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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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 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
(Address of principal executive offices)
06-1150326
(I.R.S. employer identification no.)
10577
(Zip code)
(914) 253-8000
(Registrant's telephone number, including area code)
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 May 14, 1997 was 9,587,640.
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<PAGE>
INTEGRAMED AMERICA, INC.
FORM 10-Q
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at March 31, 1997 (unaudited)
and December 31, 1996..........................................3
Consolidated Statement of Operations for the three-month
period ended March 31, 1997 and 1996 (unaudited)...............4
Consolidated Statement of Cash Flows for the three-month
period ended March 31, 1997 and 1996 (unaudited)...............5
Notes to Consolidated Financial Statements (unaudited)........6-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................9-12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings...............................................13
Item 2. Changes in Securities...........................................13
Item 3. Defaults upon Senior Securities.................................13
Item 4. Submission of Matters to a Vote of Security Holders.............13
Item 5. Other Information...............................................13
Item 6. Exhibits and Reports on Form 8-K................................13
SIGNATURES ............................................................... 14
INDEX TO EXHIBITS.........................................................15-16
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
<TABLE>
INTEGRAMED AMERICA, INC.
CONSOLIDATED BALANCE SHEET
(all dollars in thousands)
ASSETS
<CAPTION>
March 31, December 31,
1997 1996
---------- -----------
(unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents .......................................................... $ 3,336 $ 3,761
Short term investments.............................................................. -- 2,000
Patient accounts receivable, less allowance for doubtful accounts of $127 and $113
in 1997 and 1996, respectively.................................................... 3,146 2,770
Management fees receivable, less allowance for doubtful accounts of $147 and $50
in 1997 and 1996, respectively.................................................... 1,757 1,249
Research fees receivable............................................................ 222 232
Other current assets ............................................................... 1,003 897
Controlled assets of Medical Practices-(see Note 2):
Cash.............................................................................. 65 191
Patient accounts receivable, less allowance for doubtful accounts of $92 and $146
in 1997 and 1996, respectively.................................................. 360 459
------- -------
Total controlled assets of Medical Practices.................................... 425 650
Total current assets............................................................ 9,889 11,559
------- -------
Fixed assets, net ................................................................ 2,947 3,186
Intangible assets, net............................................................ 7,937 5,894
Other assets...................................................................... 216 211
------- -------
Total assets.................................................................... $20,989 $20,850
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................... $ 575 $ 1,020
Accrued liabilities................................................................. 1,275 1,652
Due to Medical Practices-(see Note 2)............................................... 428 326
Dividends accrued on Preferred Stock................................................ 364 331
Current portion of exclusive management rights obligation........................... 222 222
Note payable and current portion of long-term debt.................................. 653 426
Patient deposits ................................................................... 581 490
------- -------
Total current liabilities....................................................... 4,098 4,467
------- -------
Exclusive management rights obligation................................................ 1,213 1,213
Long-term debt ....................................................................... 681 692
Shareholders' equity
Preferred Stock, $1.00 par value -
3,165,644 shares authorized in 1997 and 1996, respectively - 2,500,000
undesignated; 665,644 shares designated as Series A Cumulative Convertible of
which 165,644 shares were issued and outstanding in 1997 and
1996, respectively.................................................................. 166 166
Common Stock, $.01 par value - 25,000,000 shares authorized; 9,587,640 and
9,230,557 shares issued and outstanding in 1997 and 1996, respectively.............. 96 92
Capital in excess of par ........................................................... 35,970 35,410
Accumulated deficit ................................................................ (21,235) (21,190)
------- -------
Total shareholders' equity ..................................................... 14,997 14,478
------- -------
Total liabilities and shareholders' equity...................................... $20,989 $20.850
======= =======
See accompanying notes to the consolidated financial statements.
