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driving
- ---- the ----------------------
eHealth connection.
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[MERGE LOGO]
99 annual report
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our time has come. [PHOTO]
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MY FELLOW SHAREHOLDERS:
I am pleased to report that this is a time of unprecedented
opportunity for Merge.
e Health-the efficient, cost-effective delivery of healthcare via
Internet communications- has seen tremendous growth in 1999. This,
combined with the actions we have taken and the investments we have
made throughout the years, has put Merge Technologies in a unique
position to tap into the burgeoning e Health opportunity.
Our 1999 revenue of $13.3 million represented a 38% increase over
1998 revenues of $9.7 million. This is in line with our strategy of
driving top-line revenue gains along with overall market share-the two
factors that will determine the true leaders in the e Health
connectivity and applications market. Every 1999 quarter, in fact,
saw record revenues.
Excluding charges related to our acquisition of Interpra Medical
Imaging Network, our net loss for 1999 was $1.3 million or $0.22 per
share. This compares to a 1998 net loss of $1.9 million or $0.34 per
share. In 1999, we invested to prepare the company for the growth
ahead.
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99 PRESIDENT'S LETTER
GROWING WITH EHEALTH.
At Merge we drive the "e" in e Health by providing the means to
create the electronic patient record, and to distribute and utilize it
using the Internet. In 1999, we took many critical steps to further
our success.
Through acquisitions and key strategic alliances, we added
significant new technologies that extend our product offerings beyond
connectivity into computer applications, while increasing our target
markets twentyfold. At the same time, we continued to enhance our
existing technologies.
We strengthened our management team with new talent and
expertise, and we realigned segments of the company to better allow us
to extend our market penetration and scale rapidly to meet new opportunities. We
also expanded our presence in global markets, invested strongly in sales and
marketing, and continued our leadership role in developing industrywide communi-
cation standards.
In short, in 1999 we made the necessary moves and leveraged our investments
to position Merge for substantial, accelerated top-line growth in 2000.
MERGE ON THE VERGE.
In fact, if you compare Merge to other investment opportunities in e
Health, you'll see a future that's extremely bright.
Unlike most e Health companies, Merge is both a world leader and a
long-term player in medical connectivity. We have served thousands of healthcare
institutions worldwide for over 12 years, and we pioneered the use of Internet
technologies for the communication of medical information.
For years we've succeeded in solving the tough connectivity challenges of
the largest market segment of e Health-in the hospital and in clinical practice,
where most healthcare costs originate.
We can do this, quite frankly, because we understand how healthcare works.
Our collective experience and knowledge give us rare insight into the immense
intricacies and daunting challenges that are unique to healthcare.
Simply put, we have what it takes to be a successful player in this complex
domain. And we have never been more prepared, more focused or more energized
than we are at this moment.
eHealth has arrived. We've made the right investments. Our time has come.
6.4 9.7 9.7 13.3
96 97 98 99
TOTAL REVENUE
(in millions)
Very truly yours,
/s/ William C. Mortimore
WILLIAM C. MORTIMORE president and chief executive officer
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MERGE PRODUCTS AND SERVICES:
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creating and distributing the electronic
patient record.
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Throughout the healthcare industry, Merge hardware, software and
integration products are used to convert data from a variety of medical
devices into standard medical data communications formats. Using Merge
products, physicians, hospitals, clinics and other healthcare providers
can:
- Register patients and remotely order and schedule their
diagnostic imaging procedures.
- Electronically collect and store medical diagnostic images
such as X-rays and MRI, ultrasound or CT scans.
- Select specific diagnostic images to be included for reference
in a physician's or radiologist's patient report.
- Directly convert a physician's or radiologist's dictated
comments and interpretation into a text form to be included
with images in a complete patient report.
- Distribute patient reports including both diagnostic images
and written interpretation over the Internet for secure
access by attending physicians and specialists anytime
and anywhere.
[PHOTO]
report creation
[PHOTO]
physician's office
[PHOTO]
diagnostic read
[PHOTO]
patient registration
[PHOTO]
image capture
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unprecedented
OPPORTUNITIES
for merge solutions.
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- Of the estimated 25 to 30
billion clinical, financial
and administrative healthcare
transactions that occur
annually, only a small fraction
are currently done
electronically.
- "Radiology results reporting"
and "Delivery of clinical
applications" -the primary
focus of Merge Technologies-
are two of the top three
"Products and Services
Perceived by Physicians as
Valuable if Provided Over a
Secure Intranet or Extranet."
- "The use of the Internet in
healthcare is quickly becoming
indispensable from a
competitive standpoint."
SOURCE: "EHEALTH 2000:
HEALTHCARE AND THE
INTERNET IN THE NEW
MILLENNIUM" WIT
CAPITAL INDUSTRY
REPORT JANUARY 31,
2000
[PHOTO]
- The dis-integration of
healthcare is the primary
cause of waste-up to $250
billion annually-and is
responsible for as many as
98,000 lives lost each year
due to medical errors.
SOURCE: THE HEALTHCARE
FINANCIAL
ADMINISTRATION
eHealth:
------------------------
a market ripe with potential.
- --------------------------
To date, e Health-with its promise of
dramatic improvements in healthcare
efficiency and cost-effectiveness-has not
materialized as quickly as many had
predicted.
Greater connectivity and integration
within the hospital environment, as well as
to the outside world of patients and payers,
will be the key drivers of eHealth.
For years, Merge has pioneered and led the development of
the technologies, products and services that connect healthcare.
