<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------- --------------
Commission File Number 0-26390
CELERIS CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1545493
(State or other jurisdiction of
incorporation or organization) (IRS Employer ID No.)
1801 WEST END AVENUE
SUITE 750
NASHVILLE, TN 37203
(615) 341-0223
(Address including zip code, of Registrant's
principal executive offices and telephone
number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and has been subject to such filing requirements
for the past 90 days. [X] Yes [ ] No
As of July 31, 1999 there were 3,092,329 shares of the registrant's common stock
outstanding, reflective of the registrant's one-for-three reverse stock split
applicable to shareholders of record July 29, 1999.
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CELERIS CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
<TABLE>
<S> <C>
Condensed Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998 ........................1
Condensed Consolidated Statements of Operations For the Three and Six Months
Ended June 30, 1999 and 1998 ..................................................................2
Condensed Consolidated Statements of Cash Flows For the Six Months
Ended June 30, 1999 and 1998 ..................................................................3
Notes to Condensed Consolidated Financial Statements ...................................................4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..........7
Item 3. Quantitative and Qualitative Disclosures About Market Risks ...................................10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .............................................................................10
Item 2. Changes in Securities and Use of Proceeds .....................................................11
Item 3. Defaults Upon Senior Securities ...............................................................11
Item 4. Submission of Matters to a Vote of Security Holders ...........................................11
Item 5. Other Information .............................................................................11
Item 6. Exhibits and Reports on Form 8-K ..............................................................11
</TABLE>
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995.
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended and Section
21E of the Securities Exchange Act of 1934, as amended. These forward-looking
statements include statements regarding intent, belief or current expectations
of Celeris Corporation (the "Company") and its management. Such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties that may cause the Company's actual results to differ materially
from the results discussed in the forward-looking statements. Risks and
uncertainties that might cause such differences include, but are not limited to:
(1) the Company's ability to control costs and keep increases in expenditures
below revenue growth, if any, to achieve profitability and positive cash flow;
(2) the Company's lack of an operating history in the clinical research services
market on which to base expectations for future performance; (3) uncertainty of
market acceptance of the Company's clinical research services; (4) fluctuations
in quarterly operating results as a result of delays in implementing or
termination of particular clinical trials; (5) the Company's dependence on the
amount of research and development activities, particularly clinical trials, of
pharmaceutical, medical device and biotechnology companies; (6) intense
competition in the market for clinical research services; (7) cancellations or
delays of contracts by the client which may leave the Company with excess
capacity; (8) challenges presented by the Company's new clinical research
operations, which will require the Company to attract and integrate new key
employees and to develop new operational and financial systems, procedures and
controls; (9) the Company's dependence on regulation of the pharmaceutical,
medical device and biotechnology industries; (10) a material portion of the
Company's future revenue is dependent on a single client; (11) the possibility
of adverse outcomes related to the Company's shareholder lawsuits or SEC
investigation; (12) failure of the Company's one-for-three reverse stock split
to cause the Company to comply with The Nasdaq Stock Market(R) requirements for
a $1.00 minimum bid price; and (13) risks associated with the Company's
discontinued operations, including the failure to realize the Company's
assumptions regarding estimated charges and performance of the assets sold. The
forward-looking statements herein are qualified in their entirety by the
cautionary statement and risk factors set forth in Item 1, under the caption
"Cautionary Statement and Risk Factors," of the Company's Annual Report on Form
10-K, dated March 30, 1999. A copy of the Form 10-K may be obtained from the
Public Reference Branch of the SEC at 450 Fifth Street NW, Washington, DC at
prescribed rates.
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CELERIS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
(UNAUDITED) (AUDITED)
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,343,121 $ 8,138,542
Short-term investments 3,037,016 7,083,851
Accounts receivable, net of allowance of $250,000
and $172,000, respectively 2,281,994 1,516,712
Other current assets 401,749 412,360
------------ ------------
Total current assets 13,063,880 17,151,465
Net furniture, fixtures and equipment 1,283,384 1,012,986
------------ ------------
Total assets $ 14,347,264 $ 18,164,451
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,288,624 $ 1,024,837
Deferred revenue and payables 507,036 398,653
Accrued compensation 335,955 279,853
Net current liabilities of discontinued operations 1,985,611 4,256,332
------------ ------------
Total current liabilities 4,117,226 5,959,675
COMMITMENTS AND CONTINGENCIES (Note 4) -- --
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value - 13,511,111 shares
authorized; 3,082,310 and 3,139,810 shares
issued and outstanding, respectively 30,823 31,398
Additional paid-in capital 67,452,392 67,591,615
Accumulated deficit (57,253,177) (55,418,237)
------------ ------------
Total shareholders' equity 10,230,038 12,204,776
------------ ------------
Total liabilities and shareholders' equity $ 14,347,264 $ 18,164,451
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
1
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CELERIS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30 JUNE 30
---------------------------- -----------------------------
1999 1998 1999 1998
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue $ 2,398,729 $ 1,441,899 $ 4,331,591 $ 2,744,524
Cost of sales 1,643,681 932,145 3,017,078 1,658,059
----------- ----------- ----------- ------------
Gross profit 755,048 509,754 1,314,513 1,086,465
Selling, general and administrative expenses 1,930,488 1,054,034 3,858,306 1,832,458
----------- ----------- ----------- ------------
Loss from operations (1,175,440) (544,280) (2,543,793) (745,993)
Interest income, net 139,028 323,690 308,853 682,161
----------- ----------- ----------- ------------
Loss from continuing operations (1,036,412) (220,590) (2,234,940) (63,832)
Discontinued operations:
Loss from discontinued operations -- (2,531,520) -- (4,706,639)
Gain (loss) on disposal of discontinued operations 200,000 (5,349,000) 400,000 (5,349,000)
----------- ----------- ----------- ------------
Total discontinued operations 200,000 (7,880,520) 400,000 (10,055,639)
----------- ----------- ----------- ------------
Net loss $ (836,412) $(8,101,110) $(1,834,940) $(10,119,471)
=========== =========== =========== ============
Basic income (loss) per common share:
Continuing operations $ (0.33) $ (0.07) $ (0.71) $ (0.02)
Discontinued operations 0.06 (2.47) 0.13 (3.12)
----------- ----------- ----------- ------------
$ (0.27) $ (2.54) $ (0.58) $ (3.14)
=========== =========== =========== ============
Diluted income (loss) per common share:
Continuing operations $ (0.33) $ (0.07) $ (0.71) $ (0.02)
Discontinued operations 0.06 (2.47) 0.13 (3.12)
----------- ----------- ----------- ------------
$ (0.27) $ (2.54) $ (0.58) $ (3.14)
=========== =========== =========== ============
Weighted average shares outstanding:
Basic 3,134,883 3,193,150 3,137,333 3,219,500
Diluted 3,134,883 3,193,150 3,137,333 3,219,500
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
2
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CELERIS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30
----------------------------
1999 1998
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(1,834,940) $(10,119,471)
Adjustments to reconcile net loss to net cash provided by
(used in) continuing operating activities:
Depreciation 216,733 48,291
Provision for bad debts 92,264 56,589
Loss from discontinued operations -- 4,706,639
Loss (gain) on disposal of discontinued operations (400,000) 5,349,000
Value of options issued for consulting services 21,225 --
Changes in operating assets and liabilities:
Accounts receivable (857,546) (8,654)
Other current assets 10,611 26,470
Accounts payable and accrued expenses 268,452 (15,627)
Deferred revenue and payables 108,383 163,442
Accrued compensation 56,102 178,371
----------- ------------
Net cash provided by (used in) continuing operating activities (2,318,716) 385,050
INVESTING ACTIVITIES:
Purchase of short-term investments -- (7,481,661)
Sales and maturities of short-term investments 4,046,835 13,550,963
Purchases of furniture, fixtures and equipment (534,149) (361,681)
----------- ------------
Net cash provided by investing activities 3,512,686 5,707,621
FINANCING ACTIVITIES:
Repurchase of common stock (140,418) (623,125)
Net proceeds from exercise of common stock options -- 48,000
----------- ------------
Net cash used in financing activities (140,418) (575,125)
Cash used in discontinued operations (1,848,973) (4,386,053)
----------- ------------
Increase (decrease) in cash and cash equivalents (795,421) 1,131,493
Cash and cash equivalents at beginning of period 8,138,542 5,949,478
----------- ------------
Cash and cash equivalents at end of period $ 7,343,121 $ 7,080,971
=========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ -- $ 4,064
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
<PAGE> 6
CELERIS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Celeris Corporation (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (including normal recurring
accruals) considered necessary for a fair presentation have been included.
Certain prior period amounts have been reclassified to conform with current
presentation. Operating results for the three and six month periods ended June
30, 1999 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1999. For further information, refer to the
consolidated financial statements and footnotes thereto for the year ended
December 31, 1998 in the Company's Annual Report on Form 10-K.
2. INCOME (LOSS) PER COMMON SHARE
Basic income (loss) per common share is computed by dividing income (loss) for
the period by the weighted average number of shares of common stock outstanding
during the period. The computation of diluted income (loss) per common share
requires that the number of weighted average shares outstanding be increased for
the assumed exercise of dilutive options using the treasury stock method.
