Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended: August 31, 2004 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ______________ to _______________
Commission file number: 0-11411
QMed, Inc.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2468665
-------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
25 Christopher Way, Eatontown, New Jersey 07724
----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(732) 544-5544
---------------------------------------------------
(Registrant's telephone number, including area code)
N/A
----------------------------------------------------
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report
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]
The number of shares of the registrant's common stock outstanding on October 8,
2004: 14,605,384
QMED, INC. AND SUBSIDIARIES
FORM 10-Q
For the Quarter Ended August 31, 2004
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
August 31, 2004 and November 30, 2003.................. 1
Condensed Consolidated Statements of Operations
for the Three and Nine Months Ended August
31, 2003 and 2004...................................... 2
Condensed Consolidated Statements of
Comprehensive Income for the Three and Nine
Months Ended March 31, 2003 and 2004................... 3
Condensed Consolidated Statements of
Stockholders' Equity for the Nine Months
Ended August 31, 2004.................................. 4
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended August 31, 2003 and 2004..... 5
Notes to Financial
Statements............................................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 13
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................. 19
Item 4. Controls and Procedures................................... 19
Part II Other Information
Item 1. Legal Proceedings......................................... 20
Item 6. Exhibits.................................................. 20
Signature ................................................................. 21
Certifications ............................................................ 22
i
Part I. Financial Information
Item 1. Financial Statements
QMED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited) (audited)
August 31, 2004 November 30, 2003
--------------- -----------------
ASSETS
Current assets
Cash and cash equivalents $ 1,640,094 $ 1,638,271
Investments 2,823,461 6,213,825
Accounts receivable, net of allowances of approximately $2,000 1,319,144 1,315,021
Inventory 141,088 146,239
Prepaid expenses and other current assets 279,908 392,783
---------------- ----------------
6,203,695 9,706,139
Property and equipment, net 1,257,825 1,133,419
Product software development costs 845,829 441,020
Accounts receivable, non-current - 1,474,674
Other assets 137,169 163,059
Investments in joint ventures 50,530 -
---------------- ----------------
$ 8,495,048 $ 12,918,311
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 934,291 $ 975,724
Leases payable, current portion 87,899 73,463
Accrued salaries and commissions 370,844 565,524
Fees reimbursable to health plans 642,587 182,359
Contract billings in excess of revenues 1,556,637 1,717,657
Deferred warranty revenue 23,938 33,235
Income taxes payable 12,000 6,810
---------------- ----------------
3,628,196 3,554,772
Leases payable - long term 210,645 44,429
Contract billings in excess of revenue - long term - 2,270,928
---------------- ----------------
3,838,841 5,870,129
Commitments and Contingencies
Stockholders' equity
Common stock $.001 par value; 40,000,000 shares authorized;
14,789,405 and 14,627,384 shares issued and 14,767,405 and
14,605,384 outstanding, respectively 14,789 14,627
Paid-in capital 33,861,890 33,380,751
Accumulated deficit (29,140,151) (26,264,572)
Accumulated other comprehensive income
Unrealized loss on securities available for sale (4,696) (6,999)
---------------- ----------------
4,731,832 7,123,807
Less treasury stock at cost, 22,000 common shares (75,625) (75,625)
---------------- ----------------
Total stockholders' equity 4,656,207 7,048,182
---------------- ----------------
$ 8,495,048 $ 12,918,311
================ ================
See Accompanying Notes to Condensed Consolidated Financial Statements
1
QMED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three For the Three For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
August 31, 2004 August 31, 2003 August 31, 2004 August 31, 2003
--------------- --------------- --------------- ---------------
Revenue
Disease management services $ 3,205,583 $ 3,102,956 $ 10,612,374 $ 9,952,986
Medical equipment 67,500 61,956 178,410 194,671
-------------- -------------- -------------- --------------
3,273,083 3,164,912 10,790,784 10,147,657
-------------- -------------- -------------- --------------
Cost of revenue
Disease management services 2,341,253 1,714,221 6,954,692 4,859,222
Medical equipment 38,923 27,382 117,627 107,590
-------------- -------------- -------------- --------------
2,380,176 1,741,603 7,072,319 4,966,812
-------------- -------------- -------------- --------------
Gross profit 892,907 1,423,309 3,718,465 5,180,845
-------------- -------------- -------------- --------------
Selling, general and
administrative expenses 1,772,054 1,699,918 5,623,117 5,115,835
Research and development expenses 209,032 235,514 707,322 682,076
Litigation settlements - - - 230,000
-------------- -------------- -------------- --------------
Loss from operations (1,088,179) (512,123) (2,611,974) (847,066)
Interest expense (8,610) (5,915) (24,334) (18,678)
Interest income 3,023 13,508 51,906 70,252
Loss in operations of
joint ventures (83,130) (168,724) (287,880) (168,724)
Other income - - 8,703 -
-------------- -------------- -------------- --------------
Loss before provision
for income tax (1,176,896) (673,254) (2,863,579) (964,216)
Provision for state
income taxes (4,000) (2,800) (12,000) (8,300)
-------------- -------------- -------------- --------------
Net loss $ (1,180,896) $ (676,054) $ (2,875,579) $ (972,516)
============== ============== ============== ==============
Basic and Diluted loss
per share
Weighted average shares outstanding 14,763,466 14,598,155 14,718,292 14,557,235
-------------- -------------- -------------- --------------
Basic loss per share $ (.08) $ (.05) $ (0.20) $ (.07)
============== ============== ============== ==============
See Accompanying Notes to Condensed Consolidated Financial Statements
2
QMED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
For the Three For the Three For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
August 31, 2004 August 31, 2003 August 31, 2004 August 31, 2003
--------------- --------------- --------------- ---------------
Net loss $ (1,180,896) $ (676,054) $ (2,875,579) $ (972,516)
Other comprehensive income
Unrealized loss on securities
available for sale (7,309) 3,102 (11,217) (18,085)
Less: reclassification adjustment for
