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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-QSB
(MARK ONE)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 0-27578
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SUNPHARM CORPORATION
(Exact name of small business issuer as specified in its charter)
DELAWARE F593097048
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4651 SALISBURY ROAD, SUITE 205
JACKSONVILLE, FLORIDA 32256
(Address of principal executive offices)
ISSUER'S TELEPHONE NUMBER: (904) 296-3320
-------------------------
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes /X/ No / /
Number of shares of the issuer's Common Stock outstanding as of June 30,
1997: 5,672,471
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STATEMENT REGARDING FORWARD-LOOKING INFORMATION
The Quarterly Report on Form 10-QSB contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Actual results could differ materially
from those projected in the forward-looking statements as a result of a number
of important factors. For a discussion of important factors that could affect
the Company's results, please refer to the discussions below, and to the
discussions in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996 under the caption "Item 1. Business - Risk Factors."
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and notes disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to these rules and regulations. However, the Company
believes that the disclosures made herein are adequate, and accordingly, the
Company believes the information presented is not misleading. These financial
statements should be read in conjunction with the financial statements for the
year ended December 31, 1996 included in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1996, filed pursuant to the Securities
Exchange Act of 1934.
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SUNPHARM CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
DECEMBER 31,
1996 JUNE 30, 1997
------------- -------------
ASSETS
<S> <C> <C>
Current assets:
Cash ............................................... $ 341,145 $ 450,680
Short term investments ............................. 1,795,312 5,926,331
Receivables......................................... 500,000 --
Other current assets ............................... 112,066 141,443
------------ ------------
Total current assets ........................... 2,748,523 6,518,454
Receivables from shareholder ......................... 10,000 127,529
Other assets-long term ............................... 12,437 15,559
------------ ------------
$ 2,770,960 $ 6,661,542
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................... $ 323,451 $ 254,665
Accrued liabilities................................. 869,245 436,544
Accrued legal fees ................................. -- --
Notes payable....................................... 112,201 37,900
------------ ------------
Total current liabilities...................... 1,304,897 729,109
------------ ------------
Stockholders' equity:
Undesignated Preferred Stock, par value $.0001 per
share; 2,500,000 shares authorized, none issued
and outstanding................................... -- --
Common stock, par value $.0001 per share;
25,000,000 shares authorized, 3,708,879 and
5,672,471 shares issued and outstanding,
respectively..................................... 371 567
Additional paid-in-capital ......................... 13,062,321 19,395,614
Accumulated deficit during the development stage ... (11,596,629) (13,463,748)
------------ ------------
Total stockholders' equity...................... 1,466,063 5,932,433
------------ ------------
$ 2,770,960 $ 6,661,542
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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SUNPHARM CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED
JUNE 30,
--------------------------
1996 1997
---------- ----------
Revenues:
Sponsored research/sublicensing revenue.... $ 500,000 $ --
Interest income............................ 8,692 94,968
---------- ----------
Total revenues......................... 508,692 94,968
---------- ----------
Expenses:
Research and development .................. 361,736 600,424
General and administrative ................ 674,703 441,120
Royalty expense............................ -- --
---------- ----------
Total expenses......................... 1,036,439 1,041,544
---------- ----------
Net loss..................................... $ (527,747) $ (946,576)
---------- ----------
---------- ----------
Net loss per share .......................... $ (0.18) $ (0.17)
---------- ----------
---------- ----------
Shares used in computing loss per share...... 2,890,579 5,615,212
---------- ----------
---------- ----------
The accompanying notes are an integral part of these financial statements.
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SUNPHARM CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
FOR THE SIX MONTHS ENDED
JUNE 30, FOR THE PERIOD
-------------------------- FROM INCEPTION
THROUGH
1996 1997 JUNE 30, 1997
----------- ----------- --------------
<S> <C> <C> <C>
Revenues:
Sponsored research/sublicensing revenue... $ 500,000 $ -- $ 2,885,000
Interest income........................... 25,776 119,505 354,767
----------- ----------- ------------
Total revenues........................ 525,776 119,505 3,239,767
----------- ----------- ------------
Expenses:
Research and development ................. 699,391 1,139,376 8,708,407
General and administrative ............... 1,007,596 847,248 7,505,108
Royalty expense........................... -- -- 490,000
----------- ----------- ------------
Total expenses........................ 1,706,987 1,986,624 16,703,515
----------- ----------- ------------
Net loss.................................... $(1,181,211) $(1,867,119) $(13,463,748)
----------- ----------- ------------
----------- ----------- ------------
Net loss per share ......................... $ (0.41) $ (0.40)
----------- -----------
----------- -----------
Shares used in computing loss per share..... 2,887,557 4,697,614
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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SUNPHARM CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
REDEEMABLE CONVERTIBLE
PREFERRED STOCK DEFICIT
---------------------- ACCUMULATED
SERIES A SERIES B COMMON STOCK ADDITIONAL DURING
--------------- --------------- ------------------- PAID-IN DEFERRED DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION STAGE
------ ------ ------ ------ --------- ------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 -- -- -- -- 3,708,879 $ 371 $13,062,321 -- $(11,596,629)
Issuance of Common Stock -- -- -- -- 1,893,286 189 6,330,061 -- --
Exercise of Options -- -- -- -- 70,936 7 3,232 -- --
Net Loss -- -- -- -- -- -- -- -- (1,867,119)
------ ------ ------ ------ --------- ------ ----------- ------------ ------------
Balance, June 30, 1997 -- -- -- -- 5,673,101 $ 567 $19,395,614 -- $(13,463,748)
------ ------ ------ ------ ---------- ------- ------------ ------------ -------------
------ ------ ------ ------ ---------- ------- ------------ ------------ -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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SUNPHARM CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
FOR THE SIX MONTHS ENDED FOR THE PERIOD
JUNE 30, FROM INCEPTION
--------------------------- (MAY 3, 1990)
THROUGH
1996 1997 JUNE 30, 1997
------------ ------------ --------------
<S> <C> <C> <C>
Cash flows from Operating Activities:
Net Loss............................................. $ (1,181,211) $ (1,867,119) $(13,463,748)
Adjustments to reconcile net loss to net
cash used in operating activities -
Depreciation and Amortization ..................... 1,800 1,800 73,506
Expense related to issuance of
stock for services .............................. -- -- 43,750
Compensation expense related to operations,
warrants and stock appreciation rights........... -- -- 865,246
Amortization of deferred offering costs incurred in
connection with issuance of Bridge Notes......... -- -- 775,000
Write-off patents.................................... -- -- 70,120
(Increase) Decrease in receivable from Stockholder... 3,114 (117,529) (127,529)
Decrease (increase) in prepaid expenses and
other assets ...................................... (392,330) 470,623 (143,084)
Increase (decrease) in Accounts Payable.............. 412,712 (68,786) 254,665
