NEOFORMA INC - 10-Q Quarterly Report

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, 2004

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934

For The Transition Period From To

Commission File No. 000-28715

NEOFORMA, INC.

(Exact name of the Registrant as Specified in its Charter)


Delaware		77-0424252
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

3061 Zanker Rd., San Jose, CA		95134
(Address of principal executive offices)		(Zip code)

(408) 468-4000

(The Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 Par Value Per Share

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 ¨

The number of shares of the Registrant’s common stock outstanding on August 2, 2004 was 20,073,295.

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION		3

ITEM 1.	Unaudited Condensed Consolidated Financial Statements:

	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003	3

	Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2004 and 2003	4

	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003	5

	Notes to Unaudited Condensed Consolidated Financial Statements	6

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	30

ITEM 4.	Controls and Procedures	30

PART II. OTHER INFORMATION		31

ITEM 1.	Legal Proceedings	31

ITEM 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities	31

ITEM 3.	Defaults Upon Senior Securities	31

ITEM 4.	Submission of Matters to a Vote of Security Holders	31

ITEM 5.	Other Information	32

ITEM 6.	Exhibits and Reports on Form 8-K	32

SIGNATURE		33

EXHIBITS

PART I. FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

NEOFORMA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(unaudited)


	December 31, 2003*			June 30, 2004
Assets
Current assets:
Cash and cash equivalents	$	13,481		$	20,375
Short-term investments		3,138			2,138
Accounts receivable, net of reserves of $235 and $322 as of December 31, 2003 and June 30, 2004, respectively		3,776			3,533
Related party accounts receivable		456			—
Prepaid expenses and other current assets		2,775			2,583

Total current assets		23,626			28,629
Property and equipment, net		7,432			9,890
Intangibles, net		2,022			1,728
Goodwill		1,652			1,652
Capitalized partnership costs, net		106,003			75,070
Non-marketable investments		83			83
Restricted cash		1,020			1,020
Other assets		1,376			885

Total assets	$	143,214		$	118,957

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,727		$	1,533
Accrued payroll		4,199			3,848
Other accrued liabilities		3,183			2,734
Deferred revenue		2,651			1,922

Total current liabilities		12,760			10,037
Deferred rent		657			621
Deferred revenue, less current portion		554			468

Total liabilities		13,971			11,126

Stockholders’ equity:
Preferred stock, $0.001 par value per share:
Authorized—5,000 shares, no shares issued and outstanding at December 31, 2003 and June 30, 2004, respectively		—			—
Common stock, $0.001 par value per share:
Authorized—300,000 shares at December 31, 2003 and June 30, 2004, respectively
Issued and outstanding: 18,943 and 19,915 shares at December 31, 2003 and June 30, 2004, respectively		19			20
Additional paid-in capital		827,570			837,288
Notes receivable from stockholders		(5,422	)		(203	)
Deferred compensation		(218	)		(4,940	)
Unrealized gain on available for sale securities		1			1
Accumulated deficit		(692,707	)		(724,335	)

Total stockholders’ equity		129,243			107,831

Total liabilities and stockholders’ equity	$	143,214		$	118,957

*	Derived from audited financial statements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

NEOFORMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2003			2004			2003			2004
Revenue:
Related party revenue, net (see Note 3)	$	—		$	—		$	539		$	—
Non-related party revenue		2,519			3,340			4,582			6,268

Total revenue		2,519			3,340			5,121			6,268
Operating expenses:
Cost of services		1,481			2,682			2,859			4,743
Operations		4,799			2,811			9,941			5,809
Product development		4,183			4,403			8,926			8,041
Selling and marketing		4,633			3,513			9,610			7,169
General and administrative		3,130			2,468			6,097			4,706
Amortization of intangibles		147			147			294			294
Amortization of partnership costs (see Note 3)		833			1,669			833			3,141
Write-off of stockholder notes receivable		—			4,115			—			4,115

Total operating expenses		19,206			21,808			38,560			38,018

Loss from operations		(16,687	)		(18,468	)		(33,439	)		(31,750	)
Other income/(expense):
Interest income		80			55			131			124
Interest expense		(300	)		(2	)		(574	)		(3	)
Other income/(expense)		(41	)		1			(117	)		1

Net loss	$	(16,948	)	$	(18,414	)	$	(33,999	)	$	(31,628	)

Net loss per share:
Basic and diluted	$	(0.94	)	$	(0.95	)	$	(1.91	)	$	(1.65	)

Weighted average shares—basic and diluted		17,985			19,357			17,763			19,213

The accompanying notes are an integral part of these condensed consolidated financial statements.

NEOFORMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2003			2004
Cash flows from operating activities:
Net loss	$	(33,999	)	$	(31,628	)
Adjustments to reconcile net loss to net cash used in operating activities:
Restricted common stock issued to employees		10			—
Provision for doubtful accounts		141			110
Accrued interest receivable on notes receivable from stockholders		(32	)		(11	)
Depreciation and amortization of property and equipment		7,061			2,483
Amortization of intangibles		294			294
Amortization of partnership costs classified as an operating expense (see Note 3)		833			3,141
Amortization of deferred compensation		1,717			1,666
Write-off of stockholder notes receivable		—			4,115
Change in assets and liabilities:
Accounts receivable		(1,698	)		589
Prepaid expenses and other current assets		378			192
Other assets		357			491
Accounts payable		(1,734	)		(1,194	)
Other accrued liabilities and accrued payroll		(4,159	)		(797	)
Deferred revenue		1,039			(815	)
Deferred rent		21			(36	)
Accrued interest on related party notes payable		(2,271	)		—

Net cash used in operating activities		(32,042	)		(21,400	)

Cash flows from investing activities:
Purchases of marketable investments		(2,082	)		(2,890	)
Proceeds from the sale or maturity of marketable investments		2,005			3,890
Capitalization of software development costs		—			(3,236	)
Purchases of property and equipment		(3,679	)		(1,652	)

Net cash used in investing activities		(3,756	)		(3,888	)

Cash flows from financing activities:
Amortization of partnership costs offset against related party revenue (see Note 3)		34,531			30,937
Repayments of notes payable		(3,399	)

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