[X]
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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For
the quarterly period ended: March 31, 2006
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[
]
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
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Commission
File Number: 001-31584
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Delaware
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23-3057155
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(State
or other jurisdiction of
incorporation
or organization)
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(I.R.S.
Employer Identification Number)
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Large
accelerated filer [ ]
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Accelerated
filer [ ]
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Non-Accelerated
filer [X]
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Item
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Page
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Part
I - Financial Information
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Part
II - Other Information
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ASSETS
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|||||||
March
31, 2006 (Unaudited)
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December
31, 2005
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||||||
Current
assets
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|||||||
Cash
and cash equivalents
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$
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6,944
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$
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5,386
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|||
Accounts
receivable, net
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16,693
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15,490
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|||||
Other
current assets
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1,464
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1,899
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|||||
Total
current assets
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25,101
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22,775
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|||||
Property
and equipment, net
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4,007
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4,042
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|||||
Goodwill
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51,620
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51,620
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|||||
Customer
list, net
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19,270
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19,641
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|||||
Other
intangible assets, net
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744
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864
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|||||
Other
long-term assets
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41
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41
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|||||
Total
assets
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$
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100,783
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$
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98,983
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LIABILITIES
AND STOCKHOLDERS’ EQUITY
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|||||||
Current
liabilities
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|||||||
Accounts
payable
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$
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9,543
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$
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8,069
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|||
Accrued
payroll and benefits
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4,064
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3,961
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|||||
Net
liabilities of discontinued operations
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1,299
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1,299
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|||||
Accrued
loss contracts
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276
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419
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|||||
Current
portion of accrued restructuring charges
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241
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312
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|||||
Other
current liabilities
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10,500
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11,782
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|||||
Total
current liabilities
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25,923
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25,842
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|||||
Senior
secured credit facility
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9,057
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8,649
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|||||
Note
payable
|
171
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--
|
|||||
Accrued
restructuring charges, net of current portion
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--
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14
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|||||
Other
long-term liabilities
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2,315
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2,315
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|||||
Total
liabilities
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37,466
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36,820
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Stockholders’
equity
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|||||||
Preferred
stock - $.001 par value, 2,000,000 shares authorized, 570,253 and
853,039
issued and outstanding, respectively; Liquidation preference: $14,256,000
and $21,326,000 at March 31, 2006 and December 31, 2005,
respectively
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1
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1
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|||||
Common
stock - $.001 par value, 100,000,000 shares authorized 36,268,386
and
32,818,955 shares issued and outstanding, respectively
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35
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32
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|||||
Additional
paid in capital
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136,044
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134,864
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|||||
Accumulated
deficit
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(72,763
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)
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(72,734
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)
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Total
stockholders’ equity
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63,317
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62,163
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Total
liabilities and stockholders’ equity
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$
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100,783
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$
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98,983
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2006
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2005
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Net
revenue
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$
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30,525
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$
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27,465
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Costs
and expenses
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Operating
expenses
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23,443
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21,151
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General
and administrative expenses
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5,992
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5,503
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Depreciation
and amortization
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859
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1,052
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Total
costs and expenses
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30,294
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27,706
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|||||
Operating
income/(loss)
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231
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(241
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)
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||||
Other
expenses
|
|||||||
Interest
expense
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114
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127
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|||||
Amortization
of financing costs
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56
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45
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|||||
Other
expenses
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-- |
--
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|||||
Total
other expenses
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170
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172
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|||||
Income/(loss)
before provision for income taxes
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61
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(413
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)
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Provision
for income taxes
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90
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7
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Net
loss
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(29
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)
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(420
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)
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Less
preferred stock dividend
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(337
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)
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(525
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)
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Net
loss applicable to common stockholders
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$
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(366
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)
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$
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(945
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)
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Loss
per common share, basic and diluted
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$
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(0.01
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)
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$
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(0.04
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)
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Weighted
average number of shares outstanding, basic and diluted
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34,788,257
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26,319,748
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2006
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2005
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||||||
Operating
activities:
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Net
loss
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$
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(29
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)
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$
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(420
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)
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Adjustments
to reconcile net loss to net cash provided by/(used in) operating
activities:
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Depreciation
and amortization
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859
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1,052
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Stock-based
compensation
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285
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--
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Issuance
of warrants for services
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16
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--
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Amortization
of financing costs
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56
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45
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Changes
in operating assets and liabilities:
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Accounts
receivable
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(1,328
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)
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(5,719
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)
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Deferred
tax asset
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--