Increase (decrease) in accrued liabilities .......... 12,524 (432,701) 442,794
Increase (decrease) in accrued liabilities .......... 73,000 -- 300,000
------------ ------------ -----------
Total Adjustments ............................... 110,820 (146,593) 2,554,468
------------ ------------ -----------
Net cash used in operating activities.................. (1,070,391) (2,013,712) (10,909,280)
------------ ------------ -----------
Cash flows from investing activities:
Purchases of Short Term investments.................. -- (5,808,774) (10,928,148)
Sales & Maturities of short-term investments ........ 1,290,464 1,677,755 5,001,817
Purchases of Office Equipment........................ (416) (4,922) (22,120)
Payment of patent costs.............................. -- -- (67,424)
------------ ------------ -----------
Net cash (used in) provided by investing activities.... 1,290,048 (4,135,941) (6,015,875)
------------ ------------ -----------
Cash flows from financing activities:
Repayments of notes payable.......................... (48,131) (74,301) (62,100)
Increase in deferred offering costs.................. -- -- (597,348)
Issuance of Series A preferred ...................... -- -- 513,525
Issuance of Series B preferred ...................... -- -- 450,000
Issuance of Common Stock ............................ -- 6,333,489 17,071,758
Proceeds from payable to stockholders................ -- -- 542,500
Repayment of payable to stockholders ................ -- -- (542,500)
------------ ------------ -----------
Net cash (used in) provided by financing activities.... (48,131) 6,259,188 17,375,835
------------ ------------ -----------
Net change in cash .................................... 171,526 109,535 450,680
Cash at beginning of period.......................... 331,069 341,145 --
------------ ------------ -----------
Cash at end of period................................ $ 502,595 $ 450,680 $ 450,680
------------ ------------ -----------
------------ ------------ -----------
Supplemental Information:
Cash Paid for Interest ................................ $ 2,349 $ 2,174 $ 167,114
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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SUNPHARM CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The balance sheet at June 30, 1997 and the related statements of operations
for the six month periods ended June 30, 1997 and 1996 and the period from
inception (May 3, 1990) through June 30, 1997 and statements of cash flows for
the six month periods ended June 30, 1997 and 1996 and the period from inception
(May 3, 1990) through June 30, 1997 are unaudited. These interim financial
statements should be read in conjunction with the December 31, 1996 financial
statements and related footnotes included in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1996. The unaudited interim financial
statements reflect all adjustments which are, in the opinion of management,
necessary for a fair statement of results for the interim periods presented and
all such adjustments are of a normal recurring nature. Interim results are not
necessarily indicative of results for a full year.
NET LOSS PER SHARE
Net loss per share is computed based on the weighted average shares of
common stock outstanding for the period.
PATENT COSTS
The Company reimburses the University of Florida Research Foundation, Inc.
(UFRFI) for direct expenses relating to the Company's patents. Patent costs
consist of legal fees and other direct costs incurred in obtaining patents.
These costs are charged to research and development expense or general and
administrative expense when incurred.
RESEARCH AND DEVELOPMENT
Sponsored research revenue is recognized as revenue when the payments are
earned or received and the research has been performed. Research and
development expenses are charged to operations when incurred. Research and
development expenses include, among other things, consulting fees and cost
reimbursements to UFRFI.
NEW ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No.128, "Earnings Per Share" ("SFAS 128").
SFAS 128 simplifies the standards for computing earnings per share previously
found in Accounting Principles Board Opinion No.15, "Earnings Per Share" ("APB
15"), and makes them comparable to international earnings per share standards.
It replaces the presentation of primary earnings per share (EPS) with a
presentation of basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures. Basic EPS excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average number of common
shares outstanding for the period.
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SUNPHARM CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
Diluted EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common
stock or otherwise resulted in issuance of common stock that then shared in
earnings, similar to fully diluted EPS as computed by APB 15.
The accounting and disclosure requirements of SFAS 128 are required for the
Company's year ending December 31, 1997; however; its impact on operating
results when initially adopted is expected to be immaterial.
2. SALE OF UNITS
On March 28, 1997, the Company completed the private placement of 1,828,286
units ("Units") pursuant to Rule 506 under and Section 4(2) of the Securities
Act of 1933 for $3.50 per Unit. Each Unit consists of one share of the
Company's common stock and one redeemable Common Stock Purchase Warrant
("Warrant"). The Warrants included in these units expire five years from the
date of issuance. In case of a "cashless exercise," the Warrants shall have an
exercise price of $4.00 per share plus forty percent of the difference between
the current trading price of the Company's common stock and $4.00; in all other
cases, the Warrants shall have an exercise price of $4.00 per share plus thirty
percent of the difference between the current trading price of the Company's
common stock and $4.00. The Warrants are subject to redemption at the exercise
price by the Company, provided the Company's common stock closes at a price of
$16.00, $20.00, $24.00, or $28.00 per share for twenty consecutive days during
the second, third, fourth or fifth years, respectively, of the term of the
Warrant. Proceeds from the private placement were $6,116,500, net of placement
agent and other offering costs of $282,500. During the three months ended
June 30, 1997, the Company issued 60,000 additional Units. Through the
issuance, the Company raised an additional $186,000, net of placement agent
costs of $24,000.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
Since its inception in May 1990, SunPharm has devoted substantially all of
its efforts and resources to research and development conducted on its own
behalf and through collaborations with clinical institutions. The Company's
drug development strategy emphasizes conducting most of its research and
clinical activities at the University of Florida. Consequently, the Company
believes that its research and development expenditures have been lower than
other comparable development stage pharmaceutical companies. The Company has
incurred cumulative net losses of $13,463,748 from its inception through
June 30, 1997. The Company expects to incur additional significant operating
losses for at least the next several years principally as a result of its
continuing anticipated research and development and clinical trial expenditures.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 AND 1997
The Comany recorded licensing revenues during the three months ended
June 30, 1996 of $500,000, as a result of an agreement with Warner-Lambert. No
licensing revenues were earned for during same period in 1997.
Interest income increased from $9,000 for three months ended June 30, 1996
to $95,000 for the same period in 1997. This increase is attributable to
investment of proceeds of private placement received on March 28, 1997.
The Company's research and development expenses increased 34% to $485,000
for the three months ended June 30, 1997 as compared with $362,000 for the same
period in 1996. This increase is primarily the result of increased sponsored
research payments made to the University of Florida. The Company expects its
research and development expenses to increase during the remainder of 1997 and
1998, reflecting anticipated increased expenses related to ongoing research,
preclinical studies and Phase I and Phase II human clinical trials.
General and administrative expenses decreased by 18% to $556,000 for the
three months ended June 30, 1997 as compared to $675,000 for the same period in
1996. In 1996, the Company settled a lawsuit with Dean L.Rider ("Rider
Settlement") in which it incurred substantial legal fees reflected in general
and administrative expenses. Although general and administrative expenses
decreased from period to period, the Company expects these expenses to increase
during the remainder of 1997, reflecting anticipated additions to management.
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
The Company recorded licensing revenues during the six months ended
June 30, 1996 of $500,000, as a result of an agreement with Warner-Lambert. No
licensing revenues were earned during the same period in 1997.
Interest income increased from $26,000 for the six months ended June 30,
1996 to $120,000 for the same period in 1997. This increase attributable to the
investment of private placement proceeds described above.
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The Company's research and development expenses increased 46% to $1,024,000
for the six months ended June 30, 1997 as compared to $699,000 for the same
period in 1996. This increase is primarily the result of increased sponsored
research payments made to the University of Florida.
General and administrative expenses decreased by 5% to $963,000 for the six
months ended June 30, 1997 as compared to $1,008,000 for the same period in
1996. This decrease is due to expenses resulting from the Rider Settlement in
1996 as discussed above, offset by increased personnel expenses in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations primarily
through collaborative research and sublicense agreements with its strategic
alliance partners and the issuance of debt and equity securities. Through
December 31, 1996 the Company had received $2,885,000 of cumulative sponsored
research and sublicensing revenues and approximately $11,266,000 in net proceeds
from equity offerings and exercise of stock warrants, including net proceeds of
approximately $7,200,000 related to the initial public offering in January of
1995.
On March 28, 1997, the Company completed the private placement of 1,828,286
units ("Units") pursuant to Rule 506 under and Section 4(2) of the Securities
Act of 1933 for $3.50 per Unit. Each Unit consists of one share of the
Company's common stock and one redeemable Common Stock Purchase Warrant
("Warrant"). The Warrants included in these units expire five years from the
date of issuance. In case of a "cashless exercise," the Warrants shall have an
exercise price of $4.00 per share plus forty percent of the difference between
the current trading price of the Company's common stock and $4.00; in all other
cases, the Warrants shall have an exercise price of $4.00 per share plus thirty
percent of the difference between the current trading price of the Company's
common stock and $4.00. The Warrants are subject to redemption at the exercise
price by the Company, provided the Company's common stock closes at a price of
$16.00, $20.00, $24.00, or $28.00 per share for twenty consecutive days during
the second, third, fourth or fifth years, respectively, of the term of the
Warrant. Proceeds from the private placement were $6,116,500, net of placement
agent and other offering costs of $282,500.
During the three months ended June 30, 1997, the Company issued 60,000
additional Units. Through the issuance, the Company raised an additional
$186,000, net of placement agent costs of $24,000. Additionally, options to
purchase 70,306 shares were exercised during this same three month period.
During the six months ended June 30, 1997, the net cash used in operating
activities was $2,070,000 compared with $1,070,000 for the comparable period in
the preceding year. This increase in cash used in operations is attributable to
increased sponsored research payments made to the University of Florida, high
personnel costs and maintaining a lower accounts payable balance. At June 30,
1997, the Company had cash and investments totalling $6,377,000 compared with
$503,000 at June 30, 1996. The Company's working capital was $5,789,000 at
June 30, 1997 compared to only $3,000 at June 30, 1996. These increases are
attributable to the equity transactions described above. The Company expects
the current available resources to be able to fund research and development as
well as operations into 1998.
The Company expects to incur substantial additional research and
development expenses, including expenses associated with preclinical studies,
clinical trials and manufacturing. The Company intends to use a portion of its
cash resources together with funds from its existing collaborative arrangements
with Warner-Lambert and Nippon Kayaku for these purposes; however, the Company's
rights to receive payments from Warner-Lambert and Nippon Kayaku are dependent
upon the achievement of certain milestones by Warner-Lambert and Nippon Kayaku,
respectively, and are not within the control of the Company. No
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assurance can be made that such milestones will be achieved or that such
payments will be received by the Company. The Company intends to obtain
additional funds for research and development through new collaborative
arrangements with corporate partners, additional financings, and from other
sources; however, there can be no assurance that the Company will be able to
obtain necessary financing when required or what the terms of any financing,
if obtained, might be. Accordingly, there can be no assurance of the
Company's future success. In addition, the Company's future success is
affected by the progress of the Company's research and development, the
scope and results of preclinical studies and clinical trials, the cost and
timing of regulatory approvals, the Company's ability to obtain patent
protection for its products on a cost-effective and timely basis, the rate of
technological advances, determinations as to the commercial potential of the
Company's products under development, the status of competitive products, the
establishment of manufacturing capacity or third-party manufacturing
arrangements, its reliance on research institutions and corporate partners,
the uncertainty of health care reform and the competitive environment in
which the Company operates. The Company's existing capital resources will not
be sufficient to fund the Company's operations to the point of introduction
of a commercially successful product, if and when that time should arrive. No
assurance can be given that additional funds will be available on acceptable
terms, if at all.
The Company has incurred losses since inception and, therefore, has not
been subject to federal income taxes. As of December 31, 1996, the Company had
net operating loss ("NOL") and tax credit carryforwards for income tax purposes
of $9,553,000 and $338,000, respectively, which may be available to reduce
future taxable income and future tax liabilities. These carryforwards begin to
expire in 2008. The Tax Reform Act of 1986 provides for an annual limitation on
the use of NOL and credit carryforwards (following certain ownership changes)
that could significantly limit the Company's ability to utilize these
carryforwards. The Company has made no determination concerning whether there
has been such a cumulative change in ownership. It is possible that such a
change in ownership occurred following the completion of the Offering and
exercise of the Representative's over-allotment option or as a result of the
Company's 1996 or 1997 private placements. Accordingly, the Company's ability
to utilize the aforementioned carryforwards to reduce future taxable income and
tax liabilities may be limited. Additionally, because United States tax laws
limit the time during which these carryforwards may be applied against future
taxes, the Company may not be able to take full advantage of these attributes
for federal income tax purposes.
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PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
On March 28, 1997, the Company completed the private placement of
1,828,286 units ("Units") pursuant to Rule 506 under and Section 4(2) of the
Securities Act of 1933 for $3.50 per Unit. Each Unit consists of one share
of the Company's common stock and one redeemable Common Stock Purchase
Warrant ("Warrant"). The Warrants included in these units expire five years
from the date of issuance. In case of a "cashless exercise," the Warrants
shall have an exercise price of $4.00 per share plus forty percent of the
difference between the current trading price of the Company's common stock
and $4.00; in all other cases, the Warrants shall have an exercise price of
$4.00 per share plus thirty percent of the difference between the current
trading price of the Company's common stock and $4.00. The Warrants are
subject to redemption at the exercise price by the Company, provided the
Company's common stock closes at a price of $16.00, $20.00, $24.00, or $28.00
per share for twenty consecutive days during the second, third, fourth or
fifth years, respectively, of the term of the Warrant. Proceeds from the
private placement were $6,116,500, net of placement agent and other offering
costs of $282,500.