We have system solutions in over 325 customer sites, and our
technology can be found in thousands of locations worldwide.
Now, as we further expand our capabilities into Internet-based
computer applications, the time is ripe for Merge to impact the
healthcare industry in a big way through eHealth.
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1999 in review:
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building an ehealth enterprise.
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ACQUISITIONS & ALLIANCES
We made moves on In September, we completed the acquisition of
Interpra Medical Imaging Network Ltd. of Toronto,
Canada.
multiple fronts in 1999 This armed us with the technology to develop and
introduce MergeWeb(TM), a Java-based middleware and
to strengthen our clinical data repository product that is our
foundation for achieving a true electronic
patient record.
market position as 1999 also saw a significant expansion of our
strategic alliances and partnerships in the
a leader in eHealth individual market segments that we have targeted.
These alliances allow us to give our customers
connectivity and access to extended product offerings and new and
complementary technologies, while providing us with
applications. a further expansion of our sales distribution
channels.
SALES & MARKETING
With the acquisition of Interpra, our combined
product offerings moved Merge from a $50 million
market into market segments totaling over
$1 billion-an increase in line with our focus on
driving top-line revenue.
With our new products, we are now taking a dual
approach to the market-attacking key vertical
markets such as medical imaging, dictation and
radiology, while offering integrated health-care
horizontally across the entire enterprise. What's
more, we are ideally positioned to control those
markets we've targeted. Our installed base already
lets us touch more than 20 million healthcare
transactions annually, and we have Systems
Solutions in over 7% of U.S. hospitals.
TECHNOLOGIES & SERVICES
In 1999 we introduced our enhanced design CaseWorks(TM) product, and
late in the year we began delivery of ExamWorks(TM), our next medical
Internet appliance. ExamWorks(TM) is an easy-to-use touch-screen
appliance that eliminates one of the biggest barriers to achieving the
integrated eHealth future, and sales are already strong.
Our professional service groups represented a more significant
portion of our overall business in 1999 than ever before. We added
personnel to double the size of the groups, and revenue from services
exceeded 10% of total revenues for the first time ever.
GOING GLOBAL
1999 was also a year of continued global expansion for the Company.
In October, we established Merge Technologies Kabushiki Kaisha, a
subsidiary in Tokyo, Japan that will allow us to better serve this growing
market and develop more sales opportunities. In addition, our European
office received ISO 9001 Certification for the excellence of its products
and services, and we also invested in ramping up our development office
in Toronto, Canada.
With business from outside of the United States growing to 39% in
1999, Merge continues as a major provider of world-class eHealth
solutions.
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BOARD OF DIRECTORS
ROBERT T. GERAS - CHAIRMAN(1)(3) president - LaSalle Investments,
Incorporated
ROBERT A. BARISH, M.D.(3) associate dean for clinical affairs and
professor, department of surgery and medicine
- University of Maryland School of Medicine
DENNIS BROWN(1) vice president - finance, chief financial officer and
treasurer - Sybron International Corporation (NYSE: SYB)
MICHAEL D. DUNHAM(1)(2)(4) executive vice president of business
development - IFS Industrial and Financial
Systems
DOUGLAS S. HARRINGTON, M.D.(2) chief executive officer and president -
Chromavision Medical Systems, Inc.
(NASDAQ: CVSN)
KEVIN E. MOLEY(2) private investor
WILLIAM C. MORTIMORE(3)(4) president and chief executive officer -
Merge Technologies Incorporated
HYMIE S. NEGIN(4) president - Joca Corporation
COMMITTEES OF THE BOARD
(1)audit committee
(2)compensation committee
(3)nominating committee
(4)executive committee
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EXECUTIVE OFFICERS
WILLIAM C. MORTIMORE president and chief executive officer
COLLEEN M. DOAN chief financial officer, treasurer
and secretary
MICHAEL J. FRANCO vice president, engineering and chief
technology officer
JOSEPH P. GENTILE director of worldwide system sales
ANTON VAN KIMMENADE vice president, service and branch
manager, europe
STEVEN J. NEVERMANN director of manufacturing and logistics
DAVID M. NOSHAY vice president, strategic marketing
WILLIAM L. STAFFORD vice president, sales - OEM/VAR solutions
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CORPORATE INFORMATION
STOCK EXCHANGE LISTING Nasdaq SmallCap: MRGE
INDEPENDENT AUDITORS KPMG LLP
REGISTRAR AND TRANSFER AGENT Firstar Trust Company, 1555 North River
Center Drive, Suite 301, Milwaukee, WI 53212
ANNUAL MEETING May 23, 2000, 10:00 a.m., Embassy Suites Hotel,
1200 South Moorland Road, Brookfield, WI 53008
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[MERGE LOGO]
PEOPLE. TECHNOLOGY.
CONNECTED.
Merge Technologies Incorporated
Headquarters Europe Japan
1126 South 70th Street Spegelt 34 Aios Gotanda Annex 5F,
Milwaukee, WI 5674 CD Nuenen, 1-7-11 Higashi
53214-3151, U.S.A. The Netherlands Gotanda, Shinagawa-ku, Tokyo,
Tel: (414) 977-4000 Tel: 31(40)299-0770 Japan 141
Fax: (414) 977-4200 Fax: 31(40)290-6615 Tel: (81)(3)3440-9109
An ISO 9001 Fax: (81) (3) 3440-9108
certified company.
email: [email protected] - home page: www.merge.com
AR(4/00) (C)2000 Merge Technologies Incorporated. All rights reserved.
