMBER 31, 1999(1)(2)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sheldon D. Asher(3)........ 125,000 $1,279,000 375,042 235,086 $3,224,006 $209,864
Randall A. Lipps........... 0 0 121,980 214,357 491,580 119,309
John D. Higham............. 0 0 24,034 52,153 105,435 67,865
S. Michael Hanna........... 0 0 33,305 68,726 0 0
Earl E. Fry................ 0 0 54,216 127,905 361,042 146,309
</TABLE>
---------
(1) Some of the shares are immediately exercisable; however, the shares
purchasable under such options are subject to repurchase by the Company at
the original exercise price paid per share upon the optionee's cessation of
service prior to the vesting of such shares. The shares listed as
exercisable are those shares which are unexercised for which the Company no
longer has a right of repurchase if the option is exercised by the holder;
similarly, the shares listed as unexercisable include those shares over
which the Company has a right of repurchase if the option is exercised by
the holder.
(2) Based on the fair market value of our common stock at year ended December
31, 1999 ($10.40 per share, as determined by our Board of Directors), less
the exercise price payable for such shares.
(3) Dianne Snedden, Mr. Asher's ex-wife, received 62,500 of the shares acquired
on exercise in 1999 and has the right to receive an additional 128,165
shares upon the exercise of other vested options pursuant to a divorce
agreement and any and all proceeds from the sale thereof.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Mr. Dotzler, Dr. Dunn and Mr.
Younger. None of these individuals is or has been an officer or employee of
Omnicell.com. No member of the Compensation Committee of Omnicell.com serves as
a member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of the Omnicell.com Board
of Directors.
STOCK PLANS
1992 EQUITY INCENTIVE PLAN AND 1995 MANAGEMENT STOCK OPTION PLAN
Our 1992 Equity Incentive Plan and 1995 Management Stock Option Plan
(collectively, the Incentive Plans) were adopted by the Board of Directors in
October 1992 and December 1995, respectively. There are currently 3,381,250
shares of common stock authorized for issuance under the Incentive Plans.
The Incentive Plans provide for the grant of incentive stock options under
the Internal Revenue Code of 1986, as amended (the Code), to employees and
nonstatutory stock options, restricted stock purchase awards and stock bonuses
to employees, directors and consultants.
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The Incentive Plans are administered by the Board of Directors or a committee
appointed by the Board which determines recipients and types of awards to be
granted, including the exercise price, number of shares subject to the award and
the exercisability thereof.
The term of stock options granted under the Incentive Plans generally may
not exceed 10 years. The exercise price of options granted under the Incentive
Plans are determined by the Board of Directors, provided that the exercise price
for an incentive stock option cannot be less than 100% of the fair market value
of the common stock on the date of the option grant and the exercise price for a
nonstatutory stock option cannot be less than 85% of the fair market value of
the common stock on the date of option grant. Options granted under the
Incentive Plans vest at the rate specified in the option agreement. No incentive
stock option may be transferred by the optionee other than by will, beneficiary
designation or the laws of descent or distribution or, in certain limited
instances, pursuant to a qualified domestic relations order. The Board of
Directors may grant a nonstatutory stock option that is transferable. An
optionee whose relationship with us or any related corporation ceases for any
reason, other than by death or permanent and total disability, may exercise
options in the three-month period following such cessation, unless such options
terminate or expire sooner or later by their terms. Options may be exercised for
up to twelve months after an optionee's relationship with us and our affiliates
ceases due to death or disability, unless such options expire sooner or later by
their terms.
No incentive stock option may be granted to any person who, at the time of
the grant, owns, or is deemed to own, stock possessing more than 10% of the
total combined voting power of Omnicell.com or any affiliate of Omnicell.com,
unless the option exercise price is at least 110% of the fair market value of
the stock subject to the option on the date of grant and the term of the option
does not exceed five years from the date of grant. The aggregate fair market
value, determined at the time of grant, of the shares of common stock with
respect to which incentive stock options are exercisable for the first time by
an optionee and its affiliates during any calendar year under all of our plans
may not exceed $100,000.
Shares subject to options that have expired or otherwise terminated without
having been exercised in full, or vested in the case of restricted stock awards
will again become available for the grant of awards under the Incentive Plans.
The Board of Directors has the authority to reprice outstanding options and
to offer optionees the opportunity to replace outstanding options with new
options for the same or a different number of shares.
We may grant restricted stock awards under the Incentive Plans that are
subject to a repurchase option by us in accordance with a vesting schedule and
at a price determined by the Board of Directors. Restricted stock purchases must
be at a price equal to at least 85% of the stock's fair market value on the
award date, but stock bonuses may be awarded in consideration of past services
without a purchase payment. Rights under a stock bonus or restricted stock
purchase agreement may not be transferred other than by will, the laws of
descent and distribution or a qualified domestic relations order while the stock
awarded pursuant to such an agreement remains subject to the agreement.
As of May 31, 2000, 995,139 shares of common stock had been issued upon the
exercise of options granted under the Incentive Plans, options to purchase
2,095,993 shares of common stock were outstanding at a weighted average exercise
price of $6.14 per share and 290,029 shares of common stock remained available
for future grant. The Incentive Plans will terminate in October 2002 and
December 2005, respectively, unless sooner terminated by the Board of Directors.
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1997 EMPLOYEE STOCK PURCHASE PLAN
In March 1997, our Board of Directors approved the 1997 Employee Stock
Purchase Plan which was amended in September 1999. The 1997 plan is intended to
qualify as an employee stock purchase plan within the meaning of Section 423 of
the Code. Under the 1997 plan, the Board of Directors may authorize
participation by eligible employees, including officers, in periodic offerings
following the adoption of the 1997 plan. The offering period for any offering
will be no more than 27 months.
The 1997 plan, as amended in September 1999, authorizes the issuance of
468,750 shares of common stock under the 1997 plan which amount is increased
each January 1 by the lesser of 312,500 or 1.5% of the number of shares of
common stock outstanding each January 1. However, the Board of Directors has the
authority to designate a smaller number of shares by which the authorized number
of shares of common stock will be increased on each January 1.
Employees are eligible to participate if they are employed by Omnicell.com
or an affiliate of Omnicell.com designated by the Board of Directors and are
regularly employed at least 20 hours per week and five months per year.
Employees who participate in an offering can have up to 15% of their earnings
withheld pursuant to the 1997 plan and applied, on specified dates determined by
the Board of Directors, to the purchase of shares of common stock. The price of
common stock purchased under the 1997 plan will be equal to 85% of the lower of
the fair market value of the common stock on the commencement date of each
offering period or the relevant purchase date. Employees may end their
participation in the offering at any time during the offering period, and
participation ends automatically on termination of employment with Omnicell.com.
In the event of certain changes of control of Omnicell.com, the Board of
Directors has discretion to provide that each right to purchase common stock
will be assumed or an equivalent right substituted by the successor corporation,
or the Board of Directors may shorten the offering period and provide for all
sums collected by payroll deductions to be applied to purchase stock immediately
prior to the change in control. The 1997 plan will terminate at the Board of
Directors' direction.
As of May 31, 2000, we had issued 247,116 shares of common stock under the
1997 plan.
1999 EQUITY INCENTIVE PLAN
Our 1999 Equity Incentive Plan was adopted by the Board of Directors in
September 1999 and amended in April 2000. The 1999 plan was established to
replace the Incentive Plans. The 1999 plan will terminate in September 2009,
unless sooner terminated by the Board of Directors.
The 1999 plan provides for the grant of incentive stock options under Code
Section 422 to employees, including officers and employee-directors, and
nonstatutory options, restricted stock purchase awards and stock bonuses to
employees, directors and consultants. The 1999 plan is administered by the Board
of Directors or a committee appointed by the Board which determines recipients
and the terms and types of awards to be granted, including the exercise price,
number of shares subject to the award and the exercisability thereof.
Stock option grants under the 1999 plan are made pursuant to an option
agreement. The term of stock options granted under the 1999 plan generally may
not exceed 10 years. The exercise price of options granted under the 1999 plan
is determined by the Board of Directors, provided that the exercise price for an
incentive stock option plan cannot be less than 100% of
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the fair market value of the common stock on the date of the option grant and
the exercise price for a nonstatutory stock option cannot be less than 85% of
the fair market value of the common stock on the date of the option grant.
Options granted under the 1999 plan vest at the rate specified in the option
agreement. No incentive stock options may be transferred by the optionee other
than by will, beneficiary designation or the laws of descent and distribution
or, in certain limited instances, pursuant to a qualified domestic relations
order. The Board of Directors may grant a nonstatutory stock option that is
transferable. An optionee whose relationship with Omnicell.com or any related
corporation ceases for any reason may exercise options in the three-month period
following such cessation, unless such options terminate or expire sooner or
later by their terms. Unless the options expire sooner or later by their terms,
options may be exercised for up to twelve months after an optionee's
relationship with Omnicell.com and our affiliates ceases due to disability and
for up to eighteen months after an optionee's relationship with Omnicell.com and
our affiliates ceases due to death.
No incentive stock options may be granted to any person who, at the time of
the grant, owns, or is deemed to own, stock possessing more than 10% of the
total combined voting power of Omnicell.com or any affiliate of Omnicell.com,
unless the option exercise price is at least 110% of the fair market value of
the stock subject to the option on the date of the grant, and the term of the
option does not exceed five years from the date of the grant. The aggregate fair
market value, determined at the time of the grant, of the shares of common stock
with respect to which incentive stock options are exercisable for the first time
by an optionee during any calendar year, under all such plans of Omnicell.com
and its affiliates, may not exceed $100,000.
Three million one hundred twenty-five thousand shares of common stock are
authorized for issuance under the 1999 plan. Effective January 1, 2001, the
number of shares of common stock authorized for issuance under the 1999 plan
will be increased on each January 1 by the lesser of (i) 1,875,000 shares, or
(ii) 5.0% of the number of shares of common stock outstanding on that date.
However, the Board of Directors has the authority to designate a smaller number
of shares by which the authorized number of shares of common stock will be
increased on each January 1.
Shares subject to stock awards that have expired or otherwise terminated
without having been exercised in full, or vested in the case of restricted stock
awards, shall again become available for the grant of awards under the 1999
plan. Shares subject to stock awards issued under the 1999 plan that have
expired or otherwise terminated without having been exercised in full, or vested
in the case of restricted stock awards, shall also become available for the
grant of awards under the 1999 plan. Shares issued under the 1999 plan may be
previously unissued shares or reacquired shares bought on the market or
otherwise.
Restricted stock purchase awards granted under the 1999 plan may be granted
pursuant to a repurchase option in favor of Omnicell.com in accordance with a
vesting schedule and at a price determined by the Board of Directors. Restricted
stock purchases must be at a price equal to 85% of the stock's fair market value
on the award date, but stock bonuses may be awarded in consideration of past
services without a purchase payment. Rights under a stock bonus or restricted
stock purchase agreement may not be transferred other than by will, the laws of
descent and distribution or a qualified domestic relations order while the stock
awarded pursuant to such an agreement remains subject to the agreement.
Under certain changes in control of Omnicell.com including (i) a
dissolution, liquidation or sale of substantially all of our assets, (ii) a
merger or consolidation in which Omnicell.com is not the surviving corporation,
or (iii) a reverse merger in which Omnicell.com is the surviving
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corporation but the shares of common stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether
securities, cash or otherwise, then to the extent permitted by applicable law,
(i) any surviving corporation will assume any stock awards, including stock
options, outstanding under the 1999 plan or substitute similar stock awards, or
(ii) such stock awards under the 1999 plan will continue in full force and
effect. In the event any surviving corporation refuses to assume or continue
such stock awards, or to substitute similar stock awards for those outstanding
under the 1999 plan, then the stock awards held by participants whose service
with Omnicell.com or surviving corporation has not terminated shall become fully
vested and exercisable prior to the change in control and any such Stock Award
that are not exercised prior to the change in control will terminate thereafter.
As of May 31, 2000, 148,768 shares of common stock had been issued upon
exercise of options granted under the 1999 plan. Options to purchase 1,275,500
shares of common stock were outstanding at a weighted average exercise price of
$10.40 per share and 1,700,732 shares of common stock remained available for
future grant. The 1999 plan will terminate in September 2009, unless sooner
terminated by the Board of Directors.
NON-EMPLOYEE DIRECTOR STOCK OPTION GRANTS
The 1999 plan provides for automatic stock option grants to non-employee
directors on the Board. After the offering, each person who is not an employee
of the Company who is elected or appointed to the Board will be granted an
initial grant on the date of his or her election or appointment to purchase
25,000 shares of the common stock of the Company at the fair market value of the
common stock on that grant date. On the date of the offering, non-employee
directors of the Board who have not previously been granted options to purchase
the common stock of the Company will receive an initial stock option grant as if
he or she were first elected or appointed to the Board after the offering. The
non-employee directors become vested in each initial stock option grant 1/36
after each month of service on the Board from the stock option grant date so
that the directors will become vested fully after 36 months of service on the
Board after the grant.
After the offering, each person who is a non-employee director on the day
after each annual stockholders' meeting, shall, on that date, be granted an
annual stock option grant to purchase 6,250 shares of the common stock of the
Company at the fair market value of the common stock of the Company on that
grant date. The non-employee directors become vested in each annual stock option
grant 1/12 after each month of service on the Board from the stock option grant
date so that the directors will become vested fully after 12 months of service
on the Board after the grant.
The non-employee director stock options will have a maximum term of ten
years and generally must be exercised prior to the earliest of eighteen months
following the death of the non-employee directors, twelve months from the
termination of service on the Board by the non-employee director due to a
disability, three months from the termination of the service of non-employee
director for any other reason, or the expiration of the original term of the
stock options. The stock options shall not be transferable except as otherwise
provided in a stock option agreement to the extent permitted by federal
securities laws and regulations. If there is a change of control as described
above, the directors will become fully vested in their unvested portion of their
stock options and the options will be exercisable for a period of the shorter of
twelve months following the termination of their service on the Board or the
original term of the stock options.
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401(k) PLAN
In October, 1993, we adopted a tax-qualified employee savings plan under
Section 401(k) of the Code covering our employees. Pursuant to the 401(k) plan,
eligible employees may elect to reduce their current compensation by up to the
lesser of 15% of their annual compensation or the statutorily prescribed annual
limit and have the amount of such reduction contributed to the 401(k) plan. In
addition, eligible employees may make rollover contributions to the 401(k) plan
from a tax-qualified retirement plan. The 401(k) plan is intended to qualify
under Section 401(a) of the Code, so that contributions by employees or
Omnicell.com to the 401(k) plan, and income earned on the 401(k) plan
contributions, are not taxable to employees until withdrawn from the 401(k)
plan, and so that contributions by Omnicell.com, if any, will be deductible by
Omnicell.com when made. We do not presently intend to make any matching or
discretionary contributions.
EMPLOYMENT ARRANGEMENTS
In December 1993, Omnicell.com and Mr. Asher entered into an employment
agreement whereby Mr. Asher agreed to serve as President and Chief Executive
Officer. The agreement provides Mr. Asher with: (1) an annual base salary of at
least $200,000; (2) a performance bonus of at least $50,000; and (3) $1,000,000
of term life insurance, the owner and beneficiary of which are to be designated
by Mr. Asher. In the event of termination without cause, Mr. Asher will be
entitled to receive the base salary amount then in effect plus $50,000 for one
year following the date of termination.
In February 1998 and in February 2000, our Board of Directors approved the
acceleration, under certain circumstances, of all prior stock options granted to
each officer under our equity incentive plans. Under this arrangement, the
unvested portion of each officer's stock options under our equity incentive
plans becomes fully-vested and exercisable if Omnicell.com is acquired and the
officer is (1) terminated without cause; (2) the principal place of performance
of the officer's responsibilities and duties is changed; or (3) there is a
material reduction in the officer's responsibilities and duties.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant indemnity to directors and
officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities, including reimbursement for expenses
incurred, arising under the Securities Act.
As permitted by Delaware law, our Certificate of Incorporation, which will
become effective upon the closing of this offering, includes a provision that
eliminates the personal liability of its directors for monetary damages for
breach of fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to us or our
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware law regarding unlawful dividends and
stock purchases; or
- for any transaction from which the director derived an improper personal
benefit.
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As permitted by Delaware law, our Certificate of Incorporation and/or our
Bylaws, which will become effective upon the closing of this offering, provide
that:
- we are required to indemnify our directors and officers to the fullest
extent permitted by Delaware law, so long as such person acted in good
faith and in a manner the person reasonably believed to be in or not
opposed to the best interests of Omnicell.com, and with respect to any
criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful.
- we are permitted to indemnify our other employees to the extent that we
indemnify our officers and directors, unless otherwise required by law,
our Certificate of Incorporation, our Bylaws or agreements;
- we are required to advance expenses, as incurred, to our directors and
officers in connection with a legal proceeding to the fullest extent
permitted by Delaware law, subject to certain very limited exceptions; and
- the rights conferred in our Bylaws are not exclusive.
Prior to the closing of this offering, we intend to enter into indemnity
agreements with each of our current directors and officers to give such
directors and officers additional contractual assurances regarding the scope of
the indemnification set forth in our Certificate of Incorporation and our Bylaws
and to provide additional procedural protections. At present, there is no
pending litigation or proceeding involving any of our directors, officers or
employees regarding which indemnification is sought, nor are we aware of any
threatened litigation that may result in claims for indemnification.
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RELATED PARTY TRANSACTIONS
Pursuant to his employment agreement, in December 1993, we loaned Sheldon
Asher an aggregate of $200,000 with an interest rate of 4% per year for the
purchase of 92,165 shares of Series D Preferred Stock, convertible into common
stock on a one-for-one basis. The purchase price of $2.17 per share was equal to
the fair market value of the shares at the time of the sale. Twenty percent of
this loan matured each year beginning on January 1, 1995 and was forgiven at
such time so long as Mr. Asher remained employed by us. This loan has been
completely forgiven.
Pursuant to the Series E Preferred Stock Purchase Agreements dated December
22, 1993, the purchasers therein agreed to vote their shares to elect to our
Board of Directors a designated representative of Medicus Venture Partners 1993.
Medicus' right to elect a representative to our Board of Directors expires
following the completion of this offering. Frederick J. Dotzler has been the
designated representative thereunder.
Pursuant to the terms of the Series H Stock Purchase Agreement, dated
September 18, 1995, we agreed to nominate and use our best efforts to elect the
designated representatives of Nassau Capital, L.L.C. to our Board of Directors.
