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 September 30, 2004
| ¨ | 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 000-49871
HEALTHETECH, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 77-0478611 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. employer identification no.) | |
| 523 Park Point Drive, 3rd Floor, | ||
| Golden, Colorado | 80401 | |
| (Address of principal executive office) | (Zip code) | |
Registrant’s telephone number, including area code: (303) 526-5085
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
As of November 9, 2004, the number of shares outstanding of the registrant’s common stock, par value $0.001 per share, 7,087,215.
| Page | ||||
| PART I. |
FINANCIAL INFORMATION | 1 | ||
| Item 1. | Unaudited Financial Statements | 1 | ||
| Unaudited Balance Sheets | 1 | |||
| Unaudited Statements of Operations | 2 | |||
| Unaudited Statements of Cash Flows | 3 | |||
| Notes to Unaudited Financial Statements | 4 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 9 | ||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 15 | ||
| Item 4. | Controls and Procedures | 15 | ||
| PART II. |
OTHER INFORMATION | 15 | ||
| Item 1. | Legal Proceedings | 15 | ||
| Item 2. | Changes in Securities and Use of Proceeds | 15 | ||
| Item 3. | Defaults Upon Senior Securities | 15 | ||
| Item 4. | Submission of Matters to a Vote of Security Holders | 16 | ||
| Item 5. | Other Information | 16 | ||
| Item 6. | Exhibits | 16 | ||
| SIGNATURES | 16 | |||
| EXHIBIT INDEX | 17 | |||
ITEM 1. Unaudited Financial Statements
Balance Sheets
| December 31, 2003 |
September 30, 2004 |
|||||||
| (unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 17,003,224 | $ | 9,781,585 | ||||
| Restricted Cash and Cash Equivalents |
— | 1,500,000 | ||||||
| Receivables, net of allowance of $307,000 and $308,744 in 2003 and 2004, respectively |
620,428 | 410,002 | ||||||
| Inventory |
1,908,233 | 1,513,003 | ||||||
| Prepaid expenses |
676,360 | 577,221 | ||||||
| Other current assets |
17,979 | — | ||||||
| Total current assets |
20,226,224 | 13,781,811 | ||||||
| Property and equipment, net |
1,843,841 | 1,164,717 | ||||||
| Deposits |
266,398 | 265,313 | ||||||
| Intangible assets, net of accumulated amortization of $2,796,970 and $3,006,583 in 2003 and 2004, respectively |
1,555,742 | 1,398,855 | ||||||
| TOTAL ASSETS |
$ | 23,892,205 | $ | 16,610,696 | ||||
| LIABILITIES & STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 567,479 | $ | 213,498 | ||||
| Accrued liabilities |
1,052,133 | 667,131 | ||||||
| Deferred revenue |
71,657 | 71,868 | ||||||
| Total current liabilities |
1,691,269 | 952,499 | ||||||
| Other liabilities |
171,640 | 93,251 | ||||||
| Total liabilities |
1,862,909 | 1,045,749 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock, $0.001 par value, 100,000,000 shares authorized; 7,041,954 and 7,087,215 shares issued and outstanding in 2003 and 2004, respectively |
7,042 | 7,088 | ||||||
| Deferred stock-based charges |
(1,817,371 | ) | (1,529,036 | ) | ||||
| Additional paid-in capital |
114,764,010 | 115,536,005 | ||||||
| Accumulated deficit |
(90,924,385 | ) | (98,449,110 | ) | ||||
| Total stockholders’ equity |
22,029,296 | 15,564,947 | ||||||
| Commitments and contingencies |
||||||||
| TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY |
$ | 23,892,205 | $ | 16,610,696 | ||||
The accompanying notes are an integral part of these unaudited financial statements.
