1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
- --- THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2001
----------------------------------------------
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 0-27588
---------------------------------------
VITALCOM INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0538926
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
15222 DEL AMO AVENUE
TUSTIN, CALIFORNIA 92780
(Address of principal executive offices and zip code)
(714) 546-0147
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $0.0001 PER SHARE
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 (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of May 4, 2001, there were 8,330,933 shares outstanding of the issuer's
common stock.
This Form 10-Q/A is being filed solely for the purpose of correcting a
typographical error that appeared in two places in the Form 10-Q for the quarter
ended March 31, 2001, as originally filed. More specifically, on each of the two
pages comprising the balance sheet contained in that report, information as of
March 31, 2001 was inadvertently identified as being as of March 31, 2000. No
amendments have been made to the information filed in this Form 10-Q/A from the
corresponding information included in the Form 10-Q for the quarter ended March
31, 2001, as originally filed, except to correct the error referred to in the
immediately preceding sentence.
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VITALCOM INC.
BALANCE SHEETS
MARCH 31, DECEMBER 31,
2001 2000
------------ ------------
(UNAUDITED) (AUDITED)
ASSETS
Current assets
Cash and cash equivalents $ 1,004,888 $ 3,657,100
Restricted cash 2,500,000 2,500,000
Accounts receivable, net 5,451,261 3,828,821
Inventories 1,667,101 1,644,181
Prepaid expenses 157,158 134,396
------------ ------------
Total current assets 10,780,408 11,764,498
Property
Machinery and equipment 1,814,829 1,777,578
Office furniture and computer equipment 2,258,901 2,266,527
Leasehold improvements 200,278 200,419
------------ ------------
4,274,008 4,244,524
Less accumulated amortization and depreciation (2,685,694) (2,536,061)
------------ ------------
Property, net 1,588,314 1,708,463
Other assets 63,476 75,872
Goodwill, net 382,350 390,485
------------ ------------
$ 12,814,547 $ 13,939,318
============ ============
The accompanying notes are an integral part of these financial statements.
2
3
VITALCOM INC.
BALANCE SHEETS - (CONTINUED)
MARCH 31, DECEMBER 31,
2001 2000
------------ ------------
(UNAUDITED) (AUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,515,866 $ 1,609,559
Accrued payroll and related costs 669,519 999,488
Accrued warranty costs 528,316 532,898
Other accrued liabilities 700,136 573,395
------------ ------------
Total current liabilities 3,413,837 3,715,340
Stockholders' equity:
Common stock, including paid-in capital, $0.0001 par value; 25,000,000
shares authorized, 8,462,453 shares issued and 8,098,903 shares
outstanding at December 31, 2000; 8,462,453 shares issued and
8,266,419 shares outstanding at March 31, 2001 38,160,751 38,160,751
Note receivable for common stock sales (30,590) (30,590)
Treasury stock, at cost (397,334) (740,154)
Accumulated deficit (28,332,117) (27,166,029)
------------ ------------
Net stockholders' equity 9,400,710 10,223,978
------------ ------------
$ 12,814,547 $ 13,939,318
============ ============
The accompanying notes are an integral part of these financial statements.
3
4
VITALCOM INC.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
MARCH 31,
-------------------------------
2001 2000
----------- -----------
(UNAUDITED)
Revenues $ 5,201,338 $ 3,102,884
Cost of revenues 2,498,283 1,838,126
----------- -----------
Gross profit 2,703,055 1,264,758
Operating expenses:
Sales and marketing 1,493,839 1,611,526
Research and development 1,539,774 1,808,503
General and administrative 877,822 578,487
----------- -----------
Total operating expenses 3,911,435 3,998,516
----------- -----------
Operating loss (1,208,380) (2,733,758)
Other income, net 51,292 166,314
----------- -----------
Loss before provision for income taxes (1,157,088) (2,567,444)
Provision for income taxes 9,000 9,000
Net loss $(1,166,088) $(2,576,444)
=========== ===========
Net loss per basic and diluted common share $ (0.14) $ (0.32)
=========== ===========
Weighted average basic and diluted common shares 8,180,800 7,934,416
=========== ===========
The accompanying notes are an integral part of these financial statements.
