FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission file number 000-22083
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GLOBAL MED TECHNOLOGIES, INC.
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(Exact name of small business issuer as specified in its charter)
COLORADO 84-1116894
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
12600 West Colfax, Suite C-420, Lakewood, Colorado 80215
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(Address of principal executive offices)
(303) 238-2000
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(Issuer's telephone number)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of November 1, 2000, 13,501,786 shares of the issuer's Common Stock were
outstanding.
Transitional Small Business Disclosure Format [ ] Yes [X] No
GLOBAL MED TECHNOLOGIES, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
a. Unaudited Consolidated Balance Sheets as of September 30, 2000
and December 31, 1999........................................... 3
b. Unaudited Consolidated Statements of Operations for the three
months ended September 30, 2000 and 1999........................ 5
c. Unaudited Consolidated Statements of Operations for the nine
months ended September 30, 2000 and 1999........................ 6
d. Unaudited Consolidated Statement of Stockholders' Deficit for
the nine months ended September 30, 2000........................ 7
e. Unaudited Consolidated Statements of Cash Flows for the nine
months ended September 30, 2000 and 1999........................ 8
f. Notes to Unaudited Consolidated Financial Statements........... 10
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations................................ 15
PART II - OTHER INFORMATION
Item 2. Changes in Securities............................................... 18
Item 4. Submission of Matters to a Vote of Security Holders................. 18
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits....................................................... 19
b. Reports on Form 8-K............................................ 19
Signatures................................................................... 19
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GLOBAL MED TECHNOLOGIES, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
September 30, December 31,
2000 1999
------------ -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................................................... $ 235 330
Accounts receivable-trade, net of allowance for uncollectible
accounts of $50 at September 30, 2000 and
December 31, 1999, respectively .......................................... 958 445
Accrued revenues, net of allowance for uncollectible accounts
of $15 at September 30, 2000 and December 31, 1999 ....................... 1,256 324
Prepaid expenses and other assets ............................................ 63 66
------- -------
Total current assets ............................................................ 2,512 1,165
EQUIPMENT, FURNITURE AND FIXTURES, AT COST:
Furniture and fixtures ....................................................... 167 167
Machinery and equipment ...................................................... 306 306
Computer hardware and software ............................................... 1,615 1,583
------- -------
2,088 2,056
Less accumulated depreciation and amortization ............................... (1,656) (1,564)
------- -------
Net equipment, furniture and fixtures ........................................ 432 492
DEFERRED FINANCING COSTS,
net of amortization of $641 and $10,853 at
September 30, 2000 and December 31, 1999, respectively ....................... 123 300
CAPITALIZED SOFTWARE DEVELOPMENT COSTS,
net of accumulated amortization of $1,637 and $1,126 at
September 30, 2000 and December 31, 1999, respectively ....................... 1,462 1,566
OTHER ASSETS .................................................................... 316 65
------- -------
Total assets .................................................................... $ 4,845 3,588
======= =======
See accompanying notes to unaudited consolidated financial statements.
3
GLOBAL MED TECHNOLOGIES, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS)
September 30, December 31,
2000 1999
----------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable ....................................................... $ 505 303
Accrued expenses ....................................................... 981 808
Accrued payroll ........................................................ 125 87
Accrued compensated absences ........................................... 342 412
Noncompete accrual ..................................................... 35 35
Deferred revenue ....................................................... 2,152 1,502
Current portion of capital lease obligations ........................... 151 145
Financing agreements with related party ................................ 5,400 --
-------- --------
Total current liabilities ................................................. 9,691 3,292
CAPITAL LEASE OBLIGATIONS, less current portion ........................... 85 179
FINANCING AGREEMENTS, less current portion ................................ -- 4,400
-------- --------
Total liabilities ......................................................... 9,776 7,871
-------- --------
STOCKHOLDERS' DEFICIT:
Preferred stock, $.01 par value: 10,000 shares authorized;
none issued or outstanding .......................................... -- --
Common stock, $.01 par value: 40,000 shares authorized;
13,502 and 11,638 shares issued and outstanding at
September 30, 2000 and December 31, 1999, respectively .............. 135 116
Additional paid-in capital ............................................. 29,764 27,158
Accumulated deficit .................................................... (34,830) (31,557)
-------- --------
Total stockholders' deficit ............................................... (4,931) (4,283)
-------- --------
Total liabilities and stockholders' deficit ............................... $ 4,845 3,588
======== ========
See accompanying notes to unaudited consolidated financial statements.