losses included in net loss 11,995 14,970 8,914 43,814
-------------- -------------- -------------- --------------
Comprehensive loss $ (1,176,210) $ (657,982) $ (2,877,882) $ (946,787)
============== ============== ============== ==============
See Accompanying Notes to Condensed Consolidated Financial Statements
3
QMED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Nine Months Ended August 31, 2004
(Unaudited)
Accumulated Common Stock
Common Stock Other Held in Treasury
------------------------ Paid-in Accumulated Comprehensive ---------------------
Shares Amount Capital Deficit Income Shares Amount Total
------ ------ ------- ----------- ------------- ------ ------ -----
Balance - November 30, 2003 14,627,384 $ 14,627 $33,380,751 $(26,264,572) $ (6,999) 22,000 $ (75,625) $ 7,048,182
Exercise of stock options and
warrants 159,639 159 420,553 420,712
Issuance in connection with
Directors equity plan 2,382 3 20,436 20,439
Amortization of non-employee
stock options 40,150 40,150
Net loss for the nine months
ended August 31, 2004 (2,875,579) (2,875,579)
Change in unrealized holding
losses on securities
available for sale 2,303 2,303
---------- -------- ----------- ------------ --------- ------ --------- -----------
Balance - August 31, 2004 14,789,405 $ 14,789 $33,861,890 $(29,140,151) $ (4,696) 22,000 $ (75,625) $ 4,656,207
========== ======== =========== ============ ========= ====== ========= ===========
See Accompanying Notes to Condensed Consolidated Financial Statements
4
QMED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine For the Nine
Months Ended Months Ended
August 31, 2004 August 31, 2003
--------------- ---------------
Cash flows from operating activities:
Net loss $ (2,875,579) $ (972,516)
Adjustments to reconcile net loss to net cash used by
operating activities:
Loss on sale of investments 8,914 43,814
Loss in operations of joint ventures 287,880 168,724
Depreciation and amortization 352,358 298,425
Issuance of stock in connection with the directors equity plan 20,439 6,407
Amortization of non-employee stock options 40,150 27,012
Amortization of bond discounts and premiums 109,460 59,482
(Increase) decrease in
Accounts receivable (4,123) (1,849,312)
Inventory 5,151 22,766
Prepaid expenses and other current assets 117,875 80,630
Increase (decrease) in
Accounts payable and accrued liabilities 333,260 831,633
Contract billings in excess of revenues and deferred revenue (966,571) 577,483
Other, net 19,015 (29,583)
-------------- --------------
Total adjustments 323,808 237,481
-------------- --------------
(2,551,771) (735,035)
-------------- --------------
Cash flows from investing activities:
Proceeds from sale of securities available for sale 9,039,860 11,619,056
Purchases of securities available for sale (5,765,567) (12,112,230)
Capital expenditures (589,098) (213,584)
Investment in joint venture (452,555) -
-------------- --------------
2,232,640 (706,758)
-------------- --------------
Cash flows from financing activities:
Payments for capital leases (99,758) (48,071)
Proceeds from issuance of common stock 420,712 237,163
-------------- --------------
320,954 189,092
-------------- --------------
Net increase (decrease) in cash and cash equivalents 1,823 (1,252,701)
Cash and cash equivalents at beginning of period 1,638,271 2,383,123
-------------- --------------
Cash and cash equivalents at end of period $ 1,640,094 $ 1,130,422
============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 24,334 $ 18,552
Income taxes - 39,000
See Accompanying Notes to Condensed Consolidated Financial Statements
5
QMED, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Interim Financial Reporting
The accompanying unaudited condensed consolidated financial statements of QMed,
Inc. and its subsidiaries (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, these financial statements do not include all of the information
and footnotes required by generally accepted accounting principles. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and nine month periods ended August 31, 2004 are not
necessarily indicative of the results that may be expected for the year ending
November 30, 2004. These condensed consolidated financials statements include
the accounts of QMed, Inc., its wholly owned subsidiary Interactive Heart
Management Corp. ("IHMC"), and QMed, Inc.'s majority owned (83%) inactive
subsidiary HeartMap, Inc. These condensed consolidated financial statements
should be read in conjunction with the financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
November 30, 2003.
Note 2 - Revenue Recognition
The Company enters into contractual arrangements with health plans to provide
disease management services. Fees under the Company's health plan contracts are
generally determined by multiplying a contractually negotiated rate per health
plan member per month ("PMPM") by the number of health plan members covered by
the Company's services during the month. The PMPM rates usually differ between
contracts due to the various types of health plan product groups (e.g. PPO, HMO,
Medicare+Choice). These contracts are generally for terms of one to three years
with provisions for subsequent renewal, and typically provide that all or a
portion of the Company's fees may be "performance-based". Performance-based
contracts have varying degrees of risk associated with the Company's ability to
deliver the guaranteed financial cost savings. In most cases, the Company
guarantees a percentage reduction of disease costs compared to a prior baseline
year determined by actuarial analysis and other estimates used as a basis to
measure performance objectives. The measurement of the Company's performance
against the base year information is a data intensive and time-consuming process
that is typically not completed until six to eight months after the end of the
contract year. The Company bills its customers each month for the entire amount
of the fees contractually due based on previous months membership, which always
includes the amount, if any that may be subject to refund for membership
retroactivity. The Company adjusts or defers revenue for contracts where it
believes results could be less then the contracted measured targets, possibly
resulting in a refund of fees or where fees generated may be subject to further
retroactive adjustment associated with a contract or plan's decision to
completely terminate its coverage in a geographic market as well as general
membership changes. For example, general terminations can be due to death,
member change of health plan, etc. Adjustments for non-performance under the
terms of the contract or other factors affecting revenue recognition are accrued
on an estimated basis in the period the services are provided and are adjusted
in future periods when final settlement is determined. The Company reviews these
estimates periodically and makes adjustments, as interim information is
available.
