<PAGE> 1
Form 10-QSB
U.S. Securities and Exchange Commission
Washington, D.C. 20549
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
| | TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-29486
Merge Technologies Incorporated
-------------------------------
(Exact name of small business issuer as specified in
its charter.)
Wisconsin 39-1600938
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1126 South 70th Street, Milwaukee, WI 53214-3151
------------------------------------------------
(Address of principal executive offices)
414-475-4300
------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
-- --
As of May 14, 1999, the issuer had 5,778,216 shares of Common Stock outstanding
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements..................................1
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................5
PART II OTHER INFORMATION
Item 2. Changes in Securities..............................................9
Item 6. Exhibits and Reports on Form 8-K...................................9
Signatures........................................................10
Exhibit Index.....................................................11
</TABLE>
i
<PAGE> 3
PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents................................................. $ 3,348,710
Accounts receivable, net of allowance for doubtful accounts of $160,000 .. 2,485,117
Inventory................................................................. 1,424,123
Prepaid expenses.......................................................... 438,389
Other current assets...................................................... 74,759
------------
Total current assets........................................................ 7,771,098
------------
Property and equipment:
Computer equipment.......................................................... 2,251,141
Office equipment............................................................ 455,239
------------
2,706,380
Less accumulated depreciation............................................. 1,208,893
------------
Net property and equipment.................................................. 1,497,487
License agreement, net of accumulated amortization of $171,128 ............. 136,570
Purchased and developed software, net of accumulated amortization of
$3,295,247 ................................................................. 3,571,349
Other intangibles, net of accumulated amortization of $23,239............... 36,148
Other....................................................................... 13,008
------------
Total assets................................................................ $ 13,025,660
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................... $ 633,806
Current portion of obligations under capital leases........................ 9,585
Customer deposits.......................................................... 171,961
Accrued wages.............................................................. 424,198
Other accrued liabilities.................................................. 165,779
------------
Total current liabilities.................................................... 1,405,329
-----------
Obligations under capital leases, excluding current portion.................. 16,321
-----------
Total liabilities......................................................... 1,421,650
-----------
Shareholders' equity
Preferred stock, $0.01 par value: authorized 5,000,000, no shares issued.. ---
Common stock, $0.01 par value: authorized 30,000,000, 5,778,216 shares
issued and outstanding.................................................... 57,782
Additional paid-in capital................................................ 13,935,476
Accumulated deficit....................................................... (2,472,596)
Accumulated other comprehensive income-cumulative translation adjustment.. 83,348
------------
Total shareholders' equity.................................................. 11,604,010
------------
Total liabilities and shareholders' equity.................................. $ 13,025,660
============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 4
MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------
1998 1999
------------- -------------
<S> <C> <C>
Net sales ...................................................... $ 2,646,098 $ 3,419,415
Cost of goods sold:
Purchased components ......................................... 797,617 851,028
Amortization of purchased and developed software.............. 154,873 307,614
Total cost of goods sold ....................................... 952,490 1,158,642
------------ ------------
Gross profit ................................................... 1,693,608 2,260,773
------------ ------------
Operating costs and expenses:
Sales and marketing .......................................... 750,997 1,116,180
Product research and development ............................. 444,489 381,394
General and administrative ................................... 536,874 597,048
------------ ------------
Total operating costs and expenses ............................. 1,732,360 2,094,622
------------ ------------
Operating income (loss) ........................................ (38,752) 166,151
------------ ------------
Other income (expenses):
Interest expense ............................................. (29,820) ---
Interest income .............................................. 58,437 33,774
Other, net ................................................... (46,776) (80,123)
------------ ------------
Total other expense ............................................ (18,159) (46,349)
------------ ------------
Income (loss) before income taxes .............................. (56,911) 119,802
Income taxes.................................................... --- 3,800
Net income (loss)............................................... $ (56,911) $ 116,002
============ ============
Basic and diluted net income (loss) per share
common equivalent share....................................... $ (0.01) $ 0.02
============ ============
Shares used to compute basic and diluted
net income (loss) per share................................... 5,106,197 5,778,216
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE> 5
MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1998 1999
