About Data Critical

Data Critical Corporation develops and distributes wireless and Internet systems for communicating critical healthcare data. The company offers StatViewä, Alarm Viewä and FlexViewä, a line of wireless alarm notification products for hospitals. It also provides MobileViewä and ECGStatä, a line of wireless products for physicians, WebChartä, an Internet-based solution for physician charting, and PocketChart, for handheld Pocket PCs. Data Critical will soon offer unwiredDr wireless Web services for physicians to allow physicians to chart online, prescribe medications, dictate notes, check lab results and more, leveraging the power of the wireless Internet.

Data Critical has sold more than 400 wireless alarm notification systems to approximately 200 U.S. hospitals. The company has more than twenty-five partnerships with industry leaders such as Aether Systems, Agilent Technologies, GE Marquette, Medtronic Physio-Control, Nellcor Puritan Bennett (Mallinckrodt) and Siemens Medical Systems.

CEOCFOinterviews – Can you give us a little history of Data Critical and where you would expect to be three years from now?

Mr. Brown – “The Company was founded in 1993 by a physician by the name of David Albert. David is still with us as our Chairman and Chief Scientist. Dave’s idea was to marry information that’s developed in healthcare with wireless technologies because of the need for anywhere, any time information in healthcare. He saw this as a strategic fit between the two types of technology in the ability to create value by delivering the information that the people need to see on an n immediate basis. Therefore, we have a set of products that do exactly that. They deliver everything from monitoring information in a hospital to prescription writing and sending lab results to a physician outside of a hospital. Our job is to take this technology, use it to deliver this information and create value by doing that. There is clearly a huge market opportunity for us to continue to do that. When you think about the healthcare delivery system in the U.S. in particular, there are about five thousand hospitals, with over one hundred beds each. That is a large number and there are tens of thousands of doctors out there that need this kind of information, so that gives us a good base just in the U.S., let alone internationally.”

CEOCFOinterviews – Is your product software of hardware?

Mr. Brown – "Most of our product is software related. We write our own software and all of our key interfaces. We do have some hardware that we either buy off the shelf or integrate in terms of servers, or in the case of our hospital-based business, we have a device that we make called a Statview receiver. This shows patient ECG waveform data and text information for a nurse to carry in the hospital."

CEOCFOinterviews – Is that manufactured to house?

Mr. Brown – "Actually, it’s out-sourced."

CEOCFOinterviews – What is your most recent and exciting news?

Mr. Brown – "Well, we just recently announced two new distribution arrangements, which are very exciting. One is our relationship with Medtronic Physio-Control. They actually have assumed our sales force of about twenty people and we are now distributing our products for hospitals through Medtronic. Their sixty-five to seventy person sales forces is now going directly into hospitals and selling our products as well as their own defibrillator products. Therefore, it’s a nice fit and we have a much larger sales force by working with them, one that is three times our existing size. On a related side, we announced a licensing deal with Agilent Technologies, which has now been brought by Phillips. They’re integrating our Statview software inside their monitoring network. So it will come as part of your monitoring package from Agilent when you’re a hospital buying systems from them. These are new and different distribution arrangements for us and we are very excited by them."

CEOCFOinterviews – Is your marketing strategy geared more towards partnering or do you have any in-house sales staff?

Mr. Brown – "It’s a little of both actually. Our hospital-based sales force is composed of Medtronic employees. On our physician side, we do have direct sales people that are out selling our systems into physician offices. Therefore, we have a little bit of both, but we are big believers in partnerships and we have about 26 partnerships with some of the biggest names in healthcare. Most of which have original equipment manufacturer (OEM) product relationships or co-selling opportunities where they’re out marketing our products for us. In terms of the number of feet out on the street that are out talking about Data Critical products, it literally is in the thousands."

CEOCFOinterviews – Are you in a global market or is your product sold mostly in the United States?

Mr. Brown – "We’re just getting started internationally in the distribution side. We are in the process of delivering our systems into Europe and Medtronic Physio-Control will be our partner for international sales as well. Because our product is radio-based, we have to get approvals by the various ministries or telecom to sell the products over there. We are currently in the process of doing that so we expect to start having sales internationally."

CEOCFOinterviews – What are your revenues derived from?

Mr. Brown – "Primarily, our revenues are in two classes. The lion’s share of our revenues come from a product called Statview, which is tied into about half a dozen patient monitoring type company systems. Statview delivers wirelessly inside of hospitals alarm notification information including ECG waveforms to nurses. We also have products that extend that information to a physician who is outside of the hospital and who is carrying around a smart phone or two-way pager type of device. To physicians, we also sell software for pacemaker follow-ups. A pacemaker patient can actually dial in to a doctor’s office and transmit information about their pacemaker and what has happened, including waveform, using our software. Once received, it is automatically printed or faxed out to the physician if they are outside of the office. Another product is our physician systems that allow prescription writing, charting and a variety of other tools."

CEOCFOinterviews – After the product is sold, do you have any residual revenues?

Mr. Brown – "Inside the hospital, it is primarily capital sales. However, there is usually yearly recurring revenue for the service that we provide. On the physician side, there is capital purchase of some of our pacemaker follow-up software, but our physician connectivity tools, which are the prescription, writing labs and dictation services are all monthly recurring models, so you actually subscribe to those."

