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
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 000-23541
NANOGEN, INC.
(Exact name of Registrant as specified in its charter)
| Delaware | 33-0489621 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 10398 Pacific Center Court, San Diego, CA | 92121 | |
| (Address of principal executive offices) | (Zip code) |
(858) 410-4600
(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 May 13, 2004, 34,025,094 shares of the Registrant’s Common Stock were outstanding.
FORM 10-Q
INDEX
2
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| March 31, 2004 |
December 31, 2003 |
|||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 32,030 | $ | 8,550 | ||||
| Short-term investments |
30,947 | 20,564 | ||||||
| Receivables, net |
2,333 | 1,415 | ||||||
| Inventories, net |
4,145 | 4,774 | ||||||
| Other current assets |
849 | 1,590 | ||||||
| Total current assets |
70,304 | 36,893 | ||||||
| Property and equipment, net |
3,898 | 4,276 | ||||||
| Acquired technology rights, net |
2,232 | 2,508 | ||||||
| Other assets, net |
1,513 | 172 | ||||||
| $ | 77,947 | $ | 43,849 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 170 | $ | 290 | ||||
| Accrued liabilities |
4,323 | 4,519 | ||||||
| Deferred revenue |
411 | 469 | ||||||
| Current portion of capital lease obligations |
580 | 743 | ||||||
| Total current liabilities |
5,484 | 6,021 | ||||||
| Capital lease obligations, less current portion |
530 | 586 | ||||||
| Other long-term liabilities |
4,304 | 4,419 | ||||||
| Total long-term liabilities |
4,834 | 5,005 | ||||||
| Stockholders’ equity: |
||||||||
| Convertible preferred stock, $0.001 par value, 5,000,000 shares authorized; no shares issued and outstanding at March 31, 2004 (unaudited) and December 31, 2003 |
— | — | ||||||
| Common stock, $0.001 par value, 50,000,000 shares authorized; 31,209,615 and 24,867,325 shares issued and outstanding at March 31, 2004 (unaudited) and December 31, 2003, respectively |
31 | 25 | ||||||
| Additional paid-in capital |
250,296 | 209,014 | ||||||
| Accumulated other comprehensive income |
11 | 1,136 | ||||||
| Deferred compensation |
(158 | ) | (175 | ) | ||||
| Accumulated deficit |
(181,629 | ) | (176,255 | ) | ||||
| Treasury stock, at cost, 500,189 shares at March 31, 2004 (unaudited) and December 31, 2003 |
(922 | ) | (922 | ) | ||||
| Total stockholders’ equity |
67,629 | 32,823 | ||||||
| $ | 77,947 | $ | 43,849 | |||||
See accompanying notes.
3
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
| Three months ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Revenues: |
||||||||
| Product |
$ | 1,132 | $ | 228 | ||||
| License |
152 | — | ||||||
| Sponsored research |
375 | 375 | ||||||
| Contract and grant |
500 | 597 | ||||||
| Total revenues |
2,159 | 1,200 | ||||||
| Costs and expenses: |
||||||||
| Cost of product sales |
914 | 274 | ||||||
| Research and development |
4,348 | 4,710 | ||||||
| Selling, general and administrative |
3,575 | 4,066 | ||||||
| Total costs and expenses |
8,837 | 9,050 | ||||||
| Loss from operations |
(6,678 | ) | (7,850 | ) | ||||
| Interest income, net |
102 | 195 | ||||||
| Other income/(expense) |
(20 | ) | 27 | |||||
| Loss on sale of investments |
— | (3,600 | ) | |||||
| Gain on foreign currency translation |
1,221 | — | ||||||
| Minority interest in loss of consolidated subsidiary |
— | 548 | ||||||
| Net loss |
$ | (5,375 | ) | $ | (10,680 | ) | ||
| Net loss per share – basic and diluted |
$ | (0.20 | ) | $ | (0.50 | ) | ||
| Number of shares used in computing net loss per share – basic and diluted |
26,936 | 21,540 | ||||||
See accompanying notes.