Diluted loss per share for the three and six months ended June 30, 1999 does not
include common stock equivalents of 850,256 as their effect would be
antidilutive.
3. DISCONTINUED OPERATIONS
On June 10, 1998 the Company announced its intent to transition out of the
healthcare provider software market and focus its resources on its clinical
research services segment. On December 24, 1998 the Company completed the sale
of its healthcare provider software segment. As consideration for the sale, the
Company will receive a total purchase price of up to $2,000,000, contingent upon
the performance of the assets and the buyer's costs to perform prepaid support
and service obligations after the closing. The consideration from the sale is
payable in the form of $1,000,000 cash, $600,000 of which has been recorded as
gain on disposal of discontinued operations when collection was assured, and the
remainder of which is payable in two equal cash payments of $200,000 to be made
at the end of each remaining fiscal quarter of the fiscal year ending December
31, 1999. At the closing, the buyer also delivered to the Company a $1,000,000
non-interest bearing promissory note (the "Note") due and payable on the earlier
of December 24, 1999 or the date on which the buyer closes an equity financing
of at least $3,000,000. The Note is subject to adjustment in the event that the
amount of service fees and similar charges to customers of the Company's
healthcare provider software segment that was billed during the twelve-month
period ending March 31, 1999 and is paid and collected on or before September
25, 1999 (the "Anniversary Revenue") is less than $2,000,000; provided that the
principal amount of the Note may not be reduced by more than $500,000. If the
Note is paid in full prior to September 25, 1999, the Company will reimburse the
buyer for any shortfall in collected fees and charges, up to a $500,000 maximum.
The Company agreed to reimburse the buyer for the performance of prepaid support
and service obligations on assigned contracts totaling $500,000, which the
Company completed by June 30, 1999. If the Anniversary Revenue exceeds
$2,000,000, the Company's reimbursement obligation will be reduced by the amount
of the excess up to a maximum of $500,000. The Company has retained certain
liabilities related to the software segment including severance and retention
liabilities, certain amounts due under customer contracts and other liabilities
related to the disposal of the segment. The Company will record the remaining
proceeds from the sale of the software segment as gain on disposal of
discontinued operations in the period collection is assured.
The financial position and results of operations of the healthcare provider
software segment are reported as discontinued operations and all prior periods
have been restated to reflect the discontinued operations. There were no
revenues related to the discontinued segment for the three months and six months
ended June 30, 1999.
4
<PAGE> 7
Revenues related to the discontinued segment were $771,897
and $2,281,243 for the three months and six months ended June 30, 1998.
4. ONE-FOR-THREE REVERSE STOCK SPLIT
On July 26, 1999, the Board of Directors declared a one-for-three reverse stock
split applicable to shareholders of record July 29, 1999. The stated par value
of the Company's common stock was not changed from $0.01. As a result, a total
of $61,646 was reclassified from the Company's common stock account to the
Company's additional paid-in capital account. Income (loss) per share, common
stock outstanding and stock option data referred to in the financial statements
and notes hereto have been adjusted retroactively to give effect to the reverse
stock split.
5. CONTINGENCIES
The Company is a defendant in IN RE SUMMIT MEDICAL SYSTEMS, INC. SECURITIES
LITIGATION, a consolidated federal court securities action venued in the United
States District Court, District of Minnesota. The putative class action was
filed on March 10, 1997 and alleges violations of Section 10(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 10b-5,
Section 20(a) of the Exchange Act, Section 11 of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 15 of the Securities Act. The
Company is also a defendant in a federal court securities action captioned
TEACHERS' RETIREMENT SYSTEM OF LOUISIANA V. SUMMIT MEDICAL SYSTEMS, INC. ET. AL.
The Teachers' Retirement action was filed on April 16, 1997 in the United States
District Court, District of Minnesota and is not a class action. In addition to
the claims alleged in the consolidated action, the Teachers' Retirement
complaint alleges a claim under Section 18(a) of the Exchange Act, common law
fraud, and negligent misrepresentation. Each action alleges, in essence, that
the Company made misleading public disclosures relating to its financial
statements and seeks compensatory damages for losses incurred as a result of
each alleged misleading public disclosure. As to federal securities law claims,
both actions are subject to the Private Securities Litigation Reform Act of 1995
(the "Reform Act"). The actions do not state the monetary damages that are being
sought at this time. The Company intends to defend against these actions
vigorously. There can be no assurance that any judgment, order or decree against
the Company arising out of these actions will not have a material adverse effect
on the Company or its business.
The Division of Enforcement of the Securities and Exchange Commission (the
"Commission") is conducting an investigation of the Company, relating to the
Company's restatement of certain financial statements. The Company is
cooperating fully with the Commission and its investigation. There can be no
assurance that any order, decree or other action issued or taken by the
Commission arising out of its investigation will not result in sanctions against
the Company or certain individuals that could have a material adverse effect on
the Company or its business.
On July 22, 1999, the District Court of Hennepin County, Minnesota ruled in
favor of the Company's motion for summary judgment in the declaratory relief
action, DAVID FOSTER ET.AL V. SUMMIT MEDICAL SYSTEMS, INC. ET. AL. The District
Court held that the Company's directors' and officers' insurance policies cover
claims related to the Company's pending federal securities actions and the
investigation by the Commission. The plaintiffs in the declaratory action, the
insurance underwriters of the Company's directors' and officers' insurance
policies, had sought to deny coverage. The District Court's order, as with all
trial court decisions, may be appealed by the plaintiffs.
6. SEGMENT REPORTING INFORMATION
The Company has adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." SFAS No. 131 established standards for
disclosure of financial information related to operating segments of the
Company. SFAS No. 131 defines an operating segment as a component of a company
for which operating results are reviewed regularly by the chief operating
decision maker to determine resource allocation and assess performance. The
Company has four segments reportable under the guidelines of SFAS No. 131: C.L.
McIntosh, the Company's regulatory consulting and clinical research services
subsidiary; site research and clinical trial staffing services group, a start-up
operation formed in the second quarter of 1998; data management and
biostatistical services group, a start-up operation formed in the fourth quarter
of 1998; and the Company's corporate operating function.
5
<PAGE> 8
The Company's operating segment disclosures are as follows:
<TABLE>
<CAPTION>
SITE RESEARCH &
CLINICAL DATA
MONITORING MANAGEMENT &
STAFFING BIOSTATISTICAL
C.L. MCINTOSH SERVICES SERVICES CORPORATE CONSOLIDATED
------------- -------- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED JUNE 30, 1999
Revenue $ 1,851,348 $ 125,839 $ 421,542 $ -- $ 2,398,729
Loss from continuing operations (50,505) (301,163) (173,792) (510,952) (1,036,412)
Segment assets 2,569,166 386,126 927,206 10,464,766 14,347,264
THREE MONTHS ENDED JUNE 30, 1998
Revenue $ 1,441,899 $ -- $ -- $ -- $ 1,441,899
Income (loss) from continuing operations 6,106 (302,923) (38,152) 114,379 (220,590)
Segment assets 1,669,373 -- -- 22,825,137 24,494,510 (a)
SIX MONTHS ENDED JUNE 30, 1999
Revenue $ 3,534,034 $ 177,971 $ 619,586 $ -- $ 4,331,591
Loss from continuing operations (131,186) (648,309) (494,027) (961,418) (2,234,940)
Segment assets 2,569,166 386,126 927,206 10,464,766 14,347,264
SIX MONTHS ENDED JUNE 30, 1998
Revenue $ 2,744,524 $ -- $ -- $ -- $ 2,744,524
Income (loss) from continuing operations 44,477 (302,923) (38,152) 232,766 (63,832)
Segment assets 1,669,373 -- -- 22,825,137 24,494,510 (a)
</TABLE>
(a) Excludes net long-term assets of discontinued operations of $1,397,541.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company is a provider of specialty clinical research services to
pharmaceutical, medical device and biotechnology manufacturers. Services offered
by the Company include regulatory consulting and strategy, device evaluation,
product and manufacturing quality assurance, statistical analysis and clinical
study design. In addition, in 1998 the Company expanded its service offerings to
include investigative site selection and qualification, clinical monitoring
staffing services, data management and biostatistical consulting.
On June 10, 1998 the Company announced its intent to transition out of the
healthcare provider software market and focus its resources on its clinical
research services segment. On December 24, 1998 the Company completed the sale
of its healthcare provider software segment. As consideration for the sale, the
Company will receive a total purchase price of up to $2,000,000, contingent upon
the performance of the assets and the buyer's costs to perform prepaid support
and service obligations after the closing. The Company has retained certain
liabilities related to the software segment including severance and retention
liabilities, certain amounts due under customer contracts and other liabilities
related to the disposal of the segment. The gain on the disposal of discontinued
operations of $200,000 for the three months ended June 30, 1999 and $400,000 for
the six months ended June 30, 1999 represents cash received in accordance with
the terms of the asset sale agreement. The Company will record the remaining
proceeds from the sale of the software segment as gain on sale of discontinued
operations in the period collection is assured.
