<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
(Mark One)
[ x ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Fiscal Year Ended December 31, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-19171
ICOS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 91-1463450
(State of incorporation) (I.R.S. Employer
Identification No.)
22021- 20th Avenue S.E.
Bothell, Washington 98021
(425) 485-1900
(Address, including zip code, and telephone number, including area code, of
principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
State the aggregate market value of voting and non-voting stock held by non-
affiliates of the registrant as of February 29, 2000.
$1,987,781,409
Indicate the number of shares outstanding of each of the registrant's
classes of Common Stock as of February 29, 2000.
<TABLE>
<CAPTION>
Title of Class Number of Shares
-------------- ----------------
<S> <C>
Common Stock, $.01 par value 45,277,767
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for the annual meeting
of stockholders held on May 4, 2000, relating to "Election of Directors,"
"Continuing Class 2 Directors (until 2001)," "Continuing Class 3 Directors
(until 2002)," "Other Executive Officers," "Section 16(a) Beneficial Ownership
Reporting Compliance," "Compensation of Directors," "Executive Compensation,"
"1999 Option Grants," "1999 Option Exercises and Year-end Option Values,"
"Compensation Committee Interlocks and Insider Participation," "Employment
Contracts, Termination of Employment and Change of Control Arrangements,"
"Security Ownership of Certain Beneficial Owners and Management," and "Certain
Relationships and Related Transactions" are incorporated by reference in Part
III of this Form 10-K.
<PAGE>
PART IV
Item 14. Exhibits, Consolidated Financial Statement Schedules, and Reports on
Form 8-K
a) 1. Consolidated Financial Statements
---------------------------------
See Index to Consolidated Financial Statements under Item 8 of this
Form 10-K.
2. Consolidated Financial Statement Schedules
------------------------------------------
Balance sheets of Suncos Corporation as of December 31, 1999 and 1998,
and the related statements of operations, stockholders' equity, and cash
flows for each of the years in the two-year period ended December 31,
1999 and the periods from February 6, 1997 (inception) through December
31, 1997 and 1999.
Independent Auditors' Report
All other consolidated financial statement schedules have been omitted
since the information is not required or because the information
required is included in the consolidated financial statements or the
notes thereto.
3. Exhibits
--------
See Index to Exhibits filed herewith.
b) Reports on Form 8-K
-------------------
No report on Form 8-K was filed during the fourth quarter of the fiscal
year ended December 31, 1999.
d) Suncos Corporation Financial Statements
---------------------------------------
Index to Financial Statements
Page
----
Independent Auditors' Report 3
Balance Sheets as of December 31, 1999 and 1998 4
Statements of Operations for each of the years in
the two-year period ended December 31, 1999 and the
periods from February 6, 1997 (inception) through
December 31, 1997 and 1999. 5
Statements of Stockholders Equity' for each of the
years in the two-year period ended December 31,
1999 and the periods from February 6, 1997 (inception)
through December 31, 1997 and 1999. 6
Statements of Cash Flows for each of the years in the
two-year period ended December 31, 1999 and the
periods from February 6, 1997 (inception) through
December 31, 1997 and 1999. 7
Notes to financial statements 8-11
2
<PAGE>
Independent Auditors' Report
The Board of Directors
Suncos Corporation:
We have audited the accompanying balance sheets of Suncos Corporation (a
development stage corporation) as of December 31, 1999 and 1998, and the related
statements of operations, stockholders' equity, and cash flows for each of the
years in the two-year period ended December 31, 1999 and the periods from
February 6, 1997 (inception) through December 31, 1997 and 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Suncos Corporation as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the years in the two-year period ended December 31, 1999 and the
periods from February 6, 1997 (inception) through December 31, 1997 and 1999, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Suncos
Corporation will continue as a going concern. As discussed in note 3 to the
financial statements, Suncos Corporation has suffered recurring losses from
operations and has a deficit accumulated during the development stage, which
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in note 3. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Seattle, Washington
January 21, 2000, except as to note 3,
which is as of November 13, 2000
3
<PAGE>
SUNCOS CORPORATION
(A Development Stage Corporation)
Balance Sheets
<TABLE>
<CAPTION>
December 31
-----------------------------------------
Assets 1999 1998
------------------- -------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,364,010 723,904
Investment securities, at market value -- 5,060,931
Interest receivable -- 43,508
------------------- -------------------
Total current assets $ 8,364,010 5,828,343
=================== ===================
Liabilities and Stockholders' Equity
Current liabilities - accrued expenses payable to related parties $ 1,930,225 3,780,574
------------------- -------------------
Stockholders' equity:
Common stock, $.0001 par value. Authorized, issued and
outstanding 9,000 shares at December 31, 1999 and
6,000 shares at December 31, 1998 1 1
Additional paid-in capital 59,999,999 29,999,999
