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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended
September 30, 1997; or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934. For the transition period
from to .
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Commission File Number
0-23076
Sparta Pharmaceuticals, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 56-1755527
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(State of incorporation) (IRS Employer Identification No.)
111 Rock Rd. Horsham, PA 19044
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(Address of principal executive offices, including zip code)
(215) 442-1700
----------------------------------------------------
(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
As of October 22, 1997, there were outstanding 14,001,396 shares of Common
Stock, $.001 par value per share.
1
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FORM 10-Q
QUARTERLY REPORT
INDEX
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION Page No.
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<S> <C> <C>
Item 1. Financial Statements (unaudited):
Balance Sheets as of September 30, 1997 and December 31, 1996 3
Statements of Operations for the three-month periods and for the nine-month
periods ended September 30, 1997 and 1996 and for the period from
June 12, 1990 (inception) to September 30, 1997 4
Statements of Cash Flows for the nine-month periods ended September 30,
1997 and 1996 and for the period from June 12, 1990 (inception) to
September 30, 1997 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Part II. OTHER INFORMATION
Item 2. Changes in Securities 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 13
</TABLE>
2
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PART I-FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
SPARTA PHARMACEUTICALS, INC.
(A Development Stage Company)
Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1997 1996
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,998,879 $ 10,246,812
Prepaid expenses and other assets 234,555 82,751
------------ ------------
Total current assets 7,233,434 10,329,563
Fixed assets, net 380,811 518,393
Other assets:
License agreements, net of amortization
of $89,673 in 1997 and $73,303 in 1996 25,115 41,485
Restricted Cash 146,433 196,842
------------ ------------
$ 7,785,793 $ 11,086,283
============ ============
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 573,318 $ 629,497
------------ ------------
Total current liabilities 573,318 629,497
Shareholders' equity:
Preferred Stock, not designated, $.001 par value;
authorized and unissued 8,288,484 shares -- --
Series B' Convertible Preferred Stock, $.001 par value;
authorized 2,711,516 shares; issued and outstanding
1,196,991 shares in 1997 and 1,487,146 shares in 1996 1,197 1,487
Common Stock, $.001 par value; authorized 72,000,000
shares; issued and outstanding 13,230,873 shares in
1997 and 9,587,717 shares in 1996 13,231 9,588
Additional paid-in capital 28,407,266 28,176,356
Stock subscriptions receivable (133,333) (200,000)
Deferred compensation (154,088) (165,309)
Deficit accumulated during the development stage (20,921,798) (17,365,336)
------------ ------------
Total shareholders' equity 7,212,475 10,456,786
------------ ------------
$ 7,785,793 $ 11,086,283
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
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SPARTA PHARMACEUTICALS, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Period From
September 30, September 30, June 12, 1990
----------------------------------- -------------------------------- (Inception) to
September 30,
1997 1996 1997 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue:
Contract revenue $ 16,568 $ -- $ 39,074 $ -- $ 166,944
Interest income 108,071 101,197 352,161 148,781 940,553
------------ ------------ ------------ ------------ ------------
Total revenue 124,639 101,197 391,235 148,781 1,107,497
Operating expenses:
Research and development 865,011 834,199 2,844,974 1,868,201 12,026,121
General and administrative 371,785 251,737 1,102,723 1,015,945 6,940,261
Charge for acquired research
and development (Note 5) -- -- -- 3,062,913 3,062,913
------------ ------------ ------------ ------------ ------------
Net loss $ (1,112,157) $ (984,739) $ (3,556,462) $ (5,798,278) $(20,921,798)
============ ============ ============ ============ ============
Net loss per share $ (.10) $ (.12) $ (.35) $ (.76)
============ ============ ============ ============
Weighted average number
of shares outstanding (Note 3) 10,647,734 8,192,195 10,158,036 7,649,130
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
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SPARTA PHARMACEUTICALS, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months ended September 30, Period from June 12, 1990
----------------------------------- (Inception) to
1997 1996 September 30, 1997
---------------- -------------- ------------------
<S> <C> <C> <C>
Operating activities:
Net loss $ (3,556,462) $ (5,798,278) $(20,921,798)
Adjustments to reconcile net loss to net cash used in
operating activities:
Recognition of gain/loss on investments -- -- 3,316
Depreciation and amortization 162,940 117,093 887,700
Writedown of license agreement -- -- 45,200
Acquired research & development (Note 5) -- 3,062,913 3,062,913
Issuance of convertible notes for services -- -- 220,474
Issuance of stock for services 60,514 3,694 221,959
Compensation expense related to stock options and
warrants granted 104,970 27,909 384,499
Compensation expense related to forgiveness of stock
subscriptions receivable 66,667 -- 66,667
Changes in operating assets and liabilities:
Prepaid expenses and other assets (151,804) 110,853 (234,555)
Restricted cash 50,409 52,898 100,916
Accounts payable and accrued expenses (56,179) 29,989 423,318
------------ ------------ ------------
Net cash used in operating activities (3,318,945) (2,392,929) (15,739,391)
------------ ------------ ------------
Investing activities:
Payment of acquisition related fees & expenses -- (130,842) (128,842)
Purchases of available-for-sale securities -- -- (1,103,193)
Maturities of available-for-sale securities -- -- 1,099,877
Purchases of fixed assets (8,988) (11,226) (140,218)
Acquisition of license agreements -- -- (160,078)
------------ ------------ ------------
Net cash used in investing activities (8,988) (142,068) (432,454)
------------ ------------ ------------
Financing activities:
Proceeds from issuance of convertible notes and notes
payable -- -- 4,488,650
Repayment of notes payable -- -- (640,000)
Proceeds from issuance of Common Stock 80,000 2,000 4,992,031
Repurchase of Common Stock -- -- (45)
Proceeds from issuance of Preferred Stock -- 13,333,607 14,800,038
Increase in debt issuance costs -- -- (469,950)
------------ ------------ ------------
Net cash provided by financing activities 80,000 13,335,607 23,170,724
------------ ------------ ------------
Increase (Decrease) in cash and cash equivalents (3,247,933) 10,800,610 6,998,879
Cash and cash equivalents at beginning of period 10,246,812 734,296 --
------------ ------------ ------------
Cash and cash equivalents at end of period $ 6,998,879 $ 11,534,906 $ 6,998,879
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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SPARTA PHARMACEUTICALS, INC.
(A Development Stage Company)
Notes to Financial Statements
(Unaudited)
1. Company Background
Sparta Pharmaceuticals, Inc. (formerly MediRx Pharmaceuticals, Inc.) (the
"Company"), a development stage company incorporated in 1990, is engaged in the
business of acquiring rights to, and developing for commercialization,
technologies and drugs for the treatment of a number of life threatening
diseases, including cancer, cardiovascular disorders and acute inflammation.
The Company has generated no product revenues to date and has incurred
losses since its inception. The Company anticipates incurring additional losses
over at least the next several years and such losses are expected to increase as
the Company expands its research and development activities. Substantial
financing will be needed by the Company to fund its operations and to develop
its products commercially. There is no assurance that such financing will be
available when needed. Operations of the Company are subject to certain risks
and uncertainties including, among others, uncertainty of product development,
technological uncertainty, dependence on collaborative partners, uncertainty
regarding patents and proprietary rights, comprehensive government regulations,
marketing and sales capability and experience, limited clinical trial
experience, and dependence on key personnel.
