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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 December 31, 1999
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, New Jersey 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 February 14, 2000 the Registrant had outstanding 3,262,571 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 December 31, 1999 (Unaudited)
and June 30, 1999.................................................... 3
Consolidated Statements of Operations (Unaudited) for the three months
ended December 31, 1999 and 1998..................................... 4
Consolidated Statements of Operations (Unaudited) for the six months
ended December 31, 1999 and 1998..................................... 5
Consolidated Statements of Cash Flows (Unaudited) for the six months
ended December 31, 1999 and 1998.................................... 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>
December 31, June 30,
1999 1999
---- ----
(Unaudited) (Audited)
Restated
(Note 3)
<S> <C> <C>
ASSETS
Cash and cash equivalents .......................................... $ 129 $ 258
Accounts receivable, net of allowances for uncollectible accounts
of $2,106 and $1,845 ........................................... 7,878 7,799
Accounts receivable from affiliates ................................ 624 340
Inventories ........................................................ 383 541
Deferred income taxes .............................................. 539 539
Prepaid expenses and other current assets .......................... 281 381
-------- --------
Total current assets ....................................... 9,834 9,858
Property and equipment, at cost, net of accumulated depreciation
of $715 and $636 ............................................... 478 317
Goodwill, net ...................................................... 103 110
Receivables from affiliates, non current ........................... 2,886 3,063
Other assets ....................................................... 261 450
-------- --------
Total assets ............................................... $ 13,562 $ 13,798
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short term debt .................................................... 646 746
Accounts payable ................................................... 7,889 7,192
Accrued payroll and related expenses ............................... 282 222
Short term obligation under capital lease .......................... 115 --
Other current liabilities .......................................... 604 440
-------- --------
Total current liabilities .................................. 9,536 8,600
Long term obligation under capital lease ........................... 237 --
Stockholders' equity:
Common stock, $.01 par value; 5,000,000 shares authorized;
3,262,571 issued ............................................. 33 33
Additional paid-in capital ..................................... 3,137 3,128
Retained earnings .............................................. 692 2,110
Treasury stock, at cost; 39,300 shares ......................... (73) (73)
-------- --------
Total stockholders' equity ................................. 3,789 5,198
-------- --------
Commitments and contingencies
Total liabilities and stockholders' equity ................. $ 13,562 $ 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 December 31,
-------------------------------
1999 1998
---- ----
(Unaudited)
Restated
(Note 3)
<S> <C> <C>
Revenues ...................................... $ 5,709 $ 6,563
----------- -----------
Costs and expenses:
Medical and nutritional product ....... 3,644 4,077
Personnel ............................. 1,268 1,400
Selling, general and administrative ... 799 676
Provision for uncollectible accounts .. 134 112
Management fees to majority shareholder 94 105
Depreciation and amortization ......... 53 26
Other expense (income), net ........... 130 45
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6,122 6,441
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(Loss) Income before income taxes ............. (413) 122
Provision for income taxes .................... -- 85
----------- -----------
Net (Loss) income ..................... $ (413) $ 37
----------- ===========
Earnings per Share:
Basic .............................. (0.13) 0.01
Diluted ............................ (0.13) 0.01
Basic weighted average number of
common shares ......................... 3,262,571 3,262,571
Diluted weighted average number of
common shares ......................... 3,262,571 3,280,571
</TABLE>
See accompanying consolidated financial statements
4
<PAGE>
INFU-TECH, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended December 31,
-----------------------------
1999 1998
---- ----
(Unaudited)
Restated
(Note 3)
<S> <C> <C>
Revenues ......................................... $ 10,535 $ 12,288
=========== ===========
Costs and expenses:
Medical and nutritional product ............ 7,020 7,332
Personnel .................................. 2,698 2,974
Selling, general and administrative ........ 1,528 1,414
Provision for uncollectible accounts ....... 261 189
Management fees to majority shareholder .... 164 196
Depreciation and amortization .............. 86 52
Other expense (income), net ................ 196 (4)
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11,953 12,153
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(Loss) Income before income taxes ................ (1,418) 135
Provision for income taxes ....................... -- 90
----------- -----------
Net (Loss) income .......................... $ (1,418) $ 45
=========== ===========
Earnings per Share:
Basic .................................... (0.43) 0.01
Diluted .................................. (0.43) 0.01