</TABLE>
3
<PAGE>
INTEGRAMED AMERICA, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(all amounts in thousands, except per share amounts)
For the
three-month period
ended March 31,
1997 1996
------- -------
(unaudited)
Revenues, net (see Note 2).............................. $5,088 $4,175
Medical Practice retainage (see Note 2)................. 396 794
------ ------
Revenues after Medical Practice retainage (see Note 2).. 4,692 3,381
Costs of services rendered ............................. 3,615 2,563
------ ------
Network Sites' contribution ............................ 1,077 818
------ ------
General and administrative expenses .................... 918 855
Clinical service development expenses................... 59 67
Amortization of intangible assets....................... 137 42
Interest income......................................... (34) (120)
Interest expense........................................ 10 5
------ ------
Total other expenses.................................... 1,090 849
------ ------
Loss before income taxes................................ (13) (31)
Provision for income and capital taxes................. 32 43
------ ------
Net loss ............................................... $ (45) $ (74)
Less: Dividends accrued on Preferred Stock.............. 33 154
------ ------
Net loss applicable to Common Stock..................... $ (78) $ (228)
====== ======
Net loss per share of Common Stock...................... $ (.01) $ (.04)
====== ======
Weighted average number of shares of
Common Stock outstanding................................ 9,544 6,087
====== ======
See accompanying notes to the consolidated financial statements.
4
<PAGE>
<TABLE>
INTEGRAMED AMERICA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(all amounts in thousands)
<CAPTION>
For the three-month
period ended March 31,
1997 1996
---- ----
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................................... $ (45) $ (74)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization.............................................. 417 230
Writeoff of fixed assets................................................... 55 --
Changes in assets and liabilities-- (Increase) decrease in assets:
Patient accounts receivable........................................... (376) (542)
Management fees receivable............................................ (508) (207)
Research fees receivable.............................................. 10 --
Other current assets.................................................. (106) (95)
Other assets.......................................................... (5) (17)
Decrease in controlled assets of Medical Practices:
Patient accounts receivable........................................... 99 458
Other current assets.................................................. -- 4
Increase (decrease) in liabilities:
Accounts payable...................................................... (445) 92
Accrued liabilities................................................... (377) (228)
Due to Medical Practices.............................................. 102 (12)
Patient deposits...................................................... 91 7
------ ------
Net cash used in operating activities....................................... (1,088) (384)
------ ------
Cash flows provided by (used in) investing activities:
Proceeds from short term investments..................................... 2,000 --
Purchase of net assets of acquired businesses............................ (29) --
Payments for exclusive management rights................................. (1,635) --
Purchase of fixed assets and leasehold improvements...................... (64) (344)
Proceeds from sale of fixed assets....................................... 80 --
------ ------
Net cash provided by (used in) investing activities......................... 352 (344)
------ ------
Cash flows provided by (used in) by financing activities:
Proceeds from bank under Credit Facility................................. 250 --
Principal repayments on debt............................................. (52) (44)
Principal repayments under capital lease obligations..................... (27) (43)
Repurchase of Convertible Preferred Stock................................ -- (11)
Proceeds from exercise of Common Stock options........................... 14 2
------ ------
Net cash provided by (used in) financing activities........................... 185 (96)
------ ------
Net decrease in cash.......................................................... (551) (824)
Cash at beginning of period................................................... 3,952 8,179
------ ------
Cash at end of period......................................................... $3,401 $7,355
====== ======
See accompanying notes to the consolidated financial statements.
</TABLE>
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 March 31, 1997, 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, 1997. 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, 1996.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue and cost recognition -
Reproductive Science Center Division ("RSC Division")
The operations of the RSC Division are currently conducted pursuant to
eight management agreements.
Under four of the Company's management agreements, the Company receives a
three-part management fee as compensation for its management services comprised
of: (i) a fixed percentage of net revenues, (ii) reimbursed cost of services
(costs incurred in managing a Network Site and any costs paid on behalf of the
Network Site) and (iii) a fixed or variable percentage of earnings after the
Company's management fees and any guaranteed physician compensation, or an
additional fixed or variable percentage of net revenues. Direct costs incurred
by the Company in performing its management services and costs incurred on
behalf of the Network Site are recorded as cost of services rendered.
Under the Company's management agreements for the Boston and Long Island
Network Sites, the Company consolidates its revenues and expenses with those of
the respective Network Sites. Under these agreements, the Company records all
clinical revenues and, out of such revenues, the Company pays the Medical
Practices' operating expenses including physicians' and other medical fees,
direct materials, and certain hospital contract fees (the "Medical Practice
retainage"). Remaining revenues, if any, are used to reimburse the Company for
other direct administrative expenses which are recorded as cost of services or
to pay the Company a management fee. Under this arrangement, the Company is
responsible for payment of all liabilities relating to the Network Site's
operations.
