UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act 1934
Date of Report: March 24, 1997
INTEGRAMED AMERICA, INC.
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(Exact name of registrant as specified in charter)
Delaware
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(State of other jurisdiction of incorporation)
0-20260 and 1-11440 06-1150326
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(Commission File Numbers) (IRS Employer Identification No.)
One Manhattanville Road, Purchase, NY 10577
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(Address of principal executive offices) (Zip Code)
Registrant's telephone no. including area code: (914) 253-8000
Registrant's former name: IVF America, Inc.
<PAGE>
INTEGRAMED AMERICA, INC.
FORM 8-K/A
BAY AREA FERTILITY MEDICAL GROUP
TABLE OF CONTENTS
Items 7(a) and (b)
PAGE
FINANCIAL INFORMATION
Financial Statements
Report of Independent Accountants.................................. 3
Balance Sheet as of December 31, 1996.............................. 4
Statement of Operations for the year ended December 31, 1996....... 5
Statement of Cash Flows for the year ended December 31, 1996....... 6
Notes to Financial Statements...................................... 7-9
Pro Forma Consolidated Financial Information (unaudited)
Basis of Presentation.............................................. 10
Pro Forma Consolidated Balance Sheet as of December 31, 1996....... 11
Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1996........................................... 12
SIGNATURES................................................................ 13
2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Bay Area Fertility Medical Group
In our opinion, the accompanying balance sheet and related statements
of operations and of cash flows present fairly, in all material respects, the
financial position of the Bay Area Fertility Medical Group at December 31, 1996,
and the results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
As discussed in Note 7 to the financial statements, on January 7, 1997,
IntegraMed America, Inc. acquired certain assets of the Partnership and acquired
the right to manage the Bay Area Fertility Medical Group, Inc., a California
professional corporation ("Bay Area Fertility") which, effective with this
transaction, became the successor to the Partnership's medical practice. Bay
Area Fertility simultaneously entered into an Employment Agreement with each
Physician pursuant to which each Physician will provide medical services, as
defined.
Price Waterhouse LLP
Stamford, Connecticut
March 24, 1997
3
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BAY AREA FERTILITY MEDICAL GROUP
BALANCE SHEET
ASSETS
December 31,
------------
1996
------------
Current assets:
Cash ........................................................ $ 4,000
Patient accounts receivable, less allowance for doubtful
accounts of $12,000....................................... 127,000
Other current assets ........................................ 12,000
--------
Total current assets...................................... 143,000
Fixed assets, net ........................................... 29,000
--------
Total assets.............................................. $172,000
========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable............................................. $ 9,000
Accrued profit sharing....................................... 15,000
Other accrued liabilities.................................... 10,000
Patient deposits ............................................ 71,000
--------
Total current liabilities................................. 105,000
Partners' capital ............................................. 67,000
--------
Total liabilities and partners' capital................... $172,000
========
See accompanying notes to the financial statements.
4
<PAGE>
BAY AREA FERTILITY MEDICAL GROUP
STATEMENT OF OPERATIONS
For the
year ended
December 31,
------------
1996
------------
Revenues, net (see Note 2)............................... $2,097,000
Costs of services rendered .............................. 923,000
----------
Contribution ............................................ 1,174,000
General and administrative expenses ..................... 228,000
----------
Net income............................................... $ 946,000
==========
See accompanying notes to the financial statements.
5
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BAY AREA FERTILITY MEDICAL GROUP
STATEMENT OF CASH FLOWS
For the
year ended
December 31,
------------
1996
------------
Cash flows from operating activities:
Net income..................................................... $946,000
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization................................ 19,000
Changes in assets and liabilities--
(Increase) decrease in assets:
Patient accounts receivable................................ (10,000)
Increase (decrease) in liabilities:
Accounts payable........................................... (6,000)
Accrued profit sharing..................................... 4,000
Other accrued liabilities.................................. 5,000
Patient deposits........................................... (28,000)
--------
Net cash provided by operating activities........................ 930,000
--------
Cash flows used in financing activities:
Distributions to partners.................................. (926,000)
--------
Net cash used in financing activities............................ (926,000)
--------
Net increase in cash............................................. 4,000
Cash at beginning of period...................................... --
Cash at end of period............................................ $ 4,000
========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
There was no significant interest paid and/or received in cash for the
year ended December 31, 1996.