The purchasers in the private placement consisted of a limited number of
institutional investors and other accredited investors. Ocean Capital
Services, Inc. received a fee of $250,000 and warrants to purchase 71,429
shares of common stock for services rendered in connection with the private
placement. During the three months ended June 30, 1997, the Company issued
60,000 additional Units. Through the issuance, the Company raised an
additional $186,000, net of placement agent costs of $24,000.
In April 1997, the Company offered to reduce the exercise price of the
warrants issued in the 1996 private placement and warrant exchange offer to
$3.00 per share, to extend the expiration date of the warrants to March 31,
2001, and to increase the price per share at which the Common Stock must
trade to permit the Company to redeem the warrants to $16.00, $20.00 and
$24.00 for 20 consecutive days during the years ending March 31, 1999, 2000
or 2001, respectively. The holders of warrants exercisable for an aggregate
of 561,679 shares agreed to such modifications, in consideration for their
consent and waiver with respect to the Company's sale of Common Stock and
warrants to certain institutional investors in March 1997.
ITEM 4. MATTERS SUBMITTED FOR SHAREHOLDER APPROVAL.
The Company's annual meeting was held on June 23, 1997. The shareholders
of the Company elected the following directors of the Company to serve until
the next annual meeting. The total number of votes cast "For" and "Withheld"
in respect of the following nominees are as set forth opposite their
respective names:
NOMINEES VOTES FOR VOTES WITHHELD
-------- --------- --------------
Stefan Borg 2,863,316 19,350
Philip R. Tracy 2,863,316 19,350
Charles L. Dimmler, III 2,863,316 19,350
Jerry T. Jackson 2,863,316 19,350
Robert S. Janicki, M.D. 2,863,316 19,350
Norman H. Lipoff 2,863,316 19,350
Jacques F. Rejeange 2,863,316 19,350
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Robert A. Schoellhorn 2,863,316 19,350
George B. Schwartz 2,863,316 19,350
The shareholders of the Company approved the Company's Amended and
Restated 1994 Stock Option Plan, and the total number of shares cast "For,"
cast "Against" and "Abstentions" are set forth below:
VOTES VOTES ABSTENTIONS
FOR AGAINST
2,160,446 75,800 19,170
The shareholders of the Company approved the Company's Amended and
Restated 1995 Nonemployee Director Option Plan, and the total number of
shares cast "For," cast "Against" and "Abstentions" are set forth below:
VOTES VOTES ABSTENTIONS
FOR AGAINST
2,247,614 81,950 13,070
Finally, the shareholders of the Company ratified the selection of
Deloitte & Touche LLP as independent accountant for its fiscal year ended
December 31, 1997, and the total number of shares cast "For," cast "Against"
and "Abstentions" are set forth below:
VOTES VOTES ABSTENTIONS
FOR AGAINST
2,886,545 15,021 1,100
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
NUMBER EXHIBIT
10.1* SunPharm Corporation Amended and Restated 1994 Stock
Option Plan
10.2* SunPharm Corporation Amended and Restated 1995
Nonemployee Director Option Plan
10.3 Form of Unit Purchase Agreement among the Company and the
several Purchasers named therein, incorporated herein by
reference to the Company's Quarterly Report on Form 10-QSB
for the period ending March 31, 1997
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10.4 Form of Warrant Agreement among the Company and the several
Purchasers named therein, incorporated herein by reference
to the Company's Quarterly Report on Form 10-QSB for the
period ending March 31, 1997
11.1* Statement of computation of net loss per share
27.1* Financial Data Schedule
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* Filed herewith.
(b) Reports on Form 8-K.
The Company filed one report on Form 8-K during the quarter ended
June 30, 1997. The report was filed on April 14, 1997 and included a
press release of the Company dated April 3, 1997. The press release
announced the closing of the private placement of 1.83 million units with
gross proceeds to the Company of approximately $6.4 million.
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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.
SUNPHARM CORPORATION
Date: August 13, 1997 By: /S/ STEFAN BORG
--------------------------------------------
President and Chief Executive Officer
(Principal Executive, Financial and
Accounting Officer)
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EXHIBIT 10.1
SunPharm Corporation Amended and Restated 1994 Stock Option Plan
<PAGE>
SUNPHARM CORPORATION
AMENDED AND RESTATED 1994 STOCK OPTION PLAN
SunPharm Corporation, a Delaware corporation (the "Company"), hereby
amends and restates its 1994 Stock Option Plan (this "Plan"), effective as of
April 25, 1997, subject to stockholder approval.
1. PURPOSES OF THE PLAN.
The purposes of this Stock Option Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to Employees and Consultants of the Company and its
Subsidiaries and to promote the success of the Company's business. Options
granted under this Plan may be incentive stock options (as defined under
Section 422 of the Code) or nonqualified stock options, as determined by the
Administrator at the time of grant of an option and subject to the applicable
provisions of Section 422 of the Code, as amended, and the regulations
promulgated thereunder.
2. DEFINITIONS. As used herein, the following definitions shall apply:
a. "ADMINISTRATOR" means the Board or any of its Committees, as
applicable, that is administering the Plan pursuant to Section 4
of the Plan.
b. "BOARD" means the Board of Directors of the Company.
c. "CODE" means the Internal Revenue Code of 1986, as amended.
d. "COMMITTEE" means the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the
Plan.
e. "COMPANY" means SunPharm Corporation, a Delaware corporation.
f. "CONSULTANT" means any consultant or advisor to the Company or
any Parent or Subsidiary and any director of the Company whether
compensated for such services or not, provided that if and in the
event the Company registers any class of any equity security
pursuant to the Exchange Act, the term Consultant shall
thereafter not include directors who are not compensated for
their services or are paid only a director's fee by the Company.
g. "CONTINUOUS STATUS AS AN EMPLOYEE" means the absence of any
interruption or termination of the employment relationship by the
Company or any Subsidiary. Continuous Status as an Employee
shall not be considered interrupted in the case of: (i) any leave
of absence approved by the Board, including sick leave, military
leave, or any other personal leave; provided, however, that for
purposes of Incentive Stock Options, such leave is for a period
of not more than ninety (90) days, unless reemployment upon the
expiration of such leave is guaranteed by contract or statute, or
unless provided otherwise pursuant to Company policy adopted from
time to time; or (ii) in the case of transfers between locations
of the Company or between the Company, its Subsidiaries or its
successor.
