-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QhC4Li/YfNMh1+8rggcTQOP37lc+Qfop5iHn3cWIECPdJ7KhBME4hie4M6vXa66Y UN/BTAwlWl3vjDC+Il4gag== 0001047469-98-030717.txt : 19980813 0001047469-98-030717.hdr.sgml : 19980813 ACCESSION NUMBER: 0001047469-98-030717 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980812 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORVAS INTERNATIONAL INC CENTRAL INDEX KEY: 0000882100 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 330238812 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19732 FILM NUMBER: 98683599 BUSINESS ADDRESS: STREET 1: 3030 SCIENCE PARK RD CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6194559800 MAIL ADDRESS: STREET 2: 3030 SCIENCE PARK ROAD CITY: SAN DIEGO STATE: CA ZIP: 92121 10-Q 1 10-Q FORM 1O-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 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 0-19732 CORVAS INTERNATIONAL, INC. (Exact name of Registrant as specified in its charter) DELAWARE 33-0238812 (State or other jurisdiction (I .R.S. Employer of incorporation or organization) Identification No.) 3030 SCIENCE PARK ROAD SAN DIEGO, CALIFORNIA 92121 (Address of principal executive offices and zip code) (619) 455-9800 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value (Title of class) Indicate by check mark whether the Registrant (l) 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 ------ ------ At July 31, 1998, there were 15,085,575 shares of Common Stock, $0.001 par value, of the Registrant issued and outstanding. CORVAS INTERNATIONAL, INC. INDEX
Page ---- PART I FINANCIAL INFORMATION Item 1 Financial Statements Condensed Balance Sheets as of June 30, 1998 (unaudited) and December 31, 1997 1 Unaudited Condensed Statements of Operations for the Three and Six Months Ended June 30, 1998 and 1997 2 Unaudited Condensed Statements of Cash Flows for the Six Months Ended June 30, 1998 and 1997 3 Notes to Condensed Financial Statements 4 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 5 Item 3 Quantitative and Qualitative Disclosures About Market Risk 9 PART II OTHER INFORMATION Item 1 Legal Proceedings 10 Item 2 Changes in Securities 10 None Item 3 Defaults Upon Senior Securities 10 None Item 4 Submission of Matters to a Vote of Security Holders 10 Item 5 Other Information 11 None Item 6 Exhibits and Reports on Form 8-K (a) Exhibits 11 (b) Reports on Form 8-K 11 None SIGNATURES 12
PART I -- FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS CORVAS INTERNATIONAL, INC. CONDENSED BALANCE SHEETS (In thousands)
JUNE 30, 1998 DECEMBER 31, 1997 ------------- ----------------- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 3,541 $ 2,044 Short-term debt securities held to maturity and time deposits, partially restricted 16,933 24,076 Receivables 258 289 Notes receivable from related parties 153 153 Other current assets 354 340 -------- -------- Total current assets 21,239 26,902 Property and equipment, net 1,662 1,312 -------- -------- $ 22,901 $ 28,214 -------- -------- -------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 483 $ 299 Accrued expenses 1,151 623 Accrued vacation 237 191 Deferred revenue 2,000 4,656 -------- -------- Total current liabilities 3,871 5,769 -------- -------- Stockholders' equity: Preferred stock - Series A 1 1 Preferred stock - Series B - - Common stock 14 14 Additional paid-in capital 92,521 92,179 Accumulated deficit (73,506) (69,749) -------- -------- Total stockholders' equity 19,030 22,445 -------- -------- Commitments and contingencies $ 22,901 $ 28,214 -------- -------- -------- --------
See accompanying notes to condensed financial statements. 1 CORVAS INTERNATIONAL, INC. CONDENSED STATEMENTS OF OPERATIONS In thousands, except per share amounts (unaudited)
Three Months Ended Six Months Ended June 30, June 30, ---------------------- --------------------- 1998 1997 1998 1997 --------- -------- -------- --------- REVENUES: Revenue from collaborative agreements $ 1,746 $ 1,244 $ 3,493 $ 2,319 License fees and milestones 1,000 250 2,000 4,100 Net product sales 10 153 44 163 Royalties 53 21 95 57 -------- -------- -------- -------- Total revenues 2,809 1,668 5,632 6,639 -------- -------- -------- -------- COSTS AND EXPENSES: Research and development 4,098 2,693 7,682 5,042 General and administrative 1,400 1,391 2,266 2,239 Cost of products sold 1 74 18 78 -------- -------- -------- -------- Total costs and expenses 5,499 4,158 9,966 7,359 -------- -------- -------- -------- Loss from operations (2,690) (2,490) (4,334) (720) OTHER INCOME: Interest income, net 245 327 572 715 Other income 5 0 5 _ -------- -------- -------- -------- 250 327 577 715 -------- -------- -------- -------- Net loss $ (2,440) $ (2,163) $ (3,757) $ (5) -------- -------- -------- -------- -------- -------- -------- -------- Basic and diluted net loss per share $ (0.18) $ (0.15) $ (0.27) $ (0.00) -------- -------- -------- -------- -------- -------- -------- -------- Shares used in calculation of net loss per share 14,038 13,850 14,005 13,832 -------- -------- -------- -------- -------- -------- -------- --------
See accompanying notes to condensed financial statements. 2 CORVAS INTERNATIONAL, INC. CONDENSED STATEMENTS OF CASH FLOWS IN THOUSANDS (UNAUDITED)
Six Months Ended June 30, ------------------------- 1998 1997 ---------- -------- Cash flows from operating activities: Net loss $ (3,757) $ (5) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 303 311 Amortization of premiums and discounts on investments (460) 26 Loss on sale of property and equipment 81 0 Stock compensation expense 104 6 Change in assets and liabilities: Decrease in receivables 31 202 Increase in other current assets (14) (416) Increase in accounts payable, accrued expenses and accrued vacation 758 426 Decrease in deferred revenue (2,656) (556) ------- ------- Net cash used in operating activities (5,610) (6) ------- ------- Cash flows from investing activities: Purchases of investments held to maturity (19,693) (27,329) Proceeds from maturity of investments held to maturity 27,295 26,485 Purchases of property and equipment (733) (803) ------- ------- Net cash provided by (used in) investing activities 6,869 (1,647) ------- ------- Cash flows from financing activities: Principal payments under capital lease obligation 0 (20) Net proceeds from issuance of common stock 238 332 ------- ------- Net cash provided by financing activities 238 312 ------- ------- Net increase (decrease) in cash and cash equivalents 1,497 (1,341) Cash and cash equivalents at beginning of period 2,044 2,202 ------- ------- Cash and cash equivalents at end of period $ 3,541 $ 861 -------- ------- -------- -------