See accompanying notes to the financial statements.
6
<PAGE>
BAY AREA FERTILITY MEDICAL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1 - THE PARTNERSHIP:
The Bay Area Fertility Medical Group is a general California partnership
(the "Partnership") established on January 1, 1992, which specializes in
providing gynecology and infertility services. The Partnership is comprised of
three professional corporations which are licensed to practice medicine in the
state of California: Arnold Jacobson, M.D., Inc., Donald I. Galen, M.D., Inc.,
and Louis N. Weckstein, M.D., Inc. (the "Partners"). Each professional
corporation has employed a physician, Arnold Jacobson, M.D., Donald I. Galen,
M.D., and Louis N. Weckstein, M.D., (the "Physicians") respectively, to
specialize in providing gynecology and infertility service.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue and cost recognition -
Revenues consist of service revenues for patients.
Patient revenues are recorded on a net realizable basis after deducting
contractual allowances and consist of patient fees collected by the Partnership
for gynecology and infertility services performed by the Partnership. Patient
revenues and related direct costs are recognized in the period in which the
clinical and/or laboratory services are rendered. Net realization is dependent
upon benefits provided by the patient's insurance policy or agreements between
the Partnership and the third-party payor. Payments collected from patients in
advance for services are included in patient deposits.
Patient accounts receivable -
Patient accounts receivable represent receivables from patients for
medical services provided by the Partnership. Such amounts are recorded net of
contractual allowances and estimated bad debts.
Fixed assets -
Fixed assets are valued at cost less accumulated depreciation and
amortization. Depreciation is computed on a straight-line basis over the
estimated useful lives of the related assets, generally three to five years. The
Partnership periodically reviews the fair value of long-lived assets, the
results of which have had no material effect on the Partnership's financial
position or results of operation.
When assets are retired or otherwise disposed of, the costs and related
accumulated depreciation are removed from the accounts. The difference between
the net book value of the assets and proceeds from disposition is recognized as
gain or loss. Routine maintenance and repairs are charged to expenses as
incurred, while costs of betterments and renewals are capitalized.
Income taxes -
The Partnership is not subject to federal and state income taxes since
income is taxed at the individual partner level.
7
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BAY AREA FERTILITY MEDICAL GROUP
NOTES TO FINANCIAL STATEMENTS (continued)
Use of estimates in the preparation of the financial statements -
The preparation of these financial statements in conformity with
generally accepted accounting principles requires management of the Partnership
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities, at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
NOTE 3 - FIXED ASSETS, NET:
Fixed assets, net at December 31, 1996 consisted of the following (000's
omitted):
Furniture, office and other equipment....................... $179
Medical equipment........................................... 119
Leasehold improvements...................................... 29
-----
Total................................................. 327
Less - Accumulated depreciation and amortization........... (298)
----
$ 29
====
Depreciation and amortization expense totaled $19,000 for the year ended
December 31, 1996.
NOTE 4 - OPERATING LEASES:
In January 1995, the Partnership entered into an operating lease for its
main medical office space with the Partners individually, and on behalf of the
Weckstein Family Trust, the Galen Family Trust and Jo-Ann Jacobson,
respectively, the owners of such property.
The Partnership also entered into an operating lease for additional
medical office space from two of the Partners and, in turn, subleased a portion
of such space to a third party. Effective in October 1996, the Partnership no
longer used this space as an additional medical office and entered into a second
sublease with a third party.
For the year ended December 31, 1996, aggregate rental expense for
medical office space was $230,000 which was higher than what the Partnership
would have paid if the lessor had been an unrelated party. Rental income on the
subleased office space totaled $33,000 in 1996.
NOTE 5 - RELATED PARTY TRANSACTIONS:
Refer to Note 4 - Operating Leases.
