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 MARCH 31, 2003
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 000-30335
SONIC INNOVATIONS, INC.
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) |
87-0494518 (I.R.S. Employer Identification No.) |
2795 East Cottonwood Parkway, Suite 660
Salt Lake City, UT 84121-7036
(Address of principal executive offices)
(801) 365-2800
(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.
x Yes o No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)
x Yes o No
As of May 8, 2003 there were 19,932,163 shares of the registrant’s common stock outstanding.
SONIC INNOVATIONS, INC.
TABLE OF CONTENTS
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| PART I |
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FINANCIAL INFORMATION |
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ITEM 1. |
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Unaudited Condensed Consolidated Financial Statements: |
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Condensed Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002 |
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Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2003 and 2002 |
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Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002 |
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ITEM 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11 |
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ITEM 3. |
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ITEM 4. |
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16 | |
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| PART II |
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OTHER INFORMATION |
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ITEM 1. |
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ITEM 4. |
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ITEM 6. |
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| 23 |
PART I
ITEM 1.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SONIC INNOVATIONS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands)
(unaudited)
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March 31, |
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December 31, |
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| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
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$ |
19,371 |
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$ |
13,690 |
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| Marketable securities |
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10,247 |
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16,255 |
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| Accounts receivable |
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9,076 |
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8,208 |
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| Inventories |
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6,814 |
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6,485 |
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| Prepaid expenses and other |
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1,695 |
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1,809 |
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| Total current assets |
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47,203 |
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46,447 |
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| Long-term marketable securities |
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4,188 |
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5,616 |
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| Property and equipment |
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5,740 |
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5,862 |
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| Goodwill and other indefinite-lived intangible assets |
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14,097 |
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13,311 |
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| Definite-lived intangible assets |
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1,548 |
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1,609 |
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| Other assets |
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2,206 |
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1,901 |
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| Total assets |
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$ |
74,982 |
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$ |
74,746 |
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| Current liabilities: |
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| Accounts payable |
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$ |
5,098 |
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$ |
4,193 |
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| Accrued payroll and related expenses |
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2,257 |
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2,948 |
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| Reserve for warranty |
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3,598 |
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3,601 |
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| Other accrued liabilities |
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4,397 |
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4,057 |
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| Capital lease obligation |
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30 |
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102 |
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| Total current liabilities |
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15,380 |
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14,901 |
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| Shareholders’ equity: |
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| Common stock |
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21 |
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21 |
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| Additional paid-in capital |
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113,461 |
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113,434 |
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| Deferred stock-based compensation |
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(113 |
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(156 |
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| Accumulated deficit |
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(52,430 |
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(51,584 |
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| Accumulated other comprehensive income |
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2,066 |
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1,533 |
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| Treasury stock, at cost |
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(3,403 |
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(3,403 |
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| Total shareholders’ equity |
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59,602 |
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59,845 |
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| Total liabilities and shareholders’ equity |
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$ |
74,982 |
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$ |
74,746 |
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See accompanying notes to condensed consolidated financial statements.
3
SONIC INNOVATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
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Three months ended March 31, |
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2003 |
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2002 |
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| Net sales |
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$ |
17,014 |
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$ |
15,104 |
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| Cost of sales |
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7,795 |
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7,441 |
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| Gross profit |
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9,219 |
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7,663 |
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| Selling, general and administrative expense |
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7,968 |
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6,313 |
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| Research and development expense |
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2,487 |
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2,052 |
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| Stock-based compensation expense |
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43 |
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106 |
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| Operating loss |
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(1,279 |
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(808 |
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| Other income, net |
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557 |
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389 |
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| Loss before income taxes |
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(722 |
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(419 |
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| Provision for income taxes |
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124 |
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— |
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| Net loss |
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$ |
(846 |
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$ |
(419 |
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| Basic and diluted loss per common share |
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$ |
(0.04 |
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$ |
(0.02 |
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| Weighted average number of common shares outstanding |
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19,824 |
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19,348 |
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| Stock-based compensation expense allocable to each caption: |
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| Cost of sales |
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$ |
2 |
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$ |
5 |
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| Selling, general and administrative expense |
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35 |
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87 |
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| Research and development expense |
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6 |
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14 |
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| Stock-based compensation expense |
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$ |
43 |
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$ |
106 |
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See accompanying notes to condensed consolidated financial statements.
4
SONIC INNOVATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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Three months ended March 31, |
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2003 |
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2002 |
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| Cash flows from operating activities: |
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| Net loss |
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$ |
(846 |
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$ |
(419 |
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| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
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| Depreciation and amortization |
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570 |
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525 |
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| Stock-based compensation |
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43 |
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106 |
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| Foreign currency gain |
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(384 |
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(101 |
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| Changes in assets and liabilities, excluding the affect of acquisitions: |
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| Accounts receivable |
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(168 |
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4 |
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| Inventories |
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(69 |
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404 |
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| Prepaid expenses and other |
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(351 |
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(107 |
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| Other assets |
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46 |
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126 |
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| Accounts payable and accrued expenses |
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411 |
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(436 |
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| Net cash provided by (used in) operating activities |
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(748 |
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102 |
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| Cash flows from investing activities: |
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| Acquisitions, net of cash acquired |
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(388 |
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(2,321 |
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| Purchases of property and equipment |
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(279 |
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(354 |
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| Investments and advances, net |
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(380 |
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| Proceeds from marketable securities, net |
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7,436 |
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(3,830 |
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| Net cash provided by (used in) investing activities |
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6,389 |
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(6,505 |
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| Cash flows from financing activities: |
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| Principal payments on long-term obligations |
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(72 |
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(83 |
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| Purchases of common stock for treasury |
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— |
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(661 |
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| Proceeds from exercise of stock options |
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27 |
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117 |
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| Net cash used in financing activities |
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(45 |
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(627 |
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| Effect of exchange rate changes on cash and cash equivalents |
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85 |
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26 |
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| Net increase (decrease) in cash and cash equivalents |
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5,681 |
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(7,004 |
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| Cash and cash equivalents, beginning of the period |
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13,690 |
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13,929 |
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| Cash and cash equivalents, end of the period |
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$ |
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