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.
OR
| ¨ | 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: 000-29037
eMerge Interactive, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 65-0534535 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
10305 102nd Terrace Sebastian, Florida 32958
(Address of principal executive offices)
(772) 581-9700
(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 the registrant’s Class A common stock, $0.008 par value, outstanding as of November 9, 2004, was 44,493,155.
FORM 10-Q QUARTERLY REPORT
(For Three and Nine Months Ended September 30, 2004)
TABLE OF CONTENTS
2
Condensed Balance Sheets
(Unaudited)
| September 30, 2004 |
December 31, 2003 |
|||||||
| Assets | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 3,139,804 | $ | 1,553,394 | ||||
| Trade accounts receivable, less allowance for doubtful accounts of $360,362 in 2004 and $371,876 in 2003 |
1,140,804 | 91,295 | ||||||
| Inventories (note 3) |
621,873 | 568,064 | ||||||
| Prepaid expenses and other assets |
582,201 | 555,904 | ||||||
| Due from related parties (note 4) |
— | 194,551 | ||||||
| Assets held for sale |
65,808 | 87,000 | ||||||
| Total current assets |
5,550,490 | 3,050,208 | ||||||
| Property, plant and equipment, net of accumulated depreciation of $9,975,682 in 2004 and $8,739,883 in 2003 |
2,424,350 | 3,758,919 | ||||||
| Food safety systems installed at customers, net of accumulated depreciation of $92,169 in 2004 and $21,941 in 2003 |
487,593 | 273,203 | ||||||
| Other assets |
— | 76,080 | ||||||
| Total assets |
$ | 8,462,433 | $ | 7,158,410 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: |
||||||||
| Current installments of capital lease obligation |
$ | — | $ | 519,278 | ||||
| Accounts payable |
472,228 | 744,796 | ||||||
| Accrued liabilities: |
||||||||
| Salaries and benefits |
428,745 | 258,210 | ||||||
| Legal and professional |
96,565 | 122,874 | ||||||
| Other |
145,223 | 149,276 | ||||||
| Advance payments from customers – current portion |
1,057,783 | 389,796 | ||||||
| Total current liabilities |
2,200,544 | 2,184,230 | ||||||
| Advance payment from customers – long term |
1,595,934 | 615,409 | ||||||
| Common stock warrants and additional investment rights (note 5) |
1,021,363 | 986,853 | ||||||
| Total liabilities |
4,817,841 | 3,786,492 | ||||||
| Stockholders’ equity (notes 5 and 6): |
||||||||
| Common stock, $.008 par value, authorized 100,000,000 shares: |
||||||||
| Class A common stock, designated 92,711,110 shares, issued 45,559,510 shares in 2004 and 36,447,881 shares in 2003; outstanding 44,315,655 shares in 2004 and 35,204,026 shares in 2003 |
364,476 | 291,583 | ||||||
| Class B common stock, designated 7,288,890 shares, 0 shares issued and outstanding in 2004 and 5,694,445 shares issued and outstanding in 2003 |
— | 45,556 | ||||||
| Additional paid-in capital |
205,519,356 | 201,691,962 | ||||||
| Accumulated deficit |
(201,811,203 | ) | (198,229,146 | ) | ||||
| Treasury stock, 1,243,855 shares, at cost |
(428,037 | ) | (428,037 | ) | ||||
| Total stockholders’ equity |
3,644,592 | 3,371,918 | ||||||
| Total liabilities and stockholders’ equity |
$ | 8,462,433 | $ | 7,158,410 | ||||
See accompanying notes to condensed financial statements.
3
Condensed Statements of Operations
For the Three Months Ended September 30, 2004 and 2003
(Unaudited)
| Three Months Ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| Revenue |
$ | 301,275 | $ | 254,060 | ||||
| Cost of revenue |
79,242 | 76,491 | ||||||
| Gross profit |
222,033 | 177,569 | ||||||
| Operating expenses: |
||||||||
| Selling, general and administrative |
1,392,311 | 1,432,729 | ||||||
| Technology and development |
708,104 | 440,423 | ||||||
| Depreciation |
436,336 | 608,074 | ||||||
| Total operating expenses |
2,536,751 | 2,481,226 | ||||||
| Operating loss |
(2,314,718 | ) | (2,303,657 | ) | ||||
| Interest and other income, net |
12,767 | 2,694 | ||||||
| Interest expense |
(5,251 | ) | (6,253 | ) | ||||
| Gain on disposal of assets |
25 | 3,130 | ||||||
| Net decrease in fair value of common stock warrants and additional investment rights (note 5) |
1,597,677 | — | ||||||
| Loss from continuing operations before income taxes |
(709,500 | ) | (2,304,086 | ) | ||||
| Income tax expense (benefit) |
— | — | ||||||
| Loss from continuing operations |
(709,500 | ) | (2,304,086 | ) | ||||
| Discontinued operations (note 7): |
||||||||
| Gain (loss) from discontinued cattle operations, net of income taxes of $0 for the 2004 and 2003 periods |
(5,651 | ) | 298,362 | |||||
| Net loss |
$ | (715,151 | ) | $ | (2,005,724 | ) | ||
| Basic and diluted earnings (loss) per common share: |
||||||||
| Loss from continuing operations |
$ | (0.02 | ) | $ | (0.06 | ) | ||
| Gain (loss) from discontinued operations |
— | 0.01 | ||||||
| Net loss per common share – basic and diluted |
$ | (0.02 | ) | $ | (0.05 | ) | ||
| Weighted average number of common shares outstanding – basic and diluted |
44,315,655 | 39,002,215 | ||||||
See accompanying notes to condensed financial statements.