8
<PAGE>
BAY AREA FERTILITY MEDICAL GROUP
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 6 - PARTNER'S CAPITAL:
During 1996, the following changes in Partners' capital were shared
equally by the Partners (000's omitted):
Balance at January 1, 1996.............. $ 47
Net income.............................. 946
Distributions to Partners............... (926)
----
Balance at December 31, 1996............ $ 67
=====
NOTE 7 - SUBSEQUENT EVENT:
On January 7, 1997, IntegraMed America, Inc. (the "Company") acquired
certain assets of the Partnership and acquired the right to manage the Bay Area
Fertility and Gynecology Medical Group, Inc., a California professional
corporation ("Bay Area Fertility") which, effective with this transaction,
became the successor to the Partnership's medical practice. Bay Area Fertility
simultaneously entered into an Employment Agreement with each Physician pursuant
to which each Physician will provide medical services, as defined. The aggregate
purchase price was approximately $2.0 million, of which $1.5 million was paid by
the Company in cash and $0.5 million was paid in the form of the Company's
Common Stock, or 333,333 shares of the Company's Common Stock, at closing. The
other assets acquired by the Company primarily consisted of the name "Bay Area
Fertility" and medical equipment and furniture and fixtures which will continue
to be used by Bay Area Fertility in the provision of infertility and ART
services.
9
<PAGE>
BAY AREA FERTILITY MEDICAL GROUP
NOTES TO FINANCIAL STATEMENTS (continued)
INTEGRAMED AMERICA, INC.
Unaudited Pro Forma Consolidated Financial Information
Basis of Presentation
The transaction detailed below was accounted for by the purchase method
of accounting and the purchase price has been allocated to the tangible and
intangible assets acquired and liabilities assumed based upon the estimated fair
values at the date of acquisition.
On January 7, 1997, IntegraMed America, Inc.(the "Registrant") 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 ("Bay
Area Fertility"). Located in San Ramon, California, Bay Area Fertility is one of
California's premiere providers of infertility and assisted reproductive
technology (ART) services. Founded in 1976, Bay Area Fertility was one of the
first providers of ART services in California and today has one of the region's
largest and most successful programs. Bay Area Fertility is currently under the
medical leadership of Arnold Jacobson, MD, Donald Galen, MD, and Louis
Weckstein, MD., (the "Physicians").
The aggregate purchase price was approximately $2.0 million, of which
$1.5 million was paid by the Registrant in cash and $0.5 million was paid in the
form of the Registrant's Common Stock, or 333,333 shares of the Registrant's
Common Stock, at closing. The Company funded the purchase price from proceeds
raised in its public offering of Series A Cumulative Convertible Preferred Stock
in May 1993. In determining the purchase price, the Registrant considered, among
other factors, the past and projected revenues generated by Bay Area Fertility.
In addition to the exclusive right to manage Bay Area Fertility, the Registrant
acquired other assets which primarily consisted of the name "Bay Area Fertility"
and medical equipment and furniture and fixtures which will continue to be used
by Bay Area Fertility in the provision of infertility and ART services.
Under long term employment agreements with Bay Area Fertility, the
Physicians will provide medical services, as defined.
The following unaudited pro forma consolidated statement of operations
have been prepared by management based on the audited information for the year
ended December 31, 1996 of the Partnership 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 results to reflect operations as if the related exclusive
management agreement had been consummated on January 1, 1996. Additional general
corporate expenses which would have been required to support the operations of
these 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.
10
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<TABLE>
INTEGRAMED AMERICA, INC.
Pro Forma Consolidated Balance Sheet
as of December 31, 1996
(all amounts in thousands, except per share amounts)
(unaudited)
<CAPTION>
Transaction Pro Forma
Historical Adjustments Consolidated
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................... $3,761 $(1,500)(a) $2,261
Short term investments....................................... 2,000 -- 2,000
Patient accounts receivable, less allowance
for doubtful accounts of $113 and $64 in 1996............. 2,770 -- 2,770
Management fees receivable, less allowance
for doubtful accounts of $50,000 and $0 in 1996........... 1,249 -- 1,249
Other current assets ........................................ 1,779 -- 1,779
------- --------- -------
Total current assets ................................ 11,559 (1,500) 10,059
------- --------- -------
Fixed assets, net ............................................. 3,186 29 3,215
Intangible assets, net......................................... 5,894 2,055 7,949
Other assets................................................... 211 -- 211
------- --------- -------
Total assets......................................... $20,850 $ 584 $21,434
======= ========= =======
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Accounts payable ............................................ $ 1,020 -- $ 1,020
Accrued liabilities ......................................... 1,652 -- 1,652
Due to Medical Providers..................................... 326 -- 326
Dividends accrued on Preferred Stock......................... 331 -- 331
Current portion of exclusive management rights obligation.... 222 -- 222
Current portion of long-term debt............................ 426 -- 426
Patient deposits ............................................ 490 -- 490
------- --------- -------
Total current liabilities .............................. 4,467 -- 4,467
------- -------
Exclusive management rights obligation......................... 1,213 -- 1,213
Long-term debt................................................. 692 -- 692
Shareholders' equity:
Preferred Stock, $1.00 par value --
3,165,644 shares authorized in 1996 - 2,500,000 undesignated;
665,644 shares designated as Series A Cumulative
Convertible of which 165,644 were issued and outstanding
in 1996................................................... 166 -- 166
Common Stock, $.01 par value -- 25,000,000 shares
authorized; 9,230,557 shares issued and
outstanding in 1996....................................... 92 $ 3(b) 95
Capital in excess of par .................................... 35,410 581(b) 35,991
Accumulated deficit ......................................... (21,190) -- (21,190)
------- --------- -------
Total shareholders' equity ............................. 14,478 584 15,062
------- --------- -------
Total liabilities and shareholders' equity.............. $20,850 $ 584 $21,434
======= ========= =======
(a) To record the cash payment for the purchase of certain assets and the
exclusive right to manage Bay Area Fertility.
