UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

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: 001-36309

 

INOGEN, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

33-0989359

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

326 Bollay Drive
Goleta, California

 

93117

(Address of principal executive offices)

 

(Zip Code)

(805) 562-0500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Name of each exchange on which registered

Common Stock, $0.001 par value

 

The NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

 

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  ¨    No  x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

¨

  

Accelerated filer

 

¨

 

 

 

 

Non-accelerated filer

 

x (Do not check if a smaller reporting company)

  

Smaller reporting company

 

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ¨    No   x

As of April 30, 2014, the registrant had 18,192,534 shares of common stock, par value $0.001, outstanding.

 

 

 

 

 

 


 

TABLE OF CONTENTS

 

 

 

Part I – Financial Information

 

Page

Item 1.

 

Financial Statements (Unaudited)

 

3

 

 

Balance Sheets as of March 31, 2014 and December 31, 2013

 

3

 

 

Statements of Operations for the Three Months Ended March 31, 2014 and March 31, 2013

 

5

 

 

Statements of Redeemable Convertible Preferred Stock for the Three Months Ended March 31, 2014 and Year Ended December 31, 2013

 

6

 

 

Statements of Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2014 and Year-Ended December 31, 2013

 

7

 

 

Statements of Cash Flows for the Three Months ended March 31, 2014 and March 31, 2013

 

8

 

 

Condensed Notes to the Financial Statements

 

9

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

26

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

35

Item 4.

 

Controls and Procedures

 

36

 

 

Part II – Other Information

 

 

Item 1.

 

Legal Proceedings

 

37

Item 1A.

 

Risk Factors

 

37

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

59

Item 6.

 

Exhibits

 

61

 

 

 

2


 

 

 

 

INOGEN, INC.

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

Inogen, Inc.

Balance Sheets

(unaudited)

(amounts in thousands)

 

 

March 31,

 

 

December 31,

 

 

2014

 

 

2013

 

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

59,550

 

 

$

13,521

 

Accounts receivable, net of allowances of $3,417 and $3,390 at March 31, 2014 and December 31, 2013, respectively

 

18,084

 

 

 

10,231

 

Inventories, net of allowances of $110 and $100 at March 31, 2014 and December 31, 2013, respectively

 

4,651

 

 

 

4,248

 

Deferred cost of rental revenue

 

283

 

 

 

289

 

Income tax receivable

 

 

 

 

87

 

Deferred tax asset-current

 

3,923

 

 

 

3,923

 

Prepaid expenses and other current assets

 

959

 

 

 

531

 

Total current assets

 

87,450

 

 

 

32,830

 

Property and equipment

 

 

 

 

 

 

 

Rental equipment, net of allowances of $282 and $156 at March 31, 2014 and December 31, 2013, respectively

 

39,832

 

 

 

37,573

 

Manufacturing equipment and tooling

 

2,584

 

 

 

2,551

 

Computer equipment and software

 

3,228

 

 

 

2,973

 

Furniture and equipment

 

603

 

 

 

601

 

Leasehold improvements

 

888

 

 

 

887

 

Construction in process

 

971

 

 

 

1,093

 

Total property and equipment

 

48,106

 

 

 

45,678

 

Less accumulated depreciation

 

(18,282

)

 

 

(15,956

)

Property and equipment, net

 

29,824

 

 

 

29,722

 

Intangible assets, net

 

345

 

 

 

215

 

Deferred tax asset - noncurrent

 

17,807

 

 

 

17,865

 

Other assets

 

80

 

 

 

1,765

 

Total assets

$

135,506

 

 

$

82,397

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying condensed notes to the financial statements.

 

 

 

3


 

Inogen, Inc.