The financial position and results of operations of the healthcare provider
software segment are reported as discontinued operations and all prior period
amounts have been restated to reflect the discontinued operations.
Effective January 29, 1999 the Company changed its name from Summit Medical
Systems, Inc. to Celeris Corporation.
On July 26, 1999, the Company's Board of Directors approved a one-for-three
reverse stock split of its common stock, applicable to shareholders of record at
the close of trading July 29, 1999. The reverse stock split was intended, in
part, to address compliance for continued listing of the Company's common stock
with the Nasdaq Stock Market(R) criteria, which requires a minimum bid price of
$1.00 per share. During a number of recent periods, the Company's common stock
has traded below this minimum bid price and the Company has been in discussion
with Nasdaq regarding steps to satisfy this requirement. Income (loss) per
share, common stock outstanding and stock option data included in this form have
been adjusted retroactively to give effect to the reverse stock split. Giving
effect to the reverse split, the Company had approximately 3.1 million shares of
common stock outstanding as of June 30, 1999.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998
The Company incurred a net loss of $836,000, or $0.27 per diluted share, for the
three months ended June 30, 1999 as compared to a net loss of $8.10 million, or
$2.54 per diluted share, for the year earlier period. The 1999 results include a
loss from continuing operations of $1.04 million, or $0.33 per diluted share,
and a gain on disposal of discontinued operations of $200,000, or $0.06 per
diluted share. The 1998 results include a loss from continuing operations of
$221,000, or $0.07 per diluted share, and a loss from discontinued operations of
$7.88 million, or $2.47 per diluted share.
Continuing Operations. Revenue from continuing operations for the three months
ended June 30, 1999 was $2.40 million compared to $1.44 million for the year
earlier period, an increase of 66.4%. This increase in revenue is attributed
primarily to the Company's expanded service capabilities as well as a higher
volume of consulting services performed. However, given the Company's current
size, management believes that fluctuations in the timing of new business may
impact revenue growth rates on a quarterly basis. Management does not expect to
maintain recent sequential quarterly growth rates in the third quarter of 1999.
7
<PAGE> 10
Cost of sales were $1.64 million for the 1999 period, or 68.5% of revenue,
compared to $932,000 for the 1998 period, or 64.6% of revenue. This increase is
primarily the result of the addition of client service personnel related to the
expansion of the Company's service offerings which began in the second quarter
of 1998. These additional resources have had and will continue to have a
negative effect on operating margins until such time the individuals are fully
utilized as billable resources.
Selling, general and administrative expenses were $1.93 million, or 80.4% of
revenue, for the 1999 period compared to $1.05 million, or 73.1% of revenue, for
the 1998 period. This increase is primarily due to the addition of salaries,
benefits and other overhead costs associated with the expansion of the Company's
service offerings, including related business development efforts, which began
in the second quarter of 1998. The Company currently has in place a significant
portion of the infrastructure necessary to support the expanded service
offerings and does not anticipate selling, general and administrative expense
growth rates in future periods will match the expense growth rate in 1998.
Interest income for the 1999 period was $139,000 compared to $324,000 for the
1998 period. The decrease is due to the Company's cash and cash equivalents
balance, including short-term investments, which decreased to $10.38 million at
June 30, 1999 from $23.06 million at June 30, 1998, due to losses incurred
related to the Company's continuing and discontinued operations, as well as
capital expenditures.
Discontinued Operations. The gain on disposal of discontinued operations of
$200,000 in the 1999 period represents cash received from the sale of the assets
of the discontinued healthcare provider software segment in accordance with the
terms of the asset sale agreement. For the 1998 period, the loss from
discontinued operations was $7.88 million.
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
The Company incurred a net loss of $1.83 million, or $0.58 per diluted share,
for the six months ended June 30, 1999 as compared to a net loss of $10.12
million, or $3.14 per diluted share, for the year earlier period. The 1999
results include a loss from continuing operations of $2.23 million, or $0.71 per
diluted share, and a gain on disposal of discontinued operations of $400,000, or
$0.13 per diluted share. The 1998 results include loss from continuing
operations of $64,000, or $0.02 per diluted share, and a loss from discontinued
operations of $10.06 million, or $3.12 per diluted share.
Continuing Operations. Revenue from continuing operations for the six months
ended June 30, 1999 was $4.33 million compared to $2.74 million for the year
earlier period, an increase of 58.0%. This increase in revenue is attributed
primarily to the Company's expanded service capabilities as well as a higher
volume of consulting services performed.
Cost of sales were $3.02 million for the 1999 period, or 69.7% of revenue,
compared to $1.66 million for the 1998 period, or 60.6% of revenue. This
increase is primarily the result of the addition of client service personnel
related to the expansion of the Company's service offerings which began in the
second quarter of 1998. These additional resources have had and will continue to
have a negative effect on operating margins until such time the individuals are
fully utilized as billable resources.
Selling, general and administrative expenses were $3.86 million, or 89.1% of
revenue, for the 1999 period compared to $1.83 million or 66.8% of revenue, for
the 1998 period. This increase is primarily due to the addition of salaries,
benefits and other overhead costs associated with the expansion of the Company's
service offerings, including related business development efforts, which began
in the second quarter of 1998. The Company currently has in place a significant
portion of the infrastructure necessary to support the expanded service
offerings and does not anticipate selling, general and administrative expense
growth rates in future periods will match the expense growth rate in 1998.
Interest income for the 1999 period was $309,000 compared to $682,000 for the
1998 period. The decrease is due to the Company's cash and cash equivalents
balance, including short-term investments, which decreased to $10.38 million at
June 30, 1999 from $23.06 million at June 30, 1998, due to losses incurred
related to the Company's continuing and discontinued operations, as well as
capital expenditures.
8
<PAGE> 11
Discontinued Operations. The gain on disposal of discontinued operations of
$400,000 in the 1999 period represents cash received from the sale of the assets
of the discontinued healthcare provider software segment in accordance with the
terms of the asset sale agreement. For the 1998 period, the loss from
discontinued operations was $10.06 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents, including short-term investments,
totaled $10.38 million as of June 30, 1999, a decrease of $4.84 million from
December 31, 1998. This decrease was primarily due to a) $2.32 million used in
continuing operations, b) $1.85 million used in discontinued operations, c)
$530,000 used for the purchase of furniture, fixtures and equipment, principally
computer and computer systems equipment, and d) $140,000 used for the repurchase
of the Company's common stock.
As of June 30, 1999 the Company had net working capital of $8.95 million,
compared to $11.19 million at December 31, 1998. This decrease resulted
primarily from net losses of $1.83 million incurred during the six months ended
June 30, 1999. Management anticipates the Company will continue to experience
operating losses through 1999, and as a result, it believes working capital will
continue to decline.
As of June 30, 1999, the Company had $2.28 million in accounts receivable, net
of bad debt allowance, related to continuing operations compared to $1.52
million as of December 31, 1998. The Company believes its current allowance of
$250,000 for bad debts is adequate. The Company's days sales outstanding in
accounts receivable was 87 days at June 30, 1999 compared to 88 days at December
31, 1998. Days sales outstanding in accounts receivable may increase in future
periods as the Company's mix of business related to the expanded service
offerings continues to evolve.
As of June 30, 1999, the Company had remaining liabilities of $1.99 million
related to the disposal of the discontinued operations. The Company expects to
pay these liabilities through the balance of 1999. Additionally, the Company is
due up to $1.40 million at various dates during 1999 under the terms of the
agreement for the sale of the assets of the discontinued healthcare provider
software segment. The consideration from the sale is payable in the form of
$1,000,000 cash, $600,000 of which has been collected, and the remainder of
which is payable in two equal cash payments of $200,000 to be made at the end of
each remaining fiscal quarter of the fiscal year ending December 31, 1999. At
the closing, the buyer also delivered to the Company a $1,000,000 non-interest
bearing promissory note (the "Note") due and payable on the earlier of December
24, 1999 or the date on which the buyer closes an equity financing of at least
$3,000,000. The Note is subject to adjustment in the event that the amount of
service fees and similar charges to customers of the Company's healthcare
provider software segment that was billed during the twelve-month period ending
March 31, 1999 and is paid and collected on or before September 25, 1999 (the
"Anniversary Revenue") is less than $2,000,000; provided that the principal
amount of the Note may not be reduced by more than $500,000. If the Note is paid
in full prior to September 25, 1999, the Company will reimburse the buyer for
any shortfall in collected fees and charges, up to a $500,000 maximum. The
Company agreed to reimburse the buyer for the performance of prepaid support and
service obligations on assigned contracts totaling $500,000, which the Company
completed by June 30, 1999. If the Anniversary Revenue exceeds $2,000,000, the
Company's reimbursement obligation will be reduced by the amount of the excess
up to a maximum of $500,000.
The Company's Board of Directors has authorized a stock repurchase program under
which up to 666,667 shares of the Company's common stock may be repurchased.
From inception of the stock repurchase program in August 1997 through June 30,
1999, the Company has repurchased 435,700 shares of common stock for
approximately $3.04 million. As of June 30, 1999, there were 3,082,310 shares of
the Company's common stock issued and outstanding.
