U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) |
| OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended June 30, 2002 |
OR
| o TRANSITION REPORT UNDER SECTION 13 OR 15(d) |
| OF THE SECURITIES EXCHANGE ACT OF 1934 |
| Commission file number 0–11303 |
SYNBIOTICS
CORPORATION
(Exact name of registrant as specified in its charter)
| California |
|
95–3737816 |
| 11011 Via Frontera |
|
92127 |
Registrant’s telephone number, including area code: (858) 451-3771
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 o
As of August 13, 2002, 17,865,279 shares of common stock were outstanding.
INDEX
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| Part I |
Item 1. |
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Condensed Consolidated Balance Sheet - June 30, 2002 and December 31, 2001 |
1 |
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2 | |
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Condensed Consolidated Statement of Cash Flows - Six months ended June 30, 2002 and 2001 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
10 |
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Item 3. |
17 | |
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| Part II |
Item 1. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Synbiotics Corporation
Condensed Consolidated Balance Sheet
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June 30, |
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December 31, |
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(unaudited) |
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(audited) |
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| Assets |
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| Current assets: |
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| Cash and equivalents |
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$ |
1,733,000 |
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$ |
1,039,000 |
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| Accounts receivable |
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3,118,000 |
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2,983,000 |
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| Inventories |
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6,044,000 |
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5,059,000 |
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| Other current assets |
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806,000 |
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796,000 |
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11,701,000 |
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9,877,000 |
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| Property and equipment, net |
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1,504,000 |
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1,648,000 |
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| Goodwill |
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4,275,000 |
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12,074,000 |
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| Intangibles, net |
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2,829,000 |
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2,744,000 |
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| Deferred debt issuance costs |
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7,000 |
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| Other assets |
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144,000 |
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152,000 |
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$ |
20,453,000 |
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$ |
26,502,000 |
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| Liabilities and Shareholders Equity: |
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| Current Liabilities: |
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| Accounts payable and accrued expenses |
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$ |
5,455,000 |
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$ |
5,915,000 |
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| Current portion of long-term debt |
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1,325,000 |
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1,200,000 |
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| Deferred revenue |
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150,000 |
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300,000 |
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6,930,000 |
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7,415,000 |
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| Long-term debt |
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5,307,000 |
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6,032,000 |
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| Other liabilities |
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1,882,000 |
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1,804,000 |
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7,189,000 |
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7,836,000 |
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| Mandatorily redeemable stock |
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2,604,000 |
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3,107,000 |
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| Non-mandatorily redeemable common stock and other shareholders’ equity: |
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Common stock, no par value, 24,800,000 shares authorized, 17,865,000 and 8,990,000 shares issued and outstanding at June 30, 2002 and December 31, 2001 |
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46,035,000 |
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40,286,000 |
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| Common stock warrants |
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1,035,000 |
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1,035,000 |
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| Accumulated other comprehensive loss |
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(1,104,000 |
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(1,411,000 |
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| Accumulated deficit |
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(42,236,000 |
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(31,766,000 |
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| Total non-mandatorily redeemable common stock and other shareholders’ equity |
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3,730,000 |
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8,144,000 |
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$ |
20,453,000 |
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$ |
26,502,000 |
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See accompanying notes to condensed consolidated financial statements.
