UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Mark One
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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: 000-31255
ISTA PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
| DELAWARE | 33-0511729 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
15279 ALTON PARKWAY #100, IRVINE, CA 92618
(Address of principal executive offices)
(949) 788-6000
(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 Exchange Act Rule 12b-2) Yes ¨ No x
The number of shares of the registrant’s common stock, $.001 par value, outstanding as of July 9, 2004 was 17,462,961.
Table of Contents
| Page No | ||||
| PART I | FINANCIAL INFORMATION (Unaudited) | 3 | ||
| Item 1 |
3 | |||
| Condensed Consolidated Balance Sheets — June 30, 2004 and December 31, 2003 |
3 | |||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| Item 2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
10 | ||
| Item 3 |
23 | |||
| Item 4 |
24 | |||
| PART II | OTHER INFORMATION | 24 | ||
| Item 1 |
24 | |||
| Item 4 |
24 | |||
| Item 5 |
24 | |||
| Item 6 |
24 | |||
| 25 | ||||
| 26 | ||||
2
Item 1 Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(Unaudited)
| June 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 10,937 | $ | 16,988 | ||||
| Short-term investments |
24,582 | 31,475 | ||||||
| Inventory, net |
558 | — | ||||||
| Other current assets |
883 | 1,035 | ||||||
| Total current assets |
36,960 | 49,498 | ||||||
| Property and equipment, net |
343 | 649 | ||||||
| Deposits and other assets |
139 | 35 | ||||||
| Total Assets |
$ | 37,442 | $ | 50,182 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,131 | $ | 2,072 | ||||
| Accrued compensation and related expenses |
708 | 699 | ||||||
| Accrued expenses — clinical trials |
301 | 476 | ||||||
| Other liabilities |
366 | — | ||||||
| Other accrued expenses |
3,144 | 2,058 | ||||||
| Total current liabilities |
5,650 | 5,305 | ||||||
| Deferred rent |
5 | 9 | ||||||
| Deferred income |
4,305 | 4,444 | ||||||
| Long term liabilities |
366 | — | ||||||
| Stockholders’ equity: |
||||||||
| Common stock, $.001 par value; 100,000,000 shares authorized at June 30, 2004 and December 31, 2003; 17,457,556 and 17,375,439 shares issued and outstanding at June 30, 2004 and December 31, 2003, respectively |
17 | 17 | ||||||
| Additional paid in capital |
188,716 | 188,621 | ||||||
| Deferred compensation |
(342 | ) | (547 | ) | ||||
| Accumulated other comprehensive income |
(84 | ) | (28 | ) | ||||
| Deficit accumulated during the development stage |
(161,191 | ) | (147,639 | ) | ||||
| Total stockholders’ equity |
27,116 | 40,424 | ||||||
| Total Liabilities and Stockholders’ Equity |
$ | 37,442 | $ | 50,182 | ||||
Note: The balance sheet at December 31, 2003 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
3
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
For the Period From February 13, 1992 (Inception) Through June 30, |
||||||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
2004 |
||||||||||||||||
| Revenue |
$ | 70 | $ | 70 | $ | 139 | $ | 139 | $ | 695 | ||||||||||
| Operating expenses: |
||||||||||||||||||||
| Research and development |
5,562 | 3,924 | 8,589 | 7,350 | 99,302 | |||||||||||||||
| Selling, general and administrative |
2,951 | 2,288 | 5,380 | 4,352 | 45,768 | |||||||||||||||
| Total operating expenses |
8,513 | 6,212 | 13,969 | 11,702 | 145,070 | |||||||||||||||
| Loss from operations |
