U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
Commission file number 1-12416
Aprogenex, Inc.
(Exact name of Small Business Issuer as specified in its charter)
Delaware 76-0269632
(State of incorporation) (I.R.S. Employer Identification Number)
8000 El Rio Street
Houston, TX 77054-4104
(Address of principal executive offices)
(713) 748-5114
(Issuer's telephone number)
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:
As of August 5, 1996, there were 5,200,598 shares of Common Stock
outstanding.
Transitional Small Business Disclosure Format (check one):
YES: NO: X
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Aprogenex, Inc.
(A Delaware Corporation in the Development Stage)
Balance Sheets
(Unaudited)
December 31, June 30,
1995 1996
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 1,301,934 $ 1,562,219
Accounts receivable and
prepaid expenses 103,412 90,335
----------- -----------
Total current assets 1,405,346 1,652,554
Property and equipment, net 956,034 787,857
Other assets, net 30,574 128,532
----------- -----------
$ 2,391,954 $ 2,568,943
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 273,361 $ 159,456
Accrued liabilities 244,491 193,559
Current portion of
capital lease obligations 176,962 174,127
---------- ----------
Total current liabilities 694,814 527,142
Capital lease obligations,
net of current portion 203,905 103,768
Convertible Notes Payable -- 1,951,837
Commitments and contingencies
Stockholders' equity
Undesignated Preferred Stock,
10,320,000 shares authorized,
none issued -- --
Series A Convertible Preferred
Stock, $.001 par value; 880,000
shares authorized; 459,000 and
449,000 shares issued and
outstanding,respectively;
liquidation preference of $13 per
share (aggregating to $5,967,000
and $5,837,000, respectively) 459 449
Common Stock, $.001 par value;
20,000,000 shares authorized;
5,156,345 and 5,200,598 shares
issued and outstanding,
respectively 5,156 5,201
Additional paid-in capital 27,311,550 27,312,430
Deficit accumulated during
the development stage (26,002,816) (27,575,770)
Warrants to purchase Common and
Preferred Stock 178,886 243,886
----------- -----------
Total stockholders'
equity (deficit) 1,493,235 (13,804)
----------- -----------
$ 2,391,954 $ 2,568,943
=========== ===========
The accompanying notes are an integral part of these financial
statements
Aprogenex, Inc.
(A Delaware Corporation in the Development Stage)
Statements of Operations
(Unaudited)
For the
Period
From
Inception
For the Three (January 25,
Months Ended June 30, 1989)Through
------------------------ June 30,
1995 1996 1996
----------- ----------- ------------
Revenues $ 8,070 $ 13,236 $ 211,310
----------- ----------- ------------
Costs and expenses:
Research and development 959,974 520,156 16,312,036
General and administrative 499,642 279,818 10,566,733
----------- ----------- ------------
Total costs and expenses 1,459,616 799,974 26,878,769
----------- ----------- ------------
Loss before interest
and other (1,451,546) (786,738) (26,667,459)
Interest expense (20,299) (26,524) (621,112)
Interest income and
other,net 33,818 16,084 645,456
----------- ----------- ------------
Net loss $(1,438,027) $ (797,178) $(26,643,115)
=========== =========== ============
Net loss per Common share $ (.29) $ (.15)
=========== ===========
Shares used in computing
net loss per Common share 5,043,340 5,200,598
=========== ===========
The accompanying notes are an integral part of these financial
statements.
Aprogenex, Inc.
(A Delaware Corporation in the Development Stage)
Statements of Operations (Continued)
(Unaudited)
For the
Period
From
Inception
For the Six (January 25,
Months Ended June 30, 1989)Through
------------------------ June 30,
1995 1996 1996
----------- ----------- ------------
Revenues $ 8,070 $ 30,581 $ 211,310
----------- ----------- ------------
Costs and expenses:
Research and development 1,813,005 1,040,853 16,312,036
General and administrative 1,088,628 549,361 10,566,733
----------- ----------- ------------
Total costs and expenses 2,901,633 1,590,214 26,878,769
----------- ----------- ------------
Loss before interest
and other (2,893,563) (1,559,633) (26,667,459)
Interest expense (42,430) (42,022) (621,112)
Interest income and
other,net 50,764 28,701 645,456
----------- ----------- ------------
Net loss $(2,885,229) $(1,572,954) $(26,643,115)
=========== =========== ============
Net loss per Common share $ (.58) $ (.30)
=========== ===========
Shares used in computing
net loss per Common share 4,993,863 5,189,923
=========== ===========
The accompanying notes are an integral part of these financial
statements.
Aprogenex, Inc.
(A Delaware Corporation in the Development Stage)
Statements of Cash Flows
(Unaudited)
For the
Period
From
Inception
For the Three (January 25,
Months Ended June 30, 1989)Through
------------------------ June 30,
1995 1996 1996
----------- ----------- ------------
Operating Activities:
Net loss $(1,438,027) $ (797,178) $(26,643,115)
Adjustments to reconcile
to net cash used by
operating activities
Depreciation and
amortization 76,007 88,698 1,831,280
Interest expense on
Convertible Notes
payable in 199 -- 10,437 10,437
Amortization of discount
on Convertible Notes -- 1,400 1,400
Amortization of deferred
compensation related to
certain stock options -- -- 94,300
Non-cash portion of
technology acquisition -- -- 2,421,875
Interest expense on notes
payable converted into
preferred stock -- -- 186,154
Issuance of common stock,
options, or warrants
for services -- -- 48,295
Changes in assets
and liabilities-
(Increase) decrease in
prepaid expenses,
receivables and other (6,658) (12,855) (110,755)
Increase (decrease) in
accounts payable and
accrued liabilities 194,703 66,350 353,015
----------- ----------- ------------
Net cash used by
operating activities (1,173,975) (643,148) (21,807,114)
Investing Activities:
Purchases of
marketable securities (161,078) -- (5,018,891)
Disposition of
marketable securities -- -- 5,018,891
Purchases of property
and equipment (38,827) -- (2,239,113)
Proceeds from
sale-leaseback agreement -- -- 982,416
Deferred organization costs -- -- (1,788)
----------- ----------- ------------
Net cash provided (used)
by investing activities (199,905) -- (1,258,485)
----------- ----------- ------------
Financing Activities:
Net proceeds from sale
of preferred stock 3,835,440 -- 8,676,736
Net proceeds from sale
of common stock 555,015 -- 10,511,178
Net borrowings under
Convertible Notes -- 1,834,318 1,834,318
Exercise of stock options 5,859 -- 110,087
Proceeds from sale of
warrants 48,786 65,000 183,886
Principal payments under
capital lease obligations (40,233) (61,448) (1,045,185)
Borrowings under notes
payable converted
into preferred stock -- -- 4,363,048
Net borrowings under
Bridge Loans -- -- 570,000
Repayment of Bridge Loans -- -- (570,000)
Purchase of treasury stock -- -- (6,250)
----------- ----------- ------------
Net cash provided (used)
by financing activities 4,404,867 1,837,870 24,627,818
----------- ----------- ------------
Increase (decrease) in cash
and cash equivalents 3,030,987 1,194,722 1,562,219
Cash and cash equivalents,
beginning of period 450,540 367,497 --
----------- ----------- ------------
Cash and cash equivalents,
end of period $ 3,481,527 $ 1,562,219 $ 1,562,219
=========== =========== ============
The accompanying notes are an integral part of these financial
statements.