Under the Company's management agreement for the New Jersey Network Site,
the Company primarily provides endocrine testing and administrative and finance
services for a fixed percentage of revenues and reimbursed costs of services.
Under the management agreement for the Walter Reed Network Site, the Company's
revenues are derived from certain ART laboratory services performed and the
Company bills patients directly for these services. The Company's direct costs
are reimbursed out of these revenues with the balance representing the Company's
Network Site contribution. All direct costs incurred by the Company are recorded
as cost of services.
Adult Women's Medical Division ("AWM Division")
The AWM Division's operations are currently conducted through and owned by
the Women's Medical & Diagnostic Center, Inc., a Florida corporation and a
wholly-owned subsidiary of the Company. The Company bills and records all
clinical revenues of the AWM Division and records all direct costs incurred as
cost of services rendered. The Company retains as Network Site contribution an
amount determined using the three-part management fee calculation described
above. The remaining balance is paid as compensation to the employed physicians
and is recorded by the Company as cost of services rendered. The employed
physicians receive a fixed monthly draw which may be adjusted quarterly by the
Company based on the Network Site's actual operating results.
6
<PAGE>
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Revenues in the AWM Division also include amounts earned under contracts
relating to clinical trials performed by the AWM Division. The AWM Division has
contracted with major pharmaceutical companies to participate in clinical trials
to determine the safety and efficacy of drugs under development. Research
revenues are recognized pursuant to each respective contract in the period in
which the medical services (as stipulated by the clinical trial 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 trial protocol. Payments collected from sponsors in advance for
services are included in accrued liabilities, and costs incurred in performing
the clinical trials are included as cost of services rendered.
The Company's 51% interest in the National Menopause Foundation, Inc.
("NMF"), is included in the Company's consolidated financial statements. The
Company records 100% of the revenues and costs of NMF and reports 49% of any
profits of NMF as a minority interest.
Patient accounts receivable--
Patient accounts receivable represent receivables from patients for medical
services provided by the Medical Practices. Such amounts are recorded net of
contractual allowances and estimated bad debts. As of March 31, 1997 and
December 31, 1996, approximately $1,041,000 and $836,000 of patient accounts
receivable were a function of the Company purchasing the accounts receivable
from the Medical Practices and the balances of $2,105,000 and $1,934,000,
respectively, were a function of net revenues of the Company (see -- "Revenue
and cost recognition" above).
Management fees receivable --
Management fees receivable represent fees owed to the Company pursuant to
its management agreements with certain Medical Practices (see -- "Revenue and
cost recognition" above).
Research fees receivable --
Research fees receivable represent receivables from pharmaceutical
companies for medical services provided by the Medical Practices at the Network
Site under the AWM Division to patients pursuant to protocols stipulated under
contracts for clinical trials between the pharmaceutical companies and the AWM
Division.
Controlled assets of Medical Practices--
Controlled cash represents segregated cash held in the name of certain
Medical Practices; controlled patient accounts receivable represent patient
receivables due to certain Medical Practices, and controlled other current
assets represent assets owned by and held in the name of certain Medical
Practices, all of which are reflected on the Company's consolidated balance
sheet due to the Company's unilateral control of such assets.
At March 31, 1997 and December 31, 1996, of the $425,000 and $650,000
controlled assets of Medical Practices, $76,000 and $117,000, respectively, was
restricted for payment of the amounts due to Medical Practices and the balance
of $349,000 and $533,000, respectively, was payable to the Company.
NOTE 3 - NOTE PAYABLE:
In November 1996, the Company obtained a $1.5 million revolving credit
facility (the "Credit Facility") issued by First Union National Bank (the
"Bank"). Borrowings under the Credit Facility bear interest at the Bank's prime
rate plus 0.75% per annum, which at March 31, 1997, was 9.25%. The Credit
Facility terminates on April 1, 1998 and is secured by the Company's assets. At
March 31, 1997, $250,000 was outstanding under the Credit Facility and is
included in "Note payable and current portion of long-term debt" in the
accompanying consolidated balance sheet. At December 31, 1996, no amounts were
outstanding under the Credit Facility.