4
GLOBAL MED TECHNOLOGIES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER COMMON SHARE INFORMATION)
Three months ended
September 30,
2000 1999
---- ----
REVENUES:
Software sales and consulting .............................. $ 1,380 856
Hardware and software sales, obtained from vendors ......... -- 76
-------- --------
1,380 932
-------- --------
COST OF REVENUES:
Software sales and consulting .............................. 397 877
Hardware and software sales, obtained from vendors ......... -- 89
-------- --------
397 966
-------- --------
Gross profit (loss) ........................................... 983 (34)
OPERATING EXPENSES:
General and administrative ................................. 621 813
Sales and marketing ........................................ 275 313
Research and development ................................... 257 77
-------- --------
Loss from operations .......................................... (170) (1,237)
OTHER INCOME (EXPENSE):
Interest income ............................................ 4 4
Interest expense ........................................... (174) (116)
Amortization of deferred financing costs ................... (172) (46)
Other ...................................................... -- 3
-------- --------
Net loss ...................................................... $ (512) (1,392)
======== ========
Basic and diluted loss per common share ....................... $ (0.04) (0.13)
======== ========
Basic and diluted weighted average number of
common shares outstanding .................................. 13,433 11,058
======== ========
See accompanying notes to unaudited consolidated financial statements.
5
GLOBAL MED TECHNOLOGIES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER COMMON SHARE INFORMATION)
Nine months ended
September 30,
2000 1999
---- ----
REVENUES:
Software sales and consulting ................................. $ 3,377 3,892
Hardware and software sales, obtained from vendors ............ -- 235
-------- --------
3,377 4,127
-------- --------
COST OF REVENUES:
Software sales and consulting ................................. 1,375 2,033
Hardware and software sales, obtained from vendors ............ -- 247
-------- --------
1,375 2,280
-------- --------
Gross profit ..................................................... 2,002 1,847
OPERATING EXPENSES:
General and administrative .................................... 2,081 2,302
Sales and marketing ........................................... 889 763
Research and development ...................................... 398 255
-------- --------
Loss from operations ............................................. (1,366) (1,473)
OTHER INCOME (EXPENSE):
Interest income ............................................... 10 106
Interest expense .............................................. (494) (334)
Amortization of deferred financing costs ...................... (1,423) (4,733)
Other ......................................................... -- 26
-------- --------
Net loss ......................................................... $ (3,273) (6,408)
======== ========
Basic and diluted loss per common share .......................... $ (0.26) (0.63)
======== ========
Basic and diluted weighted average number of
common shares outstanding .................................... 12,457 10,219
======== ========
See accompanying notes to unaudited consolidated financial statements.
6
GLOBAL MED TECHNOLOGIES, INC.
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(IN THOUSANDS)
Common Stock Additional
--------------------- paid-in Accumulated
Shares Amount capital deficit Total
------ ------ ----------- ----------- -----
Balances, December 31, 1999 ................................ 11,638 $ 116 27,158 (31,557) (4,283)
Exercise of stock options ............................... 44 1 41 -- 42
Issuance of stock options to consultant ................. -- -- 12 -- 12
Issuance of common stock for cash ....................... 1,370 14 671 -- 685
Issuance of common stock at a discount .................. -- -- 1,119 -- 1,119
Issuance of common stock for financing costs ............ 160 1 298 -- 299
Common stock issued for services ........................ 290 3 402 -- 405
Contributed capital ..................................... -- -- 63 -- 63
Net loss ................................................ -- -- -- (3,273) (3,273)
------- ------- ------- ------- -------
Balances, September 30, 2000 ............................... 13,502 $ 135 29,764 (34,830) (4,931)
======= ======= ======= ======= =======
See accompanying notes to unaudited consolidated financial statements.