Basic weighted average number of common shares ... 3,262,571 3,262,571
Diluted weighted average number of common shares . 3,262,571 3,271,571
</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>
Six Months Ended December, 31
-----------------------------
1999 1998
---- ----
(Unaudited)
Restated
(Note 3)
<S> <C> <C>
Operating activities:
Net (loss) income ................................................... $(1,418) $ 45
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation expense .......................................... 79 44
Amortization of goodwill ...................................... 7 8
Provision for uncollectible accounts .......................... 261 189
Increase (decrease) in cash due to changes in:
Accounts receivable ........................................... (340) (2,473)
Accounts receivable from affiliates ........................... (284) 117
Inventories ................................................. 158 382
Prepaid expenses and other current assets ................... 100 (266)
Receivables from affiliates, non-current .................... 177 --
Other assets ................................................ 189 24
Taxes payable ............................................... -- 65
Accounts payable ............................................ 697 1,825
Accrued payroll and related ................................. 60 43
Other current liabilities ................................... 164 (75)
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Net cash provided (used in) operating activities .................. (150) (72)
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Investing activities:
Expenditures for property and equipment ............................. 87 (8)
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Net cash (used in) investing activities ......................... 87 (8)
Financing activities:
Net proceeds from short term debt ................................... (100) --
Payment of capital lease obligations ................................ 25 (27)
-------
Proceeds from exercise of options ................................... 9 (27)
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Net cash provided (used in) financing activities ................ (66) (27)
Net increase (decrease in) cash and cash equivalents .................... (129) (107)
Cash and cash equivalents, beginning of period .......................... 258 163
------- -------
Cash and cash equivalents, end of period ................................ $ 129 $ 56
======= =======
</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.
Shortly the Company will launch its disease management and specialty
pharmaceutical programs on the internet. The site is named
Smartmeds.com at URL www.Smartmeds.com and will include an online
pharmacy featuring specialty pharmaceuticals, medical products,
healthcare and disease management information and patient interaction
with medical professionals.
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 six month period ended December 31, 1999, 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 restated to reflect a
number of adjustments that should have been recorded in the three
months ended December 31, 1999.
The adjustments to the income statement include a reduction in revenue
due to a decreased sales accrual. An increase was made in the provision
for uncollectible accounts due to 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 was reflected in selling, general, and administrative expense for an
error in recording a fixed asset.
The effect of these adjustments on net income (loss) are as follows
(dollars in thousands):
Original Restated
10Q Filing 10Q/A
----------- -----
Revenues................................ 5,809 5,709
Medical and nutritional product ........ 3,585 3,644
Selling, general and administrative .... 589 799
Provision for uncollectible accounts ... 59 134
Depreciation and amortization .......... 21 53
Interest expense ....................... 71 190
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 ($623,000)
or ($0.19) per share.
The adjustments to the balance sheet include a decrease in accounts receivable
due to the increase in the allowance for uncollectible accounts. In addition,
the Company's obligation for a capital lease was formally recorded on the
balance sheet.
The effect of restatement on the balance sheet is as follows (dollars in
thousands):
Original Restated
10Q Filing 10Q/A
----------- -----
Accounts Receivable .......................... 8,762 7,878
Accounts Receivable from Affiliates - Current. 680 624
Prepaid Expenses ............................. 318 281
Property and Equipment ....................... 370 478
Accounts Payable ............................. 7,066 7,168
Short Term Obligations under Capital Lease ... -- 115
Other Current Liabilities .................... 540 604
Long Term Obligations under Capital Lease..... -- 237
APIC.......................................... 3,128 3,137
Retained Earnings ............................ 1,383 1,105
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 December 31, 1999 Compared with Three Months Ended
December 31, 1998
Total revenues decreased by $854,000 or 13.0%, from $6,563,000 to $5,709,000.
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.
Cost of medical and nutritional products sold to patients and other customers
decreased by $433,000 or 10.6%, from $4,077,000 in 1998 to $3,644,000 in 1999.
As a percentage of total revenues, medical and nutritional product costs were
62.1% in 1998 as compared to 63.8% in 1999. The increase in the medical and
nutritional product costs as a percentage of revenues is attributable to the
change in the product mix sold and margin reductions from operating in a managed
care environment.
