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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 September 30, 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 November 10, 1997 was 17,198,616.
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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 September 30, 1997
(unaudited) and December 31, 1996........................... 3
Consolidated Statement of Operations for the three
and nine-month period ended September 30, 1997 and 1996
(unaudited)................................................. 4
Consolidated Statement of Cash Flows for the nine-month
period ended September 30, 1997 and 1996 (unaudited)........ 5
Notes to Consolidated Financial Statements (unaudited)......6-11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 12-17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings...........................................18
Item 2. Changes in Securities.......................................18
Item 3. Defaults upon Senior Securities.............................18
Item 4. Submission of Matters to a Vote of Security Holders.........18
Item 5. Other Information...........................................18
Item 6. Exhibits and Reports on Form 8-K............................18
SIGNATURES .....................................................19
INDEX TO EXHIBITS.........................................................20-22
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
<TABLE>
INTEGRAMED AMERICA, INC.
CONSOLIDATED BALANCE SHEET
(all dollars in thousands)
ASSETS
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
(unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents .......................................................... $ 1,917 $ 3,761
Short term investments.............................................................. -- 2,000
Patient accounts receivable, less allowance for doubtful accounts of $130 and $113
in 1997 and 1996, respectively.................................................... 4,939 2,770
Management fees receivable, less allowance for doubtful accounts of $183 and $50
in 1997 and 1996, respectively.................................................... 1,510 1,249
Research fees receivable............................................................ 424 232
Other current assets ............................................................... 1,005 897
Controlled assets of Medical Practices (see Note 2):
Cash.............................................................................. 62 191
Patient accounts receivable, less allowance for doubtful accounts of $13 and $146
in 1997 and 1996, respectively.................................................. 335 459
------- -------
Total controlled assets of Medical Practices.................................... 397 650
------- -------
Total current assets............................................................ 10,192 11,559
------- -------
Fixed assets, net ................................................................ 3,833 3,186
Intangible assets, net............................................................ 18,198 5,894
Other assets...................................................................... 384 211
------- -------
Total assets.................................................................... $32,607 $20,850
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................... $ 185 $ 1,020
Accrued liabilities................................................................. 2,237 1,652
Due to Medical Practices (see Note 2)............................................... 162 326
Dividends accrued on Preferred Stock................................................ 430 331
Current portion of exclusive management rights obligation........................... 472 222
Note payable and current portion of long-term debt.................................. 618 426
Patient deposits ................................................................... 924 490
------- -------
Total current liabilities....................................................... 5,028 4,467
------- -------
Exclusive management rights obligation................................................ 1,430 1,213
Long-term debt ....................................................................... 527 692
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; 17,195,991 and
9,230,557 shares issued and outstanding in 1997 and 1996, respectively............ 172 92
Capital in excess of par ........................................................... 46,317 35,410
Accumulated deficit ................................................................ (21,033) (21,190)
------- -------
Total shareholders' equity ..................................................... 25,622 14,478
------- -------
Total liabilities and shareholders' equity...................................... $32,607 $20.850
======= =======
See accompanying notes to the consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
INTEGRAMED AMERICA, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(all amounts in thousands, except per share amounts)
<CAPTION>
For the For the
three-month period nine-month period
ended September 30, ended September 30,
1997 1996 1997 1996
------- ------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues, net (see Note 2)........................................ $5,822 $5,016 $16,376 $14,004
Medical Practice retainage (see Note 2)........................... 407 761 1,263 2,264
------- ------- -------- --------
Revenues after Medical Practice retainage (see Note 2)............ 5,415 4,255 15,113 11,740
Costs of services rendered ....................................... 4,089 3,678 11,404 9,228
------- ------- -------- --------
Network Sites' contribution ...................................... 1,326 577 3,709 2,512
------- ------- -------- --------
General and administrative expenses .............................. 948 1,153 2,854 2,969
Clinical service development expenses............................. 57 94 174 222
Amortization of intangible assets................................. 209 102 490 193
Interest income................................................... (30) (108) (98) (331)
Interest expense.................................................. 14 11 48 26
------- ------- -------- --------
Total other expenses.............................................. 1,198 1,252 3,468 3,079
------- ------- -------- --------
Income (loss) before income taxes................................. 128 (675) 241 (567)
Provision for income and capital taxes........................... 20 18 84 114
------- ------- -------- --------
Net income (loss)................................................. 108 (693) 157 (681)
Less: Dividends accrued on Preferred Stock........................ 33 33 99 99
------- ------- -------- --------
Net income (loss) applicable to Common Stock before
consideration for induced conversion of Preferred Stock ....... $ 75 $ (726) $ 58 $ (780)
======= ======= ======== ========
Net income (loss) per share of Common Stock before consideration
for induced conversion of Preferred Stock..................... $0.01 $ (0.08) $ 0.01 $ (0.11)
======= ======= ======== ========
Net income (loss) per share of Common Stock and
Common Stock equivalents (see Note 3).......................... $ 0.01 $ (0.46) $ 0.01 $ (0.58)
======= ======= ======== ========
Weighted average number of shares of Common Stock and
Common Stock equivalents outstanding........................... 13,436 8,795 10,992 7,056
======= ======= ======== ========
See accompanying notes to the consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
INTEGRAMED AMERICA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(all amounts in thousands)
<CAPTION>
For the
nine-month period
ended September 30,
1997 1996
------ ------
(unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) .......................................................... $ 157 $ (681)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization.............................................. 1,228 796
Writeoff of fixed assets .................................................. 95 --
Changes in assets and liabilities-- (Increase) decrease in assets:
Patient accounts receivable........................................... (2,169) (1,094)
Management fees receivable............................................ (261) 27
Research fees receivable.............................................. (192) 31
Other current assets.................................................. (108) (113)
