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Table of Contents
 
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 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 No. 000-31953
 
 
CATALYTICA ENERGY SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
 
Delaware
   
77-0410420
(State or other jurisdiction of
Incorporation or organization)
   
(IRS Employer
Identification Number)
 
430 Ferguson Drive
Mountain View, California 94043
(Address of principal executive offices)
 
(650) 960-3000
(Registrant’s telephone number, including area code)
 
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 ¨
 
As of August 9, 2002, there were outstanding 17,560,434 shares of the Registrant’s common stock, par value $0.001, which is the only class of common stock of the Registrant registered under Section 12(g) of the Securities Act of 1933.

Table of Contents
 
CATALYTICA ENERGY SYSTEMS, INC.
 
FORM 10-Q
 
TABLE OF CONTENTS
 
June 30, 2002
 
         
Page No.
PART I.
   
FINANCIAL INFORMATION
     
Item 1.
   
Financial Statements
     
       
3
       
4
       
5
       
6
Item 2.
      
10
Item 3.
      
21
PART II.
   
OTHER INFORMATION
     
Item 4.
      
22
Item 6.
      
22
  
23

2

Table of Contents
 
PART I—FINANCIAL INFORMATION
 
ITEM 1.    FINANCIAL STATEMENTS
 
 
 
 
CATALYTICA ENERGY SYSTEMS, INC. (a company in the development stage)
CONSOLIDATED STATEMENTS OF OPERATIONS
for the three and six-month periods ended June 30, 2002 and 2001
and for the period from November 1, 1994 (inception) through June 30, 2002
(In thousands, except per share amounts)
(Unaudited)
 
    
Three Months Ended
June 30,
     
Six Months Ended
June 30,
     
Cumulative Amounts from November 1, 1994 (inception) through
June 30, 2002
  
    
2002
     
2001
     
2002
     
2001
     
Revenue:
                                       
Research and development contracts
   
$
1,123
 
   
$
2,212
 
   
$
1,772
 
   
$
3,658
 
   
$
55,812
 
    
  
  
  
  
Costs and expenses:
                                             
Research and development
   
 
3,827
 
   
 
3,514
 
   
 
7,059
 
   
 
7,608
 
   
 
90,846
 
Selling, general and administrative
   
 
2,932
 
   
 
1,939
 
   
 
5,950
 
   
 
3,681
 
   
 
29,041
 
Spin-off and related transaction costs
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
5,304
 
Legal settlements
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
4,500
 
Costs associated with discontinued product line
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
9,299
 
    
  
  
  
  
Total costs and expenses
   
 
6,759
 
   
 
5,453
 
   
 
13,009
 
   
 
11,289
 
   
 
138,990
 
    
  
  
  
  
Operating loss
   
 
(5,636
)
   
 
(3,241
)
   
 
(11,237
)
   
 
(7,631
)
   
 
(83,178
)
Interest income, net
   
 
319
 
   
 
581
 
   
 
700
 
   
 
1,370
 
   
 
5,570
 
Loss on equity investments
   
 
—  
 
   
 
(211
)
   
 
—  
 
   
 
(335
)
   
 
(10,258
)
Impairment charge to implied goodwill of an equity investment
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
(2,145
)
    
  
  
  
  
Net loss
   
$
(5,317
)
   
$
(2,871
)
   
$
(10,537
)
   
$
(6,596
)
   
$
(90,011
)
    
  
  
  
  
Basic and diluted net loss per share
   
$
(0.30
)
   
$
(0.22
)
   
$
(0.60
)
   
$
(0.51
)
         
    
  
  
  
        
Weighted average shares used in computing basic and diluted net loss per share
   
 
17,510
 
   
 
12,905
 
   
 
17,509
 
   
 
12,911
 
         
    
  
  
  
        
 
See accompanying notes.

3

Table of Contents
 
CATALYTICA ENERGY SYSTEMS, INC. (a company in the development stage)
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
    
June 30,
2002
     
December 31,
2001
  
    
(Unaudited)
         
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
62,498
 
   
$
70,064
 
Short-term investments
   
 
11,578
 
   
 
17,583
 
Accounts receivable, net
   
 
892
 
   
 
1,324
 
Inventory
   
 
410
 
   
 
178
 
Prepaid expenses and other assets
   
 
393
 
   
 
536
 
    
  
Total current assets
   
 
75,771
 
   
 
89,685
 
    
  
Property and equipment:
                  
Land
   
 
611
 
   
 
—  
 
Building, leasehold improvements and equipment
   
 
18,358
 
   
 
14,682
 
Less accumulated depreciation and amortization
   
 
(10,824
)
   
 
(9,905
)
    
  
    
 
8,145
 
   
 
4,777
 
    
  
Long-term deposits
   
 
371
 
   
 
300
 
    
  
Notes receivable from related parties, net
   
 
316
 
   
 
378
 
    
  
Total assets
   
$
84,603
 
   
$
95,140
 
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
Current liabilities:
                  
Accounts payable
   
$
726
 
   
$
829
 
Accrued payroll and benefits
   
 
2,096
 
   
 
2,432
 
Accrued legal settlements
   
 
1,000
 
   
 
3,000
 
Accrued liabilities and other
   
 
1,054
 
   
 
2,034
 
Current portion of long-term debt and capital lease obligations
   
 
190
 
   
 
60
 
    
  
Total current liabilities
   
 
5,066
 
   
 
8,355
 
Long-term debt and capital lease obligations
   
 
3,109
 
   
 
63
 
    
  
Total liabilities
   
 
8,175
 
   
 
8,418
 
    
  
Stockholders’ equity:
                  
Common stock
   
 
18
 
   
 
17
 
Additional paid-in capital
   
 
166,623
 
   
 
166,439
 
Deferred compensation
   
 
(202
)
   
 
(260
)
Deficit accumulated during the development stage
   
 
(90,011
)
   
 
(79,474
)
    
  
Total stockholders’ equity
   
 
76,428
 
   
 
86,722
 
    
  
Total liabilities and stockholders’ equity
   
$
84,603
 
   
$
95,140
 
    
  
 
See accompanying notes.

4

Table of Contents
 
CATALYTICA ENERGY SYSTEMS, INC. (a company in the development stage)
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six-month periods ended June 30, 2002 and 2001
and for the period from November 1, 1994 (inception) through June 30, 2002
(In thousands)
(Unaudited)
 
    
Six Months Ended
June 30,
     
Cumulative Amounts from November 1, 1994 (inception) through
June 30, 2002
  
    
2002
     
2001
     
Cash flows from operating activities:
                           
Net loss
   
$
(10,537
)
   
$
(6,596
)
   
$
(90,011
)
Adjustments to reconcile net loss to net cash used in operating activities:
                           
Depreciation and amortization
   
 
1,406
 
   
 
806
 
   
 
3,896
 
Notes payable issued for contract modification
   
 
200
 
   
 
—  
 
   
 
200
 
Forgiveness of notes receivable from related parties
   
 
—  
 
   
 
100
 
   
 
723
 
Provision for uncollectable accounts
   
 
—  
 
   
 
(200
)
   
 
500
 
Loss on equity investments
   
 
—  
 
   
 
335
 
   
 
10,258
 
Stock based compensation
   
 
70
 
   
 
157
 
   
 
902
 
Impairment charge to implied goodwill of an equity investment
   
 
—  
 
   
 
—  
 
   
 
1,645
 
Changes in:
                           
Accounts and notes receivable
   
 
422
 
   
 
206
 
   
 
(1,283
)
Inventory
   
 
(232
)
   
 
(440
)
   
 
(536
)
Prepaid expenses and other assets
   
 
14
 
   
 
241