2. Basis of Presentation
The accompanying unaudited interim financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
only of normal recurring accruals, considered necessary for a fair presentation,
have been included in the accompanying unaudited financial statements. For more
complete financial information, these financial statements should be read in
conjunction with the audited financial statements and notes thereto contained in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996. Results for the interim periods are not necessarily indicative of the
results for any other interim period or for the full fiscal year.
3. Net Loss Per Share of Common Stock
The net loss per share amounts are presented in accordance with Accounting
Principles Bulletin No. 15. Under this guidance, options, warrants, convertible
debt and securities and other common stock equivalents are not considered
outstanding as their effect would be anti-dilutive for both primary and fully
diluted earnings per share computations.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share", which the Company is required to adopt for both interim and annual
periods ending after December 15, 1997. SFAS No. 128 simplifies the earnings per
share ("EPS") calculation by replacing primary EPS with basic EPS. Basic EPS is
computed by dividing reported earnings available to common stockholders by the
weighted average shares outstanding. Early application is prohibited, although
footnote disclosure of pro forma EPS amounts is required. Since the Company has
incurred losses in the three months and nine months ended September 30, 1997 and
1996, there is no difference between pro forma basic EPS and the net loss per
share as reported.
6
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4. Shareholders' Equity
The Company's Series B' Convertible Preferred Stock, par value $.001 per
share ("Series B' Preferred Stock") is convertible at any time at the option of
the holder into shares of the Company's Common Stock at a conversion price of
$.75 per share, effective August 23, 1997, such that 10,000 shares of the
Company's Series B' Preferred Stock are convertible into 133,333 shares of the
Company's Common Stock. In the event of a Liquidation Event (as defined in the
Certificate of Designation relating to the Series B' Preferred Stock), the
holders of the Series B' Preferred Stock are entitled to be paid out of the
assets of the Company available for distribution to its shareholders an amount
equal to $13.00 per share, plus an amount equal to all declared and unpaid
dividends thereon, before any payment is made in respect of stock junior to the
Series B' Preferred Stock, including Common Stock. Holders of Series B'
Preferred Stock are also entitled to dividends, if any, as shall be declared on
the Company's Common Stock or on any other class of preferred stock, unless
holders of at least 66 2/3% of the outstanding Series B' Preferred Stock consent
otherwise. The Company has the option to order mandatory conversion of the
Series B' Preferred Stock into fully paid shares of Common Stock if the closing
price of the Common Stock exceeds $1.50 for 20 out of any 30 consecutive trading
days. At September 30, 1997, the outstanding Series B' Preferred Stock was
convertible into 15,959,481 shares of Common Stock. Due to the adjustment to the
conversion rate of the Series B' Preferred Stock, the number of shares of Common
Stock which can be purchased under the Placement Agent Warrants which were
issued as a result of the placement of the Series B' Preferred Stock has been
increased by 1,131,000 shares.
5. Acquisition of the Business and Assets of Lexin Pharmaceutical Corporation
On March 15, 1996, the Company acquired the business and assets, and
assumed certain liabilities of Lexin Pharmaceutical Corporation, for a payment
of 2,000,000 shares of the Company's Common Stock. The acquisition was accounted
for using the purchase method of accounting. In connection with the acquisition,
the Company performed an analysis of all identifiable assets acquired. The
Company recorded a total charge to the 1996 Statement of Operations of
$3,062,913 for acquired research and development. The development of the
technology acquired had not yet reached technological feasibility and at the
time, had no alternative future uses.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Since its inception in June 1990, the Company has been engaged in acquiring
and developing technologies and drug candidates for the treatment of cancer and
viral diseases and, through its acquisition of the assets and business of Lexin
Pharmaceutical Corporation ("Lexin"), cardiovascular disorders and acute
inflammation. Sparta has not derived revenues from the sale of any products and
expects to incur substantial operating losses for the next several years. As of
September 30, 1997, the Company's accumulated deficit was $20,921,798.
General
In September 1997, Sparta announced the appointment of Dr. Martin Rose to
the position of Vice President, Clinical and Regulatory Affairs. Dr. Rose has
broad experience in the pharmaceutical industry, most recently as Vice
President, Drug Development of Quintiles Worldwide Strategic Consulting. In
September 1997, the Company announced the award of a Phase II Small Business
Innovation Research (SBIR) Grant from the National Institute of Neurological
Disorders and Stroke (NINDS) for $750,000. This grant will fund the continuing
development of the Company's most advanced serine protease inhibitor, LEX 032,
for the treatment of reperfusion injury, and will extend over two years. In
October 1997, the Company announced that the United States Patent and Trademark
Office has granted United States Patent #5,674,708 submitted by Dr. Harvey Rubin
and colleagues of The University of Pennsylvania (Penn). The patent is entitled,
"a-1-Antichymotrypsin Analogues Having Elastase Inhibitory Activity". This is
the seventh United States patent to be granted through Sparta's collaboration
with Penn.
7
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Results of Operations
Three Months Ended September 30, 1996 and 1997
Revenue increased from $101,197 for the three months ended September 30,
1996 to $124,639 for the three months ended September 30, 1997 due primarily to
a higher level of contract revenue. The Company recorded contract revenues of
$16,568 for the three months ended September 30, 1997 related to a feasibility
study being conducted for a pharmaceutical company. Interest income increased
from $101,197 in the third quarter of 1996 to $108,071 in the third quarter of
1997 due to a higher level of funds available for investment as a result of a
private placement concluded in August 1996. Interest income is likely to
decrease in subsequent quarters unless the Company is able to secure additional
funding, as funds are consumed by the operations of the Company. The amount of
revenues may vary significantly year-to-year and quarter-to-quarter and depend
on, among other factors, the timing and amount of future financings and the
potential awarding of future grants and contracts.
Research and development expenses increased from $834,199 in the third
quarter of 1996 to $865,011 in the third quarter of 1997. This increase is
attributable to increased legal expenses, primarily for patent filings, incurred
during the third quarter of 1997, partially offset by decreased facilities
expenditures as a result of the sublease of a portion of the Company's office
facility in 1997. Subject to the availability of funding, the Company expects
research and development expenses to increase during the next several years as
product development, preclinical activity, clinical trials, and regulatory
activities increase.
General and administrative expenses increased from $251,737 in the third
quarter of 1996 to $371,785 in the third quarter of 1997. This increase is
principally due to an increase in personnel expenses and investor/public
relations.
The Company expects to incur substantial operating losses over the next
several years. The amount of net losses may vary significantly from year-to-year
and quarter-to-quarter and depend on, among other factors, the timing of
research and the progress of preclinical and clinical development programs.
