EnteroMedics Inc. (ETRM, Financial) filed Quarterly Report for the period ended 2010-03-31.
Enteromedics Inc. has a market cap of $18.9 million; its shares were traded at around $0.42 . ETRM is in the portfolios of Bill Frels of MAIRS & POWER INC, Jim Simons of Renaissance Technologies LLC.
Selling, General and Administrative Expenses. Selling, general and administrative expenses were $2.0 million for the three months ended March 31, 2010, compared to $1.9 million for the three months ended March 31, 2009. The increase of $60,000, or 3.2%, is primarily due to increases of $166,000 and $87,000 in professional services expense and stock based compensation expense, respectively. The increase in professional services expense is driven by increases of $130,000, $52,000 and $27,000 for consulting, legal and audit fees, respectively. The increase in stock-based compensation expense is a result of additional stock options granted throughout 2009. These increases were offset by decreases of $120,000 and $52,000 in compensation expense and facility charges, respectively, both as a result of a 40% reduction-in-force completed October 27, 2009.
Interest Income. Interest income was $1,000 for the three months ended March 31, 2010, compared to $48,000 for the three months ended March 31, 2009. The decrease of $47,000, or 97.9%, is primarily due to a decrease in total cash available to invest. Cash, cash equivalents and short-term investment balance was $14.6 million at March 31, 2010 compared to $35.2 million at March 31, 2009. The average cash, cash equivalents and short-term investments balance for the three months ended March 31, 2010 was $15.7 million compared to an average balance for the three months ended March 31, 2009 of $30.8 million. This decrease is the result of $23.3 million in net cash used in operating and investing activities and $12.7 million in debt principal payments from January 1, 2009 through March 31, 2010, offset by net proceeds of $24.4 million from the sale of common stock in a private placement and two registered direct offerings and $5.0 million of debt funding during the same time period.
Change in Value of Warrant Liability. The change in value of warrant liability was $28,000 for the three months ended March 31, 2010, compared to $342,000 for the three months ended March 31, 2009. For the three months ended March 31, 2009 the warrant liability consisted of warrants issued to Silicon Valley Bank (SVB), Western Technology Investment (WTI) and Compass Horizon Funding Company LLC (Horizon). Both SVB and WTI exercised their warrants in full in September and October 2009, respectively. As a result, only warrants issued to Horizon remained outstanding for the three months ended, March 31, 2010. The fair market value of the remaining 846,153 warrants, with a weighted-average exercise price of $0.65, was $500,000 as of March 31, 2010. The fair market value for these remaining warrants was calculated using the Black-Scholes valuation model, which resulted in a $28,000 increase for the three months ended March 31, 2010. While our stock price decreased from $0.56 on December 31, 2009 to $0.51 on March 31, 2010, the volatility used to calculate fair value increased from approximately 104% to 115% and the exercise price decreased from $0.80 to $0.65 per share as a result of the registered direct offering completed January 20, 2010.
We have incurred losses since our inception in December 2002 and, as of March 31, 2010, we had experienced net losses during the development stage of $138.0 million. We have financed our operations to date principally through the sale of capital stock, debt financing and interest earned on investments. Through December 31, 2009, we had received net proceeds of $122.2 million from the sale of common stock and preferred stock, including $39.1 million from our initial public offering in November 2007 and $19.9 million from private placement and registered direct offerings in 2009, and $35.8 million in debt financing, $746,000 to finance equipment purchases and $35.0 million to finance working capital. On January 20, 2010, we completed the sale of 7,438,299 shares of our common stock in a registered direct offering, at a purchase price of $0.65 per share. We received gross proceeds of $4.8 million before deducting estimated offering expenses.
Net cash provided by financing activities was $3.6 million and $15.1 million for the three months ended March 31, 2010 and 2009, respectively. Net cash provided by financing activities for the three months ended March 31, 2010 is primarily attributable to the sale of 7,438,299 shares of our common stock in a registered direct offering, at a purchase price of $0.65 per share, partially offset by repayments on our long-term debt. We received gross proceeds of $4.8 million offset by $340,000 in financing costs from the registered direct offering. Net cash provided by financing activities for the three months ended March 31, 2009 is primarily attributable to the completion of a private placement transaction that resulted in gross proceeds of $15.9 million for the issuance of common stock and common stock warrants, offset by $754,000 in financing costs incurred through March 31, 2009.
