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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q/A
Amendment No. 1
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission File No. 0-20260
Commission File No. 1-11440
INTEGRAMED AMERICA, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
One Manhattanville Road, Purchase, New York 10577
(Address of principal executive offices)
06-1150326
(I.R.S. employer identification no.)
(914) 253-8000
(Registrant's telephone number, including area code)
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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 [ ]
The aggregate number of shares of the Registrant's Common Stock, $.01
par value, outstanding on August 12, 1996 was 9,198,375.
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IntegraMed America, Inc. hereby amends Part I, Item 1 of the Quarterly
Report on Form 10-Q for the period ended June 30, 1996 as set forth herein. The
amendment is being filed to correct certain disclosures made in Note 6 -
Acquisitions - to the unaudited consolidated financial statements.
<PAGE>
INTEGRAMED AMERICA, INC.
FORM 10-Q/A
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at June 30, 1996 (unaudited)
and December 31, 1995....................................... 3
Consolidated Statement of Operations for the three and
six-month period ended June 30, 1996 and 1995 (unaudited)... 4
Consolidated Statement of Cash Flows for the six-month
period ended June 30, 1996 and 1995 (unaudited)............. 5
Notes to Consolidated Financial Statements (unaudited)........6-13
SIGNATURES .................................................. 14
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
<TABLE>
INTEGRAMED AMERICA, INC.
CONSOLIDATED BALANCE SHEET
(all dollars in thousands)
<CAPTION>
ASSETS
June 30, December 31,
1996 1995
-------- --------
(unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents ........................................................ $ 5,739 $ 7,883
Short term investments ........................................................... 2,000 1,500
Patient accounts receivable, less allowance for doubtful accounts of $96 and $64
in 1996 and 1995, respectively ................................................... 2,237 1,271
Management fees receivable ....................................................... 1,202 1,125
Research fees receivable ......................................................... 299 --
Other current assets ............................................................. 867 508
Controlled assets of Medical Providers- (see Note 2):
Cash ......................................................................... 215 296
Accounts receivable, less allowance for doubtful accounts of $31 and $25
in 1996 and 1995, respectively ............................................ 872 1,449
Other current assets ......................................................... 9 14
-------- --------
Total controlled assets of Medical Providers .............................. 1,096 1,759
Total current assets ...................................................... 13,440 14,046
-------- --------
Fixed assets, net .............................................................. 2,670 2,266
Trademarks, net ................................................................ 158 163
Goodwill and exclusive management rights, net .................................. 5,457 1,548
Other assets ................................................................... 216 248
-------- --------
Total assets .............................................................. $ 21,941 $ 18,271
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................................. $ 578 $ 181
Accrued liabilities .............................................................. 1,308 1,307
Due to Medical Providers-(see Note 2) ............................................ 665 606
Dividends accrued on Preferred Stock ............................................. 1,254 946
Current portion of exclusive management rights obligation ........................ 322 297
Current portion of long-term debt ................................................ 422 274
Patient deposits ................................................................. 371 411
------- -------
Total current liabilities ................................................. 4,920 4,022
------- -------
Exclusive management rights obligation ............................................. 1,252 978
Long-term debt ..................................................................... 726 340
Commitments and contingencies- (see Note 4) ........................................ ------- -------
Shareholders' equity - (see Note 3)
Preferred Stock, $1.00 par value -
3,773,878 and 3,785,378 shares authorized in 1996 and 1995, respectively -
2,500,000 undesignated; 1,273,378 and 1,285,378 shares designated as Series
A Cumulative Convertible in 1996 and 1995, respectively, of which 773,878
and 785,378
shares were issued and outstanding in 1996 and 1995, respectively .............. 774 785
Common Stock, $.01 par value - 25,000,000 shares authorized; 6,765,375 and
6,086,910 shares issued and outstanding in 1996 and 1995, respectively 67 61
