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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q/A
AMENDMENT 1
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(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
[ ] 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 (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
270 EAST GRAND AVENUE
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 [ ]
As of July 31, 2000 there were 19,762,886 shares of the registrant's common
stock outstanding.
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VIROLOGIC, INC.
INDEX
PAGE
NO.
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PART I. FINANCIAL INFORMATION
Explanatory Note............................................ 1
Item 1 -- Financial Statements
Condensed Balance Sheets as of June 30, 2000 and December
31, 1999............................................... 2
Condensed Statements of Operations for the three and six
months ended June 30, 2000 and 1999.................... 3
Condensed Statements of Cash Flows for the six months
ended June 30, 2000 and 1999........................... 4
Notes to Condensed Financial Statements................... 5
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 8
SIGNATURES.................................................. 11
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VIROLOGIC, INC.
EXPLANATORY NOTE
ViroLogic, Inc. hereby amends its Form 10-Q for the quarter ended June 30,
2000 to restate, in certain periods, its weighted average shares used in
computing basic and diluted net loss per common share and the related net loss
per common share. Certain weighted average shares as originally reported on the
Condensed Statements of Operations were calculated on a proforma basis, which
reflected the conversion of the convertible preferred stock from the original
date of issuance of the related preferred stock instead of the actual date of
conversion. None of the changes herein have resulted in any change in revenues,
expenses, net loss, total assets, total liabilities or total stockholders'
equity. This Form 10-Q/A amends the Company's Form 10-Q filed on August 14, 2000
only to the extent of the additions and information included in this report. The
following tables summarize the changes(in thousands, except per share data).
AS PREVIOUSLY
REPORTED AS RESTATED
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2000 1999 2000 1999
-------- ------- -------- -------
CONDENSED STATEMENTS OF OPERATIONS:
Basic and diluted net loss per common share........... $ (0.28) $(0.51) $ (0.34) $(0.77)
Weighted-average shares used in computing basic and
diluted net loss per common share................... 17,987 7,179 14,715 4,724
PRO FORMA:
Pro forma basic and diluted net loss per common
share............................................... $ -- $(0.51) $ (0.28) $(0.51)
Weighted-average shares used in computing pro forma
basic and diluted net loss per common share......... -- 7,179 17,987 7,179
AS PREVIOUSLY
REPORTED AS RESTATED
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------- -----------------
2000 1999 2000 1999
------- ------ ------- ------
CONDENSED STATEMENTS OF OPERATIONS:
Basic and diluted net loss per common share........... $ (1.70) $(0.84) $ (2.65) $(1.28)
Weighted-average shares used in computing basic and
diluted net loss per common share................... 15,449 7,188 9,876 4,733
PRO FORMA:
Pro forma basic and diluted net loss per common
share............................................... $ -- $(0.84) $ (1.70) $(0.84)
Weighted-average shares used in computing pro forma
basic and diluted net loss per common share......... -- 7,188 15,449 7,188
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VIROLOGIC, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
JUNE 30, DECEMBER 31,
2000 1999(1)
----------- ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents................................... $ 1,572 $ 2,208
Short-term investments...................................... 36,173 --
Accounts receivable, net of allowance for doubtful accounts
of $238 and $63, respectively............................. 2,198 550
Inventory................................................... 406 287
Restricted cash............................................. 2,312 950
Other current assets........................................ 991 310
-------- --------
Total current assets.............................. 43,652 4,305
Property and equipment, net................................. 5,136 5,028
Other assets................................................ 493 444
-------- --------
Total assets...................................... $ 49,281 $ 9,777
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 453 $ 1,457
Accrued liabilities......................................... 1,713 869
Accrued compensation........................................ 888 560
Current portion of loan..................................... 1,225 897
-------- --------
Total current liabilities......................... 4,279 3,783
Long-term portion of loan................................... 1,410 1,051
Long-term deferred rent..................................... 241 245
Commitments and contingencies
Stockholders' equity:
Preferred stock............................................. -- 10
Common stock................................................ 20 5
Additional paid-in capital.................................. 87,668 38,812
Deferred compensation....................................... (4,211) (4,478)
Notes receivable from officers and employees................ (40) (46)
Accumulated deficit......................................... (40,086) (29,605)
-------- --------
Total stockholders' equity........................ 43,351 4,698
-------- --------
Total liabilities and stockholders' equity........ $ 49,281 $ 9,777
======== ========
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(1) Derived from the audited financial statements included in the Company's
Registration Statement on Form S-1, No. 333-30896.