Other assets.......................................................... (151) 33
Decrease (increase) in controlled assets of Medical Practices:
Patient accounts receivable........................................... 124 590
Other current assets.................................................. -- (5)
Increase (decrease) in liabilities:
Accounts payable...................................................... (835) 343
Accrued liabilities................................................... 285 (242)
Due to Medical Practices.............................................. (164) 72
Patient deposits...................................................... 434 18
------ ------
Net cash used in operating activities....................................... (1,557) (225)
------ ------
Cash flows provided by (used in) investing activities:
Proceeds from (purchase of) short term investments....................... 2,000 (500)
Purchase of net assets of acquired businesses............................ (661) (271)
Payments for exclusive management rights and related acquisition costs... (9,447) (805)
Purchase of fixed assets and leasehold improvements...................... (834) (974)
Proceeds from sale of fixed assets....................................... 139 --
------ ------
Net cash used in investing activities....................................... (8,803) (2,550)
------ ------
Cash flows provided by (used in) by financing activities:
Proceeds from issuance of Common Stock................................... 9,601 --
Used for stock issue costs............................................... (1,193) --
Proceeds from bank under Credit Facility................................. 250 --
Principal repayments on debt............................................. (193) (105)
Principal repayments under capital lease obligations..................... (97) (162)
Repurchase of Convertible Preferred Stock................................ -- (84)
Preferred Stock conversion costs......................................... -- (18)
Proceeds from exercise of Common Stock options........................... 19 21
------ ------
Net cash provided by (used in) financing activities........................... 8,387 (348)
------ ------
Net decrease in cash and cash equivalents..................................... (1,973) (3,123)
Cash and cash equivalents at beginning of period.............................. 3,952 8,179
------ ------
Cash and cash equivalents at end of period.................................... $1,979 $5,056
====== ======
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 September 30, 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 ten
management agreements.
Under six of the Company's management agreements, the Company receives as
compensation for its management services a three-part management fee comprised
of: (i) a fixed percentage of net revenues, generally equal to 6%, (ii)
reimbursed cost of services (costs incurred in managing a Medical Practice and
any costs paid on behalf of the Medical Practice) 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, which generally results in the Company receiving up to an additional
15% of net revenues. All management fees are reported as revenues, net by the
Company. Direct costs incurred by the Company in performing its management
services and costs incurred on behalf of the Medical Practice are recorded in
costs of services rendered. The physicians receive as compensation all earnings
remaining after payment of the Company's management fee.
Under the Company's management agreements for the Boston and Long Island
Network Sites, the Company displays the patient service revenues of the Medical
Practices which are reflected as revenues, net on its consolidated statement of
operations. Under these agreements, the Company records all patient service
revenues and, out of such revenues, the Company pays the Medical Practices'
operating expenses, physicians' and other medical compensation and direct
materials (the "Medical Practice retainage"). Approximately 70%-80% of Medical
Practice retainage is fixed and the balance is primarily comprised of certain
physician compensation. Specifically, under the management agreement for the
Boston Network Site, the Company guarantees a minimum physician compensation
based on an annual budget primarily determined by the Company. Remaining
revenues, if any, which represent the Company's management fee, are used by the
Company for other direct administrative expenses which are recorded as costs of
services. Under the management agreement for the Long Island Network Site, the
Company's management fee is payable only out of the remaining revenues, if any,
after the payment of all expenses of the Medical Practice. Under these
arrangements, the Company is liable for payment of all liabilities incurred by
the Medical Practices and is at risk for any losses incurred in the operations
thereof. Effective October 1, 1997, the Company entered into an agreement with
respect to the Long Island Network Site pursuant to which the Company will
receive a fixed management fee (initially equal to $300,000 per annum) and
reimbursed cost of services.
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, equal to 15% of net 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 directly billed to the patients by the Company; out of
these patient service revenues, the Company pays its direct costs and the
remaining balance represents the Company's Network Site contribution. All direct
costs incurred by the Company are recorded as costs of services.
6
<PAGE>
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Adult Women's Medical Division ("AWM Division")
The AWM Division's operations are currently comprised of one Network Site
with three locations which are directly owned by the Company and a 51% interest
in the National Menopause Foundation ("NMF"), a company which develops
multifaceted educational programs regarding women's health care and publishes a
quarterly women's health digest. The Network Site is also involved in clinical
trials with major pharmaceutical companies.
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.
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 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 minority interest on the Company's
consolidated balance sheet. Minority interest at September 30, 1997 and December
31, 1996 was $0.
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 and risk of loss due to non-
collectibility is borne by the Company. As of September 30, 1997 and December
31, 1996, of total patient accounts receivable of $4,939,000 and $2,770,000,
respectively, approximately $2,520,000 and $836,000 of patient accounts
receivable were a function of Network Site revenue (i.e., the Company purchased
the accounts receivable from the Medical Practice) and the remaining balances of
$2,419,000 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 relating to clinical trials between the pharmaceutical companies and
the AWM Division.
7
<PAGE>
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
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 September 30, 1997 and December 31, 1996, of the $397,000 and $650,000
controlled assets of Medical Practices, $43,000 and $117,000, respectively, were
restricted for payment of the amounts due to Medical Practices and the balances
of $354,000 and $533,000, respectively, were payable to the Company.
NOTE 3 -- REVENUES, MEDICAL PRACTICE RETAINAGE AND COSTS OF SERVICES:
The following table sets forth for the three and nine months ended
September 30, 1997 and 1996, revenues, Medical Practice retainage and costs of
services for each of the Company's three types of management agreements (patient
service revenues, three-part management fee and percent of revenues and
reimbursed costs of services) and revenues and costs of services for the AWM
Division (000's omitted):
<TABLE>
<CAPTION>
For the For the
three-month period nine-month period
ended September 30, ended September 30,
1997 1996 1997 1996
------ ------ ------- -------
Revenues, net:
RSC Division --
<S> <C> <C> <C> <C>
Patient service revenues............................. $2,408 $ 3,190 $ 7,334 $ 9,185
Management fees-- three part management fee.......... 2,029 795 4,519 2,200
Management fees-- percent of revenues and
reimbursed costs of services of the New Jersey..... 925 670 2,779 2,161
------ ------ ------- -------
Network Site.......................................