Capital in excess of par ......................................................... 33,891 31,785
Accumulated deficit .............................................................. (19,689) (19,700)
------- -------
Total shareholders' equity ................................................ 15,043 12,931
------- -------
Total liabilities and shareholders' equity ................................ $ 21,941 $ 18,271
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE>
<TABLE>
INTEGRAMED AMERICA, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(all amounts in thousands, except per share amounts)
<CAPTION>
For the three-month For the six-month
period ended June 30, period ended June 30,
1996 1995 1996 1995
------- ------- ------- -------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Clinical revenues and management fees (see Note 2)........ $4,822 $4,288 $8,998 $8,420
Medical Provider retainage (see Note 2)................... 720 730 1,514 1,718
------- ------- ------- -------
Revenues after Medical Provider retainage (see Note 2).... 4,102 3,558 7,484 6,702
Costs of services rendered ............................... 2,986 2,479 5,550 5,005
------- ------- ------- -------
Network sites' contribution .............................. 1,116 1,079 1,934 1,697
------- ------- ------- -------
General and administrative expenses ...................... 960 978 1,815 1,794
Research and development.................................. 62 61 128 112
Exclusive management rights and goodwill amortization..... 49 13 91 13
Interest income........................................... (102) (160) (222) (327)
Interest expense.......................................... 9 6 14 12
------- ------- ------- -------
Total other expenses...................................... 978 898 1,826 1,604
------- ------- ------- -------
Income before income taxes................................ 138 181 108 93
Provision for income and capital taxes................... 53 53 97 87
------- ------- ------- -------
Net income................................................ 85 128 11 6
Less: Dividends accrued on Preferred Stock................ 155 166 309 331
------- ------- ------- -------
Net loss applicable to Common Stock....................... $ (70) $ (38) $ (298) $ (325)
======= ======== ======= ======
Net loss per share of Common Stock........................ $(0.01) $ (0.01) $ (0.05) $(0.05)
======= ======== ======= ======
Weighted average number of shares of Common Stock
outstanding............................................... 6,267 6,087 6,177 6,087
======= ======== ======= ======
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE>
INTEGRAMED AMERICA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(all amounts in thousands)
For the six-month
period ended June 30,
1996 1995
---- ----
(unaudited)
Cash flows from operating activities:
Net income.............................................. $ 11 $ 6
Adjustments to reconcile net income to net cash used
in operating activities:
Depreciation and amortization.......................... 489 380
Writeoff of deferred rent in 1996 and fixed assets
in 1995.............................................. (120) 9
Changes in assets and liabilities net of effects from
acquired businesses--
(Increase) decrease in assets:
Accounts receivable............................... (884) (329)
Management fees receivable........................ (77) (510)
Other current assets.............................. (359) (311)
Trademarks........................................ (14) -
Other assets...................................... 32 32
Decrease in controlled assets of Medical Providers:
Accounts receivable............................... 577 408
Other current assets.............................. 5 21
Increase (decrease) in liabilities:
Accounts payable.................................. 397 (459)
Accrued liabilities............................... (295) 208
Due to Medical Providers.......................... 59 (291)
Patient deposits.................................. (42) (122)
----- ------
Net cash used in operating activities................... (221) (958)
----- ------
Cash flows (used in) provided by investing activities:
Purchase of short-term investments................... (500) -
Purchase of net assets of acquired businesses........ (431) -
Payments for exclusive management rights............. (183) (250)
Purchase of fixed assets and leasehold improvements.. (650) (780)
Sale of fixed assets and leasehold improvements...... - 651
----- ------
Net cash used in investing activities................... (1,764) (379)
----- ------
Cash flows (used in) provided by financing activities:
Principal repayments on debt......................... (46) (37)
Principal repayments under capital lease obligations. (113) (75)
Purchase of Convertible Preferred Stock.............. (84) (150)
Proceeds from exercise of Common Stock options....... 3 -
----- ------
Net cash used in financing activities..................... (240) (262)
----- ------
Net decrease in cash...................................... (2,225) (1,599)
Cash at beginning of period............................... 8,179 11,694
----- ------
Cash at end of period..................................... $5,954 $10,095
======= =======
See accompanying notes to the consolidated financial statements.
