<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
Form 8-KA
Amendment No. 1 To
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
September 11, 2000
---------------------------------
Date of Report
(Date of earliest event reported)
DATA CRITICAL CORPORATION
-------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 000-27855 91-1901482
------------------------------ -------------------------- -------------------
(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
19820 North Creek Parkway, Suite 100
Bothell, Washington 98011
-------------------------------------------------------------------------------
(Address of principal executive offices, including Zip Code)
(425) 482-7000
-------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
This Amendment No. 1 to the Current Report on Form 8-K dated September 11,
2000 of Data Critical Corporation relates to Data Critical's acquisition of
Paceart Associates, L.P., a New Jersey limited partnership ("Paceart"), pursuant
to a Limited Partnership Interest and Stock Purchase Agreement, dated as of
August 31, 2000 among Data Critical Corporation, datacritical.com Inc., a
wholly-owned subsidiary of Data Critical, Paceart, the limited partners of
Paceart, Paceart G.P., Inc., a New Jersey corporation and the general partner of
Paceart, the stockholders of Paceart GP, and Dr. Michael N. Bergelson, as agent
for the Limited Partners and the Stockholders.
The purpose of this Amendment is to provide the financial statements of
Paceart 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 of Business Acquired (audited).
(i) Report of Arthur Andersen LLP October 17, 2000.
(ii) Paceart Associates, L.P. Balance Sheet for the year ended
December 31, 1999.
(iii) Paceart Associates, L.P. Statement of Income for the year
ended December 31, 1999.
(iv) Paceart Associates, L.P. Statement of Partners' Capital for
the year ended December 31, 1999.
(v) Paceart Associates, L.P. Statement of Cash Flows for the year
ended December 31, 1999.
(vi) Paceart Associates, L.P.Notes to Financial Statements.
(b) Pro Forma Financial Information (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 six month period ended June
30, 2000.
(iii) Notes to Unaudited Pro Forma Condensed Financial Statements.
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<PAGE>
(c) Exhibits.
2.1* Limited Partnership Interest and Stock Purchase
Agreement, dated as of August 31, 2000 among Data
Critical Corporation, datacritical.com Inc., Paceart
Associates, L.P., the limited partners of Paceart
Associates, L.P., Paceart G.P., Inc., the
stockholders of Paceart G.P., Inc., and Dr. Michael
N. Bergelson, as Sellers' Agent.
4.1* Registration Rights Agreement, dated as of August
31, 2000 among Data Critical Corporation, Dr.
Michael N. Bergelson, Richard W. Schurig, Richard
Puzo, Wayne Casebolt, Eric Reidman and Anthony
Marchesini.
10.1* Employment Agreement, dated as of August 31, 2000
between Data Critical Corporation and Dr. Michael N.
Bergelson.
99.1* Press Release dated September 11, 2000.
* Incorporated by reference from Data Critical's Current Report on Form
8-K filed September 11, 2000.
-3-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Data Critical Corporation:
We have audited the accompanying balance sheet of Paceart Associates, L.P. (a
New Jersey limited partnership) as of December 31, 1999, and the related
statements of income, partners' capital and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
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 Paceart Associates, L.P. 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.