The Company determines its level of performance at interim periods based on
medical claims data, achievement of enrollment targets or other data required to
be supplied by the health plan. In the event these interim performance measures
indicate that performance targets are not being met or sufficient data is
unavailable, fees subject to refund and not covered by reinsurance are not
recorded as revenues but rather are recorded as a current liability entitled
"contract billings in excess of revenues." Under performance based arrangements,
the ability to make estimates at interim periods can be challenging due to the
inherent nature of the medical claims process and the claims lag time associated
with it. In most cases, paid claims data is not available until up to six months
after claims are incurred. Although interim data measurement is indicative of
performance objectives, actual results could differ from those estimates. As of
August 31, 2004, based on information and data available, the Company has
deferred approximately $ 1,557,000 of revenue, which may be subject to refund.
This deferral has been reflected as contract billings in excess of revenues on
the balance sheet.
The contract billings in excess of revenues on the balance sheet represent fees
which are subject to a reconciliation process. In contracts where the Company
believes results could be less then the contracted measured targets the revenue
from that agreement, which is estimated to be subject to refund, is deferred in
accordance with our revenue recognition policy. The Company believes these
estimates adequately provide for any potential adjustments that may be applied
to revenues from these contracts. If future reconciliations provide positive
results, revenue will be recorded at that time.
6
QMED, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 2 - Revenue Recognition (continued)
Although the majority of contracts entered into by the company are multi-year
agreements, the Regence Oregon and Washington contracts were terminated early,
as of January 31, 2003. As of November 30, 2003, non-current accounts receivable
included $1,474,674 for services rendered on the Regence Oregon and Washington
contracts. As of August 31, 2004, as a result of the settlement with the Regence
Group (see note 12), these outstanding receivables were offset against the
related deferred revenue.
Note 3 - Investments in Securities
Investment in securities available-for-sale as of August 31, 2004 were as
follows:
Unrealized Gain
Cost Market Value (Loss)
-------------- -------------- --------------
Corporate debt securities $ 2,076,112 $ 2,074,690 $ (1,422)
Certificates of deposit 116,141 115,393 (748)
U.S. Government short term obligations 635,904 633,378 (2,526)
-------------- -------------- --------------
$ 2,828,157 $ 2,823,461 $ (4,696)
============== ============== ==============
Note 4 - Inventory
Inventories, consisting of finished units and raw materials, are stated at the
lower of cost (determined on a moving weighted average method) or market.
Inventories consist of the following:
August 31, 2004 November 30, 2003
(Unaudited)
-------------- --------------
Raw materials (component parts) $ 119,957 $ 119,228
Finished units 21,131 27,011
-------------- --------------
$ 141,088 $ 146,239
============== ==============
Note 5 - Product Software Development Costs
During the three and nine months ended August 31, 2004, the Company capitalized
approximately $248,000 and $493,000 in product software development costs,
respectively. These costs are amortized over a five-year useful life.
During the three and nine months ended August 31, 2004, amortization costs
related to product software development costs were approximately $29,000 and
$88,000, respectively.
Note 6 - Investments in Joint Ventures
The Company has a 50% interest in HeartMasters, LLC. ("HM"). The management
agreement provides for profits and losses to be allocated based on the Company's
50% interest. As of August 31, 2004, the Company has recorded losses to date of
approximately $821,000 bringing the investment in joint venture to zero. This
joint venture is not a variable interest entity and therefore is not required to
be consolidated under the provisions of FIN 46.
The Company has a 33.33% interest in Healthsuite Partners, LLC ("HSP"). The
management agreement provides for profits and losses to be allocated based on
the Company's 33.33% interest. As of August 31, 2004, the Company has recorded
losses to date of approximately $66,000 bringing its investment in this joint
venture to approximately $51,000. This joint venture is not a variable interest
entity and therefore is not required to be consolidated under the provisions of
FIN 46.
7
QMED, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 7 - Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses include the following:
August 31, 2004 November 30, 2003
(Unaudited)
-------------- --------------
Account payable trade $ 315,400 $ 479,472
Insurance premiums payable 124,286 183,243
Other accrued expenses - none in
excess of 5% of current liabilities 494,605 313,009
-------------- --------------
$ 934,291 $ 975,724
============== ==============
Note 8 - Fees Reimbursable to Health Plans
Fees reimbursable to health plans include amounts due health plans as part of
the contract reconciliation process. As of August 31, 2004 approximately
$514,000 of these fees were payable to health plans resulting from contract
reconciliations.
Note 9 - Business Segment Information
The Company presents segment information in accordance with SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information", which
established reporting and disclosure standards for an enterprise's operating
segments. Operating segments are defined as components of an enterprise for
which separate financial information is available and regularly reviewed by the
Company's senior management.
The Company segments are organized into two business units, disease-management
services and medical equipment sales, which are considered reportable segments.
The segments are managed separately and the Company evaluates performance on
operating profits of the respective segments. The Company supports both segments
with shared human resources, clinical, marketing and information technology
resources. The accounting policies of the operating segments are the same as
those described in the summary of significant accounting policies in Note 1.
Income (loss) before income taxes by operating segment excludes interest income,
interest expense and general corporate expenses.