See accompanying notes to condensed financial statements. 3 CORVAS INTERNATIONAL, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (1) THE COMPANY Corvas International, Inc. (the "Company") was incorporated on March 27, 1987 under the laws of the State of California. In July 1993, the Company reincorporated in the State of Delaware. The Company is engaged in the design and development of a new generation of therapeutic agents in the fields of blood clot formation (thrombosis), inflammation, cancer and other diseases. (2) BASIS OF PRESENTATION The interim financial information contained herein is unaudited but, in management's opinion, includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation. The financial statements should be read in conjunction with the Company's audited financial statements and notes thereto for the year ended December 31, 1997. Results for the interim periods are not necessarily indicative of results for other interim periods or for the full year. (3) NET LOSS PER SHARE Net loss per share for the three and six months ended June 30, 1998 and 1997 is computed using the weighted average number of common share equivalents outstanding. Common equivalent shares are not included in the per share calculation since the effect of their inclusion would be anti-dilutive. (4) COMPREHENSIVE INCOME As of January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 established standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. The adoption of SFAS 130 did not have a significant impact since the Company's net loss approximates comprehensive loss for the six month periods ended June 30, 1998 and 1997. (5) SUBSEQUENT EVENTS On July 21, 1998, the Company issued a total of 1,025,000 shares of common stock pursuant to the exercise of warrants by a select group of institutional investors, resulting in estimated net proceeds of $3,646,000. 4 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K. OVERVIEW Formed in 1987, Corvas International, Inc. (the "Company") is a biopharmaceutical firm engaged in the design and development of a new generation of therapeutic agents in the fields of blood clot formation (thrombosis), inflammation, cancer and other diseases. To date, the Company has not generated significant revenues from product sales. The Company has not been profitable on an annual basis since inception and expects to incur substantial additional operating losses on an annual basis over the next several years as the Company expands its research and development programs. There is no assurance that the Company will successfully develop, commercialize, manufacture or market its products or generate sufficient revenues to become profitable on a sustained basis or at all. At June 30, 1998, the Company had an accumulated deficit of $73,506,000. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1998 AND 1997 Operating revenues increased from $1,668,000 for the quarter ended June 30, 1997 to $2,809,000 in the corresponding period in 1998. This increase is primarily the result of a $1,000,000 milestone received from Schering Corporation ("Schering-Plough") upon the commencement of a Phase I trial of an oral antithrombotic drug candidate discovered by Corvas. Also contributing to this increase is $240,000 of revenue from collaborative agreements recognized pursuant to the Company's research and development agreement with Vascular Genomics Inc. ("VGI") covering a novel vascular targeting technology. These increases were partially offset by a decrease in net product sales. The Company has discontinued its manufacturing activities related to recombinant tissue factor and expects to complete the transfer of these activities to Ortho-Clinical Diagnostics Inc. ("Ortho"), a Johnson & Johnson company, during the third quarter of 1998. Total costs and expenses increased from $4,158,000 in the three months ended June 30, 1997 to $5,499,000 in the same period of 1998. Research and development expenses accounted for the majority of this increase, increasing from $2,693,000 in the second quarter of 1997 to $4,098,000 in the same quarter one year later. This increase is primarily due to increased costs associated with three clinical studies of NAPc2 and clinical supplies manufacturing of NAP5. General and administrative costs increased only slightly comparing these periods. These increases were partially offset by a $73,000 decrease in cost of goods sold resulting from the Company's discontinuation of all manufacturing activities. Other income decreased from $327,000 in the three month period ended June 30, 1997 to $250,000 in the corresponding period of 1998 due to a reduction in interest income earned, primarily as a result of a decrease in investment securities. 5 SIX MONTHS ENDED JUNE 30, 1998 AND 1997 Comparing the six month periods ended June 30, operating revenues decreased by $1,007,000 from $6,639,000 in 1997 to $5,632,000 in 1998. This decrease is primarily the result of a $3,000,000 milestone earned in the oral thrombin inhibitor program with Schering-Plough in the first half of 1997, compared to a $1,000,000 milestone earned in the first half of 1998. Net product sales also decreased comparing these periods, from $163,000 to $44,000, due to discontinuing the manufacturing of recombinant tissue factor. These decreases were partially offset by an increase of $1,174,000 in revenue from collaborative agreements. The increase in this line item is mainly the result of revenue recognized pursuant to a third collaboration with Schering-Plough, covering oral inhibitors of a key protease necessary for hepatitis C virus replication, and the research and development agreement with VGI, both of which were entered into in mid-1997. Total costs and expenses increased by $2,607,000 comparing the first half of 1997 to 1998, from $7,359,000 in the 1997 period to $9,966,000 in the 1998 period. Research and development expenses associated with the NAPc2 and NAP5 programs accounted for the majority of this increase, increasing from $5,042,000 to $7,682,000, while general and administrative expenses increased by a modest $27,000. A $60,000 decrease in cost of goods sold related to the discontinuation of recombinant tissue factor manufacturing offset a portion of this increase in expenses. Total other income decreased from $715,000 in the first six months of 1997 to $577,000 in the same period one year later, primarily as a result of decreased cash balances available for investment which caused interest income to decrease by $143,000. Subject to the availability of additional capital, the Company expects its expenses to increase over the next several years as the Company's research and development programs progress. The Company also expects both its expenses and losses to fluctuate from quarter to quarter and anticipates that such fluctuations may, at times, be substantial. LIQUIDITY AND CAPITAL RESOURCES Since inception, the Company's operations have been funded primarily through public offerings and private placements of equity securities, revenues and milestones from collaborative agreements, license fees and research grants, and interest income earned on cash and investment balances. The Company's principal sources of liquidity are its cash and cash equivalents, time deposits and debt securities which, net of a restricted time deposit, totaled $20,414,000 as of June 30, 1998. Working capital at June 30, 1998 was $17,368,000. Subsequent to June 30, 1998, the Company raised estimated net proceeds of $3,646,000 from the exercise of certain warrants. Available cash is invested in accordance with an investment policy set by the Board of Directors, which has the objectives to preserve principal, maintain adequate liquidity and maximize income. The policy provides guidelines concerning the quality, term and liquidity of investments. The Company presently invests its excess cash in interest-bearing, investment-grade securities. Net cash used in operations in the six months ended June 30, 1998 was $5,610,000, compared to $6,000 for the same period one year earlier. This was due to increased cash usage as the Company continues its efforts in the clinical development of NAPc2 and NAP5, as well as a decrease in 1998 operating revenues, mainly as a result of the $3,000,000 milestone payment received from Schering-Plough in the first quarter of 1997. In the six months ended June 30, 1998, net cash of $6,869,000 was provided by investing activities, compared to net cash of $1,647,000 used in investing activities in the corresponding period of 1997. This reflects the usage of proceeds from investment maturities to fund 1998 operating activities. Net cash provided by financing activities decreased slightly to $238,000 from $312,000 in the same period one year earlier due to the exercise of fewer stock options in 1998. 