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, 2004
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. x Yes ¨ No
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12(b)-2 of the Exchange Act). x Yes ¨ No
As of October 21, 2004, there were 47,290,071 shares of the Registrant’s common stock outstanding.
CURIS, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
| PART I. | FINANCIAL INFORMATION | Page Number | ||
| Item 1. |
Financial Statements (unaudited) | |||
| Condensed Consolidated Balance Sheets as of September 30, 2004 and December 31, 2003 |
3 | |||
| 4 | ||||
| Consolidated Statements of Cash Flows for the nine months ended September 30, 2004 and 2003 |
5 | |||
| Notes to Unaudited Condensed Consolidated Financial Statements |
6 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 11 | ||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 35 | ||
| Item 4. |
Controls and Procedures | 35 | ||
| PART II. | OTHER INFORMATION | |||
| Item 6. |
Exhibits | 36 | ||
| 37 | ||||
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
| September 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS |
||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents |
$ | 16,575,489 | $ | 27,734,548 | ||||
| Cash equivalents—restricted |
193,166 | 190,661 | ||||||
| Marketable securities |
14,358,075 | 7,413,703 | ||||||
| Accounts receivable |
2,581,341 | 2,184,973 | ||||||
| Prepaid expenses and other current assets |
1,248,295 | 1,202,993 | ||||||
| Total current assets |
34,956,366 | 38,726,878 | ||||||
| Property and equipment, net |
2,710,459 | 2,500,703 | ||||||
| Other Assets: |
||||||||
| Long-term investments |
1,607,682 | 2,389,742 | ||||||
| Goodwill, net |
8,982,000 | 8,982,000 | ||||||
| Other intangible assets, net |
120,890 | 177,193 | ||||||
| Long-term receivables |
— | 2,000,000 | ||||||
| Deposits and other assets |
1,148,695 | 959,974 | ||||||
| Total other assets |
11,859,267 | 14,508,909 | ||||||
| $ | 49,526,092 | $ | 55,736,490 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current Liabilities: |
||||||||
| Debt and lease obligations, current portion (Note 4) |
$ | 594,354 | $ | 322,884 | ||||
| Accounts payable |
1,498,085 | 456,860 | ||||||
| Accrued liabilities |
1,837,564 | 2,427,783 | ||||||
| Deferred revenue, current portion |
1,900,092 | 1,241,379 | ||||||
| Total current liabilities |
5,830,095 | 4,448,906 | ||||||
| Convertible notes payable (Note 4) |
5,615,688 | 5,333,733 | ||||||
| Deferred revenue, net of current portion |
7,165,571 | 7,088,638 | ||||||
| Total liabilities |
18,611,354 | 16,871,277 | ||||||
| Commitments (Note 5) |
||||||||
| Stockholders’ Equity: |
||||||||
| Common stock, $0.01 par value— |
428,613 | 416,088 | ||||||
| Additional paid-in capital |
693,784,484 | 689,489,382 | ||||||
| Notes receivable |
(110,368 | ) | (110,368 | ) | ||||
| Treasury stock (at cost, 1,047,707 shares at September 30, 2004 and December 31, 2003) |
(891,274 | ) | (891,274 | ) | ||||
| Deferred compensation |
(941,320 | ) | (963,931 | ) | ||||
| Accumulated deficit |
(661,313,320 | ) | (649,068,435 | ) | ||||
| Accumulated other comprehensive income |
(42,077 | ) | (6,249 | ) | ||||
| Total stockholders’ equity |
30,914,738 | 38,865,213 | ||||||
| $ | 49,526,092 | $ | 55,736,490 | |||||
See accompanying notes to unaudited consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (unaudited)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| REVENUES: |
||||||||||||||||
