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, 2004
Commission File Number 1-14798
IVAX DIAGNOSTICS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 11-3500746 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
27,019,829 shares of Common Stock, $.01 par value, outstanding as of November 8, 2004.
INDEX
PART I - FINANCIAL INFORMATION
IVAX DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| September 30, 2004 |
December 31, 2003 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 11,909,340 | $ | 15,464,839 | ||||
| Accounts receivable, net of allowances for doubtful accounts of $2,985,287 in 2004 and $2,897,833 in 2003 |
7,105,568 | 6,676,910 | ||||||
| Inventories |
4,796,946 | 4,473,062 | ||||||
| Other current assets |
2,146,903 | 1,649,360 | ||||||
| Total current assets |
25,958,757 | 28,264,171 | ||||||
| Property, plant and equipment, net |
2,227,947 | 2,128,029 | ||||||
| Goodwill, net |
6,691,829 | 6,683,461 | ||||||
| Equipment on lease |
870,583 | 1,205,593 | ||||||
| Other assets |
70,663 | 84,240 | ||||||
| Total assets |
$ | 35,819,779 | $ | 38,365,494 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,179,643 | $ | 810,694 | ||||
| Accrued expenses and other current liabilities |
2,639,379 | 3,119,941 | ||||||
| Total current liabilities |
3,819,022 | 3,930,635 | ||||||
| Other long-term liabilities |
569,410 | 471,577 | ||||||
| Commitments and contingencies |
||||||||
| Shareholders’ equity: |
||||||||
| Common stock, $0.01 par value, authorized 50,000,000 shares, issued and outstanding 27,019,829 in 2004 and 27,659,329 in 2003 |
270,198 | 276,593 | ||||||
| Capital in excess of par value |
41,010,041 | 43,582,346 | ||||||
| Accumulated deficit |
(8,971,503 | ) | (9,101,104 | ) | ||||
| Accumulated other comprehensive loss |
(877,389 | ) | (794,553 | ) | ||||
| Total shareholders’ equity |
31,431,347 | 33,963,282 | ||||||
| Total liabilities and shareholders’ equity |
$ | 35,819,779 | $ | 38,365,494 | ||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets.
2
IVAX DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Period Ended September 30, |
Three Months |
Nine Months |
||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Net revenues |
$ | 4,582,855 | $ | 4,343,688 | $ | 14,320,744 | $ | 13,278,722 | ||||||||
| Cost of sales |
1,938,441 | 1,712,614 | 5,857,632 | 5,493,249 | ||||||||||||
| Gross profit |
2,644,414 | 2,631,074 | 8,463,112 | 7,785,473 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Selling |
1,488,862 | 1,329,331 | 4,250,732 | 4,006,052 | ||||||||||||
| General and administrative |
1,080,540 | 1,196,470 | 3,345,257 | 3,634,895 | ||||||||||||
| Research and development |
327,039 | 304,561 | 961,869 | 995,062 | ||||||||||||
| Total operating expenses |
2,896,441 | 2,830,362 | 8,557,858 | 8,636,009 | ||||||||||||
| Loss from operations |
(252,027 | ) | (199,288 | ) | (94,746 | ) | (850,536 | ) | ||||||||
| Other income: |
||||||||||||||||
| Interest income |
53,433 | 40,150 | 137,566 | 181,770 | ||||||||||||
| Other income (expense), net |
77,761 | (5,465 | ) | 103,573 | 145,518 | |||||||||||
| Total other income, net |
131,194 | 34,685 | 241,139 | 327,288 | ||||||||||||
| Income (loss) before provision for income taxes |
(120,833 | ) | (164,603 | ) | 146,393 | (523,248 | ) | |||||||||
| Provision for (benefit from) income taxes |
(26,757 | ) | 18,581 | 16,792 | 55,062 | |||||||||||
| Net income (loss) |
$ | (94,076 | ) | $ | (183,184 | ) | $ | 129,601 | $ | (578,310 | ) | |||||
| Basic earnings (loss) per common share |
$ | 0.00 | $ | (0.01 | ) | $ | 0.00 | $ | (0.02 | ) | ||||||
| Diluted earnings (loss) per common share |
$ | 0.00 | $ | (0.01 | ) | $ | 0.00 | $ | (0.02 | ) | ||||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: |
||||||||||||||||
| Basic |
27,019,829 | 27,643,848 | 27,448,896 | 27,567,667 | ||||||||||||
| Diluted |
27,019,829 | 27,643,848 | 28,253,534 | 27,567,667 | ||||||||||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
3
IVAX DIAGNOSTICS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended September 30, |
2004 |
2003 |
||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | 129,601 | $ | (578,310 | ) | |||
