<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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, 1999
-----------------------------------------
[ ] 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: 0-18338
I-Flow Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 33-0121984
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20202 Windrow Drive, Lake Forest, CA 92630
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(Address of principal executive offices) (Zip Code)
(949) 206-2700
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
As of March 31, 1999 there were 14,225,316 shares outstanding of Common
Stock.
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I-FLOW CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I: Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1999 (Unaudited)
and December 31, 1998 3
Consolidated Statements of Operations for the three-months
ended March 31, 1999 (Unaudited) and 1998 (Unaudited) 4
Consolidated Statements of Cash Flows for the three-months
ended March 31, 1999 (Unaudited) and 1998 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk 11
Part II: Other Information 12
Signatures 13
</TABLE>
2
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I-FLOW CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 772,000 $ 971,000
Accounts receivable, net 7,302,000 7,490,000
Inventories, net 4,762,000 4,328,000
Prepaid expenses and other 583,000 638,000
------------ ------------
Total current assets 13,419,000 13,427,000
------------ ------------
PROPERTY:
Furniture, fixtures and equipment 6,989,000 6,789,000
Less accumulated depreciation (3,727,000) (3,362,000)
------------ ------------
Property, net 3,262,000 3,427,000
------------ ------------
OTHER ASSETS
Goodwill and other intangibles, net 7,196,000 7,223,000
Notes receivable and other 442,000 259,000
------------ ------------
TOTAL $ 24,319,000 $ 24,336,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,408,000 $ 1,300,000
Accrued payroll and related expenses 1,439,000 1,453,000
Current portion of long-term debt 2,006,000 2,083,000
Borrowings under line-of-credit 1,705,000 1,979,000
Other liabilities 20,000 24,000
------------ ------------
Total current liabilities 6,578,000 6,839,000
------------ ------------
LONG-TERM DEBT 2,340,000 2,680,000
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock - no par value; 5,000,000 shares
authorized; 131,667 and 301,250 series B shares
issued and outstanding at March 31, 1999 and
December 31, 1998, respectively (aggregate
preference on liquidation of $316,000 at
March 31, 1999) 299,000 686,000
Common stock - no par value; 40,000,000 shares
authorized; 14,225,316 and 14,044,428 shares
issued and outstanding at March 31, 1999 and
December 31, 1998, respectively 38,122,000 37,735,000
Common stock warrants 615,000 615,000
Cumulative other comprehensive income 24,000 --
Accumulated deficit (23,659,000) (24,219,000)
------------ ------------
Net shareholders' equity 15,401,000 14,817,000
------------ ------------
TOTAL $ 24,319,000 $ 24,336,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
3
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I-FLOW CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net revenues $ 6,218,000 $ 4,072,000
----------- -----------
Costs and expenses:
Cost of sales 2,439,000 1,810,000
Selling and marketing 1,067,000 853,000
General and administrative 1,769,000 1,189,000
Product development 241,000 210,000
----------- -----------
Total costs and expenses 5,516,000 4,062,000
Operating income 702,000 10,000
Interest expense 123,000 151,000
Income taxes 21,000 7,000
----------- -----------
Net income (loss) $ 558,000 $ (148,000)
----------- -----------
Net income (loss) per share
Basic and diluted $ 0.04 $ (0.01)
=========== ===========
Comprehensive Operations:
Net income (loss) $ 558,000 $ (148,000)
Foreign currency translation adjustment 24,000 60,000
=========== ===========
Comprehensive income (loss) $ 582,000 $ (88,000)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
4
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I-FLOW CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1999 1998
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 558,000 $ (148,000)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operations:
Depreciation and amortization 595,000 298,000
Changes in operating assets and liabilities:
Accounts receivable 188,000 1,656,000
Inventories (434,000) (295,000)
Prepaid expenses and other 55,000 (98,000)
Accounts payable, accrued expenses and
other liabilities 94,000 (2,024,000)
---------- -----------
Net cash provided (used) by operating activities 1,056,000 (611,000)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property (acquisitions) disposals (200,000) 55,000
Change in other assets (388,000) (360,000)
---------- -----------
Net cash used by investing activities (588,000) (305,000)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments proceeds from line of credit (274,000) 2,263,000
Payments on notes payable (417,000) (1,500,000)
Proceeds from exercise of stock options and warrants -- 13,000
---------- -----------
Net cash provided (used) by financing activities (691,000) 776,000
---------- -----------
Effect of exchange rates on cash 24,000 60,000
NET DECREASE IN CASH AND CASH EQUIVALENTS (199,000) (80,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 971,000 715,000
---------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 772,000 $ 635,000
========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 125,000 $ 155,000
---------- -----------
Income tax payments $ 12,000 $ 7,000
---------- -----------
Preferred stock dividends payable $ 4,000 $ 19,000
---------- -----------
Liabilities issued and assumed in connection with
acquisition:
Fair value of assets acquired (including intangibles) $ 8,254,000
Common stock issued (3,044,000)
-----------
Liabilities issued and assumed $ 5,210,000
===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
I-FLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements contain all
adjustments (consisting only of normal recurring adjustments) which, in
the opinion of management, are necessary to present fairly the financial
position of the Company at March 31, 1999 and the results of its
operations and its cash flows for the three-months ended March 31, 1999
and 1998. Certain information and footnote disclosures normally included
in financial statements have been condensed or omitted pursuant to rules
and regulations of the Securities and Exchange Commission although the
Company believes that the disclosures in the financial statements are
adequate to make the information presented not misleading.