The Company anticipates capital expenditures for the balance of 1999 will be
approximately $575,000 primarily for computer and computer-related equipment and
software associated with the Company's expanded clinical research services as
well as capital expenditures required for new employees.
9
<PAGE> 12
The Company believes that continued expenditure of funds will be necessary to
support its future operations, and that cash and cash equivalents of $10.38
million on hand at June 30, 1999 will be sufficient to fund its operations,
capital requirements, and expansion goals through 1999. However, there can be no
assurances that the Company will generate sufficient revenue, or adequately
control costs, to achieve profitability or positive cash flow for periods in or
beyond 1999. If the Company cannot achieve profitability or positive cash flow
or its contingencies result in material expenditures, the Company may require
additional external financing in the future. There can be no assurances that
such financing will be available on terms acceptable to the Company.
The Company has experienced operating losses for each of the past five years.
Net losses for the year ended December 31, 1998 were $12.65 million, and for the
three months and six months ended June 30, 1999 were $836,000 and $1.83 million,
respectively. The Company had an accumulated deficit of $57.25 million as of
June 30, 1999. The Company's ability to increase revenue, and to achieve
profitability and positive cash flow will depend on a number of factors as
summarized above under "Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995" and under "Cautionary Statement and Risk Factors"
included in Item 1 of the Company's Annual Report on Form 10-K, dated March 30,
1999.
Year 2000 Issue. The Company is currently evaluating the potential effect of the
situation commonly referred to as the "Year 2000 Issue," which involves the
inability of certain software and hardware systems to properly recognize and
process dates for the year 2000 and beyond. The Company, with the assistance of
outside consultants, has developed and implemented a plan to evaluate the
Company's internal systems and material third-party relationships.
The Company's clinical research services, particularly its data management
services, depend on the use of hardware and software supplied by third-party
vendors. The Company is currently evaluating Year 2000 compliance of the
hardware and software it uses, including obtaining Year 2000 compliance
statements from the vendors. To date, the Company has substantially completed
the review of its hardware and software systems. Based on this review, the
Company does not expect to incur material costs to upgrade or replace its
hardware or software systems. However, the estimates of costs to complete Year
2000 compliance procedures are based, in part, on compliance statements received
from third-party vendors of the Company's hardware and software systems.
Subsequent revisions to these compliance statements by third-party vendors could
result in revised estimated costs to complete Year 2000 compliance measures. The
Company can not predict whether these revisions, if any, will be material. The
Company has substantially completed its Year 2000 readiness preparations.
However, unforeseen circumstances could prevent a timely completion of all
remaining necessary Year 2000 compliance measures. The Company believes that
adequate alternatives are available for information processing should remaining
necessary upgrades or replacements not occur in a timely manner. Any failure or
delay of the Company's Year 2000 readiness preparations could cause a material
disruption in the Company's business.
The Company has paid third parties approximately $185,000 on Year 2000 testing,
auditing, and modifications or upgrades through June 30, 1999. The costs of Year
2000 compliance have been and will be expensed as incurred. Additionally, the
Company expects to spend approximately $45,000 on these efforts to complete its
Year 2000 compliance procedures.
The Company ended all expenditures on Year 2000 testing of its healthcare
provider software products upon the sale of these assets on December 24, 1998.
In connection with the sale of the assets of the Company's healthcare provider
software segment, the Company made certain representations regarding Year 2000
compliance of the Company's software products and agreed to indemnify the buyer
against losses related to a breach of representations and certain third-party
claims related to the operation of the assets prior to the sale. Although the
Company's tests and audits of these software products prior to the asset sale
did not indicate any issues with Year 2000 compliance, if
10
<PAGE> 13
an issue with Year 2000 compliance of these products were to arise, the
Company could face claims under its indemnification obligations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has no derivative financial instruments or derivative commodity
instruments in its cash and cash equivalents and short-term investments. The
Company invests its cash and cash equivalents and short-term investments in
investment grade, highly liquid investments, consisting of money market
instruments, U.S. Treasury bills, U.S. Treasury notes, commercial paper and
discounted notes and does not believe these investments are subject to material
market risks. In addition, all of the Company's transactions are conducted and
accounts are denominated in U.S. dollars. Accordingly, the Company is not
exposed to foreign currency risks.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in IN RE SUMMIT MEDICAL SYSTEMS, INC. SECURITIES
LITIGATION, a consolidated federal court securities action venued in the United
States District Court, District of Minnesota. The putative class action was
filed on March 10, 1997 and alleges violations of Section 10(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 10b-5,
Section 20(a) of the Exchange Act, Section 11 of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 15 of the Securities Act. The
Company is also a defendant in a federal court securities action captioned
TEACHERS' RETIREMENT SYSTEM OF LOUISIANA V. SUMMIT MEDICAL SYSTEMS, INC. ET. AL.
The Teachers' Retirement action was filed on April 16, 1997 in the United States
District Court, District of Minnesota and is not a class action. In addition to
the claims alleged in the consolidated action, the Teachers' Retirement
complaint alleges a claim under Section 18(a) of the Exchange Act, common law
fraud, and negligent misrepresentation. Each action alleges, in essence, that
the Company made misleading public disclosures relating to its financial
statements and seeks compensatory damages for losses incurred as a result of
each alleged misleading public disclosure. As to federal securities law claims,
both actions are subject to the Private Securities Litigation Reform Act of 1995
(the "Reform Act"). The actions do not state the monetary damages that are being
sought at this time. The Company intends to defend against these actions
vigorously. There can be no assurance that any judgment, order or decree against
the Company arising out of these actions will not have a material adverse effect
on the Company or its business.
The Division of Enforcement of the Securities and Exchange Commission (the
"Commission") is conducting an investigation of the Company, relating to the
Company's restatement of certain financial statements. The Company is
cooperating fully with the Commission and its investigation. There can be no
assurance that any order, decree or other action issued or taken by the
Commission arising out of its investigation will not result in sanctions against
the Company or certain individuals that could have a material adverse effect on
the Company or its business.
On July 22, 1999, the District Court of Hennepin County, Minnesota ruled in
favor of the Company's motion for summary judgment in the declaratory relief
action, DAVID FOSTER ET. AL. V. SUMMIT MEDICAL SYSTEMS, INC. ET. AL. The
District Court held that the Company's directors' and officers' insurance
policies cover claims related to the Company's pending federal securities
actions and the investigation by the Commission. The plaintiffs in the
declaratory action, the insurance underwriters of the Company's directors' and
officers' insurance policies, had sought to deny coverage. The District Court's
order, as with all trial court decisions, may be appealed by the plaintiffs.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
11
<PAGE> 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of shareholders on May 25, 1999. There were
9,419,429 shares of common stock outstanding and entitled to vote at the annual
meeting, and a total of 8,504,335 were represented at the meeting. Matters voted
on were the following:
1. Proposal to elect six directors, each for a one year term:
<TABLE>
<CAPTION>
For Withhold Authority
<S> <C> <C>
Barbara A. Cannon 8,022,112 482,223
W. Hudson Connery, Jr. 8,020,612 483,723
Richard B. Fontaine 8,023,112 481,223
Peter T. Garahan 8,024,378 479,957
John M. Nehra 8,011,394 492,941
Andre G. Pernet, Ph.D. 8,024,135 480,200
</TABLE>
2. Proposal to approve the adoption of the Celeris Corporation Employee
Stock Purchase Plan:
For 4,209,847
Against 629,938
Abstain 18,520
Broker Non-Vote 3,646,030
These numbers have not been restated to reflect the one-for-three reverse stock
split which occurred subsequent to the May 25, 1999, annual meeting of
shareholders.
ITEM 5. OTHER INFORMATION
The Company has attached as Exhibit 99 its press release dated July 28, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Articles of Incorporation of the Company
(incorporated by reference to Exhibits 3.1 and 3.2 of
the Company's Annual Report on Form 10-K for the year
ended December 31, 1998)
3.2 Bylaws of the Company (incorporated by reference to
Exhibit 3.3 of the Company's Annual Report on Form
10-K for the year ended December 31, 1998)
10 Celeris Corporation Employee Stock Purchase Plan
27.1 Financial Data Schedule (for SEC use only) - Six
Months Ended June 30, 1999
27.2 Restated Financial Data Schedule (for SEC use only) -
Three Months Ended March 31, 1999
27.3 Restated Financial Data Schedule (for SEC use only) -
Year Ended December 31, 1998
27.4 Restated Financial Data Schedule (for SEC use only) -
Nine Months Ended September 30, 1998
27.5 Restated Financial Data Schedule (for SEC use only) -
Six Months Ended June 30, 1998
27.6 Restated Financial Data Schedule (for SEC use only) -
Three Months Ended March 31, 1998
27.7 Restated Financial Data Schedule (for SEC use only) -
Year Ended December 31, 1997
27.8 Restated Financial Data Schedule (for SEC use only) -
Nine Months Ended September 30, 1997
12
<PAGE> 15
27.9 Restated Financial Data Schedule (for SEC use only) -
Six Months Ended June 30, 1997
27.10 Restated Financial Data Schedule (for SEC use only) -
Three Months Ended March 31, 1997
27.11 Restated Financial Data Schedule (for SEC use only) -
Year Ended December 31, 1996
99 Press Release dated July 28, 1999
(b) Reports on Form 8-K
None.
