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 | Commission File No. | |
| September 30, 2004 | No. 1-9767 |
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the transition period from to .
IRIS INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 94-2579751 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
| 9172 Eton Avenue, Chatsworth, CA. | 91311 | |
| (Address of principal executive offices) | (Zip Code) |
(818) 709-1244
(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 x No ¨
The registrant had 15,951,333 shares of common stock issued and outstanding as of November 2, 2004.
INDEX TO FORM 10-Q
| Page | ||||
| PART I |
||||
| Item 1. |
3 | |||
| Consolidated Balance Sheet as of September 30, 2004 (unaudited) and December 31, 2003 |
3 | |||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| 7 | ||||
| 8 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 | ||
| Item 3. |
30 | |||
| Item 4. |
30 | |||
| PART II |
||||
| Item 6. |
32 | |||
| 32 | ||||
| 32 | ||||
| 33 | ||||
2
FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
| September 30, 2004 |
December 31, 2003 |
|||||||
| (unaudited) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 13,258,733 | $ | 2,443,995 | ||||
| Accounts receivable, net of allowance for doubtful accounts and sales returns of $477,174 and $312,066 |
7,859,002 | 7,193,058 | ||||||
| Inventories, net |
6,175,308 | 5,352,601 | ||||||
| Prepaid expenses and other current assets |
641,611 | 461,706 | ||||||
| Investment available for sale |
179,616 | 581,910 | ||||||
| Deferred tax asset |
1,573,431 | 1,573,431 | ||||||
| Total current assets |
29,687,701 | 17,606,701 | ||||||
| Property and equipment, at cost, net of accumulated depreciation of $6,009,465 and $5,510,111 |
3,695,232 | 3,613,233 | ||||||
| Goodwill |
188,911 | 188,911 | ||||||
| Software development costs, net of accumulated amortization of $2,048,008 and $1,655,458 |
2,050,496 | 2,396,851 | ||||||
| Deferred tax asset |
6,121,169 | 7,220,407 | ||||||
| Inventories – long term portion |
403,745 | 973,593 | ||||||
| Other assets |
1,044,093 | 480,734 | ||||||
| Total assets |
$ | 43,191,347 | $ | 32,480,430 | ||||
| Liabilities And Shareholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 3,154,500 | $ | 3,635,696 | ||||
| Accrued expenses |
2,729,870 | 2,955,955 | ||||||
| Short-term borrowings |
— | 2,900,000 | ||||||
| Current portion of long-term debt |
— | 350,000 | ||||||
| Deferred revenue |
1,020,906 | 1,150,643 | ||||||
| Total current liabilities |
6,905,276 | 10,992,294 | ||||||
| Long-term debt |
— | 1,782,192 | ||||||
| Deferred revenue, long term |
224,552 | 238,498 | ||||||
| Total liabilities |
7,129,828 | 13,012,984 | ||||||
| Commitments and contingencies |
||||||||
| Shareholders’ equity: |
||||||||
| Common stock, $.01 par value, authorized: 50,000,000 shares, issued and outstanding shares: 15,877,463 and 11,901,461 |
158,724 | 119,013 | ||||||
| Additional paid-in capital |
59,698,813 | 44,717,090 | ||||||
| Unearned compensation |
(121,061 | ) | (44,843 | ) | ||||
| Accumulated other comprehensive income (loss) |
— | (200,008 | ) | |||||
| Accumulated deficit |
(23,674,957 | ) | (25,123,806 | ) | ||||
| Total shareholders’ equity |
36,061,519 | 19,467,446 | ||||||
| Total liabilities and shareholders’ equity |
$ | 43,191,347 | $ | 32,480,430 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| For the three months ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| Sales of IVD instruments |
$ | 4,033,995 | $ | 2,330,079 | ||||
| Sales of IVD consumables and service |
5,335,880 | 4,379,321 | ||||||
| Sales of small laboratory devices and supplies |
2,376,489 | 1,534,873 | ||||||
| Royalty and license revenues |
17,523 | 176,660 | ||||||
| Net revenues |
11,763,887 | 8,420,933 | ||||||