Total RSC Division revenues, net................. 5,362 4,655 14,632 13,546
------ ------ ------- -------
AWM Division -- revenues............................... 460 361 1,744 458
------ ------ ------- -------
Total revenues, net.............................. $5,822 $5,016 $16,376 $14,004
====== ====== ======= =======
Medical Practice retainage:
RSC Division --
Medical practice retainage related to patient
service revenues................................... $ 407 $ 761 $1,263 $ 2,264
====== ====== ======= =======
Costs of services:
RSC Division --
Costs related to patient service revenues............ $1,423 $2,205 $ 4,360 $ 5,819
Costs related to three part management fees.......... 1,686 774 4,075 2,137
Costs related to New Jersey Network Site............. 379 267 1,116 767
------ ------ ------- -------
Total RSC Division costs of services............. 3,488 3,246 9,551 8,723
------ ------ ------- -------
AWM Division -- Costs of services...................... 601 432 1,853 505
------ ------ ------- -------
Total costs of services.......................... $4,089 $3,678 $11,404 $ 9,228
====== ====== ======= =======
</TABLE>
8
<PAGE>
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
For the nine months ended September 30, 1997 and 1996, the New Jersey
Network Site, which management fee is based upon a percentage of revenues,
provided 17.0% and 15.4% of the Company's revenues, net, respectively. For the
nine months ended September 30, 1997 and 1996, the New Jersey Network Site
provided 44.8% and 55.5% of the Company's Network Site contribution,
respectively.
For the nine months ended September 30, 1997 and 1996, the Boston Network
Site, which is included in patient service revenues under the RSC Division,
provided 31.0% and 40.4% of the Company's revenues, net, respectively. For the
nine months ended September 30, 1997 and 1996, the Boston Network Site provided
37.6% and 67.3% of the Company's Network Site contribution, respectively.
Summary unaudited financial information for the Boston Network Site is as
follows (000's omitted):
<TABLE>
<CAPTION>
For the For the
three-month period nine-month period
ended September 30, ended September 30,
1997 1996 1997 1996
------- ------- ------ ------
<S> <C> <C> <C> <C>
Revenues, net...................................... $1,678 $1,825 $5,080 $5,660
Medical Practice retainage......................... 279 314 837 857
------- ------- ------ ------
Revenues after Medical Practice retainage.......... 1,399 1,511 4,243 4,803
Costs of services rendered......................... 950 974 2,848 3,114
------- ------- ------ ------
Network Site's contribution........................ $ 449 $ 537 $1,395 $1,689
======= ======= ====== ======
</TABLE>
NOTE 4 -- 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 September 30, 1997, was 9.25%. The Credit
Facility terminates on April 1, 1998 and is secured by the Company's assets. At
September 30, 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.
In November 1997, the Company obtained from the Bank a new $4.0 million
non-restoring credit facility (the "New Credit Facility"). Borrowings under the
New Credit Facility will bear interest at the Bank's prime rate plus 1.0% per
annum. Borrowings outstanding under the New Credit Facility at September 30,
1998 may convert into a four-year term loan. Any amounts borrowed under the New
Credit Facility will permanently reduce amounts available for future borrowings
under the New Credit Facility. The New Credit Facility will be
cross-collateralized and cross-defaulted with the Credit Facility. At September
30, 1997, no amounts were outstanding under the New Credit Facility.
NOTE 5 -- EQUITY:
In August, 1997, the Company consummated an offering of 6,400,000 shares
of Common Stock (the "Offering"). The Offering raised gross proceeds of $9.6
million and net proceeds of approximately $8.4 million. Approximately $6.6
million of the net proceeds was used for the asset purchase and right-to-manage
agreement with Fertility Centers of Illinois, S.C., one of the largest providers
of infertility and assisted reproductive technology services in the United
States. The balance of the proceeds of the Offering have been and will continue
to be used for working capital and other general corporate purposes, including
possible future acquisitions of the assets of, and the right to manage,
additional physician practices.
9
<PAGE>
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
NOTE 6 -- RECENT ACQUISITIONS:
In August 1997, the Company used $6.6 million of the net proceeds from
the Offering to acquire certain fixed assets of and the right to manage
Fertility Centers of Illinois, S.C. ("FCI"), a physician group practice
comprised of six physicians and six locations in the Chicago, Illinois area. The
aggregate purchase price was approximately $8.6 million, consisting of
approximately $6.6 million in cash and 1,009,464 shares of Common Stock.
Approximately $8.0 million of the aggregate purchase price was allocated to
exclusive management rights, which will be amortized over the twenty-year term
of the management agreement and $559,000 was allocated to certain fixed assets.
Simultaneous with closing on the FCI transaction, the Company, on behalf
of FCI, completed its first in-market merger with the addition of Edward L.
Marut, MD to the FCI practice. The aggregate purchase price was $803,000 in
cash, of which $750,000 was allocated to exclusive management rights, which will
be amortized over the twenty-year term of the management agreement and $53,000
was for certain fixed assets.
In June 1997, the Company acquired certain assets of and the right to
manage Reproductive Sciences Medical Center ("RSMC"), a physician group practice
comprised of two physicians and two locations in the San Diego, CA area (the
"San Diego Acquisition"). The aggregate purchase price for the San Diego
Acquisition was approximately $900,000, partially consisting of $50,000 in cash
and 145,454 shares of Common Stock. An additional $650,000 is payable upon the
achievement of certain specified milestones, at RSMC's option, in cash or in
shares of the Company's Common Stock, based on the closing market price of the
Common Stock on the third business day prior to issuance. The aggregate purchase
price paid was allocated to exclusive management rights which will be amortized
over the twenty-year term of the management agreement.