7
GLOBAL MED TECHNOLOGIES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Nine months ended
September 30,
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................................................... $(3,273) (6,408)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization ..................................................... 603 629
Amortization of financing costs ................................................... 1,423 4,733
Changes in allowance for uncollectible amounts .................................... -- 25
Loss on disposal of assets ........................................................ -- 38
Expense related to issuance of common stock, options and
warrants ..................................................................... 338 295
Changes in operating assets and liabilities:
Accounts receivable-trade, net ................................................. (513) 277
Accrued revenues, net .......................................................... (932) (235)
Prepaid expenses and other assets .............................................. 3 48
Accounts payable ............................................................... 202 147
Accrued expenses ............................................................... 173 (55)
Accrued payroll ................................................................ 38 94
Accrued compensated absences ................................................... (70) (24)
Deferred revenue ............................................................... 650 (285)
------- -------
Net cash used in operating activities .................................................. (1,358) (721)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalized software development costs ................................................. (407) (865)
Purchases of equipment, furniture and fixtures ......................................... (32) (206)
Proceeds from sales of property and equipment .......................................... -- 6
------- -------
Net cash used in investing activities .................................................. (439) (1,065)
------- -------
(Continued)
See accompanying notes to unaudited consolidated financial statements
8
GLOBAL MED TECHNOLOGIES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
Nine months ended
September 30,
2000 1999
---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on short-term debt .......................................................... $ 1,000 450
Sales of common stock .................................................................. 685 --
Exercise of common stock options ....................................................... 42 --
Minority investment in subsidiary ...................................................... 63 --
Borrowing on bridge loan ............................................................... -- 950
Repayments on bridge loan .............................................................. -- (200)
Principal payments under capital lease obligations ..................................... (88) (115)
------- -------
Net cash provided by financing activities .............................................. 1,702 1,085
------- -------
Net decrease in cash and cash equivalents .............................................. (95) (701)
Cash and cash equivalents, at beginning of period ...................................... 330 821
Cash and cash equivalents, at end of period ............................................ $ 235 120
======= =======
SUPPLEMENTAL DISCLOSURES OF OTHER INVESTING AND FINANCING ACTIVITIES:
Cash paid for interest .............................................................. $ 307 116
======= =======
Forgiveness of debt in exchange for exercise of warrants ............................ $ -- 500
======= =======
Common stock issued for financing fees .............................................. $ 1,239 168
======= =======
Common stock issued for services, net ............................................... $ 584 --
======= =======
Equipment financed under capital lease .............................................. $ -- 273
======= =======
See accompanying notes to unaudited consolidated financial statements.
9
GLOBAL MED TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Global Med
Technologies, Inc. and Subsidiary (collectively the Company or Global Med) have
been prepared by management in accordance with accounting principles generally
accepted in the United States of America for interim financial information and
with the regulations of the Securities and Exchange Commission. Accordingly,
they do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments consisting of only normal recurring adjustments
considered necessary for a fair presentation of their financial position at
September 30, 2000 and the results of their operations for the three and nine
months ended September 30, 2000 and 1999 have been included.
While management believes the disclosures presented are adequate to prevent
misleading information, it is suggested that the accompanying unaudited
consolidated financial statements be read in conjunction with the audited
consolidated financial statements and the notes thereto contained in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1999, as
filed with the Securities and Exchange Commission. The interim results of
operations for the three and nine months ended September 30, 2000 are not
necessarily indicative of the results that may be expected for any other interim
period of 2000 or for the year ending December 31, 2000.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the Company's
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Global Med provides information management software products and services to the
health care industry and operates in one business segment.
The Company's net loss for the nine months ended September 30, 2000 is $3.273
million. Cash flow used by operating activities totaled $1.358 million and the
Company has accumulated deficits of $34.830 million. The Company continues to
seek alternative financing arrangements, equity contributions, and capital
support while the management of the Company evaluates revenue enhancement and
cost containment strategies.