The financial statements included herein should be read in conjunction
with the financial statements of the Company included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998 filed
with the Securities and Exchange Commission on March 31, 1999.
Certain amounts previously reported have been reclassified to conform
with the presentation at March 31, 1999.
2. INVENTORIES
Inventories consisted of the following as of March 31, 1999 and December
31, 1998:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -----------
<S> <C> <C>
Raw Materials $ 3,835,000 $ 3,507,000
Work in Process 437,000 172,000
Finished Goods 1,684,000 1,869,000
Reserve for obsolescence (1,194,000) (1,220,000)
----------- -----------
Total $ 4,762,000 $ 4,328,000
=========== ===========
</TABLE>
3. EARNINGS PER SHARE
In December 1997, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 128, Earnings per Share. SFAS No. 128 redefines
earnings per share under generally accepted accounting principles. Under
the new standard, primary net income per share is replaced by basic net
income per share and fully diluted net income per share is replaced by
diluted net income per share. All historical earnings per share
information has been restated as required by SFAS No. 128.
Basic net income (loss) per share is computed using the weighted average
number of common shares outstanding during the periods presented.
Diluted net income (loss) per share is computed using the weighted
average number of common and common equivalent shares outstanding during
the periods presented assuming the conversion of all shares of the
Company's convertible preferred stock into common stock and the exercise
of all in-the-money stock options. Common equivalent shares have not
been included where inclusion would be antidilutive.
6
<PAGE> 7
The following is a reconciliation between the net income (loss) and the
number of shares used in the basic and diluted net income (loss) per
share calculations:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1999 1998
------ ------
(Amounts in thousands)
<S> <C> <C>
Net income (loss) 558 (148)
Less preferred stock dividends (4) (19)
------ ------
Net income (loss) available to common shareholders 554 (167)
------ ------
Basic net income (loss) per share
Weighted average number of shares outstanding 14,099 12,951
Effect of dilutive securities:
Preferred stock 140 700
Stock options 454 --
------ ------
Diluted net income (loss) per share
Weighted average number of shares outstanding 14,693 13,651
====== ======
</TABLE>
4. BUSINESS SEGMENTS
The Company operates in two business segments: manufacturing and
marketing of medical infusion pumps and rentals of medical infusion
pumps.
Business segment information is as follows for the three-months ended
March 31, 1999 and 1998:
<TABLE>
<CAPTION>
Manufacturing
and Marketing Rentals Consolidated
------------- ---------- ------------
<S> <C> <C> <C>
1999
Revenues $4,228,000 $1,990,000 $ 6,218,000
Operating income 292,000 410,000 702,000
Assets 20,254,000 8,549,000 24,319,000
1998
Revenues 2,989,000 1,083,000 4,072,000
Operating income (342,000) 352,000 10,000
Assets 19,948,000 8,704,000 24,609,000
</TABLE>
5. ACQUISITION OF INFUSYSTEMS II, INC. AND VENTURE MEDICAL, INC.
On February 9, 1998, the Company entered into an Agreement and Plan of
Merger (the "Agreement") with, InfuSystems II, Inc. ("InfuSystem"),
Venture Medical, Inc. ("VMI") and the shareholders of InfuSystem and
VMI, contemplating the merger of InfuSystem and VMI with and into a
wholly-owned subsidiary of the Company. Pursuant to the Agreement, VMI
and InfuSystem were merged (the "Merger") with and into the subsidiary
effective as of February 11, 1998. The acquisition was accounted for
under the purchase method of accounting and the purchase price has been
allocated to the net assets acquired and goodwill.