/s/ Arthur Andersen LLP
Seattle, Washington
October 17, 2000
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<PAGE>
PACEART ASSOCIATES, L.P.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
ASSETS 1999 June 30, 2000
------ -------------- --------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 597,589 $ 766,534
Accounts receivable, less allowance for doubtful accounts of $8,335 and
$24,471, respectively 935,989 331,627
Inventories 450,680 385,290
Other current assets 14,043 44,226
-------------- --------------
Total current assets 1,998,301 1,527,677
FURNITURE AND EQUIPMENT, net of accumulated depreciation and amortization of
$170,112 and $188,680, respectively 46,383 27,815
PATENTS AND TRADEMARKS, net of accumulated depreciation and amortization of $49,317
and $52,680, respectively 44,833 41,471
OTHER ASSETS 10,083 10,083
-------------- --------------
Total assets $ 2,099,600 $ 1,607,046
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
CURRENT LIABILITIES:
Accounts payable $ 326,759 $ 129,047
Accrued expenses 249,147 206,811
Unearned income 438,138 498,417
-------------- --------------
Total current liabilities 1,014,044 834,275
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL 1,085,556 772,771
-------------- --------------
Total liabilities and partners' capital $ 2,099,600 $ 1,607,046
============== ==============
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
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<PAGE>
PACEART ASSOCIATES, L.P.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended Six Months Six Months
December 31, Ended Ended
1999 June 30, 2000 June 30, 1999
---------------- --------------- ---------------
(unaudited) (unaudited)
<S> <C> <C> <C>
REVENUES:
Systems $ 3,882,393 $ 1,549,623 $ 1,947,884
Service contracts 837,549 529,007 325,586
Other 213,265 141,709 120,338
--------------- --------------- ---------------
Total 4,933,207 2,220,339 2,393,808
COST OF REVENUES 1,396,460 727,752 613,970
--------------- --------------- ---------------
Gross profit 3,536,747 1,492,587 1,779,838
--------------- --------------- ---------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2,765,190 1,480,663 1,037,463
--------------- --------------- ---------------
Income (loss) from operations 771,557 (11,924) 742,375
OTHER INCOME (EXPENSE):
Interest income 3,634 18,813 649
Write-off of investment in and advances to joint venture (116,115) - -
Other income (4,126) - -
--------------- --------------- ---------------
Net income $ 654,950 $ 30,737 $ 743,024
=============== =============== ===============
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
-6-
<PAGE>
PACEART ASSOCIATES, L.P.
STATEMENTS OF PARTNERS' CAPITAL
Partners'
Capital
--------------
Balance as of January 1, 1999 $ 430,606
Net Income 654,950
-------------
Balance as of December 31, 1999 1,085,556
Net Income (unaudited) 30,737
Distributions (unaudited) (343,522)
-------------
Balance as of June 30, 2000 (unaudited) $ 772,771
=============
The accompanying notes to financial statements are an integral part of these
financial statements.
-7-
<PAGE>
PACEART ASSOCIATES, L.P.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Six Months
Year Ended Ended Ended
December 31, June 30, 2000 June 30, 1999
1999
---------------- ---------------- ---------------
(unaudited) (unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 654,950 $ 30,737 $ 743,024
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation and amortization 24,757 21,930 11,480
Allowance for doubtful accounts 8,335 9,502 -
Loss on disposal 4,126 - 4,126
Write-off of investment in joint venture 116,115 13,500 -
Changes in operating assets and liabilities-
Accounts receivable (515,850) 594,860 (468,087)
Inventories (218,925) 65,390 5,059
Other current assets 49,570 (30,183) 13,188
Accounts payable 242,428 (197,712) (3,510)
Accrued expenses 106,857 (42,336) 29,701
Unearned income 103,788 60,279 10,400
-------------- -------------- --------------
Net cash provided by operating activities 576,151 525,967 345,381
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of furniture and equipment (28,438) - (15,064)
Proceeds from sale of vehicle 9,998 - 9,998
Advances to joint venture (98,866) (13,500) (60,876)
-------------- -------------- --------------
Net cash used in investing activities (117,306) (13,500) (65,942)
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions - (343,522) -
-------------- -------------- --------------
Net increase in cash and cash equivalents 458,845 168,945 279,439
CASH AND CASH EQUIVALENTS, beginning of period 138,744 597,589 138,744
-------------- -------------- --------------
CASH AND CASH EQUIVALENTS, end of period $ 597,589 $ 766,534 $ 418,183
============== ============== ==============
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
-8-
<PAGE>
1. THE PARTNERSHIP
Paceart Associates, L.P. (the "Partnership") was formed in 1992 for the
purpose of developing advanced computer technology for monitoring pacemaker,
defibrillator and arrhythmia patients. The Partnership's technology is currently
utilized in clinical, pharmaceutical research and consumer applications
throughout the world.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Statements
The accompanying balance sheet as of June 30, 2000 and statement of
operations, partners' capital, and cash flows for the six months ended June 30,
1999 and 2000 included herein have been prepared by the Partnership and are
unaudited. The information furnished in the unaudited financial statements
referred to above includes all adjustments which are, in the opinion of
management, necessary for a fair presentation of such financial statements. The
results of operations for the six months ended June 30, 2000 are not necessarily
indicative of the results to be expected for the entire year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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 financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration Risks
The Partnership has cash balances that are held principally at one
financial institution and may, at times, exceed insurable amounts. The
Partnership believes it has mitigated its risk by investing in or through major
financial institutions. Recoverability is dependent upon the performance of the
institution.