10
GLOBAL MED TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. RELATED PARTIES
Global Med is effectively controlled by Online Credit International Limited
(Online International), formerly Heng Fung Holdings Company Limited, and its
subsidiary Online Credit Limited, formerly Heng Fung Finance Company Limited
(Online Credit) per the terms of the 1998 financing agreements. In addition,
Online International is a significant shareholder of Global Med. Online
International also is a majority shareholder of eVision USA.Com, Inc. (eVision)
and, indirectly, of a subsidiary of eVision, eBanker USA.com, Inc. (eBanker).
eVision holds warrants to purchase 1,000,000 shares of common stock of Global
Med at $0.25 per share. Global Med has outstanding balances on various financing
agreements with eBanker. (See Note 3). eBanker owns a significant number of
shares of common stock of Global Med and holds warrants to purchase 9,000,000
shares of common stock of Global Med at $0.25 per share. eVision has a wholly
owned subsidiary, American Fronteer Financial Corporation (American Fronteer or
AFFC) which is a broker dealer. Online International, Online Credit, eVision,
eBanker and AFFC are related parties to Global Med.
3. FINANCING AGREEMENTS WITH RELATED PARTY
Loan agreements with eBanker for $2,650,000 and $2,000,000 that were due in
April 2000 were extended to January 9 and January 7, 2001, respectively. Payment
of interest was also extended to the respective dates in January 2001. A
conversion rate of $1.6875 per share was added to the $2,650,000 loan. Other
terms of the loans remain the same. In consideration of the extension, Global
Med agreed to pay a fee of 137,778 shares of its common stock. Based on the
market price of the stock on the date of the agreements, the shares have a value
of $262,130, which has been recorded as deferred financing costs and amortized
over the extension period. If the loans' accrued interest or principal is not
repaid in 270 days the loans' interest and principal due date will be
automatically extended to April 15, 2001. The loans will become straight loans,
without conversion features. Interest will continue to accrue on the balances at
12% interest per annum.
If the loans' accrued interest and principal are not repaid in 270 days, 10-year
warrants exercisable to acquire common shares of Global Med at a price of $0.50
per share will be issued to eBanker. The number of shares will be equal to the
entire principal and interest amount divided by the new exercise price of $0.50
per share.
The bridge loan with eBanker of $750,000, as extended, was due to mature on
September 30, 2000. In April 2000, eBanker agreed to extend the due date to
January 1, 2001. Payment of interest was also extended to January 1, 2001.
Global Med agreed to pay a fee of 22,222 shares of its common stock. Based on
the market price of the stock on the date of the agreements, the shares have a
value of $37,500, which has been recorded as deferred financing costs and
amortized over the extension period.
On November 14, 2000, the Company entered into agreements with eBanker relating
to these financing agreements as more fully described in Note 7 below.
11
GLOBAL MED TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. PEOPLEMED.COM, INC.
In May 1999, Global Med Technologies, Inc. formed a subsidiary, PeopleMed.com,
Inc., (PeopleMed) a Colorado corporation, which is approximately 85% owned by
the Company, represented by 7,500,000 shares of PeopleMed common stock, to
develop a software application designed to give HMO providers and other third
party payers access to clinical information for chronic disease patients. This
application will allow doctors and other medical employees access to a patient's
history. The remaining 15% of PeopleMed is owned by certain officers and
directors of Global Med Technologies, Inc. who acquired 1,275,000 shares of
PeopleMed common stock for $12,750 during the nine months ended September 30,
2000 in payment of subscriptions for common stock. There is no minority interest
reflected in the Company's September 30, 2000 or December 31, 1999 consolidated
balance sheets because PeopleMed had a stockholders' deficit at those dates.
In February 2000, PeopleMed sold 50,000 shares of its $.001 par value common
stock at $1.00 per share for a total of $50,000. The cash payment received
during the nine months ended September 30, 2000 is reflected as contributed
capital in the accompanying financial statements. In addition, 5,000 shares of
PeopleMed common stock were issued to an officer for services valued at $5,000.
In October 2000, the Company commenced a private placement of 2,000,000 shares
of PeopleMed common stock at $1.00 per share. American Fronteer is the placement
agent and as such will receive a commission of 10% on the sales of the shares of
PeopleMed common stock. The offering will terminate on February 28, 2000.
Warrants will be issued to American Fronteer at the rate of 10% of the total
shares of PeopleMed common stock sold. The warrants will be exercisable at $1.00
per share for a term of five years. American Fronteer will also earn a
nonaccountable expense allowance equal to 3% of the gross proceeds of the
offering.