See accompanying notes to Condensed Financial Statements.
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VIROLOGIC, INC.
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -------------------
2000 1999 2000 1999
------- ------- -------- -------
Revenue............................................ $ 1,947 $ 166 $ 2,824 $ 251
Operating costs and expenses:
Cost of revenue.................................. 1,448 65 2,131 145
Research and development......................... 2,385 2,418 4,661 4,013
Sales, general and administrative:
Non-cash stock based compensation............. 1,151 -- 2,145 --
Other sales general and administrative
expenses.................................... 2,423 1,310 4,869 2,166
------- ------- -------- -------
Total costs and operating expenses....... 7,407 3,793 13,806 6,324
------- ------- -------- -------
Operating loss..................................... (5,460) (3,627) (10,982) (6,073)
Interest income.................................... 515 53 630 155
Interest expense................................... (72) (64) (129) (132)
------- ------- -------- -------
Net loss........................................... (5,017) (3,638) (10,481) (6,050)
Deemed dividend to preferred stockholders.......... -- -- (15,700) --
------- ------- -------- -------
Net loss allocable to common stockholders.......... $(5,017) $(3,638) $(26,181) $(6,050)
======= ======= ======== =======
Basic and diluted net loss per common share........ $ (0.34) $ (0.77) $ (2.65) $ (1.28)
======= ======= ======== =======
Weighted-average shares used in computing basic and
diluted net loss per common share................ 14,715 4,724 9,876 4,733
======= ======= ======== =======
See accompanying notes to Condensed Financial Statements.
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VIROLOGIC, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
-------------------
2000 1999
-------- -------
OPERATING ACTIVITIES
Net loss.................................................... $(10,481) $(6,050)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 701 369
Stock-based compensation.................................. 2,145 --
Changes in assets and liabilities:
Accounts receivable.................................... (1,648) (74)
Inventory.............................................. (119) (254)
Other current assets................................... (681) (116)
Accounts payable and other current liabilities......... (279) 1,215
-------- -------
Net cash used in operating activities............. (10,362) (4,910)
INVESTING ACTIVITIES
Intangible and other assets................................. 218 (88)
Restricted cash............................................. (1,362) (950)
Capital expenditures........................................ (809) (1,555)
Purchases of short-term marketable securities............... (38,173) --
Sales of short-term marketable securities................... 2,000 --
-------- -------
Net cash used in investing activities............. (38,126) (2,593)
FINANCING ACTIVITIES
Principal payments on long-term debt........................ (529) (390)
Borrowings under long-term debt............................. 1,216 --
Net proceeds from issuance of common stock, net of common
stock repurchases......................................... 31,459 35
Repayments of notes receivable.............................. 6 28
Net proceeds from issuance of preferred stock............... 15,700 --
-------- -------
Net cash (used in) provided by financing
activities....................................... 47,852 (327)
-------- -------
Net increase (decrease) in cash and cash
equivalents...................................... (636) (7,830)
Cash and cash equivalents at beginning of period............ 2,208 9,564
-------- -------
Cash and cash equivalents at end of period.................. $ 1,572 $ 1,734
======== =======
See accompanying notes to Condensed Financial Statements.
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VIROLOGIC, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles 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
footnotes required by generally accepted accounting principles for complete
financial statements. All adjustments (consisting only of adjustments of a
normal recurring nature) considered necessary for a fair presentation have been
included. Operating results for the three- and six-month periods ended June 30,
2000 and 1999 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2000. The condensed balance sheet as of
December 31, 1999 has been derived from the audited financial statements as of
that date. For further information, refer to the financial statements and notes
thereto included in our Registration Statement filed on Form S-1, effective May
1, 2000.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized upon completion of tests made on samples provided by
customers and the shipment of test results to those customers. Services are
provided to certain patients covered by various third-party payor programs,
including Medicare. Billings for services under third-party payor programs are
included in revenue net of allowances for contractual discounts and allowances
for differences between the amounts billed and estimated payment amounts.
Inventory
Inventory is stated at the lower of standard cost, which approximates
actual cost, or market. At June 30, 2000 and December 31, 1999, inventories
consisted mainly of raw materials used in the performance of tests.
One-for-Two Reverse Stock Split
The accompanying financial statements have been adjusted retroactively to
reflect a one-for-two reverse stock split, which was effective on April 17,
2000.
Comprehensive Income (Loss)
For the three- and six-month periods ended June 30, 2000 and June 30, 1999,
there were no comprehensive gains or losses. Therefore, comprehensive loss was
equal to net loss for those periods.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 requires the Company
to recognize all derivatives on the balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through net income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair
value of the derivative are either offset against the change in fair value of
assets, liabilities, or firm commitments through earnings or recognized in the
other comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of the derivative's change in fair value will be immediately
recognized in earnings. SFAS 133 is effective for the
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VIROLOGIC, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
Company's year ending December 31, 2001. The Company does not currently hold any
derivatives and does not expect this pronouncement to materially impact results
of operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"), which provides guidance on the accounting for revenue recognition. As
required, the Company adopted SAB 101 effective January 1, 2000. Implementation
of this Bulletin did not materially impact the Company's financial position or
results of operations.
On March 31, 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation," which provides guidance on
several implementation issues related to Accounting Principles Board Opinion No.
25. The most significant are clarification of the definition of employee for
purposes of applying Opinion 25 and the accounting for options that have been
repriced. Under the interpretation, the employer-employee relationship would be
based on case law and Internal Revenue Service regulations. The FASB granted an
exception to this definition for outside directors. Implementation of this
interpretation had no impact on the Company's financial statements.
2. NET LOSS PER SHARE
Basic net loss per share is based on the weighted-average number of common
shares outstanding. Potentially dilutive securities, consisting of convertible
preferred stock, stock options and warrants, have been excluded from the diluted
earnings per share computations as their effect is antidilutive.
The computation of pro forma basic and diluted net loss per common share
includes shares issuable upon the conversion of outstanding shares of
convertible preferred stock (using the as-if converted method) from the original
date of issuance.
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VIROLOGIC, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
A reconciliation of pro forma basic and diluted net loss per common share
is as follows (in thousands, except per share data):
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -------------------
2000 1999 2000 1999
------- ------- -------- -------
ACTUAL:
Net loss........................................... $(5,017) $(3,638) $(10,481) $(6,050)
Deemed dividend to preferred stockholders.......... -- -- (15,700) --
------- ------- -------- -------
Net loss allocable to common stockholders.......... $(5,017) $(3,638) $(26,181) $(6,050)
======= ======= ======== =======
Basic and diluted net loss per common share........ $ (0.34) $ (0.77) $ (2.65) $ (1.28)
======= ======= ======== =======
Weighted-average shares used in computing basic and
diluted net loss per common share................ 14,715 4,724 9,876 4,733
======= ======= ======== =======
PRO FORMA:
Net loss allocable to common stockholders.......... $(5,017) $(3,638) $(26,181) $(6,050)