Balance Sheets (continued)

(unaudited)

(amounts in thousands, except share and per share amounts)

 

 

March 31,

 

 

December 31,

 

 

2014

 

 

2013

 

Liabilities, redeemable convertible preferred stock and stockholders' equity (deficit)

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

10,411

 

 

$

9,219

 

Accrued payroll

 

3,829

 

 

 

2,898

 

Current portion of long-term debt

 

5,038

 

 

 

5,258

 

Warranty reserve

 

490

 

 

 

420

 

Deferred revenue

 

1,716

 

 

 

1,487

 

Income tax payable

 

432

 

 

 

 

Total current liabilities

 

21,916

 

 

 

19,282

 

Long-term liabilities

 

 

 

 

 

 

 

Warranty reserve-noncurrent

 

431

 

 

 

389

 

Preferred stock warrant liability

 

 

 

 

260

 

Deferred revenue-noncurrent

 

1,104

 

 

 

776

 

Long-term debt, net of current portion

 

4,151

 

 

 

5,391

 

Total liabilities

 

27,602

 

 

 

26,098

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

Redeemable convertible preferred stock

 

 

 

 

 

 

 

Preferred stock, $0.001 par value per share; 10,000,000 shares authorized; 0 and 9,541,631 shares issued and outstanding; liquidation preference of $0 and $136,660 at March 31, 2014 and December 31, 2013, respectively

 

 

 

 

118,671

 

Stockholders' equity (deficit)

 

 

 

 

 

 

 

Preferred stock, $0.001 par value per share; 100,000 shares authorized; 0 and 66,666 shares issued and outstanding; liquidation preference of $0 and $250 at March 31, 2014 and December 31, 2013, respectively

 

 

 

 

247

 

Common stock, $0.001 par value per share; 60,000,000 shares authorized for both periods; 18,151,551 and 280,974 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively

 

18

 

 

 

1

 

Additional paid-in-capital

 

170,517

 

 

 

 

Accumulated deficit

 

(62,631

)

 

 

(62,620

)

Total stockholders' equity (deficit)

 

107,904

 

 

 

(62,372

)

Total liabilities, redeemable convertible preferred stock and stockholders' equity (deficit)

$

135,506

 

 

$

82,397

 

 

 

 

 

 

 

 

 

 

See accompanying condensed notes to the financial statements.

 

 

 

4


 

Inogen, Inc.

Statements of Operations

(unaudited)

(amounts in thousands, except share and per share amounts)

 

 

Three months ended March  31,

 

 

 

2014

 

 

 

2013

 

Revenue

 

 

 

 

 

 

 

Sales revenue

$

14,857

 

 

$

8,895

 

Rental revenue

 

8,776

 

 

 

6,852

 

Total revenue

 

23,633

 

 

 

15,747

 

Cost of revenue

 

 

 

 

 

 

 

Cost of sales revenue

 

7,541

 

 

 

5,191

 

Cost of rental revenue, including depreciation of $2,257 and $1,342, respectively

 

4,154

 

 

 

2,439

 

Total cost of revenue

 

11,695

 

 

 

7,630

 

Gross profit

 

11,938

 

 

 

8,117

 

Operating expenses

 

 

 

 

 

 

 

Research and development

 

635

 

 

 

503

 

Sales and marketing

 

5,705

 

 

 

4,147

 

General and administrative

 

4,049

 

 

 

2,834

 

Total operating expenses

 

10,389

 

 

 

7,484

 

Income from operations

 

1,549

 

 

 

633

 

Other income (expense)

 

 

 

 

 

 

 

Interest expense

 

(133

)

 

 

(104

)

Interest income

 

6

 

 

 

3

 

Decrease in fair value of preferred stock warrant liability

 

36

 

 

 

20

 

Other income

 

7

 

 

 

209

 

Total other income (expense), net

 

(84

)

 

 

128

 

Income before provision for income taxes

 

1,465

 

 

 

761

 

Provision for income taxes

 

577

 

 

 

31

 

Net income

$

888

 

 

$

730

 

Less deemed dividend on redeemable convertible preferred stock

 

(987

)

 

 

(1,723

)

Net loss attributable to common stockholders

$

(99

)

 

$

(993

)

Basic net loss per share attributable to common stockholders

$

(0.01

)

 

$

(3.65

)

Diluted net loss per share attributable to common stockholders

$

(0.01

)

 

$

(3.65

)

Weighted-average number of shares used in calculating loss per share

 

 

 

 

 

 

 

attributable to common stockholders - basic common

 

9,437,525

 

 

 

272,226

 

attributable to common stockholders - dilutive common

 

9,437,525

 

 

 

272,226

 

 

See accompanying condensed notes to the financial statements.