Nine Months Ended September 30, 1996 and 1997
Revenue increased from $148,781 for the nine months ended September 30,
1996 to $391,235 for the nine months ended September 30, 1997 due primarily to a
higher level of interest income. Interest income increased from $148,781 for the
first nine months of 1996 to $352,161 for the first nine months of 1997 due to a
higher level of funds available for investment as a result of a private
placement concluded in August 1996. Interest income is likely to decrease in
subsequent periods unless the Company is able to secure additional funding, as
funds are consumed by the operations of the Company. The Company recorded
contract revenues of $39,074 for the nine months ended September 30, 1997
related to a feasibility study being conducted for a pharmaceutical company. The
amount of revenues may vary significantly year-to-year and quarter-to-quarter
and depend on, among other factors, the timing and amount of future financings
and the potential awarding of future grants and contracts.
Research and development expenses increased from $1,868,201 for the first
nine months of 1996 to $2,844,974 for the first nine months of 1997. This
increase is attributable to greater outside development expenditures on certain
drug candidates, increased legal expenses, primarily for patent filings, and
increased personnel and facility-related expenses resulting from the
acquisition, on March 15, 1996, of the business and assets of Lexin. Subject to
the availability of funding, the Company expects research and development
expenses to increase during the next several years as product development,
preclinical activity, clinical trials, and regulatory activities increase.
General and administrative expenses increased from $1,015,945 for the first
nine months of 1996 to $1,102,723 for the first nine months of 1997. This
increase is due to an increase in investor/public relations expenses and
increased personnel expenditures, partially offset by a decrease in financial
advisory fees and professional fees.
8
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In connection with the Lexin purchase, the Company recorded a one-time
charge to the first quarter 1996 Statement of Operations of $3,062,913 for
acquired research and development.
Liquidity and Capital Resources
The Series B' Preferred Stock is convertible at any time at the option of
the holder into shares of the Company's Common Stock at a conversion price of
$.75 per share, effective August 23, 1997, such that 10,000 shares of the
Company's Series B' Preferred Stock are convertible into 133,333 shares of the
Company's Common Stock. In the event of a Liquidation Event (as defined in the
Certificate of Designation relating to the Series B' Preferred Stock), the
holders of the Series B' Preferred Stock are entitled to be paid out of the
assets of the Company available for distribution to its stockholders an amount
equal to $13.00 per share, plus an amount equal to all declared and unpaid
dividends thereon, before any payment is made in respect of stock junior to the
Series B' Preferred Stock, including Common Stock. Holders of Series B'
Preferred Stock are also entitled to dividends, if any, as shall be declared on
the Company's Common Stock or on any other class of preferred stock, unless
holders of at least 66 2/3% of the outstanding Series B' Preferred Stock consent
otherwise. The Company has the option to order mandatory conversion of the
Series B' Preferred Stock into fully paid shares of Common Stock if the closing
price of the Common Stock exceeds $1.50 for 20 out of any 30 consecutive trading
days. At September 30, 1997, the outstanding Series B' Preferred Stock was
convertible into 15,959,481 shares of Common Stock. Due to the adjustment to the
conversion rate of the Series B' Preferred Stock, the number of shares of Common
Stock which can be purchased under the Placement Agent Warrants which were
issued as a result of the placement of the Series B' Preferred Stock has been
increased by 1,131,000 shares. Terms of the Class C Common Stock Warrants remain
unchanged.
The Company has used $15,739,391 to fund operations from inception through
September 30, 1997. The Company has financed its operations to date from the
proceeds of its initial public offering in June and July 1994, private
placements of equity and convertible debt securities and investment income. In
1997, the Company is obligated under its license agreements to make minimum
royalty payments and an annual maintenance fee in the aggregate amount of
$182,000, of which $27,000 had been paid as of October 22, 1997. Under a
collaboration and option agreement, the term of which has been extended, the
Company may have to make payments of up to $78,000 based on the fulfillment of
certain benchmarks. This agreement is denominated in a foreign currency and is
subject to the fluctuation of exchange rates.
The Company is a party to several research agreements, clinical trial
production contracts and agreements with clinical research organizations which
require future payments in cash, and under the terms of one agreement, with a
combination of cash and Common Stock. The Company anticipates making aggregate
payments of approximately $900,000 during the terms of the agreements that were
in effect as of October 22, 1997. Provided that there is adequate financing, the
amount of the Company's obligations under research agreements can be expected to
increase. In addition, the Company is a party to employment agreements with
three of its executive officers and a former executive officer as well as
certain consulting agreements which provide for aggregate annual, minimum
payments of $660,000 and $162,000, respectively, of which $173,000 is still owed
as of October 22, 1997. The Company is a party to an operating lease agreement
which will require the Company to make payments of approximately $100,000 in
1997, of which approximately $82,000 has already been paid. The agreement also
requires the Company to pay a certain amount of contingent rentals based upon
operating, maintenance, management, and repair expenses incurred by the lessor.
As of September 30, 1997, the Company had cash and cash equivalents of
$6,998,879, accounts payable and accrued expenses of $573,318, and working
capital of $6,660,116.
The Company currently anticipates that the available cash, cash
equivalents, and investments will be sufficient to fund operations through the
third quarter of 1998. However, the Company may be required to obtain additional
financing to continue operations during such period in the event of cost
overruns or unanticipated expenses. Continuing development of the Company's
product candidates is critical and will require substantial additional funds
9
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to finance such activities on an ongoing basis. The Company's future capital
requirements will depend on numerous factors, including, but not limited to,
progress in its research and development programs, including preclinical and
clinical trials, costs of filing and prosecuting patent applications and, if
necessary, enforcing issued patents or obtaining additional licenses of patents,
competing technological and market developments, the cost and timing of
regulatory approvals, the ability of the Company to establish collaborative
relationships, and the cost of establishing manufacturing, sales and marketing
capabilities. The Company has no current commitment to obtain additional funding
and is unable to state the amount or potential source of such additional funds.
Moreover, because of the Company's potential long-term capital requirements, it
may undertake additional equity offerings whenever conditions are favorable,
even if it does not have an immediate need for additional capital at that time.
There can be no assurance that the Company will be able to obtain additional
funding when needed, or that such funding, if available, will be obtainable on
reasonable terms. Any such additional funding may result in significant dilution
to existing stockholders. If adequate funds are not available, the Company may
be required to delay, reduce or eliminate research and development programs,
capital expenditures, and other operating expenses. The Company may be required
to obtain funds through arrangements with collaborative partners that may
require the Company to relinquish certain material rights to its products that
it would not otherwise relinquish.
As of February 23, 1998, continued inclusion of the Company's Common Stock
for quotation on the Nasdaq SmallCap Market will require that (i) the Company
maintain at least $2,000,000 in net tangible assets, $35,000,000 in market
capitalization, or $500,000 in net income, (ii) the minimum bid price for the
Common Stock be at least $1.00 per share, (iii) the public float consist of at
least 500,000 shares of Common Stock, valued in the aggregate at more than
$1,000,000, (iv) the Common Stock have at least two active market makers and (v)
the Common Stock be held by at least 300 holders. The Company does not currently
meet the minimum bid price requirement of $1. In the event that the Company does
not meet all of the requirements for continued listing as of February 23, 1998,
trading, if any, in the Common Stock would thereafter be conducted in the
over-the-counter market in the so-called "pink sheets" or the NASD's "Electronic
Bulletin Board", and it would be more difficult to dispose of the securities or
to obtain as favorable a price for the securities. Consequently, the liquidity
of the securities could be impaired, not only in the number of securities that
could be bought and sold at a given price, but also through delays in the timing
of transactions and reduction in security analysts' and the media's coverage of
the Company, which could result in lower prices for the securities than might
otherwise be attained and in a larger spread between the bid and asked prices
for the securities.