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 ("Bay Area Fertility"). 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.
FCI, RSMC and Bay Area Fertility represented in aggregate approximately
$1.2 million, $305,000, and $210,000 of the Company's revenues, net, Network
Site contribution and net income for the three-month period ended September 30,
1997, respectively. FCI, RSMC and Bay Area Fertility represented in aggregate
approximately $1.9 million, $474,000, and $324,000 of the Company's revenues,
net, Network Site contribution and net income for the nine-month period ended
September 30, 1997, respectively.
NOTE 7 -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION AND NON-CASH
TRANSACTIONS:
In connection with its acquisition of the exclusive right to manage FCI
in August 1997, the Company issued 1,009,464 shares of Common Stock with an
aggregate fair value equal to $2,082,000.
In connection with its acquisition of the exclusive right to manage RSMC
in June 1997, the Company issued 145,454 shares of Common Stock with an
aggregate fair value equal to $200,000.
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 nine-month period ended September 30, 1997, the Company entered
into a capital lease obligation in the amount of $105,000 for medical equipment.
In the nine-month period ended September 30, 1997, the Company assigned
two capital lease obligations for medical equipment with an aggregate book value
of $60,000 to two related parties.
10
<PAGE>
INTEGRAMED AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Accrued dividends on Convertible Preferred Stock outstanding increased by
$99,000 to $430,000 in the nine-month period ended September 30, 1997. Accrued
dividends on Convertible Preferred Stock decreased by $648,000 to $331,000 in
the nine-month period ended September 30, 1996 due to the reversal of accrued
dividends related to the Preferred Stock conversion, partially offset by
dividends accrued in 1996.
Controlled cash of Medical Practices decreased $1,000 and $46,000 during
the nine-month periods ended September 30, 1997 and 1996, respectively.
State taxes, which primarily reflect Massachusetts income taxes and New
York capital taxes, of $66,000 and $103,000 were paid in the nine-month periods
ended September 30, 1997 and 1996, respectively.
Interest paid in cash in the nine-month periods ended September 30, 1997
and 1996 amounted to $48,000 and $26,000, respectively. Interest received in the
nine-month periods ended September 30, 1997 and 1996 amounted to $98,000 and
$360,000, respectively.
11
<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 ten Network Sites. During the
nine-month period ended September 30, 1997, the RSC Division derived its
revenues pursuant to ten management agreements, including three of which were
acquired in 1997. During the nine-month period ended September 30, 1996, the RSC
Division principally derived its revenues pursuant to six management agreements
including one which was acquired in May 1996 and 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 August, 1997, the Company consummated an offering of 6,400,000 shares
of Common Stock (the "Offering"). The Offering raised gross proceeds of $9.6
million and net proceeds of approximately $8.4 million.
In August 1997, the Company used $6.6 million of the net proceeds from
the Offering to acquire certain fixed assets of and the right to manage
Fertility Centers of Illinois, S.C. ("FCI"), a physician group practice
comprised of six physicians and six locations in the Chicago, Illinois area. The
aggregate purchase price was approximately $8.6 million, consisting of
approximately $6.6 million in cash and 1,009,464 shares of Common Stock.
Approximately $8.0 million of the aggregate purchase price was allocated to
exclusive management rights and $559,000 was allocated to certain fixed assets.
Simultaneous with closing on the FCI transaction, the Company, on behalf
of FCI, completed its first in-market merger with the addition of Edward L.
Marut, MD to the FCI practice. The aggregate purchase price was $803,000 in
cash, of which $750,000 was allocated to exclusive management rights and $53,000
was allocated to certain fixed assets.
In June 1997, the Company acquired certain assets of and the right to
manage Reproductive Sciences Medical Center ("RSMC"), a physician group practice
comprised of two physicians and two locations in the San Diego, CA area (the
"San Diego Acquisition"). The aggregate purchase price for the San Diego
Acquisition was approximately $900,000, partially consisting of $50,000 in cash
and 145,454 shares of Common Stock. An additional $650,000 is payable upon the
achievement of certain specified milestones, at RSMC's option, in cash or in
shares of the Company's Common Stock, based on the closing market price of the
Common Stock on the third business day prior to issuance.
The aggregate purchase price paid was allocated to exclusive management rights.
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 majority of the aggregate purchase price was
allocated to exclusive management rights.
12
<PAGE>
Results of Operations
Three Months Ended September 30, 1997 Compared to Three Months Ended
September 30, 1996
Revenues for the three months ended September 30, 1997 (the "third quarter
of 1997") were approximately $5.8 million as compared to approximately $5.0
million for the three months ended September 30, 1996 (the "third quarter of
1996"), an increase of 16.1%. In the third quarter of 1997, the Company's RSC
Division and AWM Division contributed 92.1% and 7.9%, respectively, of the
Company's total revenues.
RSC Division revenues for the third quarter of 1997 were approximately $5.4
million as compared to $4.7 million for the third quarter of 1996, an increase
of 15.2%. Revenues under the RSC Division were comprised of (i) patient service
revenues, (ii) three-part management fees and (iii) at the New Jersey Network
Site, management fees based on a percentage of revenues and reimbursed costs of
services. Patient service revenues were approximately $2.4 million in the third
quarter of 1997 compared to approximately $3.2 million for the third quarter of
1996, a decrease of 24.5%. Patient service revenues decreased due to the absence
of the Westchester Network Site agreement which the Company terminated in
November 1996 and due to a 8.1% decrease in revenues related to the Boston
Network Site attributable to lower volume at such Network Site. Three-part
management fee revenues were $2.0 million in the third quarter of 1997 compared
to $795,000 in the third quarter of 1996, an increase of 155%. The increase in
three-part management fee revenues was attributable to new management agreements
entered into in the second quarter of 1996 and the first and third quarter of
1997. Management fees based on a percentage of revenues and reimbursed costs of
services of the New Jersey Network Site were approximately $925,000 in the third
quarter of 1997 compared to approximately $670,000 in the third quarter of 1996,
an increase of 38.1%, due to an increase in volume at such Network Site. AWM
Division revenues for the third quarter of 1997 were approximately $460,000 as
compared to $361,000 for the third quarter of 1996 due to the acquisitions in
early June and late December of 1996 which established this Division.