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................................. $ (56,911) $ 116,002
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities
Depreciation and amortization............................................... 223,213 414,217
Provision for doubtful accounts receivable.................................. (7,500) (40,593)
Change in assets and liabilities:
Accounts receivable....................................................... (437,172) (667,180)
Inventory................................................................. 139,747 527,037
Prepaid expenses.......................................................... (184,521) (76,616)
Accounts payable.......................................................... (453,367) (144,501)
Accrued expenses.......................................................... (54,225) 34,890
Customer deposits......................................................... 32,883 22,368
Other..................................................................... 2,952 31,482
----------- -----------
Net cash provided by (used in) operating activities............................. (794,901) 217,106
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment........................................... (94,110) (207,571)
Development of software....................................................... (351,886) (345,434)
----------- -----------
Net cash used in investing activities........................................... (445,996) (553,005)
----------- -----------
Cash flows from financing activities:
Payments on loan agreement with Sirrom........................................ (2,000,000) --
Issuance of common stock, net of expenses..................................... 11,288,211 --
Proceeds from exercise of stock options....................................... 1,500 --
Payment for call of common stock.............................................. (806,592) --
Payment of warrant termination fee............................................ (196,096) --
Principal payments under capital leases....................................... (16,428) (4,795)
----------- -----------
Net cash provided by (used in) financing activities............................. 8,270,605 (4,795)
----------- -----------
Effect of exchange rate changes on cash......................................... 4,617 29,524
Net increase in cash and cash equivalents....................................... 7,034,325 (311,170)
Cash and cash equivalents, beginning of period.................................. 428,271 3,659,879
----------- -----------
Cash and cash equivalents, end of period................................... $ 7,462,596 $ 3,348,710
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes $ --- $ 14,346
Cash paid for interest.......................................................... $ 50,492 $ 2,726
NON CASH FINANCING AND INVESTING ACTIVITIES:
Property and equipment acquired through capital leases.......................... $ 4,889 $ --
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE> 6
MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 1998 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------
1998 1999
------------- --------------
<S> <C> <C>
Net income (loss) ................................... $ (56,911) $ 116,002
Other comprehensive income - cumulative translation
adjustment........................................... 19,753 61,376
--------- ---------
Comprehensive net income (loss) ..................... $ (37,158) $ 177,378
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 7
MERGE TECHNOLOGIES INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared pursuant to the rules and regulations for reporting on Form 10-QSB.
Accordingly, certain information and footnotes required by generally accepted
accounting principles for complete financial statement are not included herein.
The interim statements should be read in conjunction with the financial
statements and notes thereto included in the Company's latest Annual Report on
Form 10-KSB.
The accompanying unaudited consolidated financial statements of the Company
reflect all adjustments of a normal recurring nature which are, in the opinion
of management, necessary to present a fair statement of the financial position.
(2) Revenue Recognition
Revenue from product sales is recognized upon shipment. No significant
Company obligations exist with regard to delivery or customer acceptance
following shipment. Revenues from Software maintenance are deferred and
recognized straight-line over the contract support period, which is generally
one year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Special Note on Forward-Looking Statements
Certain statements in this report that are not historical facts constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as
amended (the Securities Act) and Section 21E of the Securities Exchange Act of
1934, as amended (the Exchange Act). Discussions containing such forward-looking
statements may be included herein in the material set forth under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" as
well as within this report generally. In addition, when used in this report, the
words believes, intends, anticipates, expects and similar expressions are
intended to identify forward-looking statements. These statements are subject to
a number of risks and uncertainties, including, among others, the Company's lack
of consistent profitability, history of operating losses, fluctuations in
operating results, credit and payment risks associated with end-user sales,
involvement with rapidly developing technology in highly competitive markets,
dependence on major customers, expansion of its international sales effort,
broad discretion of management and dependence on key personnel, risks associated
with product liability and product defects, costs of complying with government
regulation, changes in external competitive market factors which might impact
trends in the Company's results of operation, unanticipated working capital an
other cash requirements, general changes in the industries in which the Company
competes, and various other competitive factors that may prevent the Company
from competing successfully in the marketplace. Actual results could differ
materially from those projected in the forward-looking statements. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements that may be made to reflect any future events
or circumstances.