In the Merger, all of the outstanding shares of Common Stock of VMI and
InfuSystems were exchanged for shares of Common Stock of the Company.
The aggregate number of shares of Common Stock of the
7
<PAGE> 8
Company issued in the Merger to the shareholders of VMI and InfuSystems
was 972,372 shares, valued at approximately $2.9 million (subject to
certain post-closing adjustments). As contemplated by the Agreement,
shares of Common Stock of the Registrant issued in the Merger valued at
$1.5 million (the "Escrowed Shares") were withheld and were delivered to
an escrow agent, to be deposited in escrow. The Escrowed Shares, or cash
equal to the closing value of the Escrowed Shares, will be held for a
period of two years during which time they will be subject to claims by
the Company to satisfy the obligations of InfuSystems, VMI and the
shareholders of InfuSystems and VMI under the Agreement (subject to the
possible earlier release of a portion of the Escrowed Shares in
connection with collection of certain accounts receivable). At each of
the six-month, one-year, eighteen-month and two-year anniversaries of
the closing, if the value of the Company's Common Stock at such time is
less than the value of its Common Stock as of the closing ($2.98 per
share), then the Company will be obligated to pay additional amounts as
merger consideration. Any additional amounts are to be calculated
pursuant to the formula set forth in the Agreement. At the Company's
election, it may pay such additional merger consideration by the
issuance of additional shares of its Common Stock, in cash, or any
combination thereof. In August 1998, the Company issued 234,806 shares
of its Common Stock pursuant to the valuation floor provision for the
six-month anniversary. There was no incremental value ascribed to these
additional shares for purchase accounting of the acquisition. In March
1999, the Company paid $286,081 pursuant to the valuation floor
provision for the one-year anniversary.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain disclosures made by the Company in this report and in other
reports and statements released by the Company are and will be
forward-looking in nature, such as comments that express the Company's
opinions about trends and factors that may impact future operating
results. Disclosures that use words such as the Company "believes,"
"anticipates," or "expects" or use similar expressions are intended to
identify forward-looking statements. Such statements are subject to
certain risks and uncertainties that could cause actual results to
differ from those expected. Readers are cautioned not to place undue
reliance on these forward-looking statements. The Company undertakes no
obligation to publish revised forward-looking statements to reflect the
occurrence of unanticipated events. Readers are also urged to carefully
review and consider the various disclosures made by the Company in this
report that seek to advise interested parties of the risks and other
factors that affect the Company's business, as well as in the Company's
periodic reports on Forms 10-K, 10-Q, and 8-K filed with the Securities
and Exchange Commission. The risks affecting the Company's business
include reliance on the success of the home health care industry, the
ability to penetrate hospital accounts, the health care reimbursement
system in place now and in the future, competition in the industry,
demand in foreign countries, customer credit risks, technological
changes and product availability. Any such forward-looking statements,
whether made in this report or elsewhere, should be considered in
context with the various disclosures made by the Company about its
business.
RESULTS OF OPERATIONS
Net revenues during the three-months ended March 31, 1999 were
$6,218,000 compared to $4,072,000 for the same period in the prior year,
an increase of 53%. In February 1998, the Company acquired two new
subsidiaries, InfuSystems II, Inc. and Venture Medical, Inc., both of
which were national ambulatory infusion pump management and distribution
companies based in Detroit, Michigan. These companies were merged into
InfuSystem, Inc. ("InfuSystem"), a wholly owned subsidiary of the
Company. Rental revenues generated by InfuSystem, Inc. of $1,990,000 and
$1,083,000 were included in net revenues for the three-months ended
March 31, 1999 and 1998, respectively.
Net product revenues increased from $2,989,000 for the three months
ended March 31, 1998 to $4,228,000 for the same period in 1999. Revenues
in early 1998 were adversely affected by the restructuring of the
Company's worldwide distribution network as well as existing high
distributor inventory levels early in 1998, which caused a short-term
decline in shipments of infusion products to the Company's previous
distribution partners. New distribution partners and new products were
added in 1998 that contributed significantly to the increased product
revenues for the three-months ended March 31, 1999.
In March 1998, the Company entered into an agreement with B. Braun
Melsungen AG (G.BRN), a world leader in the manufacture and distribution
of pharmaceuticals and infusion products, to distribute I-Flow's
elastomeric infusion pumps in Western Europe, Eastern Europe, the Middle
East, Asia Pacific, South America and Africa. The Company also entered
into a similar agreement under which B. Braun of America, Inc.
distributes I-Flow's elastomeric pumps to its full line IV solution
customers in the United States. During the three months ended March 31,
1999 and 1998, aggregate sales to these two companies accounted for
approximately 12% and 10%, respectively, of the Company's net revenues.
I-Flow received permission in June 1998 from the Food and Drug
Administration ("FDA") to market the PainBuster(TM) in the United
States. I-Flow's PainBuster pain management system provide continuous
infusion of a non-narcotic, local anesthetic directly into the
intraoperative site for post-operative pain management. In September
1998, the Company entered into a letter of understanding to distribute
the PainBuster through Smith & Nephew, Inc., a leading worldwide
healthcare company offering a broad range of products for the care and
repair of bones, joints, skin and other soft tissue. In January 1999,
DonJoy, the division of Smith & Nephew that distributes the PainBuster,
was spun off and the Company's letter of understanding with Smith &
Nephew expired on February 28, 1999. However, DonJoy continued to
purchase the PainBuster since that time at the same terms of the letter.
During the three months ended March 31, 1999, sales of the PainBuster to
Smith & Nephew were $969,000.
9
<PAGE> 10
In May 1999, the Company signed a distribution agreement with DonJoy
under which they become the exclusive United States and Canadian
distributor for orthopaedic surgery applications of the PainBuster. The
agreement calls for I-Flow to receive a $2 million licensing fee during
1999 and for DonJoy to meet minimum purchase commitments for 1999 and
beyond in order to maintain distribution rights.
Cost of sales of $2,439,000 were incurred during the three-months ended
March 31, 1999, compared to $1,810,000 in the prior year. As a
percentage of net sales, cost of sales decreased from 44% to 39%
compared to the same period in the prior year. This increase in gross
profit is mainly attributable to the inclusion of InfuSystem for the
entire period ended March 31, 1999. As primarily a service business,
InfuSystem has a considerably higher gross margin than the Company's
traditional manufacturing business. Additionally, sales of the new
PainBuster product in the first quarter of 1999 added to the gross
margin, as this product currently has higher margins than the Company's
traditional products.
Selling and marketing expenses for the three-months ended March 31, 1999
increased over the same period in the prior year by $214,000 or 25%.
This increase is primarily due to the addition of such expenses for
InfuSystem for the entire three-month period in 1999 versus
approximately one-half of the three-month period for 1998. InfuSystem
selling and marketing expenses included in the consolidated financial
statements totaled $386,000 and $138,000 for the periods ended March 31,
1999 and 1998.
General and administrative expenses for the three-months ended March 31,
1999 increased $525,000 or 50% from the same period in the prior year,
primarily due to the addition of InfuSystem for the entire three-month
period in 1999 compared to approximately one-half of the three-month
period for 1998. For the three-months ended March 31, 1999 and 1998,
InfuSystem incurred general and administrative expenses of $531,000 and
$240,000, respectively. Without the InfuSystem general and
administrative expenses, the Company's general and administrative
expenses for the three-months ended March 31, 1999 would have increased
by $234,000 primarily due to increased payroll and related costs.
Product development expenses for the three-months ended March 31, 1999
increased over the same period in the prior year by $31,000, or 15%. The
Company will continue to incur product development expenses as it
continues its efforts to introduce new and improved technology and
cost-efficient products into the market.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 1999, funds of $1,056,000 were
provided by operating activities consisting of net income of $558,000
plus non-cash expenses of $595,000 less net changes in operating assets
and liabilities of $97,000. These changes in operating assets and
liabilities consisted of: (1) a decrease in accounts receivable of
$188,000 due to improved collections, (2) a decrease in prepaid expenses
and other of $55,000, and (3) an increase in accounts payable, accrued
expenses, and other liabilities of $94,000 due to the timing of payments
of trade accounts payable, less (4) an increase in inventories of
$434,000 due to lower than expected sales for certain products.