Summarized financial information by operating segment for three and nine months
ended August 31, 2004 and 2003, is as follows:
Three Months Ended
-----------------------------------------
August 31, 2004 August 31, 2003
--------------- ---------------
(Unaudited) (Unaudited)
Revenue
Disease management services $ 3,205,583 $ 3,102,956
Medical equipment sales 67,500 61,956
-------------- --------------
$ 3,273,083 $ 3,164,912
============== ==============
(Loss) income before income taxes:
Disease management services $ (477,823) $ (13,849)
Medical equipment sales 28,577 22,196
-------------- --------------
Total segments (449,246) 8,347
General corporate expenses - net (727,650) (681,601)
-------------- --------------
$ (1,176,896) $ (673,254)
============== ==============
8
QMED, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 9 - Business Segment Information (continued)
Three Months Ended
-----------------------------------------
August 31, 2004 August 31, 2003
--------------- ---------------
(Unaudited) (Unaudited)
Revenue
Disease management services $ 10,612,374 $ 9,952,986
Medical equipment sales 178,410 194,671
-------------- --------------
$ 10,790,784 $ 10,147,657
============== ==============
(Loss) income before income taxes:
Disease management services $ (887,579) $ 881,888
Medical equipment sales 60,812 46,498
-------------- --------------
Total segments (826,767) 928,386
General corporate expenses - net (2,036,812) (1,892,602)
-------------- --------------
$ (2,863,579) $ (964,216)
============== ==============
Note 10 - Stock-Based Compensation
The Company accounts for its stock options issued to employees and outside
directors pursuant to Accounting Principles Board Opinion ("APB") No. 25,
"Accounting for Stock Issued to Employees" and has adopted the disclosure
requirements of SFAS No. 123, "Accounting for Stock-Based Compensation", and
SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure - an Amendment of FASB Statement No. 123". Accordingly, no
compensation expense has been recognized in connection with the issuance of
stock options.
The following table illustrates the effect on net income and earnings per share
if the Company had applied the fair value recognition provisions of SFAS No. 123
to stock-based employee compensation.
Three Months Ended Nine Months Ended
------------------------------------------ ------------------------------------------
August 31, 2004 August 31, 2003 August 31, 2004 August 31, 2003
------------------- ------------------- ------------------- -------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Net loss, as reported $ (1,180,896) $ (676,054) $ (2,875,579) $ (972,516)
Deduct: Total stock-based
employee compensation
expense determined under
fair value based method
for all awards, net of
related tax
effects 302,548 240,090 871,548 604,743
-------------- -------------- -------------- --------------
Pro forma net loss $ (1,483,444) $ (916,144) $ (3,747,127) $ (1,577,259)
============== ============== ============== ==============
9
QMED, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 10 - Stock-Based Compensation (continued)
Three Months Ended Nine Months Ended
------------------------------------------ ------------------------------------------
August 31, 2004 August 31, 2003 August 31, 2004 August 31, 2003
------------------- ------------------- ------------------- -------------------
(unaudited) (unaudited) (unaudited) (unaudited)
Weighted average common 14,763,466 14,598,155 14,718,292 14,557,235
shares outstanding
Dilutive effect of stock
options and warrants - - - -
-------------- -------------- -------------- --------------
Diluted shares outstanding 14,763,466 14,598,155 14,718,292 14,557,235
============== ============== ============== ==============
Loss per share:
Basic and Diluted,
As reported $ (.08) $ (.05) $ (.20) $ (.07)
============== ============== ============== ==============
Basic and Diluted,
pro forma $ (.10) $ (.06) $ (.25) $ (.11)
============== ============== ============== ==============
Potentially dilutive options and warrants to purchase 1,901,740 and 2,151,053
shares of the common stock were outstanding for the three and nine months ending
August 31, 2004, respectively, but were not included in the computation of
diluted loss per share because the effect of their inclusion would have been
anti-dilutive. Additionally, for the three and nine months options to purchase
139,491 and 50,000 shares, respectively, of common stock were outstanding as of
August 31, 2004 but were also not included in the computation of diluted loss
per share because the options exercise price was greater than the average market
price of the common shares.
The Company accounts for stock issued to non-employees in accordance with the
provisions of SFAS 123 and the Emerging Issues Task Force ("EITF") Issue No.
96-18, "Accounting for Equity Instruments that are Issued to other than
Employees for Acquiring, or in Conjunction with Selling Goods or Services."
Under SFAS 123, the cost is measured at the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more
reliably measured.
Note 11 - Line of Credit
On September 11, 2001, the Company entered into a loan agreement with Wachovia
Bank, National Associated for a $1 million line of credit. The annual interest
rate is the lower of the bank's reference rate minus 1% or the LIBOR Market
Index Rate plus 1.5%. The line is collateralized by securities owned by the
Company. Borrowings under this line of credit were $-0- at August 31, 2004 and
November 30, 2003.
Note 12 - Commitments and Contingencies
Litigation
- ----------
On June 15, 2004, the Company entered into an agreement to settle its dispute
with The Regence Group, including all issues surrounding HeartMasters LLC's
arbitration. The settlement agreement provides QMed, Inc. and IHMC with releases
from any and all claims related to Regence and the Regence contract in exchange
10
QMED, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 12 - Commitments and Contingencies (continued)
Litigation (continued)
- ----------------------
for a financial guarantee of certain payments due from HeartMasters LLC to
Regence. The amount of the financial guarantee can range between $0 and
$2,300,000 and is contingent upon the outcome of a separate arbitration being
pursued by Regence and HeartMasters LLC against the reinsurer, Centre Insurance.
Based upon management's estimates, the Company has increased its reserve
estimate to $1,150,001, which has resulted in a reduction in year to date
revenue of approximately $353,000. The Company has made an advance payment on
this guarantee of $1,150,001on June 15, 2004. The advance payment could be
subject to refund based upon certain recovery targets under the Centre Insurance
arbitration, if successful. This settlement was in response to the following:
HeartMasters LLC, a limited liability company 50% owned by our IHMC subsidiary,
had received a Demand for Arbitration before the American Arbitration
Association of approximately $17,000,000 plus interest, of which approximately
$8,500,000 had related to IHMC, for claims under certain terminated disease
management agreements. The claims had alleged a breach of the disease management
agreements between Regence of Washington and Oregon and HeartMasters LLC.