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
| Three months ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Operating activities: |
||||||||
| Net loss |
$ | (5,375 | ) | $ | (10,680 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
854 | 980 | ||||||
| Foreign currency translation gain |
(1,221 | ) | — | |||||
| Accretion related to short-term investments |
39 | 53 | ||||||
| Stock-based compensation expense |
— | 9 | ||||||
| Interest capitalized on notes receivables from officers |
15 | — | ||||||
| Minority interest in loss of consolidated subsidiary |
— | (548 | ) | |||||
| Loss (gain) on sale of short-term investments |
6 | 3,579 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Receivables |
(918 | ) | 349 | |||||
| Inventories |
401 | 75 | ||||||
| Other assets |
317 | 252 | ||||||
| Accounts payable |
(119 | ) | (138 | ) | ||||
| Accrued liabilities |
(196 | ) | (780 | ) | ||||
| Deferred revenue and other long-term liabilities |
(179 | ) | (113 | ) | ||||
| Net cash used in operating activities |
(6,376 | ) | (6,962 | ) | ||||
| Investing activities: |
||||||||
| Purchase of short-term investments |
(14,654 | ) | (1,551 | ) | ||||
| Proceeds from sale and maturities of short-term investments |
4,223 | 11,439 | ||||||
| Purchase of equipment, net |
(120 | ) | (433 | ) | ||||
| Funding of bridge notes receivable related to acquisition |
(805 | ) | — | |||||
| Net cash provided by (used in) investing activities |
(11,356 | ) | 9,455 | |||||
| Financing activities: |
||||||||
| Principal payments on capital lease obligations |
(219 | ) | (240 | ) | ||||
| Issuance of common stock, net |
41,288 | — | ||||||
| Net cash provided by (used in) financing activities |
41,069 | (240 | ) | |||||
| Effect of exchange rate changes |
143 | 80 | ||||||
| Net increase in cash and cash equivalents |
23,480 | 2,333 | ||||||
| Cash and cash equivalents at beginning of period |
8,550 | 9,353 | ||||||
| Cash and cash equivalents at end of period |
$ | 32,030 | $ | 11,686 | ||||
| Supplemental disclosure of cash flow information: |
||||||||
| Interest paid |
$ | 33 | $ | 52 | ||||
| Supplemental schedule of noncash investing and financing activities: |
||||||||
| Equipment acquired under capital leases |
$ | — | $ | 49 | ||||
| Inventory transferred to fixed assets |
$ | (122 | ) | $ | — | |||
| Unrealized loss on short-term investments |
$ | (10 | ) | $ | 4,689 | |||
| Acquisition of treasury stock in exchange for cancellation of officer note receivable |
$ | — | $ | 212 | ||||
| Equity instruments issued in connection with employee benefit plan, non-employees services, and purchase of license rights, net |
$ | (1 | ) | $ | 112 | |||
| Repayment of note receivable |
$ | — | $ | 300 | ||||
See accompanying notes.
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
March 31, 2004
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. The consolidated balance sheet as of March 31, 2004, consolidated statements of operations for the three months ended March 31, 2004 and 2003, and the consolidated statements of cash flows for the three months ended March 31, 2004 and 2003 are unaudited, but include all adjustments (consisting of normal recurring adjustments) which the Company considers necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2004 shown herein are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.
For more complete financial information, these financial statements, and notes thereto, should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2003 included in the Nanogen, Inc. Annual Report on Form 10-K for the year ended December 31, 2003, filed with the Securities and Exchange Commission.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures at the date of the financial statements, and the amounts of revenues and expenses reported during the period. Actual results could differ from those estimates.
Net Loss per Share
The Company computes net loss per share in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 128, “Earnings per Share.” Under the provisions of SFAS No. 128, basic net income (loss) per share is computed by dividing the net income (loss) available to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period and in the periods they are dilutive, common equivalent shares for outstanding stock options and warrants computed using the treasury stock method. The weighted average common shares outstanding during the period does not include those shares issued pursuant to the exercise of stock options prior to vesting and shares issued under the Company’s 401K benefit plan prior to vesting. In loss periods, common stock equivalents are excluded from the computation of diluted net loss per share as their effect would be anti-dilutive.
Stock-Based Compensation
The Company measures compensation cost related to stock option plans using the intrinsic value method and provides pro forma disclosures of net loss and loss per common share as if a fair value based method had been applied. Accordingly, compensation cost for stock options is measured as the excess, if any, of the fair value of the Company’s common stock at the date of grant over the amount an employee must pay to acquire the stock and is amortized over the vesting period.
6
NANOGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
March 31, 2004
Had the compensation cost for the Company’s stock-based compensation plans been determined based on the fair value at the grant dates for awards under those plans, the Company’s net loss and loss per common share would have been as follows (in thousands, except for loss per share):
| Three months ended March 31, (unaudited) |
||||||||
| 2004 |
2003 |
|||||||
| Net loss: |
||||||||
| As reported |
$ | (5,375 | ) | $ | (10,680 | ) | ||
| Stock-based compensation expense under fair value based method |
(922 | ) | (997 | ) | ||||
| Pro forma net loss |
$ | (6,297 | ) | $ | (11,677 | ) | ||
| Loss per common share: |
||||||||