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 June 30, 2002 | ||
| 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 0-1000
CHROMAVISION MEDICAL SYSTEMS, INC.
| DELAWARE | 75-2649072 | |
|
|
||
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification Number) |
|
33171 PASEO CERVEZA SAN JUAN CAPISTRANO, CA |
92675 |
|
(Address of principal executive offices) |
(Zip code) |
(949) 443-3355
NOT APPLICABLE
(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, and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of August 7, 2002 there were 25,323,199 shares outstanding of the Issuer’s Common Stock, $.01 par value.
CHROMAVISION MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
Table of Contents
| Page | ||||||||
| PART I |
FINANCIAL INFORMATION |
|||||||
| Item 1 |
Financial Statements (Unaudited) |
|||||||
Condensed Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001 |
3 | |||||||
Condensed Consolidated Statements of Operations for the three and six months ended
June 30, 2002 and 2001 |
4 | |||||||
Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 2002 and 2001 |
5 | |||||||
Notes to Condensed Consolidated Financial Statements |
6 | |||||||
| Item 2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
10 | ||||||
| Item 3 |
Quantitative and Qualitative Disclosure about Market Risk |
13 | ||||||
| PART II |
OTHER INFORMATION |
|||||||
| Item 2 |
Changes in Securities and Use of Proceeds |
14 | ||||||
| Item 4 |
Submission of Matters to a Vote of Security Holders |
14 | ||||||
| Item 6 |
Exhibits and Reports on Form 8-K |
15 | ||||||
| SIGNATURES | 16 | |||||||
-2-
PART I — Item 1
CHROMAVISION MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
Assets
| June 30, | December 31, | ||||||||
| 2002 | 2001 | ||||||||
Current assets: |
|||||||||
Cash and cash equivalents |
$ | 6,418,440 | $ | 7,401,078 | |||||
Accounts receivable, net |
1,970,571 | 1,738,497 | |||||||
Other |
254,764 | 157,071 | |||||||
Total current assets |
8,643,775 | 9,296,646 | |||||||
Property and equipment, net |
4,919,788 | 5,251,149 | |||||||
Other |
733,294 | 517,426 | |||||||
Total assets |
$ | 14,296,857 | $ | 15,065,221 | |||||
Liabilities and Stockholders’ Equity |
|||||||||
Current liabilities: |
|||||||||
Accounts payable |
$ | 325,949 | $ | 832,439 | |||||
Accrued payroll |
950,831 | 759,012 | |||||||
Accrued liabilities |
696,042 | 1,349,495 | |||||||
Investment banking fee payable |
— | 1,000,000 | |||||||
Total current liabilities |
1,972,822 | 3,940,946 | |||||||
Series D redeemable convertible preferred stock,
$1,000 par value, 12,500 shares, authorized,
outstanding 11,230 shares in 2002 and 12,500
shares in 2001 |
8,359,429 | 8,567,371 | |||||||
Commitments and contingencies |
|||||||||
Stockholders’ equity: |
|||||||||
Series C convertible preferred stock, $.01 par
value, authorized 200,000 shares, none issued
and outstanding |
— | — | |||||||
Common stock $.01 par value, authorized
50,000,000 shares, issued and outstanding
25,323,099 shares in 2002 and 20,188,425
shares in 2001 |
253,231 | 201,884 | |||||||
Additional paid-in capital |
74,599,717 | 66,631,637 | |||||||
Accumulated deficit |
(70,811,489 | ) | (64,188,809 | ) | |||||
Accumulated other comprehensive loss |
(76,853 | ) | (87,808 | ) | |||||
Total stockholders’ equity |
3,964,606 | 2,556,904 | |||||||
Total liabilities and stockholders’ equity |
$ | 14,296,857 | $ | 15,065,221 | |||||
See accompanying notes to condensed consolidated financial statements.