Concentrations of credit risk with respect to trade receivables are limited
due to the large number of customers comprising the Partnership's customer base.
The Partnership routinely assesses the financial strength of all of its
customers.
-9-
<PAGE>
Revenue Recognition
The Company recognizes revenue in accordance with AICPA Statement of
Position 97-2. Accordingly, revenue on system sales is recognized when there is
evidence of an arrangement, delivery has occurred, and all significant
obligations, normally including training and installation of the systems if
applicable, have been completed.
Costs of revenue incurred prior to revenue recognition are deferred.
Capitalized Software Costs
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed", the Partnership is required to capitalize certain computer software
costs, which include product enhancements, after technological feasibility has
been established. These costs are amortized using the greater of the ratio that
current gross revenues for a product bear to the total of current and
anticipated future gross revenues for the product or a maximum of three years
using the straight line method beginning when the products are available for
general release to customers. At December 31, 1999 and June 30, 2000, no
software costs have been capitalized due to the fact that all costs incurred
after technological feasibility of a product have been deemed to be immaterial
by the Partnership.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable, accrued expenses, and convertible notes payable approximate
fair value due to the short-term maturity of these instruments. The carrying
amounts of outstanding borrowings approximate fair value.
Cash and Cash Equivalents
The Partnership considers all short-term marketable securities having a
maturity of three months or less to be cash equivalents.
Inventories
Inventories consist of parts used for system implementation and maintenance
service and are stated at the lower of cost (determined on a first-in, first-out
basis) or market.
-10-
<PAGE>
Furniture and Equipment
Furniture and equipment are stated at cost. Depreciation is calculated on a
straight-line basis over the estimated useful lives of the assets. The estimated
useful life of furniture, machinery and equipment is 5 years.
Patents and Trademarks
Patents and trademarks are being amortized on the straight-line method over
a period of fourteen years.
Long-Lived Assets
The Partnership periodically reviews its long-lived assets for impairment
whenever events or changes indicate that the carrying amount of an asset may not
be recoverable. The Partnership does not believe that any such changes have
taken place to date. Impairment of long-lived assets exists if, at a minimum,
the future expected cash flows (undiscounted and without interest charges) from
its operations are less than the carrying value of these assets. If such assets
were considered impaired, the impairment to be recognized would be measured by
the amount by which the carrying amount of the assets exceeds the underlying
fair value of the assets. Management performed a review of its long-lived assets
and determined that no impairment of the respective carrying values had occurred
for any periods presented in these financial statements.
Income Taxes
The Partnership accounts for income taxes under the liability method. Under
the liability method, deferred tax assets and liabilities are determined based
on the differences between the financial statement and the tax basis of assets
and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in results of operations in
the period that includes the enactment date. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected
to be realized.
Comprehensive Income
During 1999, the Partnership adopted SFAS No. 130 ("SFAS 130"), "Reporting
Comprehensive Income." SFAS 130 establishes standards for reporting and
presenting information on comprehensive income and its components (revenues,
expenses, gains, losses, and currency translation adjustments) in the financial
statements. Although the adoption of this statement resulted in additional
disclosure requirements, it did not have an effect on the Partnership's
financial position or results of operations.
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<PAGE>
Effects of Recent Accounting Pronouncements
In December 1999, SEC Staff Accounting Bulletin: No. 101--Revenue
Recognition in Financial Statements (SAB 101) was issued. This pronouncement
summarizes certain of the SEC Staff's views on applying generally accepted
accounting principles to revenue recognition. SAB 101 is required to be adopted
by the Company for the year ended December 31, 2000. The Company is currently
reviewing the requirements of SAB 101.
