SECURITIES AND EXCHANGE COMMISSION
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 September 30, 2003 | ||
| OR | ||
| o |
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 0-22677
CHROMAVISION MEDICAL SYSTEMS, INC.
| DELAWARE | 75-2649072 | |
| (State or other jurisdiction of incorporation or | (IRS Employer Identification Number) | |
| organization) | ||
| 33171 PASEO CERVEZA | ||
| SAN JUAN CAPISTRANO, CA | 92675 | |
| (Address of principal executive offices) | (Zip code) |
(949) 443-3355
(Registrant’s telephone number, including area code)
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 o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
As of October 29, 2003 there were 38,377,443 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 September 30, 2003 and December 31, 2002 | 3 | |||||||
| Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2003 and 2002 | 4 | |||||||
| Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2003 and 2002 | 5 | |||||||
Notes to Condensed Consolidated Financial Statements |
6 | |||||||
| Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 11 | ||||||
| Item 3 | Quantitative and Qualitative Disclosures About Market Risk | 16 | ||||||
| Item 4 | Controls and Procedures | 16 | ||||||
| PART II | OTHER INFORMATION | |||||||
| Item 6 | Exhibits and Reports on Form 8-K | 17 | ||||||
| SIGNATURES | 18 | |||||||
PART I – Item 1
CHROMAVISION MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(Unaudited)
| September 30, | December 31, | |||||||||||
| 2003 | 2002 | |||||||||||
Assets |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 2,697 | $ | 2,810 | ||||||||
Accounts receivable, net |
2,610 | 2,355 | ||||||||||
Other |
215 | 162 | ||||||||||
Total current assets |
5,522 | 5,327 | ||||||||||
Property and equipment, net |
5,605 | 4,761 | ||||||||||
Other |
1,037 | 765 | ||||||||||
Total assets |
$ | 12,164 | $ | 10,853 | ||||||||
Liabilities and Stockholders’ Equity |
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable |
$ | 390 | $ | 751 | ||||||||
Accrued payroll |
732 | 863 | ||||||||||
Accrued liabilities |
1,094 | 1,079 | ||||||||||
Current maturities of long-term debt |
1,264 | — | ||||||||||
Total current liabilities |
3,480 | 2,693 | ||||||||||
Long-term debt |
1,986 | — | ||||||||||
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 38,377,443 shares in 2003 and 32,846,085 in 2002 | 384 | 328 | ||||||||||
Additional paid-in capital |
91,921 | 85,915 | ||||||||||
Accumulated deficit |
(84,545 | ) | (78,017 | ) | ||||||||
Unamoritized deferred compensation |
(957 | ) | — | |||||||||
Accumulated other comprehensive loss |
(105 | ) | (66 | ) | ||||||||
Total stockholders’ equity |
6,698 | 8,160 | ||||||||||
Total liabilities and stockholders’ equity |
$ | 12,164 | $ | 10,853 | ||||||||
See accompanying notes to condensed consolidated financial statements.
-3-
CHROMAVISION MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except share and per share amounts)
(Unaudited)
| Three Months Ended | Nine months Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||
Revenue: |
||||||||||||||||||
Fee per use |
$ | 2,827 | $ | 2,345 | $ | 8,130 | $ | 6,210 | ||||||||||
System sales |
252 | 264 | 656 | 383 | ||||||||||||||
Total revenue |
3,079 | 2,609 | 8,786 | 6,593 | ||||||||||||||
Cost of revenue |
970 | 757 | 2,687 | 2,024 | ||||||||||||||
Gross profit |
2,109 | 1,852 | 6,099 | 4,569 | ||||||||||||||
Operating expenses: |
||||||||||||||||||
Selling, general and administrative |
3,115 | 2,606 | 8,981 | 8,042 | ||||||||||||||
Research and development |
1,171 | 1,252 | 3,636 | 3,822 | ||||||||||||||
Total operating expenses |
4,286 | 3,858 | 12,617 | 11,864 | ||||||||||||||
Loss from operations |
(2,177 | ) | (2,006 | ) | (6,518 | ) | (7,295 | ) | ||||||||||
Total other income (expense) |
(15 | ) | 25 | (10 | ) | 61 | ||||||||||||
Loss before income taxes |
(2,192 | ) | (1,981 | ) | (6,528 | ) | (7,234 | ) | ||||||||||
Income taxes |
— | — | — | — | ||||||||||||||
Net loss |
(2,192 | ) | (1,981 | ) | (6,528 | ) | (7,234 | ) | ||||||||||
Accretion of and dividends on
redeemable, convertible preferred stock |
— | (2,998 | ) | — | (4,368 | ) | ||||||||||||
Net loss attributable to common stock |
$ | (2,192 | ) | $ | (4,979 | ) | $ | (6,528 | ) | $ | (11,602 | ) | ||||||
Basic and diluted net loss per common share |
$ | (.06 | ) | $ | (.18 | ) | $ | (.18 | ) | $ | (.45 | ) | ||||||
Weighted average number of common shares outstanding |
37,820,840 | 28,044,761 | 37,094,625 | 25,625,538 | ||||||||||||||
See accompanying notes to condensed consolidated financial statements.