Medical Practice retainage, which represents physicians' and other medical
fees and direct materials related to the Boston and Long Island Network Sites in
the third quarter of 1997 and to the Boston, Long Island and Westchester Network
Sites in the third quarter of 1996, was approximately $407,000 in the third
quarter of 1997 as compared to approximately $761,000 in the third quarter of
1996, a decrease of 46.5%, primarily due to the absence of the Westchester
Network Site agreement.
Revenues after Medical Practice retainage were approximately $5.4 million
in the third quarter of 1997 as compared to approximately $4.3 million in the
third quarter of 1996, an increase of 27.3%. The increase was attributable to
new management agreements entered into in the second quarter of 1996 and the
first and third quarter of 1997. The increase in revenues after Medical Practice
Retainage was partially offset by the decrease in management fees related to the
absence of the Westchester Network Site agreement.
Costs of services rendered were approximately $4.1 million in the third
quarter of 1997 as compared to approximately $3.7 million in the third quarter
of 1996, an increase of 11.2%. This increase was directly attributable to new
management agreements entered into in the second quarter of 1996 and the first
and third 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 and a decrease in costs related to the
Boston Network Site. As a percentage of revenues, net, costs of services
rendered decreased to 70.2% in the third quarter of 1997 compared to 73.3% in
the third quarter of 1996.
Network Sites' contribution was approximately $1.3 million in the third
quarter of 1997 compared to $577,000 in the third quarter of 1996, an increase
of approximately 130%, as a result of the revenue and cost variances discussed
above. As a percentage of revenues, Network Sites' contribution increased to
22.8% in the third quarter of 1997 as compared to 11.5% in the third quarter of
1996. Network Site contribution in the third quarter of 1996 included a $365,000
non-recurring loss associated with the closing of the Westchester Network Site.
13
<PAGE>
General and administrative expenses for the third quarter of 1997 were
$948,000 compared to approximately $1.2 million in the third quarter of 1996, a
decrease of 17.8%. Such decrease was primarily attributable to the absence of
costs associated with the closing of a regional office in late 1996 and mid 1997
and a decrease in consulting costs, partially offset by increases in
communication and investor relations costs.
Clinical service development expenses were $57,000 in the third quarter of
1997 compared to $94,000 in the third quarter of 1996, a decrease of 39.4%. Such
decrease was primarily due to a decrease in development costs related to genetic
and immature oocyte testing.
Amortization of intangible assets was $209,000 in the third quarter of 1997
as compared to $102,000 in the third quarter of 1996. This increase was
attributable to the Company's acquisitions in the second quarter of 1996 and the
first and third quarter of 1997.
Interest income for the third quarter of 1997 was $30,000 compared to
$108,000 in the third quarter of 1996. This decrease was primarily due to a
lower cash balance.
The provision for income taxes primarily reflected Massachusetts income
taxes and New York capital taxes in the third quarter of 1997 and in the third
quarter of 1996, respectively.
Net income was $108,000 in the third quarter of 1997 compared to a net loss
of $693,000 in the third quarter of 1996. This increase in net income was
primarily due to a $749,000 increase in contribution and a $205,000 decrease in
general and administrative expenses, partially offset by a $107,000 increase in
amortization of intangible assets and a $78,000 decrease in interest income. The
net loss in the third quarter of 1996 was primarily due to a $365,000
non-recurring loss associated with the closing of the Westchester Network Site.
Nine Months Ended September 30, 1997 Compared to Nine Months Ended
September 30, 1996
Revenues for the nine months ended September 30, 1997 were approximately
$16.4 million as compared to approximately $14.0 million for the nine months
ended September 30, 1996, an increase of 16.9%. For the nine months ended
September 30, 1997, the Company's RSC Division and AWM Division contributed
89.4% and 10.6%, respectively, of the Company's total revenues.
RSC Division revenues for the nine months ended September 30, 1997 were
approximately $14.6 million as compared to $13.5 million for the nine months
ended September 30, 1996, an increase of 8.0%. Revenues under the RSC Division
were comprised of (i) patient service revenues, (ii) three-part management fees
and (iii) at the New Jersey Network Site, management fees based on a percentage
of revenues and reimbursed costs of services. Patient service revenues were
approximately $7.3 million for the nine months ended September 30, 1997 compared
to approximately $9.2 million for the nine months ended September 30, 1996, a
decrease of 20.2%. Patient service revenues decreased due to the absence of the
Westchester Network Site agreement which the Company terminated in November 1996
and due to a 10.2% decrease in revenues related to the Boston Network Site
attributable to lower volume at such Network Site. Three-part management fee
revenues were $4.5 million for the nine months ended September 30, 1997 compared
to $2.2 million for the nine months ended September 30, 1996, an increase of
105%. The increase in three-part management fee revenues was attributable to new
management agreements entered into in the third quarter of 1996 and the first
and third quarter of 1997. Management fees based on a percentage of revenues and
reimbursed costs of services of the New Jersey Network Site were approximately
$2.8 million for the nine months ended September 30, 1997 compared to
approximately $2.2 million for the nine months ended September 30, 1996, an
increase of 28.6%, due to an increase in volume at such Network Site. AWM
Division revenues for the nine months ended September 30, 1997 were
approximately $1.7 million as compared to $458,000 for the nine months ended
September 30, 1996 due to the acquisitions in early June and late December of
1996 which established this Division.
