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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2002
 
Commission File Number 1-14798
 
 
IVAX DIAGNOSTICS, INC.
 
Delaware
  
11-3500746
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
 
2140 North Miami Avenue, Miami, Florida 33127
(Address of principal executive offices) (Zip Code)
 
(305) 324-2300
(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  ¨
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
27,723,579 shares of Common Stock, $.01 par value, outstanding as of November 8, 2002.
 

Table of Contents
 
IVAX DIAGNOSTICS, INC.
 
INDEX
 
      
PAGE NO.
PART I—FINANCIAL INFORMATION
       
Item 1—Financial Statements
       
    
3
    
4
    
5
    
7
    
13
    
22
    
22
PART II—OTHER INFORMATION
       
    
23
    
23

2

Table of Contents
PART I—FINANCIAL INFORMATION
 
Item 1—Financial Statements
 
IVAX DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
    
September 30, 2002
     
December 31, 2001
  
    
(Unaudited)
         
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
18,286,265
 
   
$
23,282,155
 
Accounts receivable, net of allowances for doubtful accounts of $2,203,369 in 2002 and $1,911,395 in 2001
   
 
5,242,176
 
   
 
3,192,782
 
Inventories
   
 
4,504,597
 
   
 
2,857,289
 
Other current assets
   
 
1,579,381
 
   
 
1,428,493
 
    
  
Total current assets
   
 
29,612,419
 
   
 
30,760,719
 
Property, plant and equipment, net
   
 
1,816,864
 
   
 
1,458,702
 
Goodwill, net
   
 
6,827,095
 
   
 
6,878,199
 
Equipment on lease
   
 
1,269,096
 
   
 
856,439
 
Other assets
   
 
61,746
 
   
 
192,469
 
    
  
Total assets
   
$
39,587,220
 
   
$
40,146,528
 
    
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                  
Current liabilities:
                  
Accounts payable
   
$
876,391
 
   
$
801,392
 
Accrued expenses and other current liabilities
   
 
2,911,379
 
   
 
2,147,559
 
    
  
Total current liabilities
   
 
3,787,770
 
   
 
2,948,951
 
    
  
Other long-term liabilities
   
 
333,287
 
   
 
397,674
 
    
  
                   
Commitments and contingencies (Note 11)
                  
Shareholders’ equity:
                  
Common stock, $0.01 par value, authorized 50,000,000 shares, issued and outstanding 28,607,052 in 2002 and 28,635,652 in 2001
   
 
286,070
 
   
 
286,356
 
Capital in excess of par value
   
 
44,925,424
 
   
 
44,530,462
 
Accumulated deficit
   
 
(7,844,011
)
   
 
(5,596,778
)
Accumulated other comprehensive loss
   
 
(1,901,320
)
   
 
(2,420,137
)
    
  
Total shareholders’ equity
   
 
35,466,163
 
   
 
36,799,903
 
    
  
Total liabilities and shareholders’ equity
   
$
39,587,220
 
   
$
40,146,528
 
    
  
 
The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets.

3

Table of Contents
 
IVAX DIAGNOSTICS, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
Period Ended September 30,
   
Three Months
     
Nine months
  
    
2002
     
2001
     
2002
     
2001
  
Net revenues
   
$
3,904,482
 
   
$
1,910,013
 
   
$
9,526,630
 
   
$
8,047,141
 
Cost of sales
   
 
2,223,389
 
   
 
988,361
 
   
 
5,067,574
 
   
 
3,653,777
 
    
  
  
  
Gross profit
   
 
1,681,093
 
   
 
921,652
 
   
 
4,459,056
 
   
 
4,393,364
 
    
  
  
  
Operating expenses:
                                    
Selling
   
 
1,326,789
 
   
 
794,178
 
   
 
3,241,888
 
   
 
2,298,875
 
General and administrative
   
 
977,177
 
   
 
841,921
 
   
 
2,866,455
 
   
 
