<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 3, 2000
Data Critical Corporation
(Exact name of registrant as specified in its charter)
Delaware 333-78059 91-1901482
(State or other jurisdiction of (Commission File No.) (IRS Employer
incorporation or organization) Identification No.)
19820 North Creek Parkway, Suite 100
Bothell, Washington 98011
(Address of principal executive offices)
425-482-7000
(Registrant's telephone number, including area code)
<PAGE>
This Amendment No. 1 to the Current Report on Form 8-K dated April 3,
2000 of Data Critical Corporation relates to Data Critical's acquisition of
Elixis Corporation, a Washington corporation, pursuant to an Agreement and Plan
of Merger among Data Critical, datacritical.com, Inc., a Delaware corporation
and wholly-owned subsidiary of Data Critical and Elixis.
The purpose of this Amendment is to provide the financial statements of
Elixis required by Item 7(a) of Form 8-K, and the pro forma combined condensed
consolidated financial information required by Item 7(b) of Form 8-K, which
information was excluded from the original filing in reliance on Item 7(a)(4) of
Form 8-K.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements with Report of Independent Accountants of
--------------------------------------------------------------
Business Acquired.
-----------------
Audited Financial Statements:
(i) Report of Arthur Andersen LLP dated April 28, 2000.
(ii) Elixis Corporation Balance Sheet for the year ended December
31, 1999.
(iii) Elixis Corporation Statement of Operations for the year ended
December 31, 1999.
(iv) Elixis Corporation Statements of Stockholders' (Deficit)
Equity for the year ended December 31, 1999.
(v) Elixis Corporation Statements of Cash Flows for the year
ended December 31, 1999.
(vi) Elixis Corporation Notes to Financial Statements.
(b) Pro Forma Financial Information.
-------------------------------
Pro Forma Combined Condensed Consolidated Financial Statements
(unaudited):
(i) Unaudited Pro Forma Condensed Balance Sheet for the year
ended December 31, 1999.
(ii) Unaudited Pro Forma Condensed Statements of Operations for
the year ended December 31, 1999 and the three month period
ended March 31, 2000.
(iii) Notes to Unaudited Pro Forma Condensed Financial Statements.
(c) Exhibits.
2.1* Agreement and Plan of Merger dated March 12, 2000 among Data
Critical, Elixis Corporation and datacritical.com, Inc.
2.2* First Amendment to Agreement and Plan of Merger dated March
30, 2000 among Data Critical, Elixis Corporation and
<PAGE>
datacritical.com, Inc.
4.1* Registration Rights Agreement dated March 31, 2000 among Data
Critical and the former shareholders of Elixis Corporation.
99.1* Press Release dated March 14, 2000 announcing "Data Critical
Corp. Acquires Elixis Corporation Merging Technologies to
Create Wireless Internet-Based Tools for Physicians"
99.2* Press Release dated April 4, 2000 announcing "Data Critical
Corporation to Acquire Elixis Corporation"
* Incorporated by reference from Data Critical's Current Report on Form
8-K filed on April 18, 2000.
<PAGE>
Report of Independent Public Accountants
To Data Critical Corporation:
We have audited the accompanying balance sheet of Elixis Corporation (a
Washington corporation) as of December 31, 1999, and the related statement of
operations, stockholders' deficit and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Elixis Corporation as of
December 31, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States.