OVERVIEW
Merge Technologies Incorporated is an international provider of clinical
information systems integration solutions for healthcare organizations. Current
offerings include software, hardware, and integration component products that
facilitate networking and information management of image-producing and
image-using devices in diagnostic radiology. A hospital or an imaging center can
use Merge Technologies' components to create a communications bridge between
incompatible devices, permit radiologists to use video images on electronic
workstations or film as a diagnostic medium and create a diagnostic-quality
electronic archive of imaging
5
<PAGE> 8
results. In addition, the Company's products can convert the data generated by
medical imaging devices into concise electronic reports with relevant images
that may be distributed in a health care organization's information network or
included in an electronic patient record ("EPR").
The Company classifies its sales by application type. Component
Technologies (formerly referred to as OEM Sales) are products sold primarily
through OEMs and value added resellers ("VARs") which integrate Merge's products
into their own product offerings in order to increase the functionality of their
equipment or systems. Systems Solutions (formerly referred to as End-User Sales)
are complete networked imaging applications using a combination of Merge
components. Systems Solutions are sold to end-users either directly or through
distributors under the Merge brand name. Component Technologies and Systems
Solutions sales were as follows for the three months ended March 31, 1999 and
1998, respectively.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
(UNAUDITED AND IN THOUSANDS)
-------------------------------
APPLICATION 1998 1999
----------- ------------- --------------
<S> <C> <C>
Component Technologies............................... $ 1,158 $ 1,675
Systems Solutions.................................... 1,488 1,744
======= =======
$ 2,646 $ 3,419
======= =======
</TABLE>
RESULTS OF OPERATIONS
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998
Net sales. Net sales increased by 29% to $3,419,000 in the three months
ended March 31, 1999 from $2,646,000 in the three months ended March 31, 1998.
Net sales of Component Technologies accounted for the largest increase, rising
by 45% to $1,675,000 in the three months ended March 31, 1999 from $1,158,000 in
the three months ended March 31, 1998. Net sales of Systems Solutions increased
by 17% to $1,744,000 in the three months ended March 31, 1999 from $1,488,000 in
the three months ended March 31, 1998. Systems Solutions sales accounted for 51%
of net sales in the three months ended March 31, 1998 and are expected to
increase as a percentage of net sales in the future.
Cost of goods sold. Cost of goods sold consists of purchased components and
the amortization of purchased and developed software. The cost of purchased
components decreased as a percentage of net sales in the three months ended
March 31, 1999 to approximately 25% compared to 30% in the three months ended
March 31, 1998, reflecting lower discounts to customers in certain markets.
Amortization of purchased and developed software increased 99% to $308,000 in
the three months ended March 31, 1999 from $155,000 in the three months ended
March 31, 1998, due primarily to commencement of amortization of certain
software development projects as the related products were released.
Amortization of purchased and developed software is expected to increase in
dollar terms but not as a percentage of net sales in 1999.
Gross profit. Gross profit increased by 33% to $2,261,000 in the three
months ended March 31, 1999 from $1,694,000 in the three months ended March 31,
1998. As a percentage of net sales, gross profit increased to 66% in the three
months ended March 31, 1999 from 64% of net sales in the three months ended
March 31, 1998.
Sales and marketing. Sales and marketing expense increased by 49% to
$1,116,000 in the three months ended March 31, 1999 from $751,000 in the three
months ended March 31, 1998. The Company increased its sales/marketing staff to
22 persons as of March 31, 1999 from 16 persons as of March 31, 1998, and
increased service personnel to 12 persons as of March 31, 1999 from 9 persons as
of March 31, 1998. As a percentage of net sales, sales and marketing expense
increased to 33% in the three months ended March 31, 1999 from 28% in the three
months ended March 31, 1998. The Company expects that over time sales and
marketing expense will decrease
6
<PAGE> 9
slightly as a percentage of net sales. However, the Company expects to continue
to make additions of sales/marketing and service personnel in order to increase
net sales.