SIGNATURES
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 thereunto duly authorized.
Celeris Corporation
Date: August 13, 1999 By: /s/ Barbara A. Cannon
------------------------------------------
Barbara A. Cannon
President and Chief Executive Officer
Date: August 13, 1999 By: /s/ Paul R. Johnson
------------------------------------------
Paul R. Johnson
Vice President and Chief Financial Officer
13
<PAGE> 1
Exhibit 10
CELERIS CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I. INTRODUCTION
SECTION 1.01 Purpose. The purpose of the Celeris Corporation (the
"Company") Employee Stock Purchase Plan is to provide the employees of the
Company and related corporations with an opportunity to share in the ownership
of the Company by providing them a convenient means for regular and systematic
purchases of the Company's Common Stock and, thus, to develop a stronger
incentive to work for the continued success of the Company.
SECTION 1.02 Rules of Interpretation. It is intended that the Plan be
an "employee stock purchase plan" as defined in Section 423(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), and Treasury Regulations
promulgated thereunder, if approved by the Company's shareholders. Accordingly,
the Plan will be interpreted and administered in a manner consistent therewith
if so approved. All Participants in the Plan will have the same rights and
privileges consistent with the provisions of the Plan.
SECTION 1.03 Definitions. For purposes of the Plan, the following terms
will have the meanings set forth below:
(a) "Acceleration Date" means either an Acquisition Date or a
Transaction Date.
(b) "Acquisition Date" means (i) the date of public announcement of the
acquisition of "beneficial ownership" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934 (the "Exchange Act") or any successor rule
thereto) of more than fifty percent (50%) of the outstanding voting stock of the
Company by any "person" (as defined in Section 13(d) of the Exchange Act) other
than the Company, by means of a tender offer, exchange offer or otherwise; and
(ii) the date five (5) business days after the date of public announcement of
the acquisition of beneficial ownership (as so defined) of more than twenty-
five percent (25%) but not more than fifty (50%) of the outstanding voting stock
of the Company by any person (as so defined) other than the Company, by means of
a tender offer, exchange offer or otherwise if, during such five (5) business
day period, the Board or the Committee has not, by resolution duly adopted,
elected that such acquisition not give rise to an Acquisition Date. In any such
resolution, the Board or Committee may elect that any continued acquisition or
acquisitions by the same person (as so defined) which would otherwise trigger an
Acquisition Date under clause (ii) above shall also not give rise to an
Acquisition Date.
(c) "Affiliate" means any parent or subsidiary corporation of the
Company, as defined in Sections 425(e) and 425(f) of the Code.
(d) "Board" means the Board of Directors of the Company.
(e) "Committee" means the committee appointed under Section 10.01.
<PAGE> 2
(f) "Company" means Celeris Corporation, a Minnesota corporation, and
its successors by merger or consolidation as contemplated by Article XI herein.
(g) "Current Compensation" means the gross cash compensation (including
wage, salary and overtime earnings) paid by the Company or a Participating
Affiliate to a Participant in accordance with the terms of employment, but
excluding all bonus payments, expense allowances and compensation payable in a
form other than cash.
(h) "Employer" means the Company or a Participating Affiliate, as the
case may be.
(i) "Fair Market Value" as of a given date means such value of the
Stock which is equal to (i) the last sale price of the Stock as reported on the
Nasdaq National Market System on such date, if the Stock is then quoted on the
Nasdaq National Market System; (ii) the average of the closing representative
bid and asked prices of the Stock as reported on the National Association of
Securities Dealers Automated Quotation System ("Nasdaq") on such date, if the
Stock is then quoted on Nasdaq; or (iii) the closing price of the Stock on such
date on a national securities exchange, if the Stock is then quoted on a
national securities exchange. If on a given date the Stock is not traded on an
established securities market, the Committee shall make a good faith attempt to
satisfy the requirements of this Section 1.03(i) and in connection therewith
shall take such action as it deems necessary or advisable.
(j) "Participant" means a Permanent Full-Time Employee who is eligible
to participate in the Plan under Section 2.01 and who has elected to participate
in the Plan.
(k) "Participating Affiliate" means an Affiliate which has been
designated by the Committee in advance of the Purchase Period in question as a
corporation whose eligible Permanent Full-Time Employees may participate in the
Plan.
(l) "Permanent Full-Time Employee" means an employee of the Company or
a Participating Affiliate as of the first day of a Purchase Period, including an
officer or director who is also an employee, except an employee whose customary
employment is less than twenty (20) hours per week or any employee who has not
been employed by the Company or its Participating Affiliates for more than three
months.
(m) "Plan" means the Celeris Corporation Employee Stock Purchase Plan,
the provisions of which are set forth herein.
(n) "Purchase Period" means the approximate six (6) month periods
beginning on the first business day in January and ending on the last business
day in June and beginning on the first business day of July and ending on the
last business day in December of each year; provided however, the then current
Purchase Period will end upon the occurrence of an Acceleration Date.
(o) "Stock" means the Company's Common Stock, $.01 par value, as such
stock may be adjusted for changes in the stock or the Company as contemplated by
Article XI herein.
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<PAGE> 3
(p) "Stock Purchase Account" means the account maintained in the books
and records of the Company recording the amount received from each Participant
through payroll deductions made under the Plan.
(q) "Transaction Date" means the date of shareholder approval of (i)
any consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Company stock
would be converted into cash, securities or other property, other than a merger
of the Company in which shareholders immediately prior to the merger have the
same proportionate ownership of stock of the surviving corporation immediately
after the merger; (ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all, of
the assets of the Company; or (iii) any plan of liquidation or dissolution of
the Company.
ARTICLE II. ELIGIBILITY AND PARTICIPATION
SECTION 2.01 Eligible Employees. All Permanent Full-Time Employees
shall be eligible to participate in the Plan beginning on the first day of the
first full Purchase Period to commence after such person becomes a Permanent
Full-Time Employee. Subject to the provisions of Article VI, each such employee
will continue to be eligible to participate in the Plan so long as he or she
remains a Permanent Full-Time Employee.
SECTION 2.02 Election to Participate. An eligible Permanent Full-Time
Employee may elect to participate in the Plan for a given Purchase Period by
filing with his or her Employer in advance of that Purchase Period a form
provided by such Employer for such purpose (which authorizes regular payroll
deductions from Current Compensation beginning with the first payday in that
Purchase Period and continuing until the employee withdraws from the Plan or
ceases to be eligible to participate in the Plan).
SECTION 2.03 Limits on Stock Purchase. No employee shall be granted any
right to purchase hereunder if such employee, immediately after a right to
purchase is granted, would own, directly or indirectly, within the meaning of
Section 423(b)(3) and Section 425(d) of the Code stock possessing five percent
(5%) or more of the total combined voting power or value of all the then classes
of the capital stock of the Company or of all Affiliates.
SECTION 2.04 Voluntary Participation. Participation in the Plan on the
part of the Participant is voluntary and such participation is not a condition
of employment nor does participation in the Plan entitle a Participant to be
retained as an employee.
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<PAGE> 4
ARTICLE III. PAYROLL DEDUCTIONS AND STOCK PURCHASE ACCOUNT
SECTION 3.01 Deduction from Pay. The form described in Section 2.02
will permit a Participant to elect payroll deductions of any whole percentage
from one percent (1%) through fifteen percent (15%) of Current Compensation for
each pay period. The Participant may reduce or increase future payroll
deductions (within the foregoing limitations) by filing with such Participant's
Employer a form provided by such Employer for such purpose. The effective date
of any reduction in future payroll deductions will be the first day of the next
succeeding pay period. The effective date of any increase in future payroll
deductions will be the first day of the next succeeding Purchase Period. Also,
the Participant may cease making payroll deductions at any time, as provided in
Section 6.01.
SECTION 3.02 Credit to Account. Payroll deductions will be credited to
the Participant's Stock Purchase Account on each payday.
SECTION 3.03 Interest. No interest will be paid upon payroll deductions
or on any amount credited to, or on deposit in, a Participant's Stock Purchase
Account.
SECTION 3.04 Nature of Account. The Stock Purchase Account is
established solely for accounting purposes, and all amounts credited to the
Stock Purchase Account will remain part of the general assets of the Company or
the Participating Affiliate (as the case may be).
SECTION 3.05 No Additional Contributions. A Participant may not make
any payment into the Stock Purchase Account other than the payroll deductions
made pursuant to the Plan.
ARTICLE IV. RIGHT TO PURCHASE SHARES
SECTION 4.01 Number of Shares. Each Participant will have the right to
purchase on the last business day of the Purchase Period all, but not less than
all, of the largest number of whole shares of Stock that can be purchased at the
price specified in Section 4.02 with the entire credit balance in the
Participant's Stock Purchase Account, subject to the limitations that (a) no
more than 20,000 shares of Common Stock may be purchased under the Plan by any
one Participant for a given Purchase Period, and (b) in accordance with Section
423(b)(8) of the Code, no more than Twenty-Five Thousand Dollars ($25,000) in
Fair Market Value (determined at the beginning of each Purchase Period) of Stock
and other stock may be purchased under the Plan and all other employee stock
purchase plans (if any) of the Company and the Affiliates by any one Participant
for each calendar year. If the purchases for all Participants would otherwise
cause the aggregate number of shares of Stock to be sold under the Plan to
exceed the number specified in Section 10.03, however, each Participant shall be
allocated a pro rata portion of the Stock to be sold.