-3-
CHROMAVISION MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended | Six Months Ended | ||||||||||||||||||
| June 30, | June 30, | ||||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||||
Revenue: |
|||||||||||||||||||
Fee per use |
$ | 2,147,979 | $ | 691,287 | $ | 3,865,048 | $ | 1,162,831 | |||||||||||
System sales |
45,853 | 258,136 | 119,353 | 735,136 | |||||||||||||||
Total revenue |
2,193,832 | 949,423 | 3,984,401 | 1,897,967 | |||||||||||||||
Cost of revenue |
392,286 | 195,080 | 784,171 | 400,808 | |||||||||||||||
Gross profit |
1,801,546 | 754,343 | 3,200,230 | 1,497,159 | |||||||||||||||
Operating expenses: |
|||||||||||||||||||
Selling, general and administrative |
2,819,528 | 2,724,977 | 5,435,641 | 5,304,441 | |||||||||||||||
Research and development |
1,524,957 | 1,780,645 | 3,054,210 | 3,697,984 | |||||||||||||||
Total operating expenses |
4,344,485 | 4,505,622 | 8,489,851 | 9,002,425 | |||||||||||||||
Loss from operations |
(2,542,939 | ) | (3,751,279 | ) | (5,289,621 | ) | (7,505,266 | ) | |||||||||||
Other income |
13,989 | 51,331 | 36,289 | 166,512 | |||||||||||||||
Loss before income taxes |
(2,528,950 | ) | (3,699,948 | ) | (5,253,332 | ) | (7,338,754 | ) | |||||||||||
Income taxes |
— | — | — | — | |||||||||||||||
Net loss |
(2,528,950 | ) | (3,699,948 | ) | (5,253,332 | ) | (7,338,754 | ) | |||||||||||
Accretion of and dividends on redeemable,
convertible preferred stock |
(842,800 | ) | — | (1,369,348 | ) | — | |||||||||||||
Net loss attributable to common stock |
$ | (3,371,750 | ) | $ | (3,699,948 | ) | $ | (6,622,680 | ) | $ | (7,338,754 | ) | |||||||
Basic and diluted net loss per common share |
$ | (.16 | ) | $ | (.18 | ) | $ | (.29 | ) | $ | (.36 | ) | |||||||
Weighted average number of common shares
outstanding |
21,166,647 | 20,145,169 | 23,043,709 | 20,124,923 | |||||||||||||||
See accompanying notes to condensed consolidated financial statements.
-4-
CHROMAVISION MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Six Months Ended | ||||||||||
| June 30, | ||||||||||
| 2002 | 2001 | |||||||||
Cash flows from operating activities: |
||||||||||
Net loss |
$ | (5,253,332 | ) | $ | (7,338,754 | ) | ||||
Adjustments to reconcile net loss to net cash used in
operating activities: |
||||||||||
Depreciation and amortization |
1,335,483 | 977,922 | ||||||||
Changes in operating assets and liabilities: |
||||||||||
Accounts receivable, net |
(221,974 | ) | (337,374 | ) | ||||||
Other assets |
(305,629 | ) | (278,631 | ) | ||||||
Accounts payable |
(507,338 | ) | 267,120 | |||||||
Accrued payroll |
189,729 | 103,593 | ||||||||
Investment
banking fee payable |
(1,000,000 | ) | — | |||||||
Accrued liabilities |
(347,536 | ) | 151,929 | |||||||
Net cash used in operating activities |
(6,110,597 | ) | (6,454,195 | ) | ||||||
Cash flows from investing activities: |
||||||||||
Additions to property and equipment |
(1,004,123 | ) | (1,060,813 | ) | ||||||
Net cash used in investing activities |
(1,004,123 | ) | (1,060,813 | ) | ||||||
Cash flows from financing activities: |
||||||||||
Proceeds from exercise of stock options and issuance of
stock under employee stock purchase plan |
82,837 | 441,019 | ||||||||
Sale of common stock |
6,425,021 | — | ||||||||
Offering costs |
(377,685 | ) | (8,930 | ) | ||||||
Net cash provided by financing activities |
6,130,173 | 432,089 | ||||||||
Effect of exchange rate changes on cash and cash
equivalents |
1,909 | 7,384 | ||||||||
Net increase (decrease) in cash and cash equivalents |
(982,638 | ) | (7,075,535 | ) | ||||||
Cash and cash equivalents beginning of period |
7,401,078 | 9,797,698 | ||||||||
Cash and cash equivalents end of period |
$ | 6,418,440 | $ | 2,722,163 | ||||||
Supplemental disclosure of cash flow information: |
||||||||||
Non-cash investing and financing activities: |
||||||||||
Issuance of common stock in lieu of cash for preferred
stock dividend payable |
$ | 590,680 | $ | — | ||||||
Accretion of preferred stock dividend |
$ | 307,290 | $ | — | ||||||
Accretion of preferred stock |
$ | 1,062,058 | $ | — | ||||||
See accompanying notes to condensed consolidated financial statements.