This quarterly report contains certain forward-looking statements within
the meaning of the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. Such statements are made based on management's current
expectations and beliefs, and actual results may vary from those currently
anticipated based upon a number of factors, including uncertainties inherent in
the drug development process, including clinical trials. The Company undertakes
no obligation to release publicly any revisions which may be made to reflect
events or circumstances after the date hereof.
10
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PART II-OTHER INFORMATION
- -------------------------
ITEM 2. Changes in Securities and Use of Proceeds
(a) On August 23, 1997, the Series B' Preferred Stock conversion ratio was
adjusted. Previously, the conversion price was $1.50 per share such that
10,000 shares of the Company's Series B' Preferred Stock were convertible
into 66,667 shares of the Company's Common Stock. The new conversion
price is $.75 per share such that 10,000 shares of the Company's Series
B' Preferred Stock are convertible into 133,333 shares of the Company's
Common Stock. At September 30, 1997, the outstanding Series B' Preferred
Stock was convertible into 15,959,481 shares of Common Stock. Due to the
adjustment to the conversion rate of the Series B' Preferred Stock, the
number of shares of Common Stock that can be purchased under the
Placement Agent Warrants which were issued in connection with the
placement of the Series B' Preferred Stock has been increased by
1,131,000 shares.
(c) The Company issued an aggregate of 35,504 shares of Common Stock on
August 25 and September 18, to CATO Holdings Corp. and the principals of
the Caplan-Taylor Group in exchange for services performed by those
companies over the course of the past year. The aggregate amount of
consideration received by the Company in the form of services rendered
was $60,514. The aforementioned Common Stock issued by the Company was
issued pursuant to section 4(2) of the Securities Act of 1933 inasmuch as
the stock was issued by the issuer in a transaction not involving a
public offering.
ITEM 5. Other Information
On August 25, 1997, Sparta issued the press release filed as Exhibit 99.18
hereto announcing that the conversion price of its outstanding Series B'
Preferred Stock into shares of Common Stock was adjusted from $1.50 per
share to $.75 per share.
On September 18, 1997, Sparta issued the press release filed as Exhibit
99.19 hereto announcing that Dr. Martin Rose has joined the Company as Vice
President, Clinical and Regulatory Affairs.
On September 22, 1997, Sparta issued the press release filed as Exhibit
99.20 hereto announcing that the Company has been awarded a Phase II Small
Business Innovation Research (SBIR) Grant by the National Institute of
Neurological Disorders and Stroke (NINDS).
On October 17, 1997, Sparta issued the press release filed as Exhibit 99.21
hereto announcing that the United States Patent and Trademark Office has
granted United States Patent #5,674,708 submitted by Dr. Harvey Rubin and
colleagues of the University of Pennsylvania.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
- ----------- -----------
10.94 -- Employment Agreement, dated September 15, 1997, between the
Registrant and Martin Rose
10.95 -- Incentive Stock Option Agreement, dated as of September 15, 1997,
between the Registrant and Martin Rose
27 -- Financial Data Schedule
99.18 -- Press Release, dated as of August 25, 1997 announcing that the
conversion price of the Registrant's outstanding Series B'
Preferred Stock into shares of Common Stock was adjusted from
$1.50 per share to $.75 per share
99.19 -- Press Release, dated as of September 18, 1997 announcing that Dr.
Martin Rose has joined the
11
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Company as Vice President, Clinical and Regulatory Affairs
99.20 -- Press Release, dated as of September 22, 1997 announcing
that the Company has been awarded a Phase 2 Small Business
Innovation Research (SBIR) Grant by the National Institute
of Neurological Disorders and Stroke (NINDS)
99.21 -- Press Release, dated as of October 17, 1997 announcing that
the United States Patent and Trademark Office has granted
United States Patent #5,674,708 submitted by Dr. Harvey
Rubin and colleagues of the University of Pennsylvania
---------------
(b) Reports on Form 8-K
The Company filed the following reports on Form 8-K during the quarter:
None.
12
<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.
Sparta Pharmaceuticals, Inc.
November 6, 1997 By: /s/ Jerry B. Hook
- ----------------- ---------------------------------
Date Jerry B. Hook, Ph.D.
President and Chief Executive Officer
(principal executive officer)
November 6, 1997 By: /s/ Ronald H. Spair
- ----------------- ---------------------------------
Date Ronald H. Spair
Sr. Vice President and Chief Financial
Officer (principal financial officer)
<PAGE>
EXHIBIT 10.94
- -------------
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated as of September
15, 1997 between Sparta Pharmaceuticals, Inc., a Delaware corporation having its
principal place of business located at 111 Rock Road, Horsham, PA 19044
(hereinafter called the "Company") and Martin Rose (hereinafter called the
"Employee").
BACKGROUND
- ----------
The Company deems it to be in its best interest to secure and retain
the services of Employee and Employee desires to work for the Company upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises and
undertakings herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
I.Term of Employment. Subject to the terms and conditions of this
Agreement, the Company hereby employs the Employee and the Employee hereby
accepts employment by the Company. The term of this Agreement shall be for a
period of one year commencing on September 15, 1997 (the "Commencement Date")
through September 14, 1998 (such period, as it may be extended, the "Employment
Period") unless sooner terminated in accordance with the provisions of Paragraph
4 of this Agreement. The Employment Period will be automatically extended on the
first anniversary of the Commencement Date for successive one-year terms unless
either the Employee or the Company shall have given written notice to the other
of a desire that such automatic extension not occur, which notice was given no
later than ninety (90) days prior to the relevant anniversary of the
Commencement Date.
II.Duties. The Employee is engaged hereunder as Vice President of
Clinical and Regulatory Affairs at the Company, reporting to the Chief Executive
Officer of the Company, and he agrees to perform the duties and services
incident to that position, or such other or further duties and services of a
similar nature as may be required of him by the Chief Executive Officer of the
Company, the Board of Directors or his or its designee, including, without
<PAGE>
limitation, (i) the development and execution of all clinical development of the
Company's products and the underlying regulatory strategy and (ii) guidance of
preclinical development of the Company's products. The principal location at
which the Employee will perform his duties hereunder will be the Company's
principal offices in Horsham, Pennsylvania, or such other locations as the
Company may designate. The Employee shall devote his full business time,
attention, energies and best efforts to the performance of his duties hereunder
and to the promotion of the business and interests of the Company and of any
corporate subsidiaries or affiliated companies.
III. Compensation and Other Benefits.
-------------------------------
A. Salary. For all services rendered by the Employee under
this Agreement, the Company agrees to pay the Employee a salary of $200,000 per
annum (the "Base Salary"), payable on the usual and customary pay days of the
Company, plus such additional compensation and bonuses as may be awarded from
time to time to the Employee at the sole discretion of the Company.
B. Fringe Benefits. During the Employment Period, the Employee
shall be entitled to participate in all of the Company's employee benefit plans,
including all health, dental and retirement programs, which are made generally
available by the Company to its executive officers.
