<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1999
OR
[ ] Transition Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 1-12968
LXR BIOTECHNOLOGY INC.
----------------------
(Exact name of issuer as specified in its charter)
Delaware 68-0282856
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1401 Marina Way South, Richmond, California 94804
-------------------------------------------------
(Address of principal executive offices)
(510) 412-9100
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities 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
----- -----
At July 30, 1999, the number of outstanding shares of the Registrant's Common
Stock, par value $0.0001, was 29,657,489.
1
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LXR BIOTECHNOLOGY INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
QUARTERLY REPORT ON FORM 10-Q
FOR THE SIX MONTHS ENDED JUNE 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
--------
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 1999 and December 31, 1998 3
Condensed Consolidated Statements of Operations for
the three and six months ended June 30, 1999 and
1998 and for the period from April 20, 1992 (date of
incorporation) through June 30, 1999 4
Condensed Consolidated Statement of Stockholders' Equity
for the six months ended June 30, 1999 5
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 1999 and 1998 and for the period from
April 20, 1992 (date of incorporation) through
June 30, 1999 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Change in Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
</TABLE>
2
<PAGE> 3
PART I. Financial Information
Item I. Financial Statements
LXR BIOTECHNOLOGY INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
Assets 1999 1998
------------ ------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,127,077 $ 3,495,582
Prepaid expenses 176,049 93,811
Other receivables 16,291 133,339
Other current assets 342,337 --
------------ ------------
Total current assets 1,661,754 3,722,732
Equipment and leasehold improvements,
net of accumulated depreciation 81,966 975,284
Notes receivable from related parties 180,000 180,000
Deposits and other assets 14,050 40,898
------------ ------------
Total assets $ 1,937,770 $ 4,918,914
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 339,833 $ 289,542
Accrued payroll related expenses 78,023 133,635
Other accrued liabilities 51,007 36,777
Litigation settlement payable 155,000 170,000
Deferred rent obligation -- 317,564
Short-term portion of note payable -- 199,388
------------ ------------
Total current liabilities 623,863 1,146,906
Note payable, excluding short-term portion -- 193,459
------------ ------------
Total liabilities 623,863 1,340,365
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares
authorized; none issued or outstanding -- --
Common stock, $0.0001 par value; 60,000,000
shares authorized; 29,839,501 and 28,691,669
shares issued and outstanding at June 30, 1999
and December 31, 1998, respectively 2,954 2,839
Common stock to be issued; 137,099 shares and 75,000
at June 30, 1999 and December 31, 1998, respectively 14 8
Additional paid-in capital 47,680,522 46,176,875
Deficit accumulated during the development stage (46,354,408) (42,585,998)
Treasury stock, at cost; 182,012 shares at
June 30, 1999 and December 31, 1998 (15,175) (15,175)
------------ ------------
Total stockholders' equity 1,313,907 3,578,549
------------ ------------
Total liabilities and stockholders' equity $ 1,937,770 $ 4,918,914
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
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LXR BIOTECHNOLOGY INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Condensed Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
April 20, 1992
(Date of
Three months Six Months Incorporation)
Ended June 30, Ended June 30, through
-------------------------- -------------------------- June 30,
1999 1998 1999 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues:
Grant revenue $ -- $ -- $ -- $ -- $ 171,744
Funded research -- -- -- -- 215,703
License fee revenue -- -- -- -- 1,000,000
----------- ----------- ----------- ----------- ------------
Total revenues -- -- -- -- 1,437,447
Expenses:
Research and development 1,077,639 1,702,227 2,353,571 3,755,165 32,549,157
General and administrative 697,521 897,524 1,446,785 2,252,196 16,208,923
----------- ----------- ----------- ----------- ------------
Total expenses 1,775,160 2,599,751 3,800,356 6,007,361 48,758,080
----------- ----------- ----------- ----------- ------------
Loss from operations (1,775,160) (2,599,751) (3,800,356) (6,007,361) (47,320,633)
----------- ----------- ----------- ----------- ------------
Interest income, net:
Interest income 27,395 118,877 59,457 266,080 1,473,063
Interest expense (13,172) (21,971) (26,711) (42,500) (498,033)
----------- ----------- ----------- ----------- ------------
Total interest income, net 14,223 96,906 32,746 223,580 975,030
----------- ----------- ----------- ----------- ------------
Loss before income taxes (1,760,937) (2,502,845) (3,767,610) (5,783,781) (46,345,603)
Income taxes 400 400 800 800 8,800
----------- ----------- ----------- ----------- ------------
Net loss $(1,761,337) $(2,503,245) $(3,768,410) $(5,784,581) $(46,354,403)
=========== =========== =========== =========== ============
Net loss per share $ (0.06) $ (0.09) $ (0.13) $ (0.20)
=========== =========== =========== ===========
Weighted average shares used
to compute net loss per share 29,755,404 28,533,764 29,214,461 28,259,809
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
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LXR BIOTECHNOLOGY INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Condensed Consolidated Statement of Stockholders' Equity
For the six months ended June 30, 1999
(unaudited)
<TABLE>
<CAPTION>
COMMON STOCK
PREFERRED STOCK COMMON STOCK TO BE ISSUED
--------------- ------------------ ----------------
SHARES SHARES
ISSUED AMOUNT ISSUED AMOUNT SHARES AMOUNT
----- ------ ---------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1998 -- $ -- 28,691,669 $2,839 75,000 $ 8
Issuance of common stock to be
issued on acquisition of
Cardiosol technology -- -- 75,000 8 (75,000) (8)
Private placement of common stock
(net of issuance costs) -- -- 1,060,000 106 -- --
Common stock to be issued to
Boehringer Mannheim -- -- -- -- 137,099 14
Stock options exercised -- -- 12,832 1 -- --
Stock options granted -- -- -- -- -- --
Stock option repricing -- -- -- -- -- --
Net loss -- -- -- -- -- --
---- ---- ----------- ------ ------- -----
Balances at June 30, 1999 -- $ -- 29,839,501 $2,954 137,099 $ 14
==== ===== ========== ====== ======= =====
</TABLE>
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED TREASURY STOCK
ADDITIONAL DURING THE --------------------- TOTAL STOCK-
PAID-IN DEVELOPMENT SHARES HOLDERS'
CAPITAL STAGE REPURCHASED AMOUNT EQUITY
----------- ------------ ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1998 $46,176,875 $(42,585,998) (182,012) $(15,175) $ 3,578,549
Issuance of common stock to be
issued on acquisition of
Cardiosol technology -- -- -- -- --
Private placement of common stock
(net of issuance costs) 949,894 -- -- -- 950,000
Common stock to be issued to
Boehringer Mannheim 199,986 -- -- -- 200,000
Stock options exercised 384 -- -- -- 385
Stock options granted 234,703 -- -- -- 234,703
Stock option repricing 118,680 -- -- -- 118,680
Net loss -- (3,768,410) -- -- (3,768,410)
----------- ------------ -------- -------- -----------
Balances at June 30, 1999 $47,680,522 $(46,354,408) (182,012) $(15,175) $ 1,313,907
=========== ============ ======== ======== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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LXR BIOTECHNOLOGY INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
April 20, 1992
(Date of
Incorporation)
Six months Ended June 30, through
------------------------------ June 30,
1999 1998 1999
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities: $(3,110,053) $ (5,625,203) $(41,275,437)
----------- ------------ ------------
Cash flows from investing activities:
Purchase of investments -- -- (3,910,150)
Purchase of equipment and leasehold
improvements (15,990) (67,191) (2,487,953)
Proceeds from maturity of investments -- -- 4,000,000
Loans to related parties -- -- (355,000)
Repayment of loans to related parties -- -- 125,000
----------- ------------ ------------
Net cash used in investing activities (15,990) (67,191) (2,628,103)
----------- ------------ ------------
Cash flows from financing activities:
Net proceeds from sale of common stock 1,150,000 1,368,250 42,101,942
Proceeds from notes payable to related parties -- -- 4,694,500
Proceeds from line of credit -- -- 375,000
Proceeds from equipment loan -- -- 701,249
Repayment of notes payable and line of credit (392,847) (91,395) (2,282,360)
Principal payments for obligations under
capital lease -- -- (776,513)
Payments received for notes receivable from
stockholders -- -- 2,147
Repurchase of common stock -- -- (1,510)
Net proceeds from exercise of warrants -- 92,219 111,724
Net proceeds from exercise of stock options 385 100,461 104,438
----------- ------------ ------------
Net cash provided by financing
activities 757,538 1,469,535 45,030,617
----------- ------------ ------------
Net increase (decrease) in cash and cash (2,368,505) (4,222,859) 1,127,077
equivalents
Cash and cash equivalents at beginning of
period 3,495,582 11,536,687 --
----------- ------------ ------------
Cash and cash equivalents at end of period $ 1,127,077 $ 7,313,828 $ 1,127,077
=========== ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
6
<PAGE> 7
LXR BIOTECHNOLOGY INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Condensed Consolidated Financial Statements
June 30, 1999
(1) BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements have been prepared on the same basis
as the audited consolidated financial statements and contain all
adjustments (consisting of normal recurring adjustments) necessary to
present fairly the Company's financial position as of June 30, 1999,
results of operations for the three and six months ended June 30, 1999
and 1998 and for the period from April 20, 1992 (date of incorporation)
to June 30, 1999, cash flows for the six months ended June 30, 1999 and
1998 and for the period from April 20, 1992 (date of incorporation) to
June 30, 1999, and changes in stockholders' equity for the six months
ended June 30, 1999.
