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, 2004
| ¨ | 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 0-33045
SERACARE LIFE SCIENCES, INC.
(Exact name of Registrant as specified in its charter)
| California | 33-0056054 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
| 1935 Avenida del Oro, Suite F Oceanside, California |
92056 | |
| (Address of Principal Executive offices) | (Zip Code) | |
Registrant’s Telephone Number: (760) 806-8922
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 April 30, 2004, 7,814,433 shares of the Registrant’s common stock, no par value, were outstanding.
Table of Contents
| Page Number | ||||
| PART I FINANCIAL INFORMATION | ||||
| ITEM 1. | Financial Statements (unaudited) | |||
| Balance Sheets as of March 31, 2004 and September 30, 2003 | 3 | |||
| Statements of Income for the Three Month and Six Month Periods Ended March 31, 2004 and 2003 | 4 | |||
| Statements of Cash Flows for the Six Month Periods Ended March 31, 2004 and 2003 | 5 | |||
| Notes to Financial Statements | 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 | 16 | ||
| ITEM 4. | Controls and Procedures | 16 | ||
| PART II OTHER INFORMATION | ||||
| ITEM 1. | Legal Proceedings | 17 | ||
| ITEM 2. | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities | 17 | ||
| ITEM 3. | Defaults Upon Senior Securities | 17 | ||
| ITEM 4. | Submission of Matters to a Vote of Security Holders | 17 | ||
| ITEM 5. | Other Information | 18 | ||
| ITEM 6. | Exhibits and Reports on Form 8-K | 18 | ||
| 19 | ||||
2
Balance Sheets
(unaudited)
(in thousands, except for share data)
| March 31, 2004 |
September 30, 2003 | |||||
| ASSETS | ||||||
| Current assets: |
||||||
| Cash and cash equivalents |
$ | 724 | $ | 2,989 | ||
| Accounts receivable, net of allowance for doubtful accounts of $89 as of March 31, 2004 and September 30, 2003 |
6,073 | 5,969 | ||||
| Inventory, net |
12,105 | 10,554 | ||||
| Prepaid expenses and other current assets |
1,178 | 225 | ||||
| Total current assets |
20,080 | 19,737 | ||||
| Property and equipment, net |
1,217 | 1,228 | ||||
| Goodwill |
6,785 | 6,775 | ||||
| Other assets |
443 | 112 | ||||
| Total assets |
$ | 28,525 | $ | 27,852 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Current liabilities: |
||||||
| Accounts payable |
$ | 4,064 | $ | 1,888 | ||
| Accounts payable to related parties |
896 | 2,415 | ||||
| Accrued expenses |
846 | 626 | ||||
| Related party bridge note |
— | 2,500 | ||||
| Total current liabilities |
5,806 | 7,429 | ||||
| Line of credit |
500 | — | ||||
| Total liabilities |
6,306 | 7,429 | ||||
| Commitments and contingencies (Note 6) |
— | — | ||||
| Stockholders’ equity: |
||||||
| Preferred stock, no par value, 25,000,000 shares authorized, no shares issued and Outstanding |
— | — | ||||
| Common stock, no par value, 25,000,000 shares authorized, 7,814,433 and 7,714,492 shares issued and outstanding as of March 31, 2004 and September 30, 2003, respectively |
1,903 | 1,750 | ||||
| Additional paid-in capital |
13,519 | 13,519 | ||||
| Retained earnings |
6,797 | 5,154 | ||||
| Total stockholders’ equity |
22,219 | 20,423 | ||||
| Total liabilities and stockholders’ equity |
$ | 28,525 | $ | 27,852 | ||
See accompanying notes to financial statements
3
Statements of Income
(unaudited)
(in thousands, except per share data)
| Three months ended March 31, |
Six months ended March 31, | |||||||||||||
| 2004 |
2003 |
2004 |
2003 | |||||||||||
| Net sales |
$ | 6,461 | $ | 6,089 | $ | 11,438 | $ | 11,883 | ||||||
| Cost of sales |
4,267 | 4,267 | 7,340 | 8,342 | ||||||||||
| Gross profit |
2,194 | 1,822 | 4,098 | 3,541 | ||||||||||
| Selling, general and administrative expenses |
1,064 | 956 | 2,378 | 1,888 | ||||||||||
| Income from operations |
1,130 | 866 | 1,720 | 1,653 | ||||||||||
| Other (expense) income |
(44 | ) | 8 | (68 | ) | 23 | ||||||||
| Income before income tax expense |
1,086 | 874 | 1,652 | 1,676 | ||||||||||
| Income tax expense |
210 | 85 | 9 | 164 | ||||||||||
| Net income |
$ | 876 | $ | 789 | $ | 1,643 | $ | 1,512 | ||||||
| Earnings per common share: |
||||||||||||||
| Basic |
$ | 0.11 | $ | 0.11 | $ | 0.21 | $ | 0.20 | ||||||
| Diluted |
$ | 0.10 | $ | 0.10 | $ | 0.18 | $ | 0.18 | ||||||
| Weighted average shares used in per share calculation: |
||||||||||||||
| Basic |
7,814 | 7,449 | 7,772 | 7,411 | ||||||||||
| Diluted |
9,058 | 8,277 | 9,009 | 8,315 | ||||||||||
See accompanying notes to financial statements
4
Statements of Cash Flows
(unaudited)
(in thousands)
| Six months ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Cash Flows from Operating activities: |
||||||||
| Net income |
$ | 1,643 | $ | 1,512 | ||||
| Adjustments to reconcile net income to cash used in operating activities: |
||||||||
| Depreciation and amortization |
