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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2000
Commission File Number 0-21006
INFU-TECH, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3127689
(State of other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
374 Starke Road, Carlstadt, NJ 07072
(Address of principal executive offices)
(201) 896-0100
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 short 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 No X
----- -----
As of May 15, 2000 the Registrant had outstanding 3,350,221 shares of its $.01
par value Common Stock.
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INFU-TECH, INC.
Index
Part I - Financial Information:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Item 1
Consolidated Balance Sheets at March 31, 2000 (Unaudited)
and June 30, 1999................................................................................. 3
Consolidated Statements of Operations (Unaudited) for the three months
ended March 31, 2000 and 1999..................................................................... 4
Consolidated Statements of Operations (Unaudited) for the nine months
ended March 31, 2000 and 1999..................................................................... 5
Consolidated Statements of Cash Flows (Unaudited) for the nine months
ended March 31, 2000 and 1999..................................................................... 6
Notes to Unaudited Consolidated Financial Statements................................................ 7
Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................................. 8 - 10
Part II - Other Information.............................................................................. 11
Signatures.......................................................................................... 12
</TABLE>
<PAGE>
INFU-TECH, INC.
Consolidated Balance Sheets
(Dollars in thousands, except for share amounts)
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
-------- --------
(Unaudited) (Audited)
Restated
(Note 3)
<S> <C> <C>
ASSETS
Cash and cash equivalents ............................................................ $ 113 $ 258
Accounts receivable, net of allowances for uncollectible accounts
of $2,311 and $1,845 ............................................................. 6,857 7,799
Accounts receivable from affiliates .................................................. 712 340
Inventories .......................................................................... 578 541
Deferred income taxes ................................................................ 544 539
Prepaid expenses and other current assets ............................................ 350 381
-------- --------
Total current assets ......................................................... 9,154 9,858
Property and equipment, at cost, net of accumulated depreciation
of $772 and $636 ................................................................. 572 317
Goodwill, net ........................................................................ 100 110
Receivables from affiliates, non current ............................................. 2,699 3,063
Other assets ......................................................................... 375 450
-------- --------
Total assets ................................................................. $ 12,900 $ 13,798
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt ...................................................................... $ 782 $ 746
Accounts payable ..................................................................... 7,780 7,192
Accrued payroll and related expenses ................................................. 182 222
Income taxes payable ................................................................. -- --
Short term obligation under capital lease ............................................ 115 --
Other current liabilities ............................................................ 484 440
-------- --------
Total current liabilities .................................................... 9,343 8,600
Long term obligation under capital lease ............................................. 211 --
Stockholders' equity:
Common stock, $.01 par value; 5,000,000 shares authorized; 3,350,221 and 3,262,571
issued and outstanding at March 31, 2000 and June 30, 1999 respectively .......... 33 33
Additional paid-in capital ....................................................... 3,445 3,128
(Accumulated deficit) Retained earnings .......................................... (59) 2,110
Treasury stock, at cost; 39,300 shares ........................................... (73) (73)
-------- --------
Total stockholders' equity ................................................... 3,346 5,198
-------- --------
Commitments and contingencies
Total liabilities and stockholders' equity ................................... $ 12,900 $ 13,798
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
INFU-TECH, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
----------- -----------
(Unaudited)
Restated
(Note 3)
<S> <C> <C>
Revenues ....................................... $ 4,350 $ 6,546
----------- -----------
Costs and expenses:
Medical and nutritional product ........... 2,507 4,200
Personnel ................................. 1,116 1,585
Selling, general and administrative ....... 690 699
Provision for uncollectible accounts ...... 568 70
Management fees to majority shareholder ... 69 105
Depreciation and amortization ............. 60 26
Other expense (income), net ............... 91 (37)
----------- -----------
5,101 6,648
----------- -----------
(Loss) before income taxes .................... (751) (102)
(Benefit) for income taxes ..................... -- (59)
----------- -----------
Net (loss) ................................ $ (751) $ (43)
=========== ===========
Earnings per Share:
Basic ................................... (0.22) (0.01)
Diluted ................................. (0.22) (0.01)
Basic weighted average number of common shares . 3,350,221 3,262,571
Diluted weighted average number of common shares 3,350,221 3,262,571
</TABLE>
See accompanying consolidated financial statements
4
<PAGE>
INFU-TECH, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
2000 1999
----------- -----------
(Unaudited)
Restated
(Note 3)
<S> <C> <C>
Revenues ....................................... $ 14,885 $ 18,834
----------- -----------
Costs and expenses:
Medical and nutritional product .......... 9,527 11,532
Personnel ................................ 3,814 4,559
