<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, 2000 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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 6,644
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,449
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,449
<CURRENT-LIABILITIES> 189
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 13,256
<TOTAL-LIABILITY-AND-EQUITY> 13,449
<SALES> 0
<TOTAL-REVENUES> 205
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 133
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 72
<INCOME-TAX> 3
<INCOME-CONTINUING> 69
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 69
<EPS-BASIC> .04
<EPS-DILUTED> .04
</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, 2000
--------------
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)
N/A
--------------------------------------------
(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, 2000, 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,
2000
--------
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 6,644
Short-term investments 6,637
Prepaid expenses and other 168
-------
Total assets $13,449
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 13
Accrued liabilities 176
-------
Total liabilities 189
-------
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 ( 86,574)
-------
Total stockholders' equity 13,260
-------
Total liabilities and
stockholders' equity $13,449
=======
See accompanying notes to financial statements.
2
<PAGE>
CORTECH, INC.
STATEMENTS OF OPERATIONS
($000 Omitted, except per share data)
(UNAUDITED)
Three Months Ended
March 31 ,
---------------------
2000 1999
------ ------
Revenues:
Interest income $ 205 $ 124
Gain on disposition of property
and equipment - 246
Other income - 45
------- -------
Total revenues 205 415
------- -------
Expenses:
General and administrative 133 215
------- -------
Income before income taxes 72 200
Provision for income taxes 3 -
------- -------
Net income $ 69 $ 200
======= =======
Basic and fully diluted net income
per share $ .04 $ .11
======= =======
Weighted average common shares
outstanding (in 000's) 1,852 1,852
======= =======
See accompanying notes to financial statements.
3
<PAGE>
CORTECH, INC.
STATEMENTS OF CASH FLOWS
($000 Omitted)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31 ,
-------------------------
2000 1999
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 69 $ 200
Adjustments:
Gain on disposition of equipment - ( 246)
Change in accrued interest on short-term investments ( 69) -
Change in prepaid expenses and other assets ( 14) 24
Change in accounts payable ( 4) ( 92)
Change in accrued liabilities 14 ( 69)
-------- --------
Net cash used in operating activities ( 4) ( 183)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of property and equipment - 246
-------- --------
Net cash provided by investing activities - 246
-------- --------
Net increase (decrease) in cash and cash equivalents ( 4) 63
Cash and cash equivalents, beginning of period 6,648 11,597
-------- --------
Cash and cash equivalents, end of period $ 6,644 $ 11,660
======== ========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
CORTECH, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. General
-------
The accompanying unaudited financial statements of Cortech, Inc.
("Cortech" or the "Company") as of March 31, 2000 and for the three
months ended March 31, 2000 and 1999 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,
1999 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,
2000 and 1999 are not necessarily indicative of the results to be
expected for the entire year or for any other period.
2. Legal Proceedings
-----------------
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. 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
5
<PAGE>
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. Thereafter, the parties
negotiated a settlement of the claims. Pursuant to the terms of the
settlement a payment in the amount of $235,000 shall be made to
Cortech on behalf of Defendants by Cortech's directors and officers
insurance carrier. On April 6, 2000, the Court held a hearing and
approved the settlement and ordered Cortech to pay $129,261.88 in
attorney's fees and expenses from the insurance proceeds it will
receive. There were no objectors to the settlement and, barring
appeal, the Court's order ends the matter.
6
<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's 1999 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 $69,000 or $.04 basic and fully diluted earnings
per share for the three months ended March 31, 2000, compared to net income of
$200,000 or $.11 basic and fully diluted earnings per share for the same period
of 1999.
Interest income was $205,000 and $124,000 for the three months ended March
31, 2000 and 1999, respectively, an increase of $81,000. Higher invested
balances and higher yields on investments were the reasons for this increase.
Gains on disposition of property and equipment was $246,000 for the three
months ended March 31, 1999. There were no gains on disposition of property and
equipment for the three months ended March 31, 2000.
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 in connection with legal proceedings (see Part II, Item 1).
7
<PAGE>
Expenses
- --------
General and administrative expenses decreased from $215,000 in the three
months ended March 31, 1999 to $133,000 in the three months ended March 31, 2000
a decrease of $82,000. During the 1999 period, the Company was still in the
process of winding down its operations. For the three months ended March 31,
2000, general and administrative expenses consisted of legal fees of $42,000;
administrative fees of $45,000; insurance fees of $18,000 and all other expenses
of $28,000. For the three months ended March 31, 1999, general and
administrative expenses consisted of the patent related costs of $75,000; legal
fees of $62,000; insurance fees of $32,000 and all other expenses of $46,000.
The Company utilized its net operating loss carryforward to absorb all of
its federal taxable income for the quarters ended March 31, 2000 and 1999, and
continues to reflect a full valuation allowance on the tax benefit of the net
operating loss carryforwards.
Liquidity and Capital Resources
- -------------------------------
At March 31, 2000, the Company had cash and cash equivalents of
approximately $6.6 million. Cash equivalents of $6.6 million consisted of U.S.
Treasury Bills with an original maturity of three months or less with yields
ranging between 5.39% and 5.90%. 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. The Company also had
short-term investments consisting of U.S. Treasury Bills with original
maturities of six months of $6.6 million at March 31, 2000.
Net cash of $4,000 was used in operations for the quarter ended March 31,
2000, compared to net cash used in operations of $183,000 for the quarter ended
March 31, 1999. In 2000, cash flows from net income of $69,000 and the increase
in accrued liabilities of $14,000, partially offset by the increase in accrued
interest on short-term investments of $69,000 and the increase in prepaid
expenses of $14,000 were the primary reasons for the cash used in operations.
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
decreases in accounts payable of $92,000 and accrued liabilities of $69,000.
Net cash of $246,000 was provided by investing activities in the three
months ended March 31, 1999, entirely the result of proceeds from the sale of
property and equipment.
8
<PAGE>
PART II - OTHER INFORMATION
- ------- -----------------
ITEM 1. Legal Proceedings
- ------- -----------------
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 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. Thereafter, the
parties negotiated a settlement of the claims. Pursuant to the terms of the
settlement a payment in the amount of $235,000, shall be made to Cortech on
behalf of Defendants by Cortech's directors and officers insurance carrier. On
April 6, 2000, the Court held a hearing and approved the settlement and ordered
Cortech to pay $129,261.88 in attorney's fees and expenses from the insurance
proceeds it will receive. There were no objectors to the settlement and, barring
appeal, the Court's order ends the matter.
ITEM 6. Exhibits and Reports on Form 8-K
- ------- ---------------------------------
a. Exhibits
27 Financial Data Schedule for the three months ended March 31,
2000
b. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this
report is being filed.
9
<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 11, 2000 /s/ Sue Ann Itzel
-----------------
Sue Ann Itzel
Treasurer
(Principal Accounting and Financial
Officer)
10