<PAGE>
h. "EMPLOYEE" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall
not be sufficient to constitute "employment" by the Company.
i. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
j. "FAIR MARKET VALUE" means, as of any date, the value of Stock
determined as follows:
i. If the Stock is listed on any established stock
exchange or a national market system including without
limitation the National Market System of the National
Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value
shall be the closing sales price for such stock (or the
closing bid, if no sales were reported, as quoted on
such system or exchange or the exchange with the
greatest volume of trading in Stock for the last market
trading day prior to the time of determination) as
reported in the Wall Street Journal or such other
source as the Administrator deems reliable;
ii. If the Stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or regularly quoted
by a recognized securities dealer but selling prices
are not reported, its Fair Market Value shall be the
mean between the high and low asked prices for the
Stock; or
iii. In the absence of an established market for the Stock,
the Fair Market Value thereof shall be determined in
good faith by the Administrator.
k. "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of
the Code.
l. "NONQUALIFIED STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
m. "OPTION" means a stock option granted pursuant to the Plan.
n. "OPTIONED STOCK" means the Stock subject to an Option.
o. "OPTIONEE" means an Employee or Consultant who receives an
Option.
p. "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
q. "PLAN" means this 1994 Stock Option Plan.
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<PAGE>
r. "SHARE" means a share of the Stock, as adjusted in accordance
with Section 12 of the Plan.
s. "STOCK" means the Common Stock, par value $.001 per share, of the
Company;
t. "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN.
Subject to the provisions of Section 12 of the Plan, the maximum number
of shares of Stock which may be optioned and sold under the Plan is 750,000
shares. The shares may be authorized, but unissued, or reacquired Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available
for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
a. PROCEDURE.
i. ADMINISTRATION WITH RESPECT TO DIRECTORS AND OFFICERS.
With respect to grants of Options to Employees who are
also officers or directors of the Company, the Plan shall
be administered by (A) the Board or (B) a Committee
designated by the Board to administer the Plan, which
Committee shall be constituted in such a manner as to
permit the Plan to comply with Rule 16b-3 promulgated
under the Exchange Act or any successor thereto ("Rule
16b-3") with respect to a plan intended to qualify
thereunder as a discretionary plan. Once appointed, such
Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time
to time the Board may increase the size of the Committee
and appoint additional members thereof, remove members
(with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and
remove all members of the Committee and thereafter
directly administer the Plan, all to the extent permitted
by Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan. Notwithstanding the
foregoing, the Plan shall not be administered by the Board
if (a) the Company and its officers and directors are then
subject to the requirements of Section 16 of the Exchange
Act and (b) the Board's administration of the Plan would
prevent the Plan from complying with Rule 16b-3.
ii. MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule
16b-3, the Plan may be administered by different bodies
with respect to
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<PAGE>
directors, non-director officers and Employees who are
neither directors nor officers.
iii. ADMINISTRATION WITH RESPECT TO CONSULTANTS AND OTHER
EMPLOYEES. With respect to grants of Options to Employees
or Consultants who are neither directors nor officers of
the Company, the Plan shall be administered by (A) the
Board or (B) a Committee designated by the Board, which
Committee shall be constituted in such a manner as to
satisfy the legal requirements relating to the
administration of incentive stock option plans, if any, of
corporate and securities laws applicable to the Company
and of the Code (the "Applicable Laws"). Once appointed,
such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time
to time the Board may increase the size of the Committee
and appoint additional members thereof, remove members
(with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and
remove all members of the Committee and thereafter
directly administer the Plan, all to the extent permitted
by the Applicable Laws.
b. POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties
delegated by the Board to such Committee, the Administrator shall
have the authority, in its discretion:
i. to determine the Fair Market Value of the Stock, in
accordance with Section 2(j) of the Plan;
ii. to select the officers, Consultants and Employees to whom
Options may from time to time be granted hereunder;
iii. to determine whether and to what extent Options are
granted hereunder;
iv. to determine the number of shares of Stock to be covered
by each such award granted hereunder;
v. to approve forms of agreement for use under the Plan;
vi. to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder
(including, but not limited to, the per share exercise
price for the Shares to be issued pursuant to the exercise
of an Option and any restriction or limitation, or any
vesting acceleration or waiver of forfeiture restrictions
regarding any Option or other award and/or the shares of
Stock relating thereto, based in each case on such factors
as the Administrator shall determine, in its sole
discretion);
vii. to determine whether and under what circumstances an
Option may be bought-out for cash under subsection 9(f);
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<PAGE>
viii. to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect
to an award under this Plan shall be deferred either
automatically or at the election of the participant
(including providing for and determining the amount, if
any, of any deemed earnings on any deferred amount during
any deferral period); and
ix. to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the
Stock covered by such Option shall have declined since the
date the Option was granted.
c. EFFECT OF COMMITTEE'S DECISION. All decisions, determinations
and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
Neither the Board, the Committee nor any member thereof shall be
liable for any act, omission, interpretation, construction or
determination made in connection with the Plan in good faith, and
the members of the Board and of the Committee shall be entitled
to indemnification and reimbursement by the Company in respect of
any claim, loss, damage or expense (including counsel fees)
arising therefrom to the full extent permitted by law.
5. ELIGIBILITY.
a. Nonqualified Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an
Option may, if he is otherwise eligible, be granted an additional
Option or Options.
b. Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonqualified Stock
Option. However, notwithstanding such designations, to the
extent that the aggregate Fair Market Value of the Shares with
respect to which Options designated as Incentive Stock Options
are exercisable for the first time by any Optionee during any
calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be
treated as Nonqualified Stock Options.
c. For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and
the Fair Market Value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.
d. The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship
with the Company, nor shall it interfere in any way with his
right or the Company's right to terminate his employment or
consulting relationship at any time, with or without cause,
unless otherwise agreed in writing by the Company and such
Optionee.
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<PAGE>
e. The maximum number of shares subject to Options which may be
issued to any Optionee under the Plan during any period of three
consecutive years is 250,000 shares.
6. TERM OF PLAN.
The Plan shall become effective upon its adoption by the Board of
Directors. It shall continue in effect until April 30, 2004 unless extended
by the Board or sooner terminated under Section 14 of the Plan. No grants of
Options will be made pursuant to the Plan after April 30, 2004.