5
<PAGE>
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - INTERIM RESULTS:
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, accordingly, do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the accompanying unaudited interim financial statements contain all
adjustments (consisting only of normal recurring accruals) necessary to present
fairly the financial position at June 30, 1996, and the results of operations
and cash flows for the interim period presented. Operating results for the
interim period are not necessarily indicative of results that may be expected
for the year ending December 31, 1996. These financial statements should be read
in conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue and cost recognition --
The Company has two divisions: the Reproductive Science Center Division (the
"RSC Division") and the newly formed Women's Medical and Diagnostic Center
Division (the "WMDC Division"). The RSC Division derives its revenues from nine
Network sites which it provides management services to, including certain
clinics and/or laboratories which are directly owned. The WMDC Division derives
its revenues from the three women's healthcare companies and the 51% controlling
interest in the National Menopause Foundation which it acquired in June 1996
(which combined, represent one Network site referred to herein as "WMDC of
Gainesville"). For the three and six-month periods ended June 30, 1996, the RSC
and the WMDC Divisions comprised 98% and 2%, and 99% and 1% of the Company's
total revenues, respectively.
All clinical revenues are recorded on a net realizable basis after deducting
contractual allowances and consist of patient fees collected by the Company
either on its own behalf (i.e., where the clinic and/or lab are directly owned
by the Company) and/or on behalf of the medical institution or medical group for
ART, infertility, laboratory and peri and post menopausal women's healthcare
services performed at the Network sites. Under certain management contracts the
Company is exclusively liable to the Medical Providers for physician
compensation and other medical costs incurred ("Medical Provider retainage"),
regardless of the actual revenue generated by the Medical Provider pursuant to
its contract with the Company. Such retainage is segregated from clinical
revenues and paid to or on behalf of the Medical Provider; any balance remaining
represents the Company's management fee. Under management contracts where the
Company is not exclusively liable for the Medical Provider costs, the Company
recognizes management fees which typically have two components: 1) a fixed
amount per month or a fixed percentage of both monthly net revenues and earnings
after management fees; and 2) reimbursed cost of services (including other
medical costs). Costs incurred in managing the Network sites, excluding Medical
Provider retainage for certain contracts, are included in "Cost of services
rendered".
Clinical revenues and related direct costs are recognized in the period in
which the clinical and/or laboratory services are rendered by the Medical
Providers. Net realization is dependent upon benefits provided by the patient's
insurance policy or agreements between the Network site and the third-party
payor. Payments collected from patients in advance for services are included in
patient deposits. Management fees under contracts where the Company is not
exclusively liable for the Medical Provider costs are recorded on a net
realizable basis and are recognized in the period in which such services are
rendered by the Company.
6
<PAGE>
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
For the three and six month period ended June 30, 1996 and 1995 the Company's
revenues consisted of the following:
<TABLE>
<CAPTION>
For the For the
three-month period six-month period
ended June 30, ended June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Clinical revenues associated with Medical Provider Retainage ..... $3,001 $3,584 $5,526 $7,442
Management fees................................................... 1,464 532 2,906 563
Clinical revenues from clinics and labs owned directly by
the Company..................................................... 357 172 566 415
------ ------ ------ ------
Total clinical revenues and management fees....................... $4,822 $4,288 $8,998 $8,420
====== ====== ====== ======
</TABLE>
Included in clinical revenues for the six-month period ended June 30,
1996 were approximately $53,000 of revenues earned under research study
contracts between WMDC of Gainesville and various pharmaceutical companies. WMDC
of Gainesville contracts with major pharmaceutical companies (sponsors) to
perform women's medical care research mainly to determine the safety and
efficacy of a medication. Based on the data collected from studies conducted by
WMDC of Gainesville and other non-related centers for major pharmaceutical
companies, the Food and Drug Administration (FDA) determines whether a
medication can be manufactured and made available to the public. Research
revenues are recognized pursuant to each respective research contract in the
period which the medical services (as stipulated by the research study protocol)
are performed and collection of such fees is considered probable. Net
realization is dependent upon final approval by the sponsor that procedures were
performed according to study protocol. Payments collected from sponsors in
advance for services are included in accrued liabilities and totaled $71,000 as
of June 30, 1996. Costs incurred in performing the research studies are included
in "Cost of services rendered".
Patient accounts receivable --
Patient accounts receivable represent receivables from patients for
medical services provided by the Medical Providers. Such amounts are recorded
net of contractual allowances and estimated bad debts. As of June 30, 1996 and
December 31, 1995, approximately $562,000 and $150,000, respectively, of
accounts receivable were a function of Network site revenue (i.e., the Company
purchased the accounts receivable from the Medical Provider) and the $1,675,000
and $1,121,000 balance, respectively, was a function of net revenues of the
Company (see Note 2 -- "Revenue and Cost Recognition" above).