CEOCFOinterviews What are the actual revenue possibilities in your markets?

Mr. Brown – "Our typical Statview system, which is our core product for hospitals, sells at about $90,000.00 per system. There are about 3.6 different areas we can sell into in an average hospital. That gives you a market opportunity of 1.6 billion. That’s just on the hospital side alone. If you start looking at physician groups, and there are literally hundreds of thousands of physicians that can buy our products of monthly recurring revenues, that adds up to the billion-dollar category per year as an opportunity. The numbers are pretty big and the market is pretty big out there."

CEOCFOinterviews – What is your market share?

Mr. Brown – "On the hospital side, we’ve actually installed now and are approaching four hundred hospitals out there. Therefore, we are not quite ten percent of a market of five thousand yet, but we are getting there. On the physician side, we have about seventy five hundred to eight thousand physicians using our products today."

CEOCFOinterviews – How do you plan to overtake your competitors?

Mr. Brown – "On the hospital side there currently isn’t much competition for our products. We really have signed up most of the major players on that front, so we have leaped ahead of everyone else. It is a matter now of getting our products in front of people who can make the buying decisions, and that is one of the reasons we made the Medtronic deal. On the physician side, we do have some competitors who are out there talking about the ability to look at that information and manage that information for the physician. We are solely focused on the wireless side of connectivity and providing that on small platforms like cell phones and pagers. We have a little bit different market spin out there and we think that is important because those are the devices physicians’ use today. Almost every physician has a pager and/or a cell phone so we’re able to use that information and able to use those platforms for it to be delivered on. Therefore, it’s a slightly different model than everyone else."

CEOCFOinterviews – What percentage of your revenue goes toward research and development?

Mr. Brown – "Last quarter it was about fifteen percent."

CEOCFOinterviews – Will R&D spending produce any upgrades or new products?

Mr. Brown – "We’re always looking at the opportunity to upgrade our products. We look at every one of our products as an evolution and continue to work on getting those ready for connectivity to the next generation. With regard to our core Statview product, we’re looking at and working on new versions of that every day, and of course all of our product line. We feel that we have a robust R&D pipeline."

CEOCFOinterviews – Is your product pipeline increased through R&D or through acquisitions?

Mr. Brown – "We’ve done a couple of acquisitions in the past; and we’ve acquired three companies since we went public a little over a year ago. All three are in the physician area. One company, called Paceart, does arrhythmia follow-up and pacemaker follow-up software for physician offices. Then we acquired two other companies, Physix and Elixis. They were in the wireless and handheld side of connectivity for physicians with devices that could do all parts of their job, such as charting. Elixis had a web-based solution for delivering this information. We can now connect from these palm type and had-held devices to the Internet through wireless technology and really allow the physician to transact, write prescriptions and review charts wherever they are.'

CEOCFOinterviews – Which of your products do you see as being the best revenue producer of the future?

Mr. Brown – "I think they’re all in and of themselves, very big opportunities for us. Historically, we’ve gotten the lion’s share of our revenues in the hospital market place in selling these capital solutions. I think that’s going to continue to grow very nicely. The Paceart business, in selling the pacemaker follow-up and arrhythmia follow-up software, is in a market for cardiologists and those types of people. It gives us the opportunity and a good base of physicians to sell into, however, it’s not quite as large a market for that particular software. On the physician side for transaction services, that’s again a very big market. So, I would see over time that would have a lot of attraction for us as well as the hospital side continuing on."

CEOCFOinterviews – What is your cash and credit situation?

Mr. Brown – "We don’t have any debt, and we exited the third quarter, which was the last quarter we reported on with twenty seven million dollars in the bank. We’ve been burning between two to three million dollars per quarter so we obviously have a lot of powder left in our cannon there."

CEOCFOinterviews – What are your margins?

Mr. Brown – "We are in the sixty percent range."

CEOCFOinterviews – When do you expect to hit that ultimate goal of profitability?

Mr. Brown – "The model we’ve shared with the street talks about fourth quarter profitability and that’s based on essentially a build-up of our minimum commitment model from our partnerships. Do I think we can do better than that? We hope so."

CEOCFOinterviews – What is your view and strategy for crisis management?

Mr. Brown – "What we tend to do here is put in place our core fundamental business plan on how we want to make products, how we want to sell products and what those products will do, and from there we execute against it. When things come up that are out of our area of knowledge or comfort or expectations we sit down as a group and manage through them going back to the basics of whatever plan we’re working on at that point; whether it’s a manufacturing plan obviously or something else. That’s really from a crisis standpoint, we try to stay calm and just execute from the plans you put in place."

CEOCFOinterviews – Do you have some final thoughts to share with potential investors and shareholders?

Mr. Brown – "We have a company that has a great product and great partnerships with twenty-eight partners who are some of the biggest names in healthcare. We have the opportunity to really capitalize on that marketplace in the year 2001 and we are really focused on doing that. You are going to see us come out and work toward profitability, continue to execute on our business plan, permeate into a number of hospitals and sell to more physicians as we go forward."