Aprogenex, Inc.
(A Delaware Corporation in the Development Stage)
Statements of Cash Flows (Continued)
(Unaudited)
For the
Period
From
Inception
For the Six (January 25,
Months Ended June 30, 1989)Through
------------------------ June 30,
1995 1996 1996
----------- ----------- ------------
Operating Activities:
Net loss $(2,885,229) $(1,572,954) $(26,643,115)
Adjustments to reconcile
to net cash used by
operating activities
Depreciation and
amortization 150,885 178,652 1,831,280
Interest expense on
Convertible Notes
payable in 199 -- 10,437 10,437
Amortization of discount
on Convertible Notes -- 1,400 1,400
Amortization of deferred
compensation related to
certain stock options -- -- 94,300
Non-cash portion of
technology acquisition -- -- 2,421,875
Interest expense on notes
payable converted into
preferred stock -- -- 186,154
Issuance of common stock,
options, or warrants
for services -- -- 48,295
Changes in assets
and liabilities-
(Increase) decrease in
prepaid expenses,
receivables and other (83,623) 13,077 (110,755)
Increase (decrease) in
accounts payable and
accrued liabilities 92,326 (164,837) 353,015
----------- ----------- ------------
Net cash used by
operating activities (2,725,641) (1,534,225) (21,807,114)
Investing Activities:
Purchases of
marketable securities (161,078) -- (5,018,891)
Disposition of
marketable securities 1,000,000 -- 5,018,891
Purchases of property
and equipment (46,360) (2,751) (2,239,113)
Proceeds from
sale-leaseback agreement -- -- 982,416
Deferred organization costs -- -- (1,788)
----------- ----------- ------------
Net cash provided (used)
by investing activities 792,562 (2,751) (1,258,485)
----------- ----------- ------------
Financing Activities:
Net proceeds from sale
of preferred stock 3,835,440 -- 8,676,736
Net proceeds from sale
of common stock 555,015 -- 10,511,178
Net borrowings under
Convertible Notes -- 1,834,318 1,834,318
Exercise of stock options 43,546 915 110,087
Proceeds from sale of
warrants 48,786 65,000 183,886
Principal payments under
capital lease obligations (83,734) (102,972) (1,045,185)
Borrowings under notes
payable converted
into preferred stock -- -- 4,363,048
Net borrowings under
Bridge Loans -- -- 570,000
Repayment of Bridge Loans -- -- (570,000)
Purchase of treasury stock -- -- (6,250)
----------- ----------- ------------
Net cash provided (used)
by financing activities 4,399,053 1,797,261 24,627,818
----------- ----------- ------------
Increase (decrease) in cash
and cash equivalents 2,465,974 260,285 1,562,219
Cash and cash equivalents,
beginning of period 1,015,553 1,301,934 --
----------- ----------- ------------
Cash and cash equivalents,
end of period $ 3,481,527 $ 1,562,219 $ 1,562,219
=========== =========== ============
The accompanying notes are an integral part of these financial
statements.
Condensed Notes to Financial Statements
1. Description of Business and Certain Significant Risks
Aprogenex, Inc. (Aprogenex or the Company) was incorporated as
Molecular Analysis Incorporated on August 1, 1988, and commenced
operations on January 25, 1989. The Company was organized to
research, develop, and market medical diagnostic products using
DNA probes to detect and identify diseases and genetic disorders.
The proprietary technology of Aprogenex includes methods of in
situ hybridization using synthesized DNA probes.
Aprogenex is in the development stage and has only generated
limited revenues from the sale of research-use-only products. The
future success of the Company is dependent upon many factors,
including the protection of its proprietary technology, the
ability to practice its technology without infringing patents
issued to others, the successful identification and development of
saleable products using this technology, obtaining regulatory
approvals to market such products, the penetration of markets for
these products, and obtaining funds necessary to complete these
activities.
The Company's technology can be utilized to develop products that
serve various markets ranging from genetics to infectious
diseases. The potential customers for the Company's product
candidates are generally laboratories throughout the world, and
such laboratories may require a broader range of products or
instrumentation than is available from the Company. Additionally,
the Company's product candidates must compete with products from
other companies developed using similar technologies, as well as
with products developed using other technologies. Most
competitors have substantially greater resources than the Company,
which will make penetration of markets for the Company's products
difficult.
The Company estimates that, as of June 30, 1996, it has cash
resources to fund its normal operations through the end of 1996.
Accordingly, the Company will require additional funding to
complete its product development activities or to sustain
operations through the commercialization of such products. The
Company from time to time is engaged in activities to raise funds
through the sale of equity or debt or the license of portions of
its technology. The ability of the Company to continue its
activities, to realize or recover its investment in property and
equipment, or to continue as a going concern is dependent upon its
ability to obtain additional funding. There can be no assurance
that the Company will be able to obtain such funding, or the terms
upon which any such funding may occur.
As previously disclosed in the Company's Form 10-KSB for the year
ended December 31, 1995, as filed with the Securities and Exchange
Commission, the opinion of Arthur Andersen LLP, the independent
public accountants for the Company, included an explanatory fourth
paragraph that indicated that the Company's continued operations
is dependent upon its ability to obtain additional working capital
to complete the research and development and other activities and
to attain successful future operations.
2. Basis of Presentation
The accompanying unaudited financial statements have been prepared
pursuant to the rules and regulations of the Securities and
Exchange Commission (the "Commission"). Certain information and
footnote disclosures normally included in the annual financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
those rules and regulations. This financial information should be
read in conjunction with the Financial Statements included within
the Company's Form 10-KSB for the year ended December 31, 1995.
In the opinion of the management of the Company, the accompanying
financial statements reflect all adjustments (consisting only of
normal recurring adjustments) that are necessary for a fair
presentation of financial position and the results of operations
for the periods presented.