Deficit accumulated during the development stage (53,566,215) (27,952,231)
------------------- -------------------
Total stockholders' equity 6,433,785 2,047,769
Contingency
------------------- -------------------
Total liabilities and stockholders' equity $ 8,364,010 5,828,343
=================== ===================
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
SUNCOS CORPORATION
(A Development Stage Corporation)
Statements of Operations
<TABLE>
<CAPTION>
Period from Period from
February 6, February 6,
1997 1997
(inception) (inception)
Year ended Year ended through through
December 31, December 31, December 31, December 31,
1999 1998 1997 1999
------------------- ------------------- ------------------- ------------------
<S> <C> <C> <C> <C>
Operating expenses:
Development expense - Suntory Limited $ 942,372 1,614,956 2,093,054 4,650,382
Development expense - ICOS Corporation 24,287,625 14,412,449 11,173,672 49,873,746
Administrative services - Suntory Limited 26,511 43,858 -- 70,369
Administrative services - ICOS Corporation 765,310 496,549 23,328 1,285,187
Other 22,349 26,470 596 49,415
------------------- ------------------- ------------------- ------------------
Total operating expenses 26,044,167 16,594,282 13,290,650 55,929,099
Interest income 430,183 699,302 1,233,399 2,362,884
------------------- ------------------- ------------------- ------------------
Net loss $ 25,613,984 15,894,980 12,057,251 53,566,215
=================== =================== =================== ==================
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SUNCOS CORPORATION
(A Development Stage Corporation)
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Deficit
accumulated Accumulated
Common Stock Additional during the other Total
---------------- paid-in development comprehensive stockholders'
Shares Amount capital stage income (loss) equity
------ ------- ----------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances at February 6, 1997 (inception) -- $ -- -- -- -- --
Issuance of common stock
3,000 shares for $30,000,000 cash and
3,000 shares in exchange for technology 6,000 1 29,999,999 -- -- 30,000,000
Comprehensive loss:
Net loss -- -- -- (12,057,251) -- (12,057,251)
Unrealized holding loss on investment
securities -- -- -- -- (2,041) (2,041)
-------------
Total comprehensive loss -- -- -- -- -- (12,059,292)
------ ------- ----------- ----------- --------------- -------------
Balances at December 31, 1997 6,000 1 29,999,999 (12,057,251) (2,041) 17,940,708
Comprehensive loss:
Net loss -- -- -- (15,894,980) -- (15,894,980)
Unrealized holding gain on investment
securities -- -- -- -- 2,041 2,041
-------------
Total comprehensive loss -- -- -- -- -- (15,892,939)
------ ------- ----------- ----------- --------------- -------------
Balances at December 31, 1998 6,000 1 29,999,999 (27,952,231) -- 2,047,769
Issuance of 3,000 shares of common stock
for cash 3,000 -- 30,000,000 -- -- 30,000,000
Net loss -- -- -- (25,613,984) -- (25,613,984)
------ ------- ----------- ----------- --------------- -------------
Balances at December 31, 1999 9,000 $ 1 59,999,999 (53,566,215) -- 6,433,785
====== ======= =========== =========== =============== =============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
SUNCOS CORPORATION
(A Development Stage Corporation)
Statements of Cash Flows
<TABLE>
<CAPTION>
Period from Period from
February 6, February 6,
1997 1997
(inception) (inception)
Year ended Year ended through through
December 31, December 31, December 31, December 31,
1999 1998 1997 1999
---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (25,613,984) (15,894,980) (12,057,251) (53,566,215)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization of investment premiums/discounts -- (229,476) (883,070) (1,112,546)
Change in certain assets and liabilities:
Interest receivable 43,508 (32,624) (10,884) --
Accrued expenses payable to related parties (1,850,349) 2,251,698 1,528,876 1,930,225
---------------- --------------- ---------------- ---------------
Net cash used in operating activities (27,420,825) (13,905,382) (11,422,329) (52,748,536)
---------------- --------------- ---------------- ---------------
Cash flows from investing activities:
Maturities of investment securities 17,760,931 39,557,189 12,322,000 69,640,120
Purchases of investment securities (12,700,000) (28,947,667) (26,879,907) (68,527,574)
---------------- --------------- ---------------- ---------------
Net cash provided by (used in)
investing activities 5,060,931 10,609,522 (14,557,907) 1,112,546
---------------- --------------- ---------------- ---------------
Cash provided by financing activities - proceeds from
issuance of common stock 30,000,000 -- 30,000,000 60,000,000
---------------- --------------- ---------------- ---------------
Net increase (decrease) in cash
and cash equivalents 7,640,106 (3,295,860) 4,019,764 8,364,010
Cash and cash equivalents at beginning of period 723,904 4,019,764 -- --
---------------- --------------- ---------------- ---------------
Cash and cash equivalents at end of period $ 8,364,010 723,904 4,019,764 8,364,010
================ =============== ================ ===============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
SUNCOS CORPORATION
(A Development Stage Corporation)
Notes to Financial Statements
December 31, 1999 and 1998
(1) Organization and Business Operations
Suncos Corporation (the "Company"), a corporate joint venture, is a
development stage corporation that was formed in February 1997 by ICOS
Corporation ("ICOS") and Suntory Limited of Japan ("Suntory") to develop
and commercialize Pafase/TM/ products for human therapeutic use. The
Company is managed jointly by Suntory and ICOS.