C. Vacation. The Employee shall be entitled each year to a
vacation of twenty (20) days, during which his compensation shall continue to be
paid to him. Each vacation shall be taken by the Employee at such time or times
as agreed upon in advance by the Company and Employee.
D. Housing Expenses.
----------------
1.During the first year of the Employment Period, the
Company shall reimburse the Employee for all reasonable expenses incurred by
Employee in connection with (A) the actual cost of rental housing for the
Employee in the Horsham, Pennsylvania area and (B) travel to the Employee's home
in Bethesda, Maryland (collectively, the "Temporary Housing Costs"); provided,
however, that the Employee submit detailed vouchers and other records reasonably
required by the Company in support of the amount and nature of such expenses and
as may be required in order to permit such payments to be proper deductions to
the Company under the Internal Revenue Code and the rules and regulations
adopted pursuant thereto now or hereafter in effect (the "Reimbursement
Documentation").
<PAGE>
2. In the event the Employee decides to relocate to
the Horsham, Pennsylvania area within twenty-four (24) months from the
Commencement Date and completes such move within thirty (30) months from the
Commencement Date, the Company shall reimburse the Employee for all reasonable
expenses incurred by Employee in connection with (A) the packing, moving and
shipping of the Employee's personal belongings to the Horsham, Pennsylvania area
and (B) the real estate commission paid by the Employee upon the sale of his
Bethesda, Maryland home, minus fifty percent (50%) of the Temporary Housing
Costs paid to the Employee pursuant to subsection (d)(i) above.
E. Reimbursement of Expenses. The Company shall reimburse the
Employee for all reasonable expenses incurred by Employee in connection with his
employment hereunder; provided, however, that such expenses were incurred in
conformance with the policies of the Company, as established from time to time,
and Employee submits the Reimbursement Documentation. Payment of such
reimbursement shall be subject to receipt by the Company of Reimbursement
Documentation.
F. Equity Participation. Within thirty (30) days of the
Commencement Date, the Company shall grant to the Employee an option, under its
1991 Stock Plan (the "Plan"), to purchase up to 150,000 shares of Common Stock,
par value $.001 per share ("Common Stock") of the Company, at an exercise price
equal to the Fair Market Value (as defined in the Plan) of the Common Stock on
the date of the grant (the "Option"). The Option shall vest (i.e., become
exercisable) at the rate of twenty-five percent (25%) on each of the first four
anniversaries of the Commencement Date, provided in each case that the Employee
is employed by the Company on such anniversary, and on such terms and conditions
as are more fully contained in the Company's Plan and in the Stock Option
Agreement attached hereto as Exhibit A.
G. Taxes and Withholding. All compensation payable and other
benefits provided under this Agreement shall be subject to customary withholding
for income, F.I.C.A. and other employment taxes.
IV.Termination of Employment.
-----------------------------
A. Death of Employee. If Employee dies during the Employment
Period, this Agreement shall terminate immediately and the Company shall have no
further obligations hereunder except that the Company shall pay to Employee's
estate the balance of his accrued and unpaid Base Salary, unreimbursed expenses
pursuant to Paragraph
<PAGE>
3(e), and his unused accrued vacation time through the termination date.
B.Disability of Employee. If Employee, in the reasonable
opinion of the Company, is unable to perform his services by reason of
incapacity, either physical or mental, for a period of thirteen consecutive
weeks, or a period of thirteen weeks in one calendar year, or twenty weeks in
any two year period, the Company shall have the right to terminate Employee's
employment upon written notice to the Employee. If the Company decides to
terminate Employee's employment under this section, the Company shall have no
further obligations hereunder except that the Company shall pay to Employee the
balance of his accrued and unpaid Base Salary, unreimbursed expenses pursuant to
Paragraph 3(e), and his unused, accrued vacation time through the termination
date. If the Company decides not to terminate Employee's employment as allowed
under this section, the Company shall have the option of reducing the salary
thereafter payable to Employee by the amount of payment the Employee receives
pursuant to any disability program of the Company.
C. Termination for Cause.
---------------------
1.For purposes of this Agreement, "for cause" shall mean the following:
a)the commission by Employee of fraud, theft or
misappropriation or embezzlement of Company funds;
b)the conviction of Employee for commission of a felony;
c)the repeated and consistent failure of Employee to be
present at work, except as set forth above in connection with
Employee's disability;
d)the commission by Employee of an act of, or omission of
an act, that would constitute a material breach of this Agreement;
or
e)negligence in the performance of his duties on behalf of the
Company.
2.Employee's employment under this Agreement shall terminate immediately
upon written notice from the Company that the Company is terminating the
Employee "for cause". Upon the
<PAGE>
Company's termination of Employee "for cause", the Company shall have no further
obligations hereunder except that the Company shall be required to pay to
Employee the balance of his accrued and unpaid Base Salary, unreimbursed
expenses pursuant to Section 3(e), and his unused, accrued vacation time through
the termination date.
D. Termination Without Cause. The Company may terminate
Employee's employment under this Agreement at any time upon thirty days' prior
written notice to the Employee. In the event of a termination "without cause",
the Company shall make payment to the Employee in accordance with Paragraph 5
below.
E. Termination by Employee. Employee may terminate his
employment hereunder at any time upon not less than thirty days' prior written
notice. Upon such termination by the Employee, the Company shall have no further
obligations hereunder except that the Company shall be required to pay to
Employee the balance of his accrued and unpaid Base Salary, unreimbursed
expenses pursuant to Paragraph 3(e), and his unused, accrued vacation time
through the termination date.
V. Severance.
---------
1. In the event of the Company's termination of the
Employee "without cause", the Employee shall be entitled to receive Base Salary
in the amount and manner provided in Paragraph 3(a) hereof commencing on the
date written notice of termination is mailed to Employee and continuing for six
(6) months from the date of termination.
2. In the event of the Company's termination of the
Employee "without cause", the Company will continue to provide Employee with the
same benefits provided to Employee prior to the termination of employment
pursuant to Paragraph 3(b) for a period ending on the earlier of (A) six (6)
months from the date of termination or (B) the date on which the Employee
obtains full-time employment with any third party.
VI. Non-Competition.
---------------
A. During the Employment Period and for a period of one year
after the termination or expiration thereof, the Employee will not directly or
indirectly:
1. as an individual proprietor, partner, stockholder,
officer, employee, director, joint venturer, investor, lender, or in any other
capacity whatsoever (other than as the holder of not more than one
<PAGE>
percent (1%) of the total outstanding stock of a publicly-held company), engage
in the business of developing, producing, marketing or selling products of the
kind or type developed or being developed, produced, marketed or sold by the
Company while the Employee was employed by the Company; or
2. recruit, solicit or induce, or attempt to induce,
any employee or employees of the Company to terminate their employment with, or
otherwise cease their relationship with, the Company; or
3. solicit, divert or take away, or attempt to divert
or to take away, the business or patronage of any of the clients, customers, or
accounts, or prospective clients, customers or accounts, of the Company which
were contacted, solicited or served by the Employee while employed by the
Company.
B. If any restriction set forth in this Section 6 is found by
any court of competent jurisdiction to be unenforceable because it extends for
too long a period of time or over too great a range of activities or in too
broad a geographic area, it shall be interpreted to extend only over the maximum
period of time, range of activities or geographic area as to which it may be
enforceable.