Selling, general and administrative ...... 2,218 2,113
Provision for uncollectible accounts ..... 829 259
Management fees to majority shareholder .. 233 301
Depreciation and amortization ............ 146 78
Other expense (income), net .............. 287 (41)
----------- -----------
17,054 18,801
----------- -----------
(Loss) Income before income taxes .............. (2,169) 33
Provision for income taxes ..................... -- 31
----------- -----------
Net (Loss) Income ........................ $ (2,169) $ 2
=========== ===========
Earnings per share:
Basic .................................... (0.65) (0.00)
Diluted .................................. (0.65) (0.00)
Basic weighted average number of common shares . 3,350,221 3,262,571
Diluted weighted average number of common shares 3,350,221 3,262,571
</TABLE>
See accompanying consolidated financial statements
5
<PAGE>
INFU-TECH, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
2000 1999
------- -------
(Unaudited)
Restated
(Note 3)
<S> <C> <C>
Operating activities:
Net (loss) income ................................................... $(2,169) $ 2
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation expense .......................................... 136 67
Amortization of goodwill ...................................... 10 11
Provision for uncollectible accounts .......................... 829 259
Deferred income taxes ......................................... (5) --
Increase (decrease) in cash due to changes in:
Accounts receivable ....................................... 113 (4,660)
Accounts receivable from affiliates - current ............. (372) (108)
Inventories ............................................... (37) 210
Prepaid expenses and other current assets ................. 31 (560)
Accounts receivable from affiliates - non-current ......... 364 --
Other assets .............................................. 75 24
Taxes payable ............................................. -- 6
Accounts payable .......................................... 588 3,403
Accrued payroll and related ............................... (40) 367
Other current liabilities ................................. 44 1,045
------- -------
Net cash (used in) provided by operating activities ............... (433) 66
------- -------
Investing activities:
Expenditures for property and equipment ............................. (116) --
------- -------
Net cash (used in) investing activities ......................... (116) --
Financing activities:
Net proceeds from short term debt ................................... 36 --
Exercise of options ................................................. 317 --
Payment of capital lease obligations ................................ 51 --
------- -------
Net cash provided by financing activities ....................... 404 --
Net (decrease in) increase cash and cash equivalents .................... (145) 66
Cash and cash equivalents, beginning of period .......................... 258 163
------- -------
Cash and cash equivalents, end of period ................................ $ 113 $ 229
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
6
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INFU-TECH, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. The Company
Infu-Tech, Inc. (the "Company") is a provider of specialty
pharmaceuticals to the non-hospital based health care market. This includes
a broad range of complete home infusion therapy services including total
parenteral nutrition therapy, antibiotic therapy and other therapies to
patients at home and enteral nutrition infusion therapy and other medical
services and products provided primarily to patients in long- term care
facilities.
In March, 2000 the Company launched its Internet health commerce site via
its website Smartmeds.com. The Company's focused growth is based on
applying wireless interactive communications platforms to create health
solutions in partnership with our customers. Smartmeds.com serves major
healthcare markets including HMO's self insured, and government programs.
The Company is 58% owned by Kuala Healthcare, Inc. ("KUAL"). The minority
42% of the Company's equity is publicly traded.
The Company is subject to certain risks and uncertainties as a result of
changes that could occur in the healthcare industry, including pricing
pressure from managed care, Medicare and Medicaid.
2. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and pursuant to the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments, consisting of normal recurring accrual adjustments,
considered necessary for a fair presentation have been included. Operating
results for the nine month period ended March 31, 2000, are not necessarily
indicative of the results that may be expected for the year ended June 30,
2000.
These financial statements and notes should be read in conjunction with the
Company's audited financial statements and notes thereto included in the
Company's Annual Report of Form 10-K for the year ended June 30, 1999.
3. Restatement
The consolidated financial statements have been notated to reflect a number
of adjustments that should have been recorded in the three months ended
March 31, 2000.
The adjustments to the income statement include an increase in the
provision for uncollectible accounts for the deterioration of the Company's
accounts receivable aging. In addition there was an increase in interest
expense for late tax filings and accounts payable. An increase in selling,
general, and administrative expense was recorded for a charge for non
employee stock options which were exercised.
The effect of these adjustments on net income (loss) are as follows
(dollars in thousands):
Original Restated
10Q Filing 10Q/A
---------- --------
Medical and nutritional product .................. 2,498 2,507
Selling, general and administrative .............. 533 690
Provision for uncollectible accounts ............. 55 568
Depreciation and amortization .................... 28 60
Interest expense ................................. 85 151
Interest income .................................. (88) (60)
7
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INFU-TECH, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The overall effect of these restated items is an additional loss of
($783,000) or ($0.23) per share.
The adjustments to the balance sheet include a decrease in accounts
receivable due to the increase in the allowance for doubtful accounts. The
valuation allowance for the deferred tax asset was increased. Additional
paid in capital was increase relating to the exercise of non employee stock
options.