Product research and development. Research and development expense
decreased by 14% to $381,000 in the three months ended March 31, 1999 from
$444,000 in the three months ended March 31, 1998. The decrease in research and
development expense reflects the Company's decision to delay investments in
certain product development activities until net sales begin to increase. The
Company believes that advanced technology is a key element in the success of its
business, and it expects to increase its research and development expenditures
moderately in the future.
General and administrative. General and administrative expense increased by
$60,000, or 11% to $597,000 in the three months ended March 31, 1999 from
$537,000 in the three months ended March 31, 1998. Depreciation expense on
capital equipment increased $93,000 in the three months ended March 31, 1999
while total other general administrative expense decreased $33,000. There were
13 general and administrative employees as of both March 31, 1999 and March 31,
1998. As a percentage of net sales, general and administrative expense decreased
to 17% in the months ended March 31, 1999 from 20% in the three months ended
March 31, 1998.
Total other expense, net. Total other expense, net increased to $47,000 in
the three months ended March 31, 1999 from $18,000 in the three months ended
March 31, 1998 due primarily to an increase of $34,000 in foreign currency
translation expense. Foreign currency translation in the three months ended
March 31, 1999 reflects the decrease in value of the Dutch guilder relative to
the U.S. dollar.
Income taxes. The Company recorded an income tax expense of $4,000 in the
three months ended March 31, 1999 to reflect an estimated state tax liability.
The Company did not recognize an income tax benefit in the three months ended
March 31, 1998 despite incurring a loss for financial reporting purposes due to
uncertainty as to future realization of tax benefit.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by (used in) operating activities was $217,000 in the three
months ended March 31, 1999 compared to $(795,000) in the three months ended
March 31, 1998. In the three months ended March 31, 1999, the Company had net
income of $116,000 and incurred depreciation and amortization expense of
$414,000. Significant changes in assets and liabilities included an increase in
accounts receivable of $667,000 due to sales growth and a decrease in inventory
of $527,000, which reflects management's objective to reduce inventory levels to
be more in line with the current sales rate.
Investing activities include net additions to capital equipment of $208,000
and $94,000, and additions to capitalized software of $345,000 and $352,000 in
the three months ended March 31, 1999 and the three months ended March 31, 1998,
respectively.
Cash provided by (used in) financing activities for the three months ended
March 31, 1999 and the three months ended March 31, 1998 was $(5,000) and
$8,271,000, respectively. Cash provided by financing activities in 1998 consists
primarily of proceeds from the issuance of common stock in the initial public
offering and subsequent overallotment exercise less expenses and payments for
redemption of common stock, the warrant termination fee and the remaining
principal on the Sirrom note.
The Company has applied all of the offering proceeds to sales and
marketing, research and development, redemption of common stock held by Alpha,
payments to Sirrom, accounts receivable and inventory financing, establishment
and maintenance of domestic and international sales offices, and personnel
expense. The Company had cash and cash equivalents of $3,349,000 and working
capital of $6,366,000 at March 31, 1999.
Internally generated cash flows are expected to be sufficient to support
operations in 1999. The Company is currently negotiating with a bank to arrange
for a line of credit, however, it is anticipated that if the loan is not
finalized, no material adverse effect will be realized by the Company in 1999.
Thereafter, if cash generated
7
<PAGE> 10
from operations is insufficient to satisfy the Company's projected requirements,
or if the Company elects to use funds for acquisitions or other matters, the
Company may be required to sell additional equity or debt securities or obtain
bank financing or other credit facilities.
YEAR 2000
In the year 2000, many existing computer programs that use only two digits,
rather than four, to identify a year in the date field could fail or create
erroneous results if not corrected. All Merge products have received a Year 2000
compliance evaluation. Merge will continue to test its current and future
products on an ongoing basis, applying its Year 2000 compliance criteria. The
Company will include into its procedure any modifications that are incorporated
into the compliance process during its implementation.