======= ======= ======== =======
Shares used above.................................. 14,715 4,724 9,876 4,733
Adjusted to reflect weighted-average effect of
assumed conversion of preferred stock............ 3,272 2,455 5,573 2,455
------- ------- -------- -------
Weighted-average shares used in pro forma basic and
diluted net loss per common share................ 17,987 7,179 15,449 7,188
======= ======= ======== =======
Pro forma basic and diluted net loss per common
share............................................ $ (0.28) $ (0.51) $ (1.70) $ (0.84)
======= ======= ======== =======
3. DEEMED DIVIDEND TO PREFERRED STOCKHOLDERS
In January and February 2000, ViroLogic consummated the sale of 8.5 million
shares of Series C convertible preferred stock, or 4.2 million shares of common
stock on an as-if converted basis, from which ViroLogic received proceeds of
approximately $15.7 million or $1.85 per share, or $3.70 per share on an as-if-
converted basis. At the date of issuance, ViroLogic believed the per share price
of $1.85, or $3.70 per share on an as-if-converted basis, represented the fair
value of the common stock. Subsequent to the commencement of ViroLogic's initial
public offering process, ViroLogic re-evaluated the fair value of its common
stock as of January and February 2000 and deemed it to be $11.90 per share, for
financial reporting purposes. Accordingly, the increase in fair value has
resulted in a beneficial conversion feature of $15.7 million that has been
recorded as a deemed dividend to preferred stockholders in the first quarter of
2000. ViroLogic recorded the deemed dividend at the date of issuance by
offsetting charges and credits to additional paid-in-capital, without any effect
on total stockholders' equity. The preferred stock dividend increases the loss
applicable to common stockholders in the calculation of basic and diluted net
loss per common share for the six-month period ended June 30, 2000. The
guidelines set forth in the Emerging Issues Task Force Consensus No. 98-5 limit
the amount of the deemed dividend to the amount of the proceeds of the related
financing.
4. INITIAL PUBLIC OFFERING AND CONVERSION OF PREFERRED STOCK
On May 1, 2000, the Company completed its initial public offering in which
it sold 5,000,000 shares of Common Stock at $7.00 per share.
Upon the closing of the offering, all the Company's outstanding preferred
stock automatically converted into an aggregate of 9.6 million shares of common
stock. After the offering, the Company's authorized capital consisted of
60,000,000 shares of common stock, of which 19.7 million shares were outstanding
as of June 30, 2000, and 5,000,000 shares of preferred stock, none of which was
issued or outstanding as of June 30, 2000.
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ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this Quarterly Report on Form 10-Q are
forward-looking statements concerning the Company's operations, economic
performance and financial condition within the meaning of the federal securities
laws. These statements may be found under "Management's Discussion and Analysis
of Financial Condition and Results of Operation" and elsewhere in this report.
These forward-looking statements are subject to risks and uncertainties and
other factors, which may cause actual results to differ materially from the
anticipated results or other expectations expressed in such forward-looking
statements. These risks and uncertainties include, but are not limited to,
whether PhenoSense(TM) testing will achieve market acceptance, whether payors
will authorize reimbursement for our products, whether we will be able to expand
our sales and marketing capabilities, whether we encounter problems or delays in
automating our process, whether we successfully introduce new products using our
PhenoSense(TM) technology, whether intellectual property underlying our
PhenoSense(TM) technology is adequate, whether we are able to build brand
loyalty, and other risks and uncertainties detailed in our final Prospectus that
is part of our Registration Statement on Form S-1, as declared effective by the
SEC on May 1, 2000 (File No. 333-30896).
OVERVIEW
We are a biotechnology company developing and marketing innovative products
to guide and improve the treatment of viral diseases. We have developed a
practical way of directly measuring the impact of genetic mutations on drug
resistance and using this information to guide therapy. We have a patented
technology, called PhenoSense, which tests for drug resistance in viruses that
cause serious diseases such as AIDS, hepatitis B and hepatitis C. We believe our
products have the potential to revolutionize the way the healthcare industry
treats these diseases. Our first product, PhenoSense HIV, is a test that
directly and quantitatively measures the resistance, or susceptibility, of the
patient's human immunodeficiency virus to anti-viral drugs. The results help
physicians select appropriate drugs for their HIV patients. We commenced sales
and marketing activity for PhenoSense HIV in November 1999. We are also
developing PhenoSense products for other viral diseases. In addition, we are
gathering a large amount of test results and related clinical data, which we
intend to package in an interactive database that physicians can access over the
Internet for therapy guidance.