ARTHUR ANDERSEN LLP
Seattle, Washington
April 28, 2000
<PAGE>
ELIXIS CORPORATION
BALANCE SHEET - DECEMBER 31, 1999
---------------------------------
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 463,747
Accounts receivable, less allowance for doubtful accounts of
$15,550 141,824
Prepaid expenses 39,746
Other current assets 7,750
--------
Total current assets 653,067
--------
PROPERTY AND EQUIPMENT:
Computer equipment 111,176
Furniture and equipment 23,991
Software 15,977
--------
151,144
Less- Accumulated depreciation (25,214)
--------
Net property and equipment 125,930
--------
OTHER NONCURRENT ASSETS 4,285
--------
Total assets $ 783,282
========
<PAGE>
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
<TABLE>
CURRENT LIABILITIES:
<S> <C>
Accounts payable $ 76,529
Accrued expenses 115,630
Deferred revenue 320,658
Other current liabilities 21,751
Current portion of capital lease obligations 6,274
Series B convertible note 989,804
-----------
Total current liabilities 1,530,646
CAPITAL LEASE OBLIGATIONS 11,810
-----------
Total liabilities 1,542,456
-----------
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' DEFICIT:
Convertible preferred stock, 5,000,000 shares authorized:
Series A-1 convertible preferred stock, 806,122
authorized, issued and outstanding; liquidation
preference value of $0.49620
399,998
Series A-2 convertible preferred stock, 1,001,896
authorized; 690,960 issued and outstanding;
liquidation preference value of $0.86836
600,002
Common stock, no par value, 15,000,000 shares authorized;
3,450,000 issued and outstanding
500
Accumulated deficit (1,759,674)
-----------
Total stockholders' deficit (759,174)
-----------
Total liabilities and stockholders' deficit
$ 783,282
===========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
<PAGE>
ELIXIS CORPORATION
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
------------------------------------
REVENUES $ 234,794
COST OF REVENUES 32,565
-----------
Gross margin 202,229
-----------
OPERATING EXPENSES:
Sales and marketing 625,547
Research and development 480,964
General and administrative 783,105
-----------
Total operating expenses 1,889,616
-----------
Loss from operations (1,687,387)
OTHER INCOME (EXPENSE):
Interest income 22,507
Interest expense (24,947)
-----------
Net loss $(1,689,827)
===========
The accompanying notes are an integral part of this statement
<PAGE>
ELIXIS CORPORATION
------------------
STATEMENT OF STOCKHOLDERS' DEFICIT
----------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999
------------------------------------
<TABLE>
<CAPTION>
Series A
Convertible Common Stock
Preferred ------------ Accumulated Stockholders'
Stock Shares Amount Deficit Deficit
---------- ------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1999 $ 280,000 3,450,000 $ 500 $ (69,847) $ 210,653
Issuance of convertible
preferred stock for cash 720,000 - - - 720,000
Net loss - - - (1,689,827) (1,689,827)
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1999 $ 1,000,000 3,450,000 $ 500 $(1,759,674) $ (759,174)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
ELIXIS CORPORATION
------------------
STATEMENT OF CASH FLOWS
-----------------------
FOR THE YEAR ENDED DECEMBER 31, 1999
------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,689,827)
Adjustment to reconcile net loss to net cash flow
from operating activities-
Depreciation and amortization 19,624
Changes in operating assets and liabilities-
Accounts receivable (81,744)
Prepaid expenses (39,496)
Other current assets (7,750)
Other noncurrent assets (1,671)
Accounts payable 57,828
Accrued expenses 130,570
Deferred revenue 251,059
Other current liabilities 21,751
-----------
Net cash flows from operating activities (1,339,656)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (110,958)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock 720,000
Issuance of convertible notes 971,500
Payment on capital leases (5,002)
-----------
Net cash flows from financing activities 1,686,498
-----------
INCREASE IN CASH AND CASH EQUIVALENTS 235,884
CASH AND CASH EQUIVALENTS, beginning of period 227,863
-----------
CASH AND CASH EQUIVALENTS, end of period $ 463,747
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS:
Cash paid for interest $ 6,643
Equipment acquired through capital lease arrangements $ 23,086
The accompanying notes are an integral part of this statement.
<PAGE>
ELIXIS CORPORATION
------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1999
-----------------
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------------------------------
Nature of Business
Elixis Corporation, a Washington corporation (the Company), was founded in 1996
and released its first Internet-based electronic medical record product in 1999.
The Company offers Web-based products for physician clinical documentation,
evaluation and management coding, e-commerce and collaboration with patients.
The Company's current products are WebCoder and CodeChecker. The majority of
revenue from 1999 was derived from the sale and associated support and service
of the WebCoder software product, both directly and through resellers, to
physicians and large industrial product companies. Through its distribution
partnerships with leading healthcare companies, the Company offers tailored
solutions for physicians in specialized practices.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid instruments with an original maturity of
three months or less to be cash equivalents.
Property and Equipment
----------------------
Property and equipment are stated at historical cost. Property and equipment
under capital leases are stated at the lower of the present value of minimum
lease payments at the beginning of the lease term or fair value of the leased
assets at the inception of the lease. Repair and maintenance costs are expensed
as incurred.
Depreciation is calculated on a straight-line basis over the estimated useful
lives of the assets, seven years for furniture and equipment, five years for
computer equipment and three years for software. Depreciation expense for 1999
was $18,865.
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of
As required by Statement of Financial Accounting (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," the Company reviews long-lived assets and the related intangible assets for
impairment whenever events or changes in circumstances indicate the carrying
amount of the assets may not be recoverable. Recoverability of these assets is
determined by comparing the forecasted undiscounted net cash flows of the
operation to which the assets relate, to the carrying amount including
associated intangible assets of the operation. If the operation is determined to
be unable to recover the carrying amount of its assets, then intangible assets
are written down first, followed by the other long-lived assets of the
operation, to fair value. Fair value is determined based on discounted cash
flows or appraised values, depending upon the nature of the assets. At December
31, 1999, management does not believe that any of the Company's long-lived
assets are impaired.