14
<PAGE>
Medical Practice retainage, which represents physicians' and other medical
fees and direct materials related to the Boston and Long Island Network Sites
for the nine months ended September 30, 1997 and to the Boston, Long Island and
Westchester Network Site for the nine months ended September 30, 1996, was
approximately $1.3 million in the nine months ended 1997 as compared to
approximately $2.3 million for the nine months ended September 30, 1996, a
decrease of 44.2%, primarily due to the absence of the Westchester Network Site
agreement.
Revenues after Medical Practice Retainage were approximately $15.1 million
for the nine months ended September 30, 1997 as compared to approximately $11.7
million for the nine months ended September 30, 1996, an increase of 28.7%. The
increase was attributable to new management agreements entered into in the third
quarter of 1996 and the first and third quarter of 1997. The increase in
revenues after Medical Practice Retainage was partially offset by the decrease
in management fees related to the absence of the Westchester Network Site
agreement and to a decrease in management fees related to the Boston Network
Site.
Costs of services rendered were approximately $11.4 million for the nine
months ended September 30, 1997 as compared to approximately $9.2 million for
the nine months ended September 30, 1996, an increase of 23.6%. This increase
was directly attributable to new management agreements entered into during the
third quarter of 1996 and the first and third 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 69.6% for the nine months ended September 30, 1997 compared to
65.9% for the nine months ended September 30, 1996.
Network Sites' contribution was approximately $3.7 million for the nine
months ended September 30, 1997 compared to $2.5 million for the nine months
ended September 30, 1996, an increase of 47.7%, as a result of the revenue and
cost variances discussed above. As a percentage of revenues, Network Sites'
contribution increased to 22.6% for the nine months ended September 30, 1997 as
compared to 17.9% for the nine months ended September 30, 1996. Network Site
contribution for the nine months ended September 30, 1996 included a $621,000
non-recurring loss associated with the closing of the Westchester Network Site.
General and administrative expenses for the nine months ended September 30,
1997 were $2.9 million compared to $3.0 million for the nine months ended
September 30, 1996, a decrease of 3.9%. Such decrease was primarily attributable
to the absence of costs associated with the closing of a regional office in late
1996, partially offset by increases in travel and communication costs associated
with the new Network Sites and the AWM Division.
Clinical service development expenses were $174,000 for the nine months
ended September 30, 1997 compared to $222,000 for the nine months ended
September 30, 1996, a decrease of 21.6%. Such decrease was primarily due to a
decrease in development costs related to genetic and immature oocyte testing.
Amortization of intangible assets was $490,000 for the nine months ended
September 30, 1997 as compared to $193,000 for the nine months ended September
30, 1996. This increase was attributable to the Company's acquisitions in the
second quarter of 1996 and the first and third quarter of 1997.
Interest income for the nine months ended September 30, 1997 was $98,000
compared to $331,000 for the nine months ended September 30, 1996. This decrease
was primarily due to a lower cash balance.
The provision for income taxes primarily reflected Massachusetts income
taxes and New York capital taxes for the nine months ended September 30, 1997
and for the nine months ended September 30, 1996, respectively.
Net income was $157,000 for the nine months ended September 30, 1997
compared to a net loss of $681,000 for the nine months ended September 30, 1996.
This increase in net income was primarily due to a $1.2 million increase in
contribution and a $115,000 decrease in general and administrative expenses,
partially offset by an increase of $297,000 in amortization of intangible assets
and a $233,000 decrease in interest income. The net loss in 1996 was primarily
due to a $621,000 non-recurring charge associated with the closing of the
Westchester Network Site.
15
<PAGE>
Liquidity and Capital Resources
Historically, the Company has financed its operations primarily through
sales of equity securities. In August, 1997, the Company consummated an offering
of 6,400,000 shares of Common Stock (the"Offering"). The Offering raised gross
proceeds of $9.6 million and net proceeds of approximately $8.4 million.
Approximately $6.6 million of the net proceeds of the Offering was used for the
asset purchase and right-to-manage agreement with Fertility Centers of Illinois,
S.C. ("FCI"), a physician group practice comprised of six physicians and six
locations in the Chicago, Illinois area. The balance of the proceeds of the
Offering have been and will continue to be used for working capital and other
general corporate purposes, including possible future acquisitions of the assets
of, and the right to manage, additional physician practices.
At September 30, 1997, the Company had working capital of approximately $5.2
million (including $397,000 of controlled assets of Medical Practices),
approximately $2.0 million of which consisted of cash and cash equivalents
(including $62,000 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 September 30, 1997 was principally due to
payments of $9.4 million for exclusive management rights and related acquisition
costs and payments of approximately $1.5 million for the purchase of fixed
assets and leasehold improvements related to new and existing Network Sites,
partially offset by $8.4 million in net proceeds from the Offering and 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 June 1997, the Company
consummated the San Diego Acquisition for an aggregate purchase price of
$900,000, partially consisting of $50,000 in cash and 145,454 shares of Common
Stock. An additional $650,000 is payable upon the achievement of certain
specified milestones, at RSMC's option, in cash or in shares of the Company's
Common Stock, based on the closing market price of the Common Stock on the third
business day prior to issuance. In August 1997, the Company used $6.6 million of
the net proceeds from the Offering to acquire certain fixed assets of and the
right to manage FCI. The aggregate purchase price was approximately $8.6
million, consisting of approximately $6.6 million in cash and 1,009,464 shares
of Common Stock. Simultaneous with closing on the FCI transaction, the Company,
on behalf of FCI, completed its first in-market merger with the addition of
Edward L. Marut, MD to the FCI practice for an aggregate purchase price of
$803,000 in cash.