These condensed consolidated financial statements should be read in
conjunction with the Company's 1998 audited consolidated financial
statements, which are included as part of the Company's 1998 Annual
Report on Form 10-K.
The Company's condensed consolidated financial statements include the
accounts and results of operations of the Company and its wholly owned
subsidiary, Optical Analytic, Inc. (OAI). All significant intercompany
balances and transactions have been eliminated in consolidation.
The Company has incurred losses since its inception and expects to incur
additional losses while searching for strategic alternatives for the
Company. The Company does not have any committed sources of future
equity or debt funding. The Company has implemented certain cost
containment measures and established critical priorities to manage cash
to provide for operations into the first quarter of 2000. If the Company
continues as an operating Company, it would need to raise substantial
additional capital to fund its operations, including the development of
its lead compounds. The Company has no immediate plans to seek such
additional funding and will decide on its operating and financing plans
after it completes its evaluation of the strategic alternatives
available to it.
The Company's independent auditors have issued their report on the 1998
Consolidated Financial Statements which states in part that the Company
has suffered recurring losses and has limited liquidity, both of which
raise substantial doubt about the ability of the Company to continue as
a going concern.
(2) CAPITAL STOCK
In January 1999, the Company issued 75,000 shares of the Company's
common stock in connection with the acquisition of certain patent and
other rights related to Cardiosol, a preservation solution for use
during heart transplantation ("the Cardiosol Acquisition"). These shares
were valued at the fair market value on the date the agreement was
entered into. At December 31, 1998 the 75,000 shares were included in
common stock to be issued.
In March 1999, the Company raised approximately $950,000 (net of
offering costs), through the sale of 1,000,000 shares of the Company's
common stock at a price of $1.00 per share (the "March 1999 Private
Placement"). The Company also issued 60,000 shares as a sales commission
in connection with the March 1999 Private Placement.
As of June 30, 1999, warrants to purchase 1,689,958 shares of the
Company's common stock remained outstanding.
7
<PAGE> 8
LXR BIOTECHNOLOGY INC. AND SUBSIDIARY
(A development Stage Enterprise)
Notes to Condensed Consolidated Financial Statements
June 30, 1999
(3) STOCK OPTION PLANS
The following summarizes the Company's stock option activity during the
six months ended June 30, 1999:
<TABLE>
<CAPTION>
Number of Shares
----------------
<S> <C>
Balance as of December 31, 1998 3,860,729
Options granted 61,000
Options canceled or expired (1,885,180)
Options exercised (12,832)
----------
Balance as of June 30, 1999 2,026,217
==========
</TABLE>
In June 1999, the Company's stockholders approved an amendment to the
1993 Stock Option Plan to increase the shares of common stock authorized
for issuance from 3,849,850 shares to 4,849,850 shares.
The Company recorded expense of approximately $119,000 in the six months
ended June 30, 1999 as a result of its October 1998 repricing of stock
options.
(4) NOTES PAYABLE
In June 1999, the Company paid off the balance due under the equipment
loan of approximately $305,000 and accrued interest.
(5) OPERATING LEASE
In June 1999, the Company signed a lease termination agreement for its
facility. Under the terms of the agreement, the Company paid $66,000 in
cash, forfeited a security deposit of approximately $23,000, and
transferred title to leasehold improvements with a net book value of
approximately $340,000 to the landlord in exchange for the termination
of the lease agreement. The book value of the leasehold improvements
approximated the fair value, and was offset against the deferred rent
balance. The cash paid and deposit forfeited were recorded as a prepaid
asset and will be amortized to rent expense over the remaining three
months of the lease.
(6) RELATED PARTY TRANSACTIONS
In February 1999, the Board approved, at Mr. Raab's request, a temporary
reduction in Mr. Raab's salary from $180,000 to $90,000 per year. In
June 1999, Mr. Raab's salary was discontinued at his request.
(7) RESTRUCTURING CHARGES
In April 1999, the Company announced and began implementing a cash
conservation plan, including a reduction in staff, to enable it to
continue operations while it explored strategic alternatives. In
connection with the implementation of the cash conservation plan, the
Company incurred restructuring charges of approximately $254,000,
primarily related to the layoff of 18 employees, of which $179,000 was
paid out during the quarter ended June 30, 1999. These charges are
included in expenses in the accompanying statement of operations.
(8) LITIGATION
The Company and five of its past or present directors and officers are
named as defendants in Katz vs. Blech, ("Katz") and Degulis vs. LXR
Biotechnology Inc., et al. ("Degulis"). One of the five, Mark Germain, a
former director and former chairman of the Company, is named as a
defendant in the above
8
<PAGE> 9
LXR BIOTECHNOLOGY INC. AND SUBSIDIARY
(A development Stage Enterprise)
Notes to Condensed Consolidated Financial Statements
June 30, 1999
(8) LITIGATION (CONTINUED)
two cases and also in In re Blech Securities Litigation, ("In re
Blech"). In addition, L. Scott Minick, James D. Coombes and Mark J.
Tomei, all former directors and former officers of the Company, are
defendants in Katz and Degulis; and Christopher Henney, a former
director, is a defendant in Katz. The Company was previously named as a
defendant in In re Blech but was dismissed by the Court on June 6, 1996.
All three cases are brought on behalf of classes of persons purchasing
common shares of the Company prior to September 21, 1994, and assert
claims arising out to the Company's Initial Public Offering and
subsequent trading of those shares.
The Company announced on January 25, 1999, that it has reached an
agreement in principle with plaintiffs' class action counsel to settle
the above litigation against the Company and the five former officers
and directors. The agreement provides for payment of $500,000, of which
approximately $155,000 is to be paid by the Company and approximately
$345,000 is to be paid by the Company's insurer.
The settlement agreement is subject to negotiation and execution of a
detailed stipulation of settlement between the parties, submission of
the stipulation of settlement to the court, provision of notice to class
members of the settlement terms, a fairness hearing, and financial
approval of the settlement by the court. The Company cannot predict
exactly how long these procedures will take or when final dismissal will
be obtained.
The above settlement agreement does not constitute an acknowledgement of
wrongdoing by the Company or its former officers and directors.
The Company has also settled a claim for indemnity from the independent
underwriter in the initial public offering by payment of $12,500.
During the six months ended June 30, 1999 and 1998, the Company incurred
expenses of approximately $28,000 and $16,000, respectively, relating to
this litigation. As of June 30, 1999, $155,000 has been accrued for
payment of the proposed settlement.
(9) SUBSEQUENT EVENT
In July 1999, the Company auctioned its laboratory equipment no longer
needed for the development of its later stage products. Such equipment
with a net book value of approximately $342,000 was classified as held
for sale and was included in other current assets at June 30, 1999. Net
proceeds from the auction were approximately $500,000 and were received
in August 1999.
9
<PAGE> 10
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
Except for historical information, the following Management's Discussion
and Analysis of Financial Condition and Results of Operations contains
forward looking statements regarding, among other things, strategic
evaluation of our business and operations, product development plans,
product efficacy, safety and effectiveness, corporate partnering,
capital and other expenditures, timing of FDA filings, clinical trial
progress, sufficiency of cash resources and our ability to raise
additional funding. These forward looking statements concern matters
that involve risks and uncertainties that could cause actual results to
differ materially from those projected in the forward looking
statements. Words such as "believe," "expects," "likely," "may" and
"plans" are intended to identify forward looking statements, although
not all forward looking statements contain these words. The following
discussion and analysis should be read in conjunction with our financial
statements and accompanying notes included herein, our Annual Report on
Form 10-K for the year ended December 31, 1998, and "Factors Affecting
Future Results" below.
OVERVIEW
In April 1999, we announced the preliminary results from preclinical
studies of Elirex(TM), our drug candidate for treatment of heart attack.
The preliminary results suggested that Elirex(TM) did not reduce infarct
size in three of four preclinical studies conducted. In a fourth
preclinical study, Elirex(TM) appeared to reduce infarct size by 33% in
a pretreatment model of ischemia/reperfusion. Given the results of these
preclinical studies, our need for cash to continue the preclinical
development of these compounds and our cash-burn rate, we implemented a
cash conservation plan while we are identifying strategic alternatives
for the Company. We retained US Bancorp Piper Jaffray to assist in
identifying strategic alternatives for the Company. As part of our cash
conservation plan, we effected a layoff of 18 employees, signed a lease
termination agreement for our research laboratory and administrative
offices and sold our laboratory equipment and other personal property in
a public auction. Currently, our employees consist of three
administrative employees and our unpaid, part-time acting President and
CEO. We currently expect our cash resources to last into the first
quarter of 2000.
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999
AND 1998
We did not generate any revenues for the three and six months ended June
30, 1999 and 1998. We do not have any commercially available products,
and do not anticipate generating any significant product revenues for at
least the next several years.
