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
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 000-23541
NANOGEN, INC.
(Exact name of Registrant as specified in its charter)
| Delaware | 33-0489621 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 10398 Pacific Center Court, San Diego, CA | 92121 | |
| (Address of principal executive offices) | (Zip code) | |
(858) 410-4600
(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
As of November 11, 2004, 33,892,892 shares of the Registrant’s Common Stock were outstanding.
FORM 10-Q
INDEX
| Page | ||||
| PART I. |
FINANCIAL INFORMATION | |||
| Item 1. |
Financial Statements: | |||
| Consolidated Balance Sheets at September 30, 2004 (unaudited) and December 31, 2003 | 3 | |||
| Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2004 and 2003 | 4 | |||
| Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2004 and 2003 | 5 | |||
| Notes to Consolidated Financial Statements (unaudited) | 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 | 28 | ||
| Item 4. |
Controls and Procedures | 29 | ||
| PART II: |
OTHER INFORMATION | |||
| Item 6. |
Exhibits | 30 | ||
| 31 | ||||
| 32 | ||||
2
NANOGEN, INC.
(in thousands, except share data)
| September 30, 2004 |
December 31, 2003 |
|||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 6,063 | $ | 8,550 | ||||
| Short-term investments |
47,074 | 20,564 | ||||||
| Receivables, net |
1,127 | 1,415 | ||||||
| Inventories, net |
2,428 | 4,774 | ||||||
| Other current assets |
1,943 | 1,590 | ||||||
| Total current assets |
58,635 | 36,893 | ||||||
| Property and equipment, net |
6,955 | 4,276 | ||||||
| Acquired technology rights, net |
1,732 | 2,508 | ||||||
| Restricted cash |
739 | 14 | ||||||
| Other assets, net |
982 | 158 | ||||||
| Goodwill |
10,566 | — | ||||||
| $ | 79,609 | $ | 43,849 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,599 | $ | 290 | ||||
| Accrued liabilities |
4,303 | 4,519 | ||||||
| Deferred revenue |
416 | 469 | ||||||
| Current portion of capital lease obligations |
502 | 743 | ||||||
| Total current liabilities |
6,820 | 6,021 | ||||||
| Capital lease obligations, less current portion |
410 | 586 | ||||||
| Other long-term liabilities |
5,453 | 4,419 | ||||||
| Total long-term liabilities |
5,863 | 5,005 | ||||||
| Commitments and contingencies (Note 2 and Note 7) |
||||||||
| Stockholders’ equity: |
||||||||
| Convertible preferred stock, $0.001 par value, 5,000,000 shares authorized; no shares issued and outstanding at September 30, 2004 (unaudited) and December 31, 2003 |
— | — | ||||||
| Common stock, $0.001 par value, 50,000,000 shares authorized; 33,880,727 and 24,867,325 shares issued and outstanding at September 30, 2004 (unaudited) and December 31, 2003, respectively |
34 | 25 | ||||||
| Additional paid-in capital |
272,161 | 209,014 | ||||||
| Accumulated other comprehensive income (loss) |
(123 | ) | 1,136 | |||||
| Deferred compensation |
(260 | ) | (175 | ) | ||||
| Accumulated deficit |
(203,964 | ) | (176,255 | ) | ||||
| Treasury stock, at cost, 500,189 shares at September 30, 2004 (unaudited) and December 31, 2003 |
(922 | ) | (922 | ) | ||||
| Total stockholders’ equity |
66,926 | 32,823 | ||||||
| $ | 79,609 | $ | 43,849 | |||||
See accompanying notes.