(b) To record the issuance of 333,333 shares of the Registrant's Common Stock
for the purchase of certain assets and the exclusive right to manage Bay
Area Fertility.
</TABLE>
11
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<TABLE>
INTEGRAMED AMERICA, INC.
Pro Forma Consolidated Statement of Operations
for the Year Ended December 31, 1996
(all amounts in thousands, except per share amounts)
(unaudited)
<CAPTION>
Transaction Pro Forma
Historical Adjustments Consolidated
<S> <C> <C> <C>
Revenues, net................................................ $18,343 $1,441(a) $19,784
Medical Provider retainage................................... 2,680 -- 2,680
------- -------- -------
Revenues after Medical Provider retainage.................... 15,663 1,441 17,104
Costs of services rendered .................................. 12,398 1,151(b) 13,549
------- -------- -------
Network sites' contribution ................................. 3,265 290 3,555
------- -------- -------
General and administrative expenses.......................... 4,339 -- 4,339
Research and development .................................... 323 -- 323
Goodwill and exclusive management right amortization......... 331 103(c) 434
Interest income, net......................................... (379) 75(d) (304)
------- -------- -------
Total other expenses......................................... 4,614 178 4,792
------- -------- -------
(Loss) income before income taxes ........................... (1,349) 112 (1,237)
Provision for income and capital taxes ...................... 141 12 153
------- -------- -------
Net (loss) income............................................ (1,490) 100 (1,390)
Less: Dividends accrued on Preferred Stock................... 132 -- 132
------- -------- -------
Net (loss) income applicable to Common Stock before
consideration for induced conversion of Preferred Stock... $(1,622) $ 100 $(1,522)
======= ======= =======
Net (loss) income per share of Common Stock before
consideration for induced conversion of Preferred Stock... $ (0.21) $ (0.19)
======= =======
Net loss per share of Common Stock........................... $ (0.68) $ (0.66)
======= =======
Weighted average number of shares of Common Stock
and Common Stock equivalents outstanding.................. 7602 333(e) 7,935
======== ======== ========
NOTE: Under the Bay Area Fertility management agreement, the Registrant receives
as compensation for its management services a three-part management fee
comprised of: i) a fixed percentage of net revenues, ii) reimbursed cost of
services (costs incurred in managing Bay Area Fertility and any costs paid on
behalf of Bay Area Fertility), and iii) a variable percentage of net revenues.
Direct costs incurred by the Registrant in performing its management services
and costs incurred on behalf of Bay Area Fertility are recorded in cost of
services.
(a) To record net revenues earned for the year ended December 31, 1996 under
the Bay Area Fertility management agreement.
(b) To record cost of services incurred during the year ended December 31, 1996
under the Bay Area Fertility management agreement.
(c) To record amortization of exclusive management right, which is amortized
over the twenty-year term of the Bay Area Fertility management agreement,
for the year ended December 31, 1996.
(d) To record reduction in interest income due to assumption that the cash
payment of $1.5 million for the purchase price occurred on January 1, 1996.
(e) Assumes 333,333 shares were issued on January 1, 1996.
</TABLE>
12
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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: March 24, 1997 By: /s/ Dwight P. Ryan
------------------
Dwight P. Ryan
Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
13