HeartMasters LLC had received a notice from a reinsurer, Centre, denying
coverage for the Regence of Oregon HMO first year coverage period which had
asserted that the outside actuarial report concerning Regence's claims history
and other information, which were considered by the reinsurer prior to issuance
of coverage, contained "grossly incorrect data." HeartMasters has demanded
payment of the insurance coverage. The dispute with Centre over the insurance
coverage is now the subject of an arbitration proceeding.
The Company is subject to claims and legal proceedings covering a wide range of
matters that arise in the ordinary course of business. Although management of
the Company cannot predict the ultimate outcome of these legal proceedings with
certainty, it believes that their ultimate resolution, including any additional
amounts we may be required to pay will not have a material effect on the
financial statements.
Sales Guarantees
- ----------------
Typically, the Company's fees or incentives are higher in contracts with
increased financial risk such as those contracts with performance-based fees or
guarantees against cost increases. The failure to achieve targeted cost
reductions could, in certain cases, render a contract unprofitable and could
have a material negative impact on the Company's results of operations.
Purchase Commitments
- --------------------
The Company is obligated to purchase heart-monitoring equipment under various
orders from one supplier, all of which are expected to be fulfilled with no
adverse consequences material to the companies operations or financial
condition. As of August 31, 2004 total open commitments under these purchase
orders are approximately $309,000.
11
Note 13 - Reclassifications
Certain reclassifications have been made to prior period's financial statements
in order to conform to the current year presentation.
Note 14 - Recently Issued Accounting Standards
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" (FIN No. 46), which addresses consolidation by
business enterprises of variable interest entities ("VIEs"). FIN No.46 is
applicable immediately for VIEs created after January 31, 2003 and are effective
for reporting periods ending after December 15, 2003, for VIEs created prior to
February 1, 2003. In December 2003, the FASB published a revision to FIN 46
("FIN 46R") to clarify some of the provisions of the interpretation and to defer
the effective date of implementation for certain entities. Under the guidance of
FIN 46R, public companies that have interests in VIE's that are commonly
referred to as special purpose entities are required to apply the provisions of
FIN 46R for periods ending after December 15, 2003. A public company that does
not have any interests in special purpose entities but does have a variable
interest in a VIE created before February 1, 2003, must apply the provisions of
FIN 46R by the end of the first interim or annual reporting period ending after
March 14, 2004. The Company adopted FIN 46 and FIN 46R during the quarter ended
February 29, 2004. The adoption of FIN 46 had no impact on the financial
condition or results of operations since the Company does not have investments
in VIE's.
12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Overview
- --------
QMed(R), Inc. is a Delaware corporation incorporated in 1987, whose business was
organized in 1983. Interactive Heart Management Corp. ("IHMC(R)") is a wholly
owned subsidiary of QMed, which was incorporated in 1995. IHMC developed and is
co-marketing with QMed health care information and communication services to
health plans, governments and private companies. These services include
"ohms|cvd(R)" (Online Health Management System for Cardiovascular Disease) which
is an integrated cardiovascular disease management system. ohms|cvd includes
related systems to assist health plans, government organizations and employer
groups in managing the incidence, treatment, and cost of cardiovascular
conditions, including coronary artery disease ("CAD"), stroke, congestive heart
failure ("CHF"), hypertension, diabetes, hyperlipidemia and the cardiovascular
complications of diabetes. These systems are designed to aid health care
physicians in the use of optimal "evidence based" medical management for
patients with these conditions, as well as those at high risk of developing
these conditions. The net impact of this approach is the improvement in
cardiovascular health and the associated reduction in mortality, morbidity and
cost. As of August 31, 2004, we had contracts to provide these services to 14
health plans in 11 states covering approximately 2.3 million health plan members
and 2 Medicare demonstration projects operating in 3 states.
As of August 31, 2004, the Company continues to provide services in its current
Medicare demonstration project. In October 2002, we were selected to participate
with two other entities in a second disease management program for the Centers
for Medicare and Medicaid Services. This program commenced enrollment in January
2004.
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements, which are based upon current
expectations and involve a number of risks and uncertainties. In order for us to
utilize the "safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995, investors are hereby cautioned that these statements may be
affected by the important factors, among others, set forth below, and
consequently, actual operations and results may differ materially from those
expressed in these forward-looking statements. The important factors include:
o our ability to renew and/or maintain contracts with its customers under
existing terms or restructure these contracts on terms that would not
have a material negative impact on our results of operations;
o our ability to execute new contracts for health plan disease management
services;
o the risks associated with a significant concentration of our revenues
with a limited number of health plan customers;
o our ability to effect estimated cost savings and clinical outcome
improvements under health plan disease management contracts and reach
mutual agreement with customers with respect to cost savings, or to
effect such savings and improvements within the timeframes contemplated
by us;
o the ability of our health plan customers to provide timely and accurate
data that is essential to the operation and measurement of our
performance under the terms of its health plan contracts;
o our ability to resolve favorably contract billing and interpretation
issues with its health plan customers;
o our ability to effectively integrate new technologies into our care
management information technology platform;
13
o our ability to obtain adequate financing to provide the capital that
may be needed to support the growth of our health plan operations and
financing or insurance to support our performance under new health plan
contracts;
o unusual and unforeseen patterns of healthcare utilization by
individuals within the health plans with cardiovascular conditions,
including coronary artery disease ("CAD"), stroke, congestive heart
failure ("CHF"), hypertension, diabetes, hyperlipidemia and the
cardiovascular complications of diabetes with which we have executed
disease management contracts;
o the ability of the health plans to maintain the number of covered lives
enrolled in the plans during the terms of the agreements between the
health plans and us;
o our ability to attract and/or retain and effectively manage the
employees required to implement our agreements with health plan
organizations;
o the impact of future state and federal healthcare legislation and
regulations on our ability to deliver services
o the financial health of our customers and their willingness to purchase
our services
o the impact of litigation or arbitration
o general economic conditions
We undertake no obligation to update or revise any such forward-looking
statements.