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities." SFAS 133 establishes accounting and reporting standards requiring
that every derivative instrument be recorded in the balance sheet as either an
asset or liability measured at its fair value. SFAS 133 requires that changes in
the derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. SFAS 133 is effective for fiscal years
beginning after June 15, 1999. In July 1999, the FASB approved SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities-Deferral of the
Effective Date of SFAS 133", which amends SFAS 133 to be effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000. As the
Partnership currently does not engage in derivative instruments or hedging
activities, adoption of this accounting principle will not have a material
impact on the Partnership's financial position or results of operations.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following-
<TABLE>
<CAPTION>
December 31, June 30,
1999 2000
------------ ------------
(unaudited)
<S> <C> <C>
Equipment $ 178,719 $ 178,719
Furniture and fixtures 37,776 37,776
------------ ------------
216,495 216,495
Less- Accumulated depreciation and amortization (170,112) (188,680)
------------ ------------
$ 46,383 $ 27,815
============ ============
</TABLE>
Depreciation and amortization expense related to property and equipment was
$17,541 and $18,568 for the year ended December 31, 1999, and the six months
ended June 30, 2000, respectively.
-12-
<PAGE>
4. ACCRUED EXPENSES
Accrued expenses consists of the following-
December 31, June 30,
1999 2000
------------ ------------
(unaudited)
Accrued officer bonus $ 33,000 $ -
Accrued salaries and wages 75,261 58,892
Accrued vacation 28,759 41,212
Accrued professional fees 60,000 42,085
Customer deposits 36,694 42,679
Accrued 401(k) fund 11,593 18,103
Other 3,840 3,840
------------ ------------
$ 249,147 $ 206,811
============ ============
5. RELATED PARTY TRANSACTIONS
In 1999 and for the six months ending June 30, 2000, the Partnership
incurred management fees of $27,083 and $12,500 to an entity controlled by two
shareholders of the General Partner of the Partnership for consulting services.
The Partnership utilized J.H. Cohn L.P. to compile the Partnership's
financial statements. Two shareholders of the General Partner of the Partnership
are also partners with J.H. Cohn. In 1999 and for the six months ending June 30,
2000, the Partnership incurred $18,239 and $5,000 in accounting fees to J.H.
Cohn for these services.
6. INCOME TAXES
Income from the Partnership is included in the Federal taxable income of
the separate partners in proportion to their interests. Certain items of expense
are subject to special allocation among the partners under the applicable
provisions of the Internal Revenue Code.
7. INVESTMENT IN JOINT VENTURE
During 1997, the Partnership entered into a joint venture agreement (the
"Agreement") with Pylon Medical Products, Inc., which subsequently changed its
name to Baylor, Inc. ("Baylor"). Pursuant to the terms of the Agreement, Baylor
agreed to market and sell the Partnership's products in China and the
Partnership would provide equipment to Baylor in exchange for 50% of the
Baylor's revenues. During 1999, the Partnership deemed the investment to have no
future value and wrote the investment off.
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<PAGE>
8. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Partnership has entered into two noncancellable operating leases for
operating facilities. One lease expires in September 2001. The other commenced
in January 2000 and expires in June 2002. These leases provide for minimum
annual lease payments and additional operating expense charges.
Approximate future minimum obligations under noncancellable operating
leases are as follows:
Total
Minimum
Annual Lease
Year Ending December 31 Payments
----------------------- ------------
2000 $ 121,000
2001 96,000
2002 20,000
----------
$ 237,000
==========
Rent expense was approximately $83,000 and $61,000 for the year ended
December 31, 1999 and the six months ended June 30, 2000, respectively.
Legal Proceedings
From time to time, the Partnership may be involved in various legal
proceedings and other matters arising in the normal course of business. The
Partnership currently has no material outstanding legal proceedings.
9. PARTNERS' CAPITAL
On January 1, 2000, the Partnership adopted the Paceart Associates, L.P.
