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 AND EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2004
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 000-33001
NATUS MEDICAL INCORPORATED
(Exact name of registrant as specified in its charter)
| Delaware | 77-0154833 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
1501 Industrial Road, San Carlos, CA 94070
(Address of principal executive offices) (Zip Code)
(650) 802-0400
(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 and Exchange Act of 1934 during the preceding 12 months (or for 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 issued and outstanding shares of the registrant’s Common Stock, $0.001 par value, as of November 8, 2004, was 17,059,561.
TABLE OF CONTENTS
| Page No. | ||||
| PART I. |
3 | |||
| Item 1. |
3 | |||
| Condensed Consolidated Balance Sheets as of September 30, 2004 (unaudited) and December 31, 2003 |
3 | |||
| 4 | ||||
| 5 | ||||
| Notes to Condensed Consolidated Financial Statements (unaudited) |
6 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
13 | ||
| Item 3. |
34 | |||
| Item 4. |
35 | |||
| PART II. |
36 | |||
| Item 2. |
36 | |||
| Item 6. |
36 | |||
| 37 | ||||
2
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
| September 30, 2004 |
December 31, 2003(1) |
|||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 10,662 | $ | 9,435 | ||||
| Short-term investments |
23,078 | 28,200 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $461 and $395 |
6,567 | 5,682 | ||||||
| Inventories |
4,379 | 5,263 | ||||||
| Prepaid expenses and other current assets |
513 | 528 | ||||||
| Total current assets |
45,199 | 49,108 | ||||||
| Property and equipment, net |
2,549 | 2,668 | ||||||
| Long-term investment |
— | 341 | ||||||
| Deposits and other assets |
31 | 111 | ||||||
| Intangible assets |
7,415 | 3,594 | ||||||
| Goodwill |
1,700 | 1,198 | ||||||
| Total assets |
$ | 56,894 | $ | 57,020 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Liabilities: |
||||||||
| Accounts payable |
$ | 1,571 | $ | 1,659 | ||||
| Accrued liabilities |
4,149 | 2,229 | ||||||
| Deferred revenue |
301 | 500 | ||||||
| Total current liabilities |
6,021 | 4,388 | ||||||
| Commitments and contingencies |
— | — | ||||||
| Stockholders’ equity: |
||||||||
| Common stock, $0.001 par value, 120,000,000 shares authorized; shares issued and outstanding: 17,083,007 and 16,511,874 |
89,167 | 87,038 | ||||||
| Deferred stock compensation |
(2 | ) | (33 | ) | ||||
| Accumulated deficit |
(38,420 | ) | (34,495 | ) | ||||
| Accumulated other comprehensive income |
128 | 122 | ||||||
| Total stockholders’ equity |
50,873 | 52,632 | ||||||
| Total liabilities and stockholders’ equity |
$ | 56,894 | $ | 57,020 | ||||
| (1) | Derived from the consolidated audited financial statements at December 31, 2003. |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenue |
$ | 9,011 | $ | 7,669 | $ | 25,980 | $ | 21,393 | ||||||||
| Cost of revenue |
3,864 | 3,358 | 11,370 | 8,718 | ||||||||||||
| Gross profit |
5,147 | 4,311 | 14,610 | 12,675 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Marketing and selling |
2,318 | 3,171 | 8,399 | 9,656 | ||||||||||||
| Research and development |
670 | 913 | 2,648 | 2,764 | ||||||||||||
| General and administrative |
1,180 | 1,327 | 5,204 | 3,810 | ||||||||||||
| Restructuring |
— | — | 776 | — | ||||||||||||