<PAGE>
Software Development Costs
--------------------------
Software development costs have been accounted for according to the requirements
of SFAS No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed." Under the standard, capitalization of software
development costs begins upon the establishment of technological feasibility,
subject to net realizable value considerations. To date, the period between
achieving technological feasibility and the general availability of the software
has been short; therefore, software development costs qualifying for
capitalization have been immaterial. The Company has not capitalized any
software development costs and charged all costs to research and development
expense.
Revenue Recognition
-------------------
In October 1997, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) No. 97-2, "Software Revenue Recognition."
Subsequently, in March 1998, the Financial Accounting Standards Board approved
SOP 98-4, "Deferral of the Effective Date of a Provision of SOP 97-2, Software
Revenue Recognition." SOP 98-4 defers for one year, the application of several
paragraphs and examples in SOP 97-2 that limit the definition of vendor specific
objective evidence of the fair value of various elements in a multiple element
arrangement. In December 1998, the AICPA issued SOP 98-9, "Modification of SOP
97-2, Software Revenue Recognition, With Respect to Certain Transactions." This
SOP amends SOP 97-2 to require recognition of revenue using the residual method
in circumstances outlined in the SOP. Under the residual method, revenue is
recognized as follows: (1) the total fair value of undelivered elements, as
indicated by Vendor-specific objective evidence (VSOE), is deferred and
subsequently recognized according to the requirements of the relevant sections
of SOP 97-2 and (2) the difference between the total arrangement fee and the
amount deferred for the undelivered elements is recognized as revenue related to
the delivered elements.
SOP 97-2 generally requires revenue earned on software arrangements involving
multiple elements to be allocated to each element based on VSOE of the relative
fair values of each element in the arrangement. The Company has established
sufficient VSOE to ascribe a value to consulting services and post-contract
customer support based on the price charged when these elements are sold
separately. Accordingly, license revenue is recorded under the residual method
described above in arrangements in which licenses are sold with consulting
services, post-contract customer support or both.
The Company recognizes revenue from its term-based licenses on a subscription
basis even if the subscription is prepaid. Revenue is not recognized on the
term-based licenses until the customer's free trial period has elapsed.
Services revenue generally consists of consulting, training and integration
fees. These services are typically billed separately from the license fees and
are recognized as the related services are performed.
<PAGE>
Income Taxes
------------
The Company accounts for income taxes under the asset and liability method.
Under the asset and liability method, deferred income taxes reflect the future
tax consequences of differences between the tax bases of assets and liabilities
and their financial reporting amounts at each year-end. On January 1, 1999, the
Company became a C corporation for federal and state income tax purposes. Prior
to January 1, 1999, the Company was an S corporation.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the year in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in operations in
the period that include the enactment date. A valuation allowance has been
established to reduce deferred tax assets to the amount expected to be realized.
Stock-Based Employee Compensation
---------------------------------
The Company has adopted the provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation." In accordance with the provisions of SFAS 123, the
Company has elected the disclosure only provisions related to employee stock
options and follows the provisions of Accounting Principals Board Opinion No. 25
(APB 25) in accounting for stock options issued to employees. Under APB 25,
compensation expense, if any, is recognized as the difference between the
exercise price and the fair value of the common stock on the measurement date,
which is typically the date of grant, and is recognized over the period of
service, which is typically the vesting period.
Advertising Costs
-----------------
Costs related to advertising the Company's products and services are expensed as
incurred. Advertising costs incurred during the year ended December 31, 1999 was
approximately $216,100.
Use of Estimates
----------------
Generally accepted accounting principles require management to make estimates
and assumptions that affect the reported amount of assets, liabilities and
contingencies at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting periods. Actual results could
differ from those estimates.
Fair Value of Financial Instruments
-----------------------------------
The carrying amounts of cash and cash equivalents, accounts receivable, and
accounts payable approximate fair value due to the short-term nature of these
instruments. The carrying amounts of capital leases and notes payable
approximate fair value as the stated interest rates reflect current market
rates.
<PAGE>
Costs of Software Developed or Obtained for Internal Use
--------------------------------------------------------
Internal use software development costs are accounted for according to the
requirements of SOP 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." Costs incurred in the preliminary
project stage are expensed as incurred and costs incurred in the application and
development stage, which meet the capitalization criteria, are capitalized and
amortized on a straight-line basis over three years, the estimated useful life
of the asset.
