WOMEN FIRST HEALTHCARE INC - 10-Q Quarterly Report

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 September 30, 2002

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: 0-26487

WOMEN FIRST HEALTHCARE, INC.
(Exact Name of Registrant as Specified in its Charter)

Delaware		13-3919601
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

12220 El Camino Real, Suite 400, San Diego, California		92130
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (858) 509-1171

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

As of November 7, 2002, 22,949,381 shares of common stock, par value $.001 per share, were outstanding.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 which provides a “safe harbor” for these types of statements. To the extent statements in this Quarterly Report involve, without limitation, our expectations for growth, estimates of future revenue, expenses, profit, cash flow, balance sheet items or any other guidance on future periods, these statements are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” The forward-looking statements contained in this Quarterly Report are subject to various risks and uncertainties, including those identified in Item 5 below under the heading “Factors that May Affect Future Performance” and other risks identified from time to time in our filings with the Securities and Exchange Commission, press releases and other communications. We undertake no obligation to release publicly the results of any revisions to these forward-looking statements or to reflect events or circumstances arising after the date hereof.

WOMEN FIRST HEALTHCARE, INC.

INDEX TO FORM 10-Q

			Page

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS (Unaudited)

Consolidated Balance Sheets			1
Consolidated Statements of Operations			2
Consolidated Statements of Cash Flows			3
Notes to Consolidated Financial Statements			4

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			9

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			17

ITEM 4 - CONTROLS AND PROCEDURES			17

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEDINGS			17

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS			17

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES			18

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			18

ITEM 5 - OTHER INFORMATION			18

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K			30

SIGNATURES			31

CERTIFICATIONS			32

PART 1 – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Women First HealthCare, Inc.
Consolidated Balance Sheets
(in thousands)

			September 30, 2002			December 31, 2001

			Unaudited
Assets
Current assets:
	Cash and cash equivalents		$	12,009		$	19,378
	Accounts receivable, net			13,573			7,666
	Inventory			4,613			1,147
	Prepaid expenses and other current assets			3,232			1,261

		Total current assets		33,427			29,452
Property and equipment, net				934			1,066
Product rights, net				76,101			36,205
Intangible assets, net				2,775			2,809
Restricted cash				100			100
Deferred financing expenses				1,559			—
Notes receivable from officers				212			—
Other assets, net				4,320			1,406

		Total assets	$	119,428		$	71,038

Liabilities and stockholders’ equity
Current liabilities:
	Accounts payable		$	4,032		$	2,139
	Payable to related party			—			419
	Accrued salaries and employee benefits			680			646
	Accrued payroll taxes			5			1,350
	Assumed liability for product returns			2,261			—
	Other accrued liabilities			1,255			769
	Note payable and accrued interest payable			2,925			2,728

		Total current liabilities		11,158			8,051
Notes payable and accrued interest payable				42,310			17,267
Senior convertible redeemable preferred stock				13,344			—
Stockholders’ equity:
	Preferred stock			—			—
	Common stock			23			22
	Treasury stock			(100	)		(100	)
	Additional paid-in capital			120,472			114,771
	Deferred compensation			(22	)		(87	)
	Accumulated deficit			(67,757	)		(68,886	)

		Total stockholders’ equity		52,616			45,720

		Total liabilities and stockholders’ equity	$	119,428		$	71,038

See accompanying notes.

Women First HealthCare, Inc.
Unaudited Consolidated Statements of Operations
(in thousands, except per share data)

		Three months ending Sept. 30,						Nine months ending Sept. 30,

		2002			2001			2002			2001

Net product revenue		$	15,517		$	5,890		$	37,067		$	18,511
Net service revenue from related party			—			—			—			44

	Total net revenues		15,517			5,890			37,067			18,555
Cost of sales			4,769			1,740			10,781			5,504
Marketing and sales			6,338			3,587			16,761			11,153
General and administrative			1,588			1,704			4,435			5,667
Regulatory, research and development			172			111			434			337

	Total costs and expenses		12,867			7,142			32,411			22,661

Income (loss) from operations			2,650			(1,252	)		4,656			(4,106	)
Interest and other income			51			364			160			809
Interest expense			(1,550	)		(193	)		(2,319	)		(195	)

Net income (loss)			1,151			(1,081	)		2,497			(3,492	)
Accretion of beneficial conversion feature related to convertible preferred stock			—			—			(1,024	)		—
Accretion of stated value of convertible preferred stock			(325	)		—			(344	)		—

Net income (loss) available to common stockholders		$	826		$	(1,081	)	$	1,129		$	(3,492	)

Net income (loss) per share:
	Basic	$	0.05		$	(0.05	)	$	0.11		$	(0.19	)

	Diluted	$	0.05		$	(0.05	)	$	0.10		$	(0.19	)

Net income (loss) per share available to common stockholders:
	Basic and diluted	$	0.04		$	(0.05	)	$	0.05		$	(0.19	)

Weighted average shares used in computing net income share:
	Basic		22,941			20,924			22,818			18,777

	Diluted		23,536			20,924			23,801			18,777

See accompanying notes.

Women First HealthCare, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)

			Nine months ended Sept. 30,

			2002		2001

Operating activities:
	Net income (loss)		$	2,497	$	(3,492	)
	Adjustments to reconcile net income (loss) to net cash used in operating activities:
		Depreciation and amortization		809		468
		Amortization of product rights		2,591		611
		Amortization of deferred compensation		65		82
		Compensation expense related to stock options		—		50
		Interest accretion and amortization of original issue discount		1,371

Table of Contents

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