3. Sale of Convertible Notes and Warrants
On June 12, 1996, the Company issued $2,005,000 principal amount
of Convertible Notes due on May 29, 1998 (the "Convertible Notes")
and warrants to acquire 130,323 shares of Common Stock (the "1996
Warrants") for total consideration of $2,005,000. The Convertible
Notes bear interest at the rate of 10% per annum, based on a 365
day year, compounded quarterly. Interest is payable at maturity
or upon prepayment. The principal and accrued interest on the
Convertible Notes are convertible into the Common Stock of the
Company at the rate of one share of Common Stock for every $1.10
in principal and accrued interest.
On the twentieth business day prior to the maturity date of the
Convertible Notes (the "Reset Date"), the conversion price will be
adjusted to the average of the closing price of the Common Stock
on the American Stock Exchange (or such other trading forum as may
be applicable at that time) for the ten trading days prior to the
Reset Date (the "Reset Conversion Price") if and only if such new
Reset Conversion Price is lower than the then-current Conversion
Price. However, such price shall not be less than 50% of the
then-Conversion Price.
The Convertible Notes contain provisions to protect the holders
against dilution by adjusting the number of shares issuable upon
conversion thereof.
The Company has the right to prepay principal and accrued interest
upon twenty days notice to the holders of the Convertible Notes.
However, the holders have the right to convert the Convertible
Notes into Common Stock as set forth above prior to such
redemption.
The principal and accrued interest of the Note become immediately
due and payable upon the insolvency of the Company, the commission
of any act of bankruptcy by the Company, the execution by the
Company of a general assignment for the benefit of creditors, the
filing by or against the Company of any petition in bankruptcy or
any petition for relief under the provisions of the federal
bankruptcy act or any other state or federal law for the relief of
debtors and the continuation of such petition without dismissal
for a period of thirty (30) days or more, or the appointment of a
receiver or trustee to take possession of the property or assets
of the Company.
The 1996 Warrants entitle the holders thereof to purchase Common
Stock at $1.10 per share and are exercisable at any time, but such
exercise must occur prior to the close of business on May 28,
1999. The 1996 Warrants contain provisions to protect the holders
thereof against dilution by adjusting the price at which the 1996
Warrants are exercisable and the number of shares issuable upon
exercise thereof upon the occurrence of certain events.
Commencing September 10, 1996, the holders of the May Warrants
will have "piggyback" registration rights to require the Company
to include the Common Stock underlying such warrants in certain
registration statements filed by the Company.
The net proceeds from the sale of the Convertible Notes and the
1996 warrants totaled approximately $1.8 million after deducting
the expenses and fees related to the offering. The Company
expects the proceeds from the sale to fund its normal operations
through 1996. See Forward-Looking Statements herein.
The Company has assigned a value of approximately $.50 per share
of Common Stock to the 1996 Warrants, or a total of $65,000. This
valuation was based on review of the trading history of the Common
Stock, the non-transferable provisions of the 1996 Warrants, and
various other factors. The value assigned to the 1996 Warrants
was treated as issue discount on the Convertible Notes and
amortized as additional interest on the Convertible Notes. Such
amortization will increase the effective interest rate on the
Convertible Notes to approximately 11.7%, assuming the Convertible
Notes remain outstanding until maturity.
Item 2. Management's Discussion and Analysis or Plan of
Operation
Liquidity and Capital Resources
At June 30, 1996, the Company had cash resources of $1,562,000
available to it and had net working capital of $1.1 million.
To date, the Company has financed its operations primarily through
private placements of its equity and debt securities and its
initial public offering in 1993. The Company has raised
approximately $25.5 million in net proceeds through these
transactions, including $4.5 million of such sales consummated
through the conversion of the Company's debt securities into
equity. Additionally, the Company has financed $1.3 million of
its approximately $2.6 million of capital expenditures since
inception through equipment leases.
The Company has expended and will continue to expend in the future
substantial funds to continue the research and development of its
products, conduct clinical investigations, make capital
expenditures, and manufacture and market its products. Its
products are in various stages of development. Additional amounts
will be expended in research activities, continuing development of
products, testing of these existing and other products in field
trials and clinical investigations, seeking regulatory approval of
successfully tested products, and the manufacturing and marketing
of products approved for sale. If regulatory approvals are
obtained, the Company expects to expend substantial funds on
marketing and distribution activities. The amount and timing of
anticipated expenditures will depend upon numerous factors both
within and outside the Company's control. Factors within the
Company's control include the number of products under
development, the timing of the commencement of clinical
investigations and regulatory filings, and the extent of
pre-marketing or marketing activities. Factors generally beyond
the control of the Company include the results of research and
development activities, the extent of clinical investigations and
the regulatory process to obtain FDA or other approvals of
products and technological advances of, and products developed by,
its competitors. Moreover, even if the Company's activities are
successful, the ability to generate income from the sale of
products will be dependent upon, among other things, acceptance of
products by customers, access to distribution channels for
products and the Company's ability to obtain reimbursement
approval from government and third-party payers. The necessity
for instrumentation to be used with the Company's products may
also affect capital requirements.
In addition to the foregoing, the Company's working capital
requirements during the next 12 months may vary depending upon
numerous additional factors, including the progress of the
Company's research and development program, the results of
laboratory testing, the time and cost required to seek regulatory
approvals, the need to obtain licenses to proprietary rights held
by others, any required adjustments to the Company's operating
plan to respond to the competitive pressures or technological
advances, the time of pre-marketing and marketing activities, and
the success of the Company in developing collaborative
arrangements with others for the development of its technology.
The Company's cash and marketable securities as of June 30, 1996,
are expected to be used as set forth in "Plan of Operations"
below. The Company anticipates that its resources will be
sufficient to fund its activities through the 1996. The report of
the Company's independent auditors on the financial statements for
the year ended December 31, 1995 included an explanatory paragraph
with respect to the need for future financing. The Company
expects to seek additional financing in 1996 to fund its
operations during 1997. The Company will seek to obtain
additional funds through equity or debt financing, collaborative
or other arrangements with corporate partners and others, and from
other sources. If additional funds are raised by issuing equity
securities, dilution to stockholders may occur. The Board of
Directors of the Company is empowered, without stockholder
approval (other than in certain cases approvals of the holders of
the Series A Convertible Preferred Stock), to issue additional
shares of Series A Preferred Stock or other series of preferred
stock with dividend, liquidation, conversion, voting and other
rights that could adversely affect the voting power or other
rights of the holders of the Company's securities. If debt
securities are issued, a portion of the Company's cash flow will
have to be dedicated to payment of principal and interest on such
indebtedness and the Company may be subject to certain restrictive
financial and operating restrictions in the agreements and
instruments relating to such indebtedness. There can be no
assurance that there will be significant sales of the Company's
products or that such revenues will be sufficient for operations.