Contingencies and Factors that Could Affect Future Results
----------------------------------------------------------
A substantial portion of the Company's revenues each year are generated from the
development and release to market of computer software products. In the
extremely competitive industry environment in which the Company operates, these
product generating, development and marketing processes are uncertain and
complex, requiring accurate prediction of market trends and demand as well as
successful management of various development risks inherent in these products.
In light of these dependencies, it is possible that failure to successfully
manage a significant product introduction could have a severe impact on the
Company's growth and results of operations.
2. ACCOUNTS RECEIVABLE:
The major components of accounts receivable for the year ended December 31, 1999
are as follows:
Baxter Healthcare $ 125,000
Miscellaneous WebCoder subscriptions 25,477
Other receivables 6,897
Less- allowance (15,550)
---------
$ 141,824
=========
3. ACCRUED EXPENSES:
The major components of accrued expenses for the year ended December 31, 1999
are as follows:
Accrued expenses $ 18,750
Accrued compensation and benefits 56,749
Accrued taxes payable 40,131
--------
$115,630
========
<PAGE>
4. DEFERRED REVENUE:
The Company recognizes revenue from WebCoder subscriptions over the life of the
contract, with some contracts providing for prepayment of one year's
subscription. The Company accounts for the prepayments as deferred revenue. The
major components of deferred revenue for the year ended December 31, 1999 are as
follows:
Baxter Healthcare $280,000
WebCoder prepayments 40,658
--------
$320,658
========
The total Baxter Healthcare contract was for $605,000. As of December 31, 1999,
the Company had met milestones equal to $280,000 of the total contract. The
remaining portion of the contract is recorded as deferred revenue as the
milestones are met. Revenue recognition will start when WebCoder-Cardiothoracic
is completed and the licenses have been distributed to physicians.
5. OBLIGATIONS UNDER CAPITAL LEASES:
During 1999, the Company entered into certain leases for equipment which met the
criteria for a capital lease. The obligation value, and corresponding asset
value, recorded for these leases were $23,086, which have original terms of
three years. Minimum future lease payments under capital lease obligations are
as follows:
2000 $ 9,591
2001 9,357
2002 2,817
--------
21,765
Less- Amount representing interest (3,681)
--------
$ 18,084
========
6. NOTES PAYABLE:
--------------
The Company has a $30,000 unsecured line of credit with a commercial bank with a
current annual interest rate of 10.90%. At December 31, 1999, the Company had
not drawn on the line of credit.
7. CONVERTIBLE PREFERRED STOCK:
----------------------------
The Company has authorized 6% Series A-1 and A-2 Preferred Stock. The title,
carrying amount and number of shares issued and outstanding are as follows:
Series A-1, $.49620 liquidation preference; issued and
outstanding at December 31, 1999 806,122
Series A-2, $.86836 liquidation preference; shares issued
and outstanding at December 31, 1999 690,960
<PAGE>
The terms for each series of preferred stock are similar and are summarized
below:
Dividends
---------
Series A-1 and A-2 Preferred shareholders are entitled to receive dividends when
and if declared by the board of directors at an annual rate of 6% for Series A
and A-1. Such preferred dividends are cumulative. No dividends may be declared
or paid on common stock until all declared dividends on preferred stock have
been paid. As of December 31, 1999, no dividends had been declared or paid. Any
unpaid dividends on the shares of Designated preferred shall be paid upon
conversion of such shares into Common Stock either (at the option of the
Company) by payment of cash or by the issuance of additional shares of Common
Stock.
Warrants
--------
Series A-2 Preferred shareholders that invested at least $60,000 received one
warrant for each Series A-2 Preferred stock purchased. The warrant entitles the
Series A-2 Preferred shareholder to purchase Series A-2 preferred stock for
$.86836 per share. The Series A-2 Preferred Stock Warrants were issued on March
31, 1999 and expire on March 31, 2004. As of December 31, 1999, 310,932 warrants
were outstanding.
A summary of warrant activity follows:
Weighted
Average
Number of Exercise
Shares Price
Balance, December 31, 1998 - -
Issued $310,932 $.86836
Exercised - -
-------- -------
Balance, December 31, 1999 $310,932 $.86836
======== =======
Liquidation Preferences
-----------------------
Upon dissolution, liquidation or winding up of the affairs of the Company,
either voluntarily or involuntarily, the preferred shareholders receive
preference in liquidation over the common shareholders of the Company. The
liquidation value for each outstanding share is $.49620 and $.86836 for Series
A-1 and A-2, respectively. After payment of the full preferential amounts, the
entire remaining balance shall be distributed to the common shareholders.
Voting
------
The holder of each share of each series of preferred stock is entitled to the
number of votes the holder would be entitled to if the shares of preferred stock
were converted to common stock.
<PAGE>
Voluntary Conversion
--------------------
The Series A-1 and A-2 shareholders shall have the right to convert, at any
time, their preferred shares into common shares.
Automatic Conversion
--------------------
Each share of any designated preferred shall be automatically converted into
shares of common stock upon a public offering if the aggregate price to the
public equals or exceeds $15,000,000 or exceeds $7.50 per share.
8. SERIES B 6% CONVERTIBLE PROMISSORY NOTE:
----------------------------------------
The Company is authorized to issue 6% Convertible Promissory Notes for up to an
aggregate principal amount of $1,000,000. As of December 31, 1999, $971,500 was
issued and outstanding.
The terms of the note are summarized below:
Payment Terms
-------------
If not sooner converted, all outstanding principal balance and any accrued
interest is due and payable in a single installment on September 1, 2000.
Interest
--------
Interest accrues on the outstanding balance at a rate of 6% per annum. At
December 31, 1999 interest of $18,304 was accrued and included in the
outstanding principal balance.
Conversion
----------
Automatic Conversion is triggered, if the Company consummates a sale of its
Preferred Stock (excluding for this purpose the sale of Preferred Stock issuable
upon conversion of the Notes in the Note Offering) in a single, continuous
offering for consideration in an aggregate amount of not less than $500,000, the
entire outstanding principal balance plus accrued interest shall be
automatically converted into the number of shares equivalent to dividing the
outstanding principal and interest by the price per share offering price of the
preferred stock.
Optional Conversion may be triggered by the following events:
Holders of at least 50% of the outstanding principal balance of all of the
notes,
Upon the sale of substantially all of the assets or upon the acquisition of the
Company by means of any transaction or series of transactions that results in a
transfer of 50% or more of the outstanding voting power of the Company.
The number of shares upon an optional conversion shall be equal to the total
outstanding principal balance and accrued interest divided by $3.20.
<PAGE>
9. STOCK OPTION PLAN:
------------------
In 1998, the Company granted 355,000 options under the 1998 stock option plan
(this plan was merged into the 1999 plan). The options were granted at fair
value, with exercise prices between $.25 and $.275 per share. In 1999, the
Company granted an additional 543,200 options under the 1999 stock option plan
with 5,000 options cancelled during 1999. The options were granted at fair
value, with exercise prices between $.25 and $.55 per share. The options vest
over three years.
Information relating to stock options outstanding under the Plans is as follows:
Weighted
Average
Exercise
Shares Price
Options outstanding, January 1, 1999 355,000 $0.269
Options granted 543,200 $0.447
Options canceled (5,000) $0.500
------- ------
Options outstanding, December 31, 1999 893,200 $0.376
======= ======
The following table summarizes information regarding stock options outstanding
and exercisable as of December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------ ------------------------
Weighted
Weighted Average Weighted
Average Remaining Average
Range of Exercise Number Exercise Contractual Number Exercise
Prices Outstanding Price Life Exercisable Price
<S> <C> <C> <C> <C> <C>
$0.250 181,667 $0.250 9.52 43,650 $0.250
$0.275 325,000 $0.275 4.79 107,250 $0.275
$0.375 6,000 $0.375 9.68 1,980 $0.375
$0.500 205,533 $0.500 9.81 47,010 $0.500
$0.550 175,000 $0.550 4.79 175,000 $0.550
------- ------ ---- ------- ------
Totals 893,200 $0.376 6.94 374,890 $0.429
</TABLE>
For purposes of pro forma disclosure, the estimated fair value of each option
grant is estimated on the date of grant using the minimum value method, which
considers the time-value of money, with the following assumptions for grants in
1999: risk-free interest rate of 5%; expected lives of five and ten years; and
no dividends. The pro forma effect upon net loss per share, taking into account
only the additional compensation expense that would be recognized using the fair
value method, are as follows:
<PAGE>
1999
-------------
Net loss $ (1,689,827)
Pro forma net loss (1,793,385)
Basic and diluted loss per share (1.89)
Pro forma basic and diluted loss per share (2.01)
10. DEFERRED TAXES:
---------------
The components of the Company's deferred tax assets at December 31, 1999 are:
Net operating loss and research and experimentation credit carryforwards
$ 487,800
Deferred revenue 95,200
Other accruals 16,200
---------
Gross deferred tax assets 599,200
Less- valuation allowance (599,200)
---------
Net deferred tax assets $ -
=========
At December 31, 1999, the Company has available federal net operating loss
carryforwards for tax purposes of approximately $1,435,000 which start expiring
in 2019. Virtually all of the valuation allowance was recorded in 1999.