Nassau's right to elect a representative to our Board of Directors expires
following the completion of this offering. Randall A. Hack is the current
designated representative of Nassau Capital.
We entered into a Stock Purchase Agreement with Sun Healthcare, dated
June 7, 1996, for 1,802,000 shares of Series I Preferred Stock. In July 1996,
the non-voting Series I Preferred Stock was converted into voting Series J
Preferred Stock on a one for one basis.
In the years ended December 31, 1997, 1998 and 1999, we recorded revenues of
$7.1 million, $9.9 million and $5.1 million, from sales to Sun Healthcare,
representing approximately 19.7%, 20.5% and 9.7% of our revenues, respectively,
for the year. Sun Healthcare earned cash rebates of $0.7 million and $0.4
million for purchases made from us during the years ended December 31, 1997 and
1998, respectively.
In February 1999, Sun Healthcare exercised its right to redeem all of its
shares of Series J Preferred Stock on a quarterly basis, over the succeeding ten
quarters. For all of 1999 and the first quarter of 2000, Sun Healthcare redeemed
901,00 shares of Series J Preferred Stock at a price of $14.03 per share for an
aggregate redemption amount of approximately $12.6 million. In addition, we paid
Sun Healthcare accrued interest on the Series J Preferred Stock of approximately
$2.0 million. These redemptions and interest payments were paid for with cash of
$8.3 million and the balance was paid by offsetting Sun Healthcare's outstanding
accounts receivable balances of $6.3 million. Sun Healthcare's right to redeem
its remaining shares of Series J Preferred Stock shall terminate on the closing
of this offering.
In April 2000, our Board of Directors granted options to purchase an
aggregate of 334,375 shares of common stock to our officers. The exercise price
of these options is $10.40 per share which the Board determined to be the fair
market value of the common stock on the date of grant. These options vest
monthly over a 30 month period.
Pursuant to the terms of the Series K Stock Purchase Agreement, dated
January 20, 2000, we agreed to nominate and use our best efforts to elect the
designated representative of ABS Capital Partners to our Board of Directors.
ABS's right to elect a representative to our Board of Directors expires
following the completion of this offering. John D. Stobo, Jr. is the current
designated representative of ABS Capital Partners.
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<PAGE>
James C. Gaither, Secretary of Omnicell.com and a partner at Cooley Godward
LLP, our legal counsel, owns an aggregate of 16,209 shares (or 11,029 shares as
converted and per the 0.625 for 1 reverse stock split) of our preferred stock.
In April and May 2000, we made loans to the following officers:
<TABLE>
<CAPTION>
NAME AMOUNT DUE DATE
---- ------------- --------------
<S> <C> <C>
Sheldon D. Asher............................................ $2,006,879.50 April 20, 2003
Jeffrey L. Arbuckle......................................... 399,997.00 May 4, 2003
William R. Dimmer........................................... 399,997.00 May 4, 2003
S. Michael Hanna............................................ 399,997.00 May 4, 2003
Herbert J. Bellucci......................................... 346,810.00 April 20, 2003
Gary E. Wright.............................................. 37,500.00 May 24, 2003
</TABLE>
Each loan was made under a promissory note secured by the pledge of shares of
our common stock acquired upon exercise of stock options. The notes bear
interest at 6.71% per year.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our outstanding common stock as of May 31, 2000, and as
adjusted to reflect the sale of the shares of common stock offered hereby: (1)
by each person or entity who is known by us to own beneficially more than 5% of
the common stock; (2) by each of our directors; (3) by our Chief Executive
Officer, (4) our other named executive officers, and (5) by all of our directors
and executive officers as a group. The table assumes the conversion of all
outstanding Preferred Stock into common stock upon the completion of this
offering. Except as otherwise noted, the stockholders named in the table have
sole voting and investment power with respect to all shares of common stock
shown as beneficially owned by them, subject to applicable community property
laws. Unless otherwise indicated in the table, the address of each stockholder
identified in the table is 1101 East Meadow Drive, Palo Alto, California 94303.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
5% STOCKHOLDERS, EXECUTIVE OFFICERS, OWNED PRIOR TO OFFERING OWNED AFTER OFFERING
DIRECTORS, AND DIRECTORS AND EXECUTIVE --------------------------- ---------------------------
OFFICERS AS A GROUP NUMBER PERCENTAGE(1) NUMBER PERCENTAGE(1)
-------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Entities affiliated with Sutter Hill 2,565,013 18.44 2,565,013 14.32
Ventures(2) ...........................
755 Page Mill Road, Suite A-200
Palo Alto, CA 94306
ABS Capital Partners III, L.P.(3) ....... 1,876,301 13.49 1,876,301 10.47
101 California Street, 47(th) floor
San Francisco, CA 94111
Medicus Venture Partners(4) ............. 1,015,801 7.30 1,015,801 5.67
2180 Sand Hill Road, Suite 400
Menlo Park, CA 94025
Nassau Capital Partners L.P.(5) ......... 954,369 6.86 954,369 5.33
22 Chambers Street
Princeton, NJ 08542
Entities affiliated with Oak Investment
Partners(6)............................ 679,347 5.65 679,347 4.24
One Gorham Island
Westport, CT 06880
William H. Younger, Jr.(7)............... 2,565,013 18.44 2,565,013 14.32
John D. Stobo, Jr. (8)................... 1,876,301 13.49 1,876,301 10.47
Frederick J. Dotzler(9).................. 1,015,801 7.3 1,015,801 5.67
Randall A. Hack(10)...................... 954,369 6.86 954,369 5.33
Randall A. Lipps(11)..................... 784,588 6.43 784,588 4.84
Sheldon D. Asher(12)..................... 605,252 4.95 605,252 3.73
Christopher J. Dunn, M.D.(13)............ 43,552 * 43,552 *
Gordon V. Clemons(14).................... 14,322 * 14,322 *
Kevin L. Roberg(15)...................... 9,635 * 9,635 *
Benjamin A. Horowitz(16)................. 2,604 * 2,604 *
John D. Higham(17)....................... 187,305 1.55 187,305 1.17
S. Michael Hanna(18)..................... 54,895 * 54,895 *
James C. Gaither......................... 11,029 * 11,029 *
All directors and executive officers as a
group (21 persons)(19)................. 8,526,674 58.24 8,526,674 45.74
</TABLE>
---------
* Represents beneficial ownership of less than 1.0%.
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<PAGE>
(1) Applicable percentage ownership is based on 13,911,639 shares of common
stock outstanding as of May 31, 2000. Beneficial ownership is determined in
accordance with the rules of the Commission, based on factors including
voting and investment power with respect to shares, subject to the
applicable community property laws. Shares of common stock subject to
options or warrants currently exercisable, or exercisable within 60 days
after May 31, 2000, are deemed outstanding for the purpose of computing the
percentage ownership of the person holding such options or warrants, but
are not deemed outstanding for computing the percentage ownership of any
other person.
(2) Includes 1,189,329 shares of common stock owned by Sutter Hill Ventures, A
California Limited Partnership (Sutter Hill); 309,327 shares of common
stock owned by Mr. Younger, a member of our Board of Directors and a
managing director of Sutter Hill Ventures LLC, the general partner of
Sutter Hill; 6,771 which are subject to repurchase by the Company within 60
days of May 31, 2000; 716,763 shares owned by the four other managing
directors and one other director of Sutter Hill Ventures LLC, a retirement
trust of one of the managing directors of Sutter Hill LLC, and family
partnerships associated with the managing directors of Sutter Hill LLC; and
349,594 shares owned by other entities and individuals associated with
Sutter Hill Ventures. Mr. Younger and the other managing directors of
Sutter Hill Ventures LLC disclaim beneficial ownership in the shares listed
above except as to their individual pecuniary interest therein.
(3) Includes (1) 1,302 shares of common stock held by Mr. Stobo, all of which
are subject to stock options exercisable within 60 days and (2) 1,874,999
shares of common stock held by ABS Capital Partners III, L.P. Mr. Stobo, a
member of our Board of Directors, is a managing member of ABS Partners III,
LLC, the general partner of ABS Capital Partners III, L.P. Mr. Stobo
disclaims beneficial ownership of such shares held by ABS Capital Partners
except to the extent of his pecuniary interest therein.
(4) Includes (1) 12,500 shares of common stock held by Mr. Dotzler, 2,604 of
which are subject to stock options exercisable within 60 days, (2) 568,182
shares of common stock held by Medicus Venture Partners 1993, L.P.;
(3) 337,481 shares of common stock held by Medicus Venture Partners
1994, L.P.; and (4) 95,034 shares of common stock held by Medicus Venture
Partners 1995, L.P. (the Medicus Entities). Medicus Management Partners and
a limited partnership affiliated with The Hillman Company are the general
partners of each of the Medicus Entities. Mr. Dotzler, a member of our
Board of Directors, and John Reher are general partners of Medicus
Management Partners. The Hillman Company is controlled by Henry L. Hillman,
Elsie Hilliard Hillman and C. G. Grefenstette, Trustees of the Henry L.
Hillman Trust U/A dated November 18, 1985. The trustees share the power to
vote and dispose of shares representing a majority of the voting shares of
the Hillman Company. Mr. Dotzler disclaims beneficial ownership of such
shares held by the Medicus Entities, except to the extent of his pecuniary
interest therein.
(5) Includes 945,941 shares of common stock held by Nassau Capital Partners
L.P., 5,824 shares of common stock held by NAS Partners L.L.C. and 2,604
shares subject to stock options exercisable in 60 days granted to
Mr. Hack. Mr. Hack, a member of our Board of Directors, is a member of NAS
Partners L.L.C. and a member of Nassau Capital L.L.C., the sole general
partner of Nassau Capital Partners L.P. The members of Nassau Capital
L.L.C., disclaim that they are beneficial owners of shares of Nassau
Capital Partners L.P. Mr. Hack disclaims beneficial ownership of the shares
held by such entities except to the extent of his proportionate interest
therein.
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<PAGE>
(6) Includes 663,858 shares of common stock held by Oak Investment Partners VI,
Limited Partnership and 15,489 shares of common stock held by Oak VI
Affiliates Fund, Limited Partnership.
(7) Includes 1,189,329 shares of common stock owned by Sutter Hill Ventures, A
California Limited Partnership (Sutter Hill); 309,327 shares of common
stock owned by Mr. Younger, a member of our Board of Directors and a
managing director of Sutter Hill Ventures LLC, the general partner of
Sutter Hill; 6,771 which are subject to repurchase by the Company within 60
days of May 31, 2000; 716,763 shares owned by the four other managing
directors and one other director of Sutter Hill Ventures LLC, a retirement
trust of one of the managing directors of Sutter Hill LLC, and family
partnerships associated with the managing directors of Sutter Hill LLC; and
349,594 shares owned by other entities and individuals associated with
Sutter Hill Ventures. Mr. Younger and the other managing directors of
Sutter Hill Ventures LLC disclaim beneficial ownership in the shares listed
above except as to their individual pecuniary interest therein.
(8) Includes (1) 1,302 shares of common stock held by Mr. Stobo, all of which
are subject to options exercisable within 60 days and (2) 1,874,999 shares
of common stock held by ABS Capital Partners III, L.P. Mr. Stobo, a member
of our Board of Directors, is a managing member of ABS Partners III, LLC,
the general partner of ABS Capital Partners III, L.P. Mr. Stobo disclaims
beneficial ownership of such shares held by ABS Capital Partners III, L.P.
except to the extent of his pecuniary interest therein.
(9) Includes (1) 12,500 shares of common stock held by Mr. Dotzler, 2,604 of
which are subject to stock options exercisable within 60 days, (2) 568,182
shares of common stock held by Medicus Venture Partners 1993, L.P.;
(3) 337,481 shares of common stock held by Medicus Venture Partners
1994, L.P.; and (4) 95,034 shares of common stock held by Medicus Venture
Partners 1995, L.P. (the Medicus Entities). Medicus Management Partners and
a limited partnership affiliated with The Hillman Company are the general
partners of each of the Medicus Entities. Mr. Dotzler, a member of our
Board of Directors, and John Reher are general partners of Medicus
Management Partners. The Hillman Company is controlled by Henry L. Hillman,
Elsie Hilliard Hillman and C. G. Grefenstette, Trustees of the Henry L.
Hillman Trust U/A dated November 18, 1985. The trustees share the power to
vote and dispose of shares representing a majority of the voting shares of
the Hillman Company. Mr. Dotzler disclaims beneficial ownership of such
shares held by the Medicus Entities, except to the extent of his pecuniary
interest therein.
(10) Includes 945,941 shares of common stock held by Nassau Capital Partners
L.P., 5,824 shares of common stock held by NAS Partners L.L.C. and 2,604
shares subject to stock options exercisable in 60 days granted to
Mr. Hack. Mr. Hack, a member of our Board of Directors, is a member of NAS
Partners L.L.C. and a member of Nassau Capital L.L.C., the sole general
partner of Nassau Capital Partners L.P. The members of Nassau Capital
L.L.C., disclaim that they are beneficial owners of shares of Nassau
Capital Partners L.P. Mr. Hack disclaims beneficial ownership of the
shares held by such entities except to the extent of his proportionate
interest therein.
(11) Includes 168,963 shares subject to stock options exercisable within 60
days. Includes an aggregate of 95,000 shares held in trusts, of which
Mr. Lipps is a trustee, for the benefit of Mr. Lipps' minor children.
(12) Includes 119,320 shares held by the Sheldon D. Asher Trust, dated
August 31, 1998. Also includes 204,740 shares subject to stock options
exercisable within 60 days and 97,292 shares subject to repurchase by the
Company within 60 days of May 31, 2000. Diane
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<PAGE>
Snedden, Mr. Asher's ex-wife, has the right to receive 128,165 shares upon
the exercise of vested options pursuant to a divorce agreement. Mr. Asher
disclaims beneficial ownership of these shares. Also includes (1) 25,000
shares held by the Asher Family Special Trust, dated November 25, 1991,
FBO Rachel A. Asher, Mr. Asher's minor child; (2) 25,000 shares held by
the Asher Family Special Trust, dated November 25, 1991, FBO Emily R.
Asher, Mr. Asher's minor child, for both of which Diane Snedden is
Trustee; (3) 688 shares held by Bernard Asher, custodian for Emily Rose
Asher under IL Uniform Trust to Minors Act; and (4) 688 shares held by
Bernard Asher, custodian for Rachel Ann Asher under IL Uniform Trust to
Minors Act. Bernard Asher is Mr. Asher's brother. Mr. Asher disclaims
beneficial ownership of these shares.
(13) Includes 4,948 shares subject to stock options exercisable within 60 days.
(14) Consists of 14,322 shares subject to stock options exercisable within 60
days.
(15) Consists of 9,635 shares subject to stock options exercisable within 60
days.
(16) Consists of 2,604 shares subject to stock options exercisable within 60
days.
(17) Includes (1) 34,656 shares subject to stock options exercisable within 60
days; (2) 138,620 shares held by the Higham-Bunker 1991 Family Trust, John
D. Higham or Carol L. Bunker, Trustees; and (3) 6,250 shares held by John
D. Higham or Carol L. Bunker, Guardians of Christina L. Higham.
(18) Includes 8,128 shares subject to stock options exercisable within 60 days
and 8,722 shares subject to repurchase by the Company within 60 days of
May 31, 2000.
(19) Includes an aggregate of 728,718 shares subject to stock options
exercisable within 60 days and 181,682 shares subject to repurchase by the
Company within 60 days of May 31, 2000.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon the closing of this offering, we will be authorized to issue 50,000,000
shares of common stock, $.001 par value, and 5,000,000 shares of undesignated
preferred stock, $.001 par value. Immediately following the closing of this
offering, based on the number of shares outstanding as of May 31, 2000, there
were 13,911,639 shares of common stock outstanding held of record by
approximately 516 stockholders assuming the conversion of preferred stock.
COMMON STOCK
The issued and outstanding shares of common stock are, and the shares of
common stock being offered by us hereby will be upon payment therefor, validly
issued, fully paid and nonassessable. Subject to the prior rights of the holders
of any preferred stock, the holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available therefor at such
times and in such amounts as the Board of Directors may from time to time
determine. The shares of common stock are neither redeemable nor convertible and
the holders thereof have no preemptive or subscription rights to purchase any of
our securities. Upon liquidation, dissolution or winding up of Omnicell.com, the
holders of common stock are entitled to receive pro rata our assets which are
legally available for distribution, after payment of all debts and other
liabilities and subject to the prior rights of any holders of any preferred
stock then outstanding. Each outstanding share of common stock is entitled to
one vote on all matters submitted to a vote of stockholders and has cumulative
voting rights with respect to the election of directors.
WARRANTS
As of May 31, 2000, there were outstanding warrants to purchase the
following: (1) an aggregate of 11,521 shares of common stock at an exercise
price of $1.74 per share, (2) an aggregate of 12,738 shares of common stock at
an exercise price of $9.84 per share and (3) an aggregate of 42,458 shares of
common stock at an exercise price of $5.88 per share. Warrants to purchase (1)
an aggregate of 59,604 shares of common stock expire three years from the
effective date of this offering and (2) an aggregate of 7,113 shares of common
stock expire on July 7, 2005.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of preferred stock
will be converted into shares of common stock, provided that the price per share
to the public (prior to the deduction of underwriter commissions and offering
expenses) is not less than $11.78 per share and the aggregate price to the
public is not less than $10,000,000. Outstanding shares of the Series J
preferred stock are currently being redeemed at $14.03274 per share on a
quarterly basis spread out in ten equal quarterly installments beginning on
March 31, 1999. The unredeemed balance of the Series J preferred stock accrues
interest at 9 1/2% per year. Effective upon the closing of this offering, we
will be authorized to issue 5,000,000 shares of undesignated preferred stock.
The Board of Directors will have the authority to issue the preferred stock in
one or more series and to fix the price, rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting a series or the designation of
such series, without any further vote or action by our stockholders. The
issuance of preferred stock, while providing desirable flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of
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<PAGE>
delaying, deferring or preventing a change in control of Omnicell.com without
further action by the stockholders and may adversely affect the market price of
the common stock and the voting and other rights of the holders of common stock.
We have no current plans to issue any shares of preferred stock.
REGISTRATION RIGHTS
The holders of approximately 11,689,174 shares of common stock, as of
May 31, 2000, and their permitted transferees are entitled to certain rights
with respect to the registration of these shares under the Securities Act. Under
the terms of agreements between us and the holders, the holders of at least 40%
of these shares may require, on two occasions, that we use our best efforts to
register these shares for public resale. The holders of these shares may not
exercise this right until four months after the effective date of this offering.