In such event, the Company would also be required to seek
additional funds. There can be no assurance that additional
financing, whenever required, will be available when needed or on
terms acceptable to the Company. If adequate funds are not
available, the Company may be required to delay or to eliminate
expenditures for certain of its products, to license to third
parties the rights to commercialize additional products or
technologies that the Company would otherwise seek to develop
itself or if no other reasonable alternative is available, to
cease operations.
Additionally, depending on market conditions or future business
opportunities, the Company may decide to issue additional equity
or debt securities for cash or to acquire assets or technology of
others. The working capital of the Company may also be used to
acquire such assets or technology, reducing the funds available
for alternative use.
The Company from time to time engages in discussions with
diagnostic companies regarding collaborative arrangements for the
development and sale of applications of the Company's technology
which, depending upon the terms and requirements of such
arrangements, could expand the Company's research activities.
Such arrangements, if consummated, could significantly reduce the
amount of capital that would be required for the development and
commercialization of certain applications. It is possible,
however, that the net proceeds ultimately derived from any such
arrangement could be less than would be the case if the Company
undertook and completed development of such products itself. There
can be no assurance as to the ability of the Company to consummate
any such arrangement, or the terms or timing of any such
arrangement. Additionally, from time to time the Company engages
in exploratory discussions with others regarding mergers,
acquisitions, joint ventures, dispositions and other transactions.
There can be no assurance, however, that any such transaction will
be effected by the Company or on what terms.
The Company's liquidity will be reduced as amounts are expended
for continuing activities. While not currently anticipated, the
Company's liquidity could also be substantially reduced if
significant amounts are expended for additional facilities,
equipment or to license or acquire proprietary technology owned by
others or to legally defend its proprietary technology.
Plan of Operations
During the next 12 months, the principal focus of the Company's
activities is currently expected to be (i) the development and
marketing of research-use-only HIV products, (ii) the development
of clinical HIV products for submission to regulatory authorities
as therapeutic monitoring products, (iii) the marketing of DNA
probe products to other companies for use in their genetics
programs, (iv) the development of other products and enhancements
to the Company's technology, and (v) if any of the foregoing
development activities are successful, conducting field trials
for, seeking any required regulatory approvals of, and the
marketing of these products. Such planned activities may change
depending upon business opportunities that present themselves, the
success of development activities, the financial position of the
Company and other matters that may arise in the future. As
indicated, these planned activities reflect an increased emphasis
on the development of HIV and other products and a reduced
emphasis on the continued development of genetics products.
For a discussion of certain of the factors that affect the timing
of any sales of the Company's products, see the Company's Form 10-
KSB for the year ended December 31, 1995.
The Company expects to either renew its lease for its facilities
in 1996 or to move to a new location. Any move would require the
construction of new manufacturing and laboratory facilities and
may require the expenditure of approximately $1.0 million or more.
Capital expenditures of other equipment are not expected to exceed
$500,000 during the next 12 months. However, all such
expenditures will vary based on the success of the Company's
efforts, its financial resources, changes in manufacturing,
research or development programs, and other factors.
The Company does not believe that it is likely that the sales of
its For Research Use Only genetic testing products will provide
sufficient commercialization to fund its operations. The Company
can not currently predict the success or market acceptance of its
"For Research Use Only" HIV product. There can be no assurance
that the Company will ever achieve profitability or that its
products will be marketed successfully or become commercially
viable. There can be no assurance that the Company will not
encounter substantial expenses related to further testing and
development, regulatory compliance, production and marketing
problems, and competition or defense of the Company's license and
patent rights.
As of August 5, 1996, the Company employed 14 full and part-time
employees and engaged three contract personnel. If the Company is
successful in its development and marketing activities, the number
of employees and temporary personnel will increase. The number of
such personnel will depend on the progress of the Company's
efforts and cannot be forecast with certainty.
The foregoing plan of operation includes certain objectives of the
Company, and there can be no assurance that these objectives will
be achieved within the stated period, if at all. Furthermore,
this plan of operation is subject to change based on future events
and circumstances, many of which are beyond the control of the
Company. See Forward Looking Statements below.
Results of Operations
The Company's net losses for the three month periods ended June
30, 1995, March 31, 1996, and June 30, 1996 were $1,438,000,
$776,000, and $797,000, respectively. The decrease in losses from
the 1995 period is principally the result of reduced activities in
developing prenatal genetic testing products partially offset by
increased research on Human Immunodeficiency Virus (HIV)
products. See the Company's Form 10-KSB for the year ended
December 31, 1995 and the discussion below. The Company expects
to incur substantial operating losses into at least 1997 as it
continues the activities discussed in Plan of Operations above.
The Company expects to incur additional losses thereafter until
such time, if ever, as there is sufficient commercialization of
its products to offset its research and development activities.
There can be no assurance that the Company will be able to achieve
or sustain profitability.
Revenues for the three month periods ended June 30, 1995, March
31, 1996, and June 30, 1996 were $8,000, $17,000 and $13,000,
respectively. Such amounts were obtained from Research Use Only
sales of the Company's products. For a discussion of the market
potential for these products, see the Company's Form 10-KSB for
the year ended December 31, 1995.
Research and development expenditures have varied with the nature
and scope of the Company's research activities. These amounts
include the costs of basic and product-related research, process
development efforts, and costs associated with field trials.
Research and development expenditures for the three month periods
ended June 30, 1995, March 31, 1996, and June 30, 1996 were
$960,000, $521,000 and $520,000, respectively. The decrease from
the second quarters of 1995 to the first and second quarter of
1996 is principally attributable to reduced expenditures for
development of an enrichment component to the Company's prenatal
genetic testing product using fetal cells from maternal blood
(GenSite). While development efforts for the enrichment
component of GenSite constituted a significant portion of the
Company's resources prior to 1996, such efforts constituted a
small portion of the Company's efforts in 1996. During mid-1996,
the Company ended its efforts for the development of its own
enrichment system as well as any efforts to license the enrichment
systems of others; both such efforts were ended in 1996 in
conjunction with the Company's collaboration efforts with other
companies developing enrichment systems.