3
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenues: |
||||||||||||||||
| Product sales |
$ | 671 | $ | 752 | $ | 2,280 | $ | 1,642 | ||||||||
| License fees |
25 | 46 | 214 | 46 | ||||||||||||
| Sponsored research |
— | 375 | 500 | 1,125 | ||||||||||||
| Contracts and grant |
386 | 568 | 1,365 | 1,822 | ||||||||||||
| Total revenues |
1,082 | 1,741 | 4,359 | 4,635 | ||||||||||||
| Costs and expenses: |
||||||||||||||||
| Cost of product sales |
1,298 | 1,370 | 4,150 | 2,168 | ||||||||||||
| Research and development |
4,514 | 4,280 | 12,901 | 13,473 | ||||||||||||
| Selling, general and administrative |
4,811 | 3,485 | 12,626 | 11,681 | ||||||||||||
| Charge for acquired in-process research and development |
— | — | 3,758 | — | ||||||||||||
| Impairment of acquired technology rights |
— | 1,024 | — | 1,024 | ||||||||||||
| Total costs and expenses |
10,623 | 10,159 | 33,435 | 28,346 | ||||||||||||
| Loss from operations |
(9,541 | ) | (8,418 | ) | (29,076 | ) | (23,711 | ) | ||||||||
| Interest income, net |
187 | 97 | 433 | 405 | ||||||||||||
| Other income (loss) |
(36 | ) | (24 | ) | (209 | ) | (150 | ) | ||||||||
| Gain (loss) on sale of investments |
(37 | ) | 778 | (47 | ) | (2,790 | ) | |||||||||
| Gain (loss) on foreign currency translation |
(15 | ) | — | 1,190 | — | |||||||||||
| Minority interest in loss of consolidated subsidiary |
— | 488 | — | 1,594 | ||||||||||||
| Net loss |
$ | (9,442 | ) | $ | (7,079 | ) | $ | (27,709 | ) | $ | (24,652 | ) | ||||
| Net loss per share – basic and diluted |
$ | (0.28 | ) | $ | (0.33 | ) | $ | (0.89 | ) | $ | (1.14 | ) | ||||
| Number of shares used in computing net loss per share – basic and diluted |
33,336 | 21,781 | 31,034 | 21,652 | ||||||||||||
See accompanying notes.
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
| Nine months ended September 30 |
||||||||
| 2004 |
2003 |
|||||||
| Operating activities: |
||||||||
| Net loss |
$ | (27,709 | ) | $ | (24,652 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
2,678 | 3,256 | ||||||
| Inventory impairment charges |
2,429 | 829 | ||||||
| Other asset impairment and non-cash charges |
3,758 | 1,029 | ||||||
| Loss on disposal of fixed assets |
43 | 131 | ||||||
| Accretion related to short-term investments |
175 | 169 | ||||||
| Foreign currency translation gain |
(1,190 | ) | — | |||||
| Stock-based compensation expense |
505 | 152 | ||||||
| Minority interest in loss of consolidated subsidiary |
— | (1,594 | ) | |||||
| Loss (gain) on sale of short-term investments |
47 | 2,790 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Receivables |
706 | 58 | ||||||
| Inventories |
(118 | ) | (1,625 | ) | ||||
| Other assets |
(753 | ) | 471 | |||||
| Accounts payable |
(294 | ) | (363 | ) | ||||
| Accrued liabilities |
(1,796 | ) | (1,263 | ) | ||||
| Deferred revenue and other long-term liabilities |
(53 | ) | 442 | |||||
| Net cash used in operating activities |
(21,572 | ) | (20,170 | ) | ||||
| Investing activities: |
||||||||
| Purchase of short-term investments |
(61,809 | ) | (12,856 | ) | ||||
| Acquisition of business, net of cash acquired |
(2,669 | ) | — | |||||
| Proceeds from sale and maturities of short-term investments |
34,956 | 30,270 | ||||||
| Purchase of equipment, net |
(397 | ) | (1,097 | ) | ||||
| Purchase of patents and technology rights |
— | (3 | ) | |||||
| Net cash provided by (used in) investing activities |
(29,919 | ) | 16,314 | |||||
| Financing activities: |
||||||||
| Principal payments on capital lease obligations |
(420 | ) | (594 | ) | ||||
| Proceeds from development partner |
441 | 749 | ||||||
| Proceeds from restricted cash balances |
14 | 50 | ||||||
| Issuance of common stock, net |
48,956 | 6,869 | ||||||
| Net cash provided by financing activities |
48,991 | 7,074 | ||||||
| Effect of exchange rate changes |
13 | 196 | ||||||
| Net increase/decrease in cash and cash equivalents |
(2,487 | ) | 3,414 | |||||
| Cash and cash equivalents at beginning of period |
8,550 | 9,353 | ||||||
| Cash and cash equivalents at end of period |
$ | 6,063 | $ | 12,767 | ||||
| Supplemental disclosure of cash flow information: |
||||||||
| Interest paid |
$ | 82 | $ | 136 | ||||