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Table of Contents
 
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 September 30, 2002
 
OR
 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File Number: 000-30347
 
 
CURIS, INC.
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
(State or Other Jurisdiction
of Incorporation or Organization)
  
04-3505116
(I.R.S. Employer Identification No.)
61 Moulton Street, Cambridge, Massachusetts
(Address of Principal Executive Offices)
  
02138
(Zip Code)
 
Registrant’s Telephone Number, Including Area Code: (617) 503-6500
 
 
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  ¨
 
APPLICABLE ONLY TO CORPORATE ISSUERS:
 
As of October 31, 2002, there were 32,755,455 shares of the Registrant’s Common Stock, $0.01 par value per share, and there were 1,000 shares of the Registrant’s Series A Convertible Exchangeable Preferred Stock, $0.01 par value per share, outstanding. As of October 31, 2002, the Registrant held 887,207 shares of its Common Stock in treasury.
 
 

Table of Contents
 
CURIS, INC. AND SUBSIDIARIES
 
QUARTERLY REPORT ON FORM 10-Q
 
 
INDEX
 
           
Page Number
PART I.
   
FINANCIAL INFORMATION
       
Item 1.
   
Financial Statements (unaudited)
       
         
  3
         
  4
         
  5
         
  6
Item 2.
        
13
Item 3.
        
22
Item 4.
        
22
PART II.
   
OTHER INFORMATION
       
Item 6.
        
23
    
24
 

Table of Contents
 
Item 1.    Financial Statements
 
CURIS, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
 
 
    
September 30,
2002
     
December 31,
2001
  
ASSETS
                  
Current Assets:
                  
Cash and cash equivalents
   
$
12,148,890
 
   
$
38,938,062
 
Cash and cash equivalents—restricted
   
 
4,645,754
 
   
 
—  
 
Marketable securities
   
 
12,563,837
 
   
 
12,278,916
 
Marketable securities—restricted
   
 
—  
 
   
 
890,350
 
Notes receivable—Officer (Note 8)
   
 
—  
 
   
 
500,000
 
Due from joint venture (Note 6)
   
 
1,210,977
 
   
 
957,798
 
Other current assets
   
 
1,397,482
 
   
 
1,155,619
 
    
  
Total current assets
   
 
31,966,940
 
   
 
54,720,745
 
    
  
Property and Equipment, net
   
 
4,184,226
 
   
 
11,060,711
 
    
  
Other Assets:
                  
Notes receivable—Officer (Note 8)
   
 
—  
 
   
 
200,000
 
Goodwill, net (Note 4)
   
 
8,982,000
 
   
 
73,080,344
 
Other intangible assets, net (Note 4)
   
 
545,865
 
   
 
726,781
 
Long-term notes receivable
   
 
3,991,316
 
   
 
3,732,429
 
Deposits and other assets
   
 
1,361,657
 
   
 
1,235,207
 
    
  
Total other assets
   
 
14,880,838
 
   
 
78,974,761
 
    
  
    
$
51,032,004
 
   
$
144,756,217
 
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
Current Liabilities:
                  
Debt and lease obligations, current portion
   
$
2,052,740
 
   
$
3,109,613
 
Accounts payable
   
 
711,798
 
   
 
1,967,260
 
Accrued liabilities
   
 
6,385,971
 
   
 
5,942,511
 
Deferred revenue, current portion
   
 
930,439
 
   
 
81,688
 
Due to joint venture (Note 6)
   
 
980,840
 
   
 
772,097
 
    
  
Total current liabilities
   
 
11,061,788
 
   
 
11,873,169
 
Debt and Lease Obligations, net of current portion (Note 5)
   
 
4,053,625
 
   
 
4,951,324
 
    
  
Convertible Notes Payable (Note 5)
   
 
5,778,985
 
   
 
2,506,852
 
    
  
Deferred Revenue, net of current portion
   
 
11,031,785
 
   
 
12,063,845
 
    
  
Preferred Stock, $0.01 par value, 5,000,000 shares authorized—
                  
Series A Convertible Exchangeable Preferred Stock-1,426 shares authorized; 1,000 shares issued and outstanding at September 30, 2002 and December 31, 2001
   
 
12,884,058
 
   
 
12,341,381
 
    
  
Commitments
                  
Stockholders’ Equity:
                  
Common Stock, $0.01 par value—
                  
125,000,000 shares authorized at September 30, 2002 and December 31, 2001; 32,755,455 and 31,999,548 issued and outstanding, respectively, at September 30, 2002 and 32,329,228 shares issued and outstanding at December 31, 2001
                  