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144
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|||||
Other
current assets
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435
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560
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Accounts
payable
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1,474
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897
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|||||
Accrued
payroll and benefits
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165
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1,124
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Accrued
restructuring charges
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(85
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)
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--
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Accrued
loss on contracts
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(143
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)
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--
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Other
current liabilities
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(491
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)
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1,808
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Net
cash provided by/(used in) operating activities
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1,214
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(509
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)
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Investing
activities:
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Purchases
of property, plant and equipment
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(389
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)
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(967
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)
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Net
cash used in investing activities
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(389
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)
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(967
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)
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Financing
activities:
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Principal
payments on capital leases
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--
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(5
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)
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Proceeds
from stock option exercises
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132
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--
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|||||
Repayments
of note payable
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(13
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)
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--
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Proceeds
from exercise of warrants
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22
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--
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Proceeds
from bank credit facility
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592
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2,450
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Net
cash provided by financing activities
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733
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2,445
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Net
increase in cash and cash equivalents
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1,558
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969
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Cash
and cash equivalents at beginning of period
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5,386
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3,805
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Cash
and cash equivalents at end of period
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$
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6,944
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$
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4,774
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Supplemental
disclosure of cash flow information:
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Cash
paid during the period for:
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Interest
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$
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159
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$
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157
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Income
taxes
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$
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130
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$
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115
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Schedule
of non-cash investing and financing activities:
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Issuance
of warrants for services
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$
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16
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$
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--
|
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Reduction
in accrued purchase price
|
$
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--
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$
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1,346
|
|||
Preferred
stock dividend
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$
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337
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$
|
525
|
|||
Conversion
of accrued dividends to common stock
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$
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1,068
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$
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22
|
2005
|
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Net
loss as reported
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$
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(420,000
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)
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Deduct
total stock-based employee
compensation expense determined under fair
value based methods for all awards
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(339,000
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)
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Pro
forma net loss
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$
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(759,000
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)
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Net
loss per common share as reported, basic and diluted
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$
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(0.04
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)
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Pro
forma net loss per common share, basic and diluted
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$
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(0.05
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)
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Dividend
yield
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0.00%
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Expected
volatility
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94.44%
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Risk-free
interest rate
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3.99%
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Expected
life
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5
years
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· |
The
expected volatility is based on a combination of the historical volatility
of the Company’s and comparable companies’ stock over the contractual life
of the options.
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· |
The
Company uses historical data to estimate employee termination behavior.
The expected life of options granted is derived from SAB 107 and
represents the period of time the options are expected to be outstanding.
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· |
The
risk-free interest rate is based on the U.S. Treasury yield curve
in
effect at the time of grant for periods within the contractual life
of the
option.
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· |
The
expected dividend yield is based on the Company’s current dividend yield
as the best estimate of projected dividend yield for periods within
the
contractual life of the option.
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Dividend
yield
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0.00%
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Expected
volatility
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75.41%
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Risk-free
interest rate
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4.45%
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Expected
life
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6
years
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Number
of Shares
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Weighted
Average Exercise Price
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Options
Exercisable
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Weighted
Average Exercise Price
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||||||||||
December
31,
2005
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3,841,652
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$
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1.79
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1,382,185
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$
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2.33
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|||||||
Exercised
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(147,330
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)
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$
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0.89
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|||||||||
Granted
|
140,000
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$
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2.65
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||||||||||
Forfeited
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(84,468
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)
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$
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1.42
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|||||||||
March
31, 2006
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3,749,854
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$
|
1.87
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1,731,526
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$
|
2.21
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Options
Outstanding
|
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Options
Exercisable
|
|
|||||||||||||
Range
of Exercise Price
|
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Number
Outstanding
|
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Weighted
Average Remaining Contractual Life
|
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Weighted
Average Exercise Price
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Number
Exercisable
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Weighted
Average Exercise Price
|
||||||
$0.00-$2.00
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3,002,502
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8.71
|
$
|
1.42
|
1,149,478
|
$
|
1.37
|
|||||||||
$2.01-$4.00
|
590,788
|
6.63
|
$
|
2.84
|
434,703
|
$
|
2.88
|
|||||||||
$4.01-$6.00
|
61,565
|
5.67
|
$
|
4.74
|
52,344
|
$
|
4.80
|
|||||||||
$6.01-$8.00
|
52,800
|
5.12
|
$
|
6.33
|
52,800
|
$
|
6.33
|
|||||||||
$8.01-$10.00
|
42,200
|
3.58
|
$
|
10.00
|
42,200
|
$
|
10.00
|
|||||||||
3,749,854
|
8.22
|
$
|
1.87
|
1,731,525
|
$
|
2.21
|
Balance
at
December
31, 2005
|
Cash
Payments
|
Balance
at
March
31, 2006
|
||||||||
Restructuring
|
||||||||||
One-time
termination benefits
|
$
|
185,000
|
(84,000
|
)
|
$
|
101,000
|
||||
Contract
termination costs
|
141,000
|
(1,000
|
)
|
140,000
|
||||||
Restructuring
total
|
326,000
|
(85,000
|
)
|
241,000
|
||||||
Provision
for loss contracts
|
$
|
419,000
|
(143,000
|
)
|
$
|
276,000
|
Period
|
Minimum
EBITDA
|
|||
July
1, 2005 - March 31, 2006
|
$
|
2,560,000
|
||
Last
four fiscal quarters ending June 30, 2006
|
3,580,000
|
|||
Last
four fiscal quarters ending September 30, 2006
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3,960,000
|
|||
Last
four fiscal quarters ending December 31, 2006
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4,450,000
|
Shares
Underlying Warrants
|
||||
Balance
outstanding at December 31, 2005
|
3,069,514
|
|||
Granted
|
100,000
|
|||
Exercised
|
(112,911
|
)
|
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Expired
|
(12,000
|
)
|
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Balance
outstanding at March 31, 2006
|
3,044,603
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Item
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
· |
effects
of increasing competition for contracts to establish and manage
employer-dedicated pharmacies and clinics;
|
· |
loss
of advantageous pharmaceutical pricing;
|
· |
inability
to meet covenants and financial tests related to our senior secured
credit
facility;
|
· |
long
and complex sales cycles;
|
· |
loss
of a major client;
|
· |
cost
pressures in the healthcare industry;
|
· |
exposure
to professional liability claims and a failure to manage effectively
our
professional liability risks;
|
· |
economic
uncertainty; and
|
· |
each
of the factors discussed under “Item 1A. - Risk Factors” in our 2005
Annual Report.