All Merge manufacturing equipment and critical facilities equipment have
been determined to be Year 2000 compliant. Key service providers have furnished
to the Company with Year 2000 compliance statements which indicate that they
either have Year 2000 compliant internal systems or that their systems are
expected to be Year 2000 compliant during 1999. The Company has also commenced a
program to verify that its materials suppliers have effective Year 2000
compliance processes. The vendor evaluations under this program are expected to
be completed during the third quarter of 1999.
The following product have been determined to meet the Company's Year 2000
compliance criteria: MergeCOM-3(TM), MergeARK(TM), and MergeDPM(TM),
MergeVPI(TM), MergeDPI(TM) and MergeAPS(TM). A software upgrade for Year 2000
compliance is available through the Merge service department for versions of
MergeVPI, MergeVPI and MergeAPS shipped prior to March, 1999.
MergeMVPs connect to legacy image equipment, and the data output of a
MergeMVP is largely dependent upon the data received from the source equipment.
As a result, when connected to a device such as a CT or MR imaging device that
is not Year 2000 compliant, the data output from an MVP may not be Year 2000
compliant due to development issues that the Company cannot control.
Nevertheless, the majority of MergeMVP products in current production meet the
Company's Year 2000 compliance criteria. The Company offers upgrades at no
charge on MVPs shipped beginning in 1998 in which Merge software is not
compliant. The Company also will offer for sale to imaging device manufacturers
engineering services to correct Year 2000 problems inherent to their software
through programs installed on MergeMVPs. In the fourth quarter of 1998, the
first of such upgrades was sold to a customer. The Company anticipates
additional sales of Year 2000 upgrades but it expects that such sales will not
be significant in 1999.
The Company believes based on its successful completion of Year 2000
upgrades for its MergeMVP(TM), MergeVPI, MergeDPI, and MergeAPS products that
the possibility of experiencing significant technical delays in further Year
2000 product upgrades is remote. However, if the Company does experience an
unanticipated delay, it may elect to refrain from offering for sale certain
products. Should Year 2000 development projects be canceled due to such
technical delays, product development engineers would be assigned to other
projects which the Company believes would generate comparable revenues. The
Company evaluates progress on Year 2000 development at regular intervals in
order to ensure that development costs do not exceed the original estimate.
Costs associated with Year 2000 upgrades in 1998 were approximately $20,000 and
they are expected not to exceed $80,000 in 1999. A Year 2000 upgrade is
considered to be no more complicated than any other upgrade for a Merge product,
so no significant change in the rate of calls for customer support is expected.
The Company cannot quantify its risk for potential additional Year 2000
compliance costs at this time, but it anticipates that the effect of this
computer program flaw on the operations of the Company will be not be
significant. However, the Company may be required to spend time and monetary
resources addressing any necessary computer program changes.
In the Company's assessment, the most reasonably likely worst case scenario
caused by Year 2000 issues relates to potential redirection of hospital
information technology budgets for solving Year 2000 problems unrelated to Merge
product offerings. Should expenses for an institution's Year 2000 remediation
exceed its budget allocation, funds that would have been invested in networking
and image management products (such as
8
<PAGE> 11
those sold by Merge) may be reallocated to Year 2000 fixes. The Company may, in
that circumstance, encounter delays in anticipated orders. Should order delays
occur, the Company would market its products to other customers with funds
available in their capital equipment budgets. Management currently believes that
order delays due to external Year 2000 problems will not have a material impact
on the Company's future financial performance. The Company is continuing to
develop a contingency plan for maintaining revenues in the event of order delays
caused by Year 2000 issues.
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On January 29, 1998, the Company completed an initial public offering of
1,900,000 shares of common stock at an offering price of $6.00 per share. On
February 27, 1998, the underwriter exercised its overallotment option and
offered an additional 285,000 shares to the public at $6.00 per share. As a
result of the initial public offering and subsequent overallotment exercise, the
Company received net proceeds of approximately $11,800,000 and increased its
total shares of common stock outstanding by 2,185,000 shares. All of the net
proceeds of the offering of 1,900,000 shares of common stock have been applied
as follows: (1) to repay in full the outstanding principal and interest on the
$2,000,000 note with Sirrom Capital; (2) to redeem 424,757 shares of stock held
by Alpha Capital Venture Partners at $1.90 per share; (3) to terminate
unexercised warrant held by Sirrom Capital for $196,000; and (4) for the uses
described under "Liquidity and Capital Resources" (Part I, Item 2 above). All of
the net proceeds received by the Company in connection with the exercise of the
underwriters overallotment option were applied to the uses described under
"Liquidity and Capital Resources" (Part I, Item 2 above).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibit Index
(b) No Reports on Form 8-K were filed during the first fiscal quarter.
