UNITED STATES
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
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period to .
Commission file number: 000-50644
CUTERA, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 77-0492262 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. employer identification no.) |
3240 Bayshore Blvd., Brisbane, California 94005
(Address of principal executive offices)
(415) 657-5500
(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
The number of shares of Registrant’s common stock issued and outstanding as of August 3, 2004 was 10,709,025.
FORM 10-Q
TABLE OF CONTENTS
2
Forward-Looking Statements
This report contains forward-looking statements within the meaning of the U.S. federal securities laws that involve risks and uncertainties. Certain statements contained in this report are not purely historical including, without limitation, statements regarding our expectations, beliefs, intentions or strategies regarding the future that are forward-looking. These statements include those discussed in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, including “Liquidity and Capital Resources,” and “Factors That May Affect Future Results,” and elsewhere in this report. These statements include statements concerning projected revenues, international revenues, expenses, gross profit, income, product development and market acceptance of our products.
In this report, the words “anticipate,” “believe,” “expect,” “intend,” “future,” and similar expressions also identify forward-looking statements. Our actual results could differ materially from those forward-looking statements contained in this report as a result of a number of risk factors including, but not limited to, those set forth in the section entitled “Factors That May Affect Future Results” and elsewhere in this report. You should carefully consider these risks, in addition to the other information in this report and in our other filings with the SEC. All forward-looking statements and reasons why results may differ included in this report are made as of the date of this report, and we assume no obligation to update any such forward-looking statement or reason why such results might differ.
3
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
| June 30, 2004 |
December 31, 2003 |
|||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 52,652 | $ | 10,290 | ||||
| Restricted cash |
250 | 250 | ||||||
| Short-term investments |
6,090 | — | ||||||
| Accounts receivable, net |
6,543 | 7,597 | ||||||
| Inventory |
2,935 | 2,239 | ||||||
| Current portion of deferred tax asset |
2,107 | 1,699 | ||||||
| Other current assets |
993 | 879 | ||||||
| Total current assets |
71,570 | 22,954 | ||||||
| Property and equipment, net |
976 | 734 | ||||||
| Intangibles, net |
426 | 453 | ||||||
| Deferred tax asset, net of current portion |
46 | 57 | ||||||
| Total assets |
$ | 73,018 | $ | 24,198 | ||||
| Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity |
||||||||
| Liabilities: |
||||||||
| Accounts payable |
$ | 2,387 | $ | 1,915 | ||||
| Accrued liabilities |
5,317 | 5,709 | ||||||
| Deferred revenue |
1,046 | 1,125 | ||||||
| Total current liabilities |
8,750 | 8,749 | ||||||
| Deferred rent |
424 | — | ||||||
| Deferred revenue, net of current portion |
592 | 202 | ||||||
| Total liabilities |
9,766 | 8,951 | ||||||
| Contingencies (Note 6): |
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| Redeemable convertible preferred stock |
— | 7,372 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock |
11 | 2 | ||||||
| Additional paid-in capital |
61,253 | 7,579 | ||||||
| Deferred stock-based compensation |
(3,002 | ) | (3,888 | ) | ||||
| Retained earnings |
4,994 | 4,182 | ||||||
| Other comprehensive loss |
(4 | ) | — | |||||
| Total stockholders’ equity |
63,252 | 7,875 | ||||||
| Total liabilities and stockholders’ equity |
$ | 73,018 | $ | 24,198 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Net revenue |
$ | 12,265 | $ | 9,018 | $ | 23,845 | $ | 15,614 | ||||||||
| Cost of revenue(1) |
3,400 | 2,760 | 7,049 | 4,993 | ||||||||||||
| Gross profit |
8,865 | 6,258 | 16,796 | 10,621 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Sales and marketing |
4,623 | 3,049 | 8,901 | 5,537 | ||||||||||||
| Research and development |
1,047 | 683 | 2,006 | 1,435 | ||||||||||||
| General and administrative |
1,909 | 1,179 | 3,978 | 2,261 | ||||||||||||
| Amortization of deferred stock compensation (1) |
316 | 196 | 637 | 373 | ||||||||||||
| Total operating expenses |
7,895 | 5,107 | 15,522 | 9,606 | ||||||||||||
| Income from operations |
970 | 1,151 | 1,274 | 1,015 | ||||||||||||
| Interest and other income (expense), net |
(2 | ) | 12 | 57 | 30 | |||||||||||
| Income before income taxes |
968 | 1,163 | 1,331 | 1,045 | ||||||||||||
| Provision for income taxes |
(377 | ) | (468 | ) | (519 | ) | (421 | ) | ||||||||
| Net income |
$ | 591 | $ | 695 | $ | 812 | $ | 624 | ||||||||
| Net income available to common stockholders used in basic earnings per share (see Note 3 Recent Accounting Pronouncements) |
$ | 576 | $ | 213 | $ | 648 | $ | 192 | ||||||||
| Net income per share: (see Note 7 Net Income Per Share) |
||||||||||||||||
| Basic |
$ | 0.06 | $ | 0.10 | $ | 0.11 | $ | 0.09 | ||||||||
| Diluted |
$ | 0.05 | $ | 0.08 | $ | 0.07 | $ | 0.07 | ||||||||
| Weighted-average number of shares used in per share calculations: |
||||||||||||||||
| Basic |
10,289 | 2,071 | 5,997 | 2,036 | ||||||||||||
| Diluted |
12,960 | 8,799 | 10,921 | 8,711 | ||||||||||||
| (1) Amortization of deferred stock compensation related to: |
||||||||||||||||
| Cost of revenue |
$ | 39 | $ | 46 | $ | 90 | $ | 89 | ||||||||
| Operating expenses: |
||||||||||||||||
| Sales and marketing |
64 | 45 | 147 | 73 | ||||||||||||
| Research and development |
105 | 73 | 204 | 145 | ||||||||||||
| General and administrative |
147 | 78 | 286 | 155 | ||||||||||||
| 316 | 196 | 637 | 373 | |||||||||||||
| Total deferred stock compensation expense |
$ | 355 | $ | 242 | $ | 727 | $ | 462 | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Six Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 812 | $ | 624 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
246 | 194 | ||||||
| Allowance for doubtful accounts |
102 | — | ||||||
| Stock based compensation |
727 | 462 | ||||||
| Reserve for excess and obsolete inventory |
95 | — | ||||||
| Change in deferred tax asset |
(397 | ) | — | |||||
| Tax benefit related to employee stock options |
88 | — | ||||||
| Change in other comprehensive loss |
(4 | ) | — | |||||
| Loss on disposal of assets |
104 | 29 | ||||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
952 | (1,773 | ) | |||||
| Inventory |
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