| Collaboration revenues |
$ | 1,486,226 | $ | 9,308,838 | $ | 3,462,100 | $ | 10,293,138 | ||||||||
| Total revenues |
1,486,226 | 9,308,838 | 3,462,100 | 10,293,138 | ||||||||||||
| COSTS AND EXPENSES: |
||||||||||||||||
| Research and development |
2,946,962 | 2,822,855 | 8,584,658 | 9,009,957 | ||||||||||||
| General and administrative |
2,111,520 | 1,650,647 | 6,265,967 | 4,996,517 | ||||||||||||
| Stock-based compensation (A) |
368,060 | 291,241 | 1,058,678 | 1,210,435 | ||||||||||||
| Amortization of intangible assets |
18,768 | 18,769 | 56,304 | 56,311 | ||||||||||||
| Total costs and expenses |
5,445,310 | 4,783,512 | 15,965,607 | 15,273,220 | ||||||||||||
| Income (loss) from operations |
(3,959,084 | ) | 4,525,326 | (12,503,507 | ) | (4,980,082 | ) | |||||||||
| OTHER INCOME (EXPENSE): |
||||||||||||||||
| Interest income |
116,358 | 115,228 | 332,530 | 312,996 | ||||||||||||
| Other income |
39,500 | 65,258 | 232,845 | 549,727 | ||||||||||||
| Interest expense |
(102,474 | ) | (155,896 | ) | (306,753 | ) | (570,321 | ) | ||||||||
| Total other income |
53,384 | 24,590 | 258,622 | 292,402 | ||||||||||||
| Net income (loss) |
$ | (3,905,700 | ) | $ | 4,549,916 | $ | (12,244,885 | ) | $ | (4,687,680 | ) | |||||
| Accretion of preferred stock dividend |
— | — | — | (271,306 | ) | |||||||||||
| Net income (loss) applicable to common stockholders |
$ | (3,905,700 | ) | $ | 4,549,916 | $ | (12,244,885 | ) | $ | (4,958,986 | ) | |||||
| Basic net income (loss) per common share |
$ | (0.09 | ) | $ | 0.12 | $ | (0.30 | ) | $ | (0.14 | ) | |||||
| Weighted average common shares for basic net income (loss) computation |
41,620,123 | 38,282,799 | 41,398,656 | 34,529,106 | ||||||||||||
| Diluted net income (loss) per common share |
$ | (0.09 | ) | $ | 0.11 | $ | (0.30 | ) | $ | (0.14 | ) | |||||
| Weighted average common shares for diluted net income (loss) computation |
41,620,123 | 42,031,957 | 41,398,656 | 34,529,106 | ||||||||||||
| Net income (loss) |
$ | (3,905,700 | ) | $ | 4,549,916 | $ | (12,244,885 | ) | $ | (4,687,680 | ) | |||||
| Unrealized gain (loss) on marketable securities |
23,330 | (3,443 | ) | (35,829 | ) | (27,091 | ) | |||||||||
| Comprehensive loss |
$ | (3,882,370 | ) | $ | 4,546,473 | $ | (12,280,714 | ) | $ | (4,714,771 | ) | |||||
| (A) The following summarizes the departmental allocation of the stock-based compensation charge: |
||||||||||||||||
| Research and development |
$ | 341,510 | $ | 204,127 | $ | 863,876 | $ | 933,354 | ||||||||
| General and administrative |
26,550 | 87,114 | 194,802 | 277,081 | ||||||||||||
| Total stock-based compensation |
$ | 368,060 | $ | 291,241 | $ | 1,058,678 | $ | 1,210,435 | ||||||||
See accompanying notes to unaudited consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
| Nine Months Ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | (12,244,885 | ) | $ | (4,687,680 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
833,045 | 1,115,366 | ||||||
| Stock-based compensation expense |
1,058,678 | 1,210,435 | ||||||
| Non-cash interest on notes payable |
293,549 | 368,381 | ||||||
| Amortization of intangible assets |
56,304 | 56,311 | ||||||
| Impairment of property and equipment |
— | 280 | ||||||
| Decrease/increase in long-term receivables |
2,000,000 | (2,000,000 | ) | |||||
| Changes in current assets and liabilities: |
||||||||
| Accounts receivable |
(396,368 | ) | (2,000,000 | ) | ||||
| Prepaid expenses and other assets |
(234,023 | ) | 93,983 | |||||