6 The Company expects to incur substantial additional costs in the foreseeable future, including costs related to clinical and preclinical studies and expanding its research and development activities. The Company expects such costs to continue to increase and, as a result, expects to experience substantial additional operating losses and negative cash flows from operations over the next several years. In particular, increased costs are anticipated as the clinical development of NAPc2 progresses, including a Phase II trial planned to commence in late 1998. The Company also expects revenues in 1999 to decrease from the current levels due to reaching the end of the two-year term in the Factor Xa research program with Schering-Plough. The Company believes its existing capital resources and interest earned thereon should be sufficient to satisfy its anticipated funding requirements for at least the next 12 months. In addition, the Company may also receive additional funds through milestone payments and royalties on sales of products in connection with its alliances. However, there is no assurance that the Company will receive any additional amounts under existing or any future alliances. Strategic collaborations with Schering-Plough and Pfizer provide for payments to the Company if and when certain milestones are met. However, there is no assurance that any future milestones will be achieved. In the quarter ended June 30, 1998, Schering-Plough initiated a clinical trial in the oral thrombin inhibitor program which triggered a $1,000,000 milestone payment. The next milestone payment expected, in another of the Company's collaborations with Schering-Plough, is $500,000 upon the identification of an initial lead compound in the program covering inhibitors of the hepatitis C virus. In addition, the Company may also receive additional milestone payments and royalties on sales of products in connection with its existing alliances, as well as from any future alliances. If all of the milestones on all of the Company's existing collaborations are met, Corvas could receive a maximum of $94,431,000 in future milestone payments and research and development funding over the next several years. There is no assurance that the Company's existing collaborations will be successful, that the Company will receive any further milestones or other payments pursuant to collaborative agreements, that the collaborations will continue since the existing collaborative agreements are terminable at the option of the collaborator upon certain events or that the existing collaborations will be commercially successful. In June 1997, the Company entered into an option agreement with VGI pursuant to which the Company has the option through June 2000 to acquire all of the stock of VGI in exchange for Corvas Common Stock or, in certain circumstances at the option of the Company, a combination of cash and 633,600 shares of Common Stock. The aggregate acquisition price, which is based on the timing of option exercise, ranges from a minimum of $14,863,000 as of June 30, 1998 to a maximum of $19,960,000. If this option is exercised, the Company expects a noncash charge to earnings for in-process research and development. If Corvas elects not to exercise its option, VGI may require the Company to purchase 19.9% of its outstanding stock for $3,960,000 in Corvas Common Stock. During the option period, Corvas will make monthly option payments of approximately $83,000 to VGI. In addition, under a research and development agreement, VGI is required to make monthly payments of $80,000 to Corvas to be applied to research and development covering the VGI technology. Although the net impact of these payments is not material, the Company may incur substantial additional costs to develop this technology. Corvas may enter into one or more collaborative relationships to develop and commercialize this technology. However, there is no assurance that the Company will be able to establish such relationships on satisfactory terms, that such relationships will successfully reduce the costs associated with research and development of this technology, that the option will be exercised or that this technology will prove to be effective. 7 Future capital requirements of the Company will depend on many factors, including, but not limited to, the following: the continued scientific progress in its drug discovery programs; the magnitude of such programs; the progress and results of preclinical testing and clinical trials; the costs involved in complying with the regulatory process; the costs involved in filing, prosecuting, maintaining and enforcing patent claims; the competing technological and market developments; the changes in its existing research relationships; the ability of the Company to establish and maintain collaborative or licensing arrangements; the cost of manufacturing scale-up; and the effectiveness of activities and arrangements of the Company or its collaborative partners to commercialize the Company's products. The Company leases its laboratory and office facilities under an operating lease which will expire in September 1999. The Company is presently in the process of evaluating its alternatives with respect to its facilities, including the possibility of expanding its existing space. To continue its long-term product development efforts, the Company must raise substantial additional funding either through collaborative arrangements or through public or private financings. The Company's ability to raise additional funds through such sales of securities depends in part on investors' perceptions of the biotechnology industry, in general, and of the Company, in particular. The market prices for securities of biotechnology companies, including Corvas, have historically been highly volatile and, accordingly, there is no assurance that additional funding will be available, or, if available, that it will be available on acceptable terms. If additional funds are raised by issuing securities, further dilution, possibly substantial, to existing stockholders will likely result. The Company may enter into additional collaborative relationships to develop and commercialize certain of its current or future technologies or products. There is no assurance that the Company will be able to establish such relationships on satisfactory terms, if at all, or