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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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 X No
--- ---
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
<TABLE>
<CAPTION>
Part I - Financial Information:
Page
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Item 1
<S> <C>
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>
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INFU-TECH, INC.
Consolidated Balance Sheets
(Dollars in thousands, except for share amounts)
<TABLE>
<CAPTION>
December 31, June 30,
1999 1999
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(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Cash and cash equivalents................................................................ $ 129 $ 258
Accounts receivable, net of allowances for uncollectible accounts
of $1,956 and $1,845 ................................................................. 8,128 7,799
Accounts receivable from affiliates...................................................... 680 340
Inventories.............................................................................. 383 541
Deferred income taxes.................................................................... 539 539
Prepaid expenses and other current assets................................................ 318 381
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Total current assets.............................................................. 10,177 9,858
Property and equipment, at cost, net of accumulated depreciation
of $671 and $636...................................................................... 370 317
Goodwill, net ........................................................................... 103 110
Receivables from affiliates, non current (Net of allowance for uncollectible
amounts of $58 and $58)............................................................... 2,886 3,063
Other assets............................................................................. 261 450
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Total assets...................................................................... $13,797 $ 13,798
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LIABILITIES AND STOCKHOLDERS' EQUITY
Short term debt.......................................................................... $ 646 $ 746
Accounts payable......................................................................... 7,648 7,192
Accrued payroll and related expenses..................................................... 282 222
Other current liabilities................................................................ 540 440
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Total current liabilities......................................................... 9,116 8,600
Stockholders' equity:
Common stock, $.01 par value; 5,000,000 shares authorized; 3,262,571 issued........... 33 33
Additional paid-in capital............................................................ 3,128 3,128
Retained earnings..................................................................... 1,593 2,110
Treasury stock, at cost; 39,300 shares................................................ (73) (73)
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Total stockholders' equity........................................................ 4,681 5,198
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Commitments and contingencies
Total liabilities and stockholders' equity........................................ $ 13,797 $ 13,798
============= ===========
</TABLE>
See accompanying notes to consolidated financial statements
3
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INFU-TECH, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
Three Months Ended December 31,
-------------------------------
1999 1998
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(Unaudited)
Revenues ................................... $ 5,809 $ 6,563
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Costs and expenses:
Medical and nutritional product ....... 3,585 4,077
Personnel ............................. 1,268 1,400
Selling, general and administrative ... 589 676
Provision for uncollectible accounts .. 59 112
Management fees to majority shareholder 94 105
Depreciation and amortization ......... 21 26
Other expense (income), net ........... (17) 45
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5,599 6,441
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Income before income taxes ................. 210 122
Provision for income taxes ................. -- 85
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Net income ............................ $ 210 $ 37
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Earnings per Share:
Basic................................ 0.06 0.01
Diluted.............................. 0.06 0.01
Basic weighted average number of
common shares.......................... 3,262.571 3,262,571
Diluted weighted average number of
common shares ......................... 3,285,901 3,280,571
See accompanying consolidated financial statements
4
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INFU-TECH, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended December 31,
-----------------------------
1999 1998
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(Unaudited)
<S> <C> <C>
Revenues .......................................................................... $ 10,635 $ 12,288
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Costs and expenses:
Medical and nutritional product............................................... 6,939 7,332
Personnel..................................................................... 2,698 2,974
Selling, general and administrative........................................... 1,281 1,414
Provision for uncollectible accounts.......................................... 111 189
Management fees to majority shareholder ...................................... 164 196
Depreciation and amortization................................................. 43 52
Other expense (income), net................................................... (84) (4)
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11,152 12,153
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(Loss) Income before income taxes.................................................. (517) 135
Provision for income taxes......................................................... --- 90
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(Loss) Net income ........................................................... $ (517) $ 45
=============== ===============
Earnings per Share:
Basic....................................................................... (0.16) 0.01
Diluted..................................................................... (0.16) 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
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(Unaudited)
<S> <C> <C>
Operating activities:
Net (loss) income ............................................................... $ (517) $ 45
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation expense....................................................... 35 44
Amortization of goodwill................................................... 8 8
Provision for uncollectible accounts....................................... 111 189
Increase (decrease) in cash due to changes in:
Accounts receivable........................................................ (440) (2,473)
Accounts receivable from affiliates ....................................... (340) 117
Inventories.............................................................. 158 382
Prepaid expenses and other current assets................................ 63 (266)
Receivables from affiliates,non-current.................................. 177 --
Other assets............................................................. 189 24
Taxes payable............................................................ -- 65
Short term debt.......................................................... (100) --
Accounts payable......................................................... 456 1,825
Accrued payroll and related.............................................. 60 43
Other current liabilities................................................ 100 (75)
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Net cash used in operating activities.......................................... 477 (117)
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Investing activities:
Expenditures for property and equipment.......................................... (89) (8)
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Net cash provided by (used in) investing activities.......................... (89) (8)
Financing activities:
Payment of capital lease obligations............................................. -- (27)
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Net cash used in financing activities........................................ -- (27)
Net increase (decrease in) cash and cash equivalents................................ (129) (107)
Cash and cash equivalents, beginning of period...................................... 258 163
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Cash and cash equivalents, end of period............................................ $ 129 $ 56
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Supplemental disclosure of cash flow data:
Income taxes paid................................................................ $ -- $ --
</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.
