Back to GetFilings.com

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

Commission file number 000-29273

QUOVADX, INC.

6400 S. Fiddler’s Green Circle, Suite 1000, Englewood, Colorado 80111
(Address of principal executive offices)

(303) 488-2019
(Registrant’s telephone number)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o

     At October 30, 2003, 32,979,032 shares of common stock were outstanding.

Table of Contents

QUOVADX, INC.

TABLE OF CONTENTS

2

Table of Contents

PART I FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

QUOVADX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share amounts)
(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements

3

Table of Contents

QUOVADX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share amounts)
(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements

4

Table of Contents

QUOVADX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements

5

Table of Contents

QUOVADX, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Interim Financial Statements

     The accompanying condensed consolidated financial statements of Quovadx, Inc. (“Quovadx,” the “Company,” the “Registrant,” “we” or “us”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures are adequate to make the information presented not misleading. The unaudited financial statements have been prepared on the same basis as our annual financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for a fair presentation in accordance with accounting principles generally accepted in the United States. The results for the three and nine months ended September 30, 2003 are not necessarily indicative of the results expected for the full year. These financial statements should be read in conjunction with the audited financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2002.

     Reclassifications. Certain prior year information has been reclassified to conform to the current year presentation.

2. Acquisition

     On September 19, 2003, Quovadx consummated the acquisition of CareScience, Inc (“CareScience”). The primary reasons for the acquisition were as follows:

•

enhancing our ability to reach certain of our strategic objectives, which include extending our product and service offering to include CareScience products, enabling us to bring real time capabilities to care management application offerings;

•

enabling us to leverage our customer base and brand recognition to accelerate market penetration and growth;

•

enabling us to enhance our position in areas where Quovadx products and services are already strong by offering complementary products and services developed by CareScience;

•

increasing our revenue stream.

     Under the terms of the merger, a wholly owned subsidiary of Quovadx merged with CareScience and CareScience became a wholly owned subsidiary of Quovadx. CareScience stockholders received a fixed exchange rate of $1.40 cash and 0.1818 shares of Quovadx’s common stock for each share of CareScience common stock they owned. The purchase price totaling $31.1 million included 2,415,900 shares of Quovadx common stock issued in exchange for all outstanding shares of CareScience capital stock, cash of $18.6 million and $3.7 million in merger-related costs, including transaction fees, severance and stock option payout. This transaction was accounted for as a purchase. Through the acquisition, the Company acquired liabilities of $7.9 million and total assets of $18.5 million, including cash of $13.9.

     In the third quarter of 2003, due to the acquisition, the Company initiated a headcount reduction of CareScience employees. As a result, we recorded a preliminary estimate of severance costs of $256,000 comprised of salary and employee-related expenses. At September 30, 2003, the balance of the accrual was $102,000. We believe that the remaining accrual for severance costs will be substantially paid out over the next two fiscal quarters.

     The Company has retained an independent appraiser to assist with the assigning of the fair values to the identifiable intangibles acquired from CareScience. Our preliminary estimate of goodwill, software and identifiable intangible assets acquired is $14.3 million, $4.3 million and $1.9 million, respectively, and will be finalized upon receipt of the independent appraisal and reconciliation of merger costs. The goodwill recognized in the CareScience acquisition is not subject to amortization but will be tested for impairment annually or more frequently if events or changes in circumstances indicate the asset might be impaired. The identifiable intangible assets will be amortized over their estimated lives. Operating results for CareScience after the date of acquisition are included in our consolidated financial results as of and for the three and nine months ended September 30, 2003.

     The unaudited pro forma results of operations as though the CareScience acquisition had been completed as of January 1, 2002 are as follows (in thousands except per share amounts):

6

Table of Contents

     The pro forma results above do not include any anticipated cost savings or other effects of the integration of acquired entities into the Company and are not necessarily indicative of the results which would have occurred if the acquisitions has been in effect on the date indicated, or which may result in the future.

3. Net Loss per Common Share

     Net loss per common share (“EPS”) is calculated in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 128, “Earnings per Share.” Under the provisions of SFAS No. 128, basic EPS is computed by dividing the net income for the period by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if stock options were exercised, resulting in the issuance of common stock that would share in the earnings of the Company. Potential dilution of the stock options exercisable into common stock is computed using the treasury stock method based on the average fair market value of the stock. In periods where the Company has a net loss the effect of common stock equivalents is excluded from the computation of diluted EPS since their effect would decrease the loss per share. The diluted weighted average common shares calculation for the three and nine months ended September 30, 2003 and 2002 excludes 929,480 and 438,363 options, respectively, to purchase common stock because their effect would have been anti-dilutive.

     The following table sets forth the computation of the numerators and denominators in the basic and diluted net loss per common share calculations for the periods indicated (in thousands):