Management fees receivable --
Management fees receivable represent fees owed to the Company pursuant to
its management agreements with certain Network sites (see Note 2 - "Revenue and
cost recognition" above).
Research Fees Receivable --
Research fees receivable represent receivables from pharmaceutical
companies for medical services provided by WMDC of Gainesville to patients
pursuant to protocols stipulated under research study contracts between the
pharmaceutical companies and WMDC.
7
<PAGE>
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Controlled assets of Medical Providers --
Controlled cash represents segregated cash held in the name of certain
Medical Providers; controlled accounts receivable represent patient receivables
due to certain Medical Providers, and controlled other current assets represent
assets owned by and held in the name of certain Medical Providers, all of which
are reflected on the Company's balance sheet due to the Company's unilateral
control of such assets.
At June 30, 1996 and December 31, 1995, of the $1,096,000 and $1,759,000
controlled assets of Medical Providers, $198,000 and $279,000, respectively, was
restricted for payment of the amounts due to Medical Providers and the balance
of $898,000 and $1,480,000 was payable to the Company.
Intangible Assets --
Goodwill and Exclusive Management Rights
Goodwill represents the excess of the purchase price of businesses
acquired over the fair value of the net assets of the businesses acquired.
Exclusive management rights represent the cost incurred by the Company for the
right to manage certain Network sites.
Trademarks
Trademarks which represent trademarks, service marks, trade names and
logos purchased related to the ART program are valued at cost less accumulated
amortization.
Amortization and Recoverability
The Company periodically reviews its intangible assets to assess
recoverability and impairments would be recognized in the consolidated statement
of operations if a permanent impairment were determined to have occurred.
Recoverability of intangibles is determined based on undiscounted expected
earnings from the related business unit or activity over the remaining
amortization period. Goodwill is amortized over the life of the business
acquired, not to exceed forty years. At June 30, 1996, goodwill was being
amortized over a forty year period. Exclusive management rights are amortized
over the term of the respective management agreement, usually ten years.
Minority Interest --
Minority interest represents a 49% interest in the National Menopause
Foundation held by the original owner, now a significant shareholder of the
Company. The Company acquired its 51% interest in this entity in June 1996 and
this entity is included in the Company's consolidated financial statements as of
the date of acquisition. At June 30, 1996, the minority interest is included in
accrued liabilities in the consolidated balance sheet.
NOTE 3 - SHAREHOLDERS' EQUITY:
Dividends on the Convertible Preferred Stock are payable at the rate of
$.80 per share per annum, quarterly on the fifteenth day of August, November,
February and May of each year commencing August 15, 1993. As of June 30, 1996,
the Company's Board of Directors suspended eight quarterly dividend payments
thereby entitling holders of the Convertible Preferred Stock to one vote per
share of Convertible Preferred Stock on all matters submitted to a vote of
stockholders, including election of directors; once in effect, such voting
rights are not terminated by the payment of all accrued dividends. As of June
30, 1996, dividend payments of $1,254,000 on the Convertible Preferred Stock
were in arrears. The Company does not anticipate the payment of any cash
dividends on the Convertible Preferred Stock in the foreseeable future.
8
<PAGE>
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The determination by the Board of Directors to not declare and pay each
of the last eight quarterly dividends and the Company's issuance of Common
shares in connection with its acquisition of WMDC of Gainesville, resulted in an
adjustment to the conversion rate from 1.122 shares of Common Stock to 1.45
shares of Common Stock for each share of Convertible Preferred Stock.
On November 30, 1994 the Company announced it may purchase up to 300,000
shares of its outstanding Convertible Preferred Stock at such times and prices
as it deems advantageous. The Company has no commitment or obligation to
purchase any particular number of shares, and it may suspend the program at any
time. As of June 30, 1996, the Company had purchased and retired 90,000 shares
of Convertible Preferred Stock, which resulted in a balance of 773,878 shares of
Convertible Preferred Stock outstanding as of this date.