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Enteromedics Inc. has a market cap of $18.9 million; its shares were traded at around $0.42 . ETRM is in the portfolios of Bill Frels of MAIRS & POWER INC, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
Research and Development Expenses. Research and development expenses were $2.4 million for the three months ended March 31, 2010, compared to $3.8 million for the three months ended March 31, 2009. The decrease of $1.4 million, or 37.2%, is primarily due to decreases of $642,000, $624,000 and $124,000 in professional services, compensation and benefits expense and device costs, respectively. The ongoing financial commitment to maintain the EMPOWER trial continues to decrease as prescribed patient follow up visits become further apart, which has led to decreases in both professional services and device costs. The reduction in compensation and benefits expense is primarily the result of a 40% reduction-in-force completed October 27, 2009.Selling, General and Administrative Expenses. Selling, general and administrative expenses were $2.0 million for the three months ended March 31, 2010, compared to $1.9 million for the three months ended March 31, 2009. The increase of $60,000, or 3.2%, is primarily due to increases of $166,000 and $87,000 in professional services expense and stock based compensation expense, respectively. The increase in professional services expense is driven by increases of $130,000, $52,000 and $27,000 for consulting, legal and audit fees, respectively. The increase in stock-based compensation expense is a result of additional stock options granted throughout 2009. These increases were offset by decreases of $120,000 and $52,000 in compensation expense and facility charges, respectively, both as a result of a 40% reduction-in-force completed October 27, 2009.
Interest Income. Interest income was $1,000 for the three months ended March 31, 2010, compared to $48,000 for the three months ended March 31, 2009. The decrease of $47,000, or 97.9%, is primarily due to a decrease in total cash available to invest. Cash, cash equivalents and short-term investment balance was $14.6 million at March 31, 2010 compared to $35.2 million at March 31, 2009. The average cash, cash equivalents and short-term investments balance for the three months ended March 31, 2010 was $15.7 million compared to an average balance for the three months ended March 31, 2009 of $30.8 million. This decrease is the result of $23.3 million in net cash used in operating and investing activities and $12.7 million in debt principal payments from January 1, 2009 through March 31, 2010, offset by net proceeds of $24.4 million from the sale of common stock in a private placement and two registered direct offerings and $5.0 million of debt funding during the same time period.
Change in Value of Warrant Liability. The change in value of warrant liability was $28,000 for the three months ended March 31, 2010, compared to $342,000 for the three months ended March 31, 2009. For the three months ended March 31, 2009 the warrant liability consisted of warrants issued to Silicon Valley Bank (SVB), Western Technology Investment (WTI) and Compass Horizon Funding Company LLC (Horizon). Both SVB and WTI exercised their warrants in full in September and October 2009, respectively. As a result, only warrants issued to Horizon remained outstanding for the three months ended, March 31, 2010. The fair market value of the remaining 846,153 warrants, with a weighted-average exercise price of $0.65, was $500,000 as of March 31, 2010. The fair market value for these remaining warrants was calculated using the Black-Scholes valuation model, which resulted in a $28,000 increase for the three months ended March 31, 2010. While our stock price decreased from $0.56 on December 31, 2009 to $0.51 on March 31, 2010, the volatility used to calculate fair value increased from approximately 104% to 115% and the exercise price decreased from $0.80 to $0.65 per share as a result of the registered direct offering completed January 20, 2010.
We have incurred losses since our inception in December 2002 and, as of March 31, 2010, we had experienced net losses during the development stage of $138.0 million. We have financed our operations to date principally through the sale of capital stock, debt financing and interest earned on investments. Through December 31, 2009, we had received net proceeds of $122.2 million from the sale of common stock and preferred stock, including $39.1 million from our initial public offering in November 2007 and $19.9 million from private placement and registered direct offerings in 2009, and $35.8 million in debt financing, $746,000 to finance equipment purchases and $35.0 million to finance working capital. On January 20, 2010, we completed the sale of 7,438,299 shares of our common stock in a registered direct offering, at a purchase price of $0.65 per share. We received gross proceeds of $4.8 million before deducting estimated offering expenses.
Net cash provided by financing activities was $3.6 million and $15.1 million for the three months ended March 31, 2010 and 2009, respectively. Net cash provided by financing activities for the three months ended March 31, 2010 is primarily attributable to the sale of 7,438,299 shares of our common stock in a registered direct offering, at a purchase price of $0.65 per share, partially offset by repayments on our long-term debt. We received gross proceeds of $4.8 million offset by $340,000 in financing costs from the registered direct offering. Net cash provided by financing activities for the three months ended March 31, 2009 is primarily attributable to the completion of a private placement transaction that resulted in gross proceeds of $15.9 million for the issuance of common stock and common stock warrants, offset by $754,000 in financing costs incurred through March 31, 2009.
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