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 March 31, 2003
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 000-30959
RITA MEDICAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
| Delaware |
94-3199149 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
967 N. Shoreline Blvd.
Mountain View, CA 94043
(Address of principal executive offices, including zip code)
650-314-3400
(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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No ¨
As of April 30, 2003, there were 17,304,364 shares of the registrant’s Common Stock outstanding.
| Page | ||||||
| PART I. FINANCIAL INFORMATION |
||||||
| Item 1. |
Financial Statements (unaudited) |
|||||
| Condensed Consolidated Balance Sheets—March 31, 2003 and December 31, 2002 |
3 | |||||
| Condensed Consolidated Statements of Operations—three months ended March 31, 2003 and 2002 |
4 | |||||
| Condensed Consolidated Statements of Cash Flows—three months ended March 31, 2003 and 2002 |
5 | |||||
| Notes to Unaudited Condensed Consolidated Financial Statements |
6 | |||||
| Item 2. |
Management’s Discussion and Analysis of Financial Conditions and Results of Operations |
9 | ||||
| Item 3. |
18 | |||||
| Item 4. |
18 | |||||
| PART II. OTHER INFORMATION |
||||||
| Item 1. |
19 | |||||
| Item 2. |
19 | |||||
| Item 3. |
19 | |||||
| Item 4. |
19 | |||||
| Item 5. |
19 | |||||
| Item 6. |
19 | |||||
| 21 | ||||||
| Certification of the Acting Chief Executive Officer, Chief Financial Officer and Vice President, Finance and Administration |
22 | |||||
| 23 | ||||||
-2-
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts, unaudited)
| March 31, 2003 |
December 31, 2002 |
|||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
16,019 |
|
$ |
6,888 |
| ||
| Marketable securities |
|
1,717 |
|
|
5,427 |
| ||
| Accounts and note receivable, net |
|
2,882 |
|
|
2,798 |
| ||
| Inventories, net |
|
3,143 |
|
|
3,521 |
| ||
| Prepaid assets and other current assets |
|
830 |
|
|
995 |
| ||
| Total current assets |
|
24,591 |
|
|
19,629 |
| ||
| Long term marketable securities |
|
— |
|
|
520 |
| ||
| Long term note receivable, net |
|
363 |
|
|
381 |
| ||
| Property and equipment, net |
|
1,553 |
|
|
1,565 |
| ||
| Intangibles and other assets |
|
2,614 |
|
|
2,071 |
| ||
| Total assets |
$ |
29,121 |
|
$ |
24,166 |
| ||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
801 |
|
$ |
1,053 |
| ||
| Accrued liabilities |
|
2,088 |
|
|
2,510 |
| ||
| Total liabilities |
|
2,889 |
|
|
3,563 |
| ||
| Contingencies (Note 5) |
||||||||
| Stockholders’ equity: |
||||||||
| Common stock |
|
17 |
|
|
15 |
| ||
| Additional paid-in capital |
|
97,053 |
|
|
88,525 |
| ||
| Stockholder notes receivable |
|
(21 |
) |
|
(50 |
) | ||
| Accumulated other comprehensive income |
|
1 |
|
|
7 |
| ||
| Accumulated deficit |
|
(70,818 |
) |
|
(67,894 |
) | ||
| Total stockholders’ equity |
|
26,232 |
|
|
20,603 |
| ||
| Total liabilities and stockholders’ equity |
$ |
29,121 |
|
$ |
24,166 |
| ||
The accompanying notes are an integral part of the condensed consolidated financial statements.
-3-
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data, unaudited)
| Three Months Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Sales |
$ |
4,497 |
|
$ |
4,418 |
| ||
| Cost of goods sold |
|
1,574 |
|
|
2,003 |
| ||
| Gross profit |
|
2,923 |
|
|
2,415 |
| ||
| Operating expenses: |
||||||||
| Research and development |
|
1,358 |
|
|
1,335 |
| ||
| Selling, general and administrative |
|
4,564 |
|
|
5,222 |
| ||
| Total operating expenses |
|
5,922 |
|
|
6,557 |
| ||
| Loss from operations |
|
(2,999 |
) |
|
(4,142 |
) | ||
| Interest income and other expense, net |
|
75 |
|
|
149 |
| ||
| Net loss |
$ |
(2,924 |
) |
$ |
(3,993 |
) | ||
| Net loss per share, basic and diluted |
$ |
(0.17 |
) |
$ |
(0.27 |
) | ||
| Shares used in computing net loss per share, basic and diluted |
|
17,223 |
|
|
14,614 |
| ||
The accompanying notes are an integral part of the condensed consolidated financial statements.
-4-
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
| Three Months Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ |
(2,924 |
) |
$ |
(3,993 |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
|
331 |
|
|
375 |
| ||
| Revaluation of common stock warrants for services received |
|
(26 |
) |
|
54 |
| ||
| Amortization of stock-based compensation |
|
— |
|
|
167 |
| ||
| Allowance for doubtful accounts |
|
66 |
|
|
100 |
| ||
| Provision for obsolete inventories |
|
38 |
|
|
87 |
| ||
| Changes in operating assets and liabilities: |
||||||||
| Accounts and note receivable |
|
(165 |
) |
|
(406 |
) | ||
| Inventories |
|
340 |
|
|
(64 |
) | ||
| Prepaid and other current assets |
|
165 |
|
|
554 |
| ||
| Accounts payable and accrued liabilities |
|
(674 |
) |
|
(571 |
) | ||
| Net cash used in operating activities |
|
(2,849 |
) |
|
(3,697 |
) | ||
| Cash flows from investing activities: |
||||||||
| Purchase of property and equipment |
|
(233 |
) |
|
(405 |
) | ||
| Purchase of investments |
|
(143 |
) |
|
— |
| ||
| Sales and maturities of investments |
|
4,367 |
|
|
2,222 |
| ||
| Capitalization of patent litigation costs |
|
(602 |
) |
|
(297 |
) | ||
| Note receivable and other assets |
|
35 |
|
|
1 |
| ||
| Net cash provided by investing activities |
|
3,424 |
|
|
1,521 |
| ||
| Cash flows from financing activities: |
||||||||
| Proceeds from issuance of common stock |
|
8,556 |
|
|
446 |
| ||
| Payments on capital lease obligations |
|
— |
|
|
(73 |
) | ||
| Net cash provided by financing activities |
|
8,556 |
|
|
373 |
| ||
| Net increase (decrease) in cash and cash equivalents |
|
9,131 |
|
|
(1,803 |
) | ||
| Cash and cash equivalents at beginning of period |
|
6,888 |
|
|
7,297 |
| ||
| Cash and cash equivalents at end of period |
$ |
16,019 |
|
$ |
5,494 |
| ||
The accompanying notes are an integral part of the condensed consolidated financial statements.
-5-
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared by RITA Medical Systems, Inc. (the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information. These principles are consistent in all material respects with those applied in the Company’s financial statements contained in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2002 and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated by the Securities and