11. COMMITMENTS AND CONTINGENCIES:
Leases
The Company leases computer equipment and phone equipment under non-cancelable
operating lease agreements, which expire over the next four years. In 1999, the
Company entered into a 22-month operating lease agreement for office space.
The following is a schedule of future minimum lease payments for non-cancelable
operating leases for each of the years ended December 31:
2000 $ 83,400
2001 25,400
2002 19,042
2003 10,491
--------
$138,333
========
<PAGE>
401(k) Plan
-----------
The Company sponsors a 401(k) deferred savings plan for all employees. Employees
become eligible to participate in the plan upon employment. Employees may
contribute up to 20% of their pay to the plan, subject to the limitation of
$10,000 by the Internal Revenue Code. All employee contributions vest
immediately. The Company has not made any matching contributions but does pay
administrative costs for the plan. These costs were not significant for any
period presented.
12. SUBSEQUENT EVENT:
On April 3, 2000, Data Critical Corporation (Data Critical), a Delaware
corporation, acquired the Company by statutory merger. The Merger was
accomplished pursuant to an Agreement and Plan of Merger dated as of March 12,
2000, and amended on March 30, 2000.
Each share of Elixis common stock was converted into 0.0405962 shares of Data
Critical's common stock. All of the preferred A-1 and A-2 shareholders waived
their liquidation preferences and elected to convert their preferred shares into
common shares on a 1 to 1 ratio. The Series A-1 and A-2 6% cumulative annual
dividend (6% Dividend) was converted into common shares of Elixis. The Series
A-1 6% Dividend converted into 49,860 common shares of Elixis and the Series A-2
6% Dividend converted into 74,792 common shares of Elixis. The Series A-2
warrant holders converted their 310,932 Series A-2 warrants into 101,158 common
shares of Elixis. The total as-converted common shares of Elixis at the time of
the Merger was 5,172,892.
Pursuant to the Merger, all of the noteholders waived their Optional Conversion
rights and their 15 day notice for prepayment on the Notes. The Notes plus
interest were paid to the noteholders on April 13, 2000.
All of Elixis' stock option plans were terminated prior to completion of the
Merger, and Data Critical paid an aggregate of approximately $110,000 in cash to
Elixis' option holders in exchange for cancellation of all outstanding Elixis
options. This provision of the Merger agreement was agreed upon near the closing
date and caused the measurement date for the purchase to be April 3, 2000.
<PAGE>
Data Critical Corporation
Unaudited Pro Forma Condensed Balance Sheet
(In 000's)
<TABLE>
<CAPTION>
December 31, 1999
-------------------------------------------------------------------------
Pro Forma
Adjustments
Assets Data Critical Elixis (Note 1) Pro Forma
------------------- -------- ------------- ------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 33,976 $ 464 $(1,009) (a) $ 33,431
Accounts receivable, net 2,223 142 - 2,365
Inventories, net 863 - - 863
Prepaid expenses and other 377 47 - 424
------------------- -------- ------------- ------------
37,439 653 (1,009) 37,083
Note receivable from officer 45 - - 45
Investment in, and advances to
unconsolidated affiliate 215 - - 215
Property, equipment and software, net 1,492 126 - 1,618
Other assets, net 1,860 4 1,250 (c) 3,114
------------------- -------- ------------- ------------
Total assets $ 41,051 $ 783 $ 241 $ 42,075
=================== ======== ============= ============
Liabilities and Stockholders' Equity
Accounts payable $ 1,224 $ 77 $ - $ 1,301
Current portion of notes payable and - - - -
capital leases 268 996 - 1,264
Deferred revenues 1,304 321 (160) 1,465
Other current liabilities 1,521 137 - 1,658
------------------- -------- ------------- ------------
4,317 1,531 (160) 5,688
Notes payable and capital leases,
net of current portions 1,169 12 - 1,181
------------------- -------- ------------- ------------
5,486 1,543 (160) 6,869
Commitments and contingencies
Stockholders' (Deficit) Equity
Convertible preferred stock - 1,000 (1,000) -
------------------- -------- ------------- ------------
Common stock 61,912 - 2,441 (a)(b) 64,353
Deferred compensation (1,327) - - (1,327)
Accumulated deficit (25,020) (1,760) (1,040) (27,820)
------------------- -------- ------------- ------------
35,565 (1,760) 1,401 35,206
------------------- -------- ------------- ------------
Total liabilities and shareholders
(deficit) equity $ 41,051 $ 783 $ 241 $ 42,075
=================== ======== ============= ============
</TABLE>
Note 1. The pro forma condensed balance sheet has been prepared to reflect the
acquisition by Data Critical of Elixis Corporation as follows:
(a) The issuance of 210,000 shares of common stock for $2.4 million,
$0.3 million of cash, $1.4 million of assumed liabilities and $0.7
million of acquisition costs.