that agreements with collaborators will successfully reduce the Company's funding requirements. In addition, the Company has not attempted to establish bank financing arrangements, and there is no assurance that it would be able to establish such arrangements on satisfactory terms, if at all. If adequate funds are not available, the Company may be required to delay, scale back or discontinue one or more of its drug discovery programs, clinical trials or other aspects of its operations, or obtain funds through arrangements with collaborative partners or others that may require the Company to relinquish rights to certain of its technologies, product candidates or products that the Company would not otherwise relinquish or at prices below that at which the Company would otherwise choose to relinquish such rights. Many of the world's computer systems currently record years in a two-digit format. Such systems will be unable to properly interpret dates beyond the end of 1999, which could lead to business disruptions commonly referred to as the "Year 2000" issue. As of June 30, 1998, the Company has only conducted a preliminary review of its internal operations and thus has not completed the assessment of its Year 2000 issues. At the present time, the Company is unable to estimate what costs may be incurred, but does not expect the costs of this project to be material to the Company. Although the Company has made a preliminary assessment of its Year 2000 issues, there is no assurance that a complete review of the Company's operations will not identify additional efforts and costs that will be required which may have a material adverse effect on the Company. Furthermore, the Year 2000 issue is complex and there is no assurance that the Company will be able to address any problems that may arise from the Year 2000 issue without incurring a material adverse effect on the Company's business, financial condition or results of operations. 8 In addition, the Company's operations are dependent upon certain third parties with which it conducts business, including, but not limited to, its corporate partners, suppliers and vendors, as well as certain agencies and regulatory organizations. Although the Company has not yet assessed the Year 2000 readiness of certain of its key vendors, a team has developed a plan to assess such readiness. There is no assurance that the systems of third parties on which the Company relies will be Year 2000 ready or that any such failure of a third party would not have a material adverse effect on the Company. The Company does not yet have a contingency plan to deal with the risks related to the Year 2000 issue. However, the Company anticipates having such a plan in place by the end of 1998 to deal with both the risks associated with its own Year 2000 issues, as well as those that may be encountered by certain third parties with whom the Company conducts business. In 1993, the U.S. Patent and Trademark Office (the "USPTO") declared an interference to determine the priority of invention between a patent for which some rights are licensed to the Company (the "Licensed Patent") and a patent application for which rights are held by other parties (the "First Patent Application"). In 1996, the USPTO added a second patent application to the proceeding (the "Second Patent Application") and redeclared the interference. Rights to the Second Patent Application are held by other parties, at least some of which also hold rights in the First Patent Application. The subject matter of the patent and these applications is recombinant tissue factor, which is used by Ortho to determine the blood clotting abilities of patients. The Company is contesting the other parties' claims of prior invention; however, there can be no assurance that the Licensed Patent will be upheld. NEW ACCOUNTING STANDARDS In February 1998, Statement of Financial Accounting Standards No. 132, "Employers' Disclosures about Pension and Other Retirement Benefits" ("SFAS No. 132"), was issued, effective for fiscal years beginning after December 15, 1997. SFAS 132 standardizes disclosure requirements for pensions and other post retirement benefits. It does not change the measurement or recognition provisions for those benefit plans. In June 1998, Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), was issued, effective for all fiscal quarters of fiscal years beginning after June 15, 1999. SFAS 133 establishes accounting and reporting standards for derivative instruments and hedging activities. The Company anticipates that the adoption of SFAS Nos. 132 and 133 will not have a significant effect on the financial position, results of operations or liquidity of the Company. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable 9 PART II -- OTHER INFORMATION Item 1. LEGAL PROCEEDINGS In 1993, the U.S. Patent and Trademark Office (the "USPTO") declared an interference to determine the priority of invention between a patent for which some rights are licensed to the Company (the "Licensed Patent") and a patent application for which rights are held by other parties (the "First Patent Application"). In 1996, the USPTO added a second patent application to the proceeding (the "Second Patent Application") and redeclared the interference. Rights to the Second Patent Application are held by other parties, at least some of which also hold rights in the First Patent Application. The subject matter of the patent and these applications is recombinant tissue factor, which is used by Ortho-Clinical Diagnostics Inc. ("Ortho"), a Johnson & Johnson company, to determine the blood clotting abilities of patients. The Company is contesting the other parties' claims of prior invention; however, there can be no assurance that the Licensed Patent will be upheld. Item 2. CHANGES IN SECURITIES None Item 3. DEFAULTS UPON SENIOR SECURITIES None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of stockholders of the Company was held on May 28, 1998. The matters described below were submitted to a vote of stockholders. The Company had 14,014,347 shares of common stock, 1,000,000 shares of Series A convertible preferred stock and 250,000 shares of Series B convertible preferred stock outstanding as of March 31, 1998, the record date for the annual meeting. At the annual meeting, holders of a total of 12,236,542 shares of common and preferred stock were present in person or represented by proxy. a. Election of Class III Directors for a three-year term expiring at the 2001 annual meeting: Name Shares voting for Shares withheld ---- ----------------- --------------- M. Blake Ingle, Ph.D. 12,208,462 28,080 Randall E. Woods 12,210,650 25,892 R. Douglas Norby 12,207,264 29,278 Class I Directors continuing in office until the 1999 annual meeting: Gerard Van Acker W. Leigh Thompson, Jr., M.D., Ph.D. Class II Directors continuing in office until the 2000 annual meeting: John H. Fried, Ph.D. Michael Sorell, M.D. Nicole Vitullo 10 b. A proposal to ratify the appointment of KPMG Peat Marwick LLP as independent auditors for the Company for the fiscal year ending December 31, 1998. For 12,212,603 Against 7,707 Abstain 16,232 Item 5. OTHER INFORMATION Pursuant to the Company's bylaws, stockholders who wish to bring matters or propose nominees for director at the Company's 1999 annual meeting of stockholders must provide a notice with specific information to the Company and such notice must be delivered to or mailed and received at the principal executive offices of the Company no later than the close of business on December 16, 1998, which is the 120th day prior to the first anniversary of the date specified in the Company's proxy statement released in connection with the 1998 annual meeting of stockholders (unless such matters are included in the Company's proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended). Item 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits Exhibit Number Description -------------- ----------- 10.65 Offer to Amend Warrants to Purchase Shares of Common Stock of the Company, dated as of June 5, 1998, with certain exhibits thereto. 27.1 Financial Data Schedule. b. Reports on Form 8-K There were no reports on Form 8-K filed for the quarter ended June 30, 1998. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. CORVAS INTERNATIONAL, INC. Date: August 12, 1998 By: /s/ RANDALL E. WOODS ------------------------------------- Randall E. Woods President and Chief Executive Officer Date: August 12, 1998 By: /s/ CAROLYN M. FELZER ------------------------------------- Carolyn M. Felzer Senior Director of Finance Principal Financial Officer 12 EX-10.65 2 EXHIBIT 10.65 OFFER TO AMEND WARRANTS TO PURCHASE SHARES OF COMMON STOCK OF CORVAS INTERNATIONAL, INC. -------------- THIS OFFER WILL EXPIRE AT 12:00 MIDNIGHT, CALIFORNIA TIME, ON JULY 20, 1998, UNLESS EXTENDED. -------------- THIS OFFER TO AMEND WARRANTS (THE "OFFER") IS MADE TO HOLDERS (THE "HOLDERS") AS OF JUNE 5, 1998, OF WARRANTS ISSUED PURSUANT TO THAT CERTAIN COMMON STOCK AND WARRANT PURCHASE AGREEMENT DATED FEBRUARY 2, 1996 AMONG CORVAS INTERNATIONAL, INC. (THE "COMPANY") AND THE PARTIES SET FORTH ON THE SCHEDULE OF PURCHASERS THERETO. THE OFFER IS SUBJECT TO CERTAIN TERMS AND CONDITIONS CONTAINED IN THIS MEMORANDUM AND WARRANT EXERCISE AGREEMENT ATTACHED HERETO. -------------- IMPORTANT ANY HOLDER DESIRING TO ACCEPT THIS OFFER SHOULD COMPLETE AND RETURN THE FOLLOWING FOR DELIVERY NO LATER THAN JULY 19, 1998: 1. A duly completed and executed copy of the Warrant Exercise Agreement attached hereto or a facsimile thereof in accordance with the instructions in the Warrant Exercise Agreement; and 2. A cashier's check in the amount equal to the aggregate Amended Stock Purchase Price for all shares subject to your fully exercised Warrant. ANY HOLDER WISHING TO ACCEPT THE OFFER SHOULD RETURN THE DOCUMENTS DESCRIBED ABOVE TO THE ATTENTION OF CAROLYN FELZER AT 3030 SCIENCE PARK ROAD, SAN DIEGO, CALIFORNIA 92121 PRIOR TO THE EXPIRATION DATE. QUESTIONS AND REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO CAROLYN FELZER AT THE COMPANY AT (619) 455-9800. This Offer is conditioned upon the Company's receipt of warrant exercises for a minimum of 1,900,000 of the 3,000,000 shares of Common Stock subject to the outstanding Warrants ("Minimum Warrant Exercises"). If the Company does not receive the Minimum Warrant Exercises prior to the Expiration Date, then the Company will return the Warrant Exercise Agreements and checks and the Warrants will not be amended in accordance with the Offer. --------------- DATED: JUNE 5, 1998 TABLE OF CONTENTS SUMMARY OF TERMS OF OFFER TO AMEND WARRANTS. . . . . . . . . . . . . . . . 1 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1. Terms of the Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2. Procedure for Accepting Offer and Exercise of Warrant. . . . . . . . . . 4 3. Withdrawal Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 4. Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . 6 Schedule I -- Schedule of Warrant Holders Exhibit A -- Warrant Exercise Agreement Exhibit B -- Annual Report on Form 10-K Dated March 31, 1998 Exhibit C -- Quarterly Report on Form 10-Q Dated May 14, 1998 Exhibit D -- Description of Common Stock
i SUMMARY OF TERMS OF OFFER TO AMEND WARRANTS OF OFFER TO AMEND WARRANTS; The following Summary of Terms is qualified in its entirety by the more detailed statements in this Offer and attachments hereto. THE COMPANY Corvas International, Inc., a Delaware corporation. AMENDMENT OF WARRANTS The Company offers to decrease the Stock Purchase Price (as defined in the Warrants) to $3.59 per share (as amended, the "Amended Stock Purchase Price") for those Warrants that are fully exercised prior to the Expiration Date, upon the terms and subject to the conditions set forth below. CONDITIONS (1) The Stock Purchase Price will only be amended as to Warrants that are exercised in their entirety. (2) The Holder of the Warrant may transfer all or any portion of the Warrant as permitted by the Stock and Warrant Purchase Agreement to only one transferee who must fully exercise the transferred Warrant in order to be entitled to the Amended Stock Purchase Price. (3) Unless waived by the Company, the Company shall have received prior the Expiration Date (i) duly completed and executed Warrant Exercise Agreements covering in the aggregate at least 1,900,000 shares of the Company's Common Stock and (ii) payment in full of the Amended Stock Purchase Price for such shares. (4) The Post-Effective Amendment to the Registration Statement on Form S-3 registering for resale the shares acquired upon the exercise of the amended Warrants must have been declared effective by the Securities and Exchange Commission ("SEC") by no later than the Expiration Date. EXPIRATION DATE 12:00 Midnight, California Time, on July 20, 1998, unless extended by the Company in accordance with this Offer. 1 ACCEPTANCE PROCEDURE: To accept the Offer you must, prior to the Expiration Date: (1) complete, execute and return to the Company the Warrant Exercise Agreement; and (2) remit to the Company a cashier's check in the amount of the aggregate Amended Stock Purchase Price for all of the shares of Common Stock subject to the exercised Warrant. 2 INTRODUCTION To induce the Holders of the Warrants to exercise such Warrants in full, the Company hereby offers to reduce the Stock Purchase Price (as defined in the Warrants) from $6.00 per share to $3.59 per share for each Warrant that is fully exercised prior to the Expiration Date, upon the terms and subject to the conditions set forth in this Offer and in the Warrant Exercise Agreement. This Offer is conditioned upon the aggregate exercise of Warrants to purchase at least 1,900,000 shares of Common Stock prior to the Expiration Date unless the Company waives this condition. The Offer will be kept open until July 20, 1998, unless extended by the Company. The Company will use the proceeds from such exercises for working capital and general corporate purposes. Attached hereto as Schedule I is a list of the Holders as well as the number of shares of the Company's Common Stock subject to each such Holder's Warrant. The Company has not obtained commitments from any Holders to exercise the Warrants prior to making this Offer. While the Board of Directors has voted to approve the Offer, each Holder must make its own decision whether to accept the Offer and to purchase the Shares subject to such Warrant. Information about the Company is contained in the Company's Annual Report on Form 10-K attached hereto as Exhibit B ("Form 10-K") and in the Company's Quarterly Report on Form 10-Q attached hereto as Exhibit C ("Form 10-Q"). A description of the Common Stock of the Company is attached as Exhibit D hereto. The Company's Common Stock is quoted and traded on the Nasdaq National Market under the symbol CVAS. On June 4, 1998, the last reported sales price of the Common Stock on Nasdaq was $4 3/16. No public market exists for the Warrants and the Warrants are subject to restrictions on transfer. The shares of Common Stock issuable upon exercise of the Warrants ("Shares") will be restricted securities. However, the Company has registered on Form S-3 the resale by the Warrant Holders of the Shares and, as a condition to the Offer and the exercise of the Warrants, the Company will file a post-effective amendment to the Registration Statement to update the prospectus contained therein. THIS OFFER AND THE ATTACHMENTS HERETO CONTAIN IMPORTANT INFORMATION, WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER AND ANY PURCHASE OF THE SHARES. FOR DETAILED DISCUSSION OF THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE SHARES, SEE FORM 10-K - RISK FACTORS. 3 1. TERMS OF THE OFFER. Subject to the terms set forth below, the Company will reduce the Stock Purchase Price from $6.00 per share to $3.59 per share as to those Warrants that are exercised in full prior to the Expiration Date ("Amended Warrant"). An Amended Warrant must be exercised in full by (i) the Holder, (ii) by no more than one valid transferee of the Warrant provided that the transfer was made pursuant to the terms of the Warrant (a "Transferee") OR (iii) by a combination of the original Holder and one Transferee of each such Warrant. The Offer is expressly conditioned on the Company's receipt prior to the Expiration Date of completed and executed Warrant Exercise Agreements by all parties exercising Warrants covering at least 1,900,000 Shares of Common Stock, unless waived by the Company, and payment in full therefor, on the terms set forth herein. Any Warrant that is not exercised by the Expiration Date pursuant to the terms hereof shall remain unamended and continue in full force and effect in accordance with its original terms. Prior to the Expiration Date, the Company shall file a post-effective amendment to the Registration Statement on Form S-3 dated February 28, 1996 covering the resale of shares of Common Stock acquired upon the exercise of Warrants and cause the Post-Effective Amendment to be declared effective by the SEC. In the event the Post-Effective Amendment to the Registration Statement is not declared effective by the Expiration Date or any extension thereof by the Company, the Offer shall be terminated and the Company shall return all payments received by the Company. The Company reserves the right, at any time or from time to time, to extend the Expiration Date for the purpose of (i) extending the period for which payment may be made for fully exercised Warrants, (ii) causing the Post-Effective Amendment to the Registration Statement to be declared effective or (iii) for any other reason by giving written notice of such extension to all Holders. 2. PROCEDURE FOR ACCEPTING OFFER AND EXERCISE OF WARRANT. ACCEPTANCE BY HOLDERS/TRANSFEREES. For you to validly accept this Offer, you (and/or your Transferee) must: (1) complete and execute the Warrant Exercise Agreement as to all Shares covered by your Amended Warrant; (2) remit a cashier's check for the aggregate Amended Stock Purchase Price for all Shares covered by your exercised Amended Warrant; (3) deliver the completed Warrant Exercise Agreement and payment to the Company at its address set forth on page (i) of this Offer PRIOR TO THE EXPIRATION DATE. In the event that you transfer your Warrant pursuant to this Offer, you must also deliver to the Company prior to the Expiration Date: (4) copies of the duly executed document(s) effecting such transfer; and (5) Items (1) through (3) from the Transferee fully executing the transferred Amended Warrant or portion thereof. No alternative, conditional or contingent responses will be accepted. THE METHOD OF DELIVERY OF THE WARRANT EXERCISE AGREEMENT, CASHIER'S CHECK FOR THE PAYMENT FOR THE SHARES AND ALL OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND RISK OF THE ACCEPTING HOLDER. 4 ACCEPTANCE BY COMPANY. Subject to the terms and satisfaction or waiver of the conditions hereof, the Company will be deemed to have accepted your exercise of the Amended Warrant, if and when (i) the Company gives you written notice of the Company's acceptance of such payment OR (ii) the Company cashes your check and receives the funds therefrom. Promptly after the acceptance by the Company, and after the Expiration Date, the Company will issue certificates representing the Shares pursuant to the Warrant Exercise Agreements. In the event that the Company does not accept your subscription to the Amended Warrant and exercise thereof for any reason including without limitation termination or nonoccurrence of a condition to the Offer, the Company shall promptly return your payment with a notice stating that your Warrant Exercise Agreement was not accepted and that your Warrant was not amended. DETERMINATIONS OF VALIDITY. All questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance of payment for Shares will be determined by the Company, in its sole discretion, and its determination will be final and binding on all parties. The Company reserves the absolute right to reject any or all Warrant Exercise Agreements or payments for Shares that are determined by it not to be in proper form. The Company also reserves the absolute right to waive any of the conditions of the Offer, including, without limitation minimum subscription, mode and timing of payment, or any defect or irregularity in any Warrant Exercise Agreement delivered to the Company or payment for Shares. In the event the Company, on the Expiration Date, waives any condition of the Offer, it shall extend the Expiration Date for at least two days for the purpose of allowing you to consider the Offer in light of such waiver; provided, however, that in the event that the Company at any time waives the Minimum Warrant Exercise the Company shall notice the Holders of such waiver and extend the Expiration Date, if necessary, to the date that is 10 business days following the date that such notice is first sent to Holders. The Company's interpretation of the terms and conditions of the Offer (including the Warrant Exercise Agreement) will be final and binding on all parties. No Warrant Exercise Agreement or payment for Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. The Company or any other person will not be under any duty to notify you of any defects or irregularities in compliance with the acceptance procedures of this Offer or incur any liability for failure to give any such notice. 3. WITHDRAWAL RIGHTS. You may withdraw your acceptance of this Offer at any time prior to the Expiration Date. For a withdrawal to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Company at its address set forth on page (i) of this Offer. Any notice of withdrawal must specify the name of the person who delivered a completed Warrant Exercise Agreement and the amount of payment and number of Shares to be withdrawn. Any exercises of Amended Warrants properly withdrawn will be deemed not validly accepted and the subject Warrant shall not be deemed to be amended, but may be accepted and exercised at any subsequent time prior to the Expiration Date by following the procedures described in Section 2. Except as otherwise provided in this Section 3, your acceptance of the Offer, including the exercise of your Amended Warrant is irrevocable. 5 4. ADDITIONAL INFORMATION. The Board of Directors has approved the Offer but has not made any recommendation as to whether the Offer should be accepted and the Amended Warrants exercised. Each Holder must make its own decision whether to accept this Offer and purchase the Shares subject to the Amended Warrants. Each Holder is recommended to read this Offer and its attachments in their entirety. No person has been authorized to give any information or to make any representations in connection with the Offer other than those contained herein. If given or made, such recommendation and such information and representations must not be relied upon as having been authorized by the Company. Holders of Warrants who beneficially own or who would beneficially own upon acceptance of the Offer and exercise of the amended Warrants more than 10% of the Common Stock of the Company are subject to additional restrictions on the resale of Shares acquired upon exercise of the Amended Warrants. The exercise of the Amended Warrant will constitute a purchase under Section 16 of the Securities and Exchange Act of 1934, as amended, and will preclude any Holder who is or would be subject to Section 16 from selling any Common Stock of the Company for six months following the date of exercise of the Amended Warrant. Any Holder who is subject to Section 16 and who has sold any securities of the Company during the last six months may be subject to liability under Section 16 if such Holder exercises the Amended Warrant. A Holder should consult with its own advisors to determine whether the exercise of the Amended Warrant would subject the Holder to any liability. 6 SCHEDULE I SCHEDULE OF WARRANT HOLDERS
HOLDER COMMON STOCK AGGREGATE EXERCISE ISSUABLE UPON PRICE EXERCISE International Biotechnology Trust, plc 1,400,000 $5,026,000 5 Arrows House St. Swithin's Lane London EC4N 8NR England Attn: Jeremy L. Curnock Cook +44-171-623-1000 +44-171-623-6261 (fax) Copy to: Rothschild Asset Management, Ltd. One Palmer Square, #515 Princeton, NJ 08542 Attn: Nicole Vitullo (609) 683-8009 (609) 683-4581 (fax) AKKAD 800,000 $2,872,000 c/o State Street Bank & Trust 225 Franklin Street Boston, MA 02110 Attn: Anna Barnes (617) 786-3000 Copy to: Wanger Asset Management LP 227 West Monroe, Ste. 3000 Chicago, IL 60606-5016 Attn: John H. Park (312) 634-9226 (312) 634 1904 (fax) WPG Institutional Life Sciences Fund, L.P. 120,000 $430,800 WPG Life Sciences Fund, L.P. 80,000 $287,200 One New York Plaza, 30th Floor New York, NY 10004-1950 Attn: Mike Singer (212) 908-9548 (212) 908-0195 (fax) S-1 Clarion Capital Corporation 80,000 $287,200 Clarion Partners, L.P. 20,000 $71,800 1801 East "9th" Street, Ste. 510 Cleveland, OH 44114 Attn: Morton Cohen (216) 687-8940 (216) 694-3545 (fax) Framlington Unit-Management - 85,000 $305,150 A/C Health Fund 155 Bishopsgate London EC2M3XJ England Attn: Antony Milford 44+171-374-4100 44+171-330-6648 (fax) Copy to: C.O. Nominees Limited (Registered Owner) c/o Antony Milford 155 Bishopsgate London EC2M3XJ England 44+171-374-4100 44+171-330-6648 (fax) Deliver Stock Certificates and Warrants to: Brown Brothers Harriman 59 Wall Street New York, NY 10006 Attn: Maureen Keenan (201) 418-6413 (201) 418-6464 (fax) Framlington Investment-Management - 40,000 $143,600 A/C Selection Sante 155 Bishopsgate London EC2M3XJ England Attn: Antony Milford 44+171-374-4100 44+171-330-6648 (fax) Copy to: Sigler & Co. (Registered Owner) 4 New York Plaza c/o Chemical Bank New York, NY 10004 Attn: Jerry Reilly (212) 623-6274 (212) 623-1322 (fax) A-2 Deliver Stock Certificates and Warrants to: Chemical Bank 4 New York Plaza New York, NY 10004 Reference Acct. No. BS6373318 Attn: Jerry Reilly (212) 623-6274 (212) 623-1322 (fax) SE Banken Fonder AB 300,000 $1,077,000 Regeringsgaten 45 ST R2 S-106 40 Stockholm Sweden Attn: Anders Klintorph +46-8-676-9101 +46-8-676-9148 (fax) SE Banken Luxembourg S.A. 75,000 $269,250 c/o SE Banken Fonder AB Regeringsgaten 45 ST R2 S-106 40 Stockholm Sweden Attn: Anders Klintorph +46-8-676-9101 +46-8-676-9148 (fax)
A-3 EXHIBIT A WARRANT EXERCISE AGREEMENT A-1 CORVAS INTERNATIONAL, INC. WARRANT EXERCISE AGREEMENT FOR EXERCISE OF WARRANTS TO PURCHASE COMMON STOCK IF AND WHEN ACCEPTED BY CORVAS INTERNATIONAL, INC. ("COMPANY"), THIS WARRANT EXERCISE AGREEMENT, WHEN EXECUTED BELOW, SHALL CONSTITUTE AN ACCEPTANCE OF THE WARRANT AMENDMENT AND AN EXERCISE IN FULL OF THE WARRANT. EACH PART OF THIS WARRANT EXERCISE AGREEMENT MUST BE COMPLETED BY THE UNDERSIGNED AND, BY THE UNDERSIGNED'S EXECUTION BELOW, THE UNDERSIGNED ACKNOWLEDGES THAT IT UNDERSTANDS THAT THE COMPANY IS RELYING UPON THE ACCURACY AND COMPLETENESS HEREOF IN COMPLYING WITH ITS OBLIGATIONS UNDER FEDERAL AND STATE SECURITIES LAWS. THE SHARES OF COMMON STOCK OF THE COMPANY TO BE ISSUED UPON THE EXERCISE OF THE WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. SUCH SHARES CANNOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFERABILITY UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS AND WILL NOT BE TRANSFERRED OR RECORDED EXCEPT IN COMPLIANCE WITH SUCH LAWS. (1) SUBSCRIPTION. Subject to the terms and conditions hereof and the provisions of the Warrant to Purchase Common Stock of the Company issued pursuant to the Common Stock and Warrant Purchase Agreement dated February 2, 1996 as amended by the Offer to Amend Warrants dated June 5, 1998 (the "Warrant"), the undersigned hereby elects to accept the Offer and to exercise the Amended Warrant and purchase thereunder _______ shares of Common Stock of the Company (the "Shares") at a purchase price of U.S. Dollars $3.59 per share and tenders this warrant exercise, together with payment by cashier's check in the aggregate amount of $_____________. (2) OFFER TO AMEND WARRANTS. The undersigned's execution of this Warrant Exercise Agreement also constitutes acceptance by the undersigned of the Offer to Amend Warrants dated June 5, 1998 (the "Offer"). The completion of the Offer is subject to certain additional terms and conditions as set forth therein. (3) REPRESENTATIONS AND WARRANTIES OF THE UNDERSIGNED. The undersigned hereby represents and warrants to the Company as follows: (a) AUTHORIZATION. It has the requisite corporate power to enter into this Agreement, to accept the Offer to carry out and perform its obligations under the terms of this Warrant Exercise Agreement and to purchase the Shares. (b) DUE EXECUTION. This Warrant Exercise Agreement has been duly authorized, executed and delivered by it, and is a valid and binding agreement of the undersigned, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally or by equitable principles. A-2 (c) INVESTMENT REPRESENTATIONS. (i) It is acquiring the Shares for its own account, not as nominee or agent, for investment and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act, except as contemplated herein. By executing