In addition, if we propose to register any of our securities under the
Securities Act, either for our own account or for the account of other security
holders exercising registration rights, the holders are entitled to notice of
such registration and are entitled to include shares of such common stock
therein. The holders of these shares may also require us on no more than four
occasions to register all or a portion of these shares on Form S-3 under the
Securities Act when use of such form becomes available to us. All such
registration rights are subject to conditions and limitations, including the
right of the underwriters of an offering to limit the number of shares to be
included in such registration. If such holders, by exercising their demand
registration rights, cause a large number of securities to be registered and
sold in the public market, such sales could have an adverse effect on the market
price for our common stock. If we were to initiate a registration and include
shares held by such holders pursuant to the exercise of their piggyback
registration rights, such sales may have an adverse effect on our ability to
raise capital.
ANTI-TAKEOVER PROVISIONS
DELAWARE LAW
Upon the closing of this offering, we will be subject to the provisions of
Section 203 of the Delaware General Corporation Law (the Anti-Takeover Law)
regulating corporate takeovers. The Anti-Takeover Law prevents Delaware
corporations, including those that are listed on the Nasdaq National Market,
from engaging, under certain circumstances, in a "business combination," which
includes a merger or sale of more than 10% of the corporation's assets, with any
"interested stockholder," that is, a stockholder who owns 15% or more of the
corporation's outstanding voting stock, as well as affiliates and associates of
any such person, for three years following the date that such stockholder became
an "interested stockholder" unless:
- the transaction that resulted in the stockholder becoming an "interested
stockholder" was approved by the board of directors prior to the date the
"interested stockholder" attained such status;
- upon consummation of the transaction that resulted in the stockholder
becoming an "interested stockholder," the "interested stockholder" owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding those shares owned by (i)
persons who are directors as well as officers and (ii) employee stock
plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in
a tender or exchange offer; or
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<PAGE>
- on or subsequent to such date, the "business combination" is approved by
the board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least two-thirds of the
outstanding voting stock that is not owned by the "interested
stockholder."
A Delaware corporation may "opt out" of the Anti-Takeover Law with an
express provision in its original certificate of incorporation or an express
provision in its certificate of incorporation or bylaws resulting from a
stockholders' amendment approved by at least a majority of the outstanding
voting shares. We have not "opted out" of the provisions of the Anti-Takeover
Law. This statute could prohibit or delay mergers or other takeover or change-
of-control attempts with respect to Omnicell.com and, accordingly, may
discourage attempts to acquire us.
CHARTER AND BYLAW PROVISIONS
Our Certificate of Incorporation and Bylaws include a number of provisions
that may have the effect of deterring or impeding hostile takeovers or changes
of control or management. These provisions include:
- our Board of Directors is classified into three classes of directors with
staggered three-year terms;
- the authority of our Board of Directors to issue up to 5,000,000 shares of
preferred stock and to determine the price and the rights preferences and
privileges of these shares, without stockholder approval;
- all stockholder action must be effected at a duly called meeting of
stockholders and not by written consent; and
- the elimination of cumulative voting.
Such provisions may have the effect of delaying or preventing a change of
control.
Our Certificate of Incorporation and Bylaws provide that we will indemnify
officers and directors against losses that they may incur in investigations and
legal proceedings resulting from their services to us, which may include
services in connection with takeover defense measures. Such provisions may have
the effect of preventing changes in our management.
OPTION ACCELERATION
In February 1998 and February 2000, our Board of Directors approved
resolutions providing that the unvested portion of each officer's stock options
under our equity incentive plans becomes fully vested and exercisable if we are
acquired and the officer is thereafter (1) terminated without cause; (2) forced
to change the principal place of performance of the officer's responsibilities
and duties; or (3) placed in a position with a material reduction in the
officer's responsibilities and duties.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is .
NATIONAL MARKET LISTING
We have applied for listing of our common stock on the Nasdaq Stock Market's
National Market under the symbol "OMCL."
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of our common stock in the public
market could adversely affect prevailing market prices from time to time. For a
period of 180 days or more following this offering substantial amounts of our
common stock will not be freely tradable due to contractual and legal
restrictions as described below. Sales of substantial amounts of our common
stock in the public market after these restrictions lapse could depress the
prevailing market price and limit our ability to raise equity capital in the
future.
Upon the closing of this offering and based on shares outstanding as of
May 31, 2000, we will have an aggregate of 17,911,639 shares of common stock
outstanding, assuming no exercise of the underwriters' over-allotment option and
no exercise of outstanding options or warrants. Of the outstanding shares, the
shares sold in this offering will be freely tradable, except that any shares
held by our "affiliates", as that term is defined in Rule 144 promulgated under
the Securities Act, may only be sold in compliance with the limitations
described below. The remaining shares of common stock held by existing
stockholders will be deemed restricted securities as defined under Rule 144.
Restricted securities may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rules 144, 144(k) or 701
promulgated under the Securities Act, which are summarized below. In accordance
with the lock-up agreements described below and subject to the provisions of
Rules 144, 144(k) and 701, additional shares will be available for sale in the
public market at the following times:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
---------------- ------------------------------------------------------------
<S> <C>
After the date of this prospectus
90 days from the date of this prospectus
At various times after 180 days from the date of this
prospectus
</TABLE>
In general, under Rule 144, as currently in effect, a person, or persons
whose shares are aggregated, including an affiliate, who has beneficially owned
shares for at least one year is entitled to sell, within any three-month period
commencing 90 days after the date of this prospectus, a number of shares that
does not exceed the greater of 1% of the then outstanding shares of common
stock, which will equal approximately 179,116 shares immediately after this
offering or the average weekly trading volume in the common stock during the
four calendar weeks preceding the date on which notice of such sale is filed,
subject to certain restrictions. In addition, a person who is not deemed to have
been an affiliate of ours at any time during the 90 days preceding a sale and
who has beneficially owned the shares proposed to be sold for at least two years
would be entitled to sell such shares under Rule 144(k) without regard to the
requirements described above. To the extent that shares were acquired from an
affiliate of ours, the person's holding period for the purpose of effecting a
sale under Rule 144 commences on the date of transfer from the affiliate.
Employees, officers, directors, advisors or consultants who purchased our
common stock pursuant to a written compensatory plan or contract are entitled to
rely on the resale provisions of Rule 701, which permits non-affiliates to sell
their Rule 701 shares without having to comply with the public information,
holding period, volume limitation or notice provisions of Rule 144 and permits
affiliates to sell their Rule 701 shares without having to comply with Rule
144's holding period restrictions, in each case commencing 90 days after we
become subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934.
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<PAGE>
LOCK-UP AGREEMENTS. Our directors, officers and stockholders who hold
approximately shares in the aggregate, have agreed that they will
not offer, sell or agree to sell, directly or indirectly, or otherwise dispose
of any shares of common stock without the prior written consent of Deutsche Bank
Securities Inc. for a period of 180 days from the date of this prospectus.
Please see "Underwriting."
We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of the prospectus, except we
may issue, and grant options to purchase, shares of common stock under the 1999
Stock Option Plan. In addition, we may issue shares of common stock in
connection with any acquisition of another company if the terms of such issuance
provide that such common stock shall not be resold prior to the expiration of
the 180-day period referenced in the preceding sentence.
REGISTRATION RIGHTS. Following this offering, some of our stockholders will
have registration rights. Please see, "Description of Capital
Stock--Registration Rights."
STOCK OPTIONS AND WARRANTS. Options to purchase an aggregate of 3,371,493
shares of our common stock are outstanding as of May 31, 2000 under our 1992
Equity Incentive Plan, our 1995 Management Stock Option Plan and our 1999 Equity
Incentive Plan. Following this offering, we expect to register the shares
underlying these options. This registration statement will automatically become
effective upon filing. Accordingly, subject to the exercise of such options,
shares included in such registration statement will be available for sale in the
open market immediately after the 180-day lock-up period expires.
In addition, 66,175 shares of common stock issuable upon the exercise of
warrants will be eligible for sale as restricted securities set forth above, one
year after the exercise of these warrants.
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UNDERWRITING
Subject to the terms and conditions of an underwriting agreement dated
, 2000, the underwriters named below, who are represented by Deutsche Bank
Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation, Banc of
America Securities LLC and U.S. Bancorp Piper Jaffray Inc. have severally and
not jointly agreed to purchase from us, the following respective number of
shares of our common stock at a public offering price less the underwriting
discounts and commissions set forth on the cover page of this prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS: SHARES
------------- ---------
<S> <C>
Deutsche Bank Securities Inc................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Banc of America Securities LLC..............................
U.S. Bancorp Piper Jaffray Inc..............................
---------
Total............................................... 4,000,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of common stock offered hereby are subject
to certain conditions precedent and that the underwriters will purchase all
shares of the common stock offered hereby, other than those covered by the
over-allotment option described below, if any of these shares are purchased. In
addition, the underwriting agreement provides that, in the event of a default by
an underwriter, in certain circumstances the purchase commitments of
non-defaulting underwriters may be increased or the underwriting agreement may
be terminated.
The underwriters propose to offer the shares of common stock to the public
at the public offering price set forth on the cover page of this prospectus and
to dealers at a price that represents a concession not in excess of $
per share under the public offering price. The underwriters may allow, and
these dealers may re-allow, a concession of not more than $ per
share to certain other dealers. After the initial public offering,
representatives of the underwriters may change the offering price and other
selling terms.
We have granted to the underwriters an option, exercisable not later than 30
days after the date of this prospectus, to purchase up to 600,000 additional
shares of common stock at the public offering price, less the underwriting
discounts set forth on the cover page of this prospectus. The underwriters may
exercise such option solely to cover over-allotments, if any, made in connection
with this offering. To the extent that the underwriters exercise this option,
each underwriter will become obligated, subject to conditions, to purchase
approximately the same percentage of additional shares of common stock as the
number of shares of common stock to be purchased by it in the above table bears
to the total number of shares of common stock offered hereby. We will be
obligated, pursuant to the option, to sell these additional shares of common
stock to the underwriters to the extent the option is exercised. If any
additional shares of common stock are purchased, the underwriters will offer the
additional shares on the same terms as those on which the other shares are being
offered.
The underwriting fee is equal to the public offering price per share of
common stock less the amount paid by the underwriters to us per share of common
stock. The underwriting fee
80
<PAGE>
is currently expected to be approximately 7% of the initial public offering
price. We have agreed to pay the underwriters the following fees, assuming
either no exercise or full exercise by the underwriters of the underwriters'
over-allotment option:
<TABLE>
<CAPTION>
TOTAL FEES
---------------------------------------------
WITHOUT EXERCISE OF WITH FULL EXERCISE OF
FEE PER SHARE OVER-ALLOTMENT OPTION OVER-ALLOTMENT OPTION
------------- --------------------- ---------------------
<S> <C> <C> <C>
Fees paid by Omnicell.com.............. $ $ $
</TABLE>
In addition, we estimate that our share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $ .
We have agreed to indemnify the underwriters against some specified types of
liabilities, including liabilities under the Securities Act, and to contribute
to payments the underwriters may be required to make in respect of any of these
liabilities.
Each of our officers and directors, and substantially all of our
stockholders and holders of options and warrants to purchase our stock, have
agreed not to offer, sell, contract to sell or otherwise dispose of, or enter
into any transaction that is designed to, or could be expected to, result in the
disposition of any shares of our common stock or other securities convertible
into or exchangeable or exercisable for shares of our common stock or
derivatives of our common stock owned by these persons prior to this offering or
common stock issuable upon exercise of options or warrants held by these persons
for a period of 180 days after the effective date of the registration statement
of which this prospectus is a part without the prior written consent of the
registration statement of which this prospectus is a part without the prior
written consent of Deutsche Bank Securities Inc. This consent may be given at
any time without public notice. We have entered into a similar agreement with
the representatives of the underwriters. There are no agreements between the
representatives and any of our stockholders or affiliates releasing them from
these lock-up agreements prior to the expiration of the 180-day period.
The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
In order to facilitate the offering of our common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of our common stock. Specifically, the underwriters may over-allot
shares of our common stock in connection with this offering, thus creating a
short position in our common stock for their own account. A short position
results when an underwriter sells more shares of common stock than that
underwriter is committed to purchase. Additionally, to cover these
over-allotments or to stabilize the market price of our common stock, the
underwriters may bid for, and purchase, shares of our common stock in the open
market. Finally, the representatives, on behalf of the underwriters, may also
reclaim selling concessions allowed to an underwriter or dealer if the
underwriting syndicate repurchases shares distributed by that underwriter or
dealer. Any of these activities may maintain the market price of our common
stock at a level above that which might otherwise prevail in the open market.
These transactions may be effected on the Nasdaq National Market or otherwise.
The underwriters are not required to engage in these activities and, if
commenced, may end any of these activities at any time.
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 280,000 shares or 7% of our common stock being sold
in this offering for our vendors, employees, family members of employees,
customers and other third parties. The number of shares of our common stock
available for sale to the general public will be reduced to the
81
<PAGE>
extent these reserved shares are purchased. Any reserved shares that are not
purchased by these persons will be offered by the underwriters to the general
public on the same basis as the other shares in this offering.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock has
been determined by negotiations among us and the representatives of the
underwriters. Among the primary factors considered in determining the initial
public offering price were:
- prevailing market conditions;
- our results of operations in recent periods;
- the present stage of our development;
- the market capitalization and stage of development of the other companies
that we and the representatives of the underwriters believe to be
comparable to our business; and
- estimates of our business potential.
Current and former employees of Deutsche Bank Securities Inc. and its
affiliates own approximately 11% of the limited partnership interests in ABS
Capital Partners III, L.P., which owns 986,842 shares of the Company's Series K
Preferred Stock. In addition, John D. Stobo, Jr., a member of the Company's
Board of Directors and a managing member of ABS Capital Partners III, LLC, the
general partner of ABS Capital Partners III, L.P. holds stock options to
purchase up to 1,302 shares of the Company's common stock, all of which are
exercisable within 60 days.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Cooley Godward LLP, Palo Alto, California. Certain legal matters
in connection with this offering will be passed upon for the underwriters by
Preston Gates & Ellis LLP, Seattle Washington. As of the date of this
prospectus, James C. Gaither, Secretary of Omnicell.com and a partner at Cooley
Godward LLP, owns an aggregate of 16,209 (or 11,029 shares as converted per the
0.625 for 1 reverse stock split) shares of our preferred stock.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1998 and 1999, and for each of the three
years in the period ended December 31, 1999, as set forth in their report. We
have included our financial statement in this prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in auditing and accounting.
The financial statements of the Sure-Med Division of Baxter Healthcare
Corporation, an indirect division of Baxter International Inc., as of
December 31, 1998 and for each of the two years in the period ended
December 31, 1998 included in this prospectus have been so included in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
82
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock.
For further information regarding us and our common stock, please refer to the
registration statement and exhibits and schedules filed as part of the
registration statement. Each statement in this prospectus referring to a
contract, agreement or other document filed as an exhibit to the registration
statement is qualified in all respects by the filed exhibit.
You may read and copy all or any portion of the registration statement or
any other information that we file at the Securities and Exchange Commission's
public reference room at 450 Fifth Street, N.W., Washington D.C. 20549. You can
request copies of these documents, upon payment of a duplicating fee, by writing
to the SEC. Please call the Securities and Exchange Commission at 1-800-SEC-0330
for further information on the operation of the public reference rooms. Our
Securities and Exchange Commission filings, including the registration
statement, are also available to you on the Securities and Exchange Commission's
Web site located at WWW.SEC.GOV.
Upon completion of this offering, we will become subject to the information
and reporting requirements of the Securities Exchange Act of 1934, as amended,
and in accordance therewith, will file periodic reports, proxy statements and
other information with the SEC.
We intend to provide our stockholders with annual reports containing
financial statements audited by an independent public accounting firm and to
make available to our stockholders quarterly reports containing unaudited
financial data for the first three quarters of each year.
83
<PAGE>
OMNICELL.COM
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Omnicell.com
Report of Ernst & Young LLP, Independent Auditors......... F-2
Consolidated Balance Sheets as of December 31, 1998 and
1999 and March 31, 2000 (unaudited)...................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1997, 1998 and 1999 and for the three-month
periods ended March 31, 1999 and 2000 (unaudited)........ F-4
Consolidated Statement of Redeemable Convertible Preferred
Stock and Stockholders' Equity (Net Capital Deficiency)
for the years ended December 31, 1997, 1998 and 1999 and
for the three-month periods ended March 31, 1999 and 2000
(unaudited).............................................. F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1998 and 1999 and for the three-month
periods ended March 31, 1999 and 2000 (unaudited)........ F-6
Notes to Consolidated Financial Statements................ F-8
Sure-Med Division of Baxter Healthcare Corporation
Report of PricewaterhouseCoopers LLP, Independent
Accountants.............................................. F-31
Balance Sheet as of December 31, 1998..................... F-32
Statements of Operations for the years ended December 31,
1997 and 1998............................................ F-33
Statements of Cash Flows for the years ended December 31,
1997 and 1998............................................ F-34
Notes to Financial Statements............................. F-35
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Omnicell.com
We have audited the accompanying consolidated balance sheets of Omnicell.com
as of December 31, 1998 and 1999, and the related consolidated statements of
operations, redeemable convertible preferred stock and stockholders' equity (net
capital deficiency), and cash flows for each of the three years in the period
ended December 31, 1999. Our audits also included the financial statement
schedule listed in the index as item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Omnicell.com at
December 31, 1998 and 1999, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
San Jose, California
March 29, 2000,
except for Note 18, as to which the date is
, 2000
--------------------------------------------------------------------------------
The foregoing report is in the form that will be signed upon completion of
the reverse stock split described in Note 18 to the consolidated financial
statements.