Upon formation of the Company, ICOS contributed an exclusive license for
Pafase/TM/ technology to the Company and Suntory contributed $30 million to
the Company, each in exchange for 3,000 shares of common stock. The
technology contributed to the Company by ICOS had a zero basis for
financial reporting purposes and, accordingly, the Company recorded ICOS'
initial contribution as zero. The initial $30 million cash investment was
depleted in 1999. During 1999, ICOS and Suntory each invested an additional
$15 million in the Company in exchange for 1,500 shares of common stock
each. Investment beyond the additional $15 million each is at the option of
ICOS and Suntory.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The Company's financial statements are prepared on the accrual basis
of accounting.
(b) Use of Estimates
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.
(c) Financial Instruments
The Company's financial instruments consist of cash and cash
equivalents, investment securities, interest receivable, and accrued
expenses payable to related parties. The Company's cash and cash
equivalents and investment securities are diversified among security
types and issuers, and approximate fair value. The Company's other
financial instruments are short-term and/or have little or no risk
and therefore are considered to have fair value equal to book value.
The Company does not have derivative financial instruments in its
investment portfolio.
(d) Cash and Cash Equivalents
All highly liquid short-term investments with a maturity of three
months or less at purchase are considered to be cash equivalents.
8
<PAGE>
SUNCOS CORPORATION
(A Development Stage Corporation)
Notes to Financial Statements
December 31, 1999 and 1998
(e) Investment Securities
The Company's investment securities are classified as available-for-
sale and carried at market value, with unrealized gains and losses
excluded from results of operations and reported as a component of
comprehensive income (loss) in stockholders' equity. Gross realized
gains and losses on sales of investment securities are determined
using the specific identification method and are included in results
of operations.
(f) Research and Development Costs
Research and development costs are charged to expense as incurred.
(g) Income Taxes
Income taxes are accounted for using the asset and liability method
whereby deferred tax assets and liabilities are recognized for the
future tax consequences attributed to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and loss carryforwards.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment
date. A valuation allowance is established when necessary to reduce
deferred tax assets to the amount estimated by management to be
realizable.
(h) Operating Segments
The Company's operations are confined to one operating segment, the
development and commercialization of Pafase/TM/ products for human
therapeutic use.
(3) Financing
The Company has experienced recurring losses from operations and has a
deficit accumulated during the development stage of $53,566,215 at December
31, 1999. In November, 2000 the joint venture partners agreed to contribute
to the Company $5,000,000 each in exchange for 500 shares each of the
Company's common stock.
The Company anticipates that its existing cash, including the contributions
described above, along with interest income from cash investments, will be
sufficient to fund operations into the first quarter of 2001. However, the
amounts and timing of expenditures will depend on the progress of ongoing
research and development and other factors. To continue operations, the
Company will need to obtain additional financing from the joint venture
partners or other collaborative arrangements. There can be no assurance
that such financing will be made available on satisfactory terms, if at
all. If additional funds are not available, the Company will be required to
delay, reduce, or eliminate expenditures for certain, or all, of its
research and development programs.
9
<PAGE>
SUNCOS CORPORATION
(A Development Stage Corporation)
Notes to Financial Statements
December 31, 1999 and 1998
(4) License Agreements
In February 1997, in connection with ICOS' initial capital contribution,
the Company entered into a license agreement with ICOS, under which ICOS
granted to the Company an irrevocable exclusive right and license to use
all proprietary technical information, technology and know-how, for the
development, manufacture, production and worldwide commercial sale of
Pafase/TM/ for human therapeutic use.