The effect of restatement on the balance sheet is as follows (dollars in
thousands):
Original Restated
10Q Filing 10Q/A
---------- --------
Accounts Receivable ............................ 7,520 6,857
Deferred Income Taxes .......................... 814 544
Prepaid Expenses ............................... 387 350
Property and Equipment ......................... 496 572
Income Taxes Payable ........................... 5 --
Accounts Payable ............................... 7,450 7,780
Short Term Obligations under Capital Lease ..... -- 115
Other Current Liabilities ...................... 470 484
Long Term Obligation under Capital Lease ....... -- 211
APIC ........................................... 3,239 3,445
Retained Earnings .............................. 1,706 (59)
8
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INFU-TECH, INC.
Item 2. Management 's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes thereto.
RESULTS OF OPERATIONS
Three Months ended March 31, 2000 Compared with Three Months Ended
March 31, 1999
Total revenues decreased by $2,196,000, or 34%, from $6,546,000 to $4,350,000.
The decrease was due to reduced revenue for Cerezyme patients. The Company is in
discussions with Genzyme regarding the continuation of its business arrangement.
To date no satisfactory conclusion has been reached. There is a strong
possibility that the Company's relationship with Genzyme will be discontinued.
On March 9, 2000 the Company launched it's specialty pharmaceutical programs on
the Internet.
Cost of medical and nutritional products sold to patients and other customers
decreased $1,693,000 or 40%, from $4,200,000 in 1999 to $2,507,000 in 2000. As a
percentage of total revenues, medical and nutritional product costs were 64% in
1999 as compared to 58% in 2000. The decrease in the medical and nutritional
product costs as a percentage of revenues is attributable to the reduction in
revenue from Cerezyme which has a higher cost than the Company's other product
lines.
Total personnel costs decreased by $469,000 or 30% from $1,585,000 in 1999 to
$1,116,000 in 2000 primarily due to the closing of the Philadelphia pharmacy and
elimination of certain positions at the corporate headquarters.
Selling, general and administrative expenses decreased by $9,000, or 1.3% from
$699,000 in 1999 to $690,000 in 2000 due to a reduction in clinical and pharmacy
costs as a result of lower revenues and the closing of the Philadelphia
pharmacy.
The provision for uncollectible accounts was 1.3% of revenues in the period 2000
and 1.1% of revenues in 1999. The provision percentage was increased from 1999
because of an increase in the Company's experience of Accounts Receivable
writeoffs.
Management fees to Kuala Healthcare, Inc., ("KUAL") of $69,000 in 2000 and
$105,000 in 1999 were 1.6% of revenues in both years.
Depreciation expense increased from $23,000 in 1999 to $57,000 in 2000 due to
property and equipment purchases. Amortization expense of $3,000 was recognized
in both periods.
Other expense, (income) of $91,000 in 2000 and ($37,000) in 1999 consisted
primarily of interest expense on the Company's line of credit with Heller
Financial along with interest expense on certain vendor accounts payable and
offset by interest income on accounts receivable from affiliates.
There are Federal and State income tax returns for previous years which were not
filed when due. The Company has completed a substantial portion of those
outstanding Federal and State income tax returns for previous years. It is
contemplated that all prior year returns will be completed and filed shortly.
The Company believes that if Federal taxes are due, they will be a minimum
amount. The Company has accrued interest associated with the late tax filings.
The net (loss) in 2000 was ($751,000) or $(.22) per share compared to net (loss)
in 1999 of ($43,000) or ($0.01) per share. Net income (loss) before taxes for
the quarter ended March 31, 2000 was ($751,000) compared to ($102,000) for the
comparable quarter last year.
9
<PAGE>
INFU-TECH, INC.
Item 2. Management 's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Nine Months ended March 31,2000 Compared with Nine Months Ended March 31, 1999
Total revenues decreased $3,949,000 or 21%, from $18,834,000 in 1999 to
$14,885,000 in 2000, primarily due to a decrease in the reduced Cerezyme
revenues. The company is in discussions with Genzyme regarding the continuation
of its business arrangement. To date no satisfactory conclusion has been
reached. There is a strong possibility the Company's relationship with Genzyme
will be discontinued.
Costs of medical and nutritional products sold to patients and other customers
decreased $2,005,000 or 17%, from $11,532,000 in 1999 to $9,527,000 in 2000. As
a percentage of total revenues, medical and nutritional product costs increased
from 61% in 1999 to 64% in 2000. The increase in the medical and nutritional
product costs as a percentage of sales is attributable to the changing of the
product mix from reduced revenue from profitable contract service sales and the
shift to more revenue from specialty pharmaceutical contracts.