SECTION 4.02 Purchase Price. The purchase price for any Purchase Period
will be the lesser of (a) Eighty-five percent (85%) of the Fair Market Value of
the Stock on the first business day of that Purchase Period or (b) Eighty-five
percent (85%) of the Fair Market Value of the Stock on the last business day of
that Purchase Period, in each case rounded up to the next higher full cent.
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<PAGE> 5
ARTICLE V. EXERCISE OF RIGHT
SECTION 5.01 Purchase of Stock. On the last business day of a Purchase
Period, the entire credit balance in each Participant's Stock Purchase Account
will be used to purchase the largest number of whole shares of Stock purchasable
with such amount (subject to the limitations of Section 4.01) unless the
Participant has filed with the Committee in advance of that date a form provided
by his or her Employer and elected to receive the entire credit balance in cash.
SECTION 5.02 Cash Distributions. Any amount remaining in a
Participant's Stock Purchase Account after the last business day of a Purchase
Period will be paid to the Participant in cash within thirty (30) days after the
end of that Purchase Period; provided, however, that if the amount remaining in
the Participant's Stock Purchase Account at the end of a Purchase Period results
from the fact that such amount was not sufficient to purchase a whole share of
Stock, such amount will be transferred to the Participant's Stock Purchase
Account for the immediately succeeding Purchase Period.
SECTION 5.03 Notice of Acceleration Date. The Company shall use its
best efforts to notify each Participant in writing at least ten (10) days prior
to any Acceleration Date that the then current Purchase Period will end on such
Acceleration Date.
ARTICLE VI. WITHDRAWAL FROM PLAN
SECTION 6.01 Voluntary Withdrawal. A Participant may, at any time,
withdraw from the Plan and cease making payroll deductions by filing with such
Participant's Employer a form provided for this purpose. In such event, the
Participant may request that either (a) the entire credit balance in the
Participant's Stock Purchase Account be paid to the Participant in cash within
thirty (30) days, or (b) the entire credit balance in the Participant's Stock
Purchase Account be held in such account until used to purchase shares of Stock
in accordance with Section 5.01. A Participant who withdraws from the Plan will
not be eligible to reenter the Plan until the beginning of the next Purchase
Period following the date of such withdrawal.
SECTION 6.02 Death. Participation in the Plan will cease on the date of
the Participant's death, and the entire credit balance in the Stock Purchase
Account will be paid to the Participant's estate in cash within thirty (30)
days. Each Participant, however, may designate one or more beneficiaries who,
upon death, are to receive the amount that otherwise would have been paid to the
Participant's estate and may change or revoke any such designation from time to
time. No such designation, change or revocation will be effective unless made by
the Participant in writing and filed with the Participant's Employer during the
Participant's lifetime. Unless the Participant has otherwise specified in the
beneficiary designation, the beneficiary or beneficiaries so designated will
become fixed as of death so that, if a beneficiary survives the Participant but
dies before the receipt of the payment due such beneficiary, the payment will be
made to such beneficiary's estate.
SECTION 6.03 Termination of Employment. Participation in the Plan also
will cease on the date the Participant ceases to be a Permanent Full-Time
Employee for any reason other than death. In such event, the entire credit
balance in the Participant's Stock Purchase Account will be paid to
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<PAGE> 6
the Participant in cash within thirty (30) days. For purposes of this Section, a
leave of absence which has been approved by the Committee will not be deemed a
termination of employment as a Permanent Full-Time Employee.
ARTICLE VII. NONTRANSFERABILITY
SECTION 7.01 Nontransferable Right to Purchase. The right to purchase
Stock hereunder may not be assigned, transferred, pledged or hypothecated
(whether by operation of law or otherwise) and will not be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition or levy of attachment or similar process upon
the right to purchase will be null and void and without effect.
SECTION 7.02 Nontransferable Account. The amounts credited to a Stock
Purchase Account may not be assigned, transferred, pledged or hypothecated in
any way, and any attempted assignment, transfer, pledge, hypothecation or other
disposition of such amounts will be null and void and without effect.
ARTICLE VIII. STOCK CERTIFICATES
SECTION 8.01 Delivery. Within thirty (30) days after the last day of
each Purchase Period, the Company will cause to be delivered to the Participant
a certificate representing the Stock purchased on the last business day of such
Purchase Period.
SECTION 8.02 Securities Laws. The Company shall not be required to
issue or deliver any certificate representing Stock prior to registration under
the Securities Act of 1933, as amended, or registration or qualification under
any state law if such registration is required. The Company will use its best
efforts to accomplish such registration (if and to the extent required) not
later than a reasonable time following the Purchase Period, and delivery of
certificates may be deferred until such registration is accomplished.
SECTION 8.03 Completion of Purchase. A Participant will have no
interest in the Stock purchased until a certificate representing the same is
issued.
SECTION 8.04 Form of Ownership. The certificates representing Stock
issued under the Plan will be registered in the name of the Participant or
jointly in the name of the Participant and another person, as the Participant
may direct on a form provided by the Participant's Employer.
ARTICLE IX. EFFECTIVE DATE AND AMENDMENT
OR TERMINATION OF PLAN
SECTION 9.01 Effective Date. The Plan will become effective on January
1, 1999, subject to shareholder approval.
SECTION 9.02 Powers of Board. The Board may at any time amend or
terminate the Plan, except that no amendment will be made without prior approval
of the shareholders which would
-6-
<PAGE> 7
(a) authorize an increase in the number of shares of Stock which may be
purchased under the Plan, except as provided in Section 11.01, (b) permit the
issuance of Stock before payment therefor in full, (c) increase the rate of
payroll deductions above fifteen percent (15%) of Current Compensation, (d)
reduce the price per share at which the Stock may be purchased, or (e) absent
such shareholder approval, cause Rule 16b-3 to become unavailable with respect
to the Plan.
SECTION 9.03 Automatic Termination. The Plan will terminate
automatically on December 31, 2008, unless extended by the Board. The Board may
by resolution extend the Plan for one or more additional periods of five years
each.
ARTICLE X. ADMINISTRATION
SECTION 10.01 Appointment of Committee. The Plan shall be administered
by a committee (the "Committee") established by the Board and meeting the
requirements of Rule 16b-3 as in effect from time to time.
SECTION 10.02 Powers of Committee. Subject to the provisions of the
Plan, the Committee will have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan, to establish
deadlines by which the various administrative forms must be received in order to
be effective, and to adopt such other rules and regulations for administering
the Plan as it may deem appropriate. Decisions of the Committee will be final
and binding on all parties who have an interest in the Plan.
SECTION 10.03 Stock to be Sold. The Stock to be issued and sold under
the Plan may be treasury Stock or authorized but unissued Stock, or the Company
may go into the market and purchase Stock for sale under the Plan. Except as
provided in Section 11.01, the aggregate number of shares of Stock to be sold
under the Plan will not exceed 166,667 shares.
SECTION 10.04 Notices. Notices to the Committee should be addressed as
follows:
Celeris Corporation
Attention: Corporate Secretary
1801 West End Avenue
Suite 750
Nashville, Tennessee 37203
ARTICLE XI. ADJUSTMENT FOR CHANGES IN STOCK OR COMPANY
SECTION 11.01 Stock Dividend or Reclassification. If the outstanding
shares of Stock are increased, decreased, changed into or exchanged for a
different number or kind of securities of the Company, or shares of a different
par value or without par value, through reorganization, recapitalization,
reclassification, stock dividend, stock split, amendment to the Company's
Articles of Incorporation, reverse stock split or otherwise, an appropriate
adjustment shall be made in the maximum numbers and/or kind of securities to be
sold under this Plan with a corresponding adjustment in the purchase price to be
paid therefor.
-7-
<PAGE> 8
SECTION 11.02 Merger or Consolidation. If the Company is merged into or
consolidated with one or more corporations during the term of the Plan,
appropriate adjustments will be made to give effect thereto on an equitable
basis in terms of issuance of shares of the corporation surviving the merger or
of the consolidated corporation, as the case may be.
ARTICLE XII. APPLICABLE LAW
Rights to purchase Stock granted under this Plan shall be construed and
shall take effect in accordance with the laws of the State of Minnesota.