The Company expects the level of research and development
expenditures, exclusive of acquisition costs, during the next
twelve months to depend on its financial resources, the success of
its development and testing activities for certain products, and
market acceptance of its products and the need for product
enhancements, and such expenditures may increase as a result of
such activities. Expenses could increase as a result of any
additional acquisitions of intellectual property or other research
costs.
The cost of materials sold is currently included in research and
development costs because such materials manufactured are
principally used for development activities. The costs associated
with products sold in 1995 and 1996 were not material.
General and administrative expenses for the three month periods
ended June 30, 1995, March 31, 1996, and June 30, 1996 were
$500,000, $270,000 and $280,000, respectively. The decrease from
the second quarter of 1995 to the first and second quarters of
1996 is principally attributable to reduced administrative,
marketing and legal costs. The Company's President, who resigned
in September, 1995, was not replaced until April, 1996, reducing
administrative expenses through March 31, 1996. The Company
eliminated two marketing and business development related
positions in 1995 as a result of delays in the expected marketing
of its prenatal genetic testing product, and instead relied upon
part-time consulting arrangements to market its "Research Use
Only" products in certain areas. Additionally, legal expenses
declined because of lower patent prosecution fees.
The Company's selling expenses are included in selling, general
and administrative expenses, but have not been material to date.
The Company expects selling expenses to increase as the number of
research-use-only products available for sale increases, as
regulatory approvals of its products are obtained and the Company
commences the commercialization of its products. The Company
currently intends to employ distributors for certain products, and
selling expenses will vary depending upon the success of this
strategy.
Interest expense for the three month periods ended June 30, 1995,
March 31, 1996, and June 30, 1996 were $20,000, $15,000, and
$27,000, respectively. Such amounts are principally interest on
capitalized leases, and the amounts declined from the second
quarter of 1995 to the second quarter of 1996 as a result of the
expiration of certain leases and principal payments on the
remaining leases, partially offset by the $12,000 of interest
expense on the Convertible Notes during the quarter ended June 30,
1996. Such amounts are payable upon maturity of the Convertible
Notes. See Part II Other Information - Item 2. Changes in
Securities.
Interest income and other, net, for the three month periods ended
June 30, 1995, March 31, 1996, and June 30, 1996 were $34,000,
$13,000, and $16,000, respectively. The decrease from the second
quarter of 1995 is the result of lower funds available for
investment.
Forward-Looking Statements
The statements contained in all parts of this document regarding
future products and product developments, financial performance,
future regulatory approvals, business strategies, market
acceptance, business arrangements, and results and other
statements which are not historical facts are forward-looking
statements. The words expect, project, estimate, predict,
anticipate, beieves, and similar expressions are also intended
to identify forward looking statements. The forward looking
statements involve risks and uncertainties, including, but not
limited to, those relating to: the Company's products being in the
early stage of development; uncertainty of developing markets; the
need for additional financing and limited access to capital
funding; the Company's limited operating history; its accumulated
deficit and anticipated losses; government regulation (including
that the Company's products are subject to extensive regulation
and required government approvals, that there is no assurance of
regulatory approvals and that failure to obtain such approvals
will have an adverse effect; uncertainty of the type of, timing or
receipt of FDA approval; that the Company will be subject to
numerous international regulations and that other regulations may
adversely affect the Company); the Company's reliance on
distributors and collaborative partners; license patents and trade
secrets (including the uncertainty of domestic and international
patent protection, the possibility of patent infringement claims
against the Company, the Company's reliance on trade secrets and
proprietary know-how and that there is no assurance of
confidentiality); the potential adverse effects of technological
change and competition; potential of limited third-party
reimbursement; use of hazardous materials; possibility of product
liability claims; dependence on key personnel; limited
manufacturing and marketing experience; uncertainty relating to
health care reform measures; and other factors detailed in the
Company's Securities and Exchange Commission filings.
PART II - OTHER INFORMATION
Item 2. Changes in Securities
On June 12, 1996, Aprogenex, Inc. (the Company) completed the
sale of $2,005,000 of convertible notes (the Convertible Notes)
and warrants to acquire 130,323 shares of Common Stock, $.001 par
value (the 1996 Warrants) in a private placement. The following
sections describe certain of the principal terms of the
transaction and the securities.
Principal Terms of the Convertible Convertible Notes.
On June 12, 1996, the Company issued $2,005,000 principal amount of
Convertible Notes due on May 29, 1998.
The Convertible Notes bear interest at the rate of 10% per annum,
based on a 365 day year, compounded quarterly. Interest is
payable at maturity or upon prepayment.
The Convertible Notes are convertible into Common Stock at the
option of the holder at any time after the earlier of (i) the
approval for listing by the American Stock Exchange (the "AMEX")
of the Common Stock issuable upon conversion of the Convertible
Notes, or (ii) if the Common Stock of the Company ceases to be
listed for trading on the AMEX, on the day of such de-listing.
However, the Convertible Notes may not be converted after the
close of business on the fifth business day prior to either the
scheduled maturity or any scheduled redemption.
The Convertible Notes are convertible into Common Stock at a rate
of one share of Common Sock for every $1.10 in principal and
accrued interest (the "Conversion Price"). Accordingly, the
Convertible Notes are initially convertible into a total of
1,822,727 shares of Common Stock, but such number of shares will
increase as a result of interest on the Convertible Notes and may
be further adjusted by changes in the Conversion Price as set
forth herein. All or part of the principal amount of the
Convertible Notes may be converted at the election of the holder,
but accrued interest applicable to the converted principal amount
will also be converted into Common Stock.
On the twentieth business day prior to the maturity date of the
Convertible Notes (the Reset Date), the Conversion Price will be
adjusted to the average of the closing price of the Common Stock
on the AMEX (or such other trading forum as may be applicable at
that time) for the ten trading days prior to the Reset Date (the
Reset Conversion Price) if and only if such new Reset Conversion
Price is lower than the then-current Conversion Price. However,
such price shall not be less than 50% of the then-Conversion
Price.
The Convertible Notes contain provisions to protect the holders
against dilution by adjusting the number of shares issuable upon
conversion thereof.
The Company has the right to prepay principal and accrued interest
upon twenty days notice to the holders of the Convertible Notes.
However, the holders have the right to convert the Convertible
Notes into Common Stock as set forth above prior to such
redemption.
On or prior to August 11, 1996, the Company intends to file a
Registration Statement on Form S-3 to register the resale of
Common Stock issuable upon conversion of the Convertible Notes.