93 | 66 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable, net |
(104 | ) | (2,992 | ) | ||||
| Inventory |
(1,551 | ) | (990 | ) | ||||
| Prepaid expenses and other current assets |
(913 | ) | (28 | ) | ||||
| Other assets |
(331 | ) | — | |||||
| Accounts payable |
2,176 | 898 | ||||||
| Accounts payable to related parties |
(1,519 | ) | 1,798 | |||||
| Accrued expenses |
220 | (309 | ) | |||||
| Net cash used in operating activities |
(286 | ) | (45 | ) | ||||
| Cash Flows from Investing activities: |
||||||||
| Purchase of property and equipment |
(82 | ) | (80 | ) | ||||
| Acquisition of assets of BioMedical Resources, Inc. |
(10 | ) | — | |||||
| Net cash used in investing activities |
(92 | ) | (80 | ) | ||||
| Cash Flows from Financing activities: |
||||||||
| Exercise of options and warrants |
113 | 54 | ||||||
| Borrowings on line of credit |
500 | — | ||||||
| Principal payment of related party bridge note |
(2,500 | ) | — | |||||
| Net cash provided by (used in) financing activities |
(1,887 | ) | 54 | |||||
| Net decrease in cash and cash equivalents |
(2,265 | ) | (71 | ) | ||||
| Cash and cash equivalents, beginning of period |
2,989 | 4,818 | ||||||
| Cash and cash equivalents, end of period |
$ | 724 | $ | 4,747 | ||||
| Supplemental disclosure of noncash investing and financing activities: |
||||||||
| Issuance of options |
$ | 40 | $ | — | ||||
See accompanying notes to financial statements
5
Notes to Financial Statements
Unaudited
1. Basis of Presentation
The information contained herein has been prepared in accordance with instructions for Form 10-Q and Rule 10-01 of Regulation S-X. The information as of March 31, 2004 and for the three and six months ended March 31, 2004 and 2003 are unaudited. In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting only of normal and recurring accruals) necessary to present fairly the financial position of SeraCare Life Sciences, Inc. (the “Company” or “we”) as of March 31, 2004, the results of its operations for the three and six months ended March 31, 2004 and 2003, and cash flows for the six months ended March 31, 2004 and 2003. These results have been determined on the basis of accounting principles generally accepted in the United States of America and applied consistently with those used in the preparation of the audited financial statements for the fiscal year ended September 30, 2003 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission.
The results of operations for the three and six months ended March 31, 2004 are not necessarily indicative of the results to be expected for any other period or for the entire current fiscal year.
Certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with the applicable rules to Form 10-Q. The accompanying financial statements should be read in conjunction with our audited financial statements and notes thereto for the fiscal year ended September 30, 2003.
Certain amounts in prior period financial statements have been reclassified to conform to current period classifications.
2. Stock-Based Compensation
At March 31, 2004, the Company’s stock-based employee and director incentive compensation plan is accounted for under the recognition and measurement principles of APB No. 25, “Accounting for Stock Issued to Employees” and related interpretations. The following table illustrates the effect on net income and earnings per share if the Company had applied the “fair value” recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee and director compensation.
| Three months ended March 31, |
Six months ended March 31, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| (in thousands, except for per share data) | ||||||||||||||||
| Net income, as reported |
$ | 876 | $ | 789 | $ | 1,643 | $ | 1,512 | ||||||||
| Add: Stock-based compensation expense included in report of net income |
— | — | — | — | ||||||||||||
| Deduct: Total stock-based employee and director compensation expense determined under fair value based method for all awards, net of related tax effects |
(47 | ) | (10 | ) | (239 | ) | (173 | ) | ||||||||
| Pro forma net income |
$ | 829 | $ | 779 | $ | 1,404 | $ | 1,339 | ||||||||
| Earnings per common share: |
||||||||||||||||
| Basic – as reported |
$ | 0.11 | $ | 0.11 | $ | 0.21 | $ | 0.20 | ||||||||
| Basic - pro forma |
$ | 0.11 | $ | 0.10 | $ | 0.18 | $ | 0.18 | ||||||||
| Diluted - as reported |
$ | 0.10 | $ | 0.10 | $ | 0.18 | $ | 0.18 | ||||||||
| Diluted - pro forma |
$ | 0.09 | $ | 0.09 | $ | 0.16 | $ | 0.16 | ||||||||
6
The fair value of the stock options were estimated at the date of grant using the “Black-Scholes” method for option pricing and the following weighted average assumptions were used for grants made during the three and six months ended March 31, 2004 and 2003, respectively: