UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 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 number: 000-30231
TANOX, INC.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 76-0196733 | |
| (State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) |
| 10301 Stella Link Rd Houston, Texas |
77025-5497 | |
| (Address of Principal Executive Offices) | (Zip Code) |
(713) 578-4000
(Registrant’s Telephone Number, Including Area Code)
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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No ¨
As of July 31, 2003 the registrant had 44,374,326 shares of Common Stock issued and 43,819,626 shares of Common Stock outstanding.
TANOX, INC.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2003
| Page | ||
| Part I – Financial Information |
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| Item 1 – Financial Statements |
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| Condensed Consolidated Balance Sheets at June 30, 2003 and December 31, 2002 |
1 | |
| 2 | ||
| Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002 |
3 | |
| 4 | ||
| Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations |
7 | |
| Item 3 – Quantitative and Qualitative Disclosures About Market Risk |
12 | |
| 13 | ||
| 14 | ||
| 15 | ||
| Item 4 – Submission of Matters to a Vote of Security Holders |
15 | |
| 16 | ||
| 17 | ||
i
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
TANOX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except shares and per share data)
| June 30, 2003 |
December 31, 2002 |
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| (Unaudited) | ||||||||
| ASSETS |
||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 23,587 | $ | 15,968 | ||||
| Restricted cash |
5,111 | 4,795 | ||||||
| Short-term investments, including restricted amounts of $9,594 and $4,083 in 2003 and 2002, respectively |
168,606 | 113,640 | ||||||
| Interest receivable |
2,869 | 3,230 | ||||||
| Accounts receivable |
17,000 | 322 | ||||||
| Accounts receivable from related party |
3,000 | — | ||||||
| Prepaid expenses and other |
832 | 332 | ||||||
| Total current assets |
221,005 | 138,287 | ||||||
| LONG-TERM INVESTMENTS – HELD-TO-MATURITY, including restricted amounts of $5,563 in 2002 |
18,501 | 93,587 | ||||||
| PROPERTY AND EQUIPMENT, net of accumulated depreciation of $9,185 and $8,208 in 2003 and 2002, respectively |
18,472 | 19,197 | ||||||
| OTHER ASSETS |
66 | 140 | ||||||
| TOTAL ASSETS |
$ | 258,044 | $ | 251,211 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| CURRENT LIABILITIES: |
||||||||
| Accounts payable |
$ | 1,475 | $ | 1,111 | ||||
| Accrued liabilities |
3,367 | 5,510 | ||||||
| Accrued arbitration award |
9,485 | 4,074 | ||||||
| Total current liabilities |
14,327 | 10,695 | ||||||
| LONG-TERM LIABILITIES: |
||||||||
| Note payable to bank |
5,000 | 5,000 | ||||||
| Note payable to related party |
10,000 | 10,000 | ||||||
| Total long-term liabilities |
15,000 | 15,000 | ||||||
| STOCKHOLDERS’ EQUITY: |
||||||||
| Preferred stock, $.01 par value; 10,000,000 shares authorized; none outstanding |
— | — | ||||||
| Common stock, $.01 par value; 120,000,000 shares authorized; 44,366,566 and 44,301,641 shares issued, and 43,811,866 and 43,746,941 shares outstanding in 2003 and 2002, respectively |
444 | 443 | ||||||
| Additional paid-in capital |
310,617 | 310,073 | ||||||
| Treasury stock, at cost; 554,700 shares in 2003 and 2002 |
(6,261 | ) | (6,261 | ) | ||||
| Accumulated other comprehensive gain (loss) |
252 | 168 | ||||||
| Accumulated deficit |
(76,335 | ) | (78,907 | ) | ||||
| Total stockholders’ equity |
228,717 | 225,516 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 258,044 | $ | 251,211 | ||||
See accompanying notes to condensed consolidated financial statements.