(8,443 | ) | (6,142 | ) | (13,830 | ) | (11,563 | ) | (144,375 | ) | ||||||||||
| Interest income |
131 | 94 | 280 | 209 | 3,279 | |||||||||||||||
| Interest expense |
— | (1 | ) | (2 | ) | (6 | ) | (805 | ) | |||||||||||
| Net loss |
(8,312 | ) | (6,049 | ) | (13,552 | ) | (11,360 | ) | (141,901 | ) | ||||||||||
| Deemed dividend for preferred stockholders |
— | — | — | — | (19,245 | ) | ||||||||||||||
| Net loss attributable to common stockholders |
$ | (8,312 | ) | $ | (6,049 | ) | $ | (13,552 | ) | $ | (11,360 | ) | $ | (161,146 | ) | |||||
| Net loss per common share, basic and diluted |
$ | (0.48 | ) | $ | (0.45 | ) | $ | (0.78 | ) | $ | (0.85 | ) | ||||||||
| Shares used in computing net loss per common share, basic and diluted |
17,457 | 13,300 | 17,452 | 13,295 | ||||||||||||||||
4
Condensed Consolidated Statements of Cash Flows
(In thousands, unaudited)
| Six Months Ended June 30, |
For the Period February 13, June 30, |
|||||||||||
| 2004 |
2003 |
2004 |
||||||||||
| Operating Activities | ||||||||||||
| Net loss attributable to common stockholders |
$ | (13,552 | ) | $ | (11,360 | ) | $ | (161,146 | ) | |||
| Deemed dividend for preferred stockholders |
— | — | 19,245 | |||||||||
| Adjustments to reconcile net loss attributable to common stockholders to net cash used in operating activities: |
||||||||||||
| Amortization of deferred compensation |
205 | 556 | 9,732 | |||||||||
| Amortization of fair value of warrant discount and related accrued interest |
— | (9 | ) | 467 | ||||||||
| Common stock issued for services |
— | — | 310 | |||||||||
| Forgiveness of note receivable |
— | — | 162 | |||||||||
| Depreciation and amortization |
137 | 174 | 2,146 | |||||||||
| Transfer of equipment for technology |
214 | — | 214 | |||||||||
| Deferred rent |
(4 | ) | 1 | 5 | ||||||||
| Deferred income |
(139 | ) | (139 | ) | 4,305 | |||||||
| Changes in operating assets and liabilities: |
||||||||||||
| Other current assets |
(964 | ) | 9 | (1,999 | ) | |||||||
| Inventory, net |
558 | — | 558 | |||||||||
| Note receivable from officer |
— | — | (162 | ) | ||||||||
| Accounts payable |
(941 | ) | 934 | 1,132 | ||||||||
| Accrued compensation and related expenses |
9 | (456 | ) | 708 | ||||||||
| Accrued expenses - clinical trials and other accrued expenses |
911 | (347 | ) | 3,569 | ||||||||
| Other liabilities |
732 | — | 732 | |||||||||
| License fee received from Visionex |
— | — | 5,000 | |||||||||
| Net cash used in operating activities |
(12,834 | ) | (10,637 | ) | (115,022 | ) | ||||||
| Investing Activities | ||||||||||||
| Purchase of marketable investment securities |
(3,420 | ) | (9,330 | ) | (87,127 | ) | ||||||
| Sale of marketable investment securities |
10,311 | 2,799 | 62,510 | |||||||||
| Purchase of equipment |
(45 | ) | (57 | ) | (2,700 | ) | ||||||
| Deposits and other assets |
(104 | ) | — | (157 | ) | |||||||
| Proceeds from refinancing under capital leases |
— | — | 827 | |||||||||
| Cash acquired from Visionex transaction |
— | — | 4,403 | |||||||||
| Net cash provided by (used in) investing activities |
6,742 | (6,588 | ) | (22,244 | ) | |||||||
| Financing Activities | ||||||||||||
| Payments on obligation under capital lease |
— | — | (827 | ) | ||||||||
| Proceeds from exercise of stock options |
18 | 84 | 1,000 | |||||||||
| Proceeds from exercise of warrants |
— | — | 41 | |||||||||
| Proceeds from bridge loans with related parties |
— | — | 5,047 | |||||||||
| Payments on bridge loans with related parties |
— | — | (3,755 | ) | ||||||||