| Adjustments to reconcile net income (loss) to net cash flows (used in) provided by operating activities: |
||||||||
| Depreciation and amortization |
837,438 | 826,516 | ||||||
| Provision for doubtful accounts receivable |
133,638 | 205,917 | ||||||
| Stock option compensation expense |
— | 222,225 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(614,360 | ) | (568,722 | ) | ||||
| Inventories |
(345,124 | ) | 48,478 | |||||
| Other current assets |
(458,088 | ) | (212,264 | ) | ||||
| Other assets |
252 | 4,060 | ||||||
| Accounts payable and accrued expenses |
(83,598 | ) | 464,552 | |||||
| Other long-term liabilities |
56,802 | 10,906 | ||||||
| Net cash (used in) flows provided by operating activities |
(343,439 | ) | 423,358 | |||||
| Cash flows from investing activities: |
||||||||
| Capital expenditures |
(343,207 | ) | (212,050 | ) | ||||
| Acquisitions of equipment on lease |
(264,566 | ) | (555,271 | ) | ||||
| Net cash flows used in investing activities |
(607,773 | ) | (767,321 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds from stock option exercises |
49,800 | 262,320 | ||||||
| Repurchase of common stock |
(2,628,500 | ) | — | |||||
| Net cash flows (used in) provided by financing activities |
(2,578,700 | ) | 262,320 | |||||
| Effect of exchange rate changes on cash and cash equivalents |
(25,587 | ) | 96,069 | |||||
| Net (decrease) increase in cash and cash equivalents |
(3,555,499 | ) | 14,426 | |||||
| Cash and cash equivalents at the beginning of the period |
15,464,839 | 15,941,663 | ||||||
| Cash and cash equivalents at the end of the period |
$ | 11,909,340 | $ | 15,956,089 | ||||
| Supplemental disclosures: |
||||||||
| Interest paid |
$ | — | $ | — | ||||
| Income tax payments |
$ | 266,662 | $ | — | ||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
4
IVAX DIAGNOSTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) GENERAL:
The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q and, therefore, do not include all information normally included in audited financial statements. However, in the opinion of management, all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the results of operations, financial position and cash flows have been made. The results of operations and cash flows for the nine months ended September 30, 2004 are not necessarily indicative of the results of operations and cash flows which may be reported for the remainder of 2004. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes to consolidated financial statements included in the IVAX Diagnostics, Inc. (“IVAX Diagnostics,” “the Company,” “we,” “us,” “our”) Annual Report on Form 10-K for the year ended December 31, 2003. Certain prior period amounts presented in the consolidated financial statements have been reclassified to conform to the current period’s designation.
On March 14, 2001, b2bstores.com Inc. (“b2bstores.com”), IVAX Corporation (“IVAX”) and IVAX Diagnostics, Inc., a wholly-owned subsidiary of IVAX at that date (the “pre-merger IVAX Diagnostics”), consummated a merger of the pre-merger IVAX Diagnostics into b2bstores.com pursuant to which all of the issued and outstanding shares of the pre-merger IVAX Diagnostics were converted into 20,000,000 shares of b2bstores.com stock and b2bstores.com’s name was changed to IVAX Diagnostics, Inc.
(2) CASH EQUIVALENTS AND SHORT-TERM MARKETABLE SECURITIES:
The Company owns certain short-term investments in marketable debt securities with original maturities of three months or less that are classified as cash equivalents.
Substantially all cash and cash equivalents are presently held at one national securities brokerage firm. Accordingly, the Company is subject to credit risk if this brokerage firm is unable to repay the balance in the account or deliver the Company’s securities or if the brokerage firm should become bankrupt or otherwise insolvent. At September 30, 2004 and December 31, 2003, the Company owned no marketable securities. It is the Company’s policy to invest in select money market instruments, municipal securities and corporate issuers.
(3) INVENTORIES:
Inventories consist of the following:
| September 30, 2004 |
December 31, 2003 | |||||
| Raw materials</ | ||||||