4
Condensed Statements of Operations
For the Nine Months Ended September 30, 2004 and 2003
(Unaudited)
| Nine Months Ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| Revenue |
$ | 688,070 | $ | 738,648 | ||||
| Cost of revenue |
209,661 | 239,720 | ||||||
| Gross profit |
478,409 | 498,928 | ||||||
| Operating expenses: |
||||||||
| Selling, general and administrative |
5,156,915 | 4,449,623 | ||||||
| Technology and development |
1,713,012 | 1,364,462 | ||||||
| Depreciation |
1,423,916 | 1,901,084 | ||||||
| Total operating expenses |
8,293,843 | 7,715,169 | ||||||
| Operating loss |
(7,815,434 | ) | (7,216,241 | ) | ||||
| Interest and other income (expense), net |
333,792 | (13,252 | ) | |||||
| Interest expense |
(14,034 | ) | (19,204 | ) | ||||
| Gain on disposal of assets |
10,785 | 6,643 | ||||||
| Net decrease in fair value of common stock warrants and additional investment rights (note 5) |
3,926,540 | — | ||||||
| Loss from continuing operations before income taxes |
(3,558,351 | ) | (7,242,054 | ) | ||||
| Income tax expense (benefit) |
— | — | ||||||
| Loss from continuing operations |
(3,558,351 | ) | (7,242,054 | ) | ||||
| Discontinued operations (note 7): |
||||||||
| Gain (loss) from discontinued cattle operations, net of income taxes of $0 for the 2004 and 2003 periods |
(23,706 | ) | 134,303 | |||||
| Net loss |
$ | (3,582,057 | ) | $ | (7,107,751 | ) | ||
| Basic and diluted earnings (loss) per common share: |
||||||||
| Loss from continuing operations |
$ | (0.08 | ) | $ | (0.19 | ) | ||
| Gain (loss) from discontinued operations |
— | 0.01 | ||||||
| Net loss per common share – basic and diluted |
$ | (0.08 | ) | $ | (0.18 | ) | ||
| Weighted average number of common shares outstanding – basic and diluted |
44,008,113 | 38,867,435 | ||||||
See accompanying notes to condensed financial statements.
5
Condensed Statements of Cash Flows
For the Nine Months Ended September 30, 2004 and 2003
(Unaudited)
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (3,582,057 | ) | $ | (7,107,751 | ) | ||
| Adjustments to reconcile net loss to net cash used for operating activities: |
||||||||
| Depreciation |
1,494,145 | 1,906,522 | ||||||
| Gain on disposal of assets |
(10,785 | ) | (6,643 | ) | ||||
| Impairment of assets held for sale |
21,192 | — | ||||||
| Stock compensation |
360,063 | 84,308 | ||||||
| Amortization of unearned compensation |
— | 109 | ||||||
| Issuance of common stock for services |
60,000 | 30,000 | ||||||
| Reserve for inventory obsolescence |
140,504 | — | ||||||
| Decrease in fair value of common stock warrants and additional investment rights |
(3,926,540 | ) | — | |||||
| Gain on settlement of contract |
(305,719 | ) | — | |||||
| Changes in operating assets and liabilities: |
||||||||
| Trade accounts receivable, net |
(1,049,509 | ) | 191,833 | |||||
| Inventories |
(194,313 | ) | (456,072 | ) | ||||
| Prepaid expenses and other assets |
49,783 | 32,775 | ||||||
| Due from related parties, net |
(5,449 | ) | 47,163 | |||||
| Accounts payable and accrued liabilities |
(47,351 | ) | (87,689 | ) | ||||
| Advance payments from customers |
||||||||