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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2008
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period  to
 Commission File Number 001-33744
 TRANS1 INC.
  DELAWARE
    
    33-0909022(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. employer
identification no.)411 LANDMARK DRIVE, WILMINGTON, NC
(Address of principal executive office)
    
    28412-6303
(Zip code)
 (910) 332-1700
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



PART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements(unaudited)Statements of Operations
    
    
    1Balance Sheets
    
    
    2Statements of Cash Flows
    
    
    3Notes to Financial Statements
    
    
    4Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    8Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    14Item 4T.
    
    Controls and Procedures
    
    
    14PART II.
    
    OTHER INFORMATIONItem 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    15Item 6.
    
    Exhibits
    
    
    16SIGNATURES
    
    
    17EXHIBIT INDEX
    
    
    18Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 
 TranS1 Inc.
Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
 Three Months Ended March 31,2008
    
    
    2007Revenue
    
    $
    5,978
    
    
    $
    3,115Cost of revenue
    
    
    1,038
    
    
    
    590Gross profit
    
    
    4,940
    
    
    
    2,525Operating expenses:Research and development
    
    
    1,215
    
    
    
    889Sales and marketing
    
    
    5,697
    
    
    
    3,071General and administrative
    
    
    1,407
    
    
    
    444Total operating expenses
    
    
    8,319
    
    
    
    4,404Operating loss
    
    
    (3,379
    )
    
    
    (1,879
    )Interest income
    
    
    940
    
    
    
    182Net loss
    
    $
    (2,439
    )
    
    $
    (1,697
    )Net loss per common share  basic and diluted
    
    $
    (0.12
    )
    
    $
    (0.69
    )Weighted average common shares outstanding 
basic and diluted
    
    
    19,930
    
    
    
    2,449
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TranS1 Inc.
Balance Sheets
(in thousands)
 March 31,
    
    
    December 31,2008
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    39,003
    
    
    $
    64,676Short-term investments
    
    
    40,198
    
    
    
    29,245Accounts receivable, net
    
    
    3,524
    
    
    
    3,225Inventory
    
    
    3,649
    
    
    
    4,025Prepaid expenses and other assets
    
    
    628
    
    
    
    597Total current assets
    
    
    87,002
    
    
    
    101,768Property and equipment, net
    
    
    1,338
    
    
    
    1,088Long-term investments
    
    
    12,372
    
    
    
    Total assets
    
    $
    100,712
    
    
    $
    102,856Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    1,746
    
    
    $
    1,631Accrued expenses
    
    
    1,399
    
    
    
    1,786Total current liabilities
    
    
    3,145
    
    
    
    3,417Stockholders equity:Common stock
    
    
    2
    
    
    
    2Additional paid-in capital
    
    
    130,892
    
    
    
    130,325Accumulated deficit
    
    
    (33,327
    )
    
    
    (30,888
    )Total stockholders equity
    
    
    97,567
    
    
    
    99,439Total liabilities and stockholders equity
    
    $
    100,712
    
    
    $
    102,856
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TranS1 Inc.
Statements of Cash Flows
(in thousands)
(Unaudited)
 Three Months Ended March 31,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (2,439
    )
    
    $
    (1,697
    )Adjustments to reconcile net loss to net cash
used in operating activitiesDepreciation
    
    
    170
    
    
    
    128Stock-based compensation
    
    
    523
    
    
    
    386Allowance for excess and obsolete inventory
    
    
    (1
    )
    
    
    45Provision for bad debts
    
    
    18
    
    
    
    8Changes in operating assets and liabilities:Increase in accounts receivable
    
    
    (317
    )
    
    
    (584
    )Decrease (increase) in inventory
    
    
    377
    
    
    
    (674
    )(Increase) decrease in prepaid expenses
    
    
    (31
    )
    
    
    70Increase (decrease) in accounts payable
    
    
    115
    
    
    
    (161
    )(Decrease) increase in accrued liabilities
    
    
    (387
    )
    
    
    376Net cash used in operating activities
    
    
    (1,972
    )
    
    
    (2,103
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (420
    )
    
    
    (124
    )Purchases of short-term investments
    
    
    (20,778
    )
    
    
    (1,432
    )Sales of short-term investments
    
    
    9,825
    
    
    
    5,800Purchases of long-term investments
    
    
    (12,372
    )
    
    
    Net cash provided by (used in) investing activities
    
    
    (23,745
    )
    
    
    4,244Cash flows from financing activities:Proceeds from issuance of common stock
    
    
    44
    
    
    
    8Net cash provided by financing activities
    
    
    44
    
    
    
    8Net increase (decrease) in cash and cash
equivalents
    
    
    (25,673
    )
    
    
    2,149Cash and cash equivalents, beginning of period
    
    
    64,676
    
    
    
    5,034Cash and cash equivalents, end of period
    
    $
    39,003
    
    
    $
    7,183
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TranS1 Inc.
 1. Description of Business
 ®
 ® ® ® TM TM TM TM TM TM
  2. Basis of presentation
  4