Research and development expenses included salaries and related
benefits, laboratory supplies, depreciation of equipment, facility
costs, consulting fees, research collaboration expenses, toxicology
study costs, contract manufacturing expenses, legal fees for patents and
other research related expenditures. We incurred research and
development expenses of approximately $1,078,000 and $2,354,000 for the
three and six months ended June 30, 1999 and approximately $1,702,000
and $3,755,000 for the three and six months ended June 30, 1998. The
decrease in research and development costs from 1998 to 1999 is
primarily due to decreased salary and benefits costs resulting from the
reduction of personnel in June 1998 and the further reduction of
personnel in April 1999, decreased supply costs resulting from the
reduction in personnel, and decreased research collaboration costs
resulting from the termination of the agreement with Oxford Asymmetry
Limited in April 1998, partially offset by an increase in preclinical
animal study costs for Cardiosol and Elirex and severance paid to
terminated employees.
We expect research and development expenses to continue to decrease in
1999, as a result of the reduction of personnel in April 1999. Our
expenditures will also be limited by our efforts to maintain enough cash
to operate into the first quarter of 2000. See "Liquidity and Capital
Resources" below.
General and administrative expenses consist of salaries and related
benefits, legal expenses for litigation and general corporate matters,
depreciation of office furniture and equipment, facility costs,
consulting fees and other administrative expenses. We incurred general
and administrative expenses of approximately $698,000 and $1,447,000 for
the three and six months ended June 30, 1999, and $898,000 and
$2,252,000 for the three and six months ended June 30, 1998. The
decrease in 1999 compared to 1998 is primarily due to a reduction in
severance costs paid to a former officer, a reduction of compensation
expense related to option grants and a reduction in legal fees,
partially offset by severance paid to terminated employees. General and
administrative expenses are expected to continue to decrease as a result
of the reduction of personnel in April 1999.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(CONTINUED)
Interest income was approximately $27,000 and $59,000 for the three and
six months ended June 30, 1999 and $119,000 and $266,000, for the three
and six months ended June 30, 1998. The decrease in interest income in
1999 compared to 1998 is primarily due to the decrease in the cash
balance. Interest expense was approximately $13,000 and $27,000 for the
three and six months ended June 30, 1999, and $22,000 and $43,000 for
the three and six months ending June 30, 1998. The decrease in interest
expense in 1999 compared to 1998 is due to the paydown of the equipment
loan obtained during 1997. We expect interest expense in 1999 to
decrease further due to the payoff of our equipment loan in June 1999.
We incurred net losses of approximately $1,761,000 and $3,768,000 for
the three and six months ended June 30, 1999 and $2,503,000 and
$5,785,000, for the three and six months ended June 30, 1998. As of June
30, 1999, we had an accumulated deficit of approximately $46,354,000. We
expect to continue to incur losses while searching for strategic
alternatives.
YEAR 2000
We have completed our assessment of the impact of the "year 2000"
problem and believe our systems that are critical to our business
operations will be able to recognize a date using "00" as the year 2000.
In addition, we have asked our vendors that provide certain outside
services we rely upon, such as payroll, banking services and research
organizations, to determine their year 2000 readiness. While we believe
these service providers will be ready for the year 2000, failure of them
to be ready for the year 2000 could be disruptive to our business
operations if their systems are unavailable for an extended period of
time. However, we believe our business operations would not be
materially adversely affected by the disruption of such services. We
continuously evaluate our vendors for year 2000 compliance. We believe
if our systems are not year 2000 compliant, we would be able to address
and resolve any non-compliance before a material adverse effect occurs
on our business operations. Our key processes could be manually
performed for a sufficient period of time.
To date, we have not incurred substantial costs to address the year 2000
issue. We estimate additional costs, if any, for actions we take to
address the year 2000 problem would not be material. Despite our efforts
to address the year 2000 impact on our systems and business operations,
if the year 2000 problems are more disruptive than we reasonably expect
and our plans prove inadequate, the year 2000 problem could result in a
material disruption of our business or it could have a material adverse
effect on our business, financial condition or results of operation.
LIQUIDITY AND CAPITAL RESOURCES
In the first quarter of 1999, we raised approximately $950,000 in net
proceeds through the sale of 1,000,000 shares of our Common Stock at a
price of $1.00 per share in a private placement. In addition, in April
1999 we received $200,000 for the purchase of 137,099 shares of common
stock at $1.4588 per share, under the Boehringer Mannheim Letter of
Intent.
As of June 30, 1999, our remaining sources of capital consist of
approximately $1.1 million in cash and cash equivalents, approximately
$500,000 to be received for the net proceeds of the auction of equipment
and other personal property, and interest from investments.
The Company and five of its past or present directors and officers are
defendants in class action lawsuits. (See "Note 5 of the Condensed
Consolidated Financial Statements".) We maintain officers and directors
liability insurance under policies providing aggregate coverage totaling
$3 million, which covers (i) the Company for amounts spent indemnifying
directors and officers or (ii) directors and officers directly if we
fail to indemnify them. The policies do not provide coverage to the
Company itself with respect to its own defense costs and liability. On
January 25, 1999, we announced that we reached an agreement in principle
with the plaintiffs' class action counsel to settle the above litigation
against the Company and the five former officers and directors. The
agreement provides for payment of $500,000, of which approximately
$155,000 is to be paid by us and approximately $345,000 is to be paid by
our
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
insurer. We incurred expenses of approximately $28,000 in the six months
ended June 30, 1999 and approximately $16,000 in the six months ended
June 30, 1998, relating to this litigation.
The settlement agreement is subject to negotiation and execution of a
detailed stipulation of settlement between the parties, submission of
the stipulation of settlement to the court, provisions of notice to
class members of the settlement terms, a fairness hearing, and financial
approval of the settlement by the court. We cannot predict exactly how
long these procedures will take or when final dismissal will be
obtained.
We also negotiated a settlement agreement and mutual release with
Shoenberg Hieber, Inc., which was named as a defendant in Degulis v. LXR
Biotechnology Inc. Shoenberg acted as an independent underwriter in the
initial public offering and asserted claims for indemnity against us
under the underwriting agreement. We paid $12,500 in March 1999 to
settle this claim.
We do not have any committed sources of future equity or debt funding.
We have implemented cost containment measures and established critical
priorities in order to manage cash to provide for operations into the
first quarter of 2000. However, there can be no assurance that
unanticipated events will not result in depletion of our capital
resources before that time. Accordingly, we would need to raise
substantial additional capital to fund our operations if our evaluation
of strategic alternatives leads us to a decision to carry on operations.
Failure to find a buyer for LXR or our assets or to raise additional
funds in the relatively near future will have a material adverse effect
on our operations and could result in the need to cease further
operations altogether.
Our independent auditors have issued their report on our 1998
Consolidated Financial Statements which states in part that we have
suffered recurring losses and have limited liquidity, both of which
raise substantial doubt about our ability to continue as a going
concern.
FACTORS AFFECTING FUTURE RESULTS
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
We expect to require funds to continue to evaluate our strategic
alternatives through 1999 and additional funds to continue any
operations beyond the beginning of 2000. Our capital requirements depend
on numerous factors, including the following:
o the outcome of our review of our strategic alternatives;
o the status of our research and development programs;
o the time and costs involved in obtaining regulatory approvals;
o the cost of filing, prosecuting, defending and enforcing
patent claims and other intellectual property rights;
o the cost of maintaining technological rights;
o competing technological and market developments;
o our ability to establish collaborative arrangements; and
o any further legal expenses incurred in connection with
defending certain lawsuits that have been brought against us
and certain of our past and present directors and officers.
Based upon our current plans, we believe we have sufficient funds to
meet our operating expenses and capital requirements into the first
quarter of 2000. The factors identified above may result in the
expenditure of all available funds before then.
Depending on the outcome of the review of our strategic alternatives, we
may need to seek additional funding from investors and from
collaborative or other arrangements with corporate partners. Additional
financing may not be available from any of these sources, or may not be
available on favorable or acceptable terms.
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING (CONTINUED)
Additional financings may result in additional dilution to our security
holders. If we obtain funds by entering into arrangements with
collaborative partners or others, we may relinquish rights to certain of
our technologies. If adequate funds are not available, we may be
required to delay, scale back or eliminate the development of our
potential products to an even greater extent than we have done to date.
Our failure to obtain needed funds would have a material adverse effect
on our operations. This could result in the need to suspend our
operations and could prevent us from continuing to develop our
technology.
Our independent auditors' report on our 1998 Consolidated Financial
Statements states in part that we have suffered recurring losses and
have limited liquidity, both of which raise substantial doubt about our
ability to continue as a going concern.
EARLY STAGE OF DEVELOPMENT; REGULATORY AND TECHNOLOGICAL UNCERTAINTIES
We are at an early stage of development. All of our potential
pharmaceutical and medical device products are currently in research and
development. No revenues from the sale of potential products have ever
been generated. Substantially all of our resources have been, and for
the foreseeable future will continue to be, dedicated to our research
programs and the development of potential pharmaceutical, medical
device, and medical food/nutriceutical products resulting from the
research programs. We may be unable to develop a commercial product from
these projects.