The Company used funds for investing activities during the three-months
ended March 31, 1999 for acquiring leasehold improvements, furniture,
fixtures, equipment, and other assets aggregating $588,000 for use in
its operations. Included in such amount is payment of $286,000 to the
former shareholders of InfuSystem (see Note 6 of Notes to Consolidated
Financial Statements).
During the three-months ended March 31, 1999, funds of $691,000 were
used for financing activities consisting primarily of payments on notes
payable net of borrowings of $417,000 and a net reduction on the
Company's line of credit of $274,000.
As of March 31, 1999, the Company had cash funds of $772,000 and net
receivables of $7,302,000. To date, the Company has financed its
operations and working capital requirements primarily through equity
financings and bank borrowings. Management believes the Company's funds
are sufficient to provide for its short and long-term projected needs
for operations. However, the Company may decide to sell additional
equity or increase its borrowings in order to fund increased product
development or for other purposes.
10
<PAGE> 11
YEAR 2000 COMPLIANCE
Many computer systems and software products are coded to accept only two
digit entries in the date code field. These date code fields will need
to accept four digit entries to distinguish 21st century dates from 20th
century dates. As a result, prior to the end of 1999, computer systems
and/or software used in many companies may need to be upgraded to comply
with such "Year 2000" requirements.
The Company has determined that it will be necessary to modify or
replace portions of its hardware and software so that its computer
systems properly recognize dates beyond December 31, 1999. The Company
believes that with modifications and conversions, the Year 2000 issue
can be managed, and the associated risks mitigated. The Company has
received confirmation from vendors of certain software used for internal
operations that current releases or upgrades, if installed, are designed
to be Year 2000 compliant. The Company is in the process of installing
such upgrades to its current systems and believes that substantially all
of the upgrades will be completed by June 30, 1999. The Company,
however, has contacted the companies on which I-Flow relies heavily to
determine the extent to which the Company may be vulnerable to such
parties' failure to resolve their own Year 2000 issues. Where
practicable, the Company will assess and attempt to mitigate its risks
with respect to failure of these entities to be Year 2000 ready. The
effect, if any, on the Company's results of operations from the failure
of such parties to be Year 2000 ready is not reasonably estimable.
The Company is in the process of evaluating its own products for
potential Year 2000 issues and making such products Year 2000 compliant.
The vast majority of the Company's products are not date sensitive and
the Company does not directly rely on any of its vendors' or customers'
systems. The Company does not believe that there will be significant
issues or costs associated with making its products Year 2000 compliant.
However, there can be no assurance that such products do not contain
undetected errors or defects associated with year 2000 date functions.
The Company has been using both external and internal resources to
reprogram or replace its software for the Year 2000 issues. To date, the
amounts incurred and expensed for developing and carrying out the plan
have not had a material effect on the Company's operations. The Company
plans to complete Year 2000 modifications, including testing, by early
1999. The total estimated remaining cost for addressing the Year 2000
issue is approximately $66,000, and is not expected to be material to
the Company's operations. All remaining Year 2000 issues costs will be
funded through operating cash flows. Although the Company is not aware
of any material operational issues or costs associated with preparing
its products or internal information systems for the year 2000, there
can be no assurances that the Company will not experience serious
unanticipated negative consequences and/or material costs caused by
undetected errors or defects in the technology used in its internal
systems, which are composed predominantly of third party software and
hardware.
Should the Company be unable to completely mitigate internal and
external Year 2000 risks, this could result in a system failure or
miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities at the Company
or its vendors and suppliers. The Company believes, that under a worst
case scenario, it could continue the majority of its normal business
activities on a manual basis.
11
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
FOREIGN CURRENCY
The Company has a subsidiary operation in Mexico. Accordingly, the
Company is exposed to transaction gains and losses that could result
from changes in foreign currency exchange rates. The Company believes
that this foreign currency market risk is not material.