Critical Accounting Policies
- ----------------------------
Our accounting policies are described in Note 2 of the condensed consolidated
financial statements included in this Report on Form 10-Q for the quarter ended
August 31, 2004. The consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United States of
America, which requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
We consider the following policy to be the most critical in understanding the
judgments involved in preparing the financial statements and the uncertainties
that could impact our results of operations, financial condition and cash flows.
Revenue Recognition
- -------------------
We enter into contractual arrangements with health plans to provide disease
management services. Fees under our health plan contracts are generally
determined by multiplying a contractually negotiated rate per health plan member
per month ("PMPM") by the number of health plan members covered by our services
during the month. The PMPM rates usually differ between contracts due to the
various types of health plan product groups (e.g. PPO, HMO, Medicare+Choice).
These contracts are generally for terms of one to three years with provisions
for subsequent renewal, and typically provide that all or a portion of our fees
may be "performance- based". Performance-based contracts have varying degrees of
risk associated with our ability to deliver the guaranteed financial cost
savings. In most cases we guarantee a percentage reduction of disease costs
compared to a prior baseline year determined by actuarial analysis and other
estimates used as a basis to measure performance objectives. The measurement of
14
our performance against the base year information is a data intensive and
time-consuming process that is typically not completed until six to eight months
after the end of the contract year. We bill our customers each month for the
entire amount of the fees contractually due based on previous months membership,
which always includes the amount, if any that may be subject to refund for
membership retroactivity. We adjust or defer revenue for contracts where we
believe results could be less then the contracted measured targets, possibly
resulting in a refund of fees or where fees generated may be subject to further
retroactive adjustment associated with a contract or plan's decision to
completely terminate its coverage in a geographic market as well as general
membership changes. For example, general terminations can be due to death,
member change of health plan, etc. Adjustments for non-performance under the
terms of the contract or other factors affecting revenue recognition are accrued
on an estimated basis in the period the services are provided and are adjusted
in future periods when final settlement is determined. We review these estimates
periodically and make adjustments, as interim information is available.
We determine our level of performance at interim periods based on medical claims
data, achievement of enrollment targets or other data required to be supplied by
the health plan. In the event these interim performance measures indicate that
performance targets are not being met or sufficient data is unavailable, fees
subject to refund and not covered by reinsurance are not recorded as revenues
but rather are recorded as a current liability entitled "contract billings in
excess of revenues." Under performance based arrangements, the ability to make
estimates at interim periods can be challenging due to the inherent nature of
the medical claims process and the claims lag time associated with it. In most
cases, paid claims data is not available until up to six months after claims are
incurred. Although interim data measurement is indicative of performance
objectives, actual results could differ from those estimates. As of August 31,
2004, based on information and data available, we deferred approximately
$1,557,000 of revenue, which may be subject to refund. This deferral has been
reflected as contract billings in excess of revenues on the balance sheet.
The contract billings in excess of revenues on the balance sheet represent fees
which are subject to a reconciliation process. In contracts where we believe
results could be less then the contracted measured targets the revenue from that
agreement, which is estimated to be subject to refund, is deferred in accordance
with our revenue recognition policy. We believe these estimates adequately
provide for any potential adjustments that may be applied to revenues from these
contracts. If future reconciliations provide positive results, revenue will be
recorded at that time.
As of August 31, 2004, approximately 45% of disease management services were
derived from three health plans that each comprised more than 10% of our
revenues.
15
Results of Operations
- ---------------------
The following table presents the percentage of total revenues for the periods
indicated and changes from period to period of certain items included in our
Condensed Consolidated Statements of Operations.
For the For the
Three Nine
Months Months
For the Three Months Ended For the Nine Months Ended Ended
August 31, Ended August 31, August 31, August 31,
------------------------------- ------------------------------- ------------- -------------
2004 vs. 2004 vs.
2004 2003 2004 2003 2003 2003
-------------- ------------- -------------- ------------- ------------- -------------
Revenue 100.0 % 100.0 % 100.0 % 100.0 % 3.4 % 6.3 %
Cost of revenue 72.7 55.0 65.5 48.9 36.7 42.4
---------- ---------- ---------- ----------
Gross Profit 27.3 45.0 34.5 51.1 (37.3) (28.2)
Selling general
and administrative
54.1 53.7 52.1 50.4 20.6 9.9
Research and
development 6.4 7.4 6.6 6.7 (11.2) 3.7
Litigation
settlement - - - 2.3 * *
---------- ---------- ---------- ----------
Loss from
operations (33.2) (16.2) (24.2) (8.3) (112.5) 208.4
Interest expense (0.3) (0.2) (0.2) (0.2) 45.6 30.3
Interest income,
net 0.l 0.4 0.5 0.7 (77.6) 26.1
Loss on operations
of joint venture
(2.5) (5.3) (2.7) (1.7) (50.7) 70.6
Other income - - 0.1 - * *
---------- ---------- ---------- ----------
Loss before tax
(provision) benefit
(36.0) (21.3) (26.5) (9.5) 74.8 197.0
Income tax
(provision) benefit
(0.1) (0.1) (0.1) (0.1) 42.9 44.6
---------- ---------- ---------- ----------
Net loss (36.1) (21.4) (26.6) (9.6) 74.7 195.7
========== ========== ========== ==========
* Not meaningful
Three Months Ended August 31, 2004 Compared to Three Months Ended August 31,2003
Revenue for the three months ended August 31, 2004 increased approximately
$108,000 or 3.4% over the three months ended August 31, 2003. This increase
consists of approximately $1.8 million of additional revenue related to
expansion of existing contracts and the addition of new contracts entered into
since August 31, 2003. This increase was offset by a reduction in revenue of
approximately $945,000 related to market exits and reductions in membership
under existing disease management programs, the termination of disease
management programs under agreements with the Regence Group and the
renegotiation of a contract with a customer in Oregon. Further, we completed the
preliminary reconciliation process for one of our smaller health plans that has
indicated reductions in utilization as well as gross savings. However, the
unanticipated reduction in plan membership in this contract created a barrier to
achieving the contractually defined fixed dollar savings. Accordingly, the
Company increased its reserve estimate by approximately $750,000 on this
contract.