On June 6, 1996, the Company made a new conversion offer (the "Offer") to
the holders ("Preferred Stockholders") of the 773,878 outstanding shares of the
Company's Convertible Preferred Stock. Under the Offer, Preferred Stockholders
received four shares of the Company's Common Stock upon conversion of a share of
Convertible Preferred Stock subject to the terms and conditions set forth in the
Offer. The Offering was conditioned upon a minimum of 400,000 shares of
Preferred Stock being tendered; provided that the Company reserved the right to
accept fewer shares. Upon expiration of the Offer on July 17, 1996, the Company
accepted for conversion 608,234 shares, or 78.6% of the Convertible Preferred
Stock outstanding, constituting all the shares validly tendered. Following the
transaction, there were 9,198,375 shares of IntegraMed America's Common Stock
outstanding and 165,644 shares of Convertible Preferred Stock outstanding. Refer
to Note 7 for pro forma information regarding the Offer.
NOTE 4 - COMMITMENTS AND CONTINGENCIES:
Reliance on Third Party Vendors --
The Network sites are dependent on three third-party vendors that supply
patient medication. Should any of these vendors experience a supply shortage of
medication, it may have an adverse impact on the operations of the Network
sites. Currently, the Network sites have not experienced any such adverse
impacts.
Commitments to Medical Providers --
Under certain management contracts , the Company is obligated to perform
the following: (i) advance funds to the Network site to guarantee a minimum
physician draw and/or to provide to the Network site new services, utilize new
technologies, fund projects, etc. ; and (ii) on or before the fifteenth business
day of each month purchase the net accounts receivable of the Network site
arising during the previous month and to transfer or pay to the Network site
such amount of funds equal to the net accounts receivable less any amounts owed
to the Company for management fees and/or advances. Any advances are to be
repaid monthly and interest expense, computed at the prime rate used by the
Company's primary bank in effect at the time of the advance, will be charged by
the Company for funds advanced. Advances due to the Company are included in
"management fees receivable" and net receivables purchased by the Company are
included in "patient accounts receivable" in the balance sheet as of June 30,
1996 and December 31, 1995, respectively.
9
<PAGE>
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Commitments to the National Menopause Foundation --
In connection with its acquisition of 51% of the outstanding stock of the
National Menopause Foundation ("NMF") in June 1996, the Company will provide
funding to and for the development of NMF on an as-needed basis during the four
year period commencing June 6, 1996 in amounts not to exceed $500,000 in the
aggregate.
Litigation -
On June 20, 1996, the Company announced that the Court of Chancery of the
State of Delaware has denied a claim by a Preferred Stockholder, in Bernstein v.
IVF America, et.al. that the anti-dilution rights of existing Preferred
Stockholders were required to be expanded as a result of a previous Conversion
Offer made by the Company in November 1994.
The lawsuit was originally filed in the Court on December 13, 1994. By
its June 11, 1996 decision, the Court has directed that the Complaint be
dismissed and judgement entered accordingly. The plaintiff has a right of appeal
but has not indicated what, if any, further action he intends to take.
The plaintiffs' application for class certification in Karlin v. IVF
America, Inc. et.al., filed in Supreme Court, Westchester County, New York, has
been denied by the Court. The Court ruled that the potential class of patients
treated at the IVF America Program at United Hospital did not meet the criteria
for class action status as required by New York law. In particular, the Court
reached this conclusion because, "individualized and varied issues arising out
of the particular physician-patient relationship, more aligned with the issue of
lack of informed consent, tend to predominate." While plaintiffs have appealed,
the Company is pleased by this decision, sustaining the individualized nature of
treatment at IVF America Network sites, and intends to defend vigorously the
Court's ruling.
NOTE 5 - RELATED PARTY TRANSACTION
Under the WMDC of Gainesville acquisition agreement, Morris Notelovitz,
M.D., Ph.D. ("Physician"), the founder of the Gainesville entities acquired by
the Company, became a member of the Company's Board of Directors, and, under a
long term employment agreement, the Physician will serve as Vice President for
Medical Affairs and Medical Director of the Division. The Company simultaneously
entered into an Employment Agreement with the Physician pursuant to which the
Physician will provide medical services, as defined.