The Company also entered into license agreements with ICOS and Suntory to
grant each an exclusive right to manufacture and sell Pafase/TM/ products
in the United States and Japan, respectively, in exchange for royalty
payments. The Company will retain all rights to market the potential
products in territories outside the United States and Japan.
(5) Development and Supply Agreement
The Company has a Development and Supply Agreement (the "Agreement") with
ICOS and Suntory. Under the terms of the Agreement, ICOS and Suntory
conduct development work with respect to the improvement and commercial
development of the Pafase/TM/ technology. The Company pays ICOS and Suntory
actual expenses incurred by ICOS and Suntory plus a profit of 5%. The
Company incurred $25,229,997, $16,027,405 and $13,266,726 in expenses for
development work in 1999, 1998, and for the period from February 6, 1997 to
December 31, 1997, respectively. At December 31, 1999 and 1998, the Company
had payables to ICOS and Suntory for development work aggregating
$1,795,923 and $3,734,299, respectively. ICOS has agreed to supply to the
Company, for ultimate use by Suntory and the Company, sufficient amounts of
Pafase/TM/ to carry out the goals and purposes of the development program.
The Agreement terminates at the earlier of December 2011, the liquidation
of the Company or completion of the development program.
(6) Services Agreements
The Company has services agreements with ICOS and Suntory whereby both
companies have agreed to make general management support available in
connection with the daily operation of the Company and provide commercial
development, marketing research and administrative services to the Company.
ICOS and Suntory are reimbursed for a percentage of their total general and
administrative expenses calculated based on the ratio of full-time
equivalent employees assigned to Pafase/TM/ to total full-time equivalent
employees, plus a 5% profit. The Company incurred $791,821, $540,407, and
$23,328 in general and administrative expenses in 1999, 1998, and for the
period from February 6, 1997 to December 31, 1997, respectively. At
December 31, 1999 and 1998, the Company had payables to ICOS and Suntory
for these services aggregating $134,302 and $46,275, respectively.
10
<PAGE>
SUNCOS CORPORATION
(A Development Stage Corporation)
Notes to Financial Statements
December 31, 1999 and 1998
(7) Investment Securities Available-for-Sale
Investment securities available-for-sale at December 31, 1998 consisted of
Euro Deposits with a market value and an amortized cost value of
$5,060,931.
(8) Federal Income Taxes
The Company has realized no income tax benefit since its inception due to
the inability to utilize net operating loss carryforwards.
Carryforwards which give rise to deferred tax assets at December 31, 1999
and 1998 consist of the following:
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
<S> <C> <C>
Net operating loss carryforwards $ 18,212,513 9,503,759
Less valuation allowance (18,212,513) (9,503,759)
------------------- -------------------
Net deferred tax assets $ -- --
=================== ===================
</TABLE>
The increase in the valuation allowance was $8,708,754, $5,404,294 and
$4,099,465 in 1999, 1998, and for the period from February 6, 1997 to
December 31, 1997, respectively.
The Company has net operating loss carryforwards of $53,566,215 at December
31, 1999 available to offset future taxable income, which expire from 2013
to 2019.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Bothell,
State of Washington, on the 15th day of November, 2000.
ICOS CORPORATION
(Registrant)
/s/ PAUL N. CLARK
By: _____________________________________
Paul N. Clark
Chairman of the Board of Directors,
Chief Executive Officer and President
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and
appoints Paul N. Clark and Gary L. Wilcox, and each of them, with full power of
substitution and resubstitution and full power to act without the other, as his
true and lawful attorney-in-fact and agent to act in his name, place and stead
and to execute in the name and on behalf of each person, individually and in
each capacity stated below, and to file any and all amendments to this report,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing, ratifying and confirming all that said attorneys-in-fact
and agents or any of them or their or his substitute or substitutes may
lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ PAUL N. CLARK Chairman of the Board of November 14, 2000
______________________________________ Directors, Chief Executive
Paul N. Clark Officer and President
(Principal Executive
Officer)
/s/ GARY L. WILCOX Director and Executive November 14, 2000
______________________________________ Vice President, Operations
Gary L. Wilcox
/s/ THOMAS N. SWALLOW Corporate Controller November 14, 2000
______________________________________ (Principal Accounting
Thomas N. Swallow Officer)
/s/ FRANK T. CARY Director November 14, 2000
______________________________________
Frank T. Cary
/s/ ROBERT W. PANGIA Director November 14, 2000
______________________________________
Robert W. Pangia
/s/ ALEXANDER B. TROWBRIDGE Director November 14, 2000
______________________________________
Alexander B. Trowbridge
/s/ WALTER B. WRISTON Director November 14, 2000
______________________________________
Walter B. Wriston
</TABLE>
12
