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 FROM TO .
COMMISSION FILE NUMBER: 000-30369
VIROLOGIC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
| DELAWARE | 94-3234479 | |
| (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) |
(IRS EMPLOYER IDENTIFICATION NO.) |
345 OYSTER POINT BLVD
SOUTH SAN FRANCISCO, CA 94080
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
TELEPHONE NUMBER (650) 635-1100
(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 Act). Yes ¨ No x
As of November 12, 2004 there were 53,958,921 shares of the registrant’s common stock outstanding.
INDEX
| PAGE NO. | ||||
| PART I. FINANCIAL INFORMATION |
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| Item 1. Financial Statements |
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| Condensed Balance Sheets as of September 30, 2004 and December 31, 2003 | 3 | |||
| Condensed Statements of Operations for the three and nine months ended September 30, 2004 and 2003 | 4 | |||
| Condensed Statements of Cash Flows for the nine months ended September 30, 2004 and 2003 | 5 | |||
| Notes to Condensed Financial Statements | 6 | |||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11 | |||
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
31 | |||
| Item 4. Controls and Procedures |
31 | |||
| PART II. OTHER INFORMATION |
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| Item 1. Legal Proceedings |
32 | |||
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
32 | |||
| Item 3. Defaults Upon Senior Securities |
32 | |||
| 32 | ||||
| Item 5. Other Information |
32 | |||
| Item 6. Exhibits |
32 | |||
| 33 | ||||
2
CONDENSED BALANCE SHEETS
(In thousands, except share data)
| September 30, 2004 |
December 31, 2003 |
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| (Unaudited) | (Note 1) | |||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 7,240 | $ | 8,893 | ||||
| Short-term investments |
150 | 537 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $582 and $643 at September 30, 2004 and December 31, 2003, respectively |
5,515 | 6,165 | ||||||
| Prepaid expenses |
1,106 | 700 | ||||||
| Inventory |
1,071 | 1,378 | ||||||
| Restricted cash |
626 | 426 | ||||||
| Other current assets |
258 | 267 | ||||||
| Total current assets |
15,966 | 18,366 | ||||||
| Property and equipment, net |
6,895 | 8,445 | ||||||
| Restricted cash |
50 | 350 | ||||||
| Transaction costs related to pending merger |
1,998 | — | ||||||
| Other assets |
1,538 | 1,217 | ||||||
| Total assets |
$ | 26,447 | $ | 28,378 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 2,322 | $ | 1,556 | ||||
| Accrued compensation |
806 | 862 | ||||||
| Accrued liabilities |
2,419 | 2,108 | ||||||
| Deferred revenue |
978 | 268 | ||||||
| Current portion of capital lease obligations |
129 | 401 | ||||||
| Current portion of loans payable |
548 | 133 | ||||||
| Total current liabilities |
7,202 | 5,328 | ||||||
| Long-term portion of capital lease obligations |
39 | 87 | ||||||
| Other long-term liabilities |
369 | 382 | ||||||
| Redeemable convertible preferred stock, $0.001 par value, 274 shares authorized, designated by series, issued and outstanding at September 30, 2004 and December 31, 2003; aggregate liquidation preference of $2,805 at September 30, 2004 |
1,994 | 1,994 | ||||||
| Commitments |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $0.001 par value, 4,999,726 shares authorized, designated by series, none issued and outstanding at September 30, 2004 and December 31, 2003 |
— | — | ||||||
| Common stock, $0.001 par value, 100,000,000 shares authorized; 53,725,527 and 52,608,382 shares issued and outstanding at September 30, 2004 and December 31, 2003, respectively |
54 | 53 | ||||||
| Additional paid-in capital |
127,268 | 126,805 | ||||||
| Accumulated other comprehensive income |
— | 1 | ||||||
| Accumulated deficit |
(110,479 | ) | (106,272 | ) | ||||
| Total stockholders’ equity |
16,843 | 20,587 | ||||||
| Total liabilities and stockholders’ equity |
$ | 26,447 | $ | 28,378 | ||||
See accompanying notes to Condensed Financial Statements.