The principal and accrued interest of the Convertible Notes become
immediately due and payable upon the insolvency of the Company,
the commission of any act of bankruptcy by the Company, the
execution by the Company of a general assignment for the benefit
of creditors, the filing by or against the Company of any petition
in bankruptcy or any petition for relief under the provisions of
the federal bankruptcy act or any other state or federal law for
the relief of debtors and the continuation of such petition
without dismissal for a period of thirty (30) days or more, or the
appointment of a receiver or trustee to take possession of the
property or assets of the Company.
Principal Terms of the 1996 Warrants.
Warrants to acquire
130,323 shares of Common Stock were issued in conjunction with the
Convertible Notes, or warrants for approximately 6,500 shares for
every $100,000 of principal.
The 1996 Warrants entitle the holders thereof to purchase Common
Stock at $1.10 per share and are exercisable at any time after the
earlier of (i) the approval for listing by the American Stock
Exchange (the AMEX) of the Common Stock issuable upon exercise
of the warrants, or (ii) if the Common Stock of the Company ceases
to be listed for trading on the AMEX, on the day of such de-
listing, but such exercise must occur prior to the close of
business on May 28, 1999. The 1996 Warrants contain provisions to
protect the holders thereof against dilution by adjusting the
price at which the 1996 Warrants are exercisable and the number of
shares issuable upon exercise thereof upon the occurrence of
certain events. Commencing September 10, 1996, the holders of the
May Warrants will have piggyback registration rights to require
the Company to include the Common Stock underlying such warrants
in certain registration statements filed by the Company.
Purchases by Affiliates.
A substantial part of the Convertible
Notes and 1996 Warrants were purchased by existing stockholders
and affiliates of the Company. W.S. Farish and Company purchased
$1,170,000 of Convertible Notes and 1996 Warrants to acquire
76,050 shares of Common Stock. W.S. Farish and Company was the
beneficial owner of approximately 9.3% of the outstanding Common
Stock prior to the purchase. This purchase will increase the
beneficial ownership of W.S. Farish and Company to approximately
25.5% as of June 12, 1996. Terry Ward is the Financial Vice
President of W.S. Farish and Company, and is a director and
Chairman of the Board of the Company. Mr. Ward purchased $70,000
of Convertible Notes and 1996 Warrants to acquire 4,550 shares of
Common Stock. Including the shares beneficially owned by W.S.
Farish and Company, Mr. Ward beneficially owned 9.8% of the Common
Stock of the Company prior to the purchase and 26.8% of the Common
Stock after the purchase. Mr. Ward disclaims such beneficial
ownership of securities owned by W.S. Farish and Company.
Additionally, Mr. W.S. Farish and members of his family acquired
$150,000 of the Convertible Notes and 1996 Warrants to acquire
9,750 shares of Common Stock. Mr. Farish is a director and
stockholder in W.S. Farish and Company. Further information with
respect to the security ownership of purchasers of Convertible
Notes and 1996 Warrants may be available through any filings of
these parties pursuant to the Securities and Exchange Act of 1934.
Item 6. Submission of Matters to a Vote of Security-
Holders
On July 12, 1996, the annual meeting of stockholders was held in
Houston, Texas. There were 5,200,598 shares of Common Stock and
449,000 shares of Series A Convertible Preferred Stock (each of
which is entitled to 4.26 votes) issued, outstanding and entitled
to vote at the meeting. Three items were acted upon by the
stockholders.
The first action was the election of Directors of the Company.
All of the nominees were elected in uncontested elections, and the
votes cast for and against were as follow:
Nominees No. of Votes
For Withheld
Dr. Michael E. Hogan 4,118,320 22,653
Christopher T. Kelly 4,118,320 22,653
David Leech 4,118,320 22,653
J. Donald Payne 4,118,320 22,653
Terry Ward 4,118,320 22,653
The second action was the approval of the amended and restated
Directors Stock Option Plan and the increase by 50,000 in the
number shares of Common Stock authorized for issuance under the
plan. At the meeting, there were 3,681,308 votes for the approval
of the increase, 425,315 votes against the approval of the
increase, 34,350 votes abstained and no shares did not vote.
The final action was the approval of Arthur Andersen LLP as the
independent public accountants for Aprogenex, Inc. for the Company
for 1996. At the meeting, there were 4,135,143 votes for the
approval of Arthur Andersen LLP, 2,530 votes against, 3,300 votes
abstained, and no shares did not vote.
Item 7. Exhibits and Reports on Form 8-K
a.) Exhibits
Exhibit
Number Document Description
4.1 Director Stock Option Plan, as Amended and Restated on
July 12, 1996.
4.2(a)* Convertible Note Subscription Agreement dated as of
May 1, 1996 among Aprogenex, Inc. and the various
purchasers (Incorporated by reference from Exhibit
4.1(a) to the Company's Form 8-K dated as of June 12,
1996).
4.2(b)* Form of Convertible Note dated as of June 12, 1996
(Incorporated by reference from Exhibit 4.1(b) to the
Company's Form 8-K dated as of June 12, 1996).
4.3* Warrant Agreement dated as of May 1, 1996 among
Aprogenex, Inc. and the various warrantholders
(Incorporated by reference from Exhibit 4.2 to the
Company's Form 8-K dated as of June 12, 1996).
27 Financial Data Schedule.
* Incorporated by reference from a previous filing as indicated.
b.) Reports on Form 8-K
A Form 8-K was filed as of April 1, 1996 regarding the appointment
of David Leech to the Board of Directors and as Acting President
and Chief Executive Officer. Additionally, a Form 8-K was filed
as of June 12, 1996 describing the sale of the Convertible Notes
and 1996 Warrants.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Company has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Aprogenex, Inc.
August 8, 1996 By: /s/ J. Donald Payne
--------------------------
J. Donald Payne
Vice President - Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Exhibit Index
Exhibit
Number Document Description
4.1 Director Stock Option Plan, as Amended and Restated on
July 12, 1996.
4.2(a)* Convertible Note Subscription Agreement dated as of
May 1, 1996 among Aprogenex, Inc. and the various
purchasers (Incorporated by reference from Exhibit
4.1(a) to the Company's Form 8-K dated as of June 12,
1996).
4.2(b)* Form of Convertible Note dated as of June 12, 1996
(Incorporated by reference from Exhibit 4.1(b) to the
Company's Form 8-K dated as of June 12, 1996).
4.3* Warrant Agreement dated as of May 1, 1996 among
Aprogenex, Inc. and the various warrantholders
(Incorporated by reference from Exhibit 4.2 to the
Company's Form 8-K dated as of June 12, 1996).
27 Financial Data Schedule.
* Incorporated by reference from a previous filing as indicated.
EXHIBIT 4.1
APROGENEX, INC.