7. TERM OF OPTION.
The term of each Option shall be the term stated in the Option
Agreement; provided, however, that in the case of an Incentive Stock Option,
the term shall be no more than ten (10) years from the date of grant thereof
or such shorter term as may be provided in the Option Agreement. However, in
the case of an Option granted to an Optionee who, at the time the Option is
granted, owns Stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
a. The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by
the Administrator, but shall be subject to the following:
In the case of an Incentive Stock Option:
i. granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more
than ten percent (10%) of the voting power of all classes
of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
ii. granted to any Employee not included in clause (i) above,
the per Share exercise price shall be no less than 100% of
the Fair Market Value per Share on the date of grant.
b. The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be
determined by the Administrator (and, in the case of an Incentive
Stock Option, shall be determined at the time of grant) and may
consist entirely of (1) cash, (2) check, (3) promissory note, (4)
other shares of the Company's capital stock which (x) in the case
of shares of the Company's capital stock acquired upon exercise
of an Option either have been owned by the Optionee for more than
six months on the date of surrender or were not acquired,
directly or indirectly, from the Company, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be
exercised, (5) authorization for the Company to retain from the
total number of Shares as to which the Option
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<PAGE>
is exercised that number of Shares having a Fair Market Value
on the date of exercise equal to the exercise price for the
total number of Shares as to which the Option is exercised,
(6) delivery of a properly executed exercise notice together
with irrevocable instructions to a broker to promptly deliver
to the Company the amount of sale or loan proceeds required to
pay the exercise price, (7) any combination of the foregoing
methods of payment, or (8) such other consideration and method
of payment for the issuance of Shares to the extent permitted
under applicable laws.
9. EXERCISE OF OPTION.
a. PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
granted hereunder shall be exercisable at such times and under
such conditions as determined by the Administrator, including
performance criteria with respect to the Company and/or the
Optionee, and as shall be permissible under the terms of the
Plan. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised, and the Optionee deemed to be
a stockholder of the Shares being purchased upon exercise, when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Board,
consist of any consideration and method of payment allowable under Section
8(b) of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
b. TERMINATION OF EMPLOYMENT. In the event of termination of an
Optionee's relationship as a Consultant (unless such termination
is for purposes of becoming an Employee of the Company) or
Continuous Status as an Employee with the Company (as the case
may be), such Optionee may, but only within ninety (90) days (or
such other period of time as is determined by the Board, with
such determination in the case of an Incentive Stock Option being
made at the time of grant of the Option and not exceeding ninety
(90) days) after the date of such termination (but in no event
later than the expiration date of the term of such Option as set
forth in the Option Agreement), exercise his Option to the extent
that Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to
exercise the Option at the date of such termination, or if
Optionee does not exercise such Option to the extent so entitled
within the time specified herein, the Option shall terminate.
c. DISABILITY OF OPTIONEE. Notwithstanding the provisions of
Section 9(b) above, in the event of termination of an Optionee's
relationship as a Consultant or Continuous Status as an Employee
as a result of his total and permanent disability (as defined in
Section 22(e)(3) of the Code), Optionee may, but only within
twelve (12) months from the date of such termination (but in no
event later than the expiration date of the term of such Option
as set forth in the Option Agreement),
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<PAGE>
exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent
that Optionee was not entitled to exercise the Option at the
date of termination, or if Optionee does not exercise such
Option to the extent so entitled within the time specified
herein, the Option shall terminate.
d. DEATH OF OPTIONEE. In the event of the death of an Optionee, the
Option may be exercised, at any time within twelve (12) months
following the date of death (but in no event later than the
expiration date of the term of such Option as set forth in the
Option Agreement), by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to
exercise the Option at the date of death. To the extent that
Optionee was not entitled to exercise the Option at the date of
termination, or if the Optionee's estate (or such other person
who acquired the right to exercise the Option) does not exercise
such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
e. RULE 16B-3. Options granted to persons subject to Section 16(b)
of the Exchange Act must comply with Rule 16b-3 and shall contain
such additional conditions or restrictions as may be required
thereunder to qualify for the maximum exemption from Section 16
of the Exchange Act with respect to Plan transactions.
f. BUYOUT PROVISIONS. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously
granted, based on such terms and conditions as the Administrator
shall establish and communicate to the Optionee at the time that
such offer is made.
10. NON-TRANSFERABILITY OF OPTIONS.
The Option may not be sold, pledged, assigned, hypothecated, transferred,
or disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Optionee, only
by the Optionee.
11. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS.
At the discretion of the Administrator, Optionees may satisfy withholding
obligations as provided in this paragraph. When an Optionee incurs tax
liability in connection with an Option, which tax liability is subject to tax
withholding under applicable tax laws, and the Optionee is obligated to pay
the Company an amount required to be withheld under applicable tax laws, the
Optionee may satisfy the withholding tax obligation by electing to have the
Company withhold from the Shares to be issued upon exercise of the Option,
that number of Shares having a Fair Market Value equal to the amount required
to be withheld. The Fair Market Value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be
determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall
be subject to the following restrictions:
a. the election must be made on or prior to the applicable Tax Date;
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<PAGE>
b. once made, the election shall be irrevocable as to the particular
Shares of the Option or Right as to which the election is made;
c. all elections shall be subject to the consent or disapproval of
the Administrator; and
d. if the Optionee is subject to Rule 16b-3, the election must
comply with the applicable provisions of Rule 16b-3 and shall be
subject to such additional conditions or restrictions as may be
required thereunder to qualify for the maximum exemption from
Section 16 of the Exchange Act with respect to Plan transactions.
In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election
is filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
Subject to any required action by the stockholders of the Company, the
number of Shares covered by each outstanding Option, and the number of Shares
which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Stock
(or Common Stock into which the Common Stock may be convertible) resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Stock, or any other increase or decrease in the
number of issued shares of Stock effected without receipt of consideration by
the Company; provided, however, that conversion of any convertible securities
of the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Administrator, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company,
the Board shall notify the Optionee at least fifteen (15) days prior to such
proposed action. To the extent it has not been previously exercised, the
Option will terminate immediately prior to the consummation of such proposed
action. In the event of a merger or consolidation of the Company with or into
another entity or another transaction pursuant to which all or substantially
all of the assets of the Company are conveyed to another entity, the Option
shall be assumed or an equivalent option shall be substituted by such
successor entity or a parent or subsidiary of such successor entity. In the
event that such successor entity does not agree to assume the Option or to
substitute an equivalent option, the Administrator shall, in lieu of such
assumption or substitution, provide for the Optionee to have the right to
exercise the Option as to all of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable. If the Administrator
makes an Option fully exercisable in lieu of assumption or substitution in
the event of a merger, consolidation or other transaction covered by this
paragraph, the Administrator shall notify the Optionee that the Option shall
be fully exercisable for a period of fifteen (15) days from the date of such
notice, and the Option will terminate upon the expiration of such period.
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13. TIME OF GRANTING OPTIONS.
The date of grant of an Option shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option, or such
other date as is determined by the Administrator. Notice of the
determination shall be given to each Employee or Consultant to whom an Option
is so granted within a reasonable time after the date of such grant.