All of our drug and medical device candidates are in preclinical
development, except for HK-Cardiosol(TM) and CP-Cardiosol(TM), which
have received approval to begin clinical trials.
In April 1999 we announced the preliminary results from preclinical
studies of Elirex(TM), our drug candidate for treatment of heart attack.
The preliminary results suggest that Elirex(TM) did not reduce infarct
size in three of four preclinical studies conducted. In a fourth
preclinical study, Elirex(TM) appeared to reduce infarct size by 33% in
a pretreatment model of ischemia/reperfusion. Although these preclinical
results pave the way for additional studies that would be appropriate to
fully evaluate the drug, they did not meet our near-term objectives of
confirming the earlier positive results of Elirex(TM) and identifying
the best Elirex(TM) compound to develop further.
Our potential products will require significant additional research and
development and preclinical testing and will require extensive clinical
testing prior to submission of any regulatory application for commercial
use. Our potential pharmaceutical products are subject to the risks of
failure inherent in the development of pharmaceutical products based on
new technologies. These risks include the following:
o our novel approach to diagnosis and therapy may not be
successful;
o any or all of our potential pharmaceutical products may be
found to be unsafe, ineffective or toxic, or otherwise fail to
receive necessary regulatory clearances;
o the products, if safe and effective, will be difficult to
manufacture on a large scale or uneconomical to market;
o proprietary rights of third parties could preclude us from
marketing products;
o third parties could market superior or equivalent products;
and
o cash constraints may prevent further development of these
products.
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EARLY STAGE OF DEVELOPMENT; REGULATORY AND TECHNOLOGICAL UNCERTAINTIES
(CONTINUED)
As a result of the above risks:
o our research and development activities may not be
successfully completed;
o clinical trials may not be allowed by the FDA or other
regulatory authorities;
o clinical trials may not commence as planned;
o required U.S. or foreign regulatory approvals may not be
obtained on a timely basis, if at all; and
o products for which approval is obtained may not result in any
commercially viable products.
RELIANCE ON NOVEL SCIENTIFIC APPROACH
Our product development efforts have been based on the novel scientific
approach of therapeutic apoptosis modulation, which is a process of
regulating genetically programmed cell death. This process has not been
widely studied and there is substantial risk that this approach will not
be successful.
Moreover, we have applied this novel approach to discover new treatments
for a variety of diseases that are also the subject of research and
development efforts by other companies. Many of these other companies
are much larger and better funded than we are.
Biotechnology in general and apoptosis modulation in particular are
relatively new fields in which there is a potential for extensive
technological innovation in relatively short periods of time. Our
competitors may succeed in developing technologies or products that are
more effective than ours. Rapid technological change or developments by
others may result in our technology or proposed products becoming
obsolete or noncompetitive.
HISTORY OF LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY
We have incurred significant operating losses since our inception in
1992. At June 30, 1999, we had an accumulated deficit of approximately
$46,354,000. Even if we are able to raise additional funds and continue
to operate independently, we would expect to incur significant losses
for at least the next several years.
Revenues, if any, that we may receive in the next few years will be
limited to payments from the following sources:
o our agreement with Introgen related to the Bak gene, provided
Introgen exercises its option to enter into a license
agreement with us;
o payments under research or product development relationships
that we may establish in the future;
o payments under license agreements that we may establish in the
future;
o sales of products that we may develop in the future; and
o interest payments.
We may not receive the above payments because we may not be able to (i)
establish any additional collaborative relationships, (ii) enter into
any license agreements, or (iii) develop or acquire any products in the
future.
Our ability to achieve profitability also will depend upon the
following:
o our ability to successfully compete either alone or with
others;
o development of our potential products;
o clinical trial results;
o regulatory approvals; and
o our ability to manufacture and market our products or to enter
into license agreements on acceptable terms.
14
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DEPENDENCE ON QUALIFIED PERSONNEL AND CONSULTANTS
We are highly dependent on the principal member of our management staff,
G. Kirk Raab, our interim President and Chairman of the Board, who is
currently acting on an unpaid basis. The departure of Mr. Raab or other
members of our staff could have a material adverse effect on operations.
Our previous President and Chief Executive Officer, Paul J. Hastings,
resigned effective June 14, 1999, but is continuing as a member of our
board of directors.
We have an employment agreement with Mr. Raab and a consulting agreement
with L. David Tomei. Either of these people, however, may terminate his
relationship with us at any time. The laws of the State of California
generally restrict or prohibit post-employment noncompetition covenants
and, therefore, none of our employees is subject to any restriction on
competition in the future. Any employees who leave us or have left us in
the past could organize competitive businesses or accept employment with
companies competitive with us.
We are dependent on collaborators at research institutions and our
advisors and consultants. Further development of our technology will
require additional expertise from outside consultants in areas such as
preclinical testing, clinical trial management, regulatory affairs,
manufacturing and marketing.
DEPENDENCE ON OTHERS; COLLABORATIONS
Our strategy for the research, development and commercialization of our
potential pharmaceutical products requires that we enter into various
arrangements with corporate and academic collaborators, licensors,
licensees and others, in addition to those already established. Our
success may therefore be dependent upon the subsequent success of
outside parties in performing their responsibilities.
For example, we entered into an Evaluation and Exclusive Option
Agreement with Introgen Therapeutics Inc., enabling Introgen to assess
the anti-tumor activity of the Bak gene. The agreement also grants
Introgen an option to enter into an exclusive license agreement with us
related to the Bak gene. However, Introgen is not obligated to enter
into a license agreement with us. Introgen subsequently assigned this
agreement to an affiliate, Gendux Inc.
We may be unable to establish additional collaborative arrangements or
license agreements that we consider necessary or acceptable.
Additionally, we may be unable to develop and commercialize our
potential products, and our collaborative arrangements or license
agreements may not be successful.
Some of our future collaborative arrangements may place responsibility
for preclinical testing and human clinical trials and for preparing and
submitting applications for regulatory approval for potential products
on our collaborative partner. Our business may be adversely affected if
a collaborative partner fails to develop or commercialize successfully
any potential product to which it has rights. Our collaborators may
pursue alternative technologies or develop products either on their own
or in collaboration with others.
RISKS ASSOCIATED WITH LICENSES
We have licensed technologies developed by various research institutes
and universities. Pursuant to the terms of these agreements, we may be
obligated to make royalty payments on the sales, if any, of licensed
products or milestone payments. In some instances, we are responsible
for the cost of filing and prosecuting patent applications. Some of our
license agreements also require that we exercise diligence in bringing
potential products to market. In the event that we are unable to meet
our obligations under the license agreements, we could lose our rights
to our technologies under the license agreements.
MANUFACTURING LIMITATIONS
We currently do not have the capability to manufacture products under
the current Good Manufacturing Practices ("GMP") requirements prescribed
by the FDA. We will need this capability in order to independently
manufacture, package, label and distribute our potential pharmaceutical
or other products. Alternatively, depending on the outcome of the
evaluation of our strategic alternatives, we may seek arrangements with
contract manufacturers or contract packagers to do the following:
15
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MANUFACTURING LIMITATIONS (CONTINUED)
o supply sufficient quantities of products to conduct clinical
trials, and
o manufacture, package, label and distribute finished
pharmaceutical products.
If we are unable to manufacture or contract for a sufficient supply of
potential pharmaceutical products on acceptable terms, our preclinical
and human clinical testing schedule may be delayed. A delay in the
testing schedule would result in the delay of submission of products for
regulatory approval and initiation of new development programs.
Delays or difficulties in establishing relationships with manufacturers
to produce, package, label and distribute our finished pharmaceutical or
other products could delay the market introduction and subsequent sales
of those products. In addition, contract manufacturers that we may use
must adhere to GMP required by the FDA.
We have entered into a manufacturing agreement with Chesapeake
Biological Laboratories, Inc. ("CBL") to manufacture HK-Cardiosol(TM)
and CP-Cardiosol(TM) for clinical trials. CBL may be unable to
manufacture sufficient quantities of HK-Cardiosol(TM) and
CP-Cardiosol(TM) at such time in the future as we may order additional
material.
California manufacturing companies are required to obtain a license from
the State of California to distribute any investigational products. This
license will be issued to us only if we are in compliance with the GMP
regulations, as determined by an inspection conducted by the State of
California. If we are unable to manufacture our potential products
independently or to obtain or retain third-party manufacturing on
commercially acceptable terms, we may be unable to commercialize our
products as planned. Our potential dependence upon third parties for the
manufacture of our products could harm our profit margins and our
ability to develop and deliver products on a timely and competitive
basis.
We have no experience in the manufacture of pharmaceutical products or
medical devices in clinical quantities or for commercial purposes. If we
decide to manufacture products ourselves, the following would occur:
o we would be subject to the regulatory requirements described
above;
o we would be subject to similar risks regarding delays or
difficulties encountered in manufacturing those products; and
o we would require substantial additional capital.
Because of these risks, we may not be able to manufacture any products
successfully or in a cost-effective manner.
16
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information in Note 8 to the Condensed Consolidated Financial
Statements included in Part I of this document is incorporated herein by
reference.