Total personnel costs decreased by $132,000 or 9.4% from $1,400,000 in 1998 to
$1,268,000 in 1999 primarily due to the closing of the Philadelphia pharmacy and
elimination of certain positions at the corporate headquarters.
Selling, general and administrative expenses increased by $123,000, or 18.2%
from $676,000 in 1998 to $799,000 in 1999. This increase was related to
development costs associated with the e commerce business.
The provision for uncollectible accounts was 2.3% of revenues in the period 1999
and 1.7% of revenues in 1998.
Management fees to Kuala Healthcare, Inc., ('KUAL') of $94,000 in 1999 and
$105,000 in 1998 were approximately 1.6% of revenues in both years.
Depreciation expense increased from $22,000 in 1998 to $49,000 in 1999 due to
property and equipment additions. Amortization expense of $4,000 was recognized
in both periods.
Other expense, (income) of $130,000 in 1999 and $45,000 in 1998 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 no additional Federal taxes are due. The Company has
accrued interest associated with the late tax filings.
The net (loss) in 1999 was $(413,000) or $(0.13) per share compared to net
income in 1998 of $37,000 or $0.01 per share primarily due to decreased sales of
Cerezyme and higher revenues for other infusion products. Net (loss) before
taxes for the quarter ended December 31, 1999 was $(413,000) compared to net
income of $122,000 for the comparable quarter last year.
9
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INFU-TECH, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Six Months ended December 31, 1999 Compared with Six Months Ended December 31,
1998
Total revenues decreased by $1,753,000, or 14.3%, from $12,288,000 in 1998 to
$10,535,000 in 1999, primarily due to a decrease in 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.
Cost of medical and nutritional products sold to patients and other customers
decreased by $312,000 or 4.3% from $7,332,000 in 1998 to $7,020,000 in 1999. As
a percentage of total revenues, medical and nutritional product costs increased
from 59.7% in 1998 to 66.6% in 1999. 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 $276,000 or 9.3% from $2,974,000 in 1998 to
$2,698,000 in 1999 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 $114,000, or 8.1% from
$1,414,000 in 1998 to $1,528,000 in 1999.
The provision for uncollectible accounts was 2.5% of revenues in 1999 and 1.5%
of revenues in 1998. The provision percentage was decreased from 1998 because
the Company's experience of Accounts Receivable writeoffs has decreased.
Management fees to Kuala Healthcare, Inc., ('KUAL') were approximately 1.6% of
revenues in both periods.
Depreciation expense increased from $44,000 in 1998 to $79,000 in 1999 due to
property and equipment additions. Amortization expense of $7,000 was recognized
during the current year.
Other expense, (income) of $196,000 in 1999 and ($4,000) in 1998 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, there will be a minimum
amount due. The Company has accrued the interest associated with these late tax
filings.
The net (loss) income in 1999 was ($1,418,000) or ($0.43) per share compared to
a net income in 1998 of $45,000 or $.01 per share. (Loss) Income before taxes
for the six months ending December 31, 1999 was ($1,418,000) compared to
$135,000 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 second 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 December 31, 1999, the Company had total assets of $13.6 million, working
capital of $.3 million and a net worth of $3.8 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 December 31, 1999 the amount due on
this line was $646,000. The Company has not entered into any other borrowing
agreements.
At December 31, 1999, the balance in net accounts receivable for Infu-Tech was
1.6% higher than the balance at June 30, 1999. This was attributed to lower
revenues. Infu-Tech's net accounts receivable has increased from 138 days sales
outstanding at June 30, 1999 to 174 days sales outstanding at December 31, 1999.
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
December 31, 1999, the Company's net accounts receivable from the nursing homes
currently owned and operated by KUAL approximated $1.9 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 KUALA'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.
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
December 31, 1999, the Company had a capital lease obligation of $352,000 of
which $115,000 is the current portion shown in current liabilities.
Year 2000 Compliance
Infu-Tech completed its 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
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
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Jack Rosen
Chairman and Director
(Chief Financial Officer)
Date: November 7, 2000 /S/ FREDERICK W. SCHMIDT
---------------- ------------------------
Frederick W. Schmidt
Chief Financial Officer