9
<PAGE> 12
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
MERGE TECHNOLOGIES INCORPORATED
By: /s/ William C. Mortimore Date: May 14, 1999
-----------------------------------------
William C. Mortimore
President and Chief Executive Officer
By: /s/ Colleen M. Doan Date: May 14, 1999
-----------------------------------------
Colleen M. Doan
Chief Financial Officer, Treasurer and Secretary
(Principal Financial Officer and Principal Accounting Officer)
10
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<S> <C>
3.1 Articles of Incorporation of Registrant(1) and Articles of Amendment as of June 16, 1998.
3.2 Amended and Restated By-Laws of Registrant as of February 3, 1998 (2)
4.1 Stock Purchase Warrant issued June 30, 1997 by Registrant to Sirrom Capital Corporation (1)
4.2 Form of Lock-Up Agreement (1)
4.3 Common Stock Certificate (1)
4.4 Representative's Warrant (2)
10.1 Employment Agreement dated September 1, 1997 between Registrant and William C. Mortimore (1)
10.2 Merge/Sirrom Revised Modification Agreement dated as of October 30, 1997 (1) and Amendment to
Sirrom/Merge Agreement dated as of May 29, 1998 (3)
10.3 OEM Purchase Agreement between Registrant and Philips Medical Systems Nederland B.V. dated
September 24, 1994 and First Amendment dated June 4, 1996 (1)
10.4 Distribution Agreement with Picker International, Inc. (1)
10.5 1996 Stock Option Plan for Employees of Registrant dated May 13, 1996 (1)
10.6 Office Lease for West Allis Center dated May 24, 1996 between
Registrant and Whitnall Summit Company, LLC, Supplemental Office Lease
dated July 3, 1997 (1) and Supplemental Office Space Lease dated
January 30, 1998 (2)
10.7 Alpha Capital Venture Partners Limited Agreement dated March 1, 1997 (1)
10.8 1998 Stock Option Plan For Directors (2)
21 Subsidiaries of Registrant (1)
27.1 Financial Data Schedule
</TABLE>
- - - - - - - - - - - - - - - - -
(1) Incorporated by reference to Registration Statement on Form SB-2 (No.
333-39111) effective January 29, 1998.
(2) Incorporated by reference to Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1997.
(3) Incorporated by reference to Registration Statement on Form SB-2 (No.
333-58973) effective July 13, 1998.
11
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF AMENDMENT
STOCK (FOR PROFIT)
A. Name of Corporation Merge Technologies Incorporated
------------------------------------------------------
(prior to any change effected by this amendment)
RESOLVED, THAT, the articles of incorporation be amended as follows:
That the authorized number of shares of common stock, par value $0.01 per
share, reflected in the table contained in Article IV of the Company's
restated Articles of Incorporation be and hereby is amended by deleting the
number 10,000,000 and substituting in its place the number 30,000,000.
B. Amendment(s) adopted on June 16, 1998
---------------------------------------------------
(date)
Indicate by method of adoption by checking the appropriate choice below:
(x) In accordance with sec. 180.1002, Wis. Stats. (By the Board of Directors)
C. Executed on behalf of the corporation on 12/4/98
----------------------------------
(date)
/s/ Colleen M. Doan
----------------------------------
(signature)
Colleen M. Doan
----------------------------------
(printed name)
Chief Financial Officer
----------------------------------
(officer's title)
D. This document was drafted by Colleen M. Doan
----------------------------------------------
(name of individual required by law)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,348,710
<SECURITIES> 0
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0
0
<COMMON> 13,993,258
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</TABLE>