DIRECTOR STOCK OPTION PLAN
Amended and Restated as of July 12, 1996
1. Purpose. The purpose of this Director Stock Option Plan
(the "Plan") of Aprogenex, Inc. (the "Company"), is to encourage
ownership in the Company by outside directors of the Company whose
services are considered essential to the Company's continued
progress and thus to provide them with a further incentive to
continue to serve as directors of the Company. The Plan is also
intended to assist the Company through utilization of the
incentives provided by the Plan to attract and retain experienced
and qualified candidates to fill vacancies in the Board which may
occur in the future.
2. Administration. The Plan will be administered by the Board
of Directors (the "Board") of the Company. Subject to the express
provisions of the Plan, the Board will have complete authority to
interpret the Plan; to prescribe, amend, and rescind rules and
regulations relating to it; to determine the terms and provisions
of the respective option agreements in accordance with the
provisions of the Plan; and to make all other determinations
necessary or advisable for the administration of the Plan. The
Board's determination on the matters referred to in this Section 2
will be conclusive.
3. Participation in the Plan. The Directors of the Company
who are not employees of the Company or any Parent or Subsidiary
of the Company (within the meaning of Section 424(e) or (f) of the
Internal Revenue Code of 1986, as amended) ("Eligible Directors")
shall be eligible to participate in the Plan. A director who is
or has been an employee of the Company or any Parent or Subsidiary
of the Company shall not be eligible to become an Eligible
Director unless and until such director is elected to a new term
of office as a director while no longer serving as an employee of
the Company.
4. Stock Subject to the Plan. The stock subject to the Plan
shall consist of 150,000 shares of the $0.001 par value common
stock of the Company ("Common Stock"). Such shares may, as the
Board shall from time to time determine, be either authorized and
unissued shares of Common Stock or issued shares of Common Stock
which have been reacquired by the Company. If any option granted
under the Plan expires or terminates for any reason without having
been exercised in full, the shares subject to, but not delivered
under, such option may again become available for the grant of
other options under the Plan.
5. Stock Options. Each option granted under this Plan shall be
evidenced by a written agreement in such form as the Board shall
from time to time approve, which agreements shall comply with and
be subject to the following terms and conditions:
A. Option Grant Dates. For each Eligible Director who is
elected to the Board of Directors after the date of approval
of the Plan, as amended and restated, by the stockholders of
the Company (such date hereinafter referred to as the
"Effective Date"), options shall be granted to each such
Eligible Director on the day of his or her initial election
or appointment to the Board of Directors (or, if such date
falls on a non-business day, the first business day
thereafter) (the "Grant Date"). If the election or
appointment is subject to or conditioned upon the acceptance
by the Eligible Director, then the Grant Date for all
purposes herein (other than the determination of Fair Market
Value as set forth in Section 5C herein) shall be such date
of acceptance. Initially, for each Eligible Director serving
on the Effective Date, the Effective Date shall be the Grant
Date for such Eligible Director.
B. Number of Shares Earned. On the Grant Date, each
Eligible Director shall be awarded an option to purchase
10,000 shares of Common Stock. Such grant is a one-time
grant and not an annual grant.
C. Option Price per Share. The options granted
hereunder shall be exercisable at a price per share equal to
the Fair Market Value of the Common Stock on the Grant Date
(except that for Eligible Directors whose term of service
starts after the date of appointment or election, the date of
such appointment or election shall be the date for
determination of the Fair Market Value). For purposes of
this Plan, the "Fair Market Value" of a share on a particular
date shall be deemed to be, (i) if the Common Stock is listed
on a national securities exchange, the closing selling price
per share of the Common Stock on any such national securities
exchange on that date, as reported in The Wall Street Journal
or, if there shall have been no such sale so reported on that
date, on the last preceding date on which such a sale was so
reported, or (ii) if the Common Stock is not so listed, the
closing selling price (or, if not so reported, the mean
between the closing bid and asked price) on that date, or, if
there are no quotations available for such date, on the last
preceding date on which such quotations shall be available,
as reported by NASDAQ, or, if not reported by NASDAQ, by the
National Quotation Bureau, Inc.
D. Options Nontransferable. Each option granted under
the Plan by its terms shall not be transferable by the
optionee otherwise than by will, or by the laws of descent
and distribution, and shall be exercisable during the
lifetime of the optionee only by the optionee. While living,
no option or interest therein may be transferred, assigned,
pledged, or hypothecated by the optionee, whether by
operation of law or otherwise, or be made subject to
execution, attachment, or similar process.
E. Exercisability and Term of Options. Each option
granted under the Plan shall vest as follows: (i) options as
to 5,000 shares shall vest and be exercisable on the first
anniversary of the Grant Date; and (ii) options as to the
remaining 5,000 shares shall vest and be exercisable on the
second anniversary of the Grant Date. If not previously
exercised or forfeited pursuant to the provisions of Sections
5F, 5G and 5H herein, such options shall expire on the fifth
anniversary of the Grant Date.
F. Termination of Status as a Director. In the event
of termination of an optionee's status as an Eligible
Director (regardless of whether such termination is by
resignation, removal, failure to nominate or reelect upon the
end of any term or by becoming an employee of the Company)
prior to such option or portion thereof becoming exercisable
pursuant to the provisions of Section 5E or 5G herein, then
such option or portion thereof which was not exercisable as
of the date of such termination shall be forfeited. Any
portion of the option which was exercisable as of the date of
such termination shall continue to be exercisable until the
earlier of (i) the expiration of such option pursuant to
Section 5E herein or (ii) six months after the death of such
optionee pursuant to the provisions of section 5H herein.
G. Disability of Optionee. In the event of the total
and permanent disability (as defined in Section 22(e)(3) of
the Internal Revenue Code of 1986) of an Eligible Director,
regardless of whether the Eligible Director continues to
serve as a director of the Company, all of such option shall
become fully exercisable and may be exercised at any time
prior to the earlier of (i) the expiration of the option as
set forth in Section 5E herein or (ii) six months after the
death of such optionee pursuant to the provisions of section
5H herein.
H. Death. In the event of the death of an optionee during
the term of the option who is at the time of his death an
Eligible Director of the Company, the option shall become
fully exercisable (regardless of the extent of the right to
exercise that had accrued as of the date of death), and all
of such option may be exercised at any time within six (6)
months following the date of death, by the optionee's estate
or by a person who acquired the right to exercise the Option
by bequest or inheritance. In the event of the death of an
optionee during the term of the option who is not at the time
of his death an Eligible Director of the Company, the option
may be exercised at any time within six (6) months following
the date of death, 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 that the right to
exercise that had accrued as of the date of death. However,
in no event may an option be exercised after the expiration
of such option pursuant to the provisions of section 5E
herein.