-4-
CHROMAVISION MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands, except share and per share amounts)
(Unaudited)
| Nine months Ended | ||||||||||
| September 30, | ||||||||||
| 2003 | 2002 | |||||||||
Cash flows from operating activities: |
||||||||||
Net loss |
$ | (6,528 | ) | $ | (7,234 | ) | ||||
Adjustments to reconcile net loss to net cash used in
operating activities: |
||||||||||
Depreciation and amortization |
2,020 | 1,979 | ||||||||
Non-cash compensation charges |
136 | — | ||||||||
Changes in operating assets and liabilities: |
||||||||||
Accounts receivable, net |
(255 | ) | (432 | ) | ||||||
Other assets |
(325 | ) | (294 | ) | ||||||
Accounts payable |
(361 | ) | (162 | ) | ||||||
Accrued payroll |
(131 | ) | 92 | |||||||
Investment banking fee payable |
— | (1,000 | ) | |||||||
Accrued liabilities |
15 | (329 | ) | |||||||
Net cash used in operating activities |
(5,429 | ) | (7,380 | ) | ||||||
Cash flows from investing activities: |
||||||||||
Additions to property and equipment |
(2,845 | ) | (1,415 | ) | ||||||
Other |
(19 | ) | (53 | ) | ||||||
Net cash used in investing activities |
(2,864 | ) | (1,468 | ) | ||||||
Cash flows from financing activities: |
||||||||||
Proceeds from exercise of stock options and issuance of
stock under employee stock purchase plan |
— | 101 | ||||||||
Issuance of common stock |
5,000 | 7,000 | ||||||||
Borrowings on revolving credit facility |
250 | — | ||||||||
Borrowings on long-term debt |
3,000 | — | ||||||||
Offering costs |
(31 | ) | (881 | ) | ||||||
Net cash provided by financing activities |
8,219 | 6,220 | ||||||||
Effect of exchange rate changes on cash and cash equivalents |
(39 | ) | 9 | |||||||
Net decrease in cash and cash equivalents |
(113 | ) | (2,619 | ) | ||||||
Cash and cash equivalents beginning of period |
2,810 | 7,401 | ||||||||
Cash and cash equivalents end of period |
$ | 2,697 | $ | 4,782 | ||||||
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 |
$ | — | $ | 591 | ||||||
Accretion of preferred stock dividend |
$ | — | $ | 307 | ||||||
Accretion of preferred stock |
$ | — | $ | 4,060 | ||||||
Issuance of restricted common stock |
$ | 1,087 | $ | — | ||||||
See accompanying notes to condensed consolidated financial statements.
-5-
CHROMAVISION MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
(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 2002 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, except as indicated in Note 3 to the Notes to the Condensed Consolidated Financial Statements, 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 |
Basic and diluted loss per common share is calculated by dividing net loss by the weighted average common shares outstanding during the year. Stock options and warrants to purchase 4,407,162, and 4,423,575 shares of common stock with a weighted average option price of $3.85 and $4.66 were outstanding at September 30, 2003 and 2002, respectively. These stock options and warrants outstanding were not included in the computation of diluted earnings per share because the Company incurred a loss in all periods presented, and hence the impact would be anti-dilutive.
| (3) | RECLASSIFICATION |
The Company has reclassified prior year customer service costs into cost of revenue to conform to the current year presentation. The effect of the reclassification has no impact upon net income and no impact upon earnings per share.
| (4) | 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 each quarter-end. Income statement accounts are translated at the average rate of exchange prevailing during the period.
| (5) | COMPREHENSIVE LOSS |
The total comprehensive loss is summarized as follows:
| Three Months Ended | Nine months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||
Net loss |
$ | (2,192 | ) | $ | (1,981 | ) | $ | (6,528 | ) | $ | (7,234 | ) | ||||
Foreign currency
translation
adjustment |
67 | (2 | ) | (39 | ) | 9 | ||||||||||
Comprehensive loss |
$ | (2,125 | ) | $ | (1,983 | ) | $ | (6,567 | ) | $ | (7,225 | ) | ||||
-6-
| (6) | BUSINESS SEGMENTS |
The Company operates primarily in one business segment engaged in the development, manufacture and marketing of an automated cellular imaging system which is designed to assist physicians in making critical medical decisions.
This table presents business segment information by geographic area:
| Three Months Ended | Nine months Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||
Net sales |
||||||||||||||||||
United States |
$ | 3,074 | $ | 2,498 | $ | 8,760 | $ | 6,336 | ||||||||||
Europe(a) |
5 | 111 | 26 | 257 | ||||||||||||||
Total net sales |
$ | 3,079 | $ | 2,609 | $ | 8,786 | $ | 6,593 | ||||||||||
Operating loss |
||||||||||||||||||
United States |
$ | (2,026 | ) | $ | (1,877 | ) | $ | (6,113 | ) | $ | (6,980 | ) | ||||||
Europe(a) |
(151 | ) | (129 | ) | (405 | ) | (315 | ) | ||||||||||
Total operating loss |
$ | (2,177 | ) | $ | (2,006 | ) | $ | (6,518 | ) | $ | (7,295 | ) | ||||||
| Identifiable assets | September 30, | December 31, | ||||||||||||||||
| 2003 | 2002 | |||||||||||||||||
United States |
$ | 12,093 | $ | 10,689 | ||||||||||||||
Europe(a) |
71 | 164 | ||||||||||||||||
Total assets |
$ | 12,164 | $ | 10,853 | ||||||||||||||