/s/ Ernst & Young LLP
San Jose, California
June 12, 2000
F-2
<PAGE>
OMNICELL.COM
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA LIABILITIES,
REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND
STOCKHOLDERS' EQUITY
(NET CAPITAL DEFICIENCY)
DECEMBER 31, MARCH 31, AT MARCH 31,
------------------- ------------ ------------------------
1998 1999 2000 2000
-------- -------- ------------ ------------------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 11,569 $ 2,546 $ 6,499
Short-term investments.................................... 10,503 4,152 15,936
Accounts receivable, net of allowance for doubtful
accounts of $278 in 1998 and $338 in 1999............... 14,290 9,685 13,766
Inventories............................................... 4,789 7,600 6,023
Prepaid expenses and other current assets................. 1,168 1,841 2,367
-------- -------- --------
Total current assets.................................... 42,319 25,824 44,591
-------- -------- --------
Property and equipment, net................................. 2,830 7,033 7,390
Other assets................................................ 1,212 1,696 2,566
-------- -------- --------
Total assets.......................................... $ 46,361 $ 34,553 $ 54,547
======== ======== ========
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable.......................................... $ 626 $ 2,234 $ 3,667 $ 3,667
Accrued liabilities....................................... 8,548 16,465 15,068 15,068
Deferred revenue.......................................... 1,955 3,494 3,702 3,702
Deferred gross profit..................................... 20,227 28,727 28,322 28,322
-------- -------- -------- --------
Total current liabilities............................... 31,356 50,920 50,759 50,759
Notes payable............................................... -- 8,464 8,464 8,114
Other long-term liabilities................................. 67 845 838 838
Commitments and contingencies
Redeemable convertible preferred stock, no par value;
3,604,000 shares designated; 1,802,000, 1,081,200 and
901,000 shares issued and outstanding at December 31, 1998
and 1999 and March 31, 2000, respectively (no shares pro
forma) (liquidation preference of $15,166 at December 31,
1999 and $12,640 at March 31, 2000)....................... 25,282 15,166 12,640 --
Stockholders' equity (net capital deficiency):
Convertible preferred stock, no par value; 18,500,000
shares authorized (5,000,000 shares authorized pro
forma), including 3,604,000 shares designated as
redeemable convertible preferred stock (11,527,848,
11,527,848 and 14,538,376 shares issued and outstanding
at December 31, 1998 and 1999 and March 31, 2000,
respectively (no shares pro forma) (liquidation
preference of $35,147 at December 31, 1999 and $61,221 at
March 31, 2000).......................................... 33,854 33,854 62,454 --
Common stock, no par value; 35,000,000 shares authorized
(50,000,000 shares authorized pro forma); 1,385,233,
1,646,382 and 1,710,064 shares issued and outstanding at
December 31, 1998 and 1999 and March 31, 2000,
respectively (13,393,379 shares pro forma)............... 1,424 2,302 3,235 87,259
Deferred stock compensation............................... (11) -- -- --
Accumulated deficit....................................... (45,609) (77,000) (83,845) (92,425)
Accumulated other comprehensive income (loss)............. (2) 2 2 2
-------- -------- -------- --------
Total stockholders' equity (net capital deficiency)..... (10,344) (40,842) (18,154) (5,164)
-------- -------- -------- --------
Total liabilities, redeemable convertible preferred
stock, and stockholders' equity (net capital
deficiency).......................................... $ 46,361 $ 34,553 $ 54,547 $ 54,547
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
OMNICELL.COM
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- ---------------------
1997 1998 1999 1999 2000
----------- ----------- ----------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Product revenues........................ $ 26,683 $ 34,690 $ 39,210 $ 7,623 $ 12,638
Product revenues from related party..... 6,864 9,398 4,163 3,090 --
Service and other revenues.............. 2,526 4,124 7,034 1,339 2,032
-------- -------- -------- -------- --------
Total revenues...................... 36,073 48,212 50,407 12,052 14,670
Cost of product revenues................ 14,792 16,461 28,760 3,584 4,509
Cost of service and other revenues...... 1,417 1,801 5,377 901 1,910
-------- -------- -------- -------- --------
Total cost of revenues.............. 16,209 18,262 34,137 4,485 6,419
-------- -------- -------- -------- --------
Gross profit............................ 19,864 29,950 16,270 7,567 8,251
-------- -------- -------- -------- --------
Operating expenses:
Research and development.............. 5,922 5,987 8,977 1,819 3,210
Selling, general, and
administrative....................... 24,520 24,292 35,982 7,862 11,540
Integration expenses.................. -- -- 785 286 --
-------- -------- -------- -------- --------
Total operating expenses............ 30,442 30,279 45,744 9,967 14,750
-------- -------- -------- -------- --------
Loss from operations.................... (10,578) (329) (29,474) (2,400) (6,499)
Interest income......................... 953 1,039 704 -- --
Interest expense........................ -- -- (2,471) (374) (321)
-------- -------- -------- -------- --------
Income (loss) before provision for
income taxes.......................... (9,625) 710 (31,241) (2,774) (6,820)
Provision for income taxes.............. 201 185 150 24 25
-------- -------- -------- -------- --------
Net income (loss)....................... (9,826) 525 (31,391) (2,798) (6,845)
Preferred stock accretion............... (22) (22) -- -- --
-------- -------- -------- -------- --------
Net income (loss) available to common
stockholders.......................... $ (9,848) $ 503 $(31,391) $ (2,798) $ (6,845)
======== ======== ======== ======== ========
Net income (loss) per common share:
Basic................................. $ (8.61) $ 0.39 $ (21.34) $ (2.03) $ (4.07)
Diluted............................... $ (8.61) $ 0.05 $ (21.34) $ (2.03) $ (4.07)
Pro forma basic and diluted
(unaudited).......................... $ (3.18) $ (0.59)
Weighted average common shares
outstanding:
Basic................................. 1,144 1,302 1,471 1,381 1,681
Diluted............................... 1,144 11,013 1,471 1,381 1,681
Pro forma basic and diluted
(unaudited).......................... 9,876 11,621
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
OMNICELL.COM
CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
<TABLE>
<CAPTION>
REDEEMABLE
CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK
---------------------- ---------------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- -------- ----------- -------- --------- --------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996....................... 1,802,000 $ 25,238 11,527,848 $33,854 1,100,983 $ 287
Net loss......................................... -- -- -- -- -- --
Change in unrealized loss on short-term
investments..................................... -- -- -- -- -- --
Total comprehensive loss.........................
Exercise of stock options........................ -- -- -- -- 137,492 137
Employee stock purchase plan..................... -- -- -- -- 43,329 383
Forgiveness of notes receivable.................. -- -- -- -- -- --
Amortization of deferred stock compensation...... -- -- -- -- -- --
Accretion of redeemable convertible preferred
stock........................................... -- 22 -- -- -- --
---------- -------- ---------- ------- --------- ------
Balance at December 31, 1997....................... 1,802,000 25,260 11,527,848 33,854 1,281,804 807
Net income....................................... -- -- -- -- -- --
Change in unrealized loss on short-term
investments..................................... -- -- -- -- -- --
Total comprehensive income.......................
Exercise of stock options........................ -- -- -- -- 48,923 135
Employee stock purchase plan..................... -- -- -- -- 54,506 482
Amortization of deferred compensation............ -- -- -- -- -- --
Accretion of redeemable convertible preferred
stock........................................... -- 22 -- -- -- --
---------- -------- ---------- ------- --------- ------
Balance at December 31, 1998....................... 1,802,000 25,282 11,527,848 33,854 1,385,233 1,424
Net loss......................................... -- -- -- -- -- --
Change in unrealized loss on short-term
investments..................................... -- -- -- -- -- --
Total comprehensive loss......................... -- -- -- -- -- --
Exercise of stock options........................ -- -- -- -- 200,360 341
Employee stock purchase plan..................... -- -- -- -- 60,789 537
Amortization of deferred compensation............ -- -- -- -- -- --
Redemption of redeemable convertible preferred
stock........................................... (720,800) (10,116) -- -- -- --
---------- -------- ---------- ------- --------- ------
Balance at December 31, 1999....................... 1,081,200 $ 15,166 11,527,848 $33,854 1,646,382 $2,302
Net loss (unaudited)............................... -- -- -- -- -- --
Change in unrealized loss on short-term investments
(unaudited)...................................... -- -- -- -- -- --
---------- -------- ---------- ------- --------- ------
Total comprehensive loss (unaudited)............... -- -- -- -- -- --
Modification of stock option awards (unaudited).... 122,074 728
Sale of Series K convertible preferred stock....... 3,010,528 28,600
---------- -------- ---------- ------- --------- ------
Exercise of stock options.......................... -- -- -- -- 63,682 205
---------- -------- ---------- ------- --------- ------
Redemption of redeemable convertible preferred
stock (unaudited)................................ (180,200) (2,526) -- -- --
---------- -------- ---------- ------- --------- ------
Balance at March 31, 2000 (unaudited).............. 901,000 $ 12,640 14,538,376 $62,454 1,710,064 $3,235
========== ======== ========== ======= ========= ======
<CAPTION>
NOTE ACCUMULATED
RECEIVABLE OTHER
FROM DEFERRED STOCK COMPREHENSIVE ACCUMULATED
STOCKHOLDER COMPENSATION INCOME (LOSS) DEFICIT
------------ --------------- --------------- -------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Balance at December 31, 1996....................... $(120) $ (45) $ (17) $(36,264)
Net loss......................................... -- -- -- (9,826)
Change in unrealized loss on short-term
investments..................................... -- -- 11 --
Total comprehensive loss.........................
Exercise of stock options........................ -- -- -- --
Employee stock purchase plan..................... -- -- -- --
Forgiveness of notes receivable.................. 120 -- -- --
Amortization of deferred stock compensation...... -- 17 -- --
Accretion of redeemable convertible preferred
stock........................................... -- -- -- (22)
----- ------- ----- --------
Balance at December 31, 1997....................... -- (28) (6) (46,112)
Net income....................................... -- -- -- 525
Change in unrealized loss on short-term
investments..................................... -- -- 4 --
Total comprehensive income.......................
Exercise of stock options........................ -- -- -- --
Employee stock purchase plan..................... -- -- -- --
Amortization of deferred compensation............ -- 17 -- --
Accretion of redeemable convertible preferred
stock........................................... -- -- -- (22)
----- ------- ----- --------
Balance at December 31, 1998....................... -- (11) (2) (45,609)
Net loss......................................... -- -- -- (31,391)
Change in unrealized loss on short-term
investments..................................... -- -- 4 --
Total comprehensive loss......................... -- -- -- --
Exercise of stock options........................ -- -- -- --
Employee stock purchase plan..................... -- -- -- --
Amortization of deferred compensation............ -- 11 -- --
Redemption of redeemable convertible preferred
stock........................................... -- -- -- --
----- ------- ----- --------
Balance at December 31, 1999....................... $ -- $ -- $ 2 $(77,000)
Net loss (unaudited)............................... -- -- -- (6,845)
Change in unrealized loss on short-term investments
(unaudited)...................................... -- -- -- --
----- ------- ----- --------
Total comprehensive loss (unaudited)............... -- -- -- --
Modification of stock option awards (unaudited)....
Sale of Series K convertible preferred stock.......
----- ------- ----- --------
Exercise of stock options.......................... -- -- -- --
----- ------- ----- --------
Redemption of redeemable convertible preferred
stock (unaudited)................................
----- ------- ----- --------
Balance at March 31, 2000 (unaudited).............. $ -- $ -- $ 2 $(83,845)
===== ======= ===== ========
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
(NET CAPITAL
DEFICIENCY)
--------------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C>
Balance at December 31, 1996....................... $ (2,305)
Net loss......................................... (9,826)
Change in unrealized loss on short-term
investments..................................... 11
--------
Total comprehensive loss......................... (9,815)
--------
Exercise of stock options........................ 137
Employee stock purchase plan..................... 383
Forgiveness of notes receivable.................. 120
Amortization of deferred stock compensation...... 17
Accretion of redeemable convertible preferred
stock........................................... (22)
--------
Balance at December 31, 1997....................... (11,485)
Net income....................................... 525
Change in unrealized loss on short-term
investments..................................... 4
--------
Total comprehensive income....................... 529
--------
Exercise of stock options........................ 135
Employee stock purchase plan..................... 482
Amortization of deferred compensation............ 17
Accretion of redeemable convertible preferred
stock........................................... (22)
--------
Balance at December 31, 1998....................... (10,344)
Net loss......................................... (31,391)
Change in unrealized loss on short-term
investments..................................... 4
--------
Total comprehensive loss......................... (31,387)
--------
Exercise of stock options........................ 341
Employee stock purchase plan..................... 537
Amortization of deferred compensation............ 11
Redemption of redeemable convertible preferred
stock........................................... --
--------
Balance at December 31, 1999....................... $(40,842)
Net loss (unaudited)............................... (6,845)
Change in unrealized loss on short-term investments
(unaudited)...................................... --
--------
Total comprehensive loss (unaudited)............... (6,845)
--------
Modification of stock option awards (unaudited).... 728
Sale of Series K convertible preferred stock....... 28,600
--------
Exercise of stock options.......................... 205
--------
Redemption of redeemable convertible preferred
stock (unaudited)................................ (2,526)
--------
Balance at March 31, 2000 (unaudited).............. $(18,154)
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
OMNICELL.COM
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE
MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................ $ (9,826) $ 525 $(31,391) $ (2,798) $ (6,845)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation........................................... 1,741 1,375 1,984 476 710
Loss on disposal of capital equipment.................. 547 45 4 -- --
Accretion of short-term investment discount............ (2)
Deferred rent.......................................... (43) (50) (63) -- --
Forgiveness of note receivable from stockholder........ 120 -- -- -- --
Amortization of deferred compensation.................. 17 17 11 9 --
Stock option compensation expense...................... 728
Write-off of Sure-Med inventory........................ -- -- 9,722 -- --
Write-off of ADDS investment........................... -- -- 550 -- --
Write-off of fixed assets.............................. -- -- 886 -- --
Changes in assets and liabilities:
Accounts receivable.................................. (7,433) 2,066 (453) (576) (4,634)
Inventories.......................................... (1,092) (437) (2,465) (16,702) 1,577
Prepaid expenses and other current assets............ (3,957) (1,228) (673) 763 (526)
Other assets......................................... (573) (405) (432) (3,415) (870)
Accounts payable..................................... (352) (345) 1,608 (192) 1,433
Accrued liabilities.................................. 6,031 81 112 6,127 (1,397)
Deferred revenue..................................... (84) 747 (362) 3,560 208
Deferred gross profit................................ 11,837 4,309 9,185 1,926 (405)
Other liabilities...................................... -- -- 778 7,847 (7)
-------- -------- -------- -------- --------
Net cash provided by (used in) operating activities.... (3,067) 6,700 (5,205) (2,975) (10,030)
-------- -------- -------- -------- --------
INVESTING ACTIVITIES
Cash paid for Sure-Med acquisition, net of cash received... -- -- (352) -- --
Purchases of short-term investments........................ (6,047) (11,517) (4,153) (5,267) (11,783)
Maturities of short-term investments....................... 13,830 6,011 10,504 9,826 --
Capital expenditures....................................... (1,931) (1,785) (5,987) (1,678) (1,067)
-------- -------- -------- -------- --------
Net cash provided by (used in) investing activities.... 5,852 (7,291) 12 2,881 (12,850)
-------- -------- -------- -------- --------
FINANCING ACTIVITIES
Proceeds from issuance of common stock..................... 520 617 878 55 205
Proceeds from Series K preferred stock..................... -- -- -- -- 28,600
Redemption of redeemable convertible preferred stock....... -- -- (5,058) (2,529) (1,973)
Issuance of convertible promissory note.................... -- -- 350 -- --
-------- -------- -------- -------- --------
Net cash provided by (used in) financing activities.... 520 617 (3,830) (2,474) 26,832
-------- -------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents....... 3,305 26 (9,023) (2,568) 3,952
Cash and cash equivalents at beginning of period........... 8,238 11,543 11,569 11,569 2,546
-------- -------- -------- -------- --------
Cash and cash equivalents at end of period................. $ 11,543 $ 11,569 $ 2,546 $ 9,001 $ 6,499
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
OMNICELL.COM
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF NONCASH
FINANCING AND INVESTING ACTIVITIES
Issuance of note payable in Sure-Med
acquisition........................... $ -- $ -- $ 7,914 $ -- $ --
Change in unrealized loss on short-term
investments........................... (11) (4) (4) 25 (4)
Issuance of note payable for leasehold
improvements to landlord.............. -- -- 200 -- --
Accretion of redeemable convertible
preferred stock....................... 22 22 -- -- --
Redemption of preferred stock offset
with receivables...................... -- -- 5,058 -- --
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest.................. $ -- $ -- $ 2,381 $ -- $ 360
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THE COMPANY
Omnicell.com (or the Company) was incorporated in the state of California on
September 30, 1992. The Company develops, manufactures, and markets automation
systems for hospitals and other healthcare facilities. In late 1999, the Company
launched the Omnicell Commerce Network, an e-commerce service that consists of
two Web-based applications, OmniBuyer and OmniSupplier.
BASIS OF PRESENTATION
The consolidated financial statements include the Company and its wholly
owned subsidiaries, Omnicell HealthCare Canada, Inc. and Omnicell Europe SARL.
All significant intercompany accounts and transactions are eliminated in
consolidation.
INTERIM FINANCIAL INFORMATION
The interim financial information at March 31, 2000 and for the three months
ended March 31, 1999 and 2000 is unaudited but, in the opinion of management,
has been prepared on the same basis as the annual financial statements and
includes all adjustments (consisting only of normal recurring adjustments) that
the Company considers necessary for a fair presentation of its financial
position at such date and its operating results and cash flows for those
periods. Results for the interim period are not necessarily indicative of the
results to be expected for the entire year, or any future period.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements as well as the reported
amounts of revenues and expenses during the reporting period. Such management
estimates include the allowance for doubtful accounts receivable, valuation of
inventory, valuation allowance for deferred income taxes, and certain accrued
liabilities. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenues are derived from sales of automation systems and subsequent service
agreements. The Company markets its systems for sale or for lease. System sales
are recognized upon customer acceptance at the point of delivery and completion
of installation; revenues from sales-type leases are recognized upon customer
acceptance at the point of delivery, completion of installation, and the
commencement of the noncancelable lease term. Revenues from service agreements
and other revenues on system sales and sales-type leases are recognized ratably
over the related contract period. Deferred revenue represents amounts received
under service agreements for which the services have not yet been performed.
Deferred gross profit represents the profit to be earned by the Company,
exclusive of
F-8
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
installation costs, on systems sales for which customer acceptance has occurred
but the Company's installation obligation has not yet been fulfilled.
Installation costs are recorded to costs of goods sold when incurred.
Revenues from the Omnicell Commerce Network are derived from OmniSupplier
(supplier) and OmniBuyer (purchaser) arrangements. OmniSupplier contracts
typically have a term of one year and the Company earns revenues through
connection and transaction fees.