I. Exercise of Options. Options may be exercised only by
written notice to the Company at its corporate office
accompanied by payment of the full consideration for the
shares as to which they are exercised, including any federal,
state and/or local income tax withholding amount due in
connection with the exercise. The purchase price, together
with any income tax withholding amount due, is to be paid in
full to the Company upon the exercise of the option by cash
payment, which may take the form of a personal check payable
to the order of the Company.
J. Nonstatutory Options. All options granted hereunder
shall be non-statutory options not intended to qualify under
Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").
6. Assignment. The rights and benefits of a participant under
this Plan may not be assigned and any attempted assignment of such
rights and benefits shall be null and void.
7. Limitation of Rights.
A. No Right to Continue as a Director. Neither the Plan,
nor the granting of an option nor any other action taken pursuant
to the Plan, shall constitute or be evidence of any agreement or
understanding, express or implied, that the Company will retain a
Director for any period of time, or at any particular rate of
compensation.
B. No Stockholder's Rights for Optionees. An optionee or
the optionee's representative shall have no rights as a
stockholder with respect to the shares covered by the options
until the date of the issuance to the optionee or the optionee's
representative of a stock certificate therefore, and no adjustment
will be made for dividends or other rights for which the record
date is prior to the date such certificate is issued.
8. Changes in Present Stock.
A. Corporate Acts. The existence of outstanding options shall
not affect in any manner the right or power of the Company or its
stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the capital
stock of the Company or its business or any merger or
consolidation of the Company, or any issue of bonds, debentures,
preferred or prior preference stock (whether or not such issue is
prior to, on a parity with or junior to the Common Stock) or the
dissolution or liquidation of the Company, or any sale or transfer
of all or any part of its assets or business, or any other
corporate act or proceeding of any kind, whether or not of a
character similar to that of the acts or proceedings enumerated
above.
B. Adjustments. In the event of any subdivision or
consolidation of outstanding shares of Common Stock or declaration
of a dividend payable in shares of Common Stock or capital
reorganization or reclassification or other transaction involving
an increase or reduction in the number of outstanding shares of
Common Stock, the Board shall adjust proportionally (i) the number
of shares of Common Stock reserved under this Plan and covered by
outstanding options denominated in Common Stock; (ii) the exercise
price in respect of such options; and (iii) the appropriate Fair
Market Value and other price determinations for such options. In
the event of any consolidation or merger of the Company with
another corporation or entity or the adoption by the Company of a
plan of exchange affecting the Common Stock or any distribution to
holders of Common Stock of securities or property (other than
normal cash dividends or dividends payable in Common Stock), the
Board shall make such adjustments as it may deem equitable,
including adjustments to avoid fractional shares, to give proper
effect to such event. In the event of a corporate merger,
consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Board shall be authorized to
issue or assume stock options, regardless of whether in a
transaction to which Section 424(a) of the Code applies, by means
of substitution of new options for previously issued options or an
assumption of previously issued options.
9. Effective Date, Transition for Current Directors, and
Duration of the Plan.
A. Effective Date. The Plan, as amended and restated, shall
take effect on the date of approval of the Plan by the affirmative
votes of the holders of a majority of the outstanding shares of
the Company present, or represented, and entitled to vote at a
meeting of the Company's stockholders, or by the written consent
of the holders of a majority of the outstanding shares of the
Company entitled to vote.
B. Transition Provisions. Upon the adoption of the Plan as
set forth herein, it is anticipated that current or previous
Eligible Directors during 1996 would otherwise be entitled to
compensation under the provisions of the Plan prior to its
amendment and restatement. For any Eligible Directors serving as
a director as of such date of adoption, any authorized or
anticipated grants of options for service in 1996 pursuant to the
provisions of the Plan prior to such amendment and restatement
shall be superseded by the provisions of this Plan as amended and
restated. For any Eligible Directors whose service as a director
in 1996 terminated prior to such amendment and restatement, any
authorized or anticipated grants of options pursuant to the
provisions of the Plan prior to such amendment shall be made and
governed by the provisions of this Plan prior to this amendment
and restatement. Any grants to Eligible Directors under the
provisions of the Plan prior to this amendment and restatement
shall continue to be governed by the provisions of the Plan before
such amendment and restatement.
C. Termination. The Plan shall terminate when all Common Stock
subject to the Plan is subject to an option to purchase (unless
earlier discontinued by the Board) but such termination shall not
affect the rights of the holder of any option outstanding on such
date of termination. If, on a date on which options would
normally be granted, there is not a sufficient number of shares
available to grant each person otherwise eligible to receive an
option on that date an option to purchase the full number of
shares to which he or she would normally be entitled, options
shall be prorated among optionees according to the number of
shares available on such date of grant. Such optionees shall be
deemed to have received the full amount due to them on such date
of grant. All options granted under the Plan are subject to and
may not be exercised before.
10. Amendment of the Plan. The Board may suspend or
discontinue the Plan or revise or amend it in any respect
whatsoever; provided, however, that to the extent required by Rule
16b-3 under the Securities Exchange Act of 1934, as amended ("Rule
16b-3"), the provisions of this Plan relating to the class of
persons eligible to participate in this Plan and the amount,
price, and timing of awards may not be amended more often than
once every six months except to comport with changes in the Code,
the Employee Retirement Income Security Act or rules promulgated
thereunder; and provided, further, that no revision or amendment
to the Plan shall be effective without stockholder approval to the
extent required by Rule 16b-3.
11. Requirements of Law. The granting of options and the
issuance of shares of Common Stock upon the exercise of an option
shall be subject to all applicable laws, rules and regulations and
to such approvals by any governmental agencies or national
securities exchanges as may be required.
12. Notice. Any written notice to the Company required by any
of the provisions of this Plan shall be addressed to the Secretary
of the Company and shall become effective when it is received.
13. Governing Law. This Plan and all determinations made and
actions taken pursuant hereto shall be governed by the law of the
State of Delaware and construed accordingly.
APROGENEX, INC.
As approved by the Board of Directors
of the Company on May 30, 1996
/s/ J. Donald Payne
- --------------------
Secretary
As approved by the stockholders of the
Company on July 12, 1996
/s/ J. Donald Payne
- --------------------
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited Balance Sheet as of June 30, 1996 and the unaudited Statement of
Operations for the six months ended June 30, 1996 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
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<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42022
<INCOME-PRETAX> (1572954)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1572954)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1572954)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
<FN>
<F1>Net of accumulated depreciation.
</FN>
</TABLE>