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 intends to obtain significant additional financing
over the next two years to fund its acquisition strategy.
Under certain of its management agreements, the Company is obligated to
advance funds to the Medical Practices to provide a minimum physician draw (up
to an aggregate of approximately $1.3 million per annum) and to provide new
services, utilize new technologies, fund projects, purchase the net accounts
receivable of the Medical Practices 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.
16
<PAGE>
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 September 30, 1997, was 9.25%. The Credit
Facility terminates on April 1, 1998 and is secured by the Company's assets. At
September 30, 1997, $250,000 was outstanding under the Credit Facility. In
November 1997, the Company obtained from the Bank a new $4.0 million
non-restoring credit facility (the "New Credit Facility"). Borrowings under the
New Credit Facility will bear interest at the Bank's prime rate plus 1.0% per
annum. Borrowings outstanding under the New Credit Facility at September 30,
1998 may convert into a four year term loan. Any amounts borrowed under the New
Credit Facility will permanently reduce amounts available for future borrowings
under the New Credit Facility. The New Credit Facility will be
cross-collateralized and cross-defaulted with the Credit Facility. 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 and the New 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 $108,000 and $135,000
under this agreement for the nine months ended September 30, 1997 and 1996,
respectively.
As of September 30, 1997, dividend payments of $430,000 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.
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.
Fluctuations in Quarterly Results
The Company's revenues are typically lower during the first quarter of the
Company's fiscal year. This lower level of revenues is primarily attributable to
the commencement of fertility treatment by the patients of the Medical Practices
at the beginning of the calendar year. Quarterly results also may be materially
affected by the timing of acquisitions and the timing and magnitude of costs
related to acquisitions. Therefore, results for any quarter are not necessarily
indicative of the results that the Company may achieve for any subsequent fiscal
quarter or for a full fiscal year.
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
results 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.
17
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities.
In August 1997, the Registrant consummated the
acquisition of certain fixed assets of and the right to
manage the Fertility Centers of Illinois, S.C. The
Registrant issued 1,009,464 shares of Common Stock as
partial payment of the consideration for this
acquisition.
Item 3. Defaults Upon Senior Securities.
As of November 12, 1997, dividend payments of $430,000
on the Convertible Preferred Stock were in arrears.
Item 4. Submission of Matters to Vote of Security Holders.
None.
Item 5. Other Information.
In August, 1997, the Company consummated an offering of
6,400,000 shares of Common Stock. The offering raised
gross proceeds of $9.6 million and net proceeds of
approximately $8.4 million. Approximately $6.6 million
of the net proceeds was used for the asset purchase and
right-to-manage agreement with Fertility Centers of
Illinois, S.C., one of the largest providers of
infertility and assisted reproductive technology
services in the United States. The balance of the
proceeds of this offering have been and will continue to
be used for working capital and other general corporate
purposes, including possible future acquisitions of the
assets of, and the right to manage, additional physician
practices.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
See Index to Exhibits on pages 20-22.
(b) Reports on Form 8-K.
None.
18
<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: November 14, 1997 By:/s/ Dwight P. Ryan
------------------
Dwight P. Ryan
Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
19
<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)
20
<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)
10.81 -- Management Agreement between Registrant and Reproductive Sciences
Medical Center, Inc. (4)
10.82 -- Asset Purchase Agreement between Registrant and Samuel H. Wood,
M.D., Ph.D. (4)
10.83 -- Personal Responsibility Agreement between Registrant and Samual H.
Wood, M.D., Ph.D. (4)
10.84 -- Physician-Shareholder Employment Agreement between Reproductive
Sciences Medical Center, Inc. and Samuel H. Wood, M.D., Ph.D. (4)
10.85 -- Physician-Shareholder Employment Agreement between Reproductive
Endocrine & Fertility Consultants, P.A. and Elwyn M. Grimes, M.D.
(4)
10.86 -- Amendment to Management Agreement between Registrant and
Reproductive Endocrine & Fertility Consultants, P.A. (4)
10.87 -- Amendment to Management Agreement between Registrant and Fertility
Centers of Illinois, S.C. dated May 2, 1997 (4)
10.88 -- Management Agreement between Registrant and MPD Medical
Associates, P.C. dated June 2, 1997 (4)
10.89 -- Physician-Shareholder Employment Agreement between MPD Medical
Associates P.C. and Gabriel San Roman, M.D. (4)
10.90 -- Amendment No. 2 to Management Agreement between Registrant and
Fertility Centers of Illinois, S.C. dated June 18, 1997 (4)
10.91 -- Commitment Letter dated June 30, 1997 between Registrant and First
Union National Bank (3)
10.92 -- Amendment No. 3 to Management Agreement between Registrant and
Fertility Centers of Illinois, S.C. dated August 19, 1997
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.
21
<PAGE>
(3) Incorporated by reference to the Exhibit with the identical exhibit
number to Registrant's Registration Statement on Form S-1 (Registration
No. 333-26551) filed with the Securities and Exchange Commission on May
6, 1997.
(4) Incorporated by reference to the Exhibit with the identical exhibit
number to Registrant's Registration Statement on Form S-1 (Registration
No. 333-26551) filed with the Securities and Exchange Commission on
June 20, 1997.
22
AMENDMENT NO. 3 TO MANAGEMENT AGREEMENT
BETWEEN
INTEGRAMED AMERICA, INC.
AND
FERTILITY CENTERS OF ILLINOIS, S.C.
THIS AMENDMENT NO. 3 TO MANAGEMENT AGREEMENT, dated August 19, 1997 by
and between IntegraMed America, Inc., a Delaware corporation, with its principal
place of business at One Manhattanville Road, Purchase, New York 10577 ("INMD")
and Fertility Centers of Illinois, S.C., an Illinois medical corporation, with
its principal place of business at 3000 North Halsted Street, Suite 509,
Chicago, Illinois 69657 ("FCI").
