PHARSIGHT CORP - 10-Q Quarterly Report

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 September 30, 2004

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

For the transition period to .

Commission file number 000-31253

PHARSIGHT CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware

77-0401273

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

800 West El Camino Real

Mountain View, CA 94040

(Address of principal executive offices, including zip code)

(650) 314-3800

(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 outstanding as of November 4, 2004: 19,103,957

PHARSIGHT CORPORATION

FORM 10-Q

QUARTERLY REPORT

TABLE OF CONTENTS


PART I.	FINANCIAL INFORMATION	3

Item 1.	Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets — September 30, 2004 and March 31, 2004	3

	Condensed Consolidated Statements of Operations—Three and Six Months Ended September 30, 2004 and 2003	4

	Condensed Consolidated Statements of Cash Flows — Six Months Ended September 30, 2004 and 2003	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

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	31

Item 6.	Exhibits and Reports on Form 8-K	31

	Signature	32

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PHARSIGHT CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)


	September 30 2004			March 31, 2004*
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	7,780		$	10,027
Accounts receivable, net of allowance for doubtful accounts of $10 and $14 at September 30, 2004 and March 31, 2004, respectively		4,806			3,770
Unbilled accounts receivable		100			50
Prepaids and other current assets		672			670

Total current assets		13,358			14,517
Property and equipment, net		331			495
Other assets		226			282

Total assets	$	13,915		$	15,294

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	418		$	407
Accrued expenses		641			522
Accrued compensation		1,424			1,589
Deferred revenue		7,170			7,987
Current portion of notes payable		1,875			1,875
Capital lease obligations		—			55

Total current liabilities		11,528			12,435
Deferred revenue, long-term portion		163			516
Notes payable, less current portion		656			1,094
Redeemable convertible preferred stock, $0.001 par value:
Authorized shares – 3,200,000 (2,000,000 designated as Series A and 1,200,000 designated as Series B) at September 30, 2004 and March 31, 2004
Issued and outstanding shares – 1,869,085 and 1,850,943 at September 30, 2004 and March 31, 2004, respectively (1,814,662 designated as Series A at September 30, 2004 and March 31, 2004 and 54,423 and 36,281 designated as Series B at September 30, 2004 and March 31, 2004, respectively), aggregate redemption and liquidation value - $7,491 at September 30, 2004 and $7,419 at March 31, 2004		6,266			6,164
Commitments and contingencies
Stockholders’ deficit:
Preferred stock, $0.001 par value:
Authorized shares – 1,800,000 at September 30, 2004 and March 31, 2004
Issued and outstanding shares—none at September 30, 2004 and March 31, 2004		—			—
Common stock, $0.001 par value:
Authorized shares – 120,000,000 at September 30, 2004 and March 31, 2004
Issued and outstanding shares – 19,103,957 and 19,058,453 at September 30, 2004 and March 31, 2004, respectively		19			19
Additional paid-in capital		74,488			74,784
Accumulated deficit		(79,205	)		(79,718	)

Total stockholders’ deficit		(4,698	)		(4,915	)

Total liabilities, redeemable convertible preferred stock and stockholders’ deficit	$	13,915		$	15,294

*	Derived from the Company’s audited consolidated financial statements as of March 31, 2004.

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

PHARSIGHT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended September 30,						Six Months Ended September 30,
	2004			2003			2004			2003
Revenues:
License and renewal	$	2,261		$	1,996		$	4,380		$	3,585
Services		2,811			2,021			5,726			4,159

Total revenues		5,072			4,017			10,106			7,744
Cost of revenues:
License and renewal		99			83			192			193
Services		1,715			1,631			3,466			3,359

Total cost of revenues		1,814			1,714			3,658			3,552

Gross margin		3,258			2,303			6,448			4,192
Operating expenses:
Research and development		716			718			1,426			1,488
Sales and marketing		924			918			2,016			2,029
General and administrative		1,131			1,113			2,385			2,376
Amortization of deferred stock compensation		—			50			—			117

Total operating expenses		2,771			2,799			5,827			6,010
Income (loss) from operations		487			(496	)		621			(1,818	)
Other income (expense):
Interest expense		(37	)		(51	)		(79	)		(113	)
Interest income		7			6			17			20
Other expense		(18	)		(4	)		(22	)		(12	)

Total other income (expense)		(48	)		(49	)		(84	)		(105	)
Income (loss) before income taxes		439			(545	)		537			(1,923	)
Provision for income taxes		(18	)		(50	)		(22	)		(55	)

Net income (loss)		421			(595	)		515			(1,978	)
Preferred stock dividends		(145	)		(146	)		(320	)		(291	)
Deemed dividend to preferred stockholders		—			(243	)		—			(339	)

Net income (loss) attributable to common stockholders	$	276		$	(984	)	$	195		$	(2,608	)

Net income (loss) per share attributable to common stockholders
Basic	$	0.01		$	(0.05	)	$	0.01		$	(0.14	)

Diluted	$	0.01		$	(0.05	)	$	0.01		$	(0.14	)

Shares used to compute net income (loss) per share attributable to common stockholders
Basic		19,087			19,050			19,073			19,048

Diluted		20,674			19,050			20,914			19,048

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

PHARSIGHT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended September 30,
	2004			2003
Cash Flows From Operating Activities:
Net income (loss)	$	515		$	(1,978	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		204			643
Changes in assets and liabilities:
Accounts receivable, net		(1,036	)		(739	)
Unbilled accounts receivable		(50	)		(72	)
Prepaids and other assets		53			(113	)
Accounts payable		11			241
Accrued expenses		119			(535	)
Accrued compensation		(165	)		(78	)
Deferred revenue		(1,171	)		749

Net cash used in operating activities		(1,520	)		(1,882

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