(b) The elimination of shareholders equity accounts of Elixis
Corporation.
(c) The value, net of amortization assigned to developed technology.
20
<PAGE>
Data Critical Corporation
Unaudited Pro Forma Condensed Statement of Operations
(In 000's except for share amounts)
<TABLE>
<CAPTION>
Year Ended December 31, 1999 Three Months Ended March 31, 2000
----------------------------------------------------- ----------------------------------------------------
Pro Forma Pro Forma
Data Adjustments Adjustment
Critical Elixis (Note 2) Pro Forma Data Critical Elixis (Note 2) Pro Forma
------------ ------- ----------- --------- ------------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $ 9,538 $ 235 - $ 9,773 $ 3,705 $ 51 - $ 3,756
Cost of
revenue 3,612 33 - 3,645 1,472 17 - 1,489
----------- ------- ----- -------- --------- ----- ------ --------
5,926 202 - 6,128 2,233 34 - 2,267
Acquired
in-process R&D 1,758 1,758
Research and
development 2,499 481 - 2,980 1,475 293 - 1,768
Sales and
marketing 4,349 626 - 4,975 1,525 276 - 1,801
General and
administrative 4,171 783 539 (a) 5,493 1,531 283 135 (a) 1,949
----------- ------- ----- -------- --------- ----- ------ --------
Loss from
operations (6,851) (1,688) (539) (9,078) (2,298) (818) (135) (3,251)
Interest income
(expense) 35 (2) 2 (b) 35 277 (6) 6 (b) 265
----------- ------- ----- -------- --------- ----- ------ --------
Net loss $(6,816) $(1,690) $(537) $ (9,044) $(2,021) $(824) $(127) $(2,986)
=========== ======= ===== ======== ========= ===== ====== ========
Preferred
stock
dividends
and accretion
of mandatory
redemption
obligations (1,216) - - (1,216) - - -
----------- ------- ----- -------- --------- ----- ------ --------
$(8,032) $(1,690) $(537) $(10,260) $(2,021) $(824) $(127) $(2,986)
=========== ======= ===== ======== ========= ===== ====== ========
Basic and
diluted loss
per share $(2.92) $(0.19)
=========== =========
Pro forma net
loss per
share $(3.47) $(0.28)
======== ========
Shares used in
calculating
per share
data 2,749 210 2,959 10,569 210 10,779
=========== ===== ======== ========= ====== ========
</TABLE>
Note 2. The pro forma statements of operations give effect to the following pro
forma adjustments necessary to reflect the acquisition described in
Note 1. The Acquisition in the notes to unaudited pro forma condensed
financial statements. The pro forma statement does not include a non
recurring charge for acquired in-process research & development in the
amount of $2.8 million.
(a) Amortization of value assigned to acquired developed technology
(b) Elimination of interest income (expense)
<TABLE>
<CAPTION>
Purchase Price Amortization Annual Amortization
Allocation Period (Years) Expense
------------------------ ------------------- -------------------
<S> <C> <C> <C>
Working capital acquired (net) $ 5 - -
Other LT assets and liabilities (net) 145 - -
Product technology 1,100 3 $ 367
Assembled workforce 200 3 67
Goodwill 529 5 105
Acquired in process research
and development 2,800 - -
------------------ --------------
$4,779 $ 539
================== ==============
</TABLE>
21
<PAGE>
DATA CRITICAL CORPORATION AND ELIXIS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
1. The Acquisition
On April 3, 2000, Data Critical Corporation (Data Critical), a Delaware
corporation, acquired the Company by statutory merger. The Merger was
accomplished pursuant to an Agreement and Plan of Merger dated as of March 12,
2000, and amended on March 30, 2000.
Each share of Elixis common stock was converted into 0.0405962 shares of
Data Critical's common stock. All of the preferred A-1 and A-2 shareholders
waived their liquidation preferences and elected to convert their preferred
shares into common shares on a 1 to 1 ratio. The Series A-1 and A-2 6%
cumulative annual dividend (6% Dividend) was converted into common shares of
Elixis. The Series A-1 6% Dividend converted into 49,860 common shares of Elixis
and the Series A-2 6% Dividend converted into 74,792 common shares of Elixis.