7
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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 $754,000 or 11.5%, from $6,563,000 to $5,809,000.
The decrease was due to reduced revenue for Cerezyme patients and lower infusion
revenue. 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 $492,000 or 12%, from $4,077,000 in 1998 to $3,585,000 in 1999. As
a percentage of total revenues, medical and nutritional product costs were 62.1%
in 1998 as compared to 61.7% in 1999. 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 $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 decreased by $87,000, or 12.9% from
$676,000 in 1998 to $589,000 in 1999 due to a reduction in clinical and pharmacy
costs as a result of lower revenues and the closing of the Philadelphia
pharmacy. This decrease was partially offset by development costs associated
with the e commerce business.
The provision for uncollectible accounts was 1.1% of revenues in the period 1999
and 1.7% of revenues in 1998. The provision percentage was lowered from 1998
because the Company's experience of Accounts Receivable writeoffs has decreased.
Management fees to Kuala Healthcare, Inc., ('KUAL') of $94,000 in 1999 and
$105,000 in 1998 were 1.6% of revenues in both years.
Depreciation expense decreased from $26,000 in 1998 to $21,000 in 1999 due to
property and equipment retirements. Amortization expense of $4,000 was
recognized in both periods..
Other expense, (income) of ($17,000) consisted primarily of interest expense on
the Company's line of credit with Heller Financial and offset by interest income
on accounts receivable and write offs of certain accounts payables.
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 net income in 1999 was $210,000 or $.06 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 income before taxes for the
quarter ended December 31, 1999 was $210,000 compared to $122,000 for the
comparable quarter last year.
8
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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 $1,653,000, or 13.5%, from $12,288,000 in 1998 to
$10,635,000 in 1999, 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.
Cost of medical and nutritional products sold to patients and other customers
decreased by $393,000 or 5.3% from $7,332,000 in 1998 to $6,939,000 in 1999. As
a percentage of total revenues, medical and nutritional product costs increased
from 60% in 1998 to 65.2% 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 decreased by $133,000, or 9.4% from
$1,414,000 in 1998 to $1,281,000 in 1999. The decrease is largely attributable
to increased operating efficiencies in nursing and pharmacy operations.
The provision for uncollectible accounts was 1.1% of revenues in 1999 and 1.5%
of revenues in 1998. The provision percentage was lowered from 1998 because the
Company's experience of Accounts Receivable writeoffs has decreased.
Management fees to Kuala Healthcare, Inc., ('KUAL') were 1.6% of revenues
in both periods.
Depreciation expense decreased from $44,000 in 1998 to $35,000 in 1999 due to
property and equipment retirements. Amortization expense of $8,000 was
recognized during the current year.
Other expense (income) of ($84,000) consisted primarily of interest expense on
the Company's line of credit with Heller Financial and offset by interest income
on accounts receivable and writeoffs of certain accounts payables.
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 net (loss) income in 1999 was ($517,000) or ($.16) 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 ($517,000) 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.
9
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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 $13.8 million,
working capital of $1.1 million and a net worth of $4.7 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 4% higher than the balance at June 30, 1999. This was attributed to
slower collections. Infu-Tech's net accounts receivable has increased from
138 days sales outstanding at June 30, 1999 to 139 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 $2.0
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 $3.6 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.
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.
10
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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
11
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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: February 14, 2000 /S/ PRITPAL S. VIRDEE
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Pritpal S. Virdee
President and Chief Operating Officer
Date: February 14, 2000 /S/ FREDERICK W. SCHMIDT
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Frederick W. Schmidt
Chief Financial Officer
12
