SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 march 31, 2003. |
| ¨ | 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 0-25133
PHARMANETICS, INC.
(Exact Name of Registrant as Specified in its Charter)
| North Carolina |
56-2098302 | |
| (State or other jurisdiction of Incorporation or organization) |
(IRS Employer Identification Number) | |
| 9401 Globe Center Drive, Suite 140 Morrisville, North Carolina |
27560 | |
| (Address of Principal Executive Office) |
(Zip Code) |
Registrant’s Telephone Number, Including Area Code 919-582-2600
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 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 ¨ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class |
Outstanding as of April 28, 2003 | |
| Common Stock, no par value |
9,746,386 |
INDEX TO FORM 10-Q
| PART I. FINANCIAL INFORMATION |
PAGE | |
| Item 1. Financial Statements |
||
| Consolidated Balance Sheets as of March 31, 2003 (unaudited) and December 31, 2002 |
3 | |
| Consolidated Statements of Operations for the Three Months ended March 31, 2003 and 2002 (unaudited) |
4 | |
| Consolidated Statements of Cash Flows for the Three Months ended March 31, 2003 and 2002 (unaudited) |
5 | |
| 6 | ||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
9 | |
| Item 3. Quantitative and Qualitative Disclosures about Market Risk |
12 | |
| 12 | ||
| PART II. OTHER INFORMATION |
||
| 13 | ||
| 14 | ||
| CERTIFICATIONS |
2
PHARMANETICS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)
| MARCH 31, 2003 |
DECEMBER 31, 2002 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
6,250 |
|
$ |
9,146 |
| ||
| Accounts and other receivables |
|
574 |
|
|
655 |
| ||
| Inventories |
|
2,887 |
|
|
2,453 |
| ||
| Other current assets |
|
435 |
|
|
503 |
| ||
| Total current assets |
|
10,146 |
|
|
12,757 |
| ||
| Property and equipment, net |
|
7,975 |
|
|
8,292 |
| ||
| Patents and intellectual property, net |
|
584 |
|
|
580 |
| ||
| Other noncurrent assets |
|
56 |
|
|
72 |
| ||
| Total assets |
$ |
18,761 |
|
$ |
21,701 |
| ||
| LIABILITIES, REDEEMABLE PREFERRED STOCK, AND SHAREHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
1,038 |
|
$ |
1,277 |
| ||
| Accrued expenses |
|
370 |
|
|
461 |
| ||
| Deferred revenue, current portion |
|
1,134 |
|
|
1,089 |
| ||
| Current portion of long term debt and capital lease obligations |
|
492 |
|
|
482 |
| ||
| Total current liabilities |
|
3,034 |
|
|
3,309 |
| ||
| Noncurrent liabilities: |
||||||||
| Deferred revenue, less current portion |
|
2,870 |
|
|
3,139 |
| ||
| Long term debt and capital lease obligations, less current portion |
|
1,006 |
|
|
1,095 |
| ||
| Total noncurrent liabilities |
|
3,876 |
|
|
4,234 |
| ||
| Total liabilities |
|
6,910 |
|
|
7,543 |
| ||
| Series A convertible redeemable preferred stock, no par value; authorized 120,000 shares; 81,000 and 90,500 shares issued and outstanding at March 31, 2003 and December 31, 2002, respectively (aggregate liquidationvalue at March 31, 2003 of $8,100,000) |
|
6,731 |
|
|
7,520 |
| ||
| Shareholders’ equity: |
||||||||
| Common stock, no par value; authorized 40,000,000 shares; 9,746,386 and 9,630,872 issued and outstanding at March 31, 2003 and December 31, 2002, respectively |
|
68,801 |
|
|
67,852 |
| ||
| Accumulated deficit |
|
(63,681 |
) |
|
(61,214 |
) | ||
| Total shareholders’ equity |
|
5,120 |
|
|
6,638 |
| ||
| Total liabilities, redeemable preferred stock and shareholders’ equity |
$ |
18,761 |
|
$ |
21,701 |
| ||
The accompanying notes are an integral part of the unaudited consolidated financial statements.
3
PHARMANETICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| THREE MONTHS ENDED |
||||||||
| MARCH 31, 2003 |
MARCH 31, 2002 |
|||||||
| Net sales |
$ |
1,162 |
|
$ |
943 |
| ||
| Cost of goods sold |
|
683 |
|
|
906 |
| ||
| Gross profit |
|
479 |
|
|
37 |
| ||
| Operating expenses: |
||||||||
| General and administrative |
|
1,062 |
|
|
903 |
| ||
| Sales and marketing |
|
728 |
|
|
284 |
| ||
| Research and development |
|
1,263 |
|
|
1,261 |
| ||
| Total operating expenses |
|
3,053 |
|
|
2,448 |
| ||
| Operating loss |
|
(2,574 |
) |
|
(2,411 |
) | ||
| Other income (expense): |
||||||||
| Interest expense |
|
(37 |
) |
|
(3 |
) | ||
| Interest income |
|
11 |
|
|
44 |
| ||
| Other income (expense) |
|
(5 |
) |
|
1 |
| ||
| Development income |
|
261 |
|
|
114 |
| ||
| Total other income |
|
230 |
|
|
156 |
| ||
| Net and comprehensive loss |
|
(2,344 |
) |
|
(2,255 |
) | ||
| Dividends on preferred stock |
|
123 |
|
|
125 |
| ||
| Net loss applicable to common shareholders |
$ |
(2,467 |
) |
$ |
(2,380 |
) | ||
| Basic and diluted net loss per common share |
$ |
(0.25 |
) |
$ |
(0.25 |
) | ||
| Average weighted common shares outstanding |
|
9,701 |
|
|
9,524 |
| ||
The accompanying notes are an integral part of the unaudited consolidated financial statements.
4
PHARMANETICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
| THREE MONTHS ENDED |
||||||||
| MARCH 31, 2003 |
MARCH 31, 2002 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ |
(2,344 |
) |
$ |
(2,255 |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation |
|
442 |
|
|
375 |
| ||
| Amortization of intangible and other assets |
|
29 |
|
|
36 |
| ||
| Loss on trading securities |
|
6 |
|
|
— |
| ||
| Provision for inventory obsolescence |
|
20 |
|
|
18 |
| ||
| Change in operating assets and liabilities: |
||||||||
| Accounts receivable |
|
80 |
|
|
(187 |
) | ||
| Inventories |
|
(454 |
) |
|
139 |
| ||
| Other assets |
|
59 |
|
|
(115 |
) | ||
| Accounts payable and accrued expenses |
|
(391 |
) |
|
(674 |
) | ||
| Deferred revenue |
|
(224 |
) |
|
38 |
| ||
| Net cash used in operating activities |
|
(2,777 |
) |
|
(2,625 |
) | ||
| Cash flows from investing activities: |
||||||||
| Payments for purchase of property and equipment |
|
(63 |
) |
|
(281 |
) | ||
| Disposal of property and equipment |
|
— |
|
|
7 |
| ||
| Costs incurred to obtain patents and intangibles |
|
(14 |
) |
|
(14 |
) | ||
| Net cash used in investing activities |
|
(77 |
) |
|
(288 |
) | ||
| Cash flows from financing activities: |
||||||||
| Principal payments on long-term debt and capital lease obligations |
|
(79 |
) |
|
(7 |
) | ||
| Proceeds from common stock options exercised |
|
37 |
|
|
257 |
| ||
| Repurchase of common stock |
|
— |
|
|
(23 |
) | ||
| Net cash provided by (used in) financing activities |
|
(42 |
) |
|
227 |
| ||