UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QA
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --------- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
1996.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --------- EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO
_____________ .
Commission File Number 0-22570
Lynx Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
Delaware 94-3161073
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3832 Bay Center Place
Hayward, CA 94545
(Address of principal executive offices) (Zip Code)
(510) 670-9300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
The number of shares of Common Stock, Series B Preferred Stock, Series C
Preferred Stock, and Series D Preferred Stock outstanding as of September 30,
1996 were 2,345,466, 332,288, 123,299 and 40,000, respectively. The Series B,
Series C and Series D Preferred Stock are convertible into Common Stock on a
ten-for-one basis. Information regarding the aggregate market value of the
Registrant's voting stock is not included because there is currently no public
trading market for the Company's voting stock.
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PART II: OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
The following documents are filed as Exhibits to this
report:
Exhibit
Number Description
------- -----------
10.32 Collaboration Agreement dated as of September 30,
1996, by and among the Company and Schwarz Pharma AG**
11.0 Statement re: Computation of Earnings Per Share
27.1 Financial Data Schedule
- ----------
** Portions of this agreement have been deleted pursuant to our request for
confidential treatment.
(b) No reports on Form 8-K were filed during the quarter
ended September 30, 1996.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LYNX THERAPEUTICS, INC.
/s/ Sam Eletr
------------------------------------------------------
By: Sam Eletr, Ph.D.
Chief Executive Officer
Date: November 15, 1996
/s/ Craig C. Taylor
------------------------------------------------------
By: Craig C. Taylor
Acting Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: November 15, 1996
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(d) No Violation. Neither Schwarz Pharma nor any of its
Affiliates is a party to, subject to, or bound by an agreement or judgment,
award, order or writ, injunction or decree of any court, governmental body or
arbitrator which would conflict with or be breached by the execution, delivery
or performance of this Agreement and there is (a) no action, suit, dispute or
governmental, administrative, arbitration or regulatory proceeding pending or
threatened nor (b) any investigation pending or threatened against or relating
to Schwarz Pharma which, in each case, could prevent Schwarz Pharma from
carrying out its obligations under this Agreement.
13. TERM OF AGREEMENT AND TERMINATION.
13.1 Term. Unless terminated in accordance with this Article 13 or
Section 3.4, this Agreement shall expire upon the later of (i) 10 years after
commencement of marketing the Product in a Major Country or (ii) expiration of
the last to expire of the Lynx Patents issued in the Territory. The Parties
agree that at least two (2) years prior to the expiration of this Agreement
under this Section 13.1 the Parties will meet, discuss in good faith and attempt
to reach mutually acceptable agreement to provide for Lynx's continuing supply
to Schwarz Pharma of Product and economic terms for such supply. Schwarz Pharma
shall be obligated to continue to purchase Product from Lynx under such
agreement so long as Lynx is able to supply the Product at prices comparable to
those available on the market and in appropriate quantities and quality. As used
herein, "comparable" means within [REDACTED] of the price of supply available on
the market. If Lynx is unable to meet such requirements, then under the terms of
such agreement Schwarz Pharma may thereafter purchase the Product from a Third
Party or manufacture it itself.
13.2 Termination For Material Breach. Each Party shall have the right
to terminate this Agreement after written notice to the other that the other is
in material breach of this Agreement, unless the other Party cures the breach
before the expiration of 90 days after such written notice. Notwithstanding the
foregoing, Lynx may terminate this Agreement in the event Schwarz Pharma
breaches a payment obligation hereunder and thereafter fails to make full
payment of amounts due Lynx within 30 days after written notice from Lynx to
Schwarz Pharma, provided, however, that Schwarz Pharma may withhold a particular
payment for so long as Schwarz Pharma is pursuing in good faith a claim that
Lynx has not performed the specific tasks necessary to earn such payment. Any
failure by Lynx to terminate this Agreement for late payments shall not be
deemed a waiver of its right to terminate this Agreement in the future for a
future late payment by Schwarz Pharma.
13.3 Termination without Cause. Schwarz Pharma shall have the right to
terminate the Agreement at any time without the requirement of showing cause,
upon 90
CONFIDENTIAL TREATMENT REQUESTED
44.
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days prior written notice if given prior to achieving Regulatory Approval, and
upon 120 days prior written notice thereafter.
(a) If Schwarz Pharma elects to terminate under this Section
13.3 prior to Regulatory Approval, and such termination is not due to serious
safety or toxicity concerns regarding the Licensed Compound when used in the
Field (as such phrase is defined in subsection (c) below), then Schwarz Pharma
shall pay Lynx the following amounts: (i) if the termination occurs prior to
completion of the Multi-Dose Efficacy Studies, Schwarz Pharma shall pay Lynx all
costs and expenses of completing such studies according to the agreed Protocols
and budgets for such studies; (ii) if the termination occurs during ongoing
Phase III (or foreign equivalent) studies, Schwarz Pharma shall pay Lynx an
amount equivalent to all costs and expenses that Schwarz Pharma would incur in
terminating such studies, and also will loan to Lynx an amount (the "Loan")
equal to the costs and expenses of conducting such studies according to the
agreed Protocols and budgets for such studies for the [REDACTED] period
following termination of the Agreement, but subject to a maximum of $[REDACTED]
million. Such Loan will be interest free for the first [REDACTED] months and
thereafter will bear interest at the Prime Rate as established by Citibank. The
Loan will be repaid within [REDACTED] years of Schwarz Pharma providing the
loan, but may be converted at any time in such period at Schwarz Pharma's
election into the common stock of Lynx at the then current market price, as
established by a national market quotation system, if Lynx stock is so traded,
or if not as determined by Lynx's Board of Directors in good faith.
(b) If termination under this Section is due to serious safety
or toxicity concerns, then Schwarz Pharma shall not be responsible for making
the foregoing payments but will be responsible for all costs and expenses of
terminating any ongoing clinical trials. After any termination under this
Section, Schwarz Pharma covenants that neither it nor its Affiliates or
Sublicensees will make, use or sell Licensed Compounds or Products. It is agreed
that if Lynx, after termination by Schwarz Pharma under this Section, enters
into a license agreement with a Third Party granting such Third Party the right
to develop, market or sell the Licensed Compound as a product for use in the
Field, then Lynx will repay to Schwarz Pharma, out of the revenues received from
such Third Party under such Agreement, any amounts paid to Lynx by Schwarz
Pharma under this Section 13.3 (excluding the Loan if repaid or converted to
equity). Such repayment shall be made at a rate limited to [REDACTED] of any
amounts of such revenues actually received by Lynx. Lynx grants Schwarz Pharma a
security interest in such revenues to secure repayment of the Loan in accordance
with the terms hereof, and consents to the filing of an appropriate financing
statement to perfect the security interest.
(c) As used in this Section, the phrase "serious safety or
toxicity concerns" means that the Safety Monitoring Board for the applicable
clinical trial conducted hereunder has determined that a safety or toxicity
issue with respect to the
45.