C. The restrictions contained in this Section 6 are necessary
for the protection of the business and goodwill of the Company and are
considered by the Employee to be reasonable for such purpose. The Employee
agrees that any breach of this Section 6 will cause the Company substantial and
irrevocable damage and, therefore, in the event of any such breach, in addition
to such other remedies which may be available, the Company shall have the right
to seek specific performance and injunctive relief.
VII. Confidential Information.
------------------------
7.1. Proprietary Information.
-----------------------
A. Employee agrees that all information and know-how, whether
or not in writing, of a private, secret or confidential nature concerning the
Company's business or financial affairs (collectively, "Proprietary
Information") is and shall be the exclusive property of the Company. By way of
illustration, but not limitation, Proprietary Information may include
inventions, compounds, projects, developments, plans, research data, clinical
data, financial data, personnel data, computer programs, and customer and
supplier lists. Employee will not disclose any Proprietary Information to others
outside the Company or use the same for any unauthorized purposes without
written approval by an officer of the Company, either during or after his
employment, unless
<PAGE>
and until such Proprietary Information has become public knowledge without
fault by the Employee.
B.Employee agrees that all files, letters, memoranda, reports,
records, data, sketches, drawings, laboratory notebooks, program listings, or
other written, photographic, or other tangible material containing Proprietary
Information, whether created by the Employee or others, which shall come into
his custody or possession, shall be and are the exclusive property of the
Company to be used by the Employee only in the performance of his duties for the
Company.
C.Employee agrees that his obligation not to disclose or use
information, know-how and records of the types set forth in paragraphs (a) and
(b) above also extends to such types of information, know-how, records and
tangible property of customers of the Company or suppliers to the Company or
other third parties who may have disclosed or entrusted the same to the Company
or to the Employee in the course of the Company's business.
7.2. Developments.
------------
(a) Employee will make full and prompt disclosure to
the Company of all inventions, improvements, discoveries, methods, developments,
software, and works of authorship, whether patentable or not, which are created,
made, conceived or reduced to practice by the Employee or under his direction or
jointly with others during his employment by the Company, whether or not during
normal working hours or on the premises of the Company (all of which are
collectively referred to in this Agreement as "Developments").
(b) Employee agrees to assign and does hereby assign
to the Company (or any person or entity designated by the Company) all his
right, title and interest in and to all Developments and all related patents,
patent applications, copyrights, copyright applications, trade names,
trademarks, servicemarks and trademark and servicemark applications.
(c) Employee agrees to cooperate fully with the
Company, both during and after his employment with the Company, with respect to
the procurement, maintenance and enforcement of copyrights, trademarks, trade
names and patents (both in the United States and foreign countries) relating to
Developments. Employee shall sign all papers, including, without limitation,
copyright applications, patent applications,
<PAGE>
trademark applications, trade name applications, declarations, oaths, formal
assignments, assignment of priority rights, and powers of attorney, which the
Company may deem necessary or desirable in order to protect its rights and
interests in any Development.
7.3. Other Agreements. Employee hereby represents that he is
not bound by the terms of any agreement with any previous employer or other
party to refrain from using or disclosing any trade secret or confidential or
proprietary information in the course of his employment with the Company or to
refrain from competing, directly or indirectly, with the business of such
previous employer or any other party. Employee further represents that his
performance of all the terms of this Agreement and as an employee of the Company
does not and will not breach any agreement to keep in confidence proprietary
information, knowledge or data acquired by him in confidence or in trust prior
to his employment with the Company.
I. Severability. The terms of this Agreement and each Paragraph thereof
shall be considered severable and the invalidity or unenforceability of any part
thereof shall not affect the validity or enforceability of the remaining
portions or provisions hereof.
II. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient, if in writing and delivered by registered or
certified mail or overnight delivery service, to his residence, in the case of
the Employee or to its principal office in the case of the Company.
III. Assignment. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and be binding upon its successors and
assigns. Neither this Agreement nor any rights or interests herein or created
hereby may be assigned or otherwise transferred voluntarily or involuntarily by
the Employee.
IV. Waiver. The waiver by the Company or Employee of a breach of any
provision of this Agreement by the other shall not operate or be construed as a
waiver of any subsequent breach.
V. Applicable Law. This Agreement shall be interpreted and construed
under the laws of the Commonwealth of Pennsylvania.
13. CONSENT TO JURISDICTION. THE EMPLOYEE IRREVOCABLY SUBMITS AND
CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF A STATE OR FEDERAL COURT SITTING
IN PENNSYLVANIA OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, AND EMPLOYEE HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF
ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH PENNSYLVANIA
STATE OR FEDERAL COURT. THE EMPLOYEE WAIVES, TO THE EXTENT HE
<PAGE>
MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE
OF SUCH ACTION OR PROCEEDING.
14. Entire Agreement. This instrument contains the entire agreement of
the parties with respect to the subject matter hereof and supersedes all prior
or contemporaneous agreements with respect to such subject matter. It may not be
changed or altered, except by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SPARTA PHARMACEUTICALS, INC.
By: /s/ Jerry B. Hook
--------------------------
Name: Jerry B. Hook, Ph.D.
Title: President
/s/ Martin Rose
--------------------------
Martin Rose, M.D., J.D.
<PAGE>
EXHIBIT 10.95
- -------------
SPARTA PHARMACEUTICALS, INC.
STOCK OPTION AGREEMENT
This certifies that, pursuant to the Sparta Pharmaceuticals, Inc. 1991
Stock Plan, as amended, the Board of Directors of Sparta Pharmaceuticals, Inc.
has granted an option to purchase shares of Common Stock of Sparta
Pharmaceuticals, Inc., as follows:
Name and Address
of Optionee: Martin Rose, M.D., J.D.
6709 Kenhill Road
Bethesda, MD 20817
Position of
Optionee: Vice President of Clinical & Regulatory
Affairs
Type of Option: Incentive Stock Option
Number of shares
subject to Option: 150,000 Shares of Common Stock
Exercise Price: $.625 per share of Common Stock
Date of Grant: September 15, 1997
Expiration Date: September 15, 2007
<PAGE>
Vesting Schedule:
Options for 37,500 shares exercisable on or after 9/15/98
Options for 75,000 shares exercisable on or after 9/15/99
Options for 112,500 shares exercisable on or after 9/15/00
Options for 150,000 shares exercisable on or after 9/15/01
Exercise Following Termination:
If Optionee ceases to be an Employee before this Option is
exercised in full, the Option may be exercised as follows:
(a) If Optionee's termination is for "cause" (as
defined in the Plan), the Option shall be
forfeited immediately.
(b) If Optionee's termination is a result of
Disability or death, Optionee (or his
Survivors) may exercise, for a period of one
year after such date or until the expiration
of the Option, whichever is earlier, any
portion of the Option that was exercisable
on the date of his termination and a pro
rata portion of the Options that would have
become exercisable on the next anniversary
of the date of grant (based on the number of
days that elapsed during the period prior to
the date of his termination).
(c) If Optionee's termination is not a result of
Disability or death or for "cause", Optionee
may exercise, for a period of three months
after the date of termination or until the
expiration of the Option, whichever is
earlier, any portion of the Option that was
exercisable on the date of his termination.