7
<PAGE>
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
NOTE 4 -RECENT AND PENDING ACQUISITIONS:
In January 1997, the Company acquired certain assets of the Bay Area
Fertility and Gynecology Medical Group, a California partnership (the
"Partnership"), and acquired the right to manage the Bay Area Fertility and
Gynecology Medical Group, Inc., a California professional corporation which is
the successor to the Partnership's medical practice. The aggregate purchase
price was approximately $2.1 million, consisting of $1.5 million in cash and
333,333 shares of Common Stock. The aggregate purchase price was allocated as
follows: $500,000 to the name "Bay Area Fertility", $29,000 to fixed assets, and
the balance of approximately $1.6 million to exclusive management rights. All
intangible assets related to this acquisition will be amortized over the
twenty-year term of the management agreement.
In February 1997, the Company entered into agreements to acquire certain
fixed assets of and the right to manage Fertility Centers of Illinois, S.C.
("FCI"), a physician group practice comprised of five physicians and six
locations (the "Pending Acquisition") in the Chicago, Illinois area. The
aggregate purchase price for the Pending Acquisition is approximately $8.6
million of which $8.0 million is for the exclusive management right and $600,000
is for certain fixed assets. Approximately $6.6 million of the aggregate
purchase price is payable in cash and approximately $2.0 million is payable in
shares of Common Stock, the exact number of which will be determined based on
the average market price of the Common Stock for the ten trading day period
prior to closing of the Pending Acquisition, subject to a minimum and maximum
price per share. The closing of the Pending Acquisition is conditioned upon the
Company's raising at least $6.0 million in capital by August 28, 1997 and other
customary closing conditions.
NOTE 5 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION AND NON-CASH
TRANSACTIONS:
In connection with its acquisition of the exclusive right to manage Bay
Area Fertility in January 1997, the Company issued 333,333 shares of Common
Stock with an aggregate fair value equal to $583,000.
In the three-month period ended March 31, 1997, the Company entered into a
capital lease obligation in the amount of $105,000 for medical equipment.
In the three-month period ended March 31, 1997, the Company assigned two
capital lease obligations for medical equipment with an aggregate book value of
$60,000 to two related parties.
Accrued dividends on Convertible Preferred Stock outstanding increased
$33,000 and $153,000 during the three-month periods ended March 31, 1997 and
1996, respectively.
Controlled cash of Medical Practices decreased $125,000 and increased
$30,000 during the three-month periods ended March 31, 1997 and 1996,
respectively.
State taxes, which primarily reflect Massachusetts income taxes and New
York capital taxes, of $2,000 and $65,000 were paid in the three-month periods
ended March 31, 1997 and 1996, respectively.
Interest paid in cash in the three-month periods ended March 31, 1997 and
1996 amounted to $11,000 and $5,000, respectively. Interest received in the
three-month periods ended March 31, 1997 and 1996 amounted to $34,000 and
$115,000, respectively.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and notes thereto included in this
quarterly report and with the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
Overview
The Company has historically focused its efforts on providing management
support services to Medical Practices in the area of infertility and assisted
reproductive technology ("ART") services. During 1996, the Company broadened its
focus from infertility and ART services to include adult women's health care
services. In connection therewith, the Company established two divisions: the
Reproductive Science Center Division ("RSC Division"), which concentrates on
infertility and ART services, and the Adult Women's Medical Division ("AWM
Division"), which concentrates on comprehensive diagnostic and treatment
alternatives for peri- and post-menopausal women.
The RSC Division currently consists of eight Network Sites. During the
three-month period ended March 31, 1997, the RSC Division principally derived
its revenues pursuant to eight management agreements, including one which was
acquired in January 1997 and one which was acquired in May 1996. During the
three-month period ended March 31, 1996, the RSC Division principally derived
its revenues pursuant to six management agreements including one which was
terminated in November 1996.
The AWM Division currently consists of one Network Site which was
established in June 1996 and is directly owned by the Company.
In January 1997, the Company acquired certain assets of the Bay Area
Fertility and Gynecology Medical Group, a California partnership (the
"Partnership"), and acquired the right to manage the Bay Area Fertility and
Gynecology Medical Group, Inc., a California professional corporation which is
the successor to the Partnership's medical practice (the "Bay Area
Acquisition"). The aggregate purchase price was approximately $2.1 million,
consisting of $1.5 million in cash and 333,333 shares of Common Stock.
In February 1997, the Company entered into agreements to acquire certain
fixed assets of and the right to manage Fertility Centers of Illinois, S.C.
("FCI"), a physician group practice comprised of five physicians and six
locations (the "Pending Acquisition") in the Chicago, Illinois area. The
aggregate purchase price for the Pending Acquisition is approximately $8.6
million of which $8.0 million is for the exclusive management right and $600,000
is for certain fixed assets. Approximately $6.6 million of the aggregate
purchase price is payable in cash and approximately $2.0 million is payable in
shares of Common Stock, the exact number of which will be determined based on
the average market price of the Common Stock for the ten trading day period
prior to closing of the Pending Acquisition, subject to a minimum and maximum
price per share. The closing of the Pending Acquisition is conditioned upon the
Company's raising at least $6.0 million in capital by August 28, 1997 and other
customary closing conditions.
Results of Operations
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996
Revenues for the three months ended March 31, 1997 (the "first quarter of
1997") were approximately $5.1 million as compared to approximately $4.2 million
for the three months ended March 31, 1996 (the "first quarter of 1996"), an
increase of 21.9%. This increase was directly attributable to revenues related
to new management agreements entered into in the second quarter of 1996 and the
first quarter of 1997 under the RSC Division and to revenues related to the AWM
Division which was established in June 1996. In addition, certain existing
Network Sites had an increase in revenue in the first quarter of 1997 compared
to the first quarter of 1996. These favorable variances were partially offset by
the absence of the Westchester Network Site agreement which the Company
terminated in November 1996 and by an 8.8% decrease in revenue related to the
Boston Network Site attributable to lower volume at such Network Site.
9
<PAGE>
Medical Practice retainage, which represents physicians' and other medical
fees, direct materials, and certain hospital contract fees related to the Boston
and Long Island Network Sites in the first quarter of 1997 and to the Boston,
Long Island and Westchester Network Site in the first quarter of 1996, was
approximately $396,000 in the first quarter of 1997 as compared to approximately
$794,000 in the first quarter of 1996, a decrease of 50.1%, primarily due to the
absence of the Westchester Network Site agreement.
The increase in revenues and the decrease in Medical Practice retainage
resulted in an increase of approximately 38.8% in revenues after Medical
Practice retainage in the first quarter of 1997 compared to the first quarter of
1996.
Costs of services rendered were approximately $3.6 million in the first
quarter of 1997 as compared to approximately $2.6 million in the first quarter
of 1996, an increase of 41.0%. This increase was directly attributable to new
management agreements entered into in the second quarter of 1996 and the first
quarter of 1997 under the RSC Division and to the establishment of the AWM
Division. This increase was partially offset by the absence of costs from the
Westchester Network Site agreement. As a percentage of revenues, net, costs of
services rendered increased to 71.0% in the first quarter of 1997 compared to
61.4% in the first quarter of 1996.
Network Sites' contribution was approximately $1.1 million in the first
quarter of 1997 compared to $818,000 in the first quarter of 1996, an increase
of 31.7%, as a result of the revenue and cost variances discussed above. As a
percentage of revenues, Network Sites' contribution increased to 21.2% in the
first quarter of 1997 as compared to 19.6% in the first quarter of 1996.
General and administrative expenses for the first quarter of 1997 were
$918,000 compared to $855,000 in the first quarter of 1996, an increase of 7.4%.
Such increase was primarily attributable to costs associated with the new AWM
Division, partially offset by the absence of costs associated with the closing
of a regional office in late 1996.
Clinical service development expenses were $59,000 in the first quarter of
1997 compared to $67,000 in the first quarter of 1996, a decrease of 11.9%. Such
decrease was primarily due to a decrease in development costs related to genetic
and immature oocyte testing.
