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, 2004.
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 001-16537
ORASURE TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
| DELAWARE | 36-4370966 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(IRS Employer Identification No.) |
| 220 East First Street, Bethlehem, Pennsylvania | 18015 | |
| (Address of Principal Executive Offices) | (Zip code) |
(610) 882-1820
(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 x No ¨
Number of shares of Common Stock, par value $.000001 per share, outstanding as of May 3, 2004: 44,457,840
|
Page No. | ||||
| PART I. FINANCIAL INFORMATION | ||||
| Item 1. |
Financial Statements (unaudited) | 3 | ||
| 3 | ||||
| Statements of Operations for the three months ended March 31, 2004 and 2003 |
4 | |||
| Statements of Cash Flows for the three months ended March 31, 2004 and 2003 |
5 | |||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 11 | ||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 22 | ||
| Item 4. |
Controls and Procedures | 22 | ||
| PART II. OTHER INFORMATION | ||||
| Item 1. |
Legal Proceedings | 22 | ||
| Item 6. |
Exhibits and Reports on Form 8-K | 23 | ||
| 24 | ||||
- 2 -
BALANCE SHEETS
(Unaudited)
| March 31, 2004 |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 11,050,790 | $ | 30,695,177 | ||||
| Short-term investments |
52,702,979 | 33,328,610 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $361,397 and $359,158 |
7,430,410 | 8,233,869 | ||||||
| Inventories |
4,327,193 | 4,003,519 | ||||||
| Prepaid expenses and other |
1,069,099 | 922,820 | ||||||
| Total current assets |
76,580,471 | 77,183,995 | ||||||
| PROPERTY AND EQUIPMENT, net |
6,412,065 | 6,471,209 | ||||||
| PATENTS AND PRODUCT RIGHTS, net |
1,721,906 | 1,886,171 | ||||||
| OTHER ASSETS |
599,555 | 609,932 | ||||||
| $ | 85,313,997 | $ | 86,151,307 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| CURRENT LIABILITIES: |
||||||||
| Current portion of long-term debt |
$ | 1,129,309 | $ | 1,126,423 | ||||
| Accounts payable |
2,575,653 | 3,511,148 | ||||||
| Accrued expenses |
5,549,054 | 5,375,851 | ||||||
| Total current liabilities |
9,254,016 | 10,013,422 | ||||||
| LONG-TERM DEBT |
2,171,806 | 2,456,454 | ||||||
| OTHER LIABILITIES |
258,641 | 172,142 | ||||||
| COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ EQUITY: |
||||||||
| Preferred stock, par value $.000001, 25,000,000 shares authorized, none issued |
— | — | ||||||
| Common stock, par value $.000001, 120,000,000 shares authorized, 44,326,756 and 44,260,931 shares issued and outstanding |
44 | 44 | ||||||
| Additional paid-in capital |
205,554,806 | 204,867,765 | ||||||
| Deferred compensation |
(1,009,143 | ) | (614,515 | ) | ||||
| Accumulated other comprehensive loss |
(183,658 | ) | (173,704 | ) | ||||
| Accumulated deficit |
(130,732,515 | ) | (130,570,301 | ) | ||||
| Total stockholders’ equity |
73,629,534 | 73,509,289 | ||||||
| $ | 85,313,997 | $ | 86,151,307 | |||||
The accompanying notes are an integral part of these statements.
- 3 -
STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| REVENUES: |
||||||||
| Product |
$ | 12,288,868 | $ | 8,342,964 | ||||
| Licensing and product development |
119,740 | 267,672 | ||||||
| 12,408,608 | 8,610,636 | |||||||
| COST OF PRODUCTS SOLD |
5,190,530 | 3,580,116 | ||||||
| Gross profit |
7,218,078 | 5,030,520 | ||||||
| OPERATING EXPENSES: |
||||||||
| Research and development |
1,767,157 | 2,054,711 | ||||||
| Sales and marketing |
3,650,716 | 2,235,137 | ||||||
| General and administrative |
2,125,972 | 1,865,621 | ||||||
| 7,543,845 | 6,155,469 | |||||||
| Operating loss |
(325,767 | ) | (1,124,949 | ) | ||||
| INTEREST EXPENSE |
(31,413 | ) | (48,605 | ) | ||||
| INTEREST INCOME |
205,759 | 85,573 | ||||||
| FOREIGN CURRENCY LOSS |
(6,293 | ) | — | |||||
| Loss before income taxes |
(157,714 | ) | (1,087,981 | ) | ||||
| INCOME TAXES |
4,500 | 4,879 | ||||||
| NET LOSS |
$ | (162,214 | ) | $ | (1,092,860 | ) | ||
| BASIC AND DILUTED NET LOSS PER SHARE |
$ | (0.00 | ) | $ | (0.03 | ) | ||
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |
44,270,845 | 38,248,521 | ||||||
The accompanying notes are an integral part of these statements.