4
5
VITALCOM INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
MARCH 31,
2001 2000
----------- ------------
(UNAUDITED)
Cash flows from operating activities:
Net loss $(1,166,088) $ (2,576,443)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 157,730 174,434
Loss on disposal of property 38 --
Changes in operating assets and liabilities:
Accounts receivable (1,622,440) 205,266
Inventories (22,921) 154,199
Prepaid expenses and other assets (10,366) 96,046
Accounts payable (93,692) (124,893)
Accrued payroll and related costs(1) 12,851 (325,968)
Income tax payable 2,634 --
Accrued warranty costs (4,582) (15,551)
Accrued liabilities 124,108 213,725
----------- ------------
Net cash used in operating activities (2,622,728) (2,199,185)
Cash flows from investing activities:
Purchases of property (29,485) (182,115)
Proceeds from sale of short-term investments -- 5,273,037
----------- ------------
Net cash (used in) provided by investing activities (29,485) 5,090,922
Cash flows from financing activities:
Repayment of capital lease obligation and long-term debt -- (7,388)
Net proceeds from issuance of common stock -- 113,992
----------- ------------
Net cash provided in financing activities -- 106,604
Net increase (decrease) in cash and cash equivalents (2,652,213) 2,998,341
Cash and cash equivalents, beginning of period 3,657,100 7,107,420
----------- ------------
Cash and cash equivalents, end of period $ 1,004,888 $ 10,105,761
=========== ============
Supplemental disclosures of cash flow information:
Interest paid $ 6,282 $ 624
=========== ============
Income taxes paid $ 6,366 $ 4,900
=========== ============
(1) Includes a non-cash reduction of $342,820 from the issuance of treasury
stock used for the Company's matching contribution to its 401(k) plan.
The accompanying notes are an integral part of these financial statements.
5
6
VITALCOM INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The interim condensed financial statements included herein have been prepared by
the Company without audit pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). Certain information and footnote
disclosures, normally included in the financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America, have been condensed or omitted pursuant to such SEC rules and
regulations; nevertheless, the management of the Company believes that the
disclosures herein are adequate to make the information presented not
misleading. These condensed financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's Form
10-K for the year ended December 31, 2000 and filed with the SEC. In the opinion
of management, the condensed financial statements included herein reflect all
normal, recurring adjustments necessary to present fairly the financial position
of the Company as of March 31, 2001 and the results of its operations and its
cash flows for the three-month period ended March 31, 2001 and 2000. The results
of operations for the interim periods are not necessarily indicative of the
results of operations for the full year.
For the year ended December 31, 2000, the Company incurred a net loss of
$6,376,104 and experienced a significant decrease in working capital. For the
first quarter ended March 31, 2001 the Company incurred a net loss, including
expenses related to its proposed merger with Data Critical, of $1,166,088. In
2000, the Company's cost structure and operating results were negatively
impacted by both continued increases in research and development expenses and
the delay in the release of its PatientNet Wireless Network (PatientNet)
product. The PatientNet product was released during the third quarter of 2000.
The Company believes that the release of its PatientNet product will enable the
Company to improve its operating performance during fiscal 2001. The Company
began this quarter to reduce research and development expenses for fiscal 2001
and is presently re-negotiating the terms of its line of credit. However, if
management is unable to execute its business plan, the Company may need to
obtain additional financing or restructure its operations. The Company believes
that existing cash resources, cash flows from operations and line of credit
facility will be sufficient to fund the Company's operations for at least the
next twelve months.
2. PENDING MERGER
On March 12, 2001, we entered into a definitive agreement to merge with a wholly
owned subsidiary of Data Critical Corporation, a leading provider of wireless
patient monitoring systems. Under the merger agreement, VitalCom will become a
wholly owned subsidiary of Data Critical, and our stockholders will receive 0.62
shares of Data Critical common stock for each share of VitalCom common stock
held (other than shares with respect to which appraisal rights under Delaware
law have been properly exercised). This exchange ratio is fixed, and will not be
adjusted to reflect any increase or decrease in the market value of our common
stock, or any increase or decrease in the market value of Data Critical's common
stock, that may occur between the date on which the merger agreement was signed
and the effective date of the merger. Consummation of the merger is conditioned
on approval by the respective stockholders of both companies, as well as certain
other events. However, certain of our stockholders, who hold an aggregate of
approximately 61% of our outstanding common stock, have entered into voting
agreements with Data Critical. Under these voting agreements they have agreed to
vote in favor of the proposed merger. These stockholders have also granted Data
Critical irrevocable proxies to vote their shares in favor of the merger.
Meetings of Data Critical stockholders and VitalCom stockholders for the purpose
of obtaining the necessary stockholder approvals have been scheduled to be held
on June 7, 2001. Additional information concerning the proposed merger is
contained in the joint proxy statement/prospectus pertaining to those meetings.