| Acquired in process research and development |
550 | — | 550 | — | ||||||||||||
| Total operating expenses |
4,718 | 5,411 | 17,577 | 16,230 | ||||||||||||
| Income (loss) from operations |
429 | (1,100 | ) | (2,967 | ) | (3,555 | ) | |||||||||
| Interest income |
117 | 34 | 313 | 362 | ||||||||||||
| Interest expense |
— | (4 | ) | (3 | ) | (10 | ) | |||||||||
| Other income (expense), net |
(29 | ) | 118 | (130 | ) | 140 | ||||||||||
| Income (loss) before provision for income taxes |
517 | (952 | ) | (2,787 | ) | (3,063 | ) | |||||||||
| Provision for income taxes |
65 | 1 | 66 | 2 | ||||||||||||
| Income (loss) from continuing operations |
452 | (953 | ) | (2,853 | ) | (3,065 | ) | |||||||||
| Discontinued operations |
(305 | ) | (16 | ) | (1,072 | ) | (16 | ) | ||||||||
| Net Income (loss) |
$ | 147 | $ | (969 | ) | $ | (3,925 | ) | $ | (3,081 | ) | |||||
| Earnings (loss) per common share |
||||||||||||||||
| Basic: |
||||||||||||||||
| Income (loss) from continuing operations |
$ | 0.03 | $ | (0.06 | ) | $ | (0.17 | ) | $ | (0.19 | ) | |||||
| Loss from discontinued operations |
$ | (0.02 | ) | — | $ | (0.06 | ) | — | ||||||||
| Net Income (loss) |
$ | 0.01 | $ | (0.06 | ) | $ | (0.23 | ) | $ | (0.19 | ) | |||||
| Diluted: |
||||||||||||||||
| Income (loss) from continuing operations |
$ | 0.03 | $ | (0.06 | ) | $ | (0.17 | ) | $ | (0.19 | ) | |||||
| Loss from discontinued operations |
$ | (0.02 | ) | — | $ | (0.06 | ) | — | ||||||||
| Net Income (loss) |
$ | 0.01 | $ | (0.06 | ) | $ | (0.23 | ) | $ | (0.19 | ) | |||||
| Weighted-average Common shares used to compute: |
||||||||||||||||
| Basic earnings per common share |
17,011 | 16,454 | 16,740 | 16,388 | ||||||||||||
| Diluted earnings per common share |
17,899 | 16,454 | 16,740 | 16,388 | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Nine Months Ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| Operating activities: |
||||||||
| Net loss |
$ | (3,925 | ) | $ | (3,081 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||
| Accounts receivable reserve |
66 | 27 | ||||||
| Depreciation and amortization |
1,339 | 1,024 | ||||||
| In-process research and development |
550 | — | ||||||
| Stock-based compensation |
383 | 106 | ||||||
| Loss on disposal of assets |
632 | 17 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(556 | ) | 1,164 | |||||
| Inventories |
1,409 | (852 | ) | |||||
| Prepaid expenses and other current assets |
17 | (86 | ) | |||||
| Accounts payable |
(519 | ) | 53 | |||||
| Accrued liabilities and deferred revenue |
1,269 | (460 | ) | |||||
| Net cash provided by (used in) continuing operations |
665 | (2,088 | ) | |||||
| Investing activities: |
||||||||
| Acquisition, net of cash acquired |
(5,232 | ) | (3,735 | ) | ||||
| Purchase of property and equipment |
(1,457 | ) | (770 | ) | ||||
| Deposits and other assets |
5 | (16 | ) | |||||
| Purchases of short-term investments |
(31,976 | ) | (42,615 | ) | ||||
| Sales of short-term investments |
37,190 | 39,627 | ||||||
| Redemption of long-term investments |
341 | (4 | ) | |||||
| Purchase of treasury stock |
(307 | ) | — | |||||
| Net cash used in investing activities |
(1,436 | ) | (7,513 | ) | ||||
| Financing activities: |
||||||||
| Issuance of common stock |
2,084 | 370 | ||||||
| Net cash provided by financing activities |
2,084 | 370 | ||||||
| Exchange rate effect on cash and cash equivalents |
(86 | ) | (4 | ) | ||||