SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 2003.
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 No. 0-19651
GENAERA CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware |
13-3445668 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification Number) |
| 5110 Campus Drive Plymouth Meeting, Pennsylvania |
19462 | |
| (Address of principal executive offices) |
(Zip Code) |
610-941-4020
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
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 ¨
The number of outstanding shares of the Registrant’s Common Stock, par value $.002 per share, on May 6, 2003 was 35,666,491.
GENAERA CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2003
| Page | ||||
| PART I—FINANCIAL INFORMATION | ||||
| Item 1. |
Financial Statements (unaudited): |
|||
| 3 | ||||
| Statements of Operations for the three-months ended March 31, 2003 and 2002 |
4 | |||
| Statements of Cash Flows for the three-months ended March 31, 2003 and 2002 |
5 | |||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11 | ||
| Item 3. |
22 | |||
| Item 4. |
23 | |||
| PART II—OTHER INFORMATION | ||||
| Item 1. |
24 | |||
| Item 2. |
24 | |||
| Item 3. |
24 | |||
| Item 4. |
24 | |||
| Item 5. |
24 | |||
| Item 6. |
24 | |||
| 25 | ||||
| 26 | ||||
2
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS
(Amounts in thousands, except per share data)
| March 31, 2003 |
December 31, 2002 |
|||||||
| (Unaudited) |
||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
498 |
|
$ |
1,368 |
| ||
| Short-term investments (NOTE 2) |
|
7,286 |
|
|
8,032 |
| ||
| Prepaid expenses and other current assets |
|
364 |
|
|
186 |
| ||
| Total current assets |
|
8,148 |
|
|
9,586 |
| ||
| Fixed assets, net |
|
1,451 |
|
|
1,541 |
| ||
| Other assets |
|
64 |
|
|
64 |
| ||
| Total assets |
$ |
9,663 |
|
$ |
11,191 |
| ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable and accrued expenses |
$ |
1,330 |
|
$ |
1,302 |
| ||
| Note payable (NOTE 2) |
|
2,500 |
|
|
2,500 |
| ||
| Other current liabilities |
|
62 |
|
|
57 |
| ||
| Total current liabilities |
|
3,892 |
|
|
3,859 |
| ||
| Accrued development expense—long-term (NOTE 6) |
|
1,529 |
|
|
1,529 |
| ||
| Other liabilities |
|
178 |
|
|
175 |
| ||
| Series A redeemable convertible preferred stock (liquidation value of $1,134 and $1,117 at March 31, 2003 and December 31, 2002, respectively) (NOTE 4) |
|
1,134 |
|
|
1,117 |
| ||
| Commitments, contingencies and other matters (NOTE 6) |
||||||||
| Stockholders’ equity (NOTE 3): |
||||||||
| Preferred stock—$.001 par value per share; 9,211 shares authorized; 0.888 shares issued and outstanding as Series A redeemable convertible preferred stock at March 31, 2003 and December 31, 2002; 10.0 shares issued and outstanding as Series B convertible preferred stock at March 31, 2003 and December 31, 2002 (liquidation value of $10,000) |
|
— |
|
|
— |
| ||
| Common stock—$.002 par value per share; 75,000 shares authorized; 35,666 shares issued and outstanding at March 31, 2003 and December 31, 2002 |
|
71 |
|
|
71 |
| ||
| Additional paid-in capital |
|
187,280 |
|
|
187,258 |
| ||
| Accumulated other comprehensive income—unrealized gain on investments |
|
— |
|
|
1 |
| ||
| Accumulated deficit |
|
(184,421 |
) |
|
(182,819 |
) | ||
| Total stockholders’ equity |
|
2,930 |
|
|
4,511 |
| ||
| Total liabilities and stockholders’ equity |
$ |
9,663 |
|
$ |
11,191 |
| ||
See accompanying notes to financial statements.