Amortization of intangible assets was $137,000 in the first quarter of 1997
as compared to $42,000 in the first quarter of 1996. This increase was
attributable to the Company's acquisitions in the second and fourth quarter of
1996 and the first quarter of 1997.
Interest income for the first quarter of 1997 was $34,000 compared to
$120,000 in the first quarter of 1996. This decrease was due to a lower cash
balance and to lower short-term interest rates.
The provision for income taxes primarily reflected Massachusetts income
taxes and New York capital taxes in the first quarter of 1997 and in the first
quarter of 1996, respectively.
Net loss was $45,000 in the first quarter of 1997 compared to a net loss of
$74,000 in the first quarter of 1996. This decrease in net loss was primarily
due to a $259,000 increase in contribution, partially offset by an increase of
$95,000 in amortization of intangible assets, an $86,000 decrease in interest
income, and a $63,000 increase in general and administrative expenses.
10
<PAGE>
Liquidity and Capital Resources
Historically, the Company has financed its operations primarily through
sales of equity securities. At March 31, 1997, the Company had working capital
of approximately $5.8 million (including $425,000 of controlled assets of
Medical Practices), approximately $3.4 million of which consisted of cash and
cash equivalents (including $65,000 of controlled cash), compared to working
capital of $7.1 million at December 31, 1996 (including $650,000 of controlled
assets of Medical Practices), approximately $6.0 million of which consisted of
cash and cash equivalents (including $191,000 of controlled cash) and short term
investments. The net decrease in working capital at March 31, 1997 was
principally due to payments of $1.5 million in cash as part of the purchase
price of the Bay Area Acquisition in addition to cash payments for operating
activities, partially offset by an aggregate increase in receivables and other
current assets.
In January 1997, the Company consummated the Bay Area Acquisition for an
aggregate purchase price of approximately $2.1 million, consisting of $1.5
million in cash and 333,333 shares of Common Stock. In February 1997, the
Company entered into agreements with respect to the Pending Acquisition. The
aggregate purchase price for the Pending Acquisition is approximately $8.6
million of which $8.0 million is for the exclusive management right and $600,000
is for certain fixed assets. Approximately $6.6 million of the aggregate
purchase price is payable in cash and approximately $2.0 million is payable in
shares of Common Stock based on the average market price of the Common Stock for
the ten trading day period prior to closing, subject to a minimum and maximum
price per share. The closing of the Pending Acquisition is conditioned upon the
Company's raising at least $6.0 million in capital by August 28, 1997 and other
customary closing conditions.
The Company anticipates that its acquisition strategy will continue to
require substantial capital investment. Capital is needed not only for
additional acquisitions, but also for the effective integration, operation and
expansion of the existing Network Sites. The Medical Practices may require
capital for renovation and expansion and for the addition of medical equipment
and technology. The Company expects that it will need to obtain additional
financing to pursue its acquisition strategy and intends to obtain significant
additional financing over the next two years to fund such strategy.
Under certain of its management agreements, the Company has committed to
advance funds to the Medical Practice to guarantee a minimum physician draw and
to provide new services, utilize new technologies, fund projects, purchase the
net accounts receivable of the Medical Practice and for other purposes. Any
advances are to be repaid monthly and will bear interest at the prime rate used
by the Company's primary bank in effect at the time of the advance.
In November 1996, the Company obtained a $1.5 million revolving credit
facility (the "Credit Facility") issued by First Union National Bank (the
"Bank"). Borrowings under the Credit Facility bear interest at the Bank's prime
rate plus 0.75% per annum, which at March 31, 1997, was 9.25%. The Credit
Facility terminates on April 1. 1998 and is secured by the Company's assets. On
a short-term basis, the Company will continue to finance its operations from its
current working capital and may, from time to time, make additional borrowings
under the Credit Facility. At March 31, 1997, $250,000 was outstanding under the
Credit Facility.
The Company has commitments to fund clinical services development pursuant
to various collaboration agreements. Effective July 1, 1995, the Company entered
into a new three-year agreement with Monash University that provides for Monash
to conduct research in ART services and techniques to be funded by a minimum
annual payment of 220,000 Australian dollars, the results of such research to be
jointly owned by the Company and Monash. If certain milestones are met as
specified in this agreement, the Company's annual payment may be a maximum of
300,000 Australian dollars in year two and 380,000 Australian dollars in year
three. Minimum payments of 55,000 Australian dollars and payments for the
attainment of certain research milestones will be made quarterly throughout the
term of this agreement. The Company expensed approximately $36,000 and $40,000
under this agreement in the first quarter of 1997 and in the first quarter of
1996, respectively.