Since our inception, we have incurred significant losses and, as of June
30, 2000, our accumulated deficit was $40.1 million. Our losses have resulted
principally from costs incurred in research and development, clinical laboratory
scale-up, and from general and administrative costs associated with our
operations. We expect to continue to incur substantial costs in these areas, as
well as sales and marketing, and as a result, we will need to generate
significantly higher revenue to achieve profitability.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2000 and 1999
Net loss per share. Net loss for the quarter was $5.0 million, or $0.34 per
share, compared to a net loss of $3.6 million, or $0.77 per share, for the same
period in 1999.
Revenue. Revenue rose to $1.9 million in the second quarter of 2000 from
$0.2 million in the corresponding quarter of 1999, an increase of $1.7 million.
The increase was primarily attributable to revenues recognized from sales of
PhenoSense HIV to physicians for patient care. We expect revenues from the sales
of PhenoSense HIV for patient care to increase substantially relative to sales
of the product to pharmaceutical companies for use in clinical trials.
Cost of revenue. Cost of revenue increased to $1.5 million in the second
quarter of 2000 from $0.1 million in the corresponding quarter 1999, an increase
of $1.4 million. The increase in cost of revenue was due to the higher volume of
testing performed in the second quarter of 2000. Included in these costs are
materials and supplies, labor and overhead related to the tests.
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Research and development. Research and development costs were $2.4 million
in the second quarter of both 2000 and 1999. These expenses are primarily
related to research and development efforts relating to our PhenoSense HIV test.
We also increased our spending on clinical trials of PhenoSense HIV. We expect
research and development spending to increase significantly over the next
several years as we expand our research and product development and automation
efforts for other viral diseases.
General and administrative. General and administrative expenses increased
to $2.5 million in the second quarter of 2000 from $1.1 million in the
corresponding quarter of 1999, an increase of $1.4 million. This increase was
primarily due to a $1.2 million non-cash compensation expense related to
granting of stock and options prior to our initial public offering. In addition,
we increased spending on salaries and benefits due to increased headcount.
Sales and marketing. Sales and marketing expenses increased to $1.1 million
in the second quarter of 2000 from $0.2 million in the corresponding quarter of
1999, an increase of $0.9 million. This increase was primarily due to the
deployment of our sales force. In addition, we increased spending on public
relations and marketing materials related to the commercialization of PhenoSense
HIV.
Interest income, net. Net interest income increased to $0.4 million in the
second quarter of 2000 from a net expense of $11,000 in the corresponding
quarter of 1999, an increase of $0.4 million. This increase was primarily due to
investment of the proceeds from the Company's IPO on May 1, 2000.
Six Months Ended June 30, 2000 and 1999
Net loss per share. Net loss for the first half of 2000, excluding a
one-time deemed dividend to preferred stockholders was $10.5 million, or $1.06
per share, compared to a net loss of $6.1 million, or $1.28 per share, for the
same period in 1999. In the first quarter of 2000, we recorded a deemed dividend
to preferred stockholders of $15.7 million which resulted from the sale of
Series C preferred stock in January and February of 2000, at a price per share
below the deemed fair value of our stock at the time of sale of the preferred
stock. Net loss allocable to common stockholders for the first half of 2000 was
$26.2 million or $2.65 per common share.
Revenue. Revenue increased to $2.8 million in the first six months of 2000
from $0.3 million in the corresponding quarter of 1999, an increase of $2.5
million. The increase was primarily attributable to revenues recognized from
sales of PhenoSense HIV. We expect revenues from the sales of PhenoSense HIV for
patient care to increase substantially relative to sales of the product to
pharmaceutical companies for use in clinical trials.
Cost of revenue. Cost of revenue increased to $2.1 million in the first
half of 2000 from $0.1 million in the corresponding period in 1999, an increase
of $2.0 million. The increase in cost of revenue was due to the higher volume of
testing provided in the first half of 2000.