ITEM 2. CHANGES IN SECURITIES
In March 1999, the Company sold 1,000,000 shares of the Company's common
stock at a price of $1.00 per share in the March 1999 Private Placement.
The Company issued 60,000 additional shares for services rendered in
connection with the private placement.
In April 1999, the Company sold 137,099 shares of the Company's common
stock at a price of $1.4588 under the terms of the Boehringer Mannheim
Letter of Intent.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 10, 1999, the Company held its Annual Meeting of Stockholders
with the following results:
1) The following individuals were elected as directors of the Company:
<TABLE>
<CAPTION>
Shares Voting Shares
in Favor withheld
------------- --------
<S> <C> <C>
G. Kirk Raab 23,764,539 417,155
Eugene Eidenberg 23,764,539 417,155
Brian Brookover 23,534,088 647,606
Kenneth McGuire 23,763,039 418,655
William Hambrecht 23,765,539 416,155
John C. Kane 23,762,539 419,155
Paul J. Hastings 23,757,204 424,490
</TABLE>
2) The proposal to amend the Company's 1993 Stock Option Plan to
increase the number of shares of common stock reserved for issuance
by 1,000,000 was approved with 22,828,862 shares cast in favor of
the amendment, 1,326,132 shares voting against and 26,700 shares
withheld and/or abstaining.
3) The selection of KPMG LLP as the Company's independent auditors was
ratified with 23,973,219 shares cast in favor of the selection,
176,125 shares voting against, and 32,350 shares withheld and/or
abstaining.
ITEM 5. OTHER INFORMATION
On June 10, 1999, the Company announced that Paul J. Hastings had
stepped down as its President and Chief Executive Officer effective June
14, 1999, but would retain his seat on the Board of Directors. G. Kirk
Raab has assumed the role of the Company's acting President and CEO on
an unpaid, part-time basis.
The Company was delisted from the American Stock Exchange effective at
the opening of business on August 5, 1999. The Company's stock now
trades on the Nasdaq OTC Bulletin Board.
In July 1999, John C. Kane resigned from the Company's Board of
Directors. Additionally, in August 1999, William Hambrecht and
Eugene Eidenberg resigned from the Company's Board of Directors.
In June 1999, the Company signed a lease termination agreement for
its facility. Under the terms of the agreement, the Company paid
$66,000 in cash, forfeited a security deposit of approximately $23,000,
and transferred title to leasehold improvements with a net book value
of approximately $340,000 to the Landlord in exchange for the
termination of the Lease agreement.
In July 1999, the Company completed the auction of its equipment and
other personal property. The net proceeds from the auction were
approximately $500,000.
17
<PAGE> 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. The following exhibits are attached hereto:
<TABLE>
<CAPTION>
Exhibit
Number Title
------ -----
<S> <C>
10.53 Exclusive Authorization to Conduct a Public Auction
10.54 Lease Termination Agreement
11.01 Computation of Net Loss Per Share
27.01 Financial Data Schedule
</TABLE>
- -----------------------
(b) Reports on Form 8-K.
On June 10, 1999, the Company filed a report on Form 8-K, reporting
the implementation of a cash conservation plan to enable it to
continue operations while it explores strategic alternatives.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
LXR BIOTECHNOLOGY INC.
Date: August 16, 1999 By: /s/ Patti M. Childs
--------------------------------------------
Patti M. Childs
Director, Finance and Administration
(Principal Accounting and Financial Officer)
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Title
------ -----
<S> <C>
10.53 Exclusive Authorization to Conduct a Public Auction
10.54 Lease Termination Agreement
11.01 Computation of Net Loss Per Share
27.01 Financial Data Schedule
</TABLE>
- -----------------------
<PAGE> 1
EXHIBIT 10.53
EXCLUSIVE AUTHORIZATION TO CONDUCT A PUBLIC AUCTION
DOVE BROTHERS, LLC ("Auctioneer") located at 1241 E. Hillsdale Blvd., Foster
City, CA 94404, Attention Kirk Dove, telephone (650) 571-7400, fax (650)
572-1502; and
Attention: Mr. Paul J. Hastings, President & CEO
Company Name: LXR Biotechnology, Inc.
Address: 1401 Marina Way South
Richmond, CA 94804
Telephone: (510) 412-9110
Fax: (510) 412-9109
("Seller") hereby agree as follows:
1. REPRESENTATION; TERMS OF SALE: Auctioneer shall represent Seller in
connection with a piecemeal auction (the "Auction") of LXR Assets (each an
"Asset" and collectively the "Assets"). See Exhibit "A" attached hereto.
2. COMMISSION: The Assets shall be sold by the piece, or by the lot, such
determination to be made by Auctioneer at its' sole discretion. Auctioneer shall
receive a commission of zero percent (0%) of the gross proceeds of sale. (For
purposes of this contract, "gross proceeds" means all revenue from the sale of
Assets pursuant to this contract, except (a) any applicable sales taxes
collected by Auctioneer and (b) any buyer's premium payments collected pursuant
to Paragraph 3 below.)
3. BUYER'S PREMIUM: Separately, Auctioneer shall charge a Buyer's Premium
at the auction for its own account as part of its compensation for auction
services. The Buyer's Premium shall be ten percent ( 10%) of each successful
buyer's price for items purchased, and shall be collected by Auctioneer directly
from each successful bidder at the Auction.
4. SALE WITHOUT CONFIRMATION: Seller understands and agrees that all
Assets in the Auction sale (whether offered for sale by the piece or by the lot)
shall be sold to the highest bidder, regardless of price. Seller shall have no
right of confirmation, i.e., no right to approve the highest bid as a condition
to the completion of the sale of any Assets to the highest bidder. Seller
understands and agrees that all sales are final (but subject to buyer's timely
payment in full and removal of purchased items).
5. DISCLAIMERS OF WARRANTIES: Unless Seller instructs Auctioneer otherwise
in writing, Auctioneer shall state both in its advertising for the Auction and
at the Auction that all Assets are being sold "as is, where is and without
warranty" and with any additional disclaimers of warranty or other disclaimers
as Seller shall specify to Auctioneer in writing (but excluding any in-place
transferable maintenance agreements). However, Seller understands and agrees
that Auctioneer, in so stating, is in no way (a) representing or warranting to
Seller that any purchaser of any Asset will not attempt to assert a claim
against Seller based on the alleged existence or breach of any alleged
warranties, or (b) agreeing to indemnify or hold harmless Seller from or against
any claim or liability asserted against Seller by any third party (including but
not limited to any purchaser of any Assets at the Auction) based on the alleged
existence or breach of any alleged warranties, or from or against any fees or
expenses incurred by Seller in defending against any such claim or liability.
6. SALES FREE AND CLEAR OF LIENS: Seller represents and warrants that
Seller now holds (and up to the moment of the Auction and/or sales provided for
under this contract shall hold) good and
<PAGE> 2
marketable title to all Assets and each item thereof free and clear of any lien,
security interest, leasehold interest, co-ownership interest, or any other type
of encumbrance or interest of any other person or entity. Seller understands and
acknowledges that Auctioneer is relying on the foregoing representations and
warranties in proceeding to conduct the Auction and/or sales provided for under
this contract. Seller hereby agrees to defend and indemnify Auctioneer from and
against any claim, cause of action, liability or expense asserted against or
incurred by Auctioneer in connection with Auctioneer's sale of any Assets which
any person or entity alleges was, at the time of sale, subject to a lien,
security interest, leasehold interest, ownership interest, or any other type of
encumbrance or interest held by any person or entity. Seller hereby authorizes
Auctioneer to use the Seller's name, street address and logo in the advertising
of this Auction.
7. AUCTION EXPENSES: An Auction expense budget including, but not limited
to, advertising (brochures, ads, signs), site and sale preparation (site rental,
telephone lines, equipment rental, sound system, pre-Auction set-up and
post-Auction check-out), labor (temporary employment, Auction day accounting
personnel, security guards), and armored car services, not to exceed thirty
seven thousand five hundred Dollars ($37,500) (the "Expense Budget") is
authorized for this project. Auction expenses shall be advanced by Auctioneer up
to the amount of the Expense Budget and shall be reimbursed to Auctioneer from
the gross proceeds. In the event that Seller makes changes to the Assets or the
Auctioneer's set up, auction day, or check out plans, Seller agrees that the
"Auction Expenses" may change accordingly and any such additional expense, shall
also be reimbursed to the Auctioneer from the gross proceeds. In the event that
walls or other structures must be removed or modified to remove the purchased
Assets, all supervision and expense of such removal and modification will be
borne be by the Seller.
8. UNSOLD ASSETS: In the event that there are unsold assets at the end of
auction check out, they will be returned to the Seller at the auction site
9. REIMBURSEMENT EXPENDITURES: Seller understands and agrees that in all
events Auctioneer must be reimbursed by Seller for Auctioneer's reimbursable
expenditures under Paragraph 7 above. Accordingly, in the event the gross
proceeds do not exceed Auctioneer's aggregate reimbursable expenditures under
Paragraph 7 above, Auctioneer shall apply all the gross proceeds to
reimbursement of such expenditures, and Seller shall thereafter promptly pay
Auctioneer the remaining amount necessary to reimburse Auctioneer fully for all
such expenditures (i.e., Seller shall pay Auctioneer the difference between (i)
the aggregate reimbursable expenditures under Paragraph 7 above, and (ii) the
gross proceeds that Auctioneer has applied to such expenditures).