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF CELERIS CORPORATION DATED JUNE 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 7,343,121
<SECURITIES> 3,037,016
<RECEIVABLES> 2,281,994
<ALLOWANCES> 250,000
<INVENTORY> 0
<CURRENT-ASSETS> 13,063,880
<PP&E> 1,283,384
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,347,264
<CURRENT-LIABILITIES> 4,117,226
<BONDS> 0
0
0
<COMMON> 30,823
<OTHER-SE> 10,199,215
<TOTAL-LIABILITY-AND-EQUITY> 14,347,264
<SALES> 4,331,591
<TOTAL-REVENUES> 4,331,591
<CGS> 3,017,078
<TOTAL-COSTS> 3,858,306
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,234,940)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,234,940)
<DISCONTINUED> 400,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,834,940)
<EPS-BASIC> (0.58)
<EPS-DILUTED> (0.58)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF CELERIS CORPORATION DATED MARCH 31, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 9,114,580
<SECURITIES> 4,080,079
<RECEIVABLES> 1,864,494
<ALLOWANCES> 213,000
<INVENTORY> 0
<CURRENT-ASSETS> 15,216,808
<PP&E> 1,233,881
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,450,689
<CURRENT-LIABILITIES> 5,209,480
<BONDS> 0
0
0
<COMMON> 31,398
<OTHER-SE> 11,209,811
<TOTAL-LIABILITY-AND-EQUITY> 16,450,689
<SALES> 1,932,862
<TOTAL-REVENUES> 1,932,862
<CGS> 1,373,397
<TOTAL-COSTS> 1,927,818
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,198,528)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,198,528)
<DISCONTINUED> 200,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (998,528)
<EPS-BASIC> (0.32)
<EPS-DILUTED> (0.32)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF CELERIS CORPORATION DATED DECEMBER 31,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 8,138,542
<SECURITIES> 7,083,851
<RECEIVABLES> 1,688,712
<ALLOWANCES> 172,000
<INVENTORY> 0
<CURRENT-ASSETS> 17,151,465
<PP&E> 1,012,986
<DEPRECIATION> 0
<TOTAL-ASSETS> 18,164,451
<CURRENT-LIABILITIES> 5,959,675
<BONDS> 0
0
0
<COMMON> 31,398
<OTHER-SE> 12,173,378
<TOTAL-LIABILITY-AND-EQUITY> 18,164,451
<SALES> 5,782,487
<TOTAL-REVENUES> 5,782,487
<CGS> 4,027,819
<TOTAL-COSTS> 5,067,863
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,113,937)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,113,937)
<DISCONTINUED> (10,539,051)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,652,988)
<EPS-BASIC> (3.96)
<EPS-DILUTED> (3.96)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF SUMMIT MEDICAL SYSTEMS, INC.
DATED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 6,969,633
<SECURITIES> 12,164,540
<RECEIVABLES> 1,345,691
<ALLOWANCES> 148,334
<INVENTORY> 0
<CURRENT-ASSETS> 20,764,430
<PP&E> 1,583,452
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,523,539
<CURRENT-LIABILITIES> 8,641,721
<BONDS> 0
0
0
<COMMON> 31,398
<OTHER-SE> 13,850,420
<TOTAL-LIABILITY-AND-EQUITY> 22,523,539
<SALES> 4,202,378
<TOTAL-REVENUES> 4,202,378
<CGS> 2,733,344
<TOTAL-COSTS> 3,337,117
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (896,336)
<INCOME-TAX> 0
<INCOME-CONTINUING> (896,336)
<DISCONTINUED> (10,055,639)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,951,975)
<EPS-BASIC> (3.41)
<EPS-DILUTED> (3.41)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF SUMMIT MEDICAL SYSTEMS, INC.
DATED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 7,080,971
<SECURITIES> 15,977,369
<RECEIVABLES> 1,173,392
<ALLOWANCES> 117,772
<INVENTORY> 0
<CURRENT-ASSETS> 24,286,977
<PP&E> 1,424,566
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,892,051
<CURRENT-LIABILITIES> 10,989,356
<BONDS> 0
0
0
<COMMON> 31,998
<OTHER-SE> 14,870,697
<TOTAL-LIABILITY-AND-EQUITY> 25,892,051
<SALES> 2,744,524
<TOTAL-REVENUES> 2,744,524
<CGS> 1,658,059
<TOTAL-COSTS> 1,832,458
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (63,832)
<INCOME-TAX> 0
<INCOME-CONTINUING> (63,832)
<DISCONTINUED> (10,055,639)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,119,471)
<EPS-BASIC> (3.14)
<EPS-DILUTED> (3.14)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF SUMMIT MEDICAL SYSTEMS, INC. DATED MARCH
31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 6,959,785
<SECURITIES> 17,940,336
<RECEIVABLES> 1,106,280
<ALLOWANCES> 87,878
<INVENTORY> 0
<CURRENT-ASSETS> 26,123,285
<PP&E> 1,292,819
<DEPRECIATION> 0
<TOTAL-ASSETS> 27,601,901
<CURRENT-LIABILITIES> 4,489,847
<BONDS> 0
0
0
<COMMON> 32,058
<OTHER-SE> 23,079,996
<TOTAL-LIABILITY-AND-EQUITY> 27,601,901
<SALES> 1,302,625
<TOTAL-REVENUES> 1,302,625
<CGS> 725,914
<TOTAL-COSTS> 778,425
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 156,757
<INCOME-TAX> 0
<INCOME-CONTINUING> 156,757
<DISCONTINUED> (2,175,118)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,018,361)
<EPS-BASIC> (0.62)
<EPS-DILUTED> (0.62)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF SUMMIT MEDICAL SYSTEMS, INC.
DATED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 5,949,478
<SECURITIES> 22,046,671
<RECEIVABLES> 1,162,980
<ALLOWANCES> 59,425
<INVENTORY> 0
<CURRENT-ASSETS> 29,299,191
<PP&E> 1,184,191
<DEPRECIATION> 0
<TOTAL-ASSETS> 30,670,557
<CURRENT-LIABILITIES> 5,073,267
<BONDS> 0
0
0
<COMMON> 32,525
<OTHER-SE> 25,564,765
<TOTAL-LIABILITY-AND-EQUITY> 30,670,557
<SALES> 5,101,627
<TOTAL-REVENUES> 5,101,627
<CGS> 3,423,173
<TOTAL-COSTS> 2,766,972
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 857,644
<INCOME-TAX> 196
<INCOME-CONTINUING> 857,448
<DISCONTINUED> (19,902,083)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,044,635)
<EPS-BASIC> (5.57)
<EPS-DILUTED> (5.28)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF SUMMIT MEDICAL SYSTEMS, INC. DATED
DECEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,397,897
<SECURITIES> 25,986,493
<RECEIVABLES> 1,266,081
<ALLOWANCES> 100,000
<INVENTORY> 0
<CURRENT-ASSETS> 32,556,842
<PP&E> 1,376,716
<DEPRECIATION> 0
<TOTAL-ASSETS> 34,163,364
<CURRENT-LIABILITIES> 4,004,584
<BONDS> 0
0
0
<COMMON> 33,716
<OTHER-SE> 30,125,064
<TOTAL-LIABILITY-AND-EQUITY> 34,163,364
<SALES> 3,849,768
<TOTAL-REVENUES> 3,849,768
<CGS> 2,482,069
<TOTAL-COSTS> 2,077,381
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 815,165
<INCOME-TAX> 195
<INCOME-CONTINUING> 814,970
<DISCONTINUED> (16,185,915)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,370,945)
<EPS-BASIC> (4.46)
<EPS-DILUTED> (4.43)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF SUMMIT MEDICAL SYSTEMS, INC.
DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,593,224
<SECURITIES> 25,971,448
<RECEIVABLES> 1,474,835
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 35,049,183
<PP&E> 2,526,443
<DEPRECIATION> 0
<TOTAL-ASSETS> 39,141,631
<CURRENT-LIABILITIES> 3,807,729
<BONDS> 0
0
0
<COMMON> 34,589
<OTHER-SE> 35,299,313
<TOTAL-LIABILITY-AND-EQUITY> 39,141,631
<SALES> 2,688,034
<TOTAL-REVENUES> 2,688,034
<CGS> 1,748,881
<TOTAL-COSTS> 1,320,711
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 712,353
<INCOME-TAX> 0
<INCOME-CONTINUING> 712,353
<DISCONTINUED> (11,519,468)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,807,115)
<EPS-BASIC> (3.13)
<EPS-DILUTED> (3.01)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF SUMMIT MEDICAL SYSTEMS, INC. DATED MARCH
31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 8,580,164
<SECURITIES> 31,762,314
<RECEIVABLES> 1,455,206
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 41,816,645
<PP&E> 2,589,305
<DEPRECIATION> 0
<TOTAL-ASSETS> 46,019,533
<CURRENT-LIABILITIES> 4,419,882
<BONDS> 0
0
0
<COMMON> 34,492
<OTHER-SE> 41,565,159
<TOTAL-LIABILITY-AND-EQUITY> 46,019,533
<SALES> 1,423,887
<TOTAL-REVENUES> 1,423,887
<CGS> 892,516
<TOTAL-COSTS> 713,499
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 397,218
<INCOME-TAX> 0
<INCOME-CONTINUING> 397,218
<DISCONTINUED> (4,895,265)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,498,047)
<EPS-BASIC> (1.30)
<EPS-DILUTED> (1.28)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF SUMMIT MEDICAL SYSTEMS, INC. DATED DECEMBER
31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 9,386,069
<SECURITIES> 35,243,624
<RECEIVABLES> 822,649
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 45,471,303
<PP&E> 2,655,305
<DEPRECIATION> 0
<TOTAL-ASSETS> 49,847,282
<CURRENT-LIABILITIES> 3,764,082
<BONDS> 0
0
0
<COMMON> 34,479
<OTHER-SE> 46,048,721
<TOTAL-LIABILITY-AND-EQUITY> 49,847,282
<SALES> 3,671,133
<TOTAL-REVENUES> 3,671,133
<CGS> 2,099,945
<TOTAL-COSTS> 2,390,304
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,068,812
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,068,812
<DISCONTINUED> (13,904,944)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,836,132)
<EPS-BASIC> (4.10)
<EPS-DILUTED> (3.85)
</TABLE>
<PAGE> 1
EXHIBIT 99
NEWS RELEASE
CELERIS CORPORATION 2ND QUARTER 1999 REVENUES
UP 66% OVER 2ND QUARTER 1998;
COURT RULES IN FAVOR OF CELERIS' MOTION FOR SUMMARY JUDGEMENT
IN D & O CASE;
BOARD OF DIRECTORS APPROVES 1-FOR-3 REVERSE STOCK SPLIT
EFFECTIVE JULY 29
Nashville, TN (July 28, 1999) ... Celeris Corporation (Nasdaq: CRSC), a provider
of specialty clinical research services to pharmaceutical, medical device and
biotechnology companies, today announced its results from operations for the
second quarter ending June 30, 1999. From its continuing operations, Celeris
reported revenues of $2.40 million, representing an increase of approximately
66% compared to $1.44 million reported for the second quarter of 1998, and an
increase of approximately 24% compared to $1.93 million reported for the first
quarter of 1999. Celeris reported a loss from continuing operations of $1.04
million, or $0.11 per diluted share, a slight decrease compared to $1.20
million, or $0.13 per diluted share, for the first quarter of 1999. For the
second quarter of 1998, Celeris reported a loss from continuing operations of
$221,000 or $0.02 per diluted share.