    
 
327,556
 
   
 
323,292
 
Additional paid-in capital
   
 
659,868,583
 
   
 
664,889,578
 
Notes receivable
   
 
(1,337,561
)
   
 
(1,291,932
)
Treasury stock (at cost, 755,907 shares at September 30, 2002) (Note 7)
   
 
(603,523
)
   
 
—  
 
Deferred compensation
   
 
(2,885,181
)
   
 
(9,616,795
)
Accumulated deficit
   
 
(649,244,679
)
   
 
(554,135,679
)
Accumulated other comprehensive income
   
 
96,568
 
   
 
851,182
 
    
  
Total stockholders’ equity
   
 
6,221,763
 
   
 
101,019,646
 
    
  
    
$
51,032,004
 
   
$
144,756,217
 
    
  
 
See accompanying notes to unaudited consolidated financial statements
 

3

Table of Contents
 
CURIS, INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (unaudited)
 
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
  
    
2002
     
2001
     
2002
     
2001
  
REVENUES:
                                    
Royalty revenue
   
$
181,670
 
   
$
48,881
 
   
$
387,366
 
   
$
79,045
 
Research and development contract revenue
   
 
40,681
 
   
 
239,034
 
   
 
183,310
 
   
 
660,673
 
    
  
  
  
    
 
222,351
 
   
 
287,915
 
   
 
570,676
 
   
 
739,718
 
COSTS AND EXPENSES (A):
                                    
Research and development
   
 
2,884,341
 
   
 
6,901,611
 
   
 
11,621,658
 
   
 
22,903,482
 
General and administrative
   
 
1,445,712
 
   
 
2,456,488
 
   
 
5,986,803
 
   
 
7,711,170
 
Stock-based compensation
   
 
553,851
 
   
 
1,726,532
 
   
 
1,679,246
 
   
 
9,225,641
 
Amortization of intangible assets
   
 
60,105
 
   
 
5,827,392
 
   
 
180,916
 
   
 
17,474,712
 
Impairment of property and equipment
   
 
—  
 
   
 
—  
 
   
 
5,336,785
 
   
 
—  
 
Impairment of goodwill (Note 4)
   
 
—  
 
   
 
—  
 
   
 
64,098,345
 
   
 
—  
 
Realignment expenses (Note 3)
   
 
—  
 
   
 
—  
 
   
 
3,490,000
 
   
 
—  
 
    
  
  
  
Total costs and expenses
   
 
4,944,009
 
   
 
16,912,023
 
   
 
92,393,753
 
   
 
57,315,005
 
    
  
  
  
Net loss from operations
   
 
(4,721,658
)
   
 
(16,624,108
)
   
 
(91,823,077
)
   
 
(56,575,287
)
    
  
  
  
Equity in loss of joint venture (Note 6)
   
 
(977,160
)
   
 
(12,697,406
)
   
 
(3,217,066
)
   
 
(12,697,406
)
Other income (expense), net
   
 
(53,867
)
   
 
796,067
 
   
 
473,820
 
   
 
3,663,009
 
    
  
  
  
NET LOSS
   
$
(5,752,685
)
   
$
(28,525,447
)
   
$
(94,566,323
)
   
$
(65,609,684
)
Accretion of preferred stock dividend
   
 
(180,225
)
   
 
(146,155
)
   
 
(542,678
)
   
 
(146,155
)
    
  
  
  
Net loss applicable to common stockholders
   
$
(5,932,910
)
   
$
(28,671,602
)
   
$
(95,109,001
)
   
$
(65,755,839
)
    
  
  
  
NET LOSS PER COMMON SHARE—
BASIC AND DILUTED
   
$
(0.18
)
   
$
(0.89
)
   
$
(2.92
)
   
$
(2.08
)
    
  
  
  
WEIGHTED AVERAGE COMMON
SHARES—BASIC AND DILUTED
   
 
32,578,225
 
   
 
32,136,744
 
   
 
32,523,852
 
   
 
31,543,300
 
    
  
  
  
NET LOSS
   
$
(5,752,685
)
   
$
(28,525,447
)
   
$
(94,566,323
)
   
$
(65,609,684
)
CHANGE IN UNREALIZED GAIN (LOSS)
ON MARKETABLE SECURITIES
   
 
96,568
 
   
 
(393,606
)
   
 
96,568
 
   
 
(34,113
)
ACCRETION OF PREFERRED STOCK DIVIDEND
   
 
(180,225
)
   
 
(146,155
)
   
 
(542,678
)