1
Statements of Operations
Unaudited
| Three Months Ended Sept 30, |
Nine Months Ended Sept 30, |
|||||||||||||||
| 2003 |
2004 |
2003 |
2004 |
|||||||||||||
| Revenue: |
||||||||||||||||
| Product and measurement sales |
$ | 634,272 | $ | 695,596 | $ | 2,237,625 | $ | 2,098,638 | ||||||||
| Software and other |
1,173,634 | 129,594 | 2,396,757 | 506,555 | ||||||||||||
| Total revenue |
1,807,906 | 825,190 | 4,634,382 | 2,605,193 | ||||||||||||
| Cost of revenue: |
||||||||||||||||
| Product and measurement sales |
727,266 | 627,270 | 2,276,349 | 1,759,386 | ||||||||||||
| Software and other |
298,231 | 101,810 | 1,031,646 | 409,346 | ||||||||||||
| Stock-based charges |
6,539 | 10,044 | 18,662 | 35,081 | ||||||||||||
| Total cost of revenue |
1,032,036 | 739,124 | 3,326,657 | 2,203,813 | ||||||||||||
| Gross profit |
775,870 | 86,066 | 1,307,725 | 401,380 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development, excluding $176,520, $9,283, $614,192, and $304,775 of stock-based charges for the three months ended September 30, 2003 and 2004 and the nine months ended September 30, 2003 and 2004, respectively |
1,305,115 | 285,167 | 5,421,068 | 1,788,996 | ||||||||||||
| Selling, general and administrative, excluding $479,674, $100,838, $2,472,881, and $621,158 of stock-based charges for the three months ended September 30, 2003 and 2004 and the nine months ended September 30, 2003 and 2004, respectively |
2,067,733 | 1,596,663 | 12,401,524 | 4,874,250 | ||||||||||||
| Other operating expenses, excluding $0, $9,611, $0, and $9,611 of stock-based charges for the three months ended September 30, 2003 and 2004 and the nine months ended September 30, 2003 and 2004, respectively |
— | 71,743 | — | 71,743 | ||||||||||||
| Restructuring charges and asset impairment |
90,500 | — | 2,204,526 | 377,159 | ||||||||||||
| Stock-based charges |
656,194 | 119,732 | 3,087,013 | 935,544 | ||||||||||||
| Total operating expenses |
4,119,542 | 2,073,305 | 23,114,131 | 8,047,692 | ||||||||||||
| Loss from operations |
(3,343,672 | ) | (1,987,239 | ) | (21,806,406 | ) | (7,646,312 | ) | ||||||||
| Interest income |
31,312 | 41,566 | 155,481 | 122,407 | ||||||||||||
| Interest expense |
(1,210 | ) | — | (4,676 | ) | (822 | ) | |||||||||
| Net loss |
$ | (3,313,570 | ) | $ | (1,945,673 | ) | $ | (21,655,601 | ) | $ | (7,524,727 | ) | ||||
| Basic and diluted loss per common share |
$ | (0.84 | ) | $ | (0.27 | ) | $ | (5.52 | ) | $ | (1.06 | ) | ||||
| Basic and diluted weighted average number of shares outstanding |
3,928,515 | 7,086,704 | 3,923,066 | 7,079,665 | ||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
2
Statements of Cash Flows
Unaudited
| Nine months ended |
||||||||
| Sept 30, 2003 |
Sept 30, 2004 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (21,655,601 | ) | $ | (7,524,726 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
1,511,763 | 955,878 | ||||||
| Intangible asset impairment |
1,675,100 | — | ||||||
| Inventory reserves and write-offs |
699,976 | 5,576 | ||||||
| Loss on disposal of property and equipment |
56,267 | 73,545 | ||||||
| Stock-based charges |
3,105,675 | 970,625 | ||||||
| Provision for doubtful accounts |
68,200 | 1,890 | ||||||
| Change in assets and liabilities: |
||||||||
| Receivables |
2,213,170 | 208,536 | ||||||
| Inventory |
(81,724 | ) | 389,654 | |||||
| Prepaid expenses and other current assets |
2,072,469 | 117,118 | ||||||
| Deposits |
1,050 | 1,085 | ||||||
| Accounts payable |
(1,534,359 | ) | (353,980 | ) | ||||
| Accrued and other liabilities |
(969,231 | ) | (463,390 | ) | ||||
| Deferred revenue |
(1,310,543 | ) | 211 | |||||
| Net cash used in operating activities |
(14,147,788 | ) | (5,617,979 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Purchase of property and equipment |
(370,811 | ) | (140,686 | ) | ||||
| Proceeds from the sale of marketable securities |
5,242,726 | — | ||||||
| Purchase of intangible assets |
(212,861 | ) | (52,726 | ) | ||||
| Net change in restricted cash |
1,200,511 | (1,500,000 | ) | |||||
| Net cash provided by (used in) investing activities |
5,859,565 | (1,693,412 | ) | |||||
| Cash flows from financing activities: |
||||||||
| Payments on note payable to related party |
(10,000 | ) | — | |||||
| Common stock issuance costs |
— | (22,865 | ) | |||||
| Proceeds from common stock option exercises |
145,799 | 112,618 | ||||||
| Net cash provided by financing activities |
135,799 | 89,753 | ||||||
| Net decrease in cash and cash equivalents |
(8,152,424 | ) | (7,221,638 | ) | ||||
| Cash and cash equivalents, beginning of period |
16,878,263 | 17,003,224 | ||||||
| Cash and cash equivalents, end of period |
$ | 8,725,839 | $ | 11,281,585 | ||||
The accompanying notes are an integral part of these unaudited financial statements.
3
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) Business and Basis of Financial Statement Presentation
HealtheTech, Inc. (the Company or HealtheTech) was incorporated in February 1998 under the laws of the State of Delaware. The Company operates in one segment and develops and markets health solutions designed to give consumers simple, informative ways to improve and maintain health and wellness.
The accompanying financial statements as of September 30, 2004 and for the three months and nine months ended September 30, 2003 and 2004 are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America on a basis consistent with the December 31, 2003 audited financial statements and include normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of the results of these periods. These statements should be read in conjunction with our financial statements and notes thereto included in our Form 10-K (Commission File No. 000-49871), filed on March 29, 2004. Operating results for the three months and nine months ended September 30, 2004 are not necessarily indicative of the results that may be expected for the full year.
The preparation of financ