 

 

 

5


 

Inogen, Inc.

Statements of Redeemable Convertible Preferred Stock

(unaudited)

(amounts in thousands, except share amounts)

 

 

Series B

 

 

Series C

 

 

Series D

 

 

Series E

 

 

Series F

 

 

Series G

 

 

Total

 

 

redeemable

 

 

redeemable

 

 

redeemable

 

 

redeemable

 

 

redeemable

 

 

redeemable

 

 

redeemable

 

 

convertible

 

 

convertible

 

 

convertible

 

 

convertible

 

 

convertible

 

 

convertible

 

 

convertible

 

 

preferred stock

 

 

preferred stock

 

 

preferred stock

 

 

preferred stock

 

 

preferred stock

 

 

preferred stock

 

 

preferred

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

stock

 

Balance, December 31, 2012

 

425,511

 

 

$

5,056

 

 

 

365,903

 

 

$

6,460

 

 

 

1,487,225

 

 

$

32,571

 

 

 

1,634,874

 

 

$

28,044

 

 

 

2,701,957

 

 

$

14,055

 

 

 

2,840,260

 

 

$

23,159

 

 

$

109,345

 

Warrants exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

39,510

 

 

 

909

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

909

 

Deemed dividend on

   redeemable convertible

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

268

 

 

 

 

 

 

376

 

 

 

 

 

 

1,079

 

 

 

1,723

 

Balance, March 31, 2013

 

425,511

 

 

 

5,056

 

 

 

365,903

 

 

 

6,460

 

 

 

1,526,735

 

 

 

33,480

 

 

 

1,634,874

 

 

 

28,312

 

 

 

2,701,957

 

 

 

14,431

 

 

 

2,840,260

 

 

 

24,238

 

 

 

111,977

 

Warrants exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

46,391

 

 

 

1,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,139

 

Deemed dividend on

   redeemable convertible

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

818

 

 

 

 

 

 

1,189

 

 

 

 

 

 

3,548

 

 

 

5,555

 

Balance, December 31, 2013

 

425,511

 

 

 

5,056

 

 

 

365,903

 

 

 

6,460

 

 

 

1,573,126

 

 

 

34,619

 

 

 

1,634,874

 

 

 

29,130

 

 

 

2,701,957

 

 

 

15,620

 

 

 

2,840,260

 

 

 

27,786

 

 

 

118,671

 

Warrants exercised

 

 

 

 

 

 

 

11,094

 

 

 

279

 

 

 

11,415

 

 

 

314

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

593

 

Deemed dividend on

   redeemable convertible

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

139

 

 

 

 

 

 

207

 

 

 

 

 

 

641

 

 

 

987

 

Conversion of preferred stock to common stock in connection with initial public offering

 

(425,511

)

 

 

(5,056

)

 

 

(376,997

)

 

 

(6,739

)

 

 

(1,584,541

)

 

 

(34,933

)

 

 

(1,634,874

)

 

 

(29,269

)

 

 

(2,701,957

)

 

 

(15,827

)

 

 

(2,840,260

)

 

 

(28,427

)

 

 

(120,251

)

Balance, March 31, 2014

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

$

 

 

 

 

 

 

 

See accompanying condensed notes to the financial statements.

 

 

 

6


 

Inogen, Inc.

Statements of Stockholders’ Equity (Deficit)

(unaudited)

(amounts in thousands, except share amounts)

 

 

Series A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

convertible

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

preferred stock

 

 

Common stock

 

 

paid-in

 

 

Accumulated

 

 

stockholders'

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

equity (deficit)

 

Balance, December 31, 2012

 

66,666

 

 

$

247

 

 

 

272,096

 

 

$

1

 

 

$

 

 

$

(81,018

)

 

$

(80,770

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

24

 

 

 

 

 

 

24

 

Stock options exercised

 

 

 

 

 

 

 

222

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Deemed dividend on redeemable convertible

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

(25

)

 

 

(1,698

)

 

 

(1,723

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

730

 

 

 

730

 

Balance, March 31, 2013

 

66,666

 

 

 

247

 

 

 

272,318

 