1
TANOX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands, except per share data)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
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| REVENUES: |
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| Development agreements and licensing fees (net of $5,333 arbitration award in the three and six months ended June 30, 2003) |
$ | 11,773 | $ | 153 | $ | 11,778 | $ | 156 | ||||||||
| Development agreement with related party |
3,000 | — | 3,000 | — | ||||||||||||
| Total revenues |
14,773 | 153 | 14,778 | 156 | ||||||||||||
| OPERATING COSTS AND EXPENSES: |
||||||||||||||||
| Research and development |
5,425 | 5,732 | 10,496 | 10,415 | ||||||||||||
| General and administrative |
1,841 | 2,000 | 4,587 | 4,538 | ||||||||||||
| Restructuring charge |
— | (89 | ) | — | (89 | ) | ||||||||||
| Total operating costs and expenses |
7,266 | 7,643 | 15,083 | 14,864 | ||||||||||||
| INCOME (LOSS) FROM OPERATIONS |
7,507 | (7,490 | ) | (305 | ) | (14,708 | ) | |||||||||
| OTHER INCOME (EXPENSE): |
||||||||||||||||
| Interest income |
1,512 | 2,033 | 3,158 | 4,156 | ||||||||||||
| Interest expense |
(169 | ) | (134 | ) | (352 | ) | (276 | ) | ||||||||
| Other, net |
(157 | ) | — | (157 | ) | (212 | ) | |||||||||
| Total other income (expense) |
1,186 | 1,899 | 2,649 | 3,668 | ||||||||||||
| INCOME (LOSS) BEFORE INCOME TAX BENEFIT |
8,693 | (5,591 | ) | 2,344 | (11,040 | ) | ||||||||||
| Income tax benefit |
(228 | ) | — | (228 | ) | — | ||||||||||
| NET INCOME (LOSS) |
$ | 8,921 | $ | (5,591 | ) | $ | 2,572 | $ | (11,040 | ) | ||||||
| BASIC EARNINGS (LOSS) PER SHARE |
$ | 0.20 | $ | (0.13 | ) | $ | 0.06 | $ | (0.25 | ) | ||||||
| DILUTED EARNINGS (LOSS) PER SHARE |
$ | 0.20 | $ | (0.13 | ) | $ | 0.06 | $ | (0.25 | ) | ||||||
| SHARES USED IN COMPUTING EARNINGS (LOSS) PER SHARE: |
||||||||||||||||
| Basic |
43,785 | 44,173 | 43,767 | 44,126 | ||||||||||||
| Diluted |
44,324 | 44,173 | 44,100 | 44,126 | ||||||||||||
| COMPREHENSIVE INCOME (LOSS): |
||||||||||||||||
| Net income (loss) |
$ | 8,921 | $ | (5,591 | ) | $ | 2,572 | $ | (11,040 | ) | ||||||
| Foreign currency translation adjustment |
(168 | ) | 5 | (168 | ) | 5 | ||||||||||
| Unrealized gain (loss) on available-for-sale security |
252 | (442 | ) | 252 | (442 | ) | ||||||||||
| TOTAL COMPREHENSIVE INCOME (LOSS) |
$ | 9,005 | $ | (6,028 | ) | $ | 2,656 | $ | (11,477 | ) | ||||||
See accompanying notes to condensed consolidated financial statements.
2
TANOX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| Six Months Ended June 30, |
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| 2003 |
2002 |
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| CASH FLOWS FROM OPERATING ACTIVITIES: |
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| Net income (loss) |
$ | 2,572 | $ | (11,040 | ) | |||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: |
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| Depreciation and amortization |
1,130 | 1,007 | ||||||
| Loss on available-for-sale investment |
— | 220 | ||||||
| Compensation expense related to stock options |
33 | (122 | ) | |||||
| Restructuring charge |
— | (89 | ) | |||||
| Loss on sale of equipment |
300 | — | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Increase in receivables and other assets |
(19,866 | ) | (372 | ) | ||||
| (Decrease) increase in current liabilities |
3,632 | (2,110 | ) | |||||
| Other, net |
132 | |||||||