this Warrant Exercise Agreement, it further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person, with respect to any of the Shares. (ii) It understands that (i) the Shares have not been registered under the Securities Act by reason of a specific exemption therefrom, that such securities must be held by it indefinitely and that the undersigned must, therefore, bear the economic risk of such investment indefinitely, unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration; (ii) each certificate representing the Shares and the Shares will be endorsed with the following legends: (1) THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. (2) Any legend required to be placed thereon under applicable state securities laws; and (iii) the Company will instruct any transfer agent not to register the transfer of the Shares (or any portion thereof) unless the conditions specified in the foregoing legends are satisfied, until such time as a transfer is made, pursuant to the terms of this Agreement, and in compliance with Rule 144 or pursuant to a registration statement or, if the opinion of counsel referred to above is to the further effect that such legend is not required in order to establish compliance with any provisions of the Securities Act or this Agreement. (iii) It has been furnished with all information it considers necessary or appropriate for deciding whether to purchase the Shares. It has been afforded the opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the Offer to Amend and the exercise of its Warrant. (iv) It is an investor in securities of companies in the development stage and acknowledges that it can bear the economic risk of its investment and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Shares. (v) It is an "accredited investor" as such term is defined in Rule 501 of the Securities Act of 1933, as amended, and it was not formed for the specific purpose of acquiring the Shares. (4) INDEMNIFICATION. The Investor acknowledges that it understands the meaning and legal consequences of the representations and warranties contained in Section 3 hereof, and the undersigned hereby agrees to indemnify and defend the Company and each director, officer, agent, employee, representative and stockholders thereof against and hold them harmless from any and all loss, damage or liability due to or arising out of a breach of any such representation or warranty. A-3 IN WITNESS WHEREOF, subject to the acceptance by the Company, the undersigned has completed this Warrant Exercise Agreement to evidence its acceptance of the Offer and the exercise of the Amended Warrant. ------------------------------------- By: --------------------------------- Name: ------------------------------- Title: ------------------------------ Dated: ------------------------------ A-4 EXHIBIT D DESCRIPTION OF COMMON STOCK The Company is authorized to issue 50,000,000 shares of Common Stock, $.001 par value per share, and 10,000,000 shares of undesignated Preferred Stock, $.001 par value per share. As of May 31, 1998, there were 14,039,493 outstanding shares of the Company's Common Stock. Holders of Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Subject to preferences that may be applicable to any outstanding shares of Preferred Stock, holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available for the payment of dividends. The Company has never paid any cash dividends on its Common Stock. In the event of a liquidation, dissolution or winding up of the Company, holders of Common Stock are entitled to share ratably in all assets remaining after payment of liabilities and liquidation preferences of any outstanding shares of Preferred Stock. Holders of Common Stock have no preemptive rights or rights to convert their Common Stock into any other securities. There are no redemption or sinking fund provisions applicable to the Common Stock. All outstanding shares of Common Stock are validly issued, fully paid and nonassessable. All shares of Common Stock issuable upon conversion of the outstanding shares of Preferred Stock will be validly issued, fully paid and nonassessable upon such conversion. In September 1997 the Company's Board of Directors adopted a Stockholder Rights Plan and subsequently distributed one Preferred Stock purchase right (a "Right") for each outstanding share of the Company's Common Stock. Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share of the Company's Series C Junior Participating Preferred Stock, par value $.001 per share (the "Series C Junior Preferred Stock") at a purchase price of $50.00 per one one-hundredth of a share of Series C Junior Preferred Stock (subject to customary anti-dilution adjustments) (the "Purchase Price"). The Rights become exercisable if a person or group acquires, in a transaction not approved by the Company's Board of Directors, 20% or more of the Company's Common Stock or announces a tender offer for 20% or more of the Company's Common Stock. If the right becomes exercisable, each Right (other than Rights held by the acquiring person or group which become void) will entitle the holder to acquire, in lieu of purchasing Preferred Stock, upon exercise, a number of shares of Company Common Stock having a market value of two times the Purchase Price of the Right. If the Company is acquired in a transaction not approved by the Board of Directors, each Right may be exercised for common shares of the acquiring company having a market value of twice the Right's exercise price. The Company may redeem the Rights at $.001 per Right, subject to certain conditions. The Rights expire on September 18, 2007. D-1 The Series C Junior Preferred Stock is not redeemable by the Company. Each share of Series C Junior Preferred Stock is entitled to a minimum preferential quarterly dividend payment of $1.00 per share but is entitled to an aggregate dividend of 100 times the amount of any dividend declared per share on the Common Stock. In the event of liquidation, the holders of the Series C Junior Preferred Stock will be entitled to a minimum preferential liquidation payment of $1.00 per share but will be entitled to an aggregate payment of 100 times the payment made per outstanding share of Common Stock. Each share of Series C Junior Preferred Stock will have 100 votes, voting together with the outstanding shares of Common Stock (and any other series or classes entitled to vote therewith) as a single class on all matters submitted for a stockholder vote. In the event of any merger, consolidation or other transaction in which shares of Common Stock are exchanged, each share of Series C Junior Preferred Stock will be entitled to receive 100 times the amount received per outstanding share of Common Stock. These rights are protected by customary anti-dilution provisions. As of May 31, 1998, no shares of Series C Junior Preferred Stock were issued and outstanding, although the Company had reserved for issuance 500,000 shares of its Series C Junior Preferred Stock. D-2 EX-27.1 3 EXHIBIT 27.1
5 0000882100 CORVAS INTERNATIONAL, INC. 1,000 6-MOS DEC-31-1998 JUN-30-1998 3,541 16,933 411 0 0 21,239 5,258 3,596 22,901 3,871 0 0 1 14 19,015 22,901 44 5,632 18 9,966 0 0 0 (3,757) 0 (3,757) 0 0 0 (3,757) (.27) (.27)
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