10. SALES PRIOR TO THE AUCTION: Auctioneer shall be entitled to an equal
fee on each sale generated pre-Auction, i.e., any sale of one or more Assets
pre-Auction shall be subject to the commission schedule and buyer's premium as
set forth in Paragraphs 2 and 3 above. Neither Auctioneer nor Seller shall
accept a pre-Auction bid for any Assets (or otherwise effect a pre-Auction sale
of any Assets) without the mutual written consent of both Seller and Auctioneer.
If for any reason the auction sale is canceled after the signing of our auction
agreement and prior to the auction brochures being mailed out (approximately two
to three weeks before the auction date), we are to receive a fee of $20,000 plus
all out-of-pocket expenses incurred until that time. If for any reason the sale
is canceled after the mailing of the auction brochures and prior to the auction
sale, we are to receive a fee of $30,000 plus all out-of-pocket expenses
incurred until that time.
11. COLLECTION AND DISBURSEMENT OF AUCTION PROCEEDS: Auctioneer shall
collect the gross proceeds and any applicable sales taxes and deposit them into
a FDIC insured bank depository account maintained by the Auctioneer. All
applicable sales taxes collected by Auctioneer shall be paid to the appropriate
taxing authorities out of such depository account. Thereafter, Auctioneer shall
be paid from the account its reimbursable expenses pursuant to Paragraph 7
above, and its commissions pursuant to Paragraph 2 above, and Seller shall be
issued a check for the balance in the account (comprised of the gross proceeds
less the amount reimbursed to Auctioneer pursuant to Paragraph 7 above and less
the amount of Auctioneer's commissions pursuant to Paragraph 2 above), all
within fifteen (15) business days after the final day of the Auction checkout
period.
<PAGE> 3
12. SCHEDULED DATE OF THE AUCTION AND LOCATION: The Auction shall be held
on July 14, 1999 at 1401 Marina Way South, Richmond, CA 94804 or on such other
date and at such other place as may be mutually agreed to by the parties.
13. PERMITS AND LICENSES: Auctioneer shall be responsible for obtaining
all necessary city, state, and municipal licenses and permits for the Auction.
14. STANDARDS: The Auction shall be conducted in accordance with the
professional standards and expectations of the auction industry, in accordance
with the Uniform Commercial Code, and any other applicable state and local laws.
However, Auctioneer does not guarantee that any sale will be made, and
Auctioneer is not responsible in the event that a buyer fails to live up to its
agreement and complete a purchase.
15. INSURANCE AND DESTRUCTION OF ASSETS: Seller shall be responsible for
maintaining all property insurance coverage pertaining to Assets designated for
Auction, being transferred to and from Auction sites and being stored at Auction
sites. Further, if the Auction takes place at premises owned or leased by
Seller, Seller shall maintain existing liability insurance. In the event of any
loss, damage or destruction prior to the sale at Auction of any or all Assets,
Seller shall remain liable to Auctioneer for Auctioneer's reimbursable expenses
under Paragraph 7 above. In the event of loss, damage or destruction of any or
all Assets after sale at Auction, Auctioneer shall be entitled to its full
commissions under Paragraph 2 above on such lost, damaged or destroyed Assets,
based on the sales prices of such Assets at Auction. Any loss, damage or
destruction of any or all Assets (whether before or after Auction) shall in no
way alter or diminish Seller's obligation to reimburse Auctioneer for all of
Auctioneer's reimbursable expenses under Paragraph 7 above. Auctioneer shall
carry all Workmen's Compensation Insurance for Auctioneer's employees in
compliance with all applicable state and local laws.
16. ATTORNEYS' FEES: If any action at law or in equity is brought to
enforce the terms of this contract, the prevailing party shall be entitled to
recover its reasonable attorneys' fees and expenses from the other party. In
addition, in the event that Auctioneer obtains a judgment against Seller for any
amounts due under this contract, Auctioneer shall be entitled to recover its
attorneys' fees and costs incurred in enforcing and collecting upon such
judgment.
17. ADDITIONAL AUCTION INVENTORY: Seller acknowledges and agrees that
Auctioneer may, at Auctioneer's discretion, include in the Auction sale
additional items from other customers and for other customer's accounts in order
to increase public attendance.
18. SECURITY INTEREST: Seller hereby grants Auctioneer a security interest
in all of Seller's right, title and interest in and to all amounts collected or
collectable from the sale of any and all Assets under this contract (including
the gross proceeds and including accounts or general intangibles representing
any unpaid portion of the purchase price due from any buyer on any or all of the
Assets), which security interest secures Seller's obligations to Auctioneer
under this contract (including the commissions and reimbursable expenditures due
Auctioneer under this contract).
19. BONDED COMPLIANCE: Dove Brothers, LLC and the auctioneers it employs
are bonded to the people of the State of California and regulated by the
California Secretary of State, Special Filings Division, located at P. O. Box
944225, Sacramento, California 94244, Telephone (916) 324-6778.
20. COUNTERPARTS: This contract may be executed in any number of
counterparts, each of which when executed will be deemed to be an original and
all of which when taken together will be deemed to be but one and the same
instrument.
<PAGE> 4
21. GOVERNING LAW: This contract shall be governed by, and construed and
enforced in accordance with, the substantive laws of the State of California as
applied to contracts made in such State.
Seller accepts the foregoing contract under the terms and conditions set forth
above and acknowledges receipt of a copy hereof. Seller further understands and
acknowledges that this contract shall not become valid and effective as to
Auctioneer unless and until it has been signed by two separate authorized
representatives of Auctioneer in the two separate signature lines provided for
Auctioneer in the left-hand column below.
This contract is made and entered into as of June 4, 1999.
Dove Brothers, LLC LXR Biotechnology, Inc.
("Auctioneer")* ("Seller" )
California Bond No. B2488496
By: /s/Doug Berman By: /s/Paul J. Hastings
--------------------------- ----------------------------
Title: Vice President Title: President & CEO
------------------------ -------------------------
By: /s/Kirk Dove Seller's Federal Tax Identification No.:
---------------------------
Title: President 68-0282856
------------------------ ------------------------------
* Requires signatures of two separate authorized representatives of Auctioneer
for this contract to become valid, effective, and binding as to Auctioneer.
<PAGE> 1
EXHIBIT 10.54
LEASE
TERMINATION AGREEMENT
This Lease Termination Agreement ("Agreement") is made to be effective
as of June 4, 1999, by and among, MARINA WESTSHORE PARTNERS, LLC, a California
limited liability company ("Landlord") and LXR BIOTECHNOLOGY, INC., a Delaware
corporation ("Tenant"), with reference to the following facts:
RECITALS
A. Landlord's predecessor in interest and Tenant entered into that
certain Sublease dated August 19, 1993, which, as amended, is referred to herein
as the "Lease". All capitalized terms not defined herein shall have the meanings
ascribed to them in the Lease.
B. The Sublease Premises constitute in excess of 32,800 rentable square
feet and the Term of the Lease is scheduled to expire on June 30, 2010. Tenant
has determined that Tenant no longer has need of the substantial space currently
under lease and desires to terminate the Lease and its ongoing liability
thereunder. In consideration for such termination of the Lease, Tenant has
offered to make a lump sum payment to Landlord and to transfer to Landlord the
interest of Tenant in certain leasehold improvements, as more fully set forth
below.
C. Landlord has expressed its willingness to agree to such an
arrangement and to provide a license to Tenant to remain in the Sublease
Premises for a limited period of time, as set forth below.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants contained herein, the parties hereto agree as follows:
1. LEASE TERMINATION. In consideration of the covenants of the parties
set forth herein, Landlord and Tenant agree that the Lease shall terminate
effective on June 4, 1999 (the "Termination Date"), subject however to Tenant's
performance its obligations under clauses (a) and (b) below. In consideration
for such termination and the license to be granted to Tenant as described in
Section 5 below, Landlord shall retain the Security Deposit in the amount of
$22,910.40 (to be used, at Landlord's election, to restore the restroom to the
Premises that Tenant altered), and on or before June 4, 1999 (a) Tenant shall
pay to Landlord the sum of $66,000 by cashier's check or wire transfer of funds
to Landlord's designated bank account, and (b) Tenant shall execute and deliver
to Landlord a bill of sale in the form attached hereto as Exhibit A , thereby
transferring to Landlord the interest of Tenant in certain fixtures and
improvements described in Section 2 below and identified in Exhibit B attached
hereto (the "Leasehold Assets"). While Landlord and Tenant believe the Leasehold
Assets to be fixtures and therefore a part of the Leased
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Premises rather than personal property, if any sales tax is imposed with respect
to the transfer of the Leasehold Assets, Tenant shall be responsible the payment
of such tax.