OmniBuyer contracts have terms that range from 6 to 12 months and the
Company earns revenues through monthly subscription fees.
Revenues from the Omnicell Commerce Network were initially recognized in the
three-month period ended March 31, 2000. Such revenues were not significant and
are included in service revenues.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has determined the estimated fair value of financial
instruments. The amounts reported for cash and cash equivalents, accounts
receivable, accounts payable, notes payable, and accrued expenses approximate
fair value because of their short maturities. Short-term investments are
reported at their estimated fair value based on quoted market prices of
comparable instruments.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with original
maturities of 90 days or less to be cash equivalents.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash equivalents, investments, and
accounts receivable. Cash equivalents consist primarily of money market funds
and commercial debt securities and are held primarily with two financial
institutions. By policy, the Company limits the amounts invested in any type of
instrument for investments other than U.S. government treasury instruments. The
Company places its investments for safekeeping with an insured creditworthy
financial institution.
The Company leases and sells its products primarily to hospitals and other
health care facilities throughout the United States. The majority of leases
originated by the Company are sold to unaffiliated finance companies (see
Note 3). To date, the Company has had no significant credit losses.
One customer accounted for 19.7% and 20.5% of revenues in 1997 and 1998,
respectively. No one customer accounted for over 10.0% of revenues in 1999.
Three customers accounted for 15.4%, 12.9% and 10.6% of accounts receivable
at December 31, 1998. One customer accounted for 11.0% of accounts receivable in
1999.
F-9
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SHORT-TERM INVESTMENTS
Short-term investments consist primarily of highly liquid debt instruments
purchased with original maturities of greater than 90 days and are stated at
fair value. The Company classifies these securities as available-for-sale. The
differences between amortized cost and fair value, representing unrealized
holding gains or losses, are recorded as a separate component of stockholders'
equity until realized. Any gains and losses on the sale of short-term
investments are determined on a specific identification method, and such gains
and losses are reflected as a component of net interest income (expense). The
Company has not experienced any significant gains or losses on its investments
to date.
INVENTORIES
Inventories are stated at the lower of cost (utilizing standard costs, which
approximate the first-in, first-out method) or market. The Company routinely
assesses its on-hand inventory for timely identification and measurement of
obsolete, slow-moving, or otherwise impaired inventory.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed using the straight-line
method over the estimated useful lives of the related assets, generally three to
five years. Leasehold improvements are amortized over the shorter of the lease
term or the estimated useful lives of the improvements, generally four to seven
years.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses are charged to operations as incurred. In
connection with the Company's automation systems product development efforts,
the Company develops software applications that are integral to the operation of
the product. The costs to develop such software applications have not been
capitalized, as the software development process is completed concurrently with
the establishment of technological feasibility and/or development of the related
hardware.
ADVERTISING EXPENSES
The Company expenses the costs of advertising as incurred. Advertising
expenses for the years ended December 31, 1997, 1998 and 1999 were approximately
$185,000, $11,000 and $628,000, respectively.
INTEGRATION EXPENSES
Integration expenses relate to expenses incurred to integrate Sure-Med into
the Omnicell.com operations. These expenses include charges for severance
expense, travel, training and relocation expenses.
F-10
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
Under Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation," the Company accounts for stock-based
awards to employees using the intrinsic value method established by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25). Thus, no compensation expense is recognized for options granted with
exercise prices equal to the fair value of the Company's common stock on the
date of grant.
INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." This statement prescribes the use of the
liability method whereby deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities, and are measured using enacted tax rates and laws that will be in
effect when the differences are expected to reverse.
COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, "Reporting Comprehensive Income," which establishes standards for
reporting and displaying comprehensive income and its components in financial
statements. The only items of other comprehensive income (loss) that the Company
currently reports are unrealized gains (losses) on short-term investments, which
are included in other accumulated comprehensive income (loss) in the
consolidated statements of redeemable convertible preferred stock and
stockholders' equity (net capital deficiency).
SEGMENT REPORTING
The Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS 131 requires the use of a management
approach in identifying segments of an enterprise. The adoption of FAS 131 did
not affect consolidated results of operations or financial position. See Note
15.
NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed by dividing the net income
(loss) available to common stockholders for the period by weighted average
number of common shares outstanding during the period, less shares subject to
repurchase. Diluted net income (loss) per share is computed by dividing the net
income (loss) for the period by the weighted average number of common and common
equivalent shares outstanding during the period. Potentially dilutive securities
composed of incremental common shares issuable upon the exercise of stock
options and warrants, and common shares issuable on conversion of preferred
stock, were excluded from historical diluted loss per share for the years ended
December 31, 1997 and 1999 and the three months ended March 31, 1999 and 2000
because of their anti-dilutive effect.
F-11
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Under the provisions of SAB No. 98, common shares issued for nominal
consideration, if any, would be included in the per share calculations as if
they were outstanding for all periods presented. No common shares have been
issued for nominal consideration.
In accordance with SFAS No. 128, "Earnings Per Share," and Securities and
Exchange Commission (SEC) Staff Accounting Bulletin (SAB) No. 98, pro forma net
loss per share has been computed as described above and also gives effect to
common equivalent shares arising from redeemable convertible preferred stock and
convertible preferred stock that will automatically convert upon the closing of
the initial public offering contemplated by this prospectus using the
if-converted method from the original date of issuance.
F-12
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The calculation of historical and pro forma basic and diluted net income
(loss) per common share is as follows:
<TABLE>
<CAPTION>
THREE
MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER (UNAUDITED)
SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
HISTORICAL:
Basic:
Net income (loss)................................... $(9,826) $ 525 $(31,391) $(2,798) $(6,845)
Preferred stock accretion........................... (22) (22) -- -- --
------- ------- -------- ------- -------
Net income (loss) available to common
stockholders....................................... $(9,848) $ 503 $(31,391) $(2,798) $(6,845)
======= ======= ======== ======= =======
Weighted average shares of common stock
outstanding........................................ 1,176 1,318 1,477 1,392 1,694
Less: Weighted average shares subject to
repurchase......................................... 33 16 6 11 13
------- ------- -------- ------- -------
Weighted average shares outstanding--
basic.............................................. 1,144 1,302 1,471 1,381 1,681
======= ======= ======== ======= =======
Net income (loss) per common share.................. $ (8.61) $ 0.39 $ (21.34) $ (2.03) $ (4.07)
======= ======= ======== ======= =======
Diluted:
Net income (loss) available to common
stockholders....................................... $(9,848) $ 503 $(31,391) $(2,798) $(6,845)
======= ======= ======== ======= =======
Weighted average shares outstanding--
basic.............................................. 1,144 1,302 1,471 1,381 1,681
Weighted average number of common shares issuable
upon the conversion of dilutive preferred shares... -- 8,528 -- -- --
Effect of dilutive securities--stock options........ -- 1,183 -- -- --
------- ------- -------- ------- -------
Diluted weighted average number of shares
outstanding........................................ 1,144 11,013 1,471 1,381 1,681
======= ======= ======== ======= =======
Net income (loss) per common share.................. $ (8.61) $ 0.05 $ (21.34) $ (2.03) $ (4.07)
======= ======= ======== ======= =======
PRO FORMA BASIC AND DILUTED:
Net loss.............................................. $(31,391) $(6,845)
======== =======
Shares used above..................................... 1,471 1,681
Adjustment to reflect the weighted average offset of
the assumed conversion of the convertible note
payable, the redeemable convertible preferred stock
and convertible preferred stock...................... 8,405 9,939
-------- -------
Weighted average shares used in computing pro forma
basic and diluted net loss per share................. 9,876 11,621
======== =======
Pro forma basic and diluted net loss per common
share................................................ $ (3.18) $ (0.59)
======== =======
</TABLE>
F-13
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The total number of shares excluded from the calculations of diluted net
loss per share for the years ended December 31, 1997 and 1999, prior to
application of the treasury stock method for stock options, was 549,917 and
633,602, respectively. The total number of shares excluded from the calculations
of diluted net loss per share for the three months ended March 31, 1998 and
1999, prior to application of the treasury stock method for stock options, was
2,640,946 and 3,420,519, respectively. Such securities, had they been dilutive,
would have been included in the computation of diluted net loss per share.
UNAUDITED PRO FORMA LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY
The unaudited pro forma liabilities, redeemable convertible preferred stock
and stockholders' equity information at March 31, 2000 reflects the assumed
conversion of the convertible note payable, the redeemable convertible preferred
stock and convertible preferred stock upon completion of the offering by this
prospectus.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 2000, the Emerging Issues Task Force (EITF) issued Issue No. 00-2,
"Accounting for Web Site Development Costs." This EITF sets forth guidance on
whether to capitalize or expense certain development costs. The Company has
adopted EITF 00-2 effective January 1, 2000 and capitalized $160,000 of web site
development costs in the three months ended March 31, 2000.
In March 2000, the EITF issued Issue No. 00-3, "Application of AICPA
Statement of Position 97-2, Software Revenue Recognition, to Arrangements that
Include the Right to Use Software Stored on Another Entity's Hardware." This
EITF concludes that a software element covered by SOP 97-2 is only present in a
hosting arrangement if the customer has the contractual right to take possession
of the software at any time during the hosting period without significant
penalty and it is feasible for the customer to either run the software on its
own hardware or contract with another party to host the software. Because the
Omnicell Commerce Network agreements do not allow for the customer to take
possession of the software, this EITF is not expected to have a significant
effect on the Company's results of operations or financial condition.
On March 31, 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation," an interpretation of APB Opinion No. 25. The Interpretation
clarifies guidance for certain issues that arose in the application of APB
Opinion No. 25, "Accounting for Stock Issued to Employees." The Interpretation
is applied prospectively to all new awards, modifications to outstanding awards,
and changes in employee status after July 1, 2000, with the exception of the
definition of employee and stock option repricings as to which the effective
date is December 15, 1998. Management believes that this Interpretation will not
have a significant effect on the Company's results of operations or financial
condition.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by SFAS 137, which is effective
for years beginning after
F-14
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
June 15, 2000. SFAS 133 will require the Company to recognize all derivatives on
the balance sheet at fair value. Gains or losses resulting from changes in the
values of those derivatives would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. SFAS 133 will be
effective for the Company's financial statements for the year ended December 31,
2001. Management believes that this statement will not have a significant effect
on the Company's results of operations or financial condition.
In December 1999, the Securities and Exchange Commission issued SAB No. 101,
"Revenue Recognition in Financial Statements." SAB 101 provides guidance on the
recognition, presentation and disclosure of revenue in financial statements. The
Company has adopted SAB 101 for all periods presented.
In March 1998, the Accounting Standards Executive Committee issued Statement
of Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" (SOP 98-1). SOP 98-1 requires companies to capitalize
certain qualifying computer software costs that are incurred during the
application development stage and amortize them over the software's estimated
useful life. The Company adopted SOP 98-1 effective January 1, 1999. The
adoption of SOP 98-1 did not have a material effect on the Company's
consolidated financial position, results of operations, or cash flows.
In April 1998, the AICPA issued SOP 98-5, "Reporting the Costs of Start-Up
Activities" (SOP 98-5). SOP 98-5 is effective beginning on January 1, 1999 and
requires that start-up costs capitalized prior to January 1, 1999 be written off
and any future start-up costs be expensed as incurred. The adoption of SOP 98-5
did not have a material impact on the Company's financial position, results of
operations, or cash flows.
NOTE 2. SURE-MED ACQUISITION
Effective January 29, 1999, the Company acquired substantially all of the
assets together with certain specified liabilities and obligations of the
Sure-Med business activity (Sure-Med) of Baxter Healthcare Corporation (Baxter)
in a transaction accounted for as a purchase. Baxter designed, marketed and sold
Sure-Med pharmacy automation systems to hospitals and other health care
facilities. The consolidated financial statements include the operating results
of Sure-Med from the date of acquisition. Pro forma results of operations, as if
the transaction had occurred on January 1, 1999, are not presented as they would
not be materially different than actual 1999 results.
The original purchase price of $15.1 million consisted of a cash payment of
$2.0 million to Baxter, a promissory note of $12.7 million, and $400,000 of
related acquisition expenses. Subsequent to the acquisition, the Company sold to
Baxter the right to collect trade receivables related to shipments of Sure-Med
product made prior to the January 29, 1999 acquisition date for $4.8 million.
Payment on this transaction was made via a reduction in the note payable to
Baxter. In December 1999, the Company received $1.6 million from Baxter in
connection with final agreement between the two parties. For each of these
items, the purchase price was adjusted downward. The Company is obligated to
repay the principal amount of the promissory note in 12 quarterly installments,
commencing on March 31, 2001. The promissory note bears interest at a rate of
8.0% through January 31, 2001 and thereafter
F-15
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SURE-MED ACQUISITION (CONTINUED)
at a rate of 13.0%. Interest is payable quarterly, commencing on March 31, 1999.
Upon the sale or issuance by Omnicell.com of any shares of capital stock,
excluding sales or issuances of common stock or options under the Company's
stock option and stock purchase plans and private placements in any single year
not exceeding 10.0% of its outstanding paid-in capital, the Company is required
to prepay the outstanding principal amount of the promissory note plus accrued
interest to the extent of 50.0% of the net proceeds of such equity issuance.
There is an exception that allows up to $30 million of financing raised during
2000 to be excluded as long as 50% of the proceeds shall be applied to redeeming
the Series J preferred stock.
The purchase price consideration was allocated to the acquired assets and
assumed liabilities based on fair values as follows (in thousands):
<TABLE>
<S> <C>
Inventories................................................. $16,098
Property and equipment...................................... 720
Other assets, primarily residual value of leased systems.... 1,466
Liabilities................................................. (9,618)
-------
Total purchase consideration................................ $ 8,666
=======
</TABLE>
In the fourth quarter of 1999, the Company recorded a write off of $0.9
million for Sure-Med fixed assets due to abandonment of leasehold improvements
and other assets acquired as part of the product line acquisition. In the fourth
quarter of 1999, after sales of Sure-Med systems were determined to be
substantially below original forecasts, the Company recorded a $9.7 million
charge to cost of revenues to reflect a writedown of Sure-Med product line
inventory to estimated net realizable value. In 1999, the Company also recorded
$785,000 of integration expenses associated with the integration of the Company
and Sure-Med engineering efforts, product lines, and marketing efforts.
The Sure-Med acquisition was entered into with the expectation that
significant sales would be generated in 1999 and 2000. The actual sales for 1999
were dramatically below the levels anticipated in the Company's forecasts. The
Company was confronted with solving several issues regarding Sure-Med product.
With the acquisition, issues of product integration arose which slowed the sales
force's ability to effectively sell the new product. The Company anticipates
that Sure-Med sales will continue to decline.
NOTE 3. LEASING ARRANGEMENTS
In addition to direct sales, the Company leases its systems to customers
under sales-type leases, which generally have terms of five years. The Company
has entered into agreements with four finance companies whereby, concurrent with
the customer lease transaction, lease receivables are sold to the finance
companies. Under these agreements, the Company is subject to recourse only in
the event of the Company's breach or nonperformance.
In 1997, 1998 and 1999, net sales-type lease receivables sold under these
agreements totaled approximately $13.1 million, $11.7 million and
$22.3 million, respectively. The Company records revenue at an amount equal to
the cash to be received from the leasing company, which is equivalent to the net
present value of the lease streams, utilizing the
F-16
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. LEASING ARRANGEMENTS (CONTINUED)
implicit interest rate under its funding agreements. At December 31, 1998 and
1999, accounts receivable included approximately $1.0 million and $2.7 million,
respectively, due from the finance companies for lease receivables sold.
NOTE 4. SHORT-TERM INVESTMENTS
Short-term investments consist of the following (in thousands):
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED GAIN
COST (LOSS) FAIR VALUE
--------- --------------- ----------
<S> <C> <C> <C>
December 31, 1998:
Certificates of deposits............... $ 7,000 $ -- $ 7,000
U.S. commercial debt securities........ 3,505 (2) 3,503
------- --------- -------
$10,505 $ (2) $10,503
======= ========= =======
December 31, 1999:
Certificates of deposits............... $ 2,000 $ -- $ 2,000
U.S. commercial debt securities........ 2,150 2 2,152
------- --------- -------
$ 4,150 $ 2 $ 4,152
======= ========= =======
</TABLE>
All short-term investments at December 31, 1999 mature in 2000.
NOTE 5. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1998 1999 2000
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials....................................... $2,354 $3,495 $3,776
Work-in-process..................................... 435 565 138
Finished goods...................................... 2,000 3,540 2,109
------ ------ ------
Total............................................. $4,789 $7,600 $6,023
====== ====== ======
</TABLE>
F-17
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Equipment................................................... $ 5,107 $ 7,382
Furniture and fixtures...................................... 542 930
Leasehold improvements...................................... 829 1,120
Purchased software.......................................... -- 3,233
------- -------
6,478 12,665
Accumulated depreciation and amortization................... (3,648) (5,632)
------- -------
Property and equipment, net................................. $ 2,830 $ 7,033
======= =======
</TABLE>
No equipment was leased under capital leases at December 31, 1998 and 1999.
In August 1999, the Company completed a software license transaction with a
leading provider of business-to-business e-commerce software solutions.
Purchased software consists primarily of this software licensed on a perpetual
basis to enable the use of the Omnicell Commerce Network. Maintenance and
support will be provided by the licensor at contractual annual rates. The
Company will share with the licensor a portion of the transaction fees
collected, if any, from product manufacturers when purchases are made from
healthcare suppliers on the Omnicell Commerce Network.
NOTE 7. OTHER ASSETS
Included in other assets at December 31, 1997 is a $500,000, 8.5% note
receivable from a corporation in the development stage, which is due in
September 2000. The note receivable was automatically convertible to equity of
the corporation upon the closing of that entity's next financing of at least
$1,000,000 or upon default of payment, based on the unpaid principal balance and
accrued interest divided by the fair value price per share. In December 1998,
upon the closing of a financing by the corporation, the note was converted into
13,052 shares of its Series D convertible preferred stock. At December 31, 1999,
the Company determined that there was a permanent decline in the fair value of
this asset and it wrote off the entire investment, including accrued interest,
amounting to $550,000.