If Optionee dies during such three-month
period, his Survivors may exercise such
portion of the Option within one year after
Optionee's death or until the expiration of
the Option, whichever is earlier.
<PAGE>
The option is subject to all the terms and conditions of the
aforementioned Plan, a copy of which is attached to this certificate which
contains provisions covering the treatment of Options in a number of
contingencies such as stock splits and mergers and sales of the Company.
Provisions in the Plan for adjustment with respect to stock subject to Options
and the related provisions with respect to successors to the business of the
Company are hereby made applicable hereunder and are incorporated herein by
reference. Terms used herein shall have the meanings set forth in the Plan.
Notwithstanding the foregoing, in the event of a "Change of Control" (as defined
below) while the Optionee is an employee of the Company, the Optionee shall be
entitled to exercise this Option, commencing as of immediately prior to the
consummation of such Change of Control (but subject to the consummation of such
Change of Control) and in the event of a Change of Control as a result of a
tender offer, this Option shall become fully exercisable in a timely manner such
that the Optionee may participate in such tender offer at any stage, for all of
the Shares then remaining subject to purchase under such Option whether or not
the right to purchase such Shares shall have become vested and become
exercisable.
A "Change of Control" shall be deemed to have occurred upon the
occurrence of any of the following:
(i) any sale, lease, exchange or other transfer (in one transaction or
a series of transactions contemplated or arranged by any party as a single plan)
of all or substantially all of the assets of the Company;
(ii) individuals who, as of September 15, 1997, constitute the entire
Board of Directors of the Company (the "Incumbent Directors") cease for any
reason to constitute at least 50% of the Board of Directors (hereinafter
referred to as a "Board Change"), provided that any individual becoming a
director subsequent to September 15, 1997 whose election or nomination for
election was approved by a vote of at least a majority of the then Incumbent
Directors shall be, for purposes of provision, considered as though such
individual were an Incumbent Director; or
(iii) any consolidation or merger of the Company (including, without
limitation, a triangular merger) where the shareholders of the Company,
immediately prior to the consolidation or merger, would not, immediately after
the consolidation or merger, beneficially own, directly or indirectly, Shares
representing in the aggregate more than 50% of the combined voting power of all
the outstanding securities of the Company issuing cash or securities in the
consolidation or merger (or of its ultimate parent Company, if any); or
(iv) any "person," as such term is used in Section 13(d) of the
Securities Exchange Act of 1934, as amended (or any successor provision) (the
"Exchange Act") (other than the Company, any employee benefit plan of the
Company or any entity
<PAGE>
organized, appointed or established by the Company for or pursuant to the terms
of any such plan), together with all "affiliates" and "associates" (as such
terms are defined in Rule 12b-2 under the Exchange Act or any successor
provision) of such person, shall become the "beneficial owner" or "beneficial
owners" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act or any
successor provision), directly or indirectly, of securities of the Company
representing in the aggregate thirty percent (30%) or more of either (a) the
then outstanding shares of Common Stock of the Company or (b) the combined
voting power of all then outstanding securities of the Company having the right
under ordinary circumstances to vote in an election of the Board of Directors of
the Company ("Voting Securities") (hereafter referred to as an "Acquisition");
provided, that, notwithstanding the foregoing, an Acquisition shall not be
deemed to have occurred for purposes of this clause (iv) (1) solely as the
result of an acquisition of securities by the Company which, by reducing the
number of shares of Common Stock or other Voting Securities outstanding,
increases (x) the proportionate number of shares of Common Stock beneficially
owned by any person to thirty percent (30%) or more of the Common Stock then
outstanding or (y) the proportionate voting power represented by the Voting
Securities beneficially owned by any person to thirty percent (30%) or more of
the combined voting power of all then outstanding Voting Securities or (2)
solely as the result of an acquisition of securities from the Company; except
that if any person referred to in clause (1)(x) or (1)(y) of this sentence or to
which clause (2) of this sentence is applicable shall thereafter become the
beneficial owner of any additional shares of Common Stock or other Voting
Securities (other than pursuant to a stock split, stock dividend or similar
transaction or a transaction to which clause (2) applies), then an Acquisition
shall be deemed to have occurred for purposes of this clause (iv).
<PAGE>
The undersigned Optionee acknowledges receipt of a copy of the Plan and
agrees to be bound by the terms and conditions of the option set forth in the
Plan and in this Stock Option Agreement.
Date: September 15, 1997 SPARTA PHARMACEUTICALS, INC.
/s/ Jerry B. Hook
-------------------------------
By: Jerry B. Hook, Ph.D.
Title: President & CEO
/s/ Martin Rose
-------------------------------
Martin Rose, M.D., J.D.
<PAGE>
EXHIBIT 99.18
- -------------
Contact: Jerry B. Hook, Ph.D. Ronald H. Spair
President & CEO Chief Financial Officer
Sparta Pharmaceuticals, Inc. Sparta Pharmaceuticals, Inc.
(215) 442-1700, ext. 205 (215) 442-1700, ext. 207
FOR IMMEDIATE RELEASE
Sparta Pharmaceuticals Reports Change in Conversion Price of its Series B'
--------------------------------------------------------------------------
Convertible Preferred Stock
---------------------------
Horsham, PA, August 25, 1997, Sparta Pharmaceuticals, Inc. (Nasdaq:
SPTA, SPTAU, SPTAW, SPTAZ and SPTAL) announced today that the conversion price
of its outstanding Series B' Convertible Preferred Stock into shares of Common
Stock has been adjusted from $1.50 per share to $.75 per share. This adjustment
is made pursuant to the terms of the financing concluded in August 1996 and is
effective for conversions of Series B' Convertible Preferred Stock initiated
subsequent to August 23, 1997.
Sparta is a development stage pharmaceutical company engaged in the
business of acquiring rights to, and developing for commercialization,
technologies and drugs for the treatment of a number of life threatening
diseases including cancer, cardiovascular disorders and inflammation. The
Company has focused on acquiring compounds that have been previously tested in
humans and animals and technologies that may improve the delivery or targeting
of previously tested, and in some cases marketed, anticancer agents. Sparta's
foundation in cancer chemotherapy has been augmented by the addition of new
technology in the rapidly expanding field of serine protease inhibitors. Serine
protease inhibitors have wide applications in diverse fields such as
inflammation, reperfusion injury and stroke.
# # #
<PAGE>
EXHIBIT 99.19
Contact: Jerry B. Hook, Ph.D.
President & CEO
Sparta Pharmaceuticals, Inc.
(215) 442-1700, ext. 205
FOR IMMEDIATE RELEASE
Sparta Pharmaceuticals, Inc. Announces The Appointment of Dr. Martin Rose to
----------------------------------------------------------------------------
Vice President, Clinical and Regulatory Affairs
-----------------------------------------------
Horsham, PA, September 18, 1997 -- Sparta Pharmaceuticals, Inc.
(Nasdaq: SPTA, SPTAU, SPTAW, SPTAZ and SPTAL) announced today that Dr. Martin
Rose has joined the Company as Vice President, Clinical and Regulatory Affairs.