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Impact of Recently Issued Accounting Standards
     3. Income taxes
  4. Loss per share
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Three Months EndedMarch 31,2008
    
    2007Convertible preferred stock
    
    
    
    
    
    
    10,793,165Weighted average stock options
outstanding
    
    
    2,357,387
    
    
    
    1,594,709
 5. Cash, Cash Equivalents and Investments
    6. Accounts receivable, net
  March 31,
    
    
    December 31,2008
    
    
    2007(In thousands)Gross accounts receivable
    
    $
    3,643
    
    
    $
    3,335Allowance for uncollectible accounts
    
    
    (119
    )
    
    
    (110
    )Total accounts receivable, net
    
    $
    3,524
    
    
    $
    3,225
 7. Inventories
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##### Table of Contents



March 31,
    
    
    December 31,2008
    
    
    2007(In thousands)Finished goods
    
    $
    1,560
    
    
    $
    1,624Work-in-process
    
    
    1,835
    
    
    
    2,189Raw materials
    
    
    254
    
    
    
    212Total inventories
    
    $
    3,649
    
    
    $
    4,025
 8. Accrued Expenses
  March 31,
    
    
    December 31,2008
    
    
    2007(In thousands)Commissions
    
    $
    518
    
    
    $
    561Bonus
    
    
    178
    
    
    
    426Legal and professional fees
    
    
    303
    
    
    
    277Travel & entertainment
    
    
    25
    
    
    
    127Personnel related
    
    
    201
    
    
    
    170Clinical
    
    
    94
    
    
    
    94Consulting
    
    
    9
    
    
    
    59Other
    
    
    71
    
    
    
    72Total accrued expenses
    
    $
    1,399
    
    
    $
    1,786
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 The following discussion of our financial condition and results of operations should be read in
conjunction with our financial statements and the related notes to our financial statements
included in this report. In addition to historical financial information, this report contains
forward-looking statements that have been made pursuant to the provisions of the Private Securities
Litigation Reform Act of 1995 and concern matters that involve risks and uncertainties that could
cause actual results to differ materially from those projected in the forward-looking statements.
All statements other than statements of historical fact contained in this report, including
statements regarding future events, our future financial performance, business strategy and plans
and objectives of management for future operations, are forward-looking statements. We have
attempted to identify forward-looking statements by terminology including anticipates,
believes, can, continue, could, estimates, expects, intends, may, plans,
potential, predicts, should or will or the negative of these terms or other comparable
terminology. Although we do not make forward-looking statements unless we believe we have a
reasonable basis for doing so, we cannot guarantee their accuracy. Such forward-looking statements
are subject to risks, uncertainties and other factors that could cause actual results and the
timing of certain events to differ materially from future results expressed or implied by such
forward-looking statements. Readers are urged to carefully review and consider the various
disclosures made by us, which attempt to advise interested parties of the risks, uncertainties, and
other factors that affect our business, operating results, financial condition and stock price,
including without limitation the disclosures made under the captions Managements Discussion and
Analysis of Financial Condition and Results of Operations and Risk Factors in this report and in
the financial statements and notes thereto included elsewhere in this report, as well as the
disclosures made under the captions Managements Discussion and Analysis of Financial Condition
and Results of Operations, Risk Factors, Financial Statements and Notes to Financial
Statements included in our Annual Report on Form 10-K for the year ended December 31, 2007.
Furthermore, such forward-looking statements speak only as of the date of this report. We expressly
disclaim any intent or obligation to update any forward-looking statements after the date hereof to
conform such statements to actual results or to changes in our opinions or expectations.
 Overview
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Financial Operations
 Revenue
  9




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Cost of Revenue
  Research and Development
  Sales and Marketing
  General and Administrative
  Interest Income
  Results of Operations
 Comparison of the Three Months Ended March 31, 2007 and 2008
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Liquidity and Capital Resources
 Sources of Liquidity
    Cash Flows
   12




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Operating Capital and Capital Expenditure Requirements
  Critical Accounting Policies and Estimates
   New Accounting Standards
  13




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
   
 Item 4T. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  14




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Changes in Internal Control over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (b) Uses of Proceeds from Sale of Registered Securities
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Item 6. Exhibits
  16




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SIGNATURES
  TranS1 Inc.Date: May 2, 2008
    By:
    /s/ Richard RandallRichard RandallPresident and Chief Executive OfficerDate: May 2, 2008
    By:
    /s/ Michael LuetkemeyerMichael LuetkemeyerChief Financial Officer 17




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TranS1 Inc.
Exhibit Index
 ExhibitNo.
    
    Description31.1
    
    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) / 15d-14(a) of the
Securities Exchange Act of 1934.31.2
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) / 15d-14(a) of the
Securities Exchange Act of 1934.32.1
    
    Certification of Chief Executive Officer Pursuant to Rule 13a-14(b) / 15d-14(b) of the
Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.32.2
    
    Certification of Chief Financial Officer Pursuant to Rule 13a-14(b) / 15d-14(b) of the
Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
 18