5. STOCKHOLDERS' EQUITY
Stock Option Exercises
During the nine months ended September 30, 2000, options to purchase 44,000
shares of common stock were exercised for a total of $42,000.
Sales of Common Stock
During the nine months ended September 30, 2000, eVision purchased 1,000,000
shares of common stock of the Company for $500,000. A director purchased 200,000
shares of common stock for $100,000 and 170,000 shares were sold to a
shareholder for $85,000. All of these shares are restricted shares. In
connection with the sales to eVision and the director, the Company recognized
financing costs of $940 thousand and $179 thousand of compensation expense,
respectively.
12
GLOBAL MED TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Issuance of Common Stock for Services
In September 2000, the Company issued 40,000 shares of its common stock, valued
at $30,000, to a consultant, eBiz Web Solutions, Inc. (eBiz), which is a wholly
owned subsidiary of eVision. eBiz has been engaged to redesign the Company's
websites.
Consultancy Agreement
The Company entered into a consultancy agreement, effective as of February 24,
2000, for a period of twenty-four (24) months, with National Financial
Communications Corporation, dba OTC Financial Network (OTC Financial). OTC
Financial will provide consulting services, with the expressed intent and goal
of getting the Company, or its successor or assigns, listed on the Nasdaq Stock
Market which include providing financial community and investor relations for
the Company; and advising the Company, as requested, regarding the financial
community and investor relations.
Upon execution of this agreement, the Company agreed to: (a) issue to OTC
Financial, or its assigns, 250,000 shares of restricted common stock; and (b)
deposit into escrow, in the name of OTC Financial, or its assigns, an additional
250,000 shares of restricted common stock. Upon the Company's listing on the
Nasdaq Stock Market, the stock held in escrow will be released to the
consultant. The shares of common stock held in escrow may be returned to the
Company if: (a) the term of the consultancy agreement should expire before the
Company is listed on the Nasdaq Stock Market; or (b) the agreement is terminated
before the Company is listed on the Nasdaq Stock Market; or (c) the Company
gives notice to OTC Financial of OTC Financial's breach of the agreement. The
certificates for the 500,000 shares of Global Med common stock were issued in
the names of National Financial Communications Corporation in the amount of
250,000 shares and Robert Marks Company in the amount of 250,000 shares. The
250,000 shares held in escrow are represented by 125,000 shares of common stock
in the name of National Financial Communications Corporation and 125,000 shares
of common stock in the name of Robert Marks Company
On the effective date of the agreement, the 250,000 shares of common stock that
were not held in escrow had a fair value of $375,000 based on quoted market
prices of the Company's common stock. The amount has been recorded as a prepaid
expense and is being amortized over the term of the agreement.
On the effective date of the agreement, the fair value of the 250,000 shares
that are held in escrow was $375,000, based on quoted market prices of the
Company's common stock. The shares held in escrow will be released to National
Financial Communications Corporation and Robert Marks Company upon their meeting
certain criteria discussed above. Upon the performance of the criteria discussed
above, the Company will recognize an investor-relations expense equal to the
then current fair value of the 250,000 shares currently held in escrow. The
250,000 shares held in escrow are not included in the common shares outstanding.
6. RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the current
period presentation.
13
GLOBAL MED TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. SUBSEQUENT EVENTS
On November 14, 2000, and as amended November 19, 2000, the Board of Directors
of eBanker agreed to exercise warrants to purchase 8 million shares of common
stock of Global Med for $2 million at $.25 per share. The $2 million will be
paid in the form of forgiveness of $2 million of the $2.65 million owed to
eBanker under the financing agreements due January 9, 2001. In conjunction with
this exercise, eBanker agreed to extend and merge the balances on the remaining
financing agreements totaling $3.4 million, plus accrued interest, due on
various dates ranging from January 1, 2001 through January 9, 2001, until July
1, 2001. At that time, if the principal and interest outstanding is not repaid
in full, eBanker will be awarded warrants to purchase up to approximately
10,000,000 shares of Global Med common stock at $.50 per share depending on the
then outstanding principal balance and the principal will automatically be
extended until July 1, 2003. In addition, upon the occurrence of certain events
related to a certain contract for Global Med to provide products and services,
Global Med, at its discretion, will be able to put up to $1.5 million worth of
common shares to eBanker at $0.50 per share in the form of forgiveness of debt.
eBanker has agreed to modify the default conversion rate to $1.00 per share. As
consideration, eBanker will be issued 500,000 restricted shares of Global Med
common stock.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
Global Med Technologies, Inc. and its subsidiary (the Company or Global Med),
designs, develops, markets and supports information management software products
for blood banks, hospitals, centralized transfusion centers and other healthcare
related facilities. Revenues are derived from the licensing of software, the
provision of consulting and other value-added support services and the resale of
hardware and software obtained from vendors.