Total personnel costs decreased by $745,000, or 16% from $4,559,000 in 1999 to
$3,814,000 in 2000, primarily due to the closing of the Philadelphia pharmacy
and elimination of certain positions at the corporate offices.
Selling, general and administrative expenses increased by $105,000, or 5.0% from
$2,113,000 in 1999 to $2,218,000 in 2000.
The provision for uncollectible accounts was 5.6% of revenues in 2000 and 1.4%
of revenues in 1999. The provision percentage was increased in 2000 because the
Company's experience of Accounts Receivable writeoffs has increased.
Management fees to Kuala Healthcare, Inc. ("KUAL") were 1.6% of revenues in both
periods.
Depreciation expense increased from $67,000 in 1999 to $136,000 in 2000 due to
property and equipment additions. Amortization expense of $10,000 was recognized
during 2000 and $11,000 in 1999.
Other expense (income) of $287,000 in 2000 and ($41,000) in 1999 consisted
primarily of interest expense on the Company's line of credit with Heller
Financial, income taxes payable, partially offset by interest income on accounts
receivable from affiliates.
There are Federal and State income tax returns for previous years which were not
filed when due. The Company has completed a substantial portion of those
outstanding Federal and State income tax returns for previous years. It is
contemplated that all prior year returns will be completed and filed shortly.
The Company believes that if Federal taxes are due, they will be a minimum
amount. The Company has accrued interest associated with the late tax filings.
The net (loss) income in 2000 was (2,169,000) or (.65) per share compared to a
net income in 1999 of $2,000 or $.00 per share. (Loss) income before taxes for
the nine months ending March 31, 2000 was ($2,169,000) compared to $33,000 for
the comparable prior period. The loss was primarily a result of the decrease in
contract services revenue, exiting non profitable infusion business and reduced
Cerezyme sales in the third quarter of fiscal 2000.
10
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INFU-TECH, INC.
Item 2. Management 's Discussion and Analysis of Financial Condition and
Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, the Company had total assets of $12.9 million, working
capital deficit of $.2 million and a net worth of $3.3 million. Its liabilities
consisted almost entirely of accounts payable and other operating obligations.
The Company has in place an accounts receivable financing agreement. This
agreement has a credit line not to exceed $1,500,000. This line is secured by
eligible accounts receivable balance. As of March 31, 2000 the amount due on
this line was $782,000. The Company has not entered into any other borrowing
agreements.
At March 31, 2000, the balance in net accounts receivable for Infu-Tech was
lower than the balance at June 30, 1999. This was attributed to lower revenue.
Infu-Tech's net accounts receivable has increased from 138 days sales
outstanding at June 30, 1999 to 185 days sales outstanding at March 31, 2000.
Among the nursing homes with which the Company does business are five facilities
which are owned or managed by subsidiaries of Kuala Healthcare, Inc . At March
31, 2000, the Company's net accounts receivable from the nursing homes currently
owned and operated by KUAL approximated $1.8 million. KUAL owes an additional
$1.6 million for interest and other common expenses paid on behalf of KUAL by
the Company.
KUAL has agreed to pay back the $3.4 million balance, plus interest at 7% in
twenty quarterly installments beginning in January, 2000. Due to the
deterioration of KUAL's financial condition KUAL has given the company a
security interest in 1,500,000 shares of the Company's common stock that it owns
to secure that obligation. Payments may be in cash or with Infu-Tech's common
stock owned by KUAL. As of March 31, 2000 the Company received only $75,000 of
payments which were due January 2000.
Capital Lease Commitments
The Company entered into a capital lease that commenced in October 1999. The
lease was for computer equipment and software at an interest rate of 16.75%. At
March 31, 2000 the Company had a capital lease obligation of $326,000 of which
$115,000 is the current portion shown in current liabilities.
Year 2000 Compliance
Infu-Tech completed is conversion to the new equipment and software at its
corporate headquarters. The new IS processing and General Ledger system is now
in place, and training and implementation of the new system has commenced. The
Company has not experienced any problems with critical systems, nor does it
expect any continuing Year 2000 problems. The new system is Year 2000 compliant.
11
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INFU-TECH, INC.
Part II - Other Information
Item 1. Legal Proceedings
Presently, there are no pending material
legal proceedings other than as reported in
the Company's Form 10-K for the year ended
June 30, 1999.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
12
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INFU-TECH, INC.
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.
Infu-Tech, Inc.
Date: November 7, 2000 /S/ JACK ROSEN
--------------------------- ------------------------------
Jack Rosen
Chairman and Director
(Chief Executive Officer)
Date: November 7, 2000 /S/ FREDERICK W. SCHMIDT
------------------------- ------------------------------
Frederick W. Schmidt
Chief Financial Officer
13