Also in the second quarter, Celeris recorded a gain on the disposal of
discontinued operations of $200,000, or $0.02 per diluted share, representing a
portion of the proceeds due related to the previously announced sale of its
discontinued healthcare provider software business. Overall, Celeris reported a
net loss of $836,000, or $0.09 per diluted share, for the second quarter of
1999. In addition, Celeris reported cash and short-term investments of $10.38
million at June 30, 1999.
Barbara Cannon, President and CEO commented, "Market response to our clinical
research services has been encouraging and we are gratified by the upward trend
in revenues. Given our current size, however, fluctuations in the timing of new
business may affect our revenue growth rates on a quarterly basis. Specifically,
we do not expect to see the same sequential growth for the 3rd quarter."
Celeris also announced that the District Court for the State of Minnesota has
ruled in favor of the Company's motion for summary judgement and held that the
Company's director's and officer's
(more)
<PAGE> 2
Celeris Corporation
July 28, 1999
Page 2
insurance policy covers claims related to the outstanding securities lawsuits
and SEC investigation. As with all trial court decisions, the District Court's
order is subject to appeal.
In addition, Celeris announced that its board of directors has approved a
reverse one-for-three stock split of its outstanding common stock, applicable to
shareholders of record at the close of trading July 29, 1999. The reverse split
is intended, in part, to address compliance with the Nasdaq Stock Market(R)
criteria for continued listing of the Company's common stock, which requires a
minimum bid price of $1.00 per share. During a number of recent periods, the
Company's common stock has traded below this minimum bid price and the Company
has been in discussion with Nasdaq regarding steps to satisfy this requirement.
Beginning July 30 and for a period of twenty consecutive trading days, Celeris
common stock will trade under the amended ticker symbol "CRSCD", after which the
stock will resume trading under its current symbol "CRSC". After the reverse
split, the Company will have approximately 3.1 million shares of common stock
outstanding.
Celeris Corporation is a provider of specialty clinical research services to
pharmaceutical, medical device and biotechnology manufacturers. Services offered
by Celeris include regulatory consulting and strategy, device evaluation,
product and manufacturing quality assurance, statistical analysis and clinical
study design and management. In addition, Celeris has expanded its service
offerings to include investigative site selection and qualification, clinical
monitoring staffing services, data management and biostatistical consulting.
(more)
<PAGE> 3
Celeris Corporation
July 28, 1999
Page 3
CELERIS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
(UNAUDITED) (AUDITED)
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,343,121 $ 8,138,542
Short-term investments 3,037,016 7,083,851
Accounts receivable, net of allowance of
$250,000 and $172,000 2,281,994 1,516,712
Other current assets 401,749 412,360
------------ ------------
Total current assets 13,063,880 17,151,465
Net furniture, fixtures and equipment 1,283,384 1,012,986
------------ ------------
Total assets $ 14,347,264 $ 18,164,451
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,288,624 $ 1,024,837
Deferred revenue and payables 507,036 398,653
Accrued compensation 335,955 279,853
Net current liabilities of discontinued operations 1,985,611 4,256,332
------------ ------------
Total current liabilities 4,117,226 5,959,675
COMMITMENTS AND CONTINGENCIES -- --
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value - 40,553,333 shares
authorized; 9,246,929 and 9,419,429 issued
and outstanding 92,469 94,194
Additional paid-in capital 67,390,746 67,528,819
Accumulated deficit (57,253,177) (55,418,237)
------------ ------------
Total shareholders' equity 10,230,038 12,204,776
------------ ------------
Total liabilities and shareholders' equity $ 14,347,264 $ 18,164,451
============ ============
</TABLE>
(more)
<PAGE> 4
Celeris Corporation
July 28, 1999
Page 4
CELERIS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, MARCH 31, JUNE 30, JUNE 30, JUNE 30,
1999 1999 1998 1999 1998
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenue $ 2,398,729 $ 1,932,862 $ 1,441,899 $ 4,331,591 $ 2,744,524
Cost of sales 1,643,681 1,373,397 932,145 3,017,078 1,658,059
----------- ----------- ----------- ----------- ------------
Gross profit 755,048 559,465 509,754 1,314,513 1,086,465
Selling, general and administrative expenses 1,930,488 1,927,818 1,054,034 3,858,306 1,832,458
----------- ----------- ----------- ----------- ------------
Loss from operations (1,175,440) (1,368,353) (544,280) (2,543,793) (745,993)
Interest income net 139,028 169,825 323,690 308,853 682,161
----------- ----------- ----------- ----------- ------------
Income (loss) from continuing operations (1,036,412) (1,198,528) (220,590) (2,234,940) (63,832)
Discontinued operations:
Loss from discontinued operations -- -- (2,531,520) -- (4,706,639)
Gain (loss) on disposal of discontinued operations 200,000 200,000 (5,349,000) 400,000 (5,349,000)
----------- ----------- ----------- ----------- ------------
Net loss $ (836,412) $ (998,528) $(8,101,110) $(1,834,940) $(10,119,471)
=========== =========== =========== =========== ============
Basic income (loss) per common share:
Continuing operations $ (0.11) $ (0.13) $ (0.02) $ (0.24) $ (0.01)
Discontinued operations 0.02 0.02 (0.82) 0.04 (1.04)
----------- ----------- ----------- ----------- ------------
$ (0.09) $ (0.11) $ (0.84) $ (0.20) $ (1.05)
=========== =========== =========== =========== ============
Diluted income (loss) per common share:
Continuing operations $ (0.11) $ (0.13) $ (0.02) $ (0.24) $ (0.01)
Discontinued operations 0.02 0.02 (0.82) 0.04 (1.04)
----------- ----------- ----------- ----------- ------------
$ (0.09) $ (0.11) $ (0.84) $ (0.20) $ (1.05)
=========== =========== =========== =========== ============
Weighted average shares outstanding:
Basic 9,404,649 9,419,429 9,579,451 9,411,998 9,658,501
Diluted 9,404,649 9,419,429 9,579,451 9,411,998 9,658,501
</TABLE>
This press release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
include statements of intent, belief or current expectations of Celeris
Corporation and its management. Such forward-looking statements are not
guarantees of future results and involve risks and uncertainties that may cause
actual results to differ materially from the results discussed in the
forward-looking statements. Risks and uncertainties that may cause such
differences include, but are not limited to: (1) market acceptance of the
Company's new clinical research services is uncertain; (2) contracts for the
Company's clinical research services may be cancelled or delayed by the
Company's clients; (3) a material portion of the Company's revenue depends on a
single client; (4) the failure of assumptions related to the discontinued
healthcare provider software business, including the performance of the assets
sold as well as estimated remaining liability amounts; and (5) the Company's
reverse one-for-three stock split may not be effective to maintain the minimum
bid price to meet Nasdaq Stock Market(R) listing requirements.
(more)
<PAGE> 5
Celeris Corporation
July 28, 1999
Page 5
The forward-looking statements herein are also qualified in their entirety by
the cautions and risks factors set forth in Celeris' Annual Report on Form 10-K,
dated March 30, 1999 under the caption "Cautionary Statement and Risk Factors"
(Part I, Item 1, "Business"). A copy of Form 10-K may be obtained from the
Public Reference Branch of the SEC at 450 Fifth Street NW, Washington, DC at
prescribed rates.
Contact: Paul R. Johnson
Chief Financial Officer
615-341-0223
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