| Cost of goods - IVD instruments |
2,664,169 | 1,850,473 | ||||||
| Cost of goods - IVD consumables and service |
2,062,531 | 1,552,308 | ||||||
| Cost of goods - small laboratory devices and supplies |
1,226,021 | 754,192 | ||||||
| Cost of goods sold |
5,952,721 | 4,156,973 | ||||||
| Gross margin |
5,811,166 | 4,263,960 | ||||||
| Marketing and selling expenses |
1,821,455 | 1,551,107 | ||||||
| General and administrative expenses |
1,627,711 | 1,383,649 | ||||||
| Research and development, net |
1,059,880 | 1,039,511 | ||||||
| Total operating expenses |
4,509,046 | 3,974,267 | ||||||
| Operating income |
1,302,120 | 289,693 | ||||||
| Other income (expense): |
||||||||
| Interest income |
35,259 | 6,944 | ||||||
| Interest expense |
(4,398 | ) | (83,358 | ) | ||||
| Other (expense) income |
(531,366 | ) | 486 | |||||
| Income before income taxes |
801,615 | 213,765 | ||||||
| Provision for income taxes |
320,646 | 85,506 | ||||||
| Net income |
$ | 480,969 | $ | 128,259 | ||||
| Basic and diluted net income per share |
$ | 0.03 | $ | 0.01 | ||||
| Basic - average shares outstanding |
15,706,922 | 11,208,431 | ||||||
| Diluted – average shares outstanding |
16,708,906 | 12,450,707 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| For the nine months ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| Sales of IVD instruments |
$ | 10,094,038 | $ | 3,735,792 | ||||
| Sales of IVD consumables and service |
14,731,901 | 12,691,198 | ||||||
| Sales of small laboratory devices and supplies |
6,301,833 | 4,263,300 | ||||||
| Royalty and license revenues |
336,249 | 395,616 | ||||||
| Net revenues |
31,464,021 | 21,085,906 | ||||||
| Cost of goods - IVD instruments |
7,116,244 | 3,340,848 | ||||||
| Cost of goods - IVD consumables and service |
5,825,949 | 4,650,072 | ||||||
| Cost of goods - small laboratory devices and supplies |
3,226,886 | 2,173,331 | ||||||
| Cost of goods sold |
16,169,079 | 10,164,251 | ||||||
| Gross margin |
15,294,942 | 10,921,655 | ||||||
| Marketing and selling expenses |
5,052,678 | 3,740,814 | ||||||
| General and administrative expenses |
4,041,369 | 4,431,778 | ||||||
| Research and development, net |
3,080,424 | 3,526,836 | ||||||
| Total operating expenses |
12,174,471 | 11,699,428 | ||||||
| Operating income (loss) |
3,120,471 | (777,773 | ) | |||||
| Other income (expense): |
||||||||
| Interest income |
67,063 | 29,982 | ||||||
| Interest expense |
(239,300 | ) | (270,457 | ) | ||||
| Other (expense) income |
(533,483 | ) | 524 | |||||
| Income (loss) before income taxes (benefit) |
2,414,751 | (1,017,724 | ) | |||||
| Provision (benefit) for income taxes |
965,900 | (407,090 | ) | |||||
| Net income (loss) |
$ | 1,448,851 | $ | (610,634 | ) | |||
| Basic net income (loss) per share |
$ | 0.10 | $ | (0.06 | ) | |||
| Diluted net income (loss) per share |
$ | 0.09 | $ | (0.06 | ) | |||
| Basic - average shares outstanding |
13,970,499 | 11,088,869 | ||||||
| Diluted – average shares outstanding |
15,328,041 | 11,088,869 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| For the nine months ended September 30 |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | 1,448,851 | $ | (610,634 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operations: |
||||||||
| Deferred taxes, net |
965,900 | (446,652 | ) | |||||
| Depreciation and amortization |
1,128,587 | 681,334 | ||||||
| Common stock and stock option compensation |
102,986 | 57,738 | ||||||
| Loss on sale/write down of investment |
538,436 | — | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(828,019 | ) | (1,164,138 | ) | ||||
| Service contracts, net |
18,392 | 322,948 | ||||||
| Inventories, net |
(252,859 | ) | (337,905 | ) | ||||
| Prepaid expenses and other current assets |
(179,905 | ) | (162,225 | ) | ||||