<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Form 10-QSB of Cortech, Inc. for the quarter ended March 31, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000728478
<NAME> CORTECH, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 11,660
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,713
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,713
<CURRENT-LIABILITIES> 972
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0
0
<COMMON> 4
<OTHER-SE> 10,737
<TOTAL-LIABILITY-AND-EQUITY> 11,713
<SALES> 0
<TOTAL-REVENUES> 415
<CGS> 0
<TOTAL-COSTS> 215
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<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 200
<INCOME-TAX> 0
<INCOME-CONTINUING> 200
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<EPS-DILUTED> 0.11
</TABLE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: March 31, 1999
--------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission File No.: 0-20726
----------------------------
Cortech, Inc.
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 84-0894091
------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
376 Main Street, PO Box 74, Bedminster, NJ 07921
------------------------------------------------
(Address of principal executive offices)
(908) 234-1881
-------------------------
(Issuer's telephone number)
6850 N. Broadway, Suite G, Denver, Colorado 80221
---------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No _____
State the number of shares outstanding of each of the issuer's classes of
common equity: As of April 30, 1999, the issuer had 1,852,209 shares of its
common stock, par value $.002 per share, outstanding.
Transitional Small Business Disclosure Format (check one):
Yes _____ No X
<PAGE>
PART I. FINANCIAL INFORMATION
- ------ ---------------------
ITEM 1. Financial Statements
- ------ ---------------------
CORTECH, INC.
BALANCE SHEET
($000 Omitted)
(UNAUDITED)
March 31,
1999
--------
ASSETS
- ------
Current assets:
Cash and cash equivalents $11,660
Prepaid expenses and other 53
-------
Total assets $11,713
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 59
Accrued liabilities 597
Accrued severance and other compensation 316
-------
Total liabilities 972
-------
Stockholders' equity:
Preferred stock, $.002 par value,
2,000,000 shares authorized,
none issued -
Common stock, $.002 par value, 5,000,000
shares authorized, 1,852,209 shares
issued and outstanding 4
Additional paid-in capital 99,830
Accumulated deficit ( 89,093)
-------
Total stockholders' equity 10,741
-------
Total liabilities and
stockholders' equity $11,713
=======
See accompanying note to financial statements.
<PAGE>
CORTECH, INC.
STATEMENTS OF OPERATIONS
($000 Omitted, except per share data)
(UNAUDITED)
Three Months Ended
March 31 ,
----------------------
1999 1998
------ ------
Revenues:
Interest income $ 124 $ 196
Gain on disposition of property
and equipment 246 215
Other income 45 -
-------- -------
Total revenues 415 411
-------- -------
Expenses:
General and administrative 215 1,522
Research and development - 288
-------- -------
Total expenses 215 1,810
-------- -------
Net income (loss) $ 200 ($ 1,399)
======== =======
Basic and fully diluted net income
(loss) per share $ .11 ($ .76)
======== =======
Weighted average common shares
outstanding (in 000's) 1,852 1,852
======== =======
See accompanying note to financial statements.
<PAGE>
CORTECH, INC.
STATEMENTS OF CASH FLOWS
($000 Omitted)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31 ,
---------------------------
1999 1998
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 200 ($ 1,399)
Adjustments:
Depreciation and amortization - 317
Gain on disposition of equipment ( 246) ( 90)
Decrease in prepaid expenses and other 24 29
(Decrease) increase in accounts payable ( 92) 107
Decrease in accrued liabilities, accrued
severance and other ( 69) ( 223)
-------- --------
Net cash used in operating activities ( 183) ( 1,259)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property and equipment 246 171
Purchases of short-term investments - ( 9)
Sales of short-term investments - 3,850
-------- --------
Net cash provided by investing activities 246 4,012
-------- --------
Net increase in cash and cash equivalents 63 2,753
Cash and cash equivalents, beginning of period 11,597 11,562
-------- --------
Cash and cash equivalents, end of period $ 11,660 $ 14,315
======== ========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Note receivable from sale of equipment $ - $ 125
======== ========
</TABLE>
See accompanying note to financial statements.
<PAGE>
CORTECH, INC.
NOTE TO FINANCIAL STATEMENTS
(UNAUDITED)
1. General
-------
The accompanying unaudited financial statements of Cortech, Inc. ("Cortech"
or the "Company") as of March 31, 1999 and for the three months ended March
31, 1999 and 1998 reflect all material adjustments consisting of only
normal recurring adjustments, which, in the opinion of management, are
necessary for a fair presentation of results for the interim periods.
Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted pursuant to
the rules and regulations of the Securities and Exchange Commission,
although the Company believes that the disclosures are adequate to make the
information presented not misleading. These financial statements should be
read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1998 as filed with the Securities and Exchange Commission.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Prior years' financial statements have been reclassified to conform to the
current year's presentation.
The results of operations for the three months ended March 31, 1999 and
1998 are not necessarily indicative of the results to be expected for the
entire year or for any other period.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations
---------------------
The following discussion and analysis should be read in conjunction with
Cortech, Inc.'s ("Cortech" or the "Company") 1998 Annual Report on Form 10-KSB
as well as the Company's financial statements and notes thereto included
elsewhere in this Quarterly Report on Form 10-QSB. When used in this discussion,
the word "expects" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected. The forward-looking statements contained herein speak only as of the
date hereof. The Company expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statements
contained herein to reflect any change in the Company's expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based.