 

 

1

 

 

 

 

 

 

(81,986

)

 

 

(81,738

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

206

 

 

 

 

 

 

206

 

Stock options exercised

 

 

 

 

 

 

 

8,656

 

 

 

 

 

 

9

 

 

 

 

 

 

9

 

Warrants exercised - preferred

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Deemed dividend on redeemable convertible

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

(216

)

 

 

(5,339

)

 

 

(5,555

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,705

 

 

 

24,705

 

Balance, December 31, 2013

 

66,666

 

 

 

247

 

 

 

280,974

 

 

 

1

 

 

 

 

 

 

(62,620

)

 

 

(62,372

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

43

 

 

 

88

 

 

 

131

 

Stock options exercised

 

 

 

 

 

 

 

8,975

 

 

 

 

 

 

11

 

 

 

 

 

 

11

 

Warrants exercised

 

 

 

 

 

 

 

72,544

 

 

 

 

 

 

22

 

 

 

 

 

 

22

 

Reclassification of warrant liability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

76

 

 

 

 

 

 

76

 

Deemed dividend on redeemable convertible

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(987

)

 

 

(987

)

Conversion of preferred stock

 

(66,666

)

 

 

(247

)

 

 

14,259,647

 

 

 

14

 

 

 

120,484

 

 

 

 

 

 

120,251

 

Issuance of common stock in connection with  initial public

  offering

 

 

 

 

 

 

 

3,529,411

 

 

 

3

 

 

 

49,881

 

 

 

 

 

 

49,884

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

888

 

 

 

888

 

Balance, March 31, 2014

 

 

 

$

 

 

 

18,151,551

 

 

$

18

 

 

$

170,517

 

 

$

(62,631

)

 

$

107,904

 

 

 

 

 

 

 

See accompanying condensed notes to the financial statements.

 

 

 

7


 

Inogen, Inc.

Statements of Cash Flows

(unaudited)

(amounts in thousands)

 

 

Three months ended March 31,

 

 

2014

 

 

2013

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net income

$

888

 

 

$

730

 

Adjustments to reconcile net income to net cash provided by (used in) by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

2,658

 

 

 

1,661

 

Loss on rental units and other fixed assets

 

338

 

 

 

73

 

Provision for sales returns

 

948

 

 

 

362

 

Provision for doubtful accounts

 

196

 

 

 

482

 

Provision for rental revenue adjustments

 

1,672

 

 

 

1,159

 

Provision for inventory obsolescence

 

26

 

 

 

41

 

Stock-based compensation expense

 

131

 

 

 

24

 

Deferred tax assets

 

58

 

 

 

 

Decrease in fair value of preferred stock warrant liability

 

(36

)

 

 

(20

)

Changes in operating assets and liabilities

 

 

 

 

 

 

 

Accounts receivable

 

(10,669

)

 

 

(3,169

)

Inventories

 

(429

)

 

 

11

 

Deferred costs of rental revenue

 

6

 

 

 

(4

)

Prepaid expenses and other current assets

 

(428

)

 

 

(189

)

Accounts payable and accrued expenses

 

1,193

 

 

 

797

 

Accrued payroll

 

931

 

 

 

325

 

Warranty reserve

 

112

 

 

 

213

 

Deferred revenue

 

556

 

 

 

166

 

Income tax receivable

 

87

 

 

 

31

 

Income tax payable

 

432

 

 

 

 

Net cash provided by (used in) operating activities

 

(1,330

)

 

 

2,693

 

Cash flows from investing activities

 

 

 

 

 

 

 

Investment in intangible assets

 

(169

)

 

 

 

Production of rental equipment

 

(2,890

)

 

 

(3,162

)

Purchases of property and equipment

 

(169

)

 

 

(406

)

Refund of deposit

 

 

 

 

(1

)

Net cash used in investing activities

 

(3,228

)

 

 

(3,569

)

Cash flows from financing activities

 

 

 

 

 

 

 

Proceeds from redeemable convertible preferred stock warrants and common stock warrants exercised

 

467

 

 

 

865

 

Proceeds from stock options exercised

 

11

 

 

 

1

 

Proceeds from initial public offering

 

56,471