-1-
Item 1. Financial Statements (continued)
Synbiotics Corporation
Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) (unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2002 |
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2001 |
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2002 |
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2001 |
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| Revenues: |
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| Net sales |
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$ |
6,118,000 |
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$ |
7,195,000 |
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$ |
12,814,000 |
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$ |
15,157,000 |
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| License fees |
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75,000 |
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908,000 |
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150,000 |
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969,000 |
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| Royalties |
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2,000 |
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2,000 |
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5,000 |
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4,000 |
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6,195,000 |
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8,105,000 |
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12,969,000 |
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16,130,000 |
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| Operating expenses: |
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| Cost of sales |
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2,859,000 |
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3,252,000 |
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5,711,000 |
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6,460,000 |
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| Research and development |
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382,000 |
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399,000 |
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792,000 |
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905,000 |
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| Selling and marketing |
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1,292,000 |
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1,492,000 |
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2,768,000 |
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3,056,000 |
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| General and administrative |
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1,103,000 |
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1,596,000 |
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5,889,000 |
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3,192,000 |
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5,636,000 |
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6,739,000 |
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15,160,000 |
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13,613,000 |
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| Income (loss) from operations |
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559,000 |
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1,366,000 |
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(2,191,000 |
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2,517,000 |
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| Other income (expense): |
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| Interest, net |
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(191,000 |
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(232,000 |
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(358,000 |
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(526,000 |
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| Income (loss) before income taxes |
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368,000 |
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1,134,000 |
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(2,549,000 |
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1,991,000 |
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| Provision for income taxes |
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86,000 |
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23,000 |
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272,000 |
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51,000 |
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| Income (loss) before cumulative effect of a change in accounting principle |
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282,000 |
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1,111,000 |
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(2,821,000 |
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1,940,000 |
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| Cumulative effect of a change in accounting principle, net of tax |
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(7,649,000 |
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| Net income (loss) |
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282,000 |
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1,111,000 |
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(10,470,000 |
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1,940,000 |
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| Translation adjustment |
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452,000 |
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(86,000 |
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307,000 |
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(571,000 |
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| Comprehensive income (loss) |
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$ |
734,000 |
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$ |
1,025,000 |
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$ |
(10,163,000 |
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$ |
1,369,000 |
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| Basic and diluted income (loss) per share: |
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| Income (loss) from continuing operations |
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$ |
0.02 |
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$ |
0.11 |
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$ |
(0.24 |
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$ |
0.19 |
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Cumulative effect of a change in accounting principle, net of tax |
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(0.62 |
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| Net income (loss) |
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$ |
0.02 |
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$ |
0.11 |
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$ |
(0.86 |
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$ |
0.19 |
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See accompanying notes to condensed consolidated financial statements.
-2-
Item 1. Financial Statements (continued)
Synbiotics Corporation
Condensed Consolidated Statement of Cash Flows (unaudited)
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Six Months Ended June 30, |
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2002 |
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2001 |
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| Cash flows from operating activities: |
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| Net (loss) income |
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$ |
(10,470,000 |
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$ |
1,940,000 |
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Adjustments to reconcile net (loss) income to net cash (used for) provided by operating activities: |
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| Depreciation and amortization |
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558,000 |
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1,149,000 |
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| Retention bonus payable in common stock |
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2,641,000 |
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| Cumulative effect of a change in accounting principle |
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7,817,000 |
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| Changes in assets and liabilities (net of acquisitions and dispositions): |
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| Accounts receivable |
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37,000 |
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(401,000 |
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| Inventories |
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(827,000 |
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46,000 |
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| Deferred taxes |
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(8,000 |
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| Other assets |
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(201,000 |
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(120,000 |
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| Accounts payable and accrued expenses |
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(773,000 |
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(244,000 |
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| Deferred revenue |
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(150,000 |
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(969,000 |
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| Other liabilities |
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74,000 |
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(332,000 |
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| Net cash (used for) provided by operating activities |
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(1,294,000 |
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1,061,000 |
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| Cash flows from investing activities: |
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| Acquisition of property and equipment |
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(61,000 |
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(97,000 |
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| Proceeds from sale of investment in W3 held for sale |
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9,000 |
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| Net cash used for investing activities |
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(61,000 |
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(88,000 |
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| Cash flows from financing activities: |
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| Payments of long-term debt |
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(600,000 |
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(600,000 |
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| Proceeds from issuance of mandatorily redeemable preferred stock, net |
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2,603,000 |
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| Net cash provided by (used for) financing activities |
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2,003,000 |
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(600,000 |
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| Net increase in cash and equivalents |
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648,000 |
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373,000 |
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| Effect of exchange rates on cash |
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46,000 |
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(49,000 |
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| Cash and equivalents – beginning of period |
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1,039,000 |
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951,000 |
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| Cash and equivalents – end of period |
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$ |
1,733,000 |
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$ |
1,275,000 |
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See accompanying notes to condensed consolidated financial statements.
-3-
Item 1. Financial Statements (continued)
SYNBIOTICS CORPORATIONNote 1 – Interim Financial Statements:
The accompanying condensed consolidated balance sheet as of June 30, 2002 and the condensed consolidated statements of operations and comprehensive income (loss) and of cash flows for the three and six months ended June 30, 2002 and 2001 have been prepared by Synbiotics Corporation (the “Company”) and have not been audited. The condensed consolidated financial statements of the Company include the accounts of its wholly-owned subsidiary Synbiotics Europe SAS (“SBIO-E”). All significant intercompany transactions and accounts have been eliminated in consolidation. These financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the financial position, results of operations and cash flows for all periods presented. The financial statements should be read in conjunction w