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 March 31, 2005
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 000-51066
CONOR MEDSYSTEMS, INC.
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 94-3350973 | |
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) |
1003 Hamilton Court
Menlo Park, California 94025
(Address of Principal Executive Offices, including Zip Code)
(650) 614-4100
(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 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 registrant had 33,344,137 shares of Common Stock, $0.001 par value per share, outstanding as of May 2, 2005.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2005
TABLE OF CONTENTS
2
(a development stage company)
Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
| March 31, 2005 |
December 31, 2004 |
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| (unaudited) | (Note 1) | |||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 116,349 | $ | 117,676 | ||||
| Accounts receivable |
35 | – | ||||||
| Inventories |
124 | 53 | ||||||
| Prepaid expenses and other current assets |
1,083 | 1,039 | ||||||
| Total current assets |
117,591 | 118,768 | ||||||
| Property and equipment, net |
2,942 | 1,716 | ||||||
| Restricted cash |
171 | 170 | ||||||
| Other assets |
238 | 235 | ||||||
| Total assets |
$ | 120,942 | $ | 120,889 | ||||
| Liabilities and stockholders’ equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,972 | $ | 1,961 | ||||
| Accrued compensation |
721 | 892 | ||||||
| Accrued clinical development liabilities |
924 | 729 | ||||||
| Accrued legal liabilities |
605 | – | ||||||
| Other accrued liabilities |
921 | 434 | ||||||
| Deferred rent |
117 | 124 | ||||||
| Liability for early exercise of stock options – current portion |
107 | 107 | ||||||
| Total current liabilities |
5,367 | 4,247 | ||||||
| Liability for early exercise of stock options |
219 | 251 | ||||||
| Commitments and contingencies (Note 3) |
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| Stockholders’ equity: |
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| Common stock; $0.001 par value; 150,000 shares authorized at March 31, 2005 and December 31, 2004; 32,649 and 31,961 shares issued and outstanding at March 31, 2005 and December 31, 2004, respectively |
33 | 32 | ||||||
| Additional paid-in-capital |
194,153 | 186,269 | ||||||
| Accumulated other comprehensive loss |
(111 | ) | (32 | ) | ||||
| Deferred stock compensation |
(22,460 | ) | (25,367 | ) | ||||
| Deficit accumulated during development stage |
(56,259 | ) | (44,511 | ) | ||||
| Total stockholders’ equity |
115,356 | 116,391 | ||||||
| Total liabilities and stockholders’ equity |
$ | 120,942 | $ | 120,889 | ||||
See accompanying notes
3
(a development stage company)
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(unaudited)
| Three Months Ended March 31, |
Period from Inception (October 25, 1999) Through March 31, 2005 |
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| 2005 |
2004 |
|||||||||||
| Revenue: |
||||||||||||
| Product sales |
$ | 36 | $ | – | $ | 36 | ||||||
| Contract revenue |
– | – | 67 | |||||||||
| Total revenue |
36 | – | 103 | |||||||||
| Cost of sales |
238 | 238 | ||||||||||
| Gross profit |
(202 | ) | – | (135 | ) | |||||||
| Operating expenses: |
||||||||||||
| Research and development (1) |
7,653 | 3,280 | 41,106 | |||||||||
| General and administrative (1) |
4,605 | 740 | 16,234 | |||||||||
| Total operating expenses |
12,258 | 4,020 | 57,340 | |||||||||
| Loss from operations |
(12,460 | ) | (4,020 | ) | (57,475 | ) | ||||||
| Interest and other income |
712 | 54 | 1,400 | |||||||||
| Interest expense |
– | – | (184 | ) | ||||||||
| Net loss |
(11,748 | ) | (3,966 | ) | (56,259 | ) | ||||||
| Accretion to redemption value of redeemable convertible preferred stock |
– | (793 | ) | (5,039 | ) | |||||||
| Deemed dividend upon issuance of Series E convertible preferred stock |
– | – | (23,435 | ) | ||||||||
| Net loss attributable to common stockholders |
$ | (11,748 | ) | $ | (4,759 | ) | $ | (84,733 | ) | |||
| Basic and diluted net loss per share attributable to common stockholders |
$ | (0.37 | ) | $ | (1.32 | ) | ||||||
| Shares used to compute basic and diluted net loss per share attributable to common stockholders |
31,974 | 3,602 | ||||||||||
(1) Includes non-cash stock-based compensation expense as follows: |
||||||||||||
| Research and development |
$ | 1,247 | $ | 173 | $ | 3,851 | ||||||
| General and administrative |
1,844 | 182 | 5,769 | |||||||||
| Total |
$ | 3,091 | $ | 355 | $ | 9,620 | ||||||
See accompanying notes
4
(a development stage company)
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
| For The Three Months Ended March 31, |
Period from Through |
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| 2005 |
2004 |
|||||||||||
| Operating activities |
||||||||||||
| Net loss |
$ | (11,748 | ) | $ | (3,967 | ) | $ | (56,259 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||
| Depreciation and amortization |
184 | 33 | 716 | |||||||||
| Amortization of deferred stock-based compensation |
2,377 | 253 | 7,533 | |||||||||
| Loss on disposal of property and equipment |
– | – | 47 | |||||||||
| Issuance of common stock to consultants for services |
– | – | 220 | |||||||||
| Issuance of stock options to consultants for services |
714 | 102 | 2,217 | |||||||||
| Accrued interest expense on notes payable |
– | – | 60 | |||||||||
| Interest expense related to issuance of warrants |
– | – | 122 | |||||||||
| Accrued interest income on notes receivable |
– | (2 | ) | (11 | ) | |||||||
| Forgiveness of officer loan receivable |
– | – | 111 | |||||||||
| Changes in operating assets and liabilities: |
||||||||||||
| Prepaid expenses and other current assets |
(44 | ) | 29 | (1,082 | ) | |||||||
| Accounts receivable |
(35 | ) | – | (35 | ) | |||||||
| Inventories |
(71 | ) | – | (124 | ) | |||||||
| Other assets |
(3 | ) | (71 | ) | (238 | ) | ||||||
| Accounts payable |
17 | (504 | ) | 1,978 | ||||||||
| Accrued compensation |
(170 | ) | 30 | 722 | ||||||||
| Accrued clinical development liabilities |
195 | 70 | 924 | |||||||||
| Other accrued liabilities |
1,100 | (118 | ) | 1,534 | ||||||||
| Deferred rent |
(7 | ) | 26 | 117 | ||||||||
| Net cash used in operating activities |
(7,491 | ) | (4,119 | ) | (41,448 | ) | ||||||
| Cash flows from investing activities |
||||||||||||
| Transfers to restricted cash |
(1 | ) | (30 | ) | (171 | ) | ||||||
| Capital expenditures |
(1,379 | ) | (294 | ) | (3,680 | ) | ||||||