12
<PAGE> 13
PART II - OTHER INFORMATION
Items 1. - 5. Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Exhibit
----------- -------
3.1 Restated Articles of Incorporation of the Company (2)
3.2 Certificate of Amendment to Restated Articles of
Incorporation dated June 14, 1991 (3)
3.3 Certificate of Amendment to Restated Articles of
Incorporation dated May 12, 1992 (4)
3.4 Certificate of Determination covering Company's Series B
Preferred Stock filed with the Secretary of State on October
5, 1992 (4)
3.5 Restated Bylaws as of July 22, 1991 of the Company (3)
4.1 Specimen Common Stock Certificate (4)
4.2 Warrant Agreement between the Company and American Stock
Transfer & Trust Company, as Warrant Agent, dated February
13, 1990 (1)
4.3 Form of Warrant dated July 22, 1996, issued in conjunction
with the acquisition of Block Medical, Inc. (5)
27 Financial Data Schedule
- -----------------
(1) Incorporated by reference to exhibit with this title filed with the
Company's Registration Statement (#33-32263-LA) declared effective February
1, 1990.
(2) Incorporated by reference to exhibit with this title filed with the
Company's Form 10-K for its fiscal year ended September 30, 1990.
(3) Incorporated by reference to exhibit with this title filed with the
Company's Registration Statement (#33-41207-LA) declared effective August 8,
1991.
(4) Incorporated by reference to exhibit with this title filed with the
Company's Post Effective Amendment to its Registration Statement
(#33-41207-LA) declared effective November 6, 1992.
(5) Incorporated by reference to exhibit with this title filed with the
Company's Report on Form 8-K dated July 22, 1996.
(b) Reports on Form 8-K.
During the quarter ended March 31, 1999, the Company filed no
Current Reports on Form 8-K.
13
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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.
I-FLOW CORPORATION
-------------------------
(Registrant)
Date: May 12, 1999 /s/ Donald M. Earhart
-------------------------------
Donald M. Earhart,
Chairman, President and CEO
Date: May 12, 1999 /s/ Gayle L. Arnold
-------------------------------
Gayle L. Arnold,
Vice President, Finance, Chief
Financial Officer
14
<PAGE> 15
INDEX TO EXHIBITS
Set forth below is a list of the exhibits included or incorporated by
reference as part of this report:
Exhibit No. Exhibit
----------- -------
3.1 Restated Articles of Incorporation of the Company (2)
3.2 Certificate of Amendment to Restated Articles of
Incorporation dated June 14, 1991 (3)
3.3 Certificate of Amendment to Restated Articles of
Incorporation dated May 12, 1992 (4)
3.4 Certificate of Determination covering Company's Series B
Preferred Stock filed with the Secretary of State on October
5, 1992 (4)
3.5 Restated Bylaws as of July 22, 1991 of the Company (3)
4.1 Specimen Common Stock Certificate (4)
4.2 Warrant Agreement between the Company and American Stock
Transfer & Trust Company, as Warrant Agent, dated February
13, 1990 (1)
4.3 Form of Warrant dated July 22, 1996, issued in conjunction
with the acquisition of Block Medical, Inc. (5)
27 Financial Data Schedule
- -----------------
(1) Incorporated by reference to exhibit with this title filed with the
Company's Registration Statement (#33-32263-LA) declared effective February
1, 1990.
(2) Incorporated by reference to exhibit with this title filed with the
Company's Form 10-K for its fiscal year ended September 30, 1990.
(3) Incorporated by reference to exhibit with this title filed with the
Company's Registration Statement (#33-41207-LA) declared effective August 8,
1991.
(4) Incorporated by reference to exhibit with this title filed with the
Company's Post Effective Amendment to its Registration Statement
(#33-41207-LA) declared effective November 6, 1992.
(5) Incorporated by reference to exhibit with this title filed with the
Company's Report on Form 8-K dated July 22, 1996.
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<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> 772 971
<SECURITIES> 0 0
<RECEIVABLES> 7,302 7,490
<ALLOWANCES> 0 0
<INVENTORY> 4,762 4,328
<CURRENT-ASSETS> 13,419 13,427
<PP&E> 6,989 6,789
<DEPRECIATION> (3,727) (3,362)
<TOTAL-ASSETS> 24,319 24,336
<CURRENT-LIABILITIES> 9,578 5,839
<BONDS> 0 0
0 0
299 686
<COMMON> 38,737 38,350
<OTHER-SE> (23,635) (24,219)
<TOTAL-LIABILITY-AND-EQUITY> 24,319 24,336
<SALES> 6,218 4,072
<TOTAL-REVENUES> 0 0
<CGS> 2,439 1,810
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 3,077 2,252
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 123 151
<INCOME-PRETAX> 579 (141)
<INCOME-TAX> 27 7
<INCOME-CONTINUING> 558 (148)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 558 (148)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> .04 (.01)
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