-5-
CHROMAVISION MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) BASIS OF PRESENTATION
These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2001 annual report filed on Form 10-K with the Securities and Exchange Commission.
The accompanying unaudited condensed consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position and the results of operations for the interim periods presented. All such adjustments are of a normal, recurring nature. Certain amounts have been reclassified to conform to the current period presentation. The results of our operations for any interim period are not necessarily indicative of the results to be obtained for a full fiscal year.
(2) NET LOSS PER SHARE
Options to purchase 3,451,382 and 3,097,425 shares of common stock with a weighted average option price of $5.83 and $6.21 were outstanding at June 30, 2002 and 2001, respectively, and were excluded from the computation of diluted net loss per share as the effect would be antidilutive. For the six month period ended June 30, 2002, dilutive potential common shares of approximately 2,955,745 issuable upon conversion of convertible preferred stock and 546,615 shares issuable upon exercise of related warrants have also been excluded from the computation of diluted loss per share as their effect is antidilutive. See Note 7 to the Notes to Condensed Consolidated Financial Statements regarding the agreement with Safeguard Delaware, Inc. pursuant to which, at June 30, 2002, Safeguard had invested $6,425,021 in exchange for 4,053,641 shares of our Common Stock, had agreed to invest and additional $574,979 in exchange for our Common Stock and had acquired 10,370 of the 12,500 outstanding shares of our Series D Cumulative Convertible Preferred Stock (the “Series D Preferred Stock).
(3) CURRENCY TRANSLATION
The financial position and results of operations of our foreign subsidiaries are generally determined using the local currency as the functional currency. Assets and liabilities of these subsidiaries are translated at the exchange rate in effect at the balance sheet date. Income statement accounts are translated at the average rate of exchange prevailing during the period.
(4) COMPREHENSIVE LOSS
Our total comprehensive loss is summarized as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||
Net loss |
$ | (2,528,950 | ) | $ | (3,699,948 | ) | $ | (5,253,332 | ) | $ | (7,338,754 | ) | ||||
Foreign currency
translation adjustment |
10,080 | (2,420 | ) | 10,955 | 15,529 | |||||||||||
Comprehensive loss |
$ | (2,518,870 | ) | $ | (3,702,368 | ) | $ | (5,242,377 | ) | $ | (7,323,225 | ) | ||||
(5) BUSINESS SEGMENTS
We operate in one business segment engaged in the development, manufacture and marketing of an automated cellular imaging system (ACIS®) designed to substantially improve the accuracy, sensitivity, and reproducibility of cell imaging and analysis.
The following table represents our business segment information by geographic area:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||
Net sales |
||||||||||||||||
United States |
$ | 2,139,516 | $ | 837,295 | $ | 3,837,995 | $ | 1,756,558 | ||||||||
Europe(a) |
54,316 | 112,128 | 146,406 | 141,409 | ||||||||||||
-6-
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||
Total net sales |
2,193,832 | $ | 949,423 | 3,984,401 | $ | 1,897,967 | ||||||||||
Operating loss |
||||||||||||||||
United States |
$ | (2,421,608 | ) | $ | (3,693,957 | ) | $ | (5,103,071 | ) | $ | (7,269,989 | ) | ||||
Europe(a) |
(121,331 | ) | (57,322 | ) | (186,550 | ) | (235,277 | ) | ||||||||
Total operating loss |
$ | (2,542,939 | ) | $ | (3,751,279 | ) | $ | (5,289,621 | ) | $ | (7,505,266 | ) | ||||
| Identifiable assets | June 30, 2002 | December 31, 2001 | ||||||||||||||
United States |
14,046,072 | 14,814,642 | ||||||||||||||
Europe(a) |
250,785 | 250,579 | ||||||||||||||
Total assets |
14,296,857 | 15,065,221 | ||||||||||||||