As of March 31, 1997, dividend payments of $364,000 on the Series A
Cumulative Convertible Preferred Stock (the "Convertible Preferred Stock") were
in arrears. The Company does not anticipate the payment of any dividends on the
Convertible Preferred Stock in the foreseeable future.
11
<PAGE>
New Accounting Standards
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share" ("SFAS 128"). The Company will adopt SFAS No. 128 for
its fiscal year ending December 31, 1997. The Company does not anticipate the
effect on earnings to be material.
Forward Looking Statements
The Company wishes to caution readers that the information in this Form 10-Q
contains certain forward-looking statements within the meaning of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995, the
attainment of which involve risks and uncertainties. The Company's actual result
may differ materially from those described in these forward-looking statements
due to certain factors including, but not limited to, the following: The success
of the Company in acquiring additional management agreements, including the
Company's ability to finance future growth, increases in overhead due to
expansion, the possibility of loss of significant management contract(s), the
profitability or lack thereof at Network Sites, the exclusion of infertility,
ART, and adult women's health care services from third party reimbursement,
government laws and regulation regarding health care, changes in managed care
contracting, and the timely development of and acceptance of new infertility,
ART and adult women's health care technologies and techniques.
12
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults Upon Senior Securities.
As of May 14, 1997, dividend payments of $397,000 on the
Convertible Preferred Stock were in arrears.
Item 4. Submission of Matters to Vote of Security Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
See Index to Exhibits on pages 15-16.
(b) Reports on Form 8-K.
On March 24, 1997, the Company filed with the Securities
and Exchange Commission a Form 8-K/A reporting the
required audited financial statements and pro forma
information associated with the business acquired by the
Company in January 1997.
13
<PAGE>
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: May 14, 1997 By: /s/ Dwight P. Ryan
------------------
Dwight P. Ryan
Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
14
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
10.61 -- Management Agreement dated January 7, 1997 by and between the
Registrant and Bay Area Fertility and Gynecology Medical Group,
Inc. (1)
10.62 -- Asset Purchase Agreement dated January 7, 1997 by and between the
Registrant and Bay Area Fertility and Gynecology Medical Group, a
California Partnership. (1)
10.63 -- Physician Employment Agreement between Robin E. Markle, M.D. and
Women's Medical & Diagnostic Center, Inc. (2)
10.64 -- Physician Employment Agreement between W. Banks Hinshaw, Jr.,
M.D. and Women's Medical & Diagnostic Center, Inc. (2)
10.65 -- Agreement between IntegraMed America, Inc., f/k/a IVF America
Inc.; Women's Medical & Diagnostic Center, Inc., f/k/a INMD
Acquisition Corp, and Morris Notelovitz, M.D. (2)
10.66 -- Personal Responsibility Agreement between IntegraMed America,
Inc., Bay Area Fertility and Gynecology Medical Group, Inc. and
Donald I. Galen, M.D. (2)
10.67 -- Personal Responsibility Agreement between IntegraMed America,
Inc., Bay Area Fertility and Gynecology Medical Group, Inc. and
Louis N. Weckstein, M.D. (2)
10.68 -- Personal Responsibility Agreement between IntegraMed America,
Inc., Bay Area Fertility and Gynecology Medical Group, Inc. and
Arnold Jacobson, M.D. (2)
10.69 -- Copy of Executive Retention Agreement between Registrant and
Glenn G. Watkins (2)
10.70 -- Management Agreement between Registrant and Fertility Centers of
Illinois, S.C. dated February 28, 1997 (3)
10.71 -- Asset Purchase Agreement between Registrant and Fertility Centers
of Illinois, S.C. dated February 28, 1997 (3)
10.72 -- Physician-Shareholder Employment Agreement between Fertility
Centers of Illinois, S.C. and Aaron S. Lifchez, M.D. dated
February 28, 1997 (3)