2. LEASEHOLD ASSETS. The Leasehold Assets comprise all fixtures and
leasehold improvements on the Leased Premises in which Tenant has an interest,
including without limiting the foregoing, all laboratory benches, fume hoods,
autoclaves and cold rooms, the manufacturing room, the house deionised water
system and the security system. The Leasehold Assets include all items described
in Exhibit B attached hereto. Unless itemized and specifically included on
Exhibit B attached hereto, the Leasehold Assets expressly exclude all personal
property computers, office equipment and supplies, free- standing laboratory
equipment, and office furniture and furnishings at the Leased Premises.
3. SURRENDER; CONDITION OF PREMISES AND TERMINATION. On or before 3:00
p.m. on the Termination Date, Tenant shall, subject to the License, surrender
possession of the Leased Premises and the Leasehold Assets to Landlord in
substantially the same condition as they were on May 13, 1999, during the joint
walk-through of the Leased Premises by representatives of Landlord and Tenant.
Subject to Tenant performing its obligations to Landlord set forth in this
Agreement, Tenant shall have no further obligations under the Sublease after the
Termination Date.
4. RELEASE OF LIABILITY. Conditioned on the full and timely performance
by the parties of the provisions of this Agreement, effective as of the
Termination Date, Landlord and Tenant shall be fully and unconditionally
released and discharged from their respective obligations arising from or
connected with the Lease. This Agreement shall fully and finally settle all
demands, charges, claims, accounts, or causes of action of any nature,
including, but not limited to, both known and unknown claims and causes of
action that arise out of or in connection with the Lease, and this Agreement
constitutes a mutual release with respect to the Lease.
Each of the parties expressly waives the provisions of California Civil
Code Section 1542, which provides as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor."
5. LICENSE. For valuable consideration, the receipt of which is hereby
acknowledged by Landlord, and in consideration for Tenant performing its
obligations set forth above, as an accommodation to Tenant to enable Tenant to
remove and possibly sell certain personal property assets of Tenant at the
Leased Premises (which excludes any interest of Tenant in the Leasehold Assets),
concurrent with the execution of this Agreement, Landlord agrees to enter into a
license with Tenant in the form of Exhibit C attached hereto, permitting Tenant
to remain in the Leased Premises for an interim period.
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<PAGE> 3
6. VOLUNTARY AGREEMENT. The parties each confirm that they have had an
opportunity to have their respective legal counsel review this Agreement and the
Exhibits hereto. The parties further confirm that each has read this Agreement
and the mutual releases contained in it, and each has freely entered into this
Agreement.
7. BINDING EFFECT. Each of the parties represents to the other that all
authorizations necessary for it to enter into this Agreement have been obtained,
that it has full power and authority to enter into this Agreement and perform
its obligations hereunder, that the persons executing this Agreement on behalf
of such party are duly authorized to do so, and that this Agreement is binding
on such party and enforceable in accordance with its terms. This
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<PAGE> 4
Agreement shall binding on and inure to the benefit of the parties hereto and
their heirs, legal representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first set forth above.
LXR BIOTECHNOLOGY, INC.,
a Delaware corporation
By: /s/Paul J. Hastings
---------------------------------
Name: Paul J. Hastings
------------------------------
Its: President & CEO
--------------------------------
By:
---------------------------------
Name:
------------------------------
Its:
-------------------------------
MARINA WESTSHORE PARTNERS, LLC,
a California limited liability company
By /s/ Richard R. Poe
---------------------------------
Richard R. Poe
Its Manager
4
<PAGE> 5
EXHIBIT A
BILL OF SALE
FOR VALUABLE CONSIDERATION, receipt of which is hereby
acknowledged, LXR BIOTECHNOLOGY, INC., a Delaware corporation ("LXR"), hereby
transfers, assigns, conveys and sets over to MARINA WESTSHORE PARTNERS, LLC, a
California limited liability company, all of LXR's right, title and interest in
and to the assets described in Exhibit A attached hereto (the "Leasehold
Assets"). The parties acknowledge that this Bill of Sale is made to implement,
that certain Lease Termination Agreement between the parties dated as of June 4,
1999.
LXR covenants and agrees to warrant and defend title to the
Leasehold Assets against the just and lawful claims and demands of all persons
whomsoever and to execute such further documents as may be deemed desirable from
time to time to fully effectuate this Bill of Sale.
IN WITNESS WHEREOF, LXR has executed this instrument to be
effective as of June 4, 1999.
LXR BIOTECHNOLOGY, INC.,
a Delaware corporation
By: /s/ Paul J. Hastings
---------------------------------
Name: Paul J. Hastings
---------------------------------
Its: President & CEO
---------------------------------
By:
---------------------------------
Name:
---------------------------------
Its:
---------------------------------
5
<PAGE> 6
EXHIBIT B
SCHEDULE OF LEASEHOLD ASSETS
6
<PAGE> 7
EXHIBIT C
LICENSE AGREEMENT
This License Agreement ("Agreement") is made to be effective as of
June 4, 1999 (the "Commencement Date"), by and among, MARINA WESTSHORE PARTNERS,
LLC, a California limited liability company ("Licensor") and LXR BIOTECHNOLOGY,
INC., a Delaware corporation ("Licensee").
1. GRANT OF LICENSE.
Subject to the terms and conditions contained herein, Licensor grants
to Licensee an exclusive, irrevocable license to use those certain premises
previously occupied by Licensee as a tenant of Licensor, constituting
approximately 32,800 square feet at Building C at 1401 Marina Way South,
Richmond, California (the "Licensed Space"). This Agreement is made pursuant to
that certain Lease Termination Agreement between the parties dated of even date
herewith, and Licensee shall not be required to pay Licensor any further
consideration for the license (beyond the consideration paid by Licensee to
Licensor under Section 1 of the Lease Termination Agreement) granted by Licensor
under this Agreement for Licensee's use of the Licensed Space.
2. PURPOSE AND USE.
The purpose of the license granted by Licensor to Licensee hereunder
shall be to permit Licensee to have exclusive interim occupancy at the Licensed
Space for the purpose of office use, storing, showing for sale, and selling (by
private sale, auction and such other means as Licensee may choose to employ) the
personal property of Licensee therein, which includes certain intellectual
property and computers, office equipment and supplies, free-standing laboratory
equipment, and office furniture and furnishings (collectively, the "Personal
Property"). Licensee shall not use the Licensed Space for any other purpose
whatsoever without the prior written consent of Licensor, which consent Licensor
may grant or deny in the exercise of its sole and absolute discretion.
On or before the end of the Term, Licensee shall remove all its
personal property from the Leased Premises, and all property of Licensee not
removed hereunder shall be deemed, at Licensor's option, to be abandoned by
Licensee and Licensor may store such property in Licensee's name at Licensee's
expense, and/or dispose of the same in any manner permitted by law.
Licensee agrees that it will comply with and conform to all laws and
ordinances, Municipal, State and Federal, and any and all lawful requirements
and orders of any properly constituted Municipal, State or Federal Board or
Authority, present or future, in any way relating to the use or occupancy of the
Licensed Space throughout the term of this Agreement, except that Licensee shall
not be required to make any alterations of the structure, foundation, exterior
walls or exterior roof of the Buildings, or to correct
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<PAGE> 8
any defect in the original construction of the Leased Premises, in order to
comply unless such alterations of the structure, foundation, exterior walls or
exterior roof of the Buildings shall be necessitated or occasioned, in whole or
in part, by the acts, omissions or negligence of Licensee or any person claiming
through or under Licensee, or any of their servants, employees, contractors,
agents, visitors or licensees, or by the use or occupancy or manner of use or
occupancy of the Leased Premises by Licensee or any such person.
Without limiting the generality of the foregoing, Licensee agrees it
shall not do or permit anything to be done in or about the Licensed Space which
will in any way obstruct or interfere with the rights of tenants in other
portions of the building and the project of which the Licensed Space is a part.
Licensee further agrees that it shall not commit or suffer to be committed any
waste in or upon the Licensed Space.
Licensor reserves and shall have the right to enter the Licensed Space,
at any reasonable time and with reasonable notice, to inspect the same, to show
the same to prospective tenants, and to make repairs therein.
3. ALTERATIONS.
Licensee shall not make, or suffer to be made, any alterations of the
Licensed Space, or any part thereof. Without limiting the foregoing, Licensee
shall not remove any Leasehold Assets (as defined in the Lease Termination
Agreement) from the Licensed Space.
4. TERM; RELOCATION.
The term of the license granted under this Agreement shall commence on
the Commencement Date and end on September 30, 1999 (the "Termination Date"),
unless earlier terminated as provided herein. Licensee, on or before the
Termination Date specified above, shall remove all of Licensee's Personal
Property from the Licensed Space and shall vacate the Licensed Space and shall
surrender possession of the Licensed Space and the Leasehold Assets to Licensor
in substantially the same condition as they were on May 13, 1999 when Licensor
and Licensee did a joint walk through. If Licensor gives a Relocation Notice in
the manner provided below and Licensee does not timely relocate to the
Relocation Space as required below, Licensor may terminate this Agreement by
giving notice of termination, which termination shall be effective on the date
of such notice.