16
Gross profit margins for the three months ended August 31, 2004 decreased to
27.3% from 45.0% for the three months ended August 31, 2003. This decrease was
primarily due to an increase in reserve estimates of approximately $750,000
related to the unanticipated reduction in plan membership in the contract with
one of our smaller health plans as described above and implementation costs
associated with our expansion into new market places related to new contracts.
Salaries, travel and other direct costs are all factors in the initial
implementation related to any new markets and contracts. The direct costs will
decrease as a percentage of revenue once a marketplace and contract matures with
a significant number of members being enrolled.
Selling, general and administrative expenses for the three months ended August
31, 2004 increased approximately $72,000 or 4.2% compared to the three months
ended August 31, 2003. The increase was primarily due to costs associated with
compliance with the provisions under the Sarbanes-Oxley Act.
Research and development expenses for the three months ended August 31,
decreased approximately $26,000 or 11.2% compared to the three months ended
August 31, 2003. We continue to focus our efforts on the development of new,
advanced software programs to assist in the identification and evaluation of
patients who are at risk for developing various disease conditions. These
programs incorporate state of the art telecommunications, data management, and
security and information technology. Certain costs associated with the
development of new product software to be incorporated into our disease
management programs are capitalized and amortized over a 5-year useful life. We
intend to continue to improve and expand the capabilities of the ohms|cvd
system.
Loss on operations of joint venture for the three months ended August 31, 2004
primarily represents startup cost related to related to a joint venture entered
into with two partners to provide services under a disease management contract
in Minnesota. Loss on operations of joint venture for the three months ended
August 31, 2003 primarily represents legal fees associated the arbitration with
the Regence Group.
Nine Months Ended August 31, 2004 Compared to Nine Months Ended August 31,2003
Revenue for the nine months ended August 31, 2004 increased approximately
$643,000 or 6.3% over the nine months ended August 31, 2003. This increase
consists of (i) approximately $2.9 million of additional revenue related to
expansion of existing contracts and the addition of new contracts entered into
since August 31, 2003 and (ii) recognition of approximately $163,000 related to
recognition of revenue previously deferred . This increase was offset by a
reduction in revenue of approximately $1.7 million representing (i)
approximately $1.3 million related to market exits and reductions in membership
under existing disease management programs, the termination of disease
management programs under agreements with the Regence Group and the
renegotiation of a contract with a customer in Oregon and (ii) a reduction of
approximately $353,000 related an increase in management's deferred revenue
estimate related to its settlement with the Regence Group. Further, we completed
the preliminary reconciliation process for one of our smaller health plans that
has indicated reductions in utilization as well as gross savings. However, the
unanticipated reduction in plan membership in this contract created a barrier to
achieving the contractually defined fixed dollar savings. Accordingly, the
Company increased its reserve estimate by approximately $750,000 on this
contract.
17
Gross profit margins for the nine months ended August 31, 2004 decreased to
34.5% from 51.1% for the nine months ended August 31, 2003. This decrease was
primarily due to (i) a reduction of revenue of approximately $353,000 related to
an increase in management's deferred revenue estimate related to its settlement
with the Regence Group, (ii) an increase in reserve estimates of approximately
$750,000 related to the unanticipated reduction in plan membership in the
contract with one of our smaller health plans as described above and (iii)
implementation costs associated with our expansion into new market places
related to new contracts, including costs associated with one contract totaling
approximately $800,000. Salaries, travel and other direct costs are all factors
in the initial implementation related to any new markets and contracts. The
direct costs will decrease as a percentage of revenue once a marketplace and
contract matures with a significant number of members being enrolled.
Selling, general and administrative expenses for the nine months ended August
31, 2004 increased approximately $507,000 or 9.9% compared to the nine months
ended August 31, 2003. The increase was primarily due to an increase in both
executive and administrative staff, costs associated with negotiating and
closing new disease management services contracts and costs associated with
compliance with the provisions under the Sarbanes-Oxley Act.
Research and development expenses for the nine months ended August 31, increased
approximately $25,000 or 3.7% compared to the nine months ended August 31, 2003.
We continue to focus our efforts on the development of new, advanced software
programs to assist in the identification and evaluation of patients who are at
risk for developing various disease conditions. These programs incorporate state
of the art telecommunications, data management, and security and information
technology. Certain costs associated with the development of new product
software to be incorporated into our disease management programs are capitalized
and amortized over a 5-year useful life. We intend to continue to improve and
expand the capabilities of the ohms|cvd system.
Loss on operations of joint venture for the nine months ended August 31, 2004
primarily represents legal fees associated with the arbitration with the Regence
Group and startup cost related to a joint venture entered into with two partners
to provide services under a disease management contract in Minnesota. Loss on
operations of joint venture for the nine months ended August 31, 2003 primarily
represents legal fees associated the arbitration with the Regence Group.
Liquidity and Capital Resources
- -------------------------------
To date, our principal sources of working capital have been the proceeds from
public and private placements of securities. Since our inception, sales of
securities, including the proceeds from the exercise of outstanding options and
warrants, have generated approximately $31,000,000 less applicable expenses.