General
- -------
Cortech operated as a biopharmaceutical company whose research and
development efforts focused primarily on bradykinin antagonists and protease
inhibitors. Those efforts produced a technology portfolio which may have
potential therapeutic application across a broad range of medical conditions.
Cortech's strategy is to seek collaborative partners to conduct and fund future
research and development on the components of its portfolio, although there can
be no assurance that any particular agreement will be completed. At the same
time, the Company is seeking to redeploy its assets into an operating business.
Results of Operations
- ---------------------
Revenues
- --------
Cortech had net income of $200,000 or $.11 basic and fully diluted earnings
per share for the three months ended March 31, 1999, compared to a net loss of
$1,399,000 of $.76 basic and fully diluted loss per share for the same period of
1998.
Interest income was $124,000 and $196,000 for the three months ended March
31, 1999 and 1998, respectively, a decrease of $72,000. Lower invested balances
and lower yields on investments were the primary reasons for this decrease.
Gains on disposition of property and equipment was $246,000 and $215,000
for the three months ended March 31, 1999 and 1998, respectively. During 1997,
the Company commenced selling property and equipment previously used in research
and development and for administrative purposes.
Other income of $45,000 in the three months ended March 31, 1999 related to
reimbursement by one of the Company's insurance carriers of legal fees
previously expensed for the BioStar Litigation (see Part II, Item 1).
<PAGE>
Expenses
- --------
General and administrative expenses decreased from $1,522,000 in the three
months ended March 31, 1998 to $215,000 in the three months ended March 31, 1999
a decrease of $1,307,000. During the 1998 period, the Company was still in the
process of winding down its operations. During 1999, new management instituted
strict cost controls with the goal of preserving cash. For the three months
ended March 31, 1999, general and administrative expenses consisted principally
of the patent related costs of $127,000.
Expenses for research and development were $288,000 in the three months
ended March 31, 1998. Due to the cessation of on-site research and development
activities by the Company in late 1997, there were no research and development
expenses in the three months ended March 31, 1999.
The Company utilized its net operating loss carryforward to absorb all of
its regular taxable income for the quarter ended March 31, 1999, and continues
to reflect a full valuation allowance on the tax benefit of the net operating
loss carryforwards. In the first quarter of 1998, no tax benefit was reflected
due to the continuing losses recorded by the Company at that time.
Liquidity and Capital Resources
- -------------------------------
At March 31, 1999, the Company had cash and cash equivalents of
approximately $11.7 million. Cash equivalents of $11.5 million consisted of U.S.
Treasury Bills with an original maturity of three months or less with yields
ranging between 4.4% and 4.5%. Management believes its cash and cash equivalents
are sufficient for its remaining business activities and for the costs of
seeking an acquisition of an operating business.
Net cash of $183,000 was used in operating activities for the first quarter
of 1999 compared to a net use of $1,259,000 in the same quarter of 1998. In
1999, cash flows from net income of $200,000 were offset by the gain on
disposition of equipment of $246,000 (classified as an investing activity) and a
decrease in accounts payable of $92,000 and accrued liabilities of $69,000. In
1998, the net loss of $1,399,000 and the decrease in other liabilities of
$223,000 was partially offset by depreciation and amortization of $317,000 and
an increase in accounts payable of $107,000.
Net cash of $246,000 was provided by investing activities in the three
months ended March 31, 1999, entirely due to the sale of property and equipment.
In the three months ended March 31, 1998, $4,012,000 was provided by investing
activities with $3,850,000 provided by the sale of short-term investments and
$171,000 provided by the sale of property and equipment.
Impact of Year 2000
- -------------------
The year 2000 will impact computer programs written using two digits rather
than four to define the applicable year. Any programs with time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in system failure or miscalculations causing disruptions
of operation, including a temporary inability to process transactions, send
invoices or engage in other ordinary activities. This problem largely affects
software programs written years ago, before the issue came to prominence.
Insofar as Cortech has effectively discontinued all internal efforts to advance
<PAGE>
its research and development activities, Cortech does not believe that it has
significant risk associated with the year 2000 problem.
<PAGE>
PART II - OTHER INFORMATION
- ------- -----------------
ITEM 1. Legal Proceedings
- ------- -----------------
BIOSTAR LITIGATION. On February 27, 1998, a complaint was filed in the
Court of Chancery of the State of Delaware, naming the Company, the Company's
then current directors and BioStar, Inc. ("BioStar") as defendants. The
complaint, filed by a stockholder of the Company, claims to be on behalf of a
class of all the Company's stockholders and contends that the then current
directors of the Company breached their fiduciary duties to the Company's
stockholders when they unanimously approved the proposed combination with
BioStar. The complaint originally sought to enjoin the proposed combination with
BioStar as well as the operation of the company's stockholder rights plan and
sought an order rescinding the proposed combination with BioStar upon its
consummation as well as compensatory damages and costs. The complaint was
amended following termination of the proposed BioStar merger to seek to force an
auction of the company's assets and other relief. Prior management of the
Company believed that the claims are without merit. Recently elected members of
the Board of Directors, who comprise a majority of the board, have not
determined the merits of the claims nor whether they would have a material
adverse effect on the Company's financial position or results of operations.
ITEM 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
a. Exhibits
27 Financial Data Schedule for the three months ended March
31, 1999
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is being filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CORTECH, INC.
Date: May 12, 1999 /s/ Sue Ann Itzel
----------------------------
Sue Ann Itzel
Treasurer
(Principal Accounting and
Financial Officer)
