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 March 31, 2005
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: 000-51136
Threshold Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 94-3409596 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
1300 Seaport Boulevard
Redwood City, CA 94063
(Address of principal executive offices, including zip code)
(650) 474-8200
(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 ¨ No x
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
On May 9, 2005, there were 30,746,035 shares of common stock, par value $.001 per share, of Threshold Pharmaceuticals, Inc. outstanding.
Threshold Pharmaceuticals, Inc.
FORM 10-Q
QUARTER ENDED MARCH 31, 2005
TABLE OF CONTENTS
| Page | ||||||||
| PART I. |
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| Item 1. |
3 | |||||||
| 3 | ||||||||
| 4 | ||||||||
| 5 | ||||||||
| 6 | ||||||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11 | ||||||
| Item 3. |
31 | |||||||
| Item 4. |
31 | |||||||
| PART II. |
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| Item 1. |
33 | |||||||
| Item 2. |
33 | |||||||
| Item 3. |
33 | |||||||
| Item 4. |
33 | |||||||
| Item 5. |
33 | |||||||
| Item 6. |
34 | |||||||
| 35 | ||||||||
| EXHIBIT 10.19 |
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| EXHIBIT 31.1 |
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| EXHIBIT 31.2 |
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| EXHIBIT 32.1 |
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| EXHIBIT 32.2 |
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The terms “Threshold,” “we,” “us” “the Company” and “our” as used in this report refer to Threshold Pharmaceuticals, Inc.
2
Threshold Pharmaceuticals, Inc.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
| March 31, 2005 |
December 31, 2004 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 44,983 | $ | 14,339 | ||||
| Marketable securities |
16,084 | 14,326 | ||||||
| Prepaid expenses and other current assets |
966 | 1,604 | ||||||
| Restricted cash |
— | 85 | ||||||
| Total current assets |
62,033 | 30,354 | ||||||
| Property and equipment, net |
1,818 | 1,667 | ||||||
| Restricted cash and other assets |
217 | 192 | ||||||
| Total assets |
$ | 64,068 | $ | 32,213 | ||||
| LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,041 | $ | 1,550 | ||||
| Accrued liabilities |
1,923 | 1,506 | ||||||
| Notes payable, current portion |
334 | 331 | ||||||
| Advance on research and development contract |
5,000 | 5,000 | ||||||
| Total current liabilities |
8,298 | 8,387 | ||||||
| Notes payable, less current portion |
296 | 382 | ||||||
| Deferred rent |
91 | 78 | ||||||
| Total liabilities |
8,685 | 8,847 | ||||||
| Redeemable convertible preferred stock |
— | 49,839 | ||||||
| Stockholders’ equity (deficit): |
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| Common stock, $0.001 par value, 150,000,000 shares authorized; issued and outstanding: 30,746,035 shares at March 31, 2005 and 3,690,567 shares at December 31, 2004 |
31 | 4 | ||||||
| Additional paid-in capital |
115,177 | 24,619 | ||||||
| Deferred stock-based compensation |
(17,804 | ) | (16,637 | ) | ||||
| Accumulated other comprehensive income |
82 | 104 | ||||||
| Deficit accumulated during the development stage |
(42,103 | ) | (34,563 | ) | ||||
| Total stockholders’ equity (deficit) |
55,383 | (26,473 | ) | |||||
| Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit) |
$ | 64,068 | $ | 32,213 | ||||
The accompanying notes are an integral part of these unaudited financial statements.
3
Threshold Pharmaceuticals, Inc.
