10-Q/A 1 a72686a1e10-qa.txt AMENDMENT NO. 1 TO FORM 10-Q MARCH 31, 2001 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

The accompanying notes are an integral part of these financial statements. 2 3 VITALCOM INC. BALANCE SHEETS - (CONTINUED)

The accompanying notes are an integral part of these financial statements. 3 4 VITALCOM INC. STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these financial statements. 4 5 VITALCOM INC. STATEMENTS OF CASH FLOWS

(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:

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

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

VITALCOM INC 10-Q/A