Loan agreements with eBanker for $2,650,000 and $2,000,000 that were due in
April 2000 were extended to January 9 and January 7, 2001, respectively. Payment
of interest was also extended to the respective dates in January 2001. A
conversion rate of $1.6875 per share has been added to the $2,650,000 loan.
Other terms of the loans remain the same. In consideration of the extension,
Global Med agreed to pay a fee of 137,778 shares of its common stock. Based on
the market price of the stock on the date of the agreements, the shares have a
value of $262,130, which has been be recorded as deferred financing costs and
amortized over the extension period. If the loans' accrued interest or principal
is not repaid in 270 days the loans' interest and principal due date will be
automatically extended to April 15, 2001. The loans will become straight loans,
without conversion features. Interest will continue to accrue on the balances at
12% interest per annum.
If the loans and accrued interest are not repaid in 270 days, ten-year warrants,
exercisable at $0.50 per share to purchase common stock of Global Med, will be
issued to eBanker. The number of common shares to be included in the warrant to
be issued will be equal to the entire principal and interest amount divided by
the exercise price of $0.50.
The bridge loan with eBanker of $750,000 was to mature on September 30, 2000. In
April 2000, eBanker agreed to extend the due date to January 1, 2001. Payment of
interest was also extended to January 1, 2001. Global Med agreed to pay a fee of
22,222 shares of its common stock. Based on the market price of the stock on the
date of the agreements, the shares have a value of $37,500, which has been
recorded as deferred financing costs and amortized over the extension period.
On November 14, 2000, the Company entered into agreements with eBanker relating
to these financing agreements as more fully described in Note 7 in the
accompanying notes to the unaudited consolidated financial statements. The
Company continues to seek alternative financing arrangements, equity
contributions, and capital support while the management of the Company evaluates
revenue enhancement and cost containment strategies.
The following discussion of the Company's results of operations and of its
liquidity and capital resources is derived from and should be read in
conjunction with the unaudited financial statements and the related notes
herein.
RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Revenues. Revenues are comprised of license fees for SAFETRACE and SAFETRACE
Tx(TM), maintenance revenues, implementation and consulting services revenues,
collectively software sales and consulting. On January 29, 1999, the Company
received FDA 510(k) clearance on SAFETRACE TX(TM).
15
During the three months ended September 30, 2000, total revenues of $1.380
million increased $448 thousand or 48.1% from the revenues of $932 thousand for
the comparable 1999 quarter. Revenues during the three month period increased
primarily due to sales of SAFETRACE TX(TM). For the nine month period ended
September 30, 2000, total revenues decreased $750 thousand to $3.377 million or
18.2% from total revenues for the nine month period ended September 30, 1999 of
$4.127 million. This decrease is primarily due to the $919 thousand of
accelerated software license fee payments received during the nine months ended
September 30, 1999 in connection with a multiple site customer agreement that
was terminated and replaced by two separate agreements. Other factors included
the lingering effects of customer concerns about the Year 2000 delaying
decisions to purchase software.
Gross Profit. Gross profit (loss) for the three and nine months ended September
30, 2000 were $983 thousand and $2.002 million, respectively, compared to ($34)
thousand and $1.847 million for the comparable 1999 periods, respectively. Gross
profit percentages of revenue were 59.3% and 44.8% for the nine month periods
ended September 30, 2000 and 1999, respectively. The increase in the gross
profit margins for the three and nine months ended September 30, 2000 was
attributable to several factors but primarily due to the cost reduction program
implemented in October 1999. During the third quarter of 1999, consulting and
implementation service costs increased due to the addition of personnel and
equipment needed to accommodate anticipated sales of SAFETRACE TX(TM). Many of
these costs were subsequently eliminated in the cost reduction program
implemented in October 1999. In certain circumstances Global Med sells hardware
and software obtained from outside vendors to its existing customers. Global Med
had no such sales during the three or nine months ended September 30, 2000.
