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, 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 No. 000-31953
CATALYTICA ENERGY SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
| Delaware | 77-0410420 | |
| (State or other jurisdiction of | (IRS Employer | |
| Incorporation or organization) | Identification Number) |
1388 North Tech Boulevard
Gilbert, Arizona 85233
(Address of principal executive offices)
(480) 556-5555
(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 Exchange Act). Yes ¨ No x
As of August 5, 2003, there were outstanding 17,695,324 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.
CATALYTICA ENERGY SYSTEMS, INC.
FORM 10-Q
June 30, 2003
| Page No. | ||||
| PART I. FINANCIAL INFORMATION | ||||
| Item 1. | 3 | |||
| 3 | ||||
| Consolidated Balance Sheets at June 30, 2003 (Unaudited) and December 31, 2002 |
4 | |||
| 5 | ||||
| 6 | ||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
8 | ||
| Item 3. | 14 | |||
| Item 4. | 14 | |||
| PART II. OTHER INFORMATION | ||||
| Item 4. | 15 | |||
| Item 6. | 15 | |||
| Signatures | 16 | |||
2
PART I—FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
CATALYTICA ENERGY SYSTEMS, INC. (a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
for the three and six-month periods ended June 30, 2003 and 2002
and for the period from January 1, 1988 (inception) through June 30, 2003
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
Cumulative Amounts from January 1, 1988 (inception) through June 30, |
||||||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
2003 |
||||||||||||||||
| Revenues: |
||||||||||||||||||||
| Research and development contracts |
$ | 959 | $ | 1,123 | $ | 1,490 | $ | 1,772 | $ | 60,325 | ||||||||||
| Costs and expenses: |
||||||||||||||||||||
| Research and development |
2,851 | 3,827 | 6,037 | 7,059 | 104,053 | |||||||||||||||
| Selling, general and administrative |
1,726 | 2,932 | 3,796 | 5,950 | 36,541 | |||||||||||||||
| Legal settlements |
— | — | — | — | 4,500 | |||||||||||||||
| Spin-off and related transaction costs |
— | — | — | — | 5,304 | |||||||||||||||
| Costs associated with discontinued product line |
— | — | — | — | 9,299 | |||||||||||||||
| Total costs and expenses |
4,577 | 6,759 | 9,833 | 13,009 | 159,697 | |||||||||||||||
| Operating loss |
(3,618 | ) | (5,636 | ) | (8,343 | ) | (11,237 | ) | (99,372 | ) | ||||||||||
| Interest income |
197 | 378 | 428 | 765 | 7,841 | |||||||||||||||
| Interest expense |
(59 | ) | (59 | ) | (120 | ) | (65 | ) | (1,449 | ) | ||||||||||
| Loss on equity investments |
— | — | — | — | (10,258 | ) | ||||||||||||||
| Impairment charge to implied goodwill of an equity investment |
— | — | — | — | (2,145 | ) | ||||||||||||||
| Net loss |
$ | (3,480 | ) | $ | (5,317 | ) | $ | (8,035 | ) | $ | (10,537 | ) | $ | (105,383 | ) | |||||
| Basic and diluted net loss per share |
$ | (0.20 | ) | $ | (0.30 | ) | $ | (0.46 | ) | $ | (0.60 | ) | ||||||||
| Weighted average shares used in computing basic and diluted net loss per share |
17,636 | 17,510 | 17,620 | 17,509 | ||||||||||||||||
See accompanying notes.
3
CATALYTICA ENERGY SYSTEMS, INC. (a development stage company)
(In thousands)
| June 30, 2003 |
December 31, 2002 |
|||||||
| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 40,226 | $ | 45,965 | ||||
| Short-term investments |
18,363 | 20,805 | ||||||
| Accounts receivable, net |
391 | 1,362 | ||||||
| Inventory |
452 | 479 | ||||||
| Prepaid expenses and other assets |
773 | 430 | ||||||
| Total current assets |
60,205 | 69,041 | ||||||
| Property and equipment: |
||||||||
| Land |
611 | 611 | ||||||
| Building and leasehold improvements |
11,218 | 11,202 | ||||||
| Equipment |
8,253 | 7,855 | ||||||
| Less accumulated depreciation and amortization |
(13,220 | ) | (12,254 | ) | ||||
| 6,862 | 7,414 | |||||||
| Notes receivable from related parties, net |
207 | 226 | ||||||
| Other assets |
335 | 340 | ||||||
| Total assets |
$ | 67,609 | $ | 77,021 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 521 | $ | 738 | ||||
| Accrued payroll and benefits |
1,705 | 2,428 | ||||||
| Accrued legal settlements |
— | 500 | ||||||
| Accrued liabilities and other |
935 | 925 | ||||||
| Current portion of long-term debt and capital lease obligations |
158 | 188 | ||||||
| Total current liabilities |
3,319 | 4,779 | ||||||
| Long-term debt and capital lease obligations |
2,943 | 3,062 | ||||||
| Other long-term liabilities |
24 | — | ||||||
| Total liabilities |
6,286 | 7,841 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock |
18 | 18 | ||||||
| Additional paid-in capital |
166,734 | 166,533 | ||||||
| Deferred compensation |
(46 | ) | (23 | ) | ||||
| Deficit accumulated during the development stage |
(105,383 | ) | (97,348 | ) | ||||
| Total stockholders’ equity |
61,323 | 69,180 | ||||||
| Total liabilities and stockholders’ equity |
$ | 67,609 | $ | 77,021 | ||||
See accompanying notes.
4
CATALYTICA ENERGY SYSTEMS, INC. (a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six-month periods ended June 30, 2003 and 2002
and for the period from January 1, 1988 (inception) through June 30, 2003
(In thousands)
(Unaudited)
| Six Months Ended June 30, |
Cumulative Amounts from January 1, 1988 (inception) through |
|||||||||||
| 2003 |
2002 |
June 30, 2003 |
||||||||||
| Cash flows from operating activities: |
||||||||||||
| Net loss |
$ | (8,035 | ) | $ | (10,537 | ) | $ | (105,383 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||
| Depreciation and amortization |
1,117 | 1,376 | 6,494 | |||||||||
| Forgiveness of notes receivable from related parties |
30 | 30 | 813 | |||||||||
| Stock based compensation |
30 | 70 | 882 | |||||||||
| Notes payable issued for contract modification |
— | 200 | 200 | |||||||||
| Losses in equity investments |
— | — | 10,258 | |||||||||
| Impairment charge to implied goodwill of an equity investment |
— | — | 2,145 | |||||||||
| Changes in: |
||||||||||||
| Accounts and notes receivable |
960 | 422 | (793 | ) | ||||||||
| Inventory |
27 | (232 | ) | (578 | ) | |||||||
| Prepaid expenses and other assets |
(338 | ) | 14 | (600 | ) | |||||||
| Accounts payable |
(217 | ) | (28 | ) | 596 | |||||||
| Accrued liabilities and other |
(1,189 | ) | (2,845 | ) | 661 | |||||||
| Net cash used in operating activities |
(7,615 | ) | (11,530 | ) | (85,305 | ) | ||||||
| Cash flows from investing activities: |
& | |||||||||||