The Series A-2 warrant holders converted their 310,932 Series A-2 warrants into
101,158 common shares of Elixis. The total as-converted common shares of Elixis
at the time of the Merger was 5,172,892.
Pursuant to the Merger, all of the noteholders waived their Optional
Conversion rights and their 15 day notice for prepayment on the Notes. The Notes
plus interest were paid to the noteholders on April 13, 2000.
All of Elixis' stock option plans were terminated prior to completion of the
Merger, and Data Critical paid an aggregate of approximately $110,000 in cash to
Elixis' option holders in exchange for cancellation of all outstanding Elixis
options. This provision of the Merger agreement was agreed upon near the closing
date and caused the measurement date for the purchase to be April 3, 2000.
2. The Periods, Combined
The unaudited pro forma condensed balance sheet is based on the individual
audited balance sheets of Data Critical and Elixis appearing elsewhere and has
been prepared to reflect the acquisition by Data Critical of Elixis as of
December 31, 1999. The unaudited pro forma condensed statements of operations is
based on historical results of operations of Data Critical and Elixis for the
year ended December 31, 1999 and three months ended March 31, 2000 after giving
effect to the acquisition of Elixis as if it had occurred at the beginning of
the period presented.
3. Pro Forma Basis of Presentation
These Unaudited Pro Forma Condensed Financial Statements are based on
estimates and assumptions and should be read in conjunction with the historical
financial statements and notes thereto of Data Critical and Elixis. The pro
forma adjustments made in connection with the development of the pro forma
information are preliminary and have been made solely for purposes of developing
such pro forma information as necessary to comply with the disclosure
requirements of the Securities and Exchange Commission. The Unaudited Pro Forma
Condensed Financial Statements do not purport to be indicative of the
<PAGE>
combined financial position or results of operations of future periods or
indicative of the results of operations of future periods or indicative of the
results that actually would have been realized had the entities been a single
entity during these periods.
4. Pro Forma Earnings Per Share
The Unaudited Pro Forma Condensed Financial Statements for Data Critical
have been prepared as if the asset purchase was completed at the beginning of
the periods presented. The pro forma basic net loss per share is based on the
combined weighted average number of shares of Data Critical Common Stock
outstanding during the period and the number of Data Critical Common Stock to be
issued in exchange as discussed in note 5.
The Pro Forma diluted net loss per share is computed using the weighted
average number of Data Critical Common Stock and dilutive common equivalent
shares outstanding during the period and the number of shares of Data Critical
Common Stock to be issued in exchange. Common equivalent shares consist of
incremental common shares issuable upon conversion of the exercise of stock
options and warrants using the treasury stock method. Common equivalent shares
are excluded from the computation if their effect is antidilutive. The combined
Company had a pro forma net loss for the pro forma condensed statements of
operations presented herein; therefore, none of the options and warrants
outstanding during each of the periods presented were included in the
computation of pro forma dilutive earnings per share as they were antidilutive.
5. Pro Forma Statements of Operations Adjustments
The objective of the pro forma information is to show what the significant
effects on the historical financial information might have been had the asset
purchase been effected at the beginning of the period presented.
Under the purchase method of accounting, the purchase price is allocated to
the net assets acquired based on their estimated fair value. The following
represents the purchase price allocation for Elixis Corporation
Book value of net assets acquired $ 150
Core technology 1,100
Assembled workforce 200
Cost in excess of net assets acquired 539
In-process research and development 2,800
------
Fair value of assets acquired $4,779
======
Cash paid $ 309
Fair value of shares issued 2,440
Liabilities assumed 1,330
Acquisition costs 700
------
Purchase price $4,779
======
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
DATA CRITICAL CORPORATION
(Registrant)
Date: June 16, 2000 By: /s/ Michael E. Singer
------------------------------------------
Michael E. Singer
Vice President and Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
2.1* Agreement and Plan of Merger dated March 12, 2000 among Data
Critical, Elixis Corporation and datacritical.com, Inc.
2.2* First Amendment to Agreement and Plan of Merger dated March 30,
2000 among Data Critical, Elixis Corporation and datacritical.com,
Inc.
4.1* Registration Rights Agreement dated March 31, 2000 among Data
Critical, and the former shareholders of Elixis Corporation.
99.1* Press Release dated March 14, 2000 announcing "Data Critical Corp.
Acquires Elixis Corporation Merging Technologies to Create
Wireless Internet-Based Tools for Physicians"
99.2* Press Release dated April 4, 2000 announcing "Data Critical
Corporation to Acquire Elixis Corporation"
* Incorporated by reference from Data Critical's Current Report on Form 8-K
filed April 18, 2000.