Equity Appreciation Rights Plan (the "Plan") to motivate key employees to assist
in the continued growth and profitability of the Partnership, to reward key
employees for superior performance, and to attract new employees. All full-time
employees of the Company were eligible to become Participants in the Plan. The
Plan was terminated by the Partnership on September 1, 2000 and no rights are
outstanding thereunder.
During the six-months ending June 30, 2000, the Partnership distributed
$343,522 in Partners' Capital to the Partners.
-14-
<PAGE>
10. 401(k) RETIREMENT PLAN
The Partnership maintains a 401(k) retirement plan which covers all
employees who have completed one year of service from their date of hire. The
plan requires the Partnership to make matching contribution up to 25% of the
employees' first $5,000 of salary deferral, not to exceed $1,500 annually. The
Partnership made contributions of $15,789 in 1999 and $16,061 in the six months
ended June 30, 2000. Upon the acquisition of the Partnership by Data Critical,
the Partnership's 401(k) retirement plan was merged with DCC 401(k) retirement
plan and all previously unvested matching contributions by the partnership were
vested.
11. SUBSEQUENT EVENT
On September 11, 2000, the Partnership entered into an agreement to be
acquired by Data Critical Corporation for approximately $6,162,000 in cash,
300,000 shares of Data Critical Corporation common stock and an additional
earnout for an additional cash payment of $400,000 if certain conditions are met
in 2001.
-15-
<PAGE>
Data Critical Corporation
Unaudited Pro Forma Condensed Balance Sheet
(In 000's)
<TABLE>
<CAPTION>
June 30, 2000
--------------------------------------------------------------------------
Pro Forma
Adjustments
Assets Data Critical Paceart (Note 1) Pro Forma
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 35,926 $ 767 $ (6,812) (a) $ 29,881
Accounts receivable, net 3,857 332 - 4,189
Inventories, net 1,214 385 - 1,599
Prepaid expenses and other 371 44 - 415
----------- ----------- ----------- -----------
41,368 1,528 (6,812) 36,084
Note receivable from officer 45 - - 45
Investment in, and advances to
unconsolidated affiliate 218 - - 218
Property, equipment and software, net 2,365 28 - 2,393
Other assets, net 3,382 51 8,673 (c) 12,106
----------- ----------- ----------- -----------
Total assets $ 47,378 $ 1,607 $ 1,861 $ 50,846
=========== =========== =========== ===========
Liabilities and Stockholders' Equity
Accounts payable $ 1,844 $ 129 $ - $ 1,973
Current portion of notes payable and - - - -
capital leases 142 - - 142
Deferred revenues 1,467 498 - 1,965
Other current liabilities 2,607 207 - 2,814
----------- ----------- ----------- -----------
6,060 834 - 6,894
Notes payable and capital leases,
net of current portions 197 - - 197
----------- ----------- ----------- -----------
6,257 834 - 7,091
Commitments and contingencies
Mandatorily redeemable and convertible
preferred stock - - - -
----------- ----------- ----------- -----------
Stockholders' (Deficit) Equity
Common stock and partners capital 74,517 773 1,861 (a)(b) 77,151
Deferred compensation (1,259) - - (1,259)
Accumulated deficit (32,137) - - (32,137)
----------- ----------- ----------- -----------
41,121 773 1,861 43,755
----------- ----------- ----------- -----------
Total liabilities and shareholders (deficit) equity $ 47,378 $ 1,607 $ 1,861 $ 50,846
=========== =========== =========== ===========
</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 300,000 shares of common stock for $2.6 million,
$6.2 million of cash and $0.6 million of acquisition costs.
(b) The elimination of partners capital accounts of Paceart
Associates L.P.
(c) Purchase price paid in excess of net tangible assets acquired.