Dr. Jerry B. Hook, Sparta's President and Chief Executive Officer, commented,
"Sparta's team is greatly enhanced with the addition of Dr. Rose as Vice
President of Clinical and Regulatory Affairs. The multi-faceted background which
he brings to the Company will be invaluable as our clinical trials progress."
Dr. Rose has broad and in-depth experience in the pharmaceutical industry, most
recently as Vice President, Drug Development of Quintiles Worldwide Strategic
Consulting. Previously, he was with Alpha 1 Biomedicals, Inc. where he was
Senior Vice President, Clinical and Regulatory Affairs. Dr. Rose was also Senior
Director, Government Affairs for Genentech, Inc. Prior to these positions, he
was Group Leader for the Division of Cardio-Renal Drug Products in the Food and
Drug Administration. Along with his professional experience, Dr. Rose has been
associated with many trade and professional societies including: the American
Society for Clinical Pharmacology and Therapeutics (for which he Chaired the
Section on Clinical Pharmaceutical Development and Regulatory Affairs), the PMA
User Fee Task Force, the Institute of Medicine Study on the Use of Advisory
Committees by the FDA, the BIO Drug Regulatory Committee (he held the position
of Chairman for three years) and several FDLI Annual Meeting Planning
Committees.
Dr. Rose obtained his undergraduate degree as well as his MD from the University
of California School of Medicine, San Francisco. He earned the degree of Juris
Doctor from the University of California School of Law at Berkeley.
Sparta is a development stage pharmaceutical company engaged in the business of
acquiring rights to, and developing for commercialization, technologies and
drugs for the treatment of a number of life threatening diseases including
cancer, cardiovascular disorders and inflammation. The Company has focused on
acquiring compounds that have been previously tested in humans and animals and
technologies that may improve the delivery or targeting of previously tested,
and in some cases marketed, anticancer agents. Sparta's foundation in cancer
chemotherapy has been augmented by the addition of new technology in the rapidly
expanding field of serine protease inhibitors. Serine protease inhibitors have
wide applications in diverse fields such as inflammation, reperfusion injury and
stroke.
<PAGE>
EXHIBIT 99.20
- -------------
Contact: Jerry B. Hook, Ph.D.
President & CEO
Sparta Pharmaceuticals, Inc.
(215) 442-1700, ext. 205
FOR IMMEDIATE RELEASE
Sparta Pharmaceuticals, Inc. Announces Award of $750,000
--------------------------------------------------------
Horsham, PA, September 22, 1997 -- Sparta Pharmaceuticals, Inc.
(Nasdaq: SPTA, SPTAU, SPTAW, SPTAZ and SPTAL) announced today that the Company
has been awarded a Phase 2 Small Business Innovation Research (SBIR) Grant by
the National Institute of Neurological Disorders and Stroke (NINDS).
This $750,000 grant will be received over two years. The grant entitled "A Novel
Recombinant Serpin for the Treatment of Stroke" will provide funds for the
continued development of the Company's most advanced serine protease inhibitor,
LEX 032, for the treatment of reperfusion injury. LEX 032 has the potential of
benefitting stroke patients after treatment with a thrombolytic agent such as
tPA and other acute life threatening inflammatory conditions such as ARDS and
traumatic injury. The specific goals of the grant are to scale-up manufacturing,
develop additional preclinical efficacy data and complete initial toxicology
studies.
Dr. Jerry B. Hook, Sparta's President and Chief Executive Officer, said
"Receiving this grant is a major event for the Company. The award provides
resources for the development of this promising asset and also provides peer
review validation of the science underpinning this compound."
Sparta is a development stage pharmaceutical company engaged in the business of
acquiring rights to, and developing for commercialization, technologies and
drugs for the treatment of a number of life threatening diseases including
cancer, cardiovascular disorders and inflammation. The Company has focused on
acquiring compounds that have been previously tested in humans and animals and
technologies that may improve the delivery or targeting of previously tested,
and in some cases marketed, anticancer agents. Sparta's foundation in cancer
chemotherapy has been augmented by the addition of new technology in the rapidly
expanding field of serine protease inhibitors. Serine protease inhibitors have
wide applications in diverse fields such as inflammation, reperfusion injury and
stroke.
# # #
<PAGE>
EXHIBIT 99.21
- -------------
Contact: Jerry B. Hook, Ph.D.
President & Chief Executive Officer
Sparta Pharmaceuticals, Inc.
(215) 442-1700, Ext. 205
FOR IMMEDIATE RELEASE
Sparta Pharmaceuticals, Inc. Announces Patent Approval From The United States
-----------------------------------------------------------------------------
Patent and Trademark Office
---------------------------
Horsham, PA, October 17, 1997, Sparta Pharmaceuticals, Inc. (NASDAQ:
SPTA, SPTAU, SPTAW, SPTAZ AND SPTAL) announced that the United States Patent and
Trademark Office has granted United States Patent #5,674,708 submitted by Dr.
Harvey Rubin and colleagues of The University of Pennsylvania (Penn). The patent
is entitled, "[alpha]-1- Antichymotrypsin Analogues Having Elastase Inhibitory
Activity". This is the seventh United States patent to be granted through
Sparta's collaboration with Penn.
Through a Sparta-funded grant, Dr. Rubin, who is a scientific advisor to the
Company, has created a new class of recombinant modified human proteins that are
specific serine protease inhibitors. The lead compound of this series, LEX 032,
functions to inhibit acute, life-threatening inflammation. Sparta believes this
product may have utility in acute pulmonary inflammation and reperfusion injury
such as thrombo-embolic stroke. The Company was recently awarded a Phase II SBIR
grant to support more detailed investigations with this compound in stroke.
According to Dr. Jerry B. Hook, Sparta's President and Chief Executive Officer,
"The issuance of this patent further strengthens our portfolio of compounds in
this promising area of therapeutics."
The Company believes this recombinant serine protease inhibitor program has the
potential to be successful in treating serious conditions where uncontrolled
inflammatory responses may have fatal consequences including cardiovascular
disorders, stroke, lung inflammation and pancreatitis. The Company has an
exclusive license to over sixty compounds covered in the seven U.S. patents
issued to Penn; international patents are pending.
This press release contains certain forward-looking statements within the
meaning of the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. Such statements are made based on management's current
expectations and beliefs, and actual results may vary from those currently
anticipated based upon a number of factors, including uncertainties inherent in
the drug development process, including clinical trials. The Company undertakes
no obligation to release publicly any revisions which may be made to reflect
events or circumstances after the date hereof.
Sparta is a development stage pharmaceutical company engaged in the business of
acquiring rights to, and developing for commercialization, technologies and
drugs for the treatment of a number of life threatening diseases including
cancer, cardiovascular disorders and inflammation. The Company has focused on
acquiring compounds that have been previously tested in humans and
<PAGE>
animals and technologies that may improve the delivery or targeting of
previously tested, and in some cases marketed, anticancer agents. Sparta's
foundation in cancer chemotherapy has been augmented by the addition of new
technology in the rapidly expanding field of serine protease inhibitors. Serine
protease inhibitors have wide applications in diverse fields such as
inflammation, reperfusion injury and stroke.
# # #
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED IN THE COMPANY'S SEPTEMBER 30, 1997 REPORT ON
FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
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