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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 September 30, 2009
 or
 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
(State or other jurisdiction of 
incorporation or organization)
    
    33-0909022
(I.R.S. employer
identification no.)
 411 LANDMARK DRIVE, WILMINGTON, NC 28412-6303
 (910) 332-1700
 þ o
 o o
  Large accelerated filer o
Accelerated filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o
 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
    
    
    15Item 4.
    
    Controls and Procedures
    
    
    16PART II.
    
    OTHER INFORMATIONItem 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    16Item 6.
    
    Exhibits
    
    
    17SIGNATURES
    
    
    18EXHIBIT INDEX
    
    
    19EX-31.1EX-31.2EX-32.1EX-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 September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue
    
    $
    6,912
    
    
    $
    6,021
    
    
    $
    23,528
    
    
    $
    17,950Cost of revenue
    
    
    1,366
    
    
    
    1,011
    
    
    
    4,423
    
    
    
    3,186Gross profit
    
    
    5,546
    
    
    
    5,010
    
    
    
    19,105
    
    
    
    14,764Operating expenses:Research and development
    
    
    1,362
    
    
    
    910
    
    
    
    5,047
    
    
    
    3,241Sales and marketing
    
    
    8,126
    
    
    
    7,782
    
    
    
    26,219
    
    
    
    20,680General and administrative
    
    
    1,683
    
    
    
    1,671
    
    
    
    5,714
    
    
    
    5,563Total operating expenses
    
    
    11,171
    
    
    
    10,363
    
    
    
    36,980
    
    
    
    29,484Operating loss
    
    
    (5,625
    )
    
    
    (5,353
    )
    
    
    (17,875
    )
    
    
    (14,720
    )Interest income
    
    
    54
    
    
    
    589
    
    
    
    382
    
    
    
    2,218Net loss
    
    $
    (5,571
    )
    
    $
    (4,764
    )
    
    $
    (17,493
    )
    
    $
    (12,502
    )Net loss per common share
 basic and diluted
    
    $
    (0.27
    )
    
    $
    (0.23
    )
    
    $
    (0.85
    )
    
    $
    (0.62
    )Weighted average common shares
outstanding  basic and diluted
    
    
    20,630
    
    
    
    20,474
    
    
    
    20,591
    
    
    
    20,206
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TranS1 Inc.
Balance Sheets
(in thousands)
(Unaudited)
 September 30,
    
    
    December 31,2009
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    30,298
    
    
    $
    42,051Short-term investments
    
    
    30,969
    
    
    
    35,215Accounts receivable, net
    
    
    4,168
    
    
    
    4,812Inventory
    
    
    7,671
    
    
    
    6,369Prepaid expenses and other assets
    
    
    433
    
    
    
    632Total current assets
    
    
    73,539
    
    
    
    89,079Property and equipment, net
    
    
    1,281
    
    
    
    1,412Total assets
    
    $
    74,820
    
    
    $
    90,491Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    2,655
    
    
    $
    2,896Accrued expenses
    
    
    1,780
    
    
    
    2,009Total current liabilities
    
    
    4,435
    
    
    
    4,905Stockholders equity:Common stock
    
    
    2
    
    
    
    2Additional paid-in capital
    
    
    135,796
    
    
    
    133,507Accumulated other comprehensive income
    
    
    3
    
    
    
    Accumulated deficit
    
    
    (65,416
    )
    
    
    (47,923
    )Total stockholders equity
    
    
    70,385
    
    
    
    85,586Total liabilities and stockholders equity
    
    $
    74,820
    
    
    $
    90,491
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TranS1 Inc.  Statements of Cash Flows
(in thousands)
(Unaudited)
 Nine Months Ended September 30,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (17,493
    )
    
    $
    (12,502
    )Adjustments to reconcile net loss to net cash used in
operating activitiesDepreciation
    
    
    684
    
    
    
    583Stock-based compensation
    
    
    2,200
    
    
    
    2,598Allowance for excess and obsolete inventory
    
    
    541
    
    
    
    376Provision for bad debts
    
    
    63
    
    
    
    84Changes in operating assets and liabilities:(Increase) decrease in accounts receivable
    
    
    581
    
    
    
    (611
    )(Increase) decrease in inventory
    
    
    (1,843
    )
    