-16-
<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
----------------------------------------------------------
Pro Forma
Data Adjustments
Critical Paceart (Note 2) Pro Forma
----------- ---------- ----------- ---------
<S>
Revenue $ 9,538 $ 4,933 - $ 14,471
Cost of revenue 3,612 1,396 - 5,008
-------- --------- -------- ---------
5,926 3,537 - 9,463
Acquired in-process R&D 1,758 1,758
Research and development 2,499 179 - 2,678
Sales and marketing 4,349 1,085 - 5,434
General and administrative 4,171 1,501 919 (a) 6,591
-------- --------- -------- ---------
Loss from operations (6,851) 772 (919) (6,998)
Write-off of investment in
and advances to joint venture (117) (117)
Interest income (expense) 35 1 (1) (b) 35
-------- --------- -------- ---------
Net loss $ (6,816) $ 656 $ (920) $ (7,080)
======== ========= ======== =========
Preferred stock dividends and accretion
of mandatory redemption obligations (1,216) - - (1,216)
-------- --------- -------- ---------
$ (8,032) $ 656 $ (920) $ (8,296)
======== ========= ======== =========
Basic and diluted loss per share $ (2.92)
========
Pro forma net loss per share $ (2.72)
=========
Shares used in calculating per share data
2,749 300 3,049
======== ======== =========
<CAPTION>
Six Months Ended June 30, 2000
------------------------------------------------------------
Pro Forma
Adjustments
Data Critical Paceart (Note 2) Pro Forma
------------- --------- ------------- -----------
<S> <C> <C> <C> <C>
Revenue $ 8,321 $ 2,220 - $ 10,541
Cost of revenue 3,195 728 - 3,923
-------- --------- -------- ---------
5,126 1,492 - 6,618
Acquired in-process R&D 2,800 2,800
Research and development 3,199 106 - 3,305
Sales and marketing 3,665 482 - 4,147
General and administrative 3,360 892 460 (a) 4,712
-------- --------- -------- ---------
Loss from operations (7,898) 12 (460) (8,346)
Write-off of investment in
and advances to joint venture
Interest income (expense) 781 19 (19)(b) 781
-------- --------- -------- ---------
Net loss $ (7,117) $ 31 $ (479) $ (7,565)
======== ========= ======== =========
Preferred stock dividends and accretion
of mandatory redemption obligations - - - -
-------- --------- -------- ---------
(7,117) $ 31 $ (479) $ (7,565)
======== ========= ======== =========
$ (0.65)
Basic and diluted loss per share ========
$ (0.68)
Pro forma net loss per share =========
Shares used in calculating per share data 10,906 300 11,206
======== ======== =========
</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.
(a) Amortization of value assigned to acquired developed technology
(b) Elimination of interest income (expense)
<TABLE>
<CAPTION>
Annual
Purchase Price Amortization Amortization
Allocation Period (Years) Expense
-------------- -------------- ------------
<S> <C> <C> <C>
Working capital acquired (net) $ 553 - -
Other LT assets and liabilities (net) 71 - -
Intangibles 9,195 10 919
-------- --------
$ 9,819 $ 919
======== ========
</TABLE>
-17-
<PAGE>
DATA CRITICAL CORPORATION AND PACEART ASSOCIATES, L.P.
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
1. The Acquisition
On September 11, 2000, datacritical.com Inc. acquired all rights to own and
operate the business of Paceart Associates, L.P., a New Jersey limited
partnership ("the Partnership"), pursuant to a Limited Partnership Interest and
Stock Purchase Agreement, dated as of August 31, 2000 (the "Purchase Agreement")
among Data Critical Corporation ("Data Critical"), datacritical.com Inc., a
wholly-owned subsidiary of Data Critical ("datacritical.com"), Paceart, the
limited partners of Paceart (the "Limited Partners"), Paceart G.P., Inc., a New
Jersey corporation and the general partner of Paceart ("Paceart GP"), the
stockholders of Paceart GP (the "Stockholders"), and Dr. Michael N. Bergelson,
as agent for the Limited Partners and the Stockholders (the "Sellers' Agent").
By the terms of the Purchase Agreement, Datacritical.com irrevocably purchased
all rights to own and operate the business of The Partnership.
Under the terms of the Purchase Agreement, the Limited Partners and the
Stockholders were paid an aggregate cash purchase price of $6,162,000 in
exchange for the limited partnership interests of The Partnership held by the
Limited Partners and for the stock of Paceart GP held by the Stockholders. The
Stockholders were also issued 300,000 unregistered shares of Data Critical
common stock for such shares of common stock of Paceart GP. As described below,
a portion of the cash consideration payable to the Limited Partners and the
shares issuable to the Stockholders were withheld and placed in an escrow
account for the next 18 months.
