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Table of Contents
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
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 Number: 000-20931
 
 
VENTANA MEDICAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
 
 
Delaware
  
94-2976937
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. employer
identification no.)
 
1910 Innovation Park Drive
Tucson, AZ
  
85737
(Address of principal executive offices)
  
(Zip Code)
 
Registrant’s telephone number, including area code: (520) 887-2155
 
Not Applicable
(Formal name, former address and former fiscal year, if changed from 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  x    No  ¨
 
Applicable Only to Issuers Involved in Bankruptcy
(Formal name, former address and former fiscal year, if changed from last report)
 
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by the court. Yes  ¨    No  ¨
 
Applicable Only to Corporate Issuers
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.
 
Common Stock, $0.001 par value—16,337,594 shares as of July 29, 2002
 

Table of Contents
 
VENTANA MEDICAL SYSTEMS, INC.
 
INDEX TO FORM 10-Q
 
Part I.        Financial Information
     
    
Item 1.      Financial Statements (Unaudited)
     
       
3
       
4
       
5
       
6
       
14
Part II.        Other Information
     
    
Item 1.       Legal Proceedings
  
17
       
20
       
20
    
           Signatures
   
21

2

Table of Contents
 
VENTANA MEDICAL SYSTEMS, INC.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except share data)
(Unaudited)
 
    
June 30, 2002
     
December 31, 2001
  
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
12,395
 
   
$
12,280
 
Accounts receivable, net
   
 
22,056
 
   
 
20,448
 
Inventories
   
 
14,365
 
   
 
11,763
 
Prepaid expenses
   
 
653
 
   
 
520
 
Deferred tax benefit, current portion
   
 
2,386
 
   
 
2,386
 
Other current assets
   
 
981
 
   
 
752
 
    
  
Total current assets
   
 
52,836
 
   
 
48,149
 
Property and equipment, net
   
 
43,159
 
   
 
41,432
 
Goodwill
   
 
3,068
 
   
 
3,068
 
Intangibles, net
   
 
8,822
 
   
 
9,124
 
Other assets
   
 
3,200
 
   
 
2,796
 
Deferred tax benefit, long term portion
   
 
6,566
 
   
 
6,416
 
    
  
Total assets
   
$
117,651
 
   
$
110,985
 
    
  
LIABILITIES AND STOCKHOLDERS' EQUITY
                  
Current liabilities:
                  
Accounts payable
   
$
5,914
 
   
$
4,733
 
Other current liabilities
   
 
12,200
 
   
 
9,578
 
    
  
Total current liabilities
   
 
18,114
 
   
 
14,311
 
Long term debt
   
 
2,420
 
   
 
2,521
 
Commitments and Contingencies
                  
Stockholders' equity:
                  
Common stock—$.001 par value; 50,000,000 shares authorized; 16,282,960 and 16,110,466 shares issued and outstanding at June 30, 2002 and December 31, 2001, respectively
   
 
16
 
   
 
16
 
Additional paid-in capital
   
 
143,454
 
   
 
140,587
 
Accumulated deficit
   
 
(45,271
)
   
 
(45,194
)
Accumulated other comprehensive loss
   
 
(482
)
   
 
(656
)
Treasury stock—40,000 shares, at cost
   
 
(600
)
   
 
(600
)
    
  
Total stockholders' equity
   
 
97,117
 
   
 
94,153
 
    
  
Total liabilities and stockholders' equity
   
$
117,651
 
   
$
110,985
 
    
  
 
See accompanying notes

3

Table of Contents
VENTANA MEDICAL SYSTEMS, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
(Unaudited)
 
    
Three Months Ended
June 30
     
Six Months Ended
June 30
  
    
2002
     
2001
     
2002
     
2001
  
Sales:
                                    
Reagents and other
   
$
19,800
 
   
$
15,143
 
   
$
37,635
 
   
$
28,907
 
Instruments
   
 
5,951
 
   
 
6,195
 
   
 
10,298
 
   
 
11,711
 
    
  
  
  
Total net sales
   
 
25,751
 
   
 
21,338
 
   
 
47,933
 
   
 
40,618
 
Cost of goods sold
   
 
7,885
 
   
 
7,051
 
   
 
14,695
 
   
 
13,226
 
    
  
  
  
Gross profit
   
 
17,866
 
   
 
14,287
 
   
 
33,238
 
   
 
27,392
 
Operating expenses:
                                    
Research and development
   
 
3,849
 
   
 
3,850
 
   
 
7,471
 
   
 
7,156
 
Selling, general and administrative
   
 
12,930
 
   
 
10,221
 
   
 
24,638
 
   
 
20,980
 
Amortization of acquisition costs
   
 
396
 
   
 
382
 
   
 
808
 
   
 
754
 
    
  
  
  
Income (loss) from operations
   
 
691
 
   
 
(166
)
   
 
321
 
   
 
(1,498
)
Interest and other income (expense)
   
 
63
 
   
 
286
 
   
 
66
 
   
 
625
 
    
  
  
  
Income (loss) before taxes
   
 
754
 
   
 
120
 
   
 
387
 
   
 
(873
)
(Provision for) benefit from income taxes
   
 
(276
)
   
 
(105
)
   
 
(464
)
   
 
(239
)
    
  
  
  
Net income (loss)
   
$
478
 
   
$
15
 
   
$
(77
)
   
$
(1,112
)
    
  
  
  
Per share data:
                                    
Net income (loss)
                                    
—Basic
   
$
0.03
 
   
$
0.00
 
   
$
(0.00
)
   
$
(0.07
)
    
  
  
  
—Diluted
   
$
0.03
 
   
$
0.00
 
   
$
(0.00
)
   
$
(0.07
)
    
  
  
  
Shares used in computing per share data:
                                    
—Basic
   
 
16,258
 
   
 
15,970
 
   
 
16,225
 
   
 
15,790
 
    
  
  
  
—Diluted
   
 
16,622
 
   
 
16,722
 
   
 
16,225
 
   
 
15,790
 
    
  
  
  
 
See accompanying notes

4

Table of Contents
VENTANA MEDICAL SYSTEMS, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
    
Six Months Ended
June 30
  
    
2002
     
2001
  
Operating activities:
                  
Net income (loss)
   
$
(77
)
   
$
(1,112
)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
                  
Depreciation and amortization
   
 
3,819
 
   
 
3,194
 
Changes in operating assets and liabilities
   
 
(1,998
)
   
 
(5,790
)
    
  
Net cash provided by (used in) operating activities
   
 
1,744
 
   
 
(3,708
)
Investing activities:
                  
Purchase of property and equipment
   
 
(4,411
)
   
 
(11,807
)
Purchase of intangible assets, net
   
 
(158
)
   
 
—  
 
    
  
Net cash provided by (used in) investing activities
   
 
(4,569
)
   
 
(11,807
)
Financing activities:
                  
Payments of debt
   
 
(101
)
   
 
(604
)
Issuance of common stock
   
 
2,867
 
   
 
3,504
 
    
  
Net cash provided by (used in) by financing activities
   
 
2,766
 
   
 
2,900
 
Effect of exchange rate change on cash
   
 
174
 
   
 
41
 
    
  
Net increase (decrease) in cash and cash equivalents
   
 
115
 
   
 
(12,574
)
Cash and cash equivalents, beginning of period
   
 
12,280
 
   
 
38,512
 
    
  
Cash and cash equivalents, end of period
   
$
12,395
 
   
$
25,938
 
    
  
 
See accompanying notes

5

Table of Contents
VENTANA MEDICAL SYSTEMS, INC.
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS