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 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: 000-30347
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. x Yes ¨ No
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No
As of July 31, 2003, there were 37,374,888 shares of the registrant’s common stock, $0.01 par value per share, outstanding.
CURIS, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
INDEX
| PART I. |
FINANCIAL INFORMATION | Page Number | ||
| Item 1. |
Financial Statements | |||
| Condensed Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002 |
3 | |||
| 4 | ||||
| Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2003 and 2002 |
5 | |||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 13 | ||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 35 | ||
| Item 4. |
Controls and Procedures | 35 | ||
| PART II. |
OTHER INFORMATION | |||
| Item 2. |
Changes in Securities and Use of Proceeds | 36 | ||
| Item 4. |
Submission of Matters to a Vote of Security Holders | 36 | ||
| Item 6. |
Exhibits and Reports on Form 8-K | 37 | ||
| 38 | ||||
| CERTIFICATION |
||||
PART I—FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CURIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
| June 30, 2003 |
December 31, 2002 |
|||||||
| ASSETS |
||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 21,778,707 | $ | 26,920,605 | ||||
| Cash and cash equivalents—restricted |
4,191,951 | 4,403,188 | ||||||
| Marketable securities |
8,791,060 | 9,652,671 | ||||||
| Due from joint venture |
— | 1,299,289 | ||||||
| Other current assets |
5,680,812 | 1,386,817 | ||||||
| Total current assets |
40,442,530 | 43,662,570 | ||||||
| Property and Equipment, net |
3,022,418 | 3,775,269 | ||||||
| Other Assets: |
||||||||
| Goodwill, net |
8,982,000 | 8,982,000 | ||||||
| Other intangible assets, net (Note 7) |
214,731 | 252,273 | ||||||
| Long-term notes receivable |
5,050,152 | 4,662,553 | ||||||
| Deposits and other assets |
1,567,762 | 1,107,028 | ||||||
| Total other assets |
15,814,645 | 15,003,854 | ||||||
| $ | 59,279,593 | $ | 62,441,693 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current Liabilities: |
||||||||
| Debt and lease obligations, current portion |
$ | 4,748,321 | $ | 2,105,049 | ||||
| Accounts payable |
529,891 | 726,092 | ||||||
| Accrued liabilities |
4,150,985 | 4,450,893 | ||||||
| Deferred revenue, current portion |
348,569 | 191,782 | ||||||
| Due to joint venture |
— | 1,089,083 | ||||||
| Total current liabilities |
9,777,766 | 8,562,899 | ||||||
| Debt and Lease Obligations, net of current portion |
7,594 | 3,424,422 | ||||||
| Convertible Notes Payable |
5,145,096 | 6,885,486 | ||||||
| Deferred Revenue, net of current portion |
16,693,245 | 11,962,224 | ||||||
| 21,845,935 | 22,272,132 | |||||||
| Preferred Stock, $0.01 par value, 5,000,000 shares authorized— |
— | 13,064,283 | ||||||
| Commitments |
||||||||
| Stockholders’ Equity: |
||||||||
| Common stock, $0.01 par value—Authorized—125,000,000 shares at June 30, 2003 and December 31,
2002 |
373,602 | 327,685 | ||||||
| Additional paid-in capital |
699,889,650 | 659,512,957 | ||||||
| Notes receivable |
(1,337,561 | ) | (1,337,561 | ) | ||||
| Treasury stock (at cost, 1,047,707 and 1,022,207 shares at June 30, 2003 and December 31, 2002, respectively) |
(891,274 | ) | (869,384 | ) | ||||
| Deferred compensation |
(1,505,423 | ) | (2,037,230 | ) | ||||
| Accumulated deficit |
(668,872,786 | ) | (637,174,017 | ) | ||||
| Accumulated other comprehensive income |
(316 | ) | 119,929 | |||||
| Total stockholders’ equity |
27,655,892 | 18,542,379 | ||||||
| $ | 59,279,593 | $ | 62,441,693 | |||||
See accompanying notes to unaudited consolidated financial statements
3
CURIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||||
| REVENUES: |
||||||||||||||||
| License fees and royalty revenue |
$ | 63,485 | $ | 127,846 | $ | 112,192 | $ | 205,606 | ||||||||
| Research and development contract revenue |
485,457 | 61,757 | 872,108 | 142,629 | ||||||||||||
| 548,942 | 189,603 | 984,300 | 348,235 | |||||||||||||
| COSTS AND EXPENSES (A): |
||||||||||||||||
| Research and development |
3,592,678 | 3,902,554 | 6,506,319 | 8,737,317 | ||||||||||||
| General and administrative |
1,492,221 | 1,980,024 | 3,026,653 | 5,200,032 | ||||||||||||
| Stock-based compensation |
655,328 | 427,433 | 919,194 | 1,124,895 | ||||||||||||
| Amortization of intangible assets |
18,771 | 60,405 | 37,542 | 120,810 | ||||||||||||
| Impairment of property and equipment |
— | 164,842 | — | 5,336,785 | ||||||||||||
| Impairment of goodwill |
— | 64,098,345 | — | 64,098,345 | ||||||||||||
| Realignment expenses |
— | — | — | 3,490,000 | ||||||||||||
| Total costs and expenses |
5,758,998 | 70,633,603 | 10,489,708 | 88,108,184 | ||||||||||||
| Net loss from operations |
(5,210,056 | ) | (70,444,000 | ) | (9,505,408 | ) | (87,759,949 | ) | ||||||||
| Equity in loss of joint venture |
— | (1,078,223 | ) | — | (2,239,906 | ) | ||||||||||
| Other income, net |
262,264 | 529,036 | 267,812 | 1,186,629 | ||||||||||||
| Net loss |
$ | (4,947,792 | ) | $ | (70,993,187 | ) | $ | (9,237,596 | ) | $ | (88,813,226 | ) | ||||
| Accretion of preferred stock dividend Net loss applicable to common stockholders |
(91,081 | ) | (180,225 | ) | (271,306 | ) | (362,453 | ) | ||||||||
| $ | (5,038,873 | ) | $ | (71,173,412 | ) | $ | (9,508,902 | ) | $ | (89,175,679 | ) | |||||
| Net loss per common share—basic and diluted |
$ | (0.15 | ) | $ | (2.20 | ) | $ | (0.29 | ) | $ | (2.76 | ) | ||||
| Weighted average common shares—basic and diluted |
33,501,511 | 32,334,965 | 32,621,151 | 32,332,113 | ||||||||||||
| Net loss |
$ | (4,947,792 | ) | $ | (70,993,187 | ) | $ | (9,237,596 | ) | $ | (88,813,226 | ) | ||||
| Unrealized loss on marketable securities |
(9,003 | ) | — | (23,648 | ) | (249,841 | ) | |||||||||
| Comprehensive loss |
$ | (4,956,795 | ) | $ | (70,993,187 | ) | $ | (9,261,244 | ) | $ | (89,063,067 | ) | ||||
| (A) The following summarizes the departmental allocation of the stock-based compensation charge: |
||||||||||||||||
| Research and development |
$ | 543,302 | $ | 311,323 | $ | 729,227 | $ | 649,790 | ||||||||
| General and administrative |
112,026 | 116,610 | 189,967 | 475,605 | ||||||||||||
| Total stock-based compensation |
$ | 655,328 | $ | 427,933 | $ | 919,194 | $ | 1,125,395 | ||||||||
See accompanying notes to unaudited consolidated financial statements
4
CURIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
| Six-Months Ended June 30, |
||||||||
| 2003 |
2002 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | (9,237,596 | ) | $ | (88,813,226 | ) | ||