    
    (1,804
    )(Increase) decrease in prepaid expenses
    
    
    199
    
    
    
    196Increase (decrease) in accounts payable
    
    
    (241
    )
    
    
    772Increase (decrease) in accrued expenses
    
    
    (229
    )
    
    
    412Net cash used in operating activities
    
    
    (15,538
    )
    
    
    (9,896
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (553
    )
    
    
    (1,003
    )Purchases of investments
    
    
    (39,911
    )
    
    
    (50,826
    )Sales and maturities of investments
    
    
    44,157
    
    
    
    39,791Net cash provided by (used in) investing activities
    
    
    3,693
    
    
    
    (12,038
    )Cash flows from financing activities:Proceeds from issuance of common stock
    
    
    92
    
    
    
    188Net cash provided by financing activities
    
    
    92
    
    
    
    188Net decrease in cash and cash equivalents
    
    
    (11,753
    )
    
    
    (21,746
    )Cash and cash equivalents, beginning of period
    
    
    42,051
    
    
    
    64,676Cash and cash equivalents, end of period
    
    $
    30,298
    
    
    $
    42,930
  3




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TranS1 Inc.
 1. Description of Business
 ®
   2. Basis of presentation
  4




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Impact of Recently Issued Accounting Standards
     3. Income taxes
  5




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4. Loss per share
   Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2009
    
    2008
    
    2009
    
    2008Weighted average stock options
outstanding
    
    
    2,441,139
    
    
    
    2,300,906
    
    
    
    2,274,259
    
    
    
    1,982,502
 5. Cash, Cash Equivalents and Investments
    6. Accounts receivable, net
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September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Gross accounts receivable
    
    $
    4,350
    
    
    $
    5,005Allowance for uncollectible accounts
    
    
    (182
    )
    
    
    (193
    )Total accounts receivable, net
    
    $
    4,168
    
    
    $
    4,812
 7. Inventories
  September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Finished goods
    
    $
    3,503
    
    
    $
    2,598Work-in-process
    
    
    3,852
    
    
    
    3,334Raw materials
    
    
    316
    
    
    
    437Total inventories
    
    $
    7,671
    
    
    $
    6,369
 8. Accrued Expenses
  September 30,
    
    
    December 31,2009
    
    
    2008(In thousands)Commissions
    
    $
    731
    
    
    $
    1,178Vacation
    
    
    349
    
    
    
    163Bonus
    
    
    307
    
    
    
    270Legal and professional fees
    
    
    101
    
    
    
    69Other
    
    
    292
    
    
    
    329Total accrued expenses
    
    $
    1,780
    
    
    $
    2,009
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9. Comprehensive Loss
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net loss
    
    $
    (5,571
    )
    
    $
    (4,764
    )
    
    $
    (17,493
    )
    
    $
    (12,502
    )Other comprehensive
income ( loss):Translation adjustments
    
    
    (1
    )
    
    
    
    
    
    
    3
    
    
    
    Total comprehensive loss
    
    $
    (5,572
    )
    
    $
    (4,674
    )
    
    $
    (17,490
    )
    
    $
    (12,502
    )
 
 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 caption Managements
Discussion and Analysis of Financial Condition and Results of Operations 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, 2008.
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.
References in this report to TranS1, we, our, us, or the Company refer to TranS1 Inc.
 8




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Overview
      Financial Operations
 9




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Revenue
  Cost of Revenue
  Research and Development
  Sales and Marketing
  General and Administrative
  Interest Income
  10




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Results of Operations
 Comparison of the Three Months Ended September 30, 2008 and 2009
    11




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Comparison of the Nine Months Ended September 30, 2008 and 2009
    12




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Liquidity and Capital Resources
 Sources of Liquidity
    13




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Cash Flows
    Operating Capital and Capital Expenditure Requirements
  Critical Accounting Policies and Estimates
   14




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New Accounting Standards
     
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   15




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Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  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
   16




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Item 6. Exhibits
  17




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SIGNATURES
  TranS1 Inc.Date:      November 6, 2009
    By:
    /s/ Richard RandallRichard RandallPresident and Chief Executive OfficerDate:      November 6, 2009
    By:
    /s/ Michael LuetkemeyerMichael LuetkemeyerChief Financial Officer 18




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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.
 19