3
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenue: |
||||||||||||||||
| Product revenue |
$ | 7,977 | $ | 8,759 | $ | 25,351 | $ | 23,096 | ||||||||
| Contract revenue |
645 | 366 | 1,520 | 950 | ||||||||||||
| Total revenue |
8,622 | 9,125 | 26,871 | 24,046 | ||||||||||||
| Operating costs and expenses: |
||||||||||||||||
| Cost of product revenue |
4,186 | 4,403 | 13,077 | 12,490 | ||||||||||||
| Research and development |
1,618 | 1,090 | 4,611 | 3,525 | ||||||||||||
| Sales and marketing |
2,406 | 1,990 | 7,148 | 6,301 | ||||||||||||
| General and administrative |
2,019 | 2,113 | 5,849 | 6,954 | ||||||||||||
| Lease termination charge |
— | — | 433 | — | ||||||||||||
| Total costs and expenses |
10,229 | 9,596 | 31,118 | 29,270 | ||||||||||||
| Operating loss |
(1,607 | ) | (471 | ) | (4,247 | ) | (5,224 | ) | ||||||||
| Interest income |
24 | 22 | 64 | 85 | ||||||||||||
| Interest expense |
(5 | ) | (32 | ) | (24 | ) | (120 | ) | ||||||||
| Other income |
— | 52 | — | 156 | ||||||||||||
| Net loss |
(1,588 | ) | (429 | ) | (4,207 | ) | (5,103 | ) | ||||||||
| Deemed dividend to preferred stockholders |
— | — | — | (2,155 | ) | |||||||||||
| Preferred stock dividend |
(91 | ) | (413 | ) | (236 | ) | (1,386 | ) | ||||||||
| Loss applicable to common stockholders |
$ | (1,679 | ) | $ | (842 | ) | $ | (4,443 | ) | $ | (8,644 | ) | ||||
| Basic and diluted loss per common share |
$ | (0.03 | ) | $ | (0.02 | ) | $ | (0.08 | ) | $ | (0.28 | ) | ||||
| Weighted-average shares used in computing basic and diluted loss per common share |
53,672 | 34,365 | 53,435 | 30,809 | ||||||||||||
See accompanying notes to Condensed Financial Statements.
4
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Nine Months Ended September 30, |
||||||||
| 2004 |
2003 |
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| OPERATING ACTIVITIES |
||||||||
| Net loss |
$ | (4,207 | ) | $ | (5,103 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
2,031 | 2,470 | ||||||
| Loss on disposal of property and equipment related to lease termination |
108 | — | ||||||
| Stock-based compensation |
52 | 258 | ||||||
| Amortization of deferred gain on lease assignment |
— | (156 | ) | |||||
| Changes in assets and liabilities |
||||||||
| Accounts receivable |
650 | (185 | ) | |||||
| Prepaid expenses |
(406 | ) | (370 | ) | ||||
| Inventory |
307 | (7 | ) | |||||
| Other current assets |
9 | (217 | ) | |||||
| Accounts payable |
471 | 286 | ||||||
| Accrued compensation |
(56 | ) | 325 | |||||
| Accrued liabilities |
59 | (449 | ) | |||||
| Deferred revenue |
710 | (320 | ) | |||||
| Long-term deferred rent |
(13 | ) | (31 | ) | ||||
| Net cash used in operating activities |
(285 | ) | (3,499 | ) | ||||
| INVESTING ACTIVITIES |
||||||||
| Purchases of short-term investments |
(6 | ) | (4,576 | ) | ||||
| Maturities and sales of short-term investments |
392 | 4,621 | ||||||
| Capital expenditures |
(589 | ) | (375 | ) | ||||
| Restricted cash |
100 | (69 | ) | |||||
| Transaction costs related to pending merger |
(1,418 | ) | — | |||||
| Other assets |
(321 | ) | (365 | ) | ||||
| Net cash used in investing activities |
(1,842 | ) | (764 | ) | ||||
| FINANCING ACTIVITIES |
||||||||
| Proceeds from loans payable |
548 | 238 | ||||||
| Principal payments on loans payable |
(133 | ) | (442 | ) | ||||
| Payments on capital lease obligations |
(320 | ) | (803 | ) | ||||
| Net proceeds from issuance of common stock |
379 | 2,882 | ||||||
| Expenses relating to issuance of preferred stock |
— | (423 | ) | |||||
| Net cash provided by financing activities |
474 | 1,452 | ||||||
| Net decrease in cash and cash equivalents |
(1,653 | ) | (2,811 | ) | ||||
| Cash and cash equivalents at beginning of period |
8,893 | 10,559 | ||||||
| Cash and cash equivalents at end of period |
$ | 7,240 | $ | 7,748 | ||||
See accompanying notes to Condensed Financial Statements.
5
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed financial statements have been prepared by ViroLogic, Inc., also referred to as the Company, we, us, or our, in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and