Research and development. Research and development costs increased to $4.7
million in the first six months of 2000 from $4.0 million in the corresponding
half of 1999, an increase of $0.7 million. The increase in research and
development expenses was primarily the result of increased staffing and expenses
related to research and development efforts relating to our PhenoSense HIV test.
We also increased our spending on clinical trials of PhenoSense HIV. We expect
research and development spending to increase significantly over the next
several years as we expand our research and product development and automation
efforts for other viral diseases.
General and administrative. General and administrative expenses increased
to $5.1 million in the first half of 2000 from $1.8 million in the corresponding
period of 1999, an increase of $3.3 million. This increase was primarily due to
$2.1 million in non-cash compensation expenses related to granting of stock and
options prior to our initial public offering. In addition, we increased spending
on salaries and benefits due to increased headcount.
Sales and marketing. Sales and marketing expenses increased to $1.9 million
in the first six months of 2000 from $0.4 million in the corresponding half of
1999, an increase of $1.5 million. This increase was
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primarily due to the deployment of our sales force. In addition, we increased
spending on public relations and marketing materials related to the
commercialization of PhenoSense HIV.
Interest income, net. Net interest income increased to $0.5 million in the
first half of 2000 from $23,000 in the corresponding quarter of 1999, an
increase of $0.5 million. This increase was primarily due to higher average cash
and short term investment balances.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations since inception primarily through public
and private sales of common and preferred stock and equipment financing
arrangements. During the first half of 2000, we received net proceeds of $31.5
million from issuance of common stock in our initial public offering and $15.7
million from issuance of preferred stock. We also financed equipment purchases
totaling approximately $0.8 million. As of June 30, 2000, we had approximately
$40.1 million in cash, cash equivalents, short-term investments and restricted
cash.
Net cash used in operating activities was $10.4 million and $4.9 million
for the six months ended June 30, 2000 and 1999, respectively. Net cash used in
investing activities was $38.1 million and $2.6 million for the six months ended
June 30, 2000 and 1999. Net cash provided by financing activities was $47.9
million for the six months ended June 30, 2000 and net cash used in financing
activities was $0.3 million for the six months ended June 30, 1999.
On May 1, 2000, we completed the initial public offering of five million
shares of common stock at $7.00 per share. Total net proceeds to the Company
were approximately $31.5 million. We have invested the net proceeds in highly
liquid, interest bearing, investment grade securities. Our investment policy
emphasizes liquidity and preservation of principal over other portfolio
considerations. We select investments that maximize interest income to the
extent possible by investing excess cash in securities with different maturities
to match projected cash needs and limit risk by diversifying our investments.
In May 2000, we issued a letter of credit for $1.0 million from a
commercial bank, secured by a certificate of deposit of $1.0 million, as a
deposit under the terms of a lease for a new facility.
We believe that the net proceeds of our initial public offering together
with existing cash and marketable securities, borrowings under equipment
financing arrangements and anticipated cash flow from operations will be
sufficient to support our operations through at least December 31, 2001. These
estimates are forward-looking statements that involve risks and uncertainties.
Our actual future capital requirements and the adequacies of our available funds
will depend on many factors, including those discussed under "Risk Factors" in
the Company's Form 10-Q as originally filed.
Future capital requirements will also depend on the extent to which we
acquire or invest in businesses, products and technologies. If we should require
additional financing due to unanticipated developments, we cannot assure you
that additional financing or collaboration or licensing agreements will be
available when needed or that, if available, this financing will be obtained on
terms favorable to us or to our stockholders.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of South San
Francisco, County of San Mateo, State of California, on March 23, 2001.
By: /s/ WILLIAM D. YOUNG
------------------------------------
William D. Young
Chief Executive Officer
(Principal Executive Officer)
/s/ KAREN J. WILSON
------------------------------------
Karen J. Wilson
Vice President and Chief Financial
Officer
(Principal Financial and Accounting
Officer)
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