NOTE 6 - ACQUISITIONS
The transactions detailed below were accounted for on the purchase method
and the purchase price has been allocated to the assets acquired and liabilities
assumed based upon the estimated fair value at the date of acquisition. The
unaudited consolidated financial statements include the results of these
transactions from their respective dates of acquisition.
On June 7, 1996, the Company entered into an Agreement and Plan of
Merger (the "Agreement") pursuant to which INMD Acquisition Corp. ("IAC"), a
Florida corporation and wholly-owned subsidiary of the Company, acquired all of
the outstanding stock of the following three related Florida corporations: The
Climacteric Clinic, Inc. ("CCI"), Midlife Centers of America, Inc. ("MCA"), and
Women's Research Centers, Inc. ("WRC"), America (collectively "the Merger
Companies"), and 51% of the outstanding stock of the National Menopause
Foundation, Inc. ("NMF"), also a related Florida corporation. Pursuant to the
Agreement, the Merger Companies were merged with and into IAC, the surviving
corporation in the Merger, which will continue its corporate existence under the
laws of the State of Florida under the name Women's Medical & Diagnostic Center,
10
<PAGE>
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Inc. ("WMDC"). In exchange for the shares of the Merger Companies, the Company
paid cash in an aggregate amount of $350,000 and issued 666,666 shares of Common
Stock which had a market value of $2.5 million. In exchange for the 51% of the
outstanding stock of NMF, the Company paid cash in an aggregate amount of
$50,000 and issued a note in an amount of $600,000, which is payable in sixteen
quarterly installments of $37,500 beginning September 1, 1996 with simple
interest at a rate of 4%.
The aggregate purchase price of the Merger Companies of $2,850,000 was
allocated as follows to assets acquired and liability assumed: $390,000 to
current assets, $99,000 to fixed assets, $254,000 to accrued liabilities,
$97,000 to debt and the balance of $2,712,000 to goodwill, which will be
amortized over a forty year period. The aggregate purchase price of NMF of
$650,000 was allocated as follows: $2,000 to current assets, $30,000 to fixed
assets, $10,000 to current liabilities and the $628,000 balance to goodwill,
-------------------------------
which will be amortized over a forty year period.
On May 15, 1996, the Company entered into an asset purchase and a long
term management agreement with W.F. Howard, M.D., P.A. near Dallas, Texas (the
"Reproductive Science Center ("RSC") of Dallas"), a provider of conventional
infertility and assisted reproductive technology services. The aggregate
purchase price was approximately $701,500 of which approximately $244,000 was
paid at closing and the Company issued a promissory note for the $457,500
balance which is payable as follows: $100,000 on the last business day of May
1997 and 1998, and $36,786 on the last business day of May in each of the seven
years thereafter, thru May 2005. The aggregate purchase price was allocated to
fixed assets in the amount of $144,000 and the balance of $557,500 to exclusive
--------
management rights, which will be amortized over the ten year term of the
agreement.
The following unaudited pro forma results of operations have been
prepared by management based on the unaudited financial information of the
Merger Companies, NMF and the RSC of Dallas adjusted where necessary, with
respect to pre-acquisition periods, to the basis of accounting used in the
historical financial statements of the Company. Such adjustments include
modifying the unaudited results to reflect operations as if the related
management agreements had been consummated on January 1, 1996 and 1995,
respectively. Additional general corporate expenses which would have been
required to support the operations of the new Network sites are not included in
the pro forma results. The unaudited pro forma results may not be indicative of
the results that would have occurred if the acquisition and management agreement
had been in effect on the dates indicated or which may be obtained in the
future.
For the
six-month period
ended June 30,
1996 1995
---- ----
Unaudited
Clinical revenues and management fees......... $10,166,000 $10,164,000
Income (loss) before income taxes (1)......... $ (87,000) $ 59,000
Net loss applicable to Common Stock
(includes $309,000 and $331,000 dividends
accrued on Preferred Stock for the six-month
period ended June 30, 1996 and 1995,
respectively)................................. $ (493,000) $ (359,000)
Net loss per share of Common Stock............ $ (0.07) $ (0.05)
(1) Income (loss) before income taxes include $150,000 and $70,000 of goodwill
and exclusive management rights amortization in 1996 and 1995, respectively.