Software Development Costs. The Company capitalizes software development costs
in accordance with Statement of Financial Accounting Standard No. 86, Accounting
for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed.
During the three and nine months ended September 30, 2000, the Company
capitalized software development costs of $60 thousand and $407 thousand,
respectively. The capitalized software development costs relate primarily to
enhancements and upgrades of the Company's existing products. Capitalized
software development costs were $1.462 million, net of accumulated amortization
of $1.637 million as of September 30, 2000 compared to $1.566 million, net of
accumulated amortization of $1.126 million as of December 31, 1999.
Sales and Marketing Expenses. Sales and marketing expenses for the three and
nine months ended September 30, 2000 decreased from the comparable periods of
the prior year. For the three months ended September 30, 2000, sales and
marketing expenses decreased $38 thousand or 12.1% to $275 thousand. For the
nine months ended September 30, 2000, sales and marketing expenses increased
$126 thousand or 16.5% to $889 thousand. The decrease for the three months ended
September 30, 2000 was primarily due to the reductions in advertising-related
expenses of approximately $50 thousand and a decrease in consulting and other
expenses of approximately $64 thousand associated primarily with the October
1999 reduction in force. The reduction in expenses for the three months ended
September 30, 2000 was partially offset by increases in sales and marketing
expenses associated with PeopleMed of approximately $80 thousand. The increase
in sales and marketing expenses for the nine months ended September 30, 2000 was
due primarily to the increase in PeopleMed expenses of approximately $200
thousand. This expense was partially offset by lower advertising-related
expenses of approximately $75 thousand and the reduction in force in October
1999.
Research and Development Expenses. Research and development expenses for the
three and nine months ended September 30, 2000 increased from the comparable
periods of the prior year. For the three months ended September 30, 2000,
research and development expenses increased $180 thousand or 233.8% to $257
thousand. For the nine months ended September 30, 2000, research and development
expenses increased $143 thousand or 56.0% to $398 thousand. For the three and
nine months ended September 30, 2000, research and development expenses
primarily relate to the development of the platform for PeopleMed with the
exception of approximately $10 thousand related to SAFETRACE TX (TM) and
internet related products.
16
General and Administrative Expenses. General and administrative expenses
decreased for the three and nine months ended September 30, 2000 when compared
to the three and nine months ended September 30, 1999 periods. General and
administrative expenses decreased $192 thousand or 23.6% from $813 thousand for
the three months ended September 30, 1999 to $621 thousand for the three months
ended September 30, 2000. General and administrative expenses decreased
approximately $221 thousand or 9.6% from the nine months ended September 30,
1999 to the nine months ended September 30, 2000. The decreases in general and
administrative expense are primarily due to the reduction in force of October
1999. The October 1999 reduction in force was partially offset by increases
associated with the amortization of the consultancy agreement with OTC Financial
of $47 thousand and $125 thousand, respectively, for the three and nine months
ended September 30, 2000. In addition, the Company recognized $141 thousand in
compensation expense associated with the issuance of shares to a related party
at a discount.
Financing Costs. As a result of the financing agreements described above, the
Company has recognized significant noncash financing costs. For the three and
nine months ended September 30, 2000, the charges were $172 thousand and $1.423
million, respectively. For the three and nine month periods ended September 30,
1999, the charges were $46 thousand and $4.733 million, respectively. As of
September 30, 2000, the Company had deferred financing costs remaining of $123
thousand.
COST REDUCTION PROGRAMS
On October 1, 1999, the Company implemented a cost reduction program designed to
reduce operating costs by approximately 50%. As part of the temporary reduction,
approximately 50% of the employee positions were eliminated. This was
necessitated by a reduction in the anticipated sales of SAFETRACE and delays in
purchase commitments for SAFETRACE TX (TM) due to customer concerns about Year
2000 issues.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, the Company has $5.4 million in short-term debt that
matures in varying amounts in January 2000. Subsequent to September 30, 2000,
this amount was reduced to $3.4 million in accordance with the extension
provisions of the debt agreements and may be reduced further. If the debt is not
reduced, the Company may be able to obtain the cash necessary to repay the loans
from sales of its products, through exercises of warrants or stock options,
additional debt financing or public or private equity financing. In the event
the Company cannot repay the loans or negotiate an extension of the due date
with the lender, the debt is convertible into shares of the Company's common
stock.