14. AMENDMENT AND TERMINATION OF THE PLAN.
a. AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment,
alteration, suspension or discontinuation shall be made which
would impair the rights of any Optionee under any grant
theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act or with Section 422 of the Code (or any
other applicable law or regulation, including the applicable
requirements of the NASD or an established stock exchange), the
Company shall obtain stockholder approval of any Plan amendment
in such a manner and to such a degree as required.
b. EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted
and such Options shall remain in full force and effect as if this
Plan had not been amended or terminated, unless mutually agreed
otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
15. CONDITIONS UPON ISSUANCE OF SHARES.
Shares shall not be issued pursuant to the exercise of an Option unless
the exercise of such Option and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, and the requirements of any
stock exchange upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
of the aforementioned relevant provisions of law.
16. RESERVATION OF SHARES.
The Company, during the term of this Plan, will at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any
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<PAGE>
Shares hereunder, shall relieve the Company of any liability in respect of
the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
17. AGREEMENTS.
Options shall be evidenced by written agreements in such form as the
applicable Administrator shall approve from time to time.
18. INFORMATION TO OPTIONEES.
The Company shall provide to each Optionee, during the period for which
such Optionee has one or more Options outstanding, copies of all annual
reports and other information which are generally provided to all
stockholders of the Company. The Company shall not be required to provide
such information to persons whose duties in connection with the Company
assure their access to equivalent information.
19. GOVERNING LAW; CONSTRUCTION.
All rights and obligations under the Plan shall be governed by, and the
Plan shall be construed in accordance with, the laws of the State of Florida
without regard to the principles of conflicts of laws. Titles and headings
to Sections herein are for purposes of reference only, and shall in no way
limit, define or otherwise affect the meaning or interpretation of any
provisions of the Plan.
20. EFFECTIVE DATE OF AMENDED AND RESTATED PLAN.
The amendment and restatement of this Plan shall become effective,
subject to stockholder approval, on April 25, 1997. The amendment and
restatement of this Plan, and all Options granted pursuant to the amendment
and restatement of this Plan prior to stockholder approval, shall be void and
of no further force and effect unless the amendment and restatement of this
Plan shall have been approved by the requisite vote of the stockholders
entitled to vote at a meeting of the stockholders of the Company called for
such purpose prior to July 30, 1997. In the event such stockholder approval
is not obtained, this Plan shall continue in existence with the terms and
conditions in effect prior to the effective date of the amendment and
restatement provided for hereby.
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EXHIBIT 10.2
SunPharm Corporation Amended and Restated 1995 Nonemployee Director Option Plan
<PAGE>
SUNPHARM CORPORATION
AMENDED AND RESTATED 1995 NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN
SunPharm Corporation, a Delaware corporation (the "Company"), hereby amends
and restates its 1995 Nonemployee Directors' Option Plan (this "Plan"),
effective as of April 25, 1997, subject to stockholder approval.
I. PURPOSE OF THE PLAN
The SUNPHARM CORPORATION 1995 NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN (the
"Plan") is intended to promote the interests of SUNPHARM CORPORATION, a Delaware
corporation (the "Company"), and its stockholders by helping to award and retain
highly-qualified independent directors and allowing them to develop a sense of
proprietorship and personal involvement in the development and financial success
of the Company. Accordingly, the Company shall grant to directors of the Company
who are not employees or consultants of the Company or any of its subsidiaries
("Nonemployee Directors") the option ("Option") to purchase shares of the common
stock of the Company ("Stock"), as hereinafter set forth. Options granted under
the Plan shall be options which do not constitute incentive stock options,
within the meaning of section 422(b) of the Internal Revenue Code of 1986, as
amended.
II. OPTION AGREEMENTS
Each Option shall be evidenced by a written agreement in the form attached
to the Plan.
III. ELIGIBILITY OF OPTIONEE
Options may be granted only to individuals who are Nonemployee Directors of
the Company. Each Nonemployee Director who is elected to the Board of Directors
of the Company (the "Board") for the first time after the effective date of the
Plan shall receive, as of the date of his or her election and without the
exercise of the discretion of any person or persons, an Option exercisable for
25,000 shares of Stock (subject to adjustment in the same manner as provided in
Paragraph VII hereof with respect to shares of Stock subject to Options then
outstanding). As of the date of the annual meeting of the stockholders of the
Company in each year that the Plan is in effect as provided in Paragraph VI
hereof, each Nonemployee Director then in office who is not then entitled to
receive an Option pursuant to the preceding sentence shall receive, without the
exercise of the discretion of any person or persons, an Option exercisable for
5,000 shares of Stock, provided that the Chairman of the Board of Directors then
in office shall receive without the exercise of the discretion of any person or
persons, an Option exercisable for an additional 10,000 shares of Stock if such
Chairman of the Board of Directors is a Nonemployee Director (subject in each
case to adjustment in the same manner as provided in Paragraph VII hereof with
respect to shares of Stock subject to Options then outstanding). If, as of any
date that the Plan is in effect, there are not sufficient shares of Stock
available under the Plan to allow for the grant to each Nonemployee Director of
an Option for the number of shares provided herein, each Nonemployee Director
shall receive an Option for his or her pro-rata share of the total number of
shares of Stock then available under the Plan. All Options granted under the
Plan shall be at the Option price set forth in Paragraph V hereof and shall be
subject to adjustment as provided in Paragraph VII hereof.
<PAGE>
IV. SHARES SUBJECT TO THE PLAN
The aggregate number of shares which may be issued under Options granted
under the Plan shall not exceed 300,000 shares of Stock. Such shares may
consist of authorized but unissued shares of Stock or previously issued shares
of Stock acquired by the Company. Any of such shares which remain unissued and
which are not subject to outstanding Options at the termination of the Plan
shall cease to be subject to the Plan, but, until termination of the Plan, the
Company shall at all times make available a sufficient number of shares to meet
the requirements of the Plan. Should any Option hereunder expire or terminate
prior to its exercise in full, the shares theretofore subject to such Option
which may be issued under the Plan shall be subject to adjustment in the same
manner as provided in Paragraph VII hereof with respect to shares of Stock
subject to Options then outstanding. Exercise of an Option shall result in a
decrease in the number of shares of Stock which may thereafter be available,
both for purposes of the Plan and for sale to any one individual, by the number
of shares as to which the Option is exercised.
V. OPTION PRICE
The purchase price of Stock issued under each Option shall be the fair
market value of Stock subject to the Option as of the date the Option is
granted. For all purposes under the Plan, the fair market value of a share of
Stock on a particular date shall be equal to the mean of the high and low sales
prices of the Stock (i) reported by the Nasdaq Stock Market on that date or (ii)
if the Stock is listed on a national stock exchange, reported on the stock
exchange composite tape on that date; or, in either case, if no prices are
reported on that date, on the last preceding date on which such prices of the
Stock are so reported. If the Stock is traded over the counter at the time a
determination of its fair market value is required to be made hereunder, its
fair market value shall be deemed to be equal to the average between the
reported high and low or closing bid and asked prices of Stock on the most
recent date on which Stock was publicly traded. In the event Stock is not
publicly traded at the time a determination of its value is required to be made
hereunder, the determination of its fair market value shall be made by the Board
in such manner as it deems appropriate.