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Three Months Ended March 31, |
Cumulative Period from October 17, 2001 (date of inception) to March 31, 2005 |
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| 2005 |
2004 |
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| Operating expenses: |
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| Research and development |
$ | 5,251 | $ | 1,997 | $ | 30,044 | ||||||
| General and administrative |
2,565 | 872 | 12,778 | |||||||||
| Total operating expenses |
7,816 | 2,869 | 42,822 | |||||||||
| Loss from operations |
(7,816 | ) | (2,869 | ) | (42,822 | ) | ||||||
| Interest income, net |
284 | 92 | 819 | |||||||||
| Interest expense |
(8 | ) | (16 | ) | (100 | ) | ||||||
| Net loss |
(7,540 | ) | (2,793 | ) | (42,103 | ) | ||||||
| Dividend related to beneficial conversion feature of redeemable convertible preferred stock |
— | — | (40,862 | ) | ||||||||
| Net loss attributable to common stockholders |
$ | (7,540 | ) | $ | (2,793 | ) | $ | (82,965 | ) | |||
| Net loss per common share, basic and diluted |
$ | (0.46 | ) | $ | (23.87 | ) | ||||||
| Weighted average number of shares used in per common share calculations: basic and diluted |
16,340 | 117 | ||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
4
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Three Months Ended March 31, |
Cumulative Period from October 17, 2001 (date of inception) to March 31, 2005 |
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| 2005 |
2004 |
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| Cash flows from operating activities: |
||||||||||||
| Net loss |
$ | (7,540 | ) | $ | (2,793 | ) | $ | (42,103 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||
| Depreciation |
147 | 29 | 391 | |||||||||
| Stock-based compensation expense |
1,627 | 268 | 8,690 | |||||||||
| Amortization of debt issuance costs |
— | 10 | 44 | |||||||||
| Loss on disposal of property and equipment |
— | — | 5 | |||||||||
| Changes in operating assets and liabilities: |
||||||||||||
| Prepaid expenses and other assets |
(674 | ) | (26 | ) | (991 | ) | ||||||
| Accounts payable |
61 | 31 | 1,041 | |||||||||
| Accrued liabilities |
435 | 308 | 1,923 | |||||||||
| Advance on research and development contract |
— | — | 5,000 | |||||||||
| Deferred rent |
13 | — | 91 | |||||||||
| Net cash used in operating activities |
(5,931 | ) | (2,173 | ) | (25,909 | ) | ||||||
| Cash flows from investing activities: |
||||||||||||
| Acquisition of property and equipment |
(886 | ) | (64 | ) | (2,214 | ) | ||||||
| Acquisition of marketable securities |
(9,180 | ) | — | (47,425 | ) | |||||||
| Proceeds from sale of marketable securities |
7,400 | — | 31,423 | |||||||||
| Restricted cash |
85 | — | (192 | ) | ||||||||
| Net cash used in investing activities |
(2,581 | ) | (64 | ) | (18,408 | ) | ||||||
| Cash flows from financing activities: |
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| Proceeds from redeemable convertible preferred stock, net |
— | — | 49,839 | |||||||||
| Proceeds from initial public offering, net |
39,031 | — | 37,744 | |||||||||
| Proceeds from issuance of common stock |
208 | 2 | 1,087 | |||||||||
| Proceeds from issuance of notes payable |
— | — | 1,000 | |||||||||
| Repayment of notes payable |
(83 | ) | (41 | ) | (370 | ) | ||||||
| Net cash provided by (used in) financing activities |
39,156 | (39 | ) | 89,300 | ||||||||
| Net increase (decrease) in cash and cash equivalents |
30,644 | (2,276 | ) | 44,983 | ||||||||
| Cash and cash equivalents, beginning of period |
14,339 | 40,609 | — | |||||||||
| Cash and cash equivalents, end of period |
$ | 44,983 | $ | 38,333 | $ | 44,983 | ||||||
| Supplemental schedule of non-cash investing and financing activities |
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| Deferred stock-based compensation |
$ | 2,645 | $ | 10,832 | $ | 25,387 | ||||||
| Fair value of redeemable convertible preferred stock warrant |
$ | — | $ | 44 | $ | 44 | ||||||
| Deferred offering costs in connection with initial public offering |
$ | (1,287 | ) | $ | — | $ | — | |||||
| Change in unrealized gain (loss) on marketable securities |
$ | (22 | ) | $ | — | $ | 82 | |||||
| Dividend related to beneficial conversion feature of redeemable convertible preferred stock. |
$ | — | $ | — | $ | 40,862 | ||||||