3
STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share data)
| Three Months Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Collaborative research agreement revenues |
$ |
487 |
|
$ |
436 |
| ||
| Costs and expenses: |
||||||||
| Research and development |
|
1,734 |
|
|
3,653 |
| ||
| General and administrative |
|
327 |
|
|
875 |
| ||
|
|
2,061 |
|
|
4,528 |
| |||
| Loss from operations |
|
(1,574 |
) |
|
(4,092 |
) | ||
| Interest income |
|
24 |
|
|
82 |
| ||
| Interest expense |
|
(34 |
) |
|
(43 |
) | ||
| Net loss |
|
(1,584 |
) |
|
(4,053 |
) | ||
| Dividends on preferred stock |
|
18 |
|
|
18 |
| ||
| Net loss applicable to common stockholders |
$ |
(1,602 |
) |
$ |
(4,071 |
) | ||
| Net loss applicable to common stockholders per share—basic and diluted |
$ |
(0.04 |
) |
$ |
(0.12 |
) | ||
| Weighted average shares outstanding—basic and diluted |
|
35,666 |
|
|
32,866 |
| ||
See accompanying notes to financial statements.
4
STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
| Three Months Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Cash Flows From Operating Activities: |
||||||||
| Net loss |
$ |
(1,584 |
) |
$ |
(4,053 |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
|
112 |
|
|
147 |
| ||
| Amortization of investment discounts/premiums |
|
(21 |
) |
|
(73 |
) | ||
| Compensation expense on option grants and equity awards |
|
21 |
|
|
79 |
| ||
| Gain on sale of fixed assets |
|
(130 |
) |
|
— |
| ||
| Changes in operating assets and liabilities: |
||||||||
| Increase in prepaid expenses and other |
|
(178 |
) |
|
(118 |
) | ||
| Increase in accounts payable and accrued expenses |
|
28 |
|
|
237 |
| ||
| Decrease in accrued development expenses |
|
— |
|
|
(480 |
) | ||
| Increase in other liabilities |
|
8 |
|
|
55 |
| ||
| Net cash used in operating activities |
|
(1,744 |
) |
|
(4,206 |
) | ||
| Cash Flows From Investing Activities: |
||||||||
| Purchase of investments |
|
(5,785 |
) |
|
(6,017 |
) | ||
| Proceeds from maturities of investments |
|
6,550 |
|
|
10,300 |
| ||
| Proceeds from sale of fixed assets |
|
130 |
|
|
— |
| ||
| Capital expenditures |
|
(21 |
) |
|
(353 |
) | ||
| Net cash provided by investing activities |
|
874 |
|
|
3,930 |
| ||
| Cash Flows From Financing Activities: |
||||||||
| Proceeds from exercise of stock options |
|
— |
|
|
5 |
| ||
| Net cash provided by financing activities |
|
— |
|
|
5 |
| ||
| Net decrease in cash and cash equivalents |
|
(870 |
) |
|
(271 |
) | ||
| Cash and cash equivalents at beginning of period |
|
1,368 |
|
|
1,973 |
| ||
| Cash and cash equivalents at end of period |
$ |
498 |
|
$ |
1,702 |
| ||
| Supplemental Cash Flow Information: |
||||||||
| Cash paid during the period for interest |
$ |
34 |
|
$ |
43 |
| ||
See accompanying notes to financial statements.
5
GENAERA CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. Basis of Presentation and Stock-Based Compensation
The accompanying financial statements of Genaera Corporation (“Genaera” or the “Company”) are unaudited and have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial statements. The December 31, 2002 balance sheet was derived from audited financial statements, however, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to SEC rules and regulations. The Company believes that the financial statements include all adjustments of a normal and recurring nature necessary to present fairly the results of operations, financial position, changes in stockholders’ equity and cash flows for the periods presented. Results of operations for interim periods are not necessarily indicative of those to be achieved for full fiscal years. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. There have been no material changes in accounting policies from those stated in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.
The Company accounts for its fixed-plan stock o