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 September 30, 2004
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 Houston, Texas |
77025 | |
| (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 Exchange Act). Yes x No ¨
Number of shares of common shares outstanding at October 29, 2004: 43,971,548.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2004
INDEX
| Page | ||||||
| Part I – Financial Information |
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| Item 1 – Financial Statements |
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| Condensed Consolidated Balance Sheets at September 30, 2004 and December 31, 2003 |
1 | |||||
| 2 | ||||||
| 3 | ||||||
| 4 | ||||||
| Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations |
8 | |||||
| Item 3 – Quantitative and Qualitative Disclosures About Market Risk |
15 | |||||
| Item 4 – Controls and Procedures |
15 | |||||
| Part II – Other Information |
||||||
| Item 1 – Legal Proceedings |
16 | |||||
| Item 6 – Exhibits and Reports on Form 8-K |
16 | |||||
| 17 | ||||||
i
FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Shares and Per Share Data)
| September 30, 2004 |
December 31, 2003 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 40,483 | $ | 46,350 | ||||
| Restricted cash |
5,018 | 10,536 | ||||||
| Short-term investments, including a restricted amount of $5,431 in 2003 |
116,650 | 106,711 | ||||||
| Interest receivable |
2,031 | 3,002 | ||||||
| Accounts receivable |
2,626 | 1,706 | ||||||
| Accounts receivable from related party |
67 | 184 | ||||||
| Prepaid expenses and other |
504 | 276 | ||||||
| Total current assets |
167,379 | 168,765 | ||||||
| LONG-TERM INVESTMENTS |
45,840 | 63,837 | ||||||
| PROPERTY, PLANT & EQUIPMENT, NET |
24,250 | 19,205 | ||||||
| OTHER ASSETS |
8 | 49 | ||||||
| TOTAL ASSETS |
$ | 237,477 | $ | 251,856 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: |
||||||||
| Accounts payable |
$ | 1,164 | $ | 968 | ||||
| Accrued liabilities |
2,980 | 3,390 | ||||||
| Accrued arbitration award |
622 | 9,841 | ||||||
| Total current liabilities |
4,766 | 14,199 | ||||||
| LONG-TERM LIABILITIES: |
||||||||
| Note payable to bank |
5,000 | 5,000 | ||||||
| Note payable to related party |
— | 10,000 | ||||||
| Total long-term liabilities |
5,000 | 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; 44,526,328 and 44,470,446 shares issued, and 43,971,628 and 43,915,746 shares outstanding in 2004 and 2003, respectively |
445 | 445 | ||||||
| Additional paid-in capital |
322,588 | 311,324 | ||||||
| Treasury stock, at cost; 554,700 shares in 2004 and 2003, respectively |
(6,261 | ) | (6,261 | ) | ||||
| Accumulated other comprehensive income |
931 | 694 | ||||||
| Accumulated deficit |
(89,992 | ) | (83,545 | ) | ||||
| Total stockholders’ equity |
227,711 | 222,657 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 237,477 | $ | 251,856 | ||||
See accompanying notes to condensed consolidated financial statements.
1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(In Thousands, Except Per Share Data)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| REVENUES: |
||||||||||||||||
| Development agreements and licensing fees, net of arbitration award in 2003 |
$ | 103 | $ | 176 | $ | 3,610 | $ | 11,952 | ||||||||
| Development agreement with related party |
48 | 222 | 3,455 | 3,222 | ||||||||||||
| Royalties, net of arbitration award |
2,298 | 501 | 7,810 | 502 | ||||||||||||
| Royalties from related party, net of arbitration award |
17 | — | 44 | — | ||||||||||||
| Total revenues |
2,466 | 899 | 14,919 | 15,676 | ||||||||||||
| OPERATING COSTS AND EXPENSES: |
||||||||||||||||
| Research and development |
6,622 | 5,264 | 18,698 | 15,761 | ||||||||||||
| General and administrative |
1,639 | 1,214 | 5,150 | 5,801 | ||||||||||||
| Total operating costs and expenses |
8,261 | 6,478 | 23,848 | 21,562 | ||||||||||||
| LOSS FROM OPERATIONS |
(5,795 | ) | (5,579 | ) | (8,929 | ) | (5,886 | ) | ||||||||
| OTHER INCOME (EXPENSE): |
||||||||||||||||
| Interest income |
941 | 1,439 | 2,745 | 4,598 | ||||||||||||
| Interest expense |
(33 | ) | (106 | ) | (126 | ) | (344 | ) | ||||||||
| Other, net |
(26 | ) | (115 | ) | (137 | ) | (386 | ) | ||||||||
| Total other income (expense) |
882 | 1,218 | 2,482 | 3,868 | ||||||||||||
| LOSS BEFORE INCOME TAX BENEFIT |
(4,913 | ) | (4,361 | ) | (6,447 | ) | (2,018 | ) | ||||||||
| Income tax benefit |
— | — | — | (228 | ) | |||||||||||
| NET LOSS |
$ | (4,913 | ) | $ | (4,361 | ) | $ | (6,447 | ) | $ | (1,790 | ) | ||||
| NET LOSS PER BASIC and DILUTED SHARE |
$ | (0.11 | ) | $ | (0.10 | ) | $ | (0.15 | ) | $ | (0.04 | ) | ||||
| SHARES USED IN COMPUTING NET LOSS PER SHARE – BASIC and DILUTED: |
44,006 | 43,806 | 44,014 | 43,789 | ||||||||||||
| COMPREHENSIVE LOSS: |
||||||||||||||||
| Net loss |
$ | (4,913 | ) | $ | (4,361 | ) | $ | (6,447 | ) | $ | (1,790 | ) | ||||
| Foreign currency translation adjustment |
— | — | — | (168 | ) | |||||||||||
| Unrealized gain (loss) on available-for-sale security |
(221 | ) | 391 | 237 | 643 | |||||||||||
| TOTAL COMPREHENSIVE LOSS |
$ | (5,134 | ) | $ | (3,970 | ) | $ | (6,210 | ) | $ | (1,315 | ) | ||||
See accompanying notes to condensed consolidated financial statements.
2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
| Nine Months Ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | (6,447 | ) | $ | (1,790 | ) | ||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
1,895 | 1,689 | ||||||
| Compensation expense related to stock options |
30 | 46 | ||||||
| Loss on sale of equipment |
— | 348 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Increase in receivables and other assets |
(19 | ) | (309 | ) | ||||
| (Decrease) increase in current liabilities |
(8,691 | ) | 2,955 | |||||
| Other, net |
— | 123 | ||||||
| Net cash (used in) provided by operating activities |
(13,232 | ) | 3,062 | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Additions to property and equipment |
(6,978 | ) | (1,132 | ) | ||||
| Purchases of investments |
(108,885 | ) | (59,660 | ) | ||||
| Maturities and sales of investments |
117,180 | 81,372 | ||||||
| Loss on disposal of equipment |
38 | 51 | ||||||
| (Increase) decrease in restricted cash |
5,518 | (4,954 | ) | |||||
| Net cash provided by investing activities |
6,873 | 15,677 | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Proceeds from issuance of stock |
492 | 996 | ||||||
| Net cash provided by financing activities |
492 | 996 | ||||||
| IMPACT OF EXCHANGE RATES ON CASH</ | ||||||||