Licensor may at any time give Licensee at least ten (10) prior days
notice (the "Relocation Notice") of Licensor's intent to relocate Licensee to
other office space of not less than 400 square feet within Building C (plus
additional space incidental thereto for storage of Licensee's records), which
relocation space may be within Licensor's current offices and/or other nearby
space (the space so designated by Licensor is referred to herein as the
"Relocation Space"); provided however that Licensee shall not be required to
relocate prior to August 10, 1999. Within five (5) days of receipt of the
Relocation
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<PAGE> 9
Notice, Licensee may elect by written notice to Licensor to vacate the Licensed
Space and terminate this Agreement effective upon a date on or before the date
that Licensee would have had to relocate. If Licensee does not so elect to
vacate the Licensed Space and terminate this Agreement, then Licensee shall, at
Licensee's sole cost and expense, remove its Personal Property and relocate such
of its Personal Property as it reasonably determines to the Relocation Space on
the date specified by Licensor in the Relocation Notice. Upon such relocation by
Licensee, the Relocation Space shall become the Licensed Space hereunder.
Licensee may not hold over under any circumstances. Upon any holding
over by Licensee following the expiration of the term of this Agreement,
Licensee shall be deemed to be wrongfully trespassing upon the Licensed Space
without Licensor's consent, and Licensee shall be liable to Licensor for not
only tort damages measured by the reasonable value of the use and occupation of
the Licensed Space, but shall also be liable to Licensor for any other damages
incurred by Licensor as a result of Licensee's delay in surrendering possession
of the Licensed Space, including, but not limited to any loss arising from
Licensor's inability to prepare the Licensed Space for occupancy by others, and
any claim made by any third party founded on such delay.
5. OPERATING COSTS.
Licensee shall maintain in its name and be solely responsible for the
payment for any utilities necessary for Licensee's operations at the Licensed
Space and all costs of cleaning and maintaining the Licensed Space. Licensee
shall not be required to reimburse Licensor for any costs incurred by Licensor
in maintaining the Building or the business park.
6. INSURANCE.
Licensee agrees to maintain in full force during the term of this
Agreement, at Licensee's own cost and expense, a policy of comprehensive
liability insurance, including property damage, which will insure Licensee and
Licensor against liability for injury to persons, damage to property, and death
of any person occurring in or about the Licensed Space. The policy shall have
the same scope, form, limits of liability and coverage as the comprehensive
liability policy most recently required to be maintained by Licensee when it
leased the Licensed Space from Licensor. Licensee shall provide Licensor with a
copy of the policy, including an endorsement that states that the policy will
not be canceled except after thirty (30) days' notice in writing to Licensor.
Each of the parties hereto does hereby waive its entire right of
recovery against the other for any damages caused by an occurrence insured
against by such party, and the rights of any insurance carrier to be subrogated
to the rights of the insured under the applicable policy to the extent allowed
by each party's respective insurance carrier. The parties covenant that at the
Commencement Date of the term of this Agreement, their respective insurance
policies will contain waiver of subrogation endorsements.
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<PAGE> 10
7. MAINTENANCE; TAXES; SECURITY.
During the term of this Agreement, Licensee shall be solely
responsible, at its expense, for the maintenance and operation of the Licensed
Space, and shall pay, before delinquency, all personal property taxes,
employment taxes, sale and use taxes, if any, due as a result of Licensee's
business conducted at the Licensed Space. Licensee shall be solely responsible,
at its expense, for maintaining and providing all necessary security to the
Licensed Space, and Licensee assumes the risk of theft or damage to its Personal
Property from any cause whatsoever, except the sole negligence or willful
misconduct of Licensor.
8. NON-TRANSFERABILITY OF LICENSE.
The license granted under this Agreement shall be, and is, personal to
Licensee and is not transferable or assignable, and Licensee shall have no right
to "sublet" the Licensed Space. Any transfer or purported transfer, however
structured, in whatever form or nature, whether by means of an assignment of
this Agreement or an attempted subletting of the Licensed Space, shall be null
and void and shall be a material default of this agreement causing the immediate
and automatic termination thereof.
9. ATTORNEYS' FEES.
If any action or proceeding arising out of or related to this Agreement
is brought by either party to this Agreement, the prevailing party shall be
entitled to receive from the other party, in addition to any other relief that
may be granted, the reasonable attorneys' fees, costs and expenses incurred in
the action or proceeding by the prevailing party.
10. RELEASE AND INDEMNITY.
Licensee, as a material part of the consideration to be rendered to
Licensor, (i) hereby releases and waives all claims against Licensor for injury
to any person or for damages to Licensee's Personal Property in, upon or about
the Licensed Space from any cause arising at any time except the sole negligence
or willful misconduct of Licensor, and (ii) shall indemnify, defend, protect and
hold Licensor harmless from any suit, claim, loss, liability, cost, damage,
expense (including, but not limited to attorneys' fees) arising out of any
damage or injury to any person or to the Personal Property and any other
property of any person in the Licensed Space or arising from the failure of
Licensee to comply with any of the provisions of this Agreement.
11. ENTIRE AGREEMENT.
The Lease Termination Agreement and the Lease referenced therein, as to
the period prior to the commencement of the term hereof, and the Lease
Termination Agreement and this Agreement for the period thereafter, constitute
the entire agreement between Licensor and Licensee relating to the use of the
Licensed Space, or
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<PAGE> 11
matters related thereto. Subject to the foregoing, any prior agreements,
promises, negotiations, or representations not expressly set forth in this
Agreement are of no force and effect. Any amendment to this Agreement shall be
of no force and effect unless it is in writing and signed by both Licensee and
Licensor.
12. EXCULPATION.
Licensor, is a California limited liability company. All persons
dealing with Licensor, its manager, members, employees or representatives shall
look solely to Licensor's property for satisfaction of claims of any nature
arising in connection with the affairs of Licensor.
13. WAIVER.
No covenant or condition of this Agreement can be waived except by the
written consent of the Licensor or Licensee as appropriate, and forbearance or
indulgence by Licensor or Licensee in any regard whatsoever shall not constitute
a waiver of the covenant or condition to be performed.
14. NOTICES.
Any notices, demands, requests or other communications given or
required to be given under this Agreement shall be effective only if rendered or
given in writing, and either delivered personally, sent by overnight delivery
service, or sent by registered or certified mail, return receipt requested,
addressed (a) to Licensee at the Licensed Space (b) to Licensor at 1391 Marina
Way South, Richmond, CA 94804, or (c) to either Licensor or Licensee at such
other address as either Licensor or Licensee may designate as its new address
for such purpose by notice given to the other in accordance herewith. Any such
bill, statement, notice, demand, request or other communication shall be deemed
to have been rendered or given on the date of actual delivery or the date it is
officially recorded as delivered to the intended recipient by return receipt or
equivalent, and, in the absence of such record of delivery, the effective date
shall be presumed to have been the second business day after the date when it
shall have been deposited in the mail as provided herein if sent by registered
or certified mail.
15. SEVERABILITY.
If any term or provision of this Agreement shall, to any
extent, be determined by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Agreement shall not be affected thereby,
and each term and provision of this Agreement shall be valid and enforceable to
the fullest extent permitted by law; it is the intention of Licensor and
Licensee that if any provision of this Agreement is capable of two
constructions, one of which would render the
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<PAGE> 12
provision void and the other of which would render the provision valid, then the
provision shall have the meaning which renders it valid.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the date first written above.
LICENSEE:
LXR BIOTECHNOLOGY, INC.,
a Delaware corporation
By: /s/ Paul J. Hastings
---------------------------------
Name: Paul J. Hastings
-------------------------------
Its: President & CEO
--------------------------------
By:
---------------------------------
Name:
-------------------------------
Its:
--------------------------------
LICENSOR:
MARINA WESTSHORE PARTNERS, LLC,
a California limited liability company
By /s/Richard R. Poe
---------------------------------
Richard R. Poe
Its Manager
12
<PAGE> 1
EXHIBIT 11.01
LXR Biotechnology Inc. and Subsidiary
Exhibit 11.01
Computation of Net Loss Per Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Loss $ 1,761,337 $ 2,503,245 $ 3,768,410 $ 5,784,581
----------- ----------- ----------- -----------
Weighted average number of shares outstanding:
Common Stock 29,652,956 28,396,380 29,162,954 28,153,445
Common Stock to be issued 102,448 137,384 51,507 106,364
----------- ----------- ----------- -----------
29,755,404 28,533,764 29,214,461 28,259,809
=========== =========== =========== ===========
Net Loss Per Share $ (0.06) $ (0. 09) $ (0.13) $ (0.20)
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,127,077
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,661,754
<PP&E> 209,459
<DEPRECIATION> 127,493
<TOTAL-ASSETS> 1,937,770
<CURRENT-LIABILITIES> 623,863
<BONDS> 0
0
0
<COMMON> 2,954
<OTHER-SE> 1,310,954
<TOTAL-LIABILITY-AND-EQUITY> 1,937,770
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 3,800,356
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,711
<INCOME-PRETAX> (3,767,610)
<INCOME-TAX> 800
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,768,410)
<EPS-BASIC> (0.13)
<EPS-DILUTED> 0
</TABLE>