3,513,825
 
Research and development
   
 
398,423
 
   
 
349,989
 
   
 
1,108,515
 
   
 
958,794
 
Goodwill amortization
   
 
—  
 
   
 
63,742
 
   
 
—  
 
   
 
191,211
 
    
  
  
  
                                     
Total operating expenses
   
 
2,702,389
 
   
 
2,049,830
 
   
 
7,216,858
 
   
 
6,962,705
 
    
  
  
  
Loss from operations
   
 
(1,021,296
)
   
 
(1,128,178
)
   
 
(2,757,802
)
   
 
(2,569,341
)
Other income:
                                    
Interest income
   
 
96,086
 
   
 
227,575
 
   
 
389,102
 
   
 
583,169
 
Interest expense – related party
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
(93,336
)
Other income (expense), net
   
 
6,299
 
   
 
(21,959
)
   
 
25,925
 
   
 
51,440
 
    
  
  
  
                                     
Total other income, net
   
 
102,385
 
   
 
205,616
 
   
 
415,027
 
   
 
541,273
 
    
  
  
  
                                     
Loss from continuing operations before income taxes
   
 
(918,911
)
   
 
(922,562
)
   
 
(2,342,775
)
   
 
(2,028,068
)
Provision (benefit) for income taxes
   
 
(120,706
)
   
 
(57,904
)
   
 
(95,542
)
   
 
356,433
 
    
  
  
  
Net loss
   
$
(798,205
)
   
$
(864,658
)
   
$
(2,247,233
)
   
$
(2,384,501
)
    
  
  
  
Basic and diluted loss per common share
   
$
(.03
)
   
$
(.03
)
   
$
(.08
)
   
$
(.09
)
    
  
  
  
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
                                    
Basic and diluted
   
 
28,645,430
 
   
 
28,629,061
 
   
 
28,642,563
 
   
 
26,293,079
 
    
  
  
  
 
 
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

4

Table of Contents
IVAX DIAGNOSTICS AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine months Ended September 30,
   
2002
     
2001
  
Cash flows from operating activities:
                  
Net loss
   
$
(2,247,233
)
   
$
(2,384,501
)
Adjustments to reconcile net loss to net cash flows used in operating activities:
                  
Depreciation and amortization
   
 
656,263
 
   
 
787,447
 
Provision for losses on accounts receivable
   
 
108,577
 
   
 
36,926
 
Stock option compensation expense
   
 
445,950
 
   
 
1,337,833
 
Changes in operating assets and liabilities:
                  
Accounts receivable
   
 
(1,848,527
)
   
 
1,324,747
 
Inventories
   
 
321,519
 
   
 
(106,386
)
Other current assets
   
 
(20,780
)
   
 
(215,344
)
Other assets
   
 
1,312
 
   
 
(16,112
)
Accounts payable and accrued expenses
   
 
438,990
 
   
 
(732,067
)
Other long-term liabilities
   
 
(101,298
)
   
 
44,669
 
    
  
Net cash flows (used in) provided by operating activities
   
 
(2,245,227
)
   
 
77,212
 
    
  
Cash flows from investing activities:
                  
Capital expenditures
   
 
(491,518
)
   
 
(157,199
)
Investment in marketable securities
   
 
—  
 
   
 
(2,475,083
)
Acquisition of business
   
 
(2,211,747
)
   
 
—  
 
Acquisitions of equipment on lease
   
 
(524,042
)
   
 
(625,019
)
    
  
Net cash flows used in investing activities
   
 
(3,227,307
)
   
 
(3,257,301
)
    
  
Cash flows from financing activities:
                  
Proceeds from sale of common stock
   
 
—  
 
   
 
22,255,111
 
Proceeds from stock option exercises
   
 
8,760
 
   
 
35,863
 
Repurchase of common stock
   
 
(60,034
)
   
 
—  
 
Change in balance due to IVAX Corporation
   
 
82,000
 
  &nb