6
7
3. NET LOSS PER SHARE
Net loss per share is computed by dividing net loss by the weighted average
number of common and common equivalent shares outstanding. For the three-month
periods ended March 31, 2001 and 2000, the diluted weighted average shares were
equal to the basic weighted average shares due to the anti-dilutive effect the
conversion of options would have given the Company's net loss for the period.
4. STOCK PLANS AND STOCKHOLDERS' EQUITY
Stock Option Plans - The following is a summary of stock option transactions
under the 1993 Stock Option Plan (the "1993 Plan") and 1996 Stock Option Plan
(the "1996 Plan") for the three months ended March 31, 2001:
NUMBER OF
NUMBER OF PRICE PER OPTIONS
SHARES SHARE EXERCISABLE
--------- --------- -----------
Balance, December 31, 2000 1,655,626 $0.60 to $4.75 858,449
Granted 7,000 $1.94 to $2.00
Exercised 0 --
Canceled (17,526) $1.88 to $4.00
---------
Balance, March 31, 2001 1,645,100 $0.60 to $4.75 937,188
=========
At March 31, 2001, 780,785 shares were available for the grant of additional
options under the 1993 Plan and 1996 Plan.
There were no stock transactions under the 1996 Director Option Plan (the
"Director Plan") for the three months ended March 31, 2001. At March 31, 2001,
60,000 shares were available for the grant of additional options under the
Director Plan and no options were exercisable.
The Company has reserved an aggregate of 450,000 shares of Common Stock for
issuance under its 1996 Employee Stock Purchase Plan (the "ESPP"). The ESPP was
adopted by the Board of Directors in January 1996 and approved by the Company's
stockholders prior to the consummation of the Company's initial public offering
in February 1996. The ESPP is intended to qualify under Section 423 of the
Internal Revenue Code of 1986, as amended, and permits eligible employees of the
Company to purchase Common Stock through payroll deductions of up to 10% of
their compensation provided that no employee may purchase more than $25,000
worth of stock in any calendar year. The ESPP was implemented by an offering
period commencing on February 14, 1996 and ending on the last business day in
the period ending October 31, 1996. Each subsequent offering period (an
"Offering Period") commences on the day following the end of the prior Offering
Period and has a duration of six months. The price of Common Stock purchased
under the ESPP is 85% of the lower of the fair market value of the Common Stock
on the first or last day of each offering period. The ESPP will expire in the
year 2006 In the years ended December 31, 1998, 1999 and 2000 the Company issued
52,703, 74,334 and 80,021 shares of Common Stock, under the ESPP for $145,264,
$88,240 and $125,034 respectively. During the three months ended March 31, 2001,
$57,083 has been withheld from employee earnings for stock purchases under the
ESPP.
5. SEGMENT REPORTING
Utilizing the management approach, the Company has broken down its business
based upon sales through its two distribution channels. The Company does not
allocate operating expenses to these segments, nor does it allocate specific
assets to these segments. Therefore, segment information reported includes only
net sales, cost of sales and gross profit.
Selected information regarding the Company's product sectors is as follows:
7
8
Enterprise-Wide
OEM Products Systems Total
---------- --------------- ----------
Three months ended March 31, 2001
Revenues ................... $2,040,398 $3,160,940 $5,201,338
Cost of revenues ........... 998,090 1,500,193 2,498,283
---------- ---------- ----------
Gross profit ............... $1,042,308 $1,660,747 $2,703,055
========== ========== ==========
Three months ended March 31, 2000
Revenues ................... $2,354,675 $ 748,209 $3,102,884
Cost of revenues ........... 1,296,174 541,952 1,838,126
---------- ---------- ----------
Gross profit ............... $1,058,501 $ 206,257 $1,264,758
========== ========== ==========
6. RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities, is effective for all fiscal years
beginning after June 15, 2000. SFAS 133, as amended, establishes accounting and
reporting standards for derivative instruments embedded in other contracts and
for hedging activities. Under SFAS 133, certain contracts that were not formerly
considered derivatives may now meet the definition of a derivative. The Company
adopted SFAS 133 effective January 1, 2001. The adoption of SFAS 133 did not
have a significant impact on the Company's financial position, results of
operations, or cash flows.
8
9
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.
VITALCOM INC.
Dated: May 17, 2001 /s/ Frank T. Sample
------------------------------
Frank T. Sample
Chairman of the Board,
President and Chief
Executive Officer
(Principal Executive
Officer)
Dated: May 17, 2001 /s/ Scott E. Lamb
------------------------------
Scott E. Lamb
Senior Director of Finance
and Controller (Principal
Financial and Accounting
Officer)
9