VI. TERM OF PLAN
The Plan shall be effective on the date the Plan is approved by the
stockholders of the Company. Except with respect to Options then outstanding,
if not sooner terminated under the provisions of Paragraph VIII, the Plan shall
terminate upon and no further Options shall be granted after the expiration of
ten years from the date the Plan is approved by the stockholders of the Company.
VII. RECAPITALIZATION OR REORGANIZATION
A. The existence of the Plan and the Options granted hereunder shall not
affect in any way the right or power of the Board or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization,
or other change in the Company's capital structure or its business, any merger
or consolidation of the Company, any issue of debt or equity securities, the
dissolution or liquidation of the Company or any sale, lease, exchange or other
disposition of all or any part of its assets or business or any other corporate
act or proceeding.
B. The shares with respect to which Options may be granted are shares of
Stock as presently constituted, but if, and whenever, prior to the expiration of
an Option theretofore granted, the Company shall effect a subdivision or
consolidation of shares of Stock or the payment of a stock dividend on Stock
without receipt of consideration by the Company, the number of shares of Stock
with respect to which such Option
-2-
<PAGE>
may thereafter be exercised (i) in the event of an increase in the number of
outstanding shares shall be proportionately increased, and the purchase price
per share shall be proportionately reduced, and (ii) in the event of a
reduction in the number of outstanding shares shall be proportionately
reduced, and the purchase price per share shall be proportionately increased.
C. If the Company recapitalizes, reclassifies its capital stock, or
otherwise changes its capital structure (a "recapitalization"), the number and
class of shares of Stock covered by an Option theretofore granted shall be
adjusted so that such Option shall thereafter cover the number and class of
shares of stock and securities to which the optionee would have been entitled
pursuant to the terms of the recapitalization if, immediately prior to the
recapitalization, the optionee had been the holder of record of the number of
shares of Stock then covered by such Option.
D. Any adjustment provided for in Subparagraph (B) or (C) above shall be
subject to any required stockholder action.
E. Except as hereinbefore expressly provided, the issuance by the Company
of shares of stock of any class or securities convertible into shares of stock
of any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Stock subject to Options theretofore granted or the purchase price per
share.
VIII. AMENDMENT OR TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with respect
to any shares for which Options have not theretofore been granted. The Board
shall have the right to alter or amend the Plan or any part thereof from time to
time; provided, that no change in any Option theretofore granted may be made
which would impair the rights of the optionee without the consent of such
optionee and provided, further, that the Board may not make any alteration or
amendment which would materially increase the benefits accruing to participants
under the Plan, increase the aggregate number of shares which may be issued
pursuant to the provisions of the Plan, change the class of individuals eligible
to receive Options under the Plan or extend the term of the Plan, without the
approval of the stockholders of the Company.
IX. SECURITIES LAWS
A. The Company shall not be obligated to issue any Stock pursuant to any
Options granted under the Plan at any time when the offering of the shares
covered by such Option have not been registered under the Securities Act of
1933, as amended, and such other state and federal laws, rules or regulations as
the Company deems applicable and, in the opinion of legal counsel for the
Company, there is no exemption from the registration requirements of such laws,
rules or regulations available for the offering and sale of such shares.
B. It is intended that the Plan and any grant of an Option made to a
person subject to Section 16 of the Securities Exchange Act of 1944, as amended
(the "1934 Act"), meet all of the requirements of Rule 16b-3, as currently in
effect or as hereinafter modified or amended ("Rule 16b-3"), promulgated under
the 1934 Act. If any provision of the Plan or any such Option would disqualify
the Plan or such Option under, or would otherwise not comply with, Rule 16b-3,
such provision or Option shall be construed or deemed amended to conform to Rule
16b-3.
-3-
<PAGE>
X. EFFECTIVE DATE OF AMENDED AND RESTATED PLAN
The amendment and restatement of this Plan shall become effective, subject
to stockholder approval, on April 25, 1997. The amendment and restatement of
this Plan, and all Options granted pursuant to the amendment and restatement of
this Plan prior to stockholder approval, shall be void and of no further force
and effect unless the amendment and restatement of this Plan shall have been
approved by the requisite vote of the stockholders entitled to vote at a meeting
of the stockholders of the Company called for such purpose prior to July 30,
1997. In the event such stockholder approval is not obtained, this Plan shall
continue in existence with the terms and conditions in effect prior to the
effective date of the amendment and restatement provided for hereby.
-4-
<PAGE>
EXHIBIT 11.1
SUNPHARM CORPORATION
CALCULATION OF LOSS PER SHARE
(UNAUDITED)
FOR THE THREE MONTHS ENDED JUNE 30, 1997
Weighted Average Shares Outstanding:
# Days
Total Shares Outstanding
------------ -----------
5,537,165 x 2 = 11,074,330
5,607,471 x 76 = 426,167,796
5,672,471 13 73,742,123
-- -----------
91 510,984,249 DIVIDED BY 91 = 5,615,212
FOR THE THREE MONTHS ENDED JUNE 30, 1996
Weighted Average Shares Outstanding:
# Days
Total Shares Outstanding
------------ -----------
2,884,535 x 80 = 230,762,800
2,934,535 x 11 = 32,279,885
-- -----------
91 263,042,685 DIVIDED BY 91 = 2,890,579
FOR THE SIX MONTHS ENDED JUNE 30, 1997
Weighted Average Shares Outstanding:
# Days
Total Shares Outstanding
------------ -----------
3,708,879 x 87 = 322,672,473
5,537,165 x 5 = 27,685,825
5,607,471 x 76 = 426,167,796
5,672,471 x 13 73,742,123
--- -----------
181 850,268,217 DIVIDED BY 181 = 4,697,614
FOR THE SIX MONTHS ENDED JUNE 30, 1996
Weighted Average Shares Outstanding:
# Days
Total Shares Outstanding
------------ -----------
2,884,535 x 171 = 493,255,485
2,934,535 x 11 = 32,279,885
--- -----------
182 525,535,370 DIVIDED BY 182 = 2,887,557
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SUNPHARM CORPORATION SET FORTH IN THE COMPANY'S FORM
10-QSB FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 450,680
<SECURITIES> 5,926,331
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,518,454
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,661,542
<CURRENT-LIABILITIES> 729,109
<BONDS> 0
567
0
<COMMON> 0
<OTHER-SE> 5,931,426
<TOTAL-LIABILITY-AND-EQUITY> 6,661,542
<SALES> 0
<TOTAL-REVENUES> 94,968
<CGS> 0
<TOTAL-COSTS> 1,986,624
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,867,119)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,867,119)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (946,576)
<EPS-PRIMARY> (0.40)
<EPS-DILUTED> (0.40)
</TABLE>