In addition, if, and only to the extent that, the division or subsidiary of
Data Critical or datacritical.com comprised of the operations of the former
Partnership after the acquisition achieves sales revenues of more than
$5,000,000 during the fiscal year ending December 31, 2001, Data Critical will
pay an additional $400,000 in cash to the Limited Partners and the Stockholders.
In connection with the acquisition, Data Critical entered into an
employment agreement with the founder and president of The Partnership, Dr.
Michael N. Bergelson, pursuant to which Data Critical granted Dr. Bergelson
options to purchase 100,000 shares of Data Critical common stock at an exercise
price of $8.781 per share. Dr. Bergelson's options will vest monthly for the
next three years. Data Critical also entered into transition agreements with two
officers of Paceart GP, Mr. Richard Schurig, and Mr. Richard Puzo, pursuant to
which Data Critical made a cash payment of $50,000 to one consultant and granted
each consultant fully-vested, nonqualified options to purchase 10,000 shares of
Data Critical common stock at an exercise price of $8.781 per share in exchange
for the provision
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of certain consulting services to Data Critical and datacritical.com for a
period of three months after closing of the acquisition. In addition, Data
Critical agreed to grant options under its 1999 Stock Option Plan to purchase an
aggregate of 112,500 shares at an exercise price of $8.781 per share to
employees of The Partnership who are continuing their employment with Data
Critical.
A portion of the initial purchase price will be held in escrow for a period
of 18 months after closing to protect Data Critical and datacritical.com from
losses, costs, damages, claims and expenses ("Losses") resulting from any
------
breaches by The Partnership, Paceart GP, the Stockholders or the Limited
Partners of their respective representations and warranties in the Purchase
Agreement. The amount of the escrow comprises $382,500 of cash held back from
the Limited Partners' consideration and 75,000 shares of Data Critical common
stock held back from the initial consideration to be paid to the Stockholders.
2. The Periods, Combined
The unaudited pro forma condensed balance sheet is based on the individual
audited balance sheets of Data Critical and The Partnership appearing elsewhere
and has been prepared to reflect the acquisition by Data Critical of The
Partnership as of June 30, 2000. The unaudited pro forma condensed statements of
operations is based on historical results of operations of Data Critical and The
Partnership for the year ended December 31, 1999 and six months ended June 30,
2000 after giving effect to the acquisition of The Partnership 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 The Partnership 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 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
and Paceart 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.
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<PAGE>
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 The Partnership.
<TABLE>
<S> <C>
Book value of net assets acquired $ 624
Cost in excess of net assets acquired 9,195
-----------
Fair value of assets acquired $ 9,819
===========
Cash paid $ 6,162
Fair value of shares issued 2,634
Liabilities assumed 473
Acquisition costs 550
-----------
Purchase price $ 9,819
===========
</TABLE>
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DATA CRITICAL CORPORATION
Dated: November 9, 2000 By /s/ Michael E. Singer
-------------------------
Michael E. Singer
Executive VP Corporate Development and
Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
Exhibit Number Description
2.1* Limited Partnership Interest and Stock Purchase Agreement,
dated as of August 31, 2000 among Data Critical Corporation,
Datacritical.com Inc., The Partnership, the limited partners
of The Partnership, Paceart G.P., Inc., the stockholders of
Paceart G.P., Inc., and Dr. Michael N. Bergelson, as Sellers'
Agent.
4.1* Registration Rights Agreement, dated as of August 31, 2000
among Data Critical Corporation, Dr. Michael N. Bergelson,
Richard W. Schurig, Richard Puzo, Wayne Casebolt, Eric
Reidman and Anthony Marchesini.
10.1* Employment Agreement, dated as of August 31, 2000 by and
between Data Critical Corporation and Dr. Michael N.
Bergelson.
99.1* Press Release dated September 11, 2000.
* Incorporated by reference from Data Critical's Current Report on Form
8-K filed September 11, 2000.
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