- 4 -
STATEMENTS OF CASH FLOWS
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | (162,214 | ) | $ | (1,092,860 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
| Stock-based compensation expense |
63,772 | 33,900 | ||||||
| Depreciation and amortization |
597,487 | 626,847 | ||||||
| Provision for excess and obsolete inventories |
140,014 | 111,284 | ||||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
803,459 | (300,812 | ) | |||||
| Inventories |
(463,688 | ) | (71,908 | ) | ||||
| Prepaid expenses and other assets |
(146,279 | ) | 10,181 | |||||
| Accounts payable, accrued expenses, and other liabilities |
(693,574 | ) | 855,274 | |||||
| Net cash provided by operating activities |
138,977 | 171,906 | ||||||
| INVESTING ACTIVITIES: |
||||||||
| Purchases of short-term investments |
(27,106,355 | ) | (6,790,725 | ) | ||||
| Proceeds from the sale of short-term investments |
7,733,157 | 4,803,559 | ||||||
| Purchases of property and equipment |
(345,904 | ) | (411,798 | ) | ||||
| Purchases of patent and product rights |
— | (250,000 | ) | |||||
| Increase in other assets |
(16 | ) | (1,287 | ) | ||||
| Net cash used in investing activities |
(19,719,118 | ) | (2,650,251 | ) | ||||
| FINANCING ACTIVITIES: |
||||||||
| Borrowings of term debt |
— | 108,683 | ||||||
| Repayments of term debt |
(281,762 | ) | (270,545 | ) | ||||
| Proceeds from issuance of common stock |
228,641 | 1,001,064 | ||||||
| Net cash provided by (used in) financing activities |
(53,121 | ) | 839,202 | |||||
| EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH |
(11,125 | ) | 6,915 | |||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS |
(19,644,387 | ) | (1,632,228 | ) | ||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
30,695,177 | 4,364,308 | ||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 11,050,790 | $ | 2,732,080 | ||||
The accompanying notes are an integral part of these statements.
- 5 -
Notes to Financial Statements
(Unaudited)
1. The Company
We develop, manufacture and market oral specimen collection devices using our proprietary oral fluid technologies, diagnostic products including in vitro diagnostic tests, and other medical devices. These products are sold in the United States and internationally to various clinical laboratories, hospitals, clinics, community-based organizations and other public health organizations, distributors, government agencies, physicians’ offices, and commercial and industrial entities.
2. Summary of Significant Accounting Policies
Basis of Presentation. The accompanying financial statements are unaudited and, in the opinion of management, include all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of the results for these interim periods. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003. Results of operations for the three-month period ended March 31, 2004 are not necessarily indicative of the results of operations expected for the full year.
Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents. We consider all highly liquid investments with a purchased maturity of ninety days or less to be cash equivalents. As of March 31, 2004 and December 31, 2003, cash equivalents consisted of certificates of deposit, commercial paper, U.S. government and agency obligations, state and local government agency obligations and corporate bonds.
Short-term Investments. We consider all short-term investments to be available-for-sale securities, in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” These securities are comprised of certificates of deposits, commercial paper, U.S. government and agency obligations, state and local government agency obligations, corporate bonds, and asset-backed obligations with purchased maturities greater than ninety days. Available-for-sale securities are carried at fair value, based upon quoted market prices, with unrealized gains and losses reported in stockholders’ equity as a component of accumulated other comprehensive loss.
- 6 -
The following is a summary of our available-for-sale securities at March 31, 2004 and December 31, 2003:
| Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value | ||||||||||
| March 31, 2004 |
|||||||||||||
| Certificates of deposit |
$ | 14,881,782 | $ | 613 | $ | (5,159 | ) | $ | 14,877,236 | ||||
| Commercial paper |
5,085,112 | 248 | — | 5,085,360 | |||||||||
| Government and agency bonds |
21,015,438 | 12,343 | (1,366 | ) | 21,026,415 | ||||||||
| State and local government agency obligations |
586,783 | 1,385 | (283 | ) | 587,885 | ||||||||
| Corporate bonds |
7,395,981 | 6,997 | (2,779 | ) | 7,400,199 | ||||||||
| Asset-backed obligations |
3,724,535 | 1,792 | (443 | ) | 3,725,884 | ||||||||
| Total available-for-sale securities |
$ | 52,689,631 | $ | 23,378 | $ | (10,030 | ) | $ | 52,702,979 | ||||
| December 31, 2003 |
|||||||||||||
| Certificates of deposit |
$ | 14,047,127 | $ | 1,167 | $ | (5,586 | ) | $ | 14,042,708 | ||||
| Commercial paper |
1,296,941 | 121 | — | 1,297,062 | |||||||||
| Government and agency bonds |
14,483,893 | 7,667 | — | 14,491,560 | |||||||||
| State and local government agency obligations |
629,999 | 1,118 | (3 | ) | 631,114 | ||||||||
| Corporate bonds |
2,867,261 | 1,641 | (2,736 | ) | 2,866,166 | ||||||||
| Total available-for-sale securities |
$ | 33,325,221 | $ | 11,714 | $ | (8,325 | ) | $ | 33,328,610 | ||||
| At March 31, 2004, maturities of investments were as follows: |
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