NOTE 8. ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Accrued compensation and related benefits................... $1,989 $ 2,225
Accrued license fees........................................ -- 2,523
Accrued upgrade costs....................................... -- 3,960
Other accrued liabilities................................... 6,559 7,757
------ -------
$8,548 $16,465
====== =======
</TABLE>
F-18
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. LONG TERM NOTES PAYABLE
In October 1999, the Company executed a convertible promissory note with a
private party for $350,000 with interest accruing at 6.02%. No interest payments
are due until October 1, 2004, the maturity date of the note. If the Company
closes an initial public offering of its common stock, the note shall
automatically convert to an equivalent number of shares of the Company's common
stock at the initial public offering price per share.
In connection with the Company's facilities lease, the landlord has advanced
$200,000 to the Company for leasehold improvements. The Company has agreed to
repay this advance in monthly installments of $4,249. This borrowing arrangement
commenced on July 1, 1999, ends June 30, 2004, and bears interest at 10% per
annum.
Scheduled debt repayments under the convertible promissory note, facilities
lease advance and Baxter promissory note (Note 2) are as follows:
<TABLE>
<S> <C>
2000........................................................ $ 60
2001........................................................ 2,678
2002........................................................ 2,678
2003........................................................ 2,678
2004........................................................ 370
</TABLE>
NOTE 10. CREDIT FACILITY
In March 1999, the Company entered into a credit facility with a bank,
providing the Company with advances under a revolving loan in an aggregate
amount not to exceed the lesser of $10.0 million or 75.0% of eligible accounts
receivable, as defined. Amounts borrowed under the credit facility may be repaid
at any time with all outstanding advances due on September 26, 2000. Interest,
payable monthly, is at a rate equal to one and one-half percentage points above
the bank's prime rate (10.0% on December 31, 1999). At December 31, 1999, the
Company was not in compliance with certain financial covenants and no amounts
were outstanding or available under this credit facility.
In January 2000, the Company replaced its previous line of credit with a new
credit facility. This facility provides the Company with up to $10.0 million of
advances or 75% of eligible receivables, as defined, and expires on January 27,
2001. This line of credit bears interest at the prime rate plus 2.25%. The
Company has pledged certain intangible property as collateral for this line of
credit. This line of credit requires the Company to comply with a tangible net
deficit financial covenant and other specified non-financial covenants. At
March 31, 2000, the Company had no borrowings under this credit facility, but
was in compliance with its covenants.
NOTE 11. LEASE COMMITMENTS
The Company leases its Palo Alto, California and Waukegan, Illinois offices
and manufacturing facilities under noncancelable operating leases. The leases
expire beginning January, 2002 through June, 2006. The Company has an option to
renew the Palo Alto
F-19
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11. LEASE COMMITMENTS (CONTINUED)
facilities leases for an additional five years. Rent expense for all operating
leases was $631,000 (net of sublease income of $140,000), $728,000 (net of
sublease income of $64,000) and $1,629,000 for the years ended December 31,
1997, 1998 and 1999, respectively.
At December 31, 1999, future minimum annual lease payments, net of aggregate
future minimum receipts from sublease, were as follows (in thousands):
<TABLE>
<CAPTION>
OPERATING
LEASES
---------
<S> <C>
2000........................................................ $1,848
2001........................................................ 1,946
2002........................................................ 2,009
2003........................................................ 2,090
2004........................................................ 1,522
Thereafter.................................................. 451
------
Total minimum lease payments.............................. $9,866
======
</TABLE>
NOTE 12. REDEEMABLE CONVERTIBLE PREFERRED STOCK
In June 1996, the Company issued 1,802,000 shares of nonvoting Series I
redeemable convertible preferred stock for $25,227,000 (net of issuance costs of
approximately $60,000) and authorized an equal number of voting shares of Series
J redeemable convertible preferred stock. The Series I redeemable convertible
preferred stock was converted into Series J redeemable convertible preferred
stock on a one-for-one basis in 1996.
At any time after December 31, 1998, the holders of the Series J redeemable
convertible preferred stock were entitled to require the Company to redeem for
cash the outstanding shares over two- and-one-half years at a per share price
equal to the original issue price (subject to adjustment for events of dilution)
plus interest at 9.5% per annum (accruing beginning on March 8, 1999).
On January 7, 1999, the holder of all Series J shares notified the Company
of its intent to exercise its redemption right.
In March, June, and December 1999, the Company's Series J redeemable
convertible preferred stockholder redeemed a total of 720,800 shares (or 450,000
shares of common stock as converted per the 0.625 for 1 reverse stock split) of
the preferred stock for approximately $10.2 million. In lieu of cash payment to
the stockholder, the Company reduced approximately $5.1 million in trade
receivables owed to it by the stockholder. The Company also reduced its Series J
stockholder trade receivable by approximately $692,000 in lieu of cash payment
for interest. At December 31, 1999, the Company is obligated to redeem the
remaining Series J stock in six future installments over the next eighteen
months.
Significant terms of the Series J redeemable convertible preferred stock are
as follows:
- Conversion of the Series J preferred stock is automatic upon completion of
an initial public offering. In addition to adjustments for events of
dilution, if the Company completes an initial public offering at a price
qreater than $11.23 per share and less than $13.47 per share, the
conversion price of the Series J preferred stock will be adjusted to
$17.72 per share from the original purchase price of $22.4523 (as
converted per the 0.625 reverse stock split). If the offering price is
less than $11.23 per share the conversion price of the Series J preferred
stock will be adjusted to $16.8370 per share.
F-20
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
- Series J preferred stock has voting rights equivalent to the number of
shares of common stock into which it is convertible.
- Dividends may be declared at the discretion of the Board of Directors and
are noncumulative. To the extent declared, dividends of $1.12 per share,
per annum for Series J preferred stock must be paid prior to any dividends
on any other preferred stock or common stock. No such dividends have been
declared or paid.
- In the event of liquidation, dissolution, or winding up of the Company,
prior to any other preferred stockholders, Series J stockholders shall
receive $14.03 per share plus all declared but unpaid dividends. Upon
completion of this distribution, the holders of the common stock will
receive a pro rata distribution of any remaining assets of the Company. At
December 31, 1999, the aggregate liquidation preference for redeemable
convertible preferred stock was $15,166,000.
NOTE 13. STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
At December 31, 1998 and 1999, convertible preferred stock consisted of the
following (in thousands, net of issuance costs):
<TABLE>
<CAPTION>
SHARES
DESIGNATED OUTSTANDING AMOUNT
---------- ----------- --------
<S> <C> <C> <C>
Series A................................... 480 480 $ 120
Series B................................... 321 321 120
Series C................................... 1,700 1,700 1,014
Series D................................... 1,328 1,310 1,412
Series E................................... 1,966 1,965 6,458
Series F................................... 2,000 1,948 11,527
Series G................................... 1,000 -- --
Series H................................... 4,000 3,804 13,203
------ ------ -------
Total.................................... 12,795 11,528 $33,854
====== ====== =======
</TABLE>
Significant terms of the convertible preferred stock are as follows:
- Each share of Series A, B, C, D, E, G, and H is convertible into one share
of common stock, and each share of Series F preferred stock is convertible
into 1.107 shares of common stock (subject to adjustment for events of
dilution). Each share will automatically convert upon an underwritten
public offering of common stock meeting specified criteria.
- Each share of convertible preferred stock has voting rights equivalent to
the number of shares of common stock into which it is convertible. The
holders of Series E preferred stock, voting together as a class, are
entitled to elect one director of the Company. The holders of Series H
preferred stock, voting as a class, are also entitled to elect one
director of the Company.
F-21
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. STOCKHOLDERS' EQUITY (CONTINUED)
- Dividends may be declared at the discretion of the Board of Directors and
are noncumulative. To the extent declared, dividends of $0.02, $0.03,
$0.048, $0.085, $0.265, $0.49, $0.49, and $0.29 per share, per annum for
Series A, B, C, D, E, F, G, and H preferred stock, respectively, must be
paid prior to any dividends on common stock. No such dividends have been
declared or paid.
- In the event of liquidation, dissolution, or winding up of the Company,
Series A, B, C, D, E, F, G, and H stockholders shall receive, after
required distributions to the redeemable convertible preferred
stockholders, $0.25, $0.375, $0.60, $1.085, $3.30, $6.15, $6.15 and $3.68
per share, respectively, plus all declared but unpaid dividends. Upon
completion of this distribution, the holders of the common stock will
receive a pro rata distribution of any remaining assets of the Company. At
December 31, 1999, the aggregate liquidation preference for preferred
stock was $35.1 million.
SERIES K PREFERRED STOCK
During the first quarter of 2000, the Company designated and issued
3,010,528 shares of Series K convertible preferred stock at a price of $9.50 per
share (or 1,881,580 shares of common stock as converted per the 0.625 for 1
reverse stock split at a price of $15.20 per share) subject to adjustment for
events of dilution as described below. Net proceeds were approximately $28.6
million. The attributes of the Series K convertible preferred stock are similar
to the Company's other series of outstanding convertible preferred stock.
Conversion of the Series K convertible preferred stock is automatic upon
completion of an initial public offering in excess of $10 million at an offering
price of not less than $11.78 per share. If the Company completes an initial
public offering prior to January 2001 at a price less than $33.78 per share, the
conversion price of the Series K convertible preferred stock will adjust to 45%
of the initial public offering price, but in no event will it adjust to less
than $8.00 per share. This means that if this offering is completed at a price
less than $17.78 per share, the resulting conversion price of the Series K
convertible preferred stock will be $8.00 per share, and a total of 3,575,000
shares of common stock will be issued on conversion of such preferred stock.
In connection with the issuance of the Series K convertible preferred stock,
the Company has calculated $8,580,000 of contingent preferred stock accretion to
reflect the value of the Series K embedded beneficial conversion feature. This
amount will be recognized as an increase to accumulated deficit with a
corresponding credit to preferred stock and will be recognized in earnings as a
non-cash charge (preferred stock accretion) upon completion of the proposed
initial public offering of common stock.
CONVERTIBLE PREFERRED STOCK WARRANTS
In connection with a capital lease financing in 1994, the Company issued a
warrant to purchase 18,434 shares of Series D preferred stock at an exercise
price of $1.09 per share (or 11,521 shares as converted for the 0.625 to 1
reverse stock split at a price of $1.74 per share). The warrant expires the
later of three years from the effective date of an initial public offering of
the Company's common stock or in 2000. The value of the warrant was immaterial.
F-22
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. STOCKHOLDERS' EQUITY (CONTINUED)
In connection with capital lease financings in 1995, the Company issued
warrants to purchase 8,130, 11,382, and 67,934 shares of Series F, G, and H
preferred stock at $6.15, $6.15, and $3.68 per share, respectively (or 5,081,
7,113 and 42,121 shares of common stock as converted per the 0.625 to 1 reverse
stock split at prices of $9.84, $9.84 and $5.89 per share, respectively). The
Series F and H warrants expire the later of three years from the effective date
of an initial public offering of the Company's common stock or in 2002. The
Series G warrant expires the later of five years from the effective date of an
initial public offering of the Company's common stock or in 2005. The estimated
value of these warrants remaining after amortization was expensed in June 1996
when the repayments were made for the borrowings.
COMMON STOCK
At December 31, 1999, 6,200 shares of common stock are subject to repurchase
by the Company at the original issuance price. These repurchase rights generally
expire ratably over periods of three to five years.
STOCK OPTION PLANS
The Company has reserved 5,256,250 shares of common stock for issuance under
its 1992 Incentive Stock Plan, 1995 Management Option Plan, and 1999 Equity
Incentive Plan (the Plans). Under the Plans, incentive and nonqualified stock
options or rights to purchase common stock may be granted to employees,
directors, and consultants. Incentive options, nonqualified options, and stock
purchase rights must be priced to be at least 100%, 85%, and 85%, respectively,
of the common stock's fair value at the date of grant as determined by the Board
of Directors. Options shall become exercisable as determined by the Board of
Directors. Sales of stock under stock purchase rights are made pursuant to
restricted stock purchase agreements.
In September 1999, the Board of Directors adopted the 1999 Equity Incentive
Plan (Incentive Plan) for granting of incentive and nonqualified stock options
and rights to purchase common stock to employees, directors, and consultants.
Under the Incentive Plan, 1,875,000 shares of common stock are authorized for
issuance. Further, all unissued stock under the Company's 1992 Incentive Stock
Plan and 1995 Management Stock Option Plan are added to the 1,875,000 shares
reserved.
F-23
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. STOCKHOLDERS' EQUITY (CONTINUED)
A summary of stock option activity under the Plans follows (shares in
thousands):
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at December 31, 1996................ 2,047 $ 2.88
Granted....................................... 413 10.40
Exercised..................................... (138) .99
Canceled...................................... (128) 5.22
-----
Outstanding at December 31, 1997................ 2,194 4.27
Granted....................................... 454 10.40
Exercised..................................... (49) 2.75
Canceled...................................... (110) 8.67
-----
Outstanding at December 31, 1998................ 2,489 5.23
Granted....................................... 1,203 10.40
Exercised..................................... (205) 1.12
Canceled...................................... (142) 9.89
-----
Outstanding at December 31, 1999................ 3,345 $ 7.10
=====
</TABLE>
Subsequent to December 31, 1999, the Company issued options to employees to
purchase 294,075 shares of its common stock at $10.40 per share.
Additional information regarding options outstanding as of December 31, 1999
is as follows (shares in thousands):
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
NUMBER CONTRACTUAL AVERAGE NUMBER AVERAGE
RANGE OF EXERCISE PRICE OUTSTANDING LIFE (YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
----------------------- ----------- ------------ -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$0.03 - $0.50.................. 515 3.89 $ .24 515 $ .24
$0.75 - $2.00.................. 461 5.34 1.28 426 1.26
$4.00 - $4.00.................. 405 6.29 6.40 242 6.40
$6.50 - $6.50.................. 1,964 8.70 10.40 444 10.40
----- -----
3,345 1,627
===== =====
</TABLE>
At December 31, 1999, there were 1,280,000 shares available for future grant
under the Plans, and options to purchase 1,626,875 shares were exercisable. Upon
the exercise of certain exercisable options, the Company would have the right to
repurchase 6,200 shares at the original issuance price. Such a right generally
expires over three to five years.
In connection with the grant of certain stock options in December 1995, the
Company recorded deferred compensation of $62,000 for the difference between the
deemed fair value for accounting purposes and the option price. At December 31,
1999, the deferred compensation has been fully amortized. Such deferred
compensation is presented as a reduction to stockholders' equity.
F-24
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. STOCKHOLDERS' EQUITY (CONTINUED)
As discussed in Note 1, the Company continues to account for its stock-based
awards using the intrinsic value method in accordance with APB 25 and its
related interpretations. Accordingly, compensation expense has not been
recognized in the consolidated financial statements for employee stock
arrangements except for the difference between the deemed fair value for
accounting purposes and the exercise price of certain stock options as noted
above.
For the year ended December 31, 1999 and the three months ended March 31,
2000, the Company issued options to independent contractors to purchase 2,750
and 625 shares of common stock, respectively. The value of the options, using
the Black-Scholes option pricing model, was not significant.
For the three months ended March 31, 2000, the Company recorded compensation
expense of approximately $728,000 in connection with granting certain former
employees extended periods (beyond the period specified by the Plans) to
exercise their stock options upon termination of employment.
SFAS 123 requires the disclosure of pro forma net loss had the Company
adopted the fair value method as of the beginning of 1995. Under SFAS 123, the
fair value of stock-based awards to employees is calculated through the use of
option pricing models, even though such models were developed to estimate the
fair value of freely tradable, fully transferable options without vesting
restrictions, which significantly differ from the Company's stock option awards.
These models also require subjective assumptions, including future stock price
volatility and expected time to exercise, which greatly affects the calculated
values. The Company's calculations were made using the Black-Scholes option
pricing model with risk-free interest rates of 6.17%, 5.42% and 5.38% in 1997,
1998 and 1999, respectively, and no dividends during the expected term. The
Company's calculations are based on a multiple-option valuation approach, and
forfeitures are recognized as they occur.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Pro forma net income (loss)............................ $(10,233) $ (12) $(32,199)
Pro forma net income (loss) per common share:
Basic................................................ $ (8.94) $(0.01) $ (21.89)
Diluted.............................................. $ (8.94) $(0.01) $ (21.89)
</TABLE>
The impact of outstanding nonvested stock options granted prior to 1995 has
been excluded from the pro forma calculations; accordingly, the 1999 and 1998
pro forma adjustments are not indicative of future period pro forma adjustments
when the calculation will apply to all applicable stock options.
F-25
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. STOCKHOLDERS' EQUITY (CONTINUED)
1997 EMPLOYEE STOCK PURCHASE PLAN
The Company has an Employee Stock Purchase Plan under which employees can
purchase shares of the Company's common stock based on a percentage of their
compensation, but not greater than 15% of their earnings, up to a maximum of
$25,000 of fair value per year. The purchase price per share must be equal to
the lower of 85% of the fair value of the common stock at the beginning or end
of the six-month offering period. A total of 468,750 shares of common stock are
reserved for issuance under the plan. As of December 31, 1999, 254,000 shares
had been issued under this plan.
On September 1, 1999, the Board of Directors amended the 1997 Employee Stock
Purchase Plan (Purchase Plan) to become effective simultaneously with the
effectiveness of the Company's initial public offering. Under the amended
Purchase Plan, 468,750 shares of common stock are authorized for issuance. As
amended, eligible employees may purchase stock at 85% of the lower of closing
prices for the common stock at the beginning of a twenty-four month offering
period or the end of each six-month purchase period.
At December 31, 1999, the Company has reserved shares of common stock for
issuance as follows (in thousands):
<TABLE>
<S> <C>
Conversion of outstanding convertible preferred stock....... 7,205
Issuance under the Plans.................................... 4,625
Employee stock purchase plan................................ 310
Convertible preferred stock warrants........................ 66
------
Total....................................................... 12,206
======
</TABLE>
NOTE 14. INCOME TAXES
The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Current provision:
Federal.............................................. $120 $105 $ --
State................................................ 66 50 150
Foreign.............................................. 15 30 --
---- ---- ----
Total current provision................................ $201 $185 $150
==== ==== ====
</TABLE>
F-26
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14. INCOME TAXES (CONTINUED)
The difference between the provision for income taxes and the amount
computed by applying the Federal statutory income tax rate (35%) to income
before taxes is explained below (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Tax provision (benefit) at federal statutory
rate.......................................... $(1,215) $ 1,563 $(9,501)
State income tax................................ 66 50 150
Federal alternative minimum taxes............... 120 105 --
Foreign taxes................................... 15 30 --
Unutilized (utilized) net operating losses...... 1,215 (1,563) 9,501
------- ------- -------
Total........................................... $ 201 $ 185 $ 150
======= ======= =======
</TABLE>
Income tax expense for the three-month periods ended March 31, 1999 and 2000
relates only to state income tax expense.
Significant components of the Company's deferred tax assets are as follows
at December 31 (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........... $ 7,500 $ 5,500 $ 6,000
Tax credit carryforwards................... 500 985 1,257
Inventory related items.................... -- -- 5,746
Reserves and accruals...................... 3,943 3,784 3,960
Deferred revenue........................... -- -- 2,357
Capitalized research and development
costs..................................... 320 220 476
Depreciation and amortization.............. 112 205 205
Other, net................................. 342 498 2,298
-------- -------- --------
Total deferred tax assets.................... 12,717 11,192 22,299
Valuation allowance.......................... (12,717) (11,192) (22,299)
-------- -------- --------
Net deferred tax assets...................... $ -- $ -- $ --
======== ======== ========
</TABLE>
The Company has established a valuation allowance equal to the net deferred
tax assets due to the uncertainties regarding the realization of deferred tax
assets based on the Company's lack of earnings history.
As of December 31, 1999, the Company had a federal net operating loss
carryforward of approximately $17,100,000. The federal net operating loss
carryforward will expire beginning in 2008. The Company also had federal and
state research and development tax credit carryforwards of approximately
$670,000 and $550,000, respectively. The federal and state research and
development tax credit carryforwards will expire at various dates beginning in
year 2007 through 2019, if not utilized.
F-27
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14. INCOME TAXES (CONTINUED)
Utilization of the net operating losses and tax credits may be subject to a
substantial annual limitation due to the ownership change limitations provided
by the Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and tax credits
before utilization.
NOTE 15. OPERATING SEGMENTS AND GEOGRAPHIC INFORMATION
During the first quarter of 2000, the Company changed the way that it
reports information to the chief operating decision maker. The disclosures below
have been revised for all periods presented to reflect this new reporting
structure.
Management of the Company has determined the operating segments based upon
how the business is managed and operated. There are no significant intersegment
sales or transfers and substantially all of the Company's long-lived assets are
located in the United States.
The Company reports two operating segments: Automation Systems and the
Omnicell Commerce Network group. The Company's chief operating decision maker
reviews information pertaining to reportable segments only to the gross profit
level. Assets of the operating segments are not segregated.
Information about reportable segment sales and gross profit are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
AUTOMATION SYSTEMS
Net sales........................... $36,073 $48,212 $50,407 $12,052 $14,668
Gross profit (loss)................. $19,862 $30,828 $16,540 $ 7,567 $ 8,526
OMNICELL COMMERCE NETWORK GROUP
Net sales........................... $ -- $ -- $ -- $ -- $ 2
Gross profit (loss)................. $ -- $ -- $ (270) $ -- $ (269)
NET SALES
North America....................... $36,073 $47,709 $50,162 $12,002 $14,620
Other............................... -- 503 245 50 50
------- ------- ------- ------- -------
Consolidated net sales.............. $36,073 $48,212 $50,407 $12,052 $14,670
======= ======= ======= ======= =======
</TABLE>
NOTE 16. RELATED PARTY TRANSACTIONS
The Company recorded revenues of approximately $7.1 million, $9.9 million
and $5.1 million in 1997, 1998 and 1999, respectively, from a Series J
redeemable convertible preferred stockholder and member of the Company's Board
of Directors until August 11, 1999 (of which approximately $974,000 and $302,000
is included in accounts receivable at December 31, 1998 and 1999, respectively).
Payment terms are net 45 days. Under the terms
F-28
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 16. RELATED PARTY TRANSACTIONS (CONTINUED)
of a distribution agreement, this related party earned cash rebates of
approximately $438,000 and $0 for purchases made from the Company during the
years ended December 31, 1998 and 1999, respectively.
NOTE 17. EMPLOYEE BENEFIT PLAN
During 1994, the Company established a 401(k) tax-deferred savings plan,
whereby eligible employees may contribute a percentage of their eligible
compensation but not greater than 15.0% of their earnings. Company contributions
are discretionary; no such Company contributions have been made since inception
of the plan.
NOTE 18. SUBSEQUENT EVENTS
On April 19, 2000, the Company's Board of Directors took the following
actions:
- authorized the filing of a registration statement with the Securities and
Exchange Commission to register shares of its common stock in connection
with the proposed initial public offering;
- authorized the change of the Company's state of incorporation to Delaware.
As part of the reincorporation, the Board of Directors authorized an
increase in the number of authorized shares of common stock to 31,250,000.
Upon the completion of this offering and after the conversion of all the
Company's outstanding preferred stock to common stock, the Board of
Directors authorized a decrease in the number of authorized shares of
preferred stock to 3,125,000;
- approved an amendment to the Company's 1999 Equity Incentive Plan to
increase the number of shares reserved for issuance under such plan by
1,250,000 shares, to a total of 3,125,000. The Board of Directors also
approved an automatic increase in the number of shares reserved under such
plan each January 1 (beginning January 1, 2001) by the lesser of 5% of the
total then outstanding shares of common stock or 1,875,000 shares, unless
the Board of Directors then designates a smaller increase in the number of
authorized shares; and
- approved an amendment to the Company's 1997 Employee Stock Purchase Plan
to provide for an automatic increase in the number of shares reserved
under such plan each January 1 (beginning January 1, 2001) by the lesser
of 1.5% of the total then outstanding shares of common stock or 468,750
shares, unless the Board of Directors then designates a smaller increase
in the number of authorized shares.
STOCK OPTION GRANTS
Subsequent to March 31, 2000, the Company approved grants to employees for
options to purchase 635,436 shares of its common stock at $10.40 per share.
F-29
<PAGE>
OMNICELL.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 18. SUBSEQUENT EVENTS (CONTINUED)
STOCK SPLIT
On , 2000, the Company's stockholders approved a 0.625-for-one
reverse stock split on the Company's common stock. Accordingly, all common stock
share and per-share data for all periods presented have been restated to reflect
this event.
F-30
<PAGE>
REPORT OF PRICEWATERHOUSECOOPERS LLP INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders of
Baxter International Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations and cash flows present fairly, in all material respects, the
financial position of the Sure-Med Division of Baxter Healthcare Corporation
(the Business), an indirect division of Baxter International Inc., at
December 31, 1998, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Business' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chicago, Illinois
July 30, 1999
F-31
<PAGE>
SURE-MED DIVISION OF BAXTER HEALTHCARE CORPORATION
(AN INDIRECT DIVISION OF BAXTER INTERNATIONAL INC.)
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1998
--------------
(IN THOUSANDS)
<S> <C>
Current assets
Accounts receivable, net of allowances of $278............ $11,234
Inventories, net.......................................... 17,081
-------
Total current assets.................................... 28,315
-------
Fixed assets, net........................................... 971
Capitalized software costs, net............................. 8,911
Other assets................................................ 2,455
-------
Total assets............................................ $40,652
=======
Current liabilities
Accounts payable.......................................... $ 2,096
Accrued liabilities....................................... 2,802
-------
Total current liabilities............................... 4,898
-------
Long-term liabilities....................................... 1,923
-------
Investment by parent........................................ 33,831
-------
Total liabilities and Investment by Parent.............. $40,652
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE>
SURE-MED DIVISION OF BAXTER HEALTHCARE CORPORATION
(AN INDIRECT DIVISION OF BAXTER INTERNATIONAL INC.)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1997 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net revenues................................................ $32,174 $26,211
Costs and expenses
Cost of goods sold (including related party charges of
$1,058 and $1,018, respectively.)........................ 24,564 23,228
Selling and marketing expenses (including related party
charges of $1,924 and $1,901, respectively.)............. 10,461 8,741
General and administrative expenses (including related
party charges of $1,198 and $1,143, respectively.)....... 2,315 2,245
Research and development expenses (including related party
charges of $108 and $101, respectively.)................. 1,304 1,347
------- -------
Total costs and expenses.................................... 38,644 35,561
------- -------
Net loss.................................................... $(6,470) $(9,350)
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
SURE-MED DIVISION OF BAXTER HEALTHCARE CORPORATION
(AN INDIRECT DIVISION OF BAXTER INTERNATIONAL INC.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1997 1998
-------- --------
(IN THOUSANDS)
-------------------
(BRACKETS DENOTE
CASH OUTFLOWS)
----------------
<S> <C> <C>
Cash flows from operations
Net loss.................................................. $(6,470) $(9,350)
Adjustments
Depreciation and amortization........................... 1,168 1,233
Changes in balance sheet items
Accounts receivable, net.............................. (595) 5,711
Inventories........................................... 458 4,044
Other Assets.......................................... (210) (243)
Accounts payable...................................... 2,140 (1,221)
Accrued liabilities................................... (411) 900
------- -------
Cash flows from operations................................ (3,920) 1,074
------- -------
Cash flows from investing activities
Capitalized software costs.................................. (3,333) (3,690)
Capital expenditures........................................ (378) (453)
Installed base of equipment leased to customers............. (421) (659)
------- -------
Cash flows from investing activities........................ (4,132) (4,802)
------- -------
Cash flows from financing activities
Financing from Parent....................................... 8,052 3,728
------- -------
Cash flows from financing activities........................ 8,052 3,728
------- -------
Change in cash and equivalents.............................. -- --
------- -------
Cash and equivalents at beginning of year................... -- --
------- -------
Cash and equivalents at end of year......................... $ -- $ --
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE>
SURE-MED DIVISION OF BAXTER HEALTHCARE CORPORATION
(AN INDIRECT DIVISION OF BAXTER INTERNATIONAL INC.)
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF ENTITY AND BASIS OF PRESENTATION
The Sure-Med Division of Baxter Healthcare Corporation (the Business) is a
division of Baxter Healthcare Corporation (Baxter), which is in turn a
subsidiary of Baxter International Inc. (BII or Parent). The Business is
principally engaged in the development, manufacturing, marketing and
distribution of an automated distribution system designed to control the
dispensing of narcotics, medications and supplies in both hospital and alternate
site settings. The Business operates mainly in the domestic market, but does
sell some of its products through related parties into certain international
markets, principally Canada and Western Europe. Historically, the Business had
no separate legal status. The accompanying financial statements have been
prepared from the historical accounting records as if the Business had operated
as a separate entity during all periods presented.
The financial statements include all of the direct operating expenses of the
Business and allocations of certain shared costs from Baxter and BII.
Allocations are based on actual usage or other methods that approximate actual
usage. Management believes that the allocation methods are reasonable. However,
these allocations are not necessarily indicative of the costs and expenses that
would have resulted if the Business had been operated as a separate entity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTATION
The preparation of the financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make estimates and
assumptions that affect reported amounts and related disclosures. Actual results
could differ from those estimates.
REVENUE RECOGNITION
Revenue is recognized when products are installed and any remaining
obligations of the Business are insignificant. Installation consists principally
of software planning and configuration, staff training, hardware set-up and
certain interfacing activities. Revenue for certain repeat sales to existing
customers (i.e. where a system interface has been previously developed) is
recognized upon shipment of the units to the customers as the installation
effort is considered insignificant. Costs associated with installation, in these
instances, are accrued upon shipment.
CASH
The Business has not maintained any cash accounts and all cash management
activities have been performed by Baxter and BII.
ACCOUNTS RECEIVABLE
Accounts receivable include unbilled amount of $7,584,000 as of
December 31, 1998. These unbilled amounts relate to products shipped to
customers for which installation activities are substantially complete.
F-35
<PAGE>
SURE-MED DIVISION OF BAXTER HEALTHCARE CORPORATION
(AN INDIRECT DIVISION OF BAXTER INTERNATIONAL INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
1998
--------------
(IN THOUSANDS)
<S> <C>
Raw materials............................................... $ 2,379
Finished products........................................... 16,280
-------
Total gross inventories..................................... 18,659
Inventory reserves.......................................... (1,578)
-------
Total net inventories....................................... $17,081
=======
</TABLE>
Inventories are stated at the lower of cost (first-in, first-out method) or
market value. Market value for raw materials is based on replacement costs and,
for finished products, on net realizable value.
FIXED ASSETS
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
1998
--------------
(IN THOUSANDS)
<S> <C>
Computer equipment.......................................... $1,702
Machinery and equipment..................................... 756
------
Total fixed assets, at cost................................. 2,458
Accumulated depreciation.................................... (1,487)
------
Net fixed assets............................................ $ 971
======
</TABLE>
Fixed assets are carried at cost less accumulated depreciation. Expenditures
for repairs and maintenance are charged to expense as incurred and were not
significant for 1998 or 1997. Interest costs applicable to the construction of
major projects are capitalized when material.
Depreciation is principally calculated on the straight-line method over the
estimated useful lives of the related assets, which range from three to five
years. Straight-line and accelerated methods of depreciation are used for income
tax purposes.
Depreciation expense was $511,000 and $411,000 in 1998 and 1997,
respectively. Capitalized interest was $35,000 and $209,000 for 1998 and 1997,
respectively.
CAPITALIZED SOFTWARE COSTS
The Business capitalizes software development costs once technological
feasibility has been determined and ceases capitalization once the software is
ready for its intended use as a component of the business' automated
distribution products. Research and development costs
F-36
<PAGE>
SURE-MED DIVISION OF BAXTER HEALTHCARE CORPORATION
(AN INDIRECT DIVISION OF BAXTER INTERNATIONAL INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
incurred prior to technological feasibility and software maintenance costs
incurred subsequent to release are expensed as incurred. Capitalized software
costs are amortized on a straight-line basis over periods ranging from three to
five years, depending on the estimated useful life of the software.
The carrying values and amortizable lives of capitalized software are
regularly reviewed by the Business for recoverability. At the time a
determination is made that capitalized amounts are not recoverable based on
estimated cash flows to be generated from the software, any remaining amounts
are written down to net realizable value.
Information related to capitalized software costs is as follows:
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
1998
--------------
(IN THOUSANDS)
<S> <C>
Beginning of year........................................... $6,410
Capitalized costs........................................... 2,988
Amortization................................................ (487)
------
End of year................................................. $8,911
======
</TABLE>
Capitalized software included approximately $8,200 of costs related to
projects in development at December 31, 1998.
LEASE ACCOUNTING
The Business offers lease financing to its customers under the terms of its
standard five-year sales type lease. Leases originated by the business result in
the recognition of revenue (present value of lease payments, net of executory
costs) and cost of sales (actual cost of automated distribution system), as well
as the recording of unearned income (excess of gross receivable plus estimated
residual value over the cost of the equipment). Consistent with the Business'
revenue recognition policy and concurrent with lease initiation, all leases are
automatically included in a pool of leases sold on a non-recourse basis to a
third party financial institution under the terms of a rolling lease sale
agreement administered by the Parent ("Lease Sale Program"). As a result of this
arrangement, all leased receivable balances and associated unearned income
amounts are reclassified from their original balance sheet classifications and
reflected as net activity within Investment by Parent (Note 11). The Business
retains all warranty obligations related to units sold under the Lease Sale
Program. The amount of gross leased receivables sold under the Lease Sale
Program were $19,300,000 and $17,467,000 for the years ended December 31, 1998
and 1997, respectively.
F-37
<PAGE>
SURE-MED DIVISION OF BAXTER HEALTHCARE CORPORATION
(AN INDIRECT DIVISION OF BAXTER INTERNATIONAL INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
WARRANTIES
Estimated future warranty obligations related to products sold or leased are
provided by charges to operations in the period of product sale or lease
inception. The standard warranty period for products sold or leased is one year
and five years, respectively. The cost of warranty obligations is contractually
capitated as part of an agreement with a third party.
SEGMENT INFORMATION
BII adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (SFAS
No. 131) in 1998. This statement establishes standards for the reporting of
information about operating segments in annual and interim financial statements.
Operating segments are defined as components of an enterprise for which separate
financial information is available that is evaluated regularly by the chief
operating decision maker(s) in deciding how to allocate resources and in
assessing performance. SFAS No. 131 also requires disclosures about products and
services, geographic areas and major customers. The adoption of SFAS No. 131 did
not affect results of operations, financial position or the disclosure of
segment information. Refer to Note 10 for the Business' segment information.
3. TRANSACTIONS WITH RELATED PARTIES
A portion of the operations of the Business involves transactions with
subsidiaries and divisions of BII.
A division of Baxter provides accounting, administrative and other services
related to the business' sales-type leases with its customers. The Business is
charged for such services at a rate which management believes approximates the
market rate. As discussed in Note 2, Baxter sells substantially all of the
Business' lease receivables to an independent third party.
In addition, the corporate headquarters of BII and the divisional
headquarters of Baxter provide to the Business certain other accounting, tax,
and administrative services. All significant expenses relating to such services
are included in the financial statements of the Business.
The financial statements of the Business include expenses of $4,288,000 and
$4,163,000 in 1998 and 1997, respectively, for services provided by related
parties.
4. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
CONCENTRATIONS OF CREDIT RISK
In the normal course of business, the company provides credit to customers
in the health-care industry, performs credit evaluations of these customers and
maintains reserves for potential credit losses which, when realized, have been
within the range of management's allowance for doubtful accounts.
The carrying values of financial instruments approximate their fair values.
F-38
<PAGE>
SURE-MED DIVISION OF BAXTER HEALTHCARE CORPORATION
(AN INDIRECT DIVISION OF BAXTER INTERNATIONAL INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CURRENT ACCRUED LIABILITIES
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
1998
--------------
(IN THOUSANDS)
<S> <C>
Accrued installation costs.................................. $ 965
Employee compensation and withholdings...................... 647
Accrued dispenser liability................................. 762
Other....................................................... 428
------
Total....................................................... $2,802
======
</TABLE>
6. LONG TERM ACCRUED LIABILITIES
Long term accrued liabilities consist principally of accrued warranty cost
at December 31, 1998.
7. STOCK-BASED COMPENSATION PLANS
Certain employees of the Business participate in stock-based compensation
plans sponsored by BII. Such plans principally include fixed stock option plans
and an employee stock purchase plan. BII applies APB Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its plans. Accordingly, no compensation cost has been recognized by BII for its
fixed stock option plans and its stock purchase plan. These plans are the sole
responsibility of BII and, accordingly, no information is presented herein.
8. RETIREMENT AND OTHER BENEFIT PROGRAMS
Substantially all of the employees of the Business are eligible to
participate in BII's contributory defined contribution plan, non-contributory
defined benefit pension plans and certain other postretirement benefit plans.