RECITALS:
INMD and FCI entered into a Management Agreement dated February 28,
1997 (the "Management Agreement"), as amended; and
INMD and FCI wish to further amend the Management Agreement, in
pertinent part to provide for a revised Right to Manage Fee, as defined in the
Management Agreement, in light of FCI's expansion to include practice of Dr.
Edward Marut.
NOW THEREFORE, in consideration of the mutual promises and covenants
herein contained, and as contained in the Management Agreement, INMD and FCI
agree as follows:
1. The term "FCI" shall include the medical practice of Dr. Edward
Marut encompassing the provision of in vitro fertilization and other assisted
reproductive services.
2. The Management Fee set forth in Section 7.1 shall be $8,750,000
instead of $8,000,000.
3. The amount payable at the closing pursuant to Section 7.1.2 shall be
$6,750,000 instead of $6,000,000.
4. All representations and covenants by FCI set forth in the Management
are hereby amended to include the medical practice of Dr. Edward Marut.
5. All other provisions of the Management Agreement, as amended, not in
conflict with this Amendment No. 3 remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Amendment No. 3 the
date first above written.
INTEGRAMED AMERICA, INC.
By:/s/ Gerardo Canet
------------------------
Gerardo Canet, President
FERTILITY CENTERS OF ILLINOIS, S.C.
By:/s/ Aaron S. Lifchez
-------------------------
Aaron S. Lifchez, President
<TABLE>
EXHIBIT 11
Page 1 of 2
INTEGRAMED AMERICA, INC.
COMPUTATION OF NET INCOME (LOSS) PER SHARE OF COMMON STOCK AND
COMMON STOCK EQUIVALENTS
All amounts in thousands, except per share amounts
<CAPTION>
For the For the
three-month period nine-month period
ended September 30 , ended September 30,
1997 1996 1997 1996
------ ------ ------ ------
Primary
<S> <C> <C> <C> <C>
Net income (loss)......................................... $ 108 $ (693) $ 157 $ (681)
Less: Dividends accrued on Preferred Stock............... 33 33 99 99
------ ------ ------ ------
Net income (loss) applicable to Common Stock
before consideration for induced conversion
of Preferred Stock..................................... 75 (726) 58 (780)
Assumed value of Common Stock issued to induce
conversion of Preferred Stock, net of the reversal
of $973,000 of accrued Preferred Stock dividends....... -- 3,292 -- 3,292
------ ------ ------ ------
Net income (loss) for computation......................... $ 75 $(4,018) $ 58 $(4,072)
====== ====== ====== ======
Net income (loss) per share of Common Stock and
Common Stock equivalents outstanding
before consideration for induced conversion of
Preferred Stock........................................... $ 0.01 $ (0.08) $ 0.01 $ (0.11)
Assumed value of conversion inducement.................... -- (0.38) -- (0.47)
------ ------ ------ ------
Net income (loss) per share of Common Stock and
Common Stock equivalents............................... $ 0.01 $ (0.46) $ 0.01 $ (0.58)
====== ====== ====== ======
Weighted average number of shares of Common Stock
outstanding........................................... 13,243 8,795 10,819 7,056
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............................. 193 -- 173 --
------ ------ ------ ------
Weighted average number of shares of Common Stock
and Common Stock equivalents outstanding............... 13,436 8,795 10,992 7,056
====== ====== ====== ======
</TABLE>
<PAGE>
EXHIBIT 11
Page 2 of 2
<TABLE>
INTEGRAMED AMERICA, INC.
COMPUTATION OF NET INCOME (LOSS) PER SHARE OF COMMON STOCK AND
COMMON STOCK EQUIVALENTS
All amounts in thousands, except per share amounts
<CAPTION>
For the For the
three-month period nine-month period
ended September 30 , ended September 30,
1997 1996 1997 1996
------ ------ ------ ------
Fully Diluted
<S> <C> <C> <C> <C>
Net income (loss)......................................... $ 108 $ (693) $ 157 $ (681)
======= ====== ======== ======
Weighted average number of shares of Common Stock
outstanding............................................ 13,243 6,785 10,819 6,381
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............................. 230 37 230 244
Shares of Common Stock issued upon assumed conversion of
608,234 shares of Series A Preferred Stock
pursuant to July 17, 1996 conversion offer assuming
Offer was effective January 1, 1996.................... -- 2,433 -- 2,433
Shares of Common Stock Issued upon assumed conversion of
Series A Preferred Stock not converted pursuant to
July 17, 1996 conversion offer......................... 451 245 451 245
------- ------ ------- ------
Average number of shares of Common Stock and Common
Stock equivalents outstanding.......................... 13,924 9,500 11,500 9,303
======= ====== ======= ======
Net income (loss) per share of Common Stock and Common
Stock equivalents outstanding.......................... $ 0.01 $(0.07) $ 0.01 $(0.07)
======= ====== ======= ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Sep-30-1997
<CASH> 1,979
<SECURITIES> 0
<RECEIVABLES> 7,534
<ALLOWANCES> 326
<INVENTORY> 0
<CURRENT-ASSETS> 10,192
<PP&E> 3,833 <F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 32,607
<CURRENT-LIABILITIES> 5,028
<BONDS> 0
0
166
<COMMON> 172
<OTHER-SE> 25,284
<TOTAL-LIABILITY-AND-EQUITY> 32,607
<SALES> 16,376
<TOTAL-REVENUES> 16,376
<CGS> 12,667
<TOTAL-COSTS> 12,667
<OTHER-EXPENSES> 174
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48
<INCOME-PRETAX> 241
<INCOME-TAX> 84
<INCOME-CONTINUING> 157
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 157
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
<FN>
<F1>
PP&E is net of accumulated depreciation
</FN>
</TABLE>