11
<PAGE>
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
NOTE 7- PROFORMA EFFECT OF JULY 1996 PREFERRED STOCK CONVERSION OFFERING
In connection with the July 1996 conversion of Preferred Stock to Common
Stock (see Note 3), the Company converted 78% of its Convertible Preferred Stock
to Common Stock. The pro-forma effect of this change, as if the conversion
occurred on January 1, 1996, would have resulted in a reduction in the net loss
applicable to Common Stockholders from $(0.05) per share to $(0.01) per share
for the six-month period ended June 30, 1996. The pro-forma effect of this
change, as if the conversion occurred on January 1, 1995, would have resulted in
a reduction in the net loss applicable to Common Stockholders from $(0.05) per
share to $(0.01) per share for the six-month period ended June 30, 1995. The pro
forma loss per share calculations give effect to the 2,432,936 Common Shares
which were issued in the conversion and the elimination of accrued dividends
related to the converted Preferred Shares of approximately $243,000 for both
1996 and 1995,respectively. However, the pro forma information does not give
effect to the inducement discussed in the following paragraph.
As discussed in Note 3, the Company made a new conversion offer to its
Convertible Preferred Stockholders in July 1996. In connection therewith, the
Company offered the Preferred holders four shares of Common Stock for each
Preferred share owned. The four shares represented an increase from the original
terms of the Preferred Stock which provided for 1.45 Common Shares for each
Preferred Share after adjustment for the failure of the Company to pay eight
dividends and after adjustment for the issuance of Common Shares pursuant to the
acquisition of WMDC of Gainesville. Under a recently enacted accounting
pronouncement, the Company is required to reduce earnings available to Common
Stockholders to convert their shares. Since the Company issued an additional
1,550,997 Common Shares in the tender offer, compared to the shares that would
have been issued under the original terms of the Preferred Stock, the Company
was required to deduct the fair value of these additional shares of
approximately $4,265,000 from earnings available to Common shareholders. This
non-cash charge, partially offset by the reversal of $973,000 accrued dividends
attributable to the conversion, will result in the increase in net loss per
share by approximately $(.46) and $(.57) in the three and nine-month period
ended September 30, 1996, respectively. While this charge is intended to show
the cost of the inducement to the owners of the Company's Common Shares
immediately before the tender offer, management does not believe that it
accurately reflects the impact of the tender offer on the Company's Common
Stockholders. As a result of the conversion, the Company will reverse $973,000
in accrued dividends from its balance sheet and the conversion will save the
Company from accruing annual dividends of $486,000 and the need to include these
dividends in earnings per share calculations. The conversion has also eliminated
a $6.1 million liquidation preference related to the Preferred Shares converted.
NOTE 8 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION AND NON-CASH
TRANSACTIONS:
In connection with the Company's acquisition of WMDC of Gainesville in
June 1996, the Company issued 666,666 shares of Common Stock, acquired assets of
$521,000, assumed current liabilities of $264,000, and debt of $97,000. In
connection with this transaction, the Company also issued a note payable in the
amount of $600,000 with annual interest payable at 4%.
In May 1996, the Company entered into a management agreement with W.F.
Howard, M.D., P.A. located near Dallas, Texas. Pursuant to this agreement, the
Company incurred a $550,000 obligation for the exclusive right to manage this
facility of which $100,000 had been paid as of June 30, 1996.
At June 30, 1996 and 1995, there were accrued dividends on Convertible
Preferred Stock outstanding of $1,254,000 and $676,000, respectively (see Note 3
and Note 7).
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At June 30, 1996 and 1995 controlled cash of Medical Providers was
$215,000 and $429,000, respectively, which represented a decrease of $81,000 and
$60,000 for the six-month periods ended June 30, 1996 and 1995, respectively.
State taxes, which primarily reflect Massachusetts income taxes and New
York capital taxes of $65,000 and $70,000 were paid in the six-month period
ended June 30, 1996 and 1995, respectively.
Interest paid in cash in the six-month period ended June 30, 1996 and
1995 amounted to $13,000 and $12,000, respectively. Interest received in the
six-month period ended June 30, 1996 and 1995 amounted to $221,000 and $327,000,
respectively.
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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.
INTEGRAMED AMERICA, INC.
(Registrant)
Date: August 28, 1996 By: /s/ Dwight P. Ryan
------------------
Dwight P. Ryan
Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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