At August 31, 2004, we had working capital of approximately $2,575,000 compared
to working capital at November 30, 2003 of approximately $5,355,000 (net of an
approximate $797,000 reserve related to the settlement with the Regence Group)
and ratios of current assets to current liabilities of 1.7:1 as of August 31,
2004, and 1.9:1 as of November 30, 2003. The working capital decrease of
approximately $2,780,000 was due to a net loss (adjusted for depreciation &
amortization) of approximately $2,524,000 and capital expenditures of
approximately $589,000 offset by the proceeds from the sale of common stock
through the exercise of outstanding options and warrants of approximately
$421,000. In September 2001 we entered into a $1,000,000 line of credit
agreement with Wachovia Bank, National Associated. Outstanding balances under
the loan bear interest at an annual rate equal to the lower of the bank's
reference rate minus 1% or LIBOR plus 1.5%. As of August 31, 2004 no debt was
outstanding and the entire $1,000,000 was available under this credit line.
18
We anticipate that funds generated from operations, together with cash and
investments, and availability under our credit line will be sufficient to fund
our current level of growth and our existing commitments. However, to the extent
the expansion of our operations requires significant additional resources or
certain forms of financial guarantees to assure our performance under the terms
of new health plan contracts, we may be required to seek additional financing.
No assurance can be given that such financing would be available on terms that
would be acceptable to us.
Material Commitments
- --------------------
The following schedule summarizes our contractual cost obligation as of August
31, 2004 in the periods indicated.
Contractual Payments Due by Period
Obligations
----------------------------------- ------------------------------------------------------------------------------------
Total Less than 1 year 1-3 years 4-5 years After 5 years
---------------- ------------------- --------------- ---------------- --------------
Long-Term Debt $ - $ - $ - $ - $ -
Capital Lease Obligations 315,000 143,000 172,000 - -
Operating Leases 1,334,000 492,000 837,000 5,000 -
Unconditional Obligations 2,182,000 2,182,000 - - -
Other Long-Term Obligations 701,000 570,000 131,000 - -
Total Contractual Cash Obligations $4,532,000 $3,387,000 $1,140,000 $ 5,000 $ -
----------------------------------- ---------------- ------------------- --------------- ---------------- --------------
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk for changes in interest rates relates primarily to
the increase or decrease in the amount of interest income we can earn on our
available funds for investment. We ensure the safety and preservation of our
invested principal funds by limiting default risk, market risk and reinvestment
risk. We mitigate default risk by investing in short term high-credit quality
securities.
Item 4. Controls and Procedures
Under the supervision and with the participation of our management, including
Chief Executive Officer and Chief Financial Officer, we have evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14(c) as of the end of the period
covered by this report. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer have concluded that these disclosure controls and
procedures are effective. There were no changes in our internal control over
financial reporting during the quarter ended August 31, 2004 that have
materially affected, or are reasonably likely to materially affect, our internal
controls over financial reporting.
19
Part II. Other Information
Item 1. Legal Proceedings
HeartMasters LLC, a limited liability company 50% owned by our IHMC
subsidiary, received a Demand for Arbitration before the American
Arbitration Association of approximately $17,000,000 plus interest, of
which approximately $8,500,000 related to IHMC, for claims under
certain terminated disease management agreements. The claims allege
breach of disease management agreements between Regence of Washington
and Oregon and HeartMasters LLC. HeartMasters LLC received a notice
from a reinsurer, Centre, denying coverage for the Regence of Oregon
HMO first year coverage period asserting that an outside actuarial
report concerning Regence's claims history and other information, which
were considered by the reinsurer prior to issuance of coverage,
contained "grossly incorrect data." HeartMasters has demanded payment
of the insurance coverage. The dispute with Centre over the insurance
coverage is now the subject of an arbitration proceeding. On June 15,
2004, the Company entered into an agreement to settle its dispute with
The Regence Group, including all issues surrounding HeartMasters LLC's
arbitration. The settlement agreement provides QMed, Inc. and IHMC with
releases from any and all claims related to Regence and the Regence
contract in exchange for a financial guarantee of certain payments due
from HeartMasters LLC to Regence. The amount of the financial guarantee
can range between $-0- and $2,300,000 and is contingent upon the
outcome of a separate arbitration being pursed by Regence and
HeartMasters LLC against the reinsurer, Centre Insurance. Based upon
management's estimates, the Company has increased its reserve estimate
to $1,150,001, which has resulted in a reduction in current revenue of
approximately $353,000. The Company has made an advance payment on this
guarantee of $1,150,001on June 15, 2004. The advance payment could be
subject to refund based upon certain recovery targets under the Centre
Insurance arbitration, if successful.
The Company is subject to claims and legal proceedings covering a wide
range of matters that arise in the ordinary course of business.
Although management of the Company cannot predict the ultimate outcome
of these legal proceedings with certainty, it believes that their
ultimate resolution, including any additional amounts we may be
required to pay will not have a material effect on the financial
statements.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
(a) None
(b) There have been no material changes to the procedures by which
security holders may recommend nominees to the Company's Board
of Directors.
Item 6. Exhibits
(a) The following exhibits are filed as part of this report:
31.1 Certification of Chief Executive Officer of Periodic
Report pursuant to Rule 13a-14a and Rule 15d-14(a).
31.2 Certification of Chief Financial Officer of Periodic
Report pursuant to Rule 13a-14a and Rule 15d-14(a).
32.1 Certification of Chief Executive Officer and Chief
Financial Officer pursuant to 18 U.S.C. - Section
1350.
20
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.
QMed, Inc.
By: /s/ Michael W. Cox
-------------------------------------
Michael W. Cox
President and Chief Executive Officer
By: /s/ William T. Schmitt, Jr.
-------------------------------------
William T. Schmitt, Jr.
Senior Vice President, Chief Financial
Officer and Treasurer
October 14, 2004
21