|
· |
reported
net revenue of $30,525,000, an increase of 11.1%, from $27,465,000
for the
quarter ended March 31, 2005;
|
· |
generated
$231,000 of operating income as compared to last year’s operating loss of
$241,000 for the comparable period;
|
· |
increased
our earnings before interest, taxes, depreciation and amortization,
or
EBITDA, to $1,090,000 from $811,000 for last year’s first quarter (2006
EBITDA includes $285,000 of share-based compensation resulting from
the
implementation of SFAS 123R);
|
· |
reduced
our net losses to $29,000 in the first quarter of 2006 from $420,000
for
the first quarter of 2006; and
|
· |
implemented
SFAS 123R, resulting in additional general and administrative expense
of
$285,000 during this quarter.
|
2006
|
2005
|
||||||
Revenue
|
30,525,000
|
27,465,000
|
|||||
Total
costs and expenses
|
30,294,000
|
27,706,000
|
|||||
Operating
income (loss)
|
231,000
|
(241,000
|
)
|
||||
Other
expenses
|
170,000
|
172,000
|
|||||
Income
before taxes
|
61,000
|
(413,000
|
)
|
||||
Provision
for taxes
|
90,000
|
7,000
|
|||||
Net
loss
|
(29,000
|
)
|
(420,000
|
)
|
|||
Reconciliation
of net income to EBITDA
|
|||||||
Net
loss
|
(29,000
|
)
|
(420,000
|
)
|
|||
Add:
Depreciation and amortization
|
915,000
|
1,097,000
|
|||||
Add:
Provision for income taxes
|
90,000
|
7,000
|
|||||
Add:
Interest
|
114,000
|
127,000
|
|||||
EBITDA
|
1,090,000
|
811,000
|
Period
|
Minimum
EBITDA
|
|||
July
1, 2005 - March 31, 2006
|
$
|
2,560,000
|
||
Last
four fiscal quarters ending June 30, 2006
|
3,580,000
|
|||
Last
four fiscal quarters ending September 30, 2006
|
3,960,000
|
|||
Last
four fiscal quarters ending December 31, 2006
|
4,450,000
|
Payments
due by period
|
||||||||||||||||
Contractual
obligations:
|
Total
|
Less
than
1
year
|
1-3
years
|
3-5
years
|
More
than
5
years
|
|||||||||||
Operating
leases
|
$
|
5,926,000
|
$
|
1,737,000
|
$
|
2,648,000
|
$
|
1,540,000
|
$
|
1,000
|
||||||
Less:
Amounts reimbursed by clients
|
897,000
|
617,000
|
252,000
|
28,000
|
--
|
|||||||||||
$
|
5,029,000
|
$
|
1,120,000
|
$
|
2,396,000
|
$
|
1,512,000
|
$
|
1,000
|
Number
|
Exhibit
Title
|
10.1
|
Seventh
Amendment to Credit Agreement, effective as of March 31, 2006 (executed
on
May 4, 2006), by and among I-trax, Inc., certain subsidiaries of
I-trax,
Inc., and Bank of America, N.A.
|
15
|
Awareness
letter of Goldstein, Golub Kessler LLP regarding unaudited interim
financial information.
|
31.1
|
Chief
Executive Officer Certification Pursuant to Rule 13a-14(a) and 15d-14(a)
of the Securities Exchange Act of 1934.
|
31.2
|
Chief
Financial Officer Certification Pursuant to Rule 13a-14(a) and 15d-14(a)
of the Securities Exchange Act of 1934.
|
32.1
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002.
|
32.2
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002.
|
I-TRAX,
INC.
|
|
Date:
May 15, 2006
|
By:
/s/
R. Dixon Thayer
|
R.
Dixon Thayer, Chief Executive
|
|
Officer
|
|
Date:
May 15, 2006
|
By:
/s/
David R. Bock
|
David
R. Bock, Executive Vice
|
|
President
and Chief Financial Officer
|