Management anticipates that the net proceeds from any future financing
activities will be used to fund the Company's anticipated research and software
development costs, sales and marketing efforts, general working capital
purposes, and negative cash flows during the remainder of 2000. It is expected
that the proceeds available from current sales are sufficient to fund the
Company's liquidity and capital requirements in the short term excluding
acquisitions or major new product development initiatives.
To the extent that the borrowings provided by the current financing agreements
are insufficient to fund the Company's liquidity and capital requirements in the
short or long term, the Company will require additional capital through debt
financing or public or private equity financing, or the Company may be required
to reduce its existing software development programs and other operating
expenses.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements," which provides guidance with respect to revenue recognition issues
and disclosures. As amended by SAB No. 101B, the Company is required to
implement the provisions of SAB No. 101 no later than the fourth quarter of the
fiscal year ending December 31, 2000. The Company does not believe SAB No. 101
will have a material impact on its financial statements.
17
In June 1998, SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, was issued which was effective for all fiscal years beginning after
June 15, 1999. In July 1999, SFAS No. 137, Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133 was issued. This statement defers the effective date of SFAS No. 133 to all
fiscal quarters of all fiscal years beginning after June 15, 2000. Historically,
Global Med has not engaged in any hedging activity using derivative instruments.
Accordingly, management does not believe the impact of SFAS No. 133 will be
material to the financial statements.
All statements contained herein, as well as statements made in press releases
and oral statements that may be made by the Company or its officers, directors,
or employees acting on its behalf, that are not statements of historical fact
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
could cause the actual results of the Company to be materially different from
historical results or from any future results expressed or implied by such
forward-looking statements and risk factors described from time to time in the
Company's reports filed with the Commission. In addition to statements that
explicitly describe such risks and uncertainties, readers are urged to consider
statements that include the terms "believes," "belief," "expects," "plans,"
"anticipates," "intends," or the like to be uncertain and forward-looking. All
cautionary statements made herein should be read as being applicable to all
forward-looking statements wherever they appear.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
(c) Recent Sales of Unregistered Securities
The issuance of the 40,000 shares of common stock for payment of consultant fees
were made in reliance upon the exemption from registration provided by Section
4(2) of the Securities Act of 1933, as amended (1933 Act). The purchasers had
access to full information concerning the Company and represented that they
purchased the securities for the purchasers' own accounts and not for the
purpose of distribution. The shares contain a restrictive legend advising that
such securities may not be offered for sale, sold or otherwise transferred
without having first been registered under the 1933 Act or pursuant to an
exemption from registration under the 1933 Act. No underwriters were involved in
the transaction.
During the quarter ended September 30, 2000, Global Med sold a total of 50,000
shares of its common stock to an individual. The issuance of the shares were
made in reliance upon the exemption from registration provided by Section 4(2)
of the 1933 Act. The purchasers had access to full information concerning the
Company. The certificates for the shares contain a restrictive legend advising
that the shares may not be offered for sale, sold or otherwise transferred
without having first been registered under the 1933 Act or pursuant to an
exemption from registration under the 1933 Act. No underwriters were involved in
the transaction.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders during the three
months ended September 30, 2000.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. Description
---------- -----------
27 Financial Data Schedule for September 30, 2000
(b) Reports on Form 8-K:
-------------------
There were no Current Reports on Form 8-K filed during the three
months ended September 30, 2000.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
GLOBAL MED TECHNOLOGIES, INC.,
A Colorado Corporation
Date: November 20, 2000 By /s/ Michael I. Ruxin
-------------------------------
Michael I. Ruxin, M.D.
Chairman and CEO and
Date: November 20, 2000 By /s/ Gary L. Cook
-------------------------------
Gary L. Cook, Director and Acting
Principal Accounting Officer
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