10.73 -- Physician-Shareholder Employment Agreement between Fertility
Centers of Illinois, S.C. and Brian Kaplan, M.D. dated February
28, 1997 (3)
10.74 -- Physician-Shareholder Employment Agreement between Fertility
Centers of Illinois S.C. and Jacob Moise, M.D. dated February 28,
1997 (3)
10.75 -- Physician-Shareholder Employment Agreement between Fertility
Centers of Illinois, S.C. and Jorge Valle, M.D. dated February
28, 1997 (3)
10.76 -- Personal Responsibility Agreement among Registrant, Fertility
Centers of Illinois, S.C. and Aaron S. Lifchez, M.D. dated
February 28, 1997 (3)
15
<PAGE>
10.77 -- Personal Responsibility Agreement among Registrant, Fertility
Centers of Illinois, S.C. and Jacob Moise, M.D. dated February
28, 1997 (3)
10.78 -- Personal Responsibility Agreement among Registrant, Fertility
Centers of Illinois, S.C. and Brian Kaplan, M.D. dated February
28, 1997 (3)
10.79 -- Personal Responsibility Agreement among Registrant, Fertility
Centers of Illinois, S.C. and Jorge Valle, M.D. dated February
28, 1997 (3)
10.80 -- Amendment to Contract Number DADA15-96-C-009 between Registrant
and the Department of the Army, Walter Reed Army Medical Center
for In Vitro Fertilization Laboratory Services dated February 11,
1997 (3)
11 -- Computation of Net Loss Per Share of Common Stock
27 -- Financial Data Schedule
(1) Incorporated by reference to the Exhibit with the identical exhibit
number to Registrant's current Report on Form 8-K dated January 20,
1997.
(2) Incorporated by reference to the Exhibit with the identical number to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1996.
(3) Incorporated by reference to the Exhibit with the identical exhibit
number to Registrant's Registration Statement on Form S-1 (File No.
333- filed with the Securities and Exchange Commission on May 6, 1997).
16
EXHIBIT 11
<TABLE>
INTEGRAMED AMERICA, INC.
COMPUTATION OF NET LOSS PER SHARE OF COMMON STOCK
All amounts in thousands, except per share amounts
<CAPTION>
For the
three-month period
ended March 31,
1997 1996
---- ----
<S> <C> <C>
Primary
Net loss....................................................... $ (45) $ (74)
Less: Dividends accrued on Preferred Stock.................... 33 154
------- -------
Adjusted net loss.............................................. $ (78) $ (228)
======= =======
Weighted average number of shares of Common Stock
outstanding................................................ 9,544 6,087
======= =======
Net loss per share of Common Stock............................. $ (0.01) $ (0.04)
======= =======
Fully Diluted
Net loss....................................................... $ (45) $ (74)
======= =======
Weighted average number of shares of Common Stock
outstanding................................................. 9,544 6,087
Add: Common equivalent shares (determined using the
"treasury stock" method) representing incremental shares
issuable upon assumed exercise of options and warrants
using average market price.................................. 208 389
Shares of Common Stock issued upon assumed conversion of
Series A Preferred Stock.................................... 265 1,001
------- -------
Average number of shares of Common Stock and Common
Stock equivalents outstanding............................... 10,017 7,477
======= =======
Net loss per share of Common Stock and Common
Stock equivalents........................................... $ (0.00) $ (0.01)
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Mar-31-1997
<CASH> 3,401
<SECURITIES> 0
<RECEIVABLES> 5,485
<ALLOWANCES> 366
<INVENTORY> 0
<CURRENT-ASSETS> 9,889
<PP&E> 2,947 <F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,989
<CURRENT-LIABILITIES> 4,098
<BONDS> 0
0
166
<COMMON> 96
<OTHER-SE> 14,735
<TOTAL-LIABILITY-AND-EQUITY> 20,989
<SALES> 5,088
<TOTAL-REVENUES> 5,088
<CGS> 4,011
<TOTAL-COSTS> 4,011
<OTHER-EXPENSES> 59
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> (13)
<INCOME-TAX> 32
<INCOME-CONTINUING> (45)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (45)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.00)
<FN>
<F1>
PP&E is net of accumulated depreciation.
</FN>
</TABLE>
