-----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, OhGbEIBKtaDDV4OZj3kQtBFRumtIWuXKbwpl50FzgSq5nkErL5NLyuDvcHPwTCpE UeHubA+KGWO8UYweFDdMnw== 0000950109-97-006963.txt : 19971117 0000950109-97-006963.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950109-97-006963 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INNOVIR LABORATORIES INC CENTRAL INDEX KEY: 0000901099 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 133536290 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21972 FILM NUMBER: 97719923 BUSINESS ADDRESS: STREET 1: 510 E 73RD ST CITY: NEW YORK STATE: NY ZIP: 10021 BUSINESS PHONE: 2122494703 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 -------------------------- FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR - --------- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 1997 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 