These plans are the sole responsibility of BII and, accordingly, no information
is presented herein related to those plans. Total expense recognized by the
Business relating to these plans was $329,000 and $307,000 in 1998 and 1997,
respectively.
9. INCOME TAXES
The results of the Business' operations are included in the consolidated tax
return of BII. These financial statements do not reflect income tax expense or
benefit for 1998 or 1997. As instructed by its parent, the Business calculates
its taxes as if it were filing its own return. On a separate return basis, the
losses incurred during those years would have given rise to net operating loss
carryforwards and related deferred tax assets. Due to the uncertainty of
ultimate utilization of those carryforwards on a separate-return basis, the
Business would have recorded valuation allowances for the full amounts of those
deferred tax assets. The tax effects of other temporary differences that give
rise to deferred tax assets and liabilities at December 31, 1998 were not
material.
F-39
<PAGE>
SURE-MED DIVISION OF BAXTER HEALTHCARE CORPORATION
(AN INDIRECT DIVISION OF BAXTER INTERNATIONAL INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES (CONTINUED)
The Business, on a stand-alone basis, would have a net operating loss
carryforward for federal income tax purposes of approximately $34,000,000 at
December 31, 1998. However, since the Business has been included in the
consolidated tax filings of BII, its prior losses have been utilized in the BII
consolidated tax returns. As such, should the Business actually file separate
tax returns in the future, no net operating losses would be available.
10. SEGMENT INFORMATION
The Business operates in one segment, the pharmacy automation market, the
activities and products of which are described in Note 1.
GEOGRAPHIC INFORMATION
The following geographic area data include net sales based on product
shipment destination (in thousands).
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Net Sales
United States........................................... $25,109 $31,030
Other countries......................................... 1,102 1,144
------- -------
Consolidated totals..................................... $26,211 $32,174
======= =======
</TABLE>
11. INVESTMENT BY PARENT
Investment by Parent represents Baxter's ownership interest in the recorded
net assets of the Business. All cash transactions with Baxter and BII are
reflected in this amount. In addition, all intercompany expenses charged from
the Parent are not expected to be settled and, therefore, while recorded as
expenses in the appropriate period, have been considered additional
contributions from the Parent. The Business has not been charged interest on any
investments made by the Parent other than those amounts capitalized into fixed
assets as disclosed in Note 2. A summary of the activity is as follows (in
thousands):
<TABLE>
<S> <C>
Balance at December 31, 1997................................ 40,235
Net loss.................................................... (9,350)
Leased receivable transfers, net of unearned income (Note
2)........................................................ (15,774)
Other net intercompany activity............................. 18,720
--------
Balance at December 31, 1998................................ $ 33,831
========
</TABLE>
12. SUBSEQUENT EVENTS
In December 1998, Baxter signed an agreement to sell the Business to
OmniCell.com (formerly Omnicell Technologies, Inc.) (Omnicell). In
January 1999, Baxter completed its sale of the Business to Omnicell subject to
delivery of final, audited financial statements.
F-40
<PAGE>
YOU MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN THE
PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR SALE OF COMMON STOCK
MEANS THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE DATE OF
THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR SOLICITATION OF AN
OFFER TO BUY THESE SHARES IN ANY CIRCUMSTANCES UNDER WHICH THE OFFER OR
SOLICITATION IS UNLAWFUL.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary......................... 1
Risk Factors............................... 6
Special Note Regarding Forward-Looking
Statements............................... 20
Use of Proceeds............................ 20
Dividend Policy............................ 20
Capitalization............................. 21
Dilution................................... 22
Selected Consolidated Financial Data....... 23
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 25
Business................................... 36
Management................................. 56
Related Party Transactions................. 69
Principal Stockholders..................... 71
Description of Capital Stock............... 75
Shares Eligible for Future Sale............ 78
Underwriting............................... 80
Legal Matters.............................. 82
Experts.................................... 82
Where You Can Find More Information........ 83
Index to Financial Statements.............. F-1
</TABLE>
UNTIL 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
THAT BUY, SELL OR TRADE IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN
THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. DEALERS ARE ALSO
OBLIGATED TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
[OMNICELL.COM LOGO]
SHARES
COMMON STOCK
DEUTSCHE BANC ALEX. BROWN
DONALDSON, LUFKIN & JENRETTE
BANC OF AMERICA SECURITIES LLC
U.S. BANCORP PIPER JAFFRAY
PROSPECTUS
, 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by Omnicell.com in connection with the sale
of the common stock being registered. All the amounts shown are estimates except
for the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 15,180
Nasdaq National Market listing fee.......................... 17,500
NASD filing fee............................................. 6,250
Printing and engraving expenses............................. 250,000
Legal fees and expenses..................................... 600,000
Accounting fees and expenses................................ 350,000
Transfer agent and registrar fees........................... 50,000
Miscellaneous............................................... 111,070
----------
Total....................................................... $1,400,000
==========
</TABLE>
We intend to pay all expenses of registration, issuance and distribution.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law (the DGCL) authorizes a
court to award, or a corporation's board of directors to grant indemnity to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities, including
reimbursement for expenses incurred, arising under the Securities Act.
As permitted by the DGCL, our Certificate of Incorporation, which will
become effective upon the closing of this offering, includes a provision that
eliminates the personal liability of our directors for monetary damages for
breach of fiduciary duty as a director, except for liability (1) for any breach
of the director's duty of loyalty to us or our stockholders; (2) for acts or
omissions not in good faith or that involve intentional misconduct or knowing
violation of law; (3) under Section 174 of the DGCL regarding unlawful dividends
and stock purchases; or (4) for any transaction from which the director derived
an improper personal benefit.
As permitted by the DGCL, our Certificate of Incorporation and/or our
Bylaws, which will become effective upon the closing of this offering, provide
that (1) we are required to indemnify our directors and officers to the fullest
extent permitted by the DGCL, subject to certain very limited exceptions;
(2) we are permitted to indemnify our other employees to the extent that we
indemnify our officers and directors, unless otherwise required by law, our
Certificate of Incorporation, our Bylaws or agreements; (3) we are required to
advance expenses, as incurred, to our directors and officers in connection with
a legal proceeding to the fullest extent permitted by the DGCL, subject to
certain very limited exceptions; and (4) the rights conferred in our Bylaws are
not exclusive.
Prior to the closing of this offering, we intend to enter into indemnity
agreements with each of our current directors and officers to give such
directors and officers additional contractual assurances regarding the scope of
the indemnification set forth in our Certificate of Incorporation and our Bylaws
and to provide additional procedural protections. At present, there is no
pending litigation or proceeding involving a director, officer or employee of
Omnicell.com regarding which indemnification is sought, nor are we aware or any
threatened litigation that may result in claims for indemnification.
With approval by the board of directors, we expect to obtain directors' and
officers' liability insurance. Reference is made to the underwriting agreement
contained in Exhibit 1.1 hereto, which contains provisions indemnifying our
officers and directors against certain liabilities.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
(a) The Company has issued or sold the following securities within the past
three years:
- an aggregate of 3,010,528 shares of Series K convertible preferred stock
at $9.50 per share in January and March 2000 to 25 accredited investors,
including 105,264 shares sold to Commerce One.
(b) As of May 31, 2000, the Company has issued:
- an aggregate of 464,383 shares of common stock upon exercise of options
under the 1992 Equity Incentive Plan;
- an aggregate of 206,303 shares of common stock upon exercise of options
under the 1995 Management Stock Option Plan;
- an aggregate of 247,116 shares of common stock upon exercise of options
under the 1997 Employee Stock Purchase Plan; and
- an aggregate of 148,768 shares of common stock under the 1999 Equity
Incentive Plan.
(c) There were no underwritten offerings employed in connection with the
transaction set forth in Item 15(a).
The issuances described in Item 15(a) were deemed to be exempt from
registration under the Securities Act in reliance upon Section 4(2) thereof as
transactions by an issuer not involving any public offering. The issuances
described in Item 15(b) were deemed to be exempt from registration under the
Securities Act in reliance upon Rule 701 promulgated thereunder in that they
were offered and sold either pursuant to written compensatory benefit plans or
pursuant to a written contract relating to compensation, as provided by
Rule 701. In addition, such issuances were deemed to be exempt from registration
under Section 4(2) of the Securities Act as transactions by an issuer not
involving any public offering. The recipients of securities in each such
transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends where affixed to the securities
issued in such transactions. All recipients had adequate access, through their
relationships with the Company, to information about the Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1+ Amended and Restated Articles of Incorporation of
Omnicell.com.
3.2+ Certificate of Amendment of Amended and Restated Articles of
Incorporation of Omnicell.com.
3.3+ Certificate of Incorporation of Omnicell.com to be effective
upon reincorporation in Delaware.
3.4+ Amended and Restated Certificate of Incorporation of
Omnicell.com to be filed following the closing of the
offering.
3.5+ Bylaws of Omnicell.com.
3.6+ Bylaws of Omnicell.com to be effective upon reincorporation
in Delaware.
4.1* Form of Common Stock Certificate.
4.2+ Amended and Restated Investor Rights Agreement, dated
January 20, 2000.
4.3+ Warrant Agreement, dated September 30, 1993, between
Omnicell.com and Comdisco, Inc.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C>
4.4+ Warrant Agreement, dated January 23, 1995, between
Omnicell.com and Comdisco, Inc.
4.5+ Warrant Agreement, dated July 7, 1995, between Omnicell.com
and Comdisco, Inc.
4.6+ Warrant Agreement, dated September 29, 1995, between
Omnicell.com and Comdisco, Inc.
4.7+ Convertible Promissory Note, dated October 1, 1999.
5.1* Opinion of Cooley Godward LLP, counsel to Omnicell.com.
10.1+ Real Property Lease, dated September 24, 1999, between W.F.
Baton & Co., Inc. and Omnicell.com, as amended.
10.2+ Real Property Lease, effective July 1, 1999, between
Omnicell.com and Amli Commercial Properties Limited
Partnership.
10.3+ Real Property Lease, dated April 3, 1996, between O'Donnell
Palo Alto Associates and Omnicell.com.
10.4+ Real Property Lease, dated March 25, 1994, between W.F.
Batton & Co., Inc. and Omnicell.com, as amended.
10.5+ Master Assignment Agreement and Master Sales Agreement,
dated September 29, 1994, between Americorp Financial, Inc.
and Omnicell.com, as amended.
10.6+ Group Purchasing Agreement, effective June 1, 1997, between
Premier Purchasing Partners, L.P., and Omnicell.com.
10.7+ Letter Agreement, dated June 27, 1997, between the
University Health System Consortium Services Corporation and
Omnicell.com.
10.8+ Federal Supply Schedule Contract No. V797P-3406k, effective
August 7, 1997, between the Department of Veterans Affairs
and Omnicell.com.
10.9+ Asset Purchase Agreement dated December 18, 1998, between
Omnicell.com and Baxter Healthcare Corporation, as amended.
10.10+ Loan and Security Agreement and Standby Facility Agreement,
dated January 27, 2000, between Silicon Valley Bank and
Omnicell.com.
10.11**+ Vertical Hosted License Agreement, dated August 21, 1999,
between Omnicell.com and Commerce One, as amended.
10.12+ Form of Director and Officer Indemnification Agreement.
10.13+ 1992 Equity Incentive Plan, as amended.
10.14+ 1995 Management Stock Option Plan.
10.15+ 1997 Employee Stock Purchase Plan, as amended.
10.16+ 1999 Equity Incentive Plan, as amended.
10.17+ Program Agreement, dated June 7, 1999, between General
Electric Company and Omnicell.com.
10.18+ Employment Agreement, dated December 13, 1993, between
Omnicell.com and Sheldon D. Asher.
10.19** Strategic Alliance Agreement, dated April 17, 2000, between
Omnicell.com and PricewaterhouseCoopers LLP.
10.20** Strategic Alliance Agreement, dated June 6, 2000, between
Omnicell.com and Promedix.com, Inc.
21.1+ Subsidiaries of Omnicell.com
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of PricewaterhouseCoopers LLP, independent
accountants.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C>
23.3* Consent of Cooley Godward LLP. Reference is made to
Exhibit 5.1.
24.1+ Powers of Attorney. Reference is made to Page II-5.
27.1 Financial Data Schedule.
</TABLE>
------------------------
* To be filed by amendment.
** Confidential treatment requested.
+ Previously filed.
(b) Financial Statement Schedules.
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNT DEDUCTIONS PERIOD
----------- ------------ ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997 allowance
for doubtful accounts................. $159,783 $60,000 -- $1,415(1) $218,368
Year ended December 31, 1998 allowance
for doubtful accounts................. 218,368 60,000 -- -- 278,368
Year ended December 31, 1999 allowance
for doubtful accounts................. 278,368 60,000 -- -- 338,368
</TABLE>
------------------------
(1) Uncollectible accounts written off.
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes to provide the Underwriters at the closing
specified in the Underwriting Agreement, certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered hereunder, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be a part of
this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall be
deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Palo Alto, State of
California, on the 13th day of June, 2000.
<TABLE>
<S> <C> <C>
OMNICELL.COM
By: /s/ SHELDON D. ASHER
-----------------------------------------
Sheldon D. Asher
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ SHELDON D. ASHER President and Chief Executive
------------------------------------ Officer and Director (PRINCIPAL June 13, 2000
Sheldon D. Asher EXECUTIVE OFFICER)
/s/ ROBERT Y. NEWELL, IV Vice President and Chief Financial
------------------------------------ Officer (PRINCIPAL FINANCIAL AND June 13, 2000
Robert Y. Newell, IV ACCOUNTING OFFICER)
*
------------------------------------ Chairman of the Board and Director June 13, 2000
Randall A. Lipps
*
------------------------------------ Director June 13, 2000
Gordon V. Clemons
*
------------------------------------ Director June 13, 2000
Christopher J. Dunn, M.D.
*
------------------------------------ Director June 13, 2000
Frederick J. Dotzler
*
------------------------------------ Director June 13, 2000
Randall A. Hack
*
------------------------------------ Director June 13, 2000
Benjamin A. Horowitz
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
*
------------------------------------ Director June 13, 2000
Kevin L. Roberg
*
------------------------------------ Director June 13, 2000
John D. Stobo, Jr.
*
------------------------------------ Director June 13, 2000
William H. Younger, Jr.
</TABLE>
<TABLE>
<S> <C> <C> <C>
* /s/ SHELDON D. ASHER
----------------------------------
Sheldon D. Asher
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- ------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1+ Amended and Restated Articles of Incorporation of
Omnicell.com.
3.2+ Certificate of Amendment of Amended and Restated Articles of
Incorporation of Omnicell.com.
3.3+ Certificate of Incorporation of Omnicell.com to be effective
upon reincorporation in Delaware.
3.4+ Amended and Restated Certificate of Incorporation of
Omnicell.com to be filed following the closing of the
offering.
3.5+ Bylaws of Omnicell.com.
3.6+ Bylaws of Omnicell.com to be effective upon reincorporation
in Delaware.
4.1* Form of Common Stock Certificate.
4.2+ Amended and Restated Investor Rights Agreement dated
January 20, 2000.
4.3+ Warrant Agreement, dated September 30, 1993, between
Omnicell.com and Comdisco, Inc.
4.4+ Warrant Agreement, dated January 23, 1995, between
Omnicell.com and Comdisco, Inc.
4.5+ Warrant Agreement, dated July 7, 1995, between Omnicell.com
and Comdisco, Inc.
4.6+ Warrant Agreement, dated September 29, 1995, between
Omnicell.com and Comdisco, Inc.
4.7+ Convertible Promissory Note, dated October 1, 1999.
5.1* Opinion of Cooley Godward LLP, counsel to Omnicell.com.
10.1+ Real Property Lease, dated September 24, 1999, between W.F.
Baton & Co., Inc. and Omnicell.com, as amended.
10.2+ Real Property Lease, effective July 1, 1999, between
Omnicell.com and Amli Commercial Properties Limited
Partnership.
10.3+ Real Property Lease, dated April 3, 1996, between O'Donnell
Palo Alto Associates and Omnicell.com.
10.4+ Real Property Lease, dated March 25, 1994, between W.F.
Batton & Co., Inc. and Omnicell.com, as amended.
10.5+ Master Assignment Agreement and Master Sales Agreement,
dated September 29, 1994, between Americorp Financial, Inc.
and Omnicell.com, as amended.
10.6+ Group Purchasing Agreement, effective June 1, 1997, between
Premier Purchasing Partners, L.P., and Omnicell.com.
10.7+ Letter Agreement, dated June 27, 1997, between the
University Health System Consortium Services Corporation and
Omnicell.com.
10.8+ Federal Supply Schedule Contract No. V797P-3406k, effective
August 7, 1997, between the Department of Veterans Affairs
and Omnicell.com.
10.9+ Asset Purchase Agreement dated December 18, 1998, between
Omnicell.com and Baxter Healthcare Corporation, as amended.
10.10+ Loan and Security Agreement and Standby Facility Agreement,
dated January 27, 2000, between Silicon Valley Bank and
Omnicell.com.
10.11**+ Vertical Hosted License Agreement, dated August 21, 1999,
between Omnicell.com and Commerce One, as amended.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- ------------------------------------------------------------
<S> <C>
10.12+ Form of Director and Officer Indemnification Agreement.
10.13+ 1992 Equity Incentive Plan, as amended.
10.14+ 1995 Management Stock Option Plan.
10.15+ 1997 Employee Stock Purchase Plan, as amended.
10.16+ 1999 Equity Incentive Plan, as amended.
10.17+ Program Agreement, dated June 7, 1999, between General
Electric Company and Omnicell.com.
10.18+ Employment Agreement, dated December 13, 1993, between
Omnicell.com and Sheldon D. Asher.
10.19** Strategic Alliance Agreement, dated April 17, 2000, between
Omnicell.com and PricewaterhouseCoopers LLP.
10.20** Strategic Alliance Agreement, dated June 6, 2000, between
Omnicell.com and Promedix.com, Inc.
21.1+ Subsidiaries of Omnicell.com
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of PricewaterhouseCoopers LLP, independent
accountants.
23.3* Consent of Cooley Godward LLP. Reference is made to
Exhibit 5.1.
24.1+ Powers of Attorney. Reference is made to Page II-5.
27.1 Financial Data Schedule.
</TABLE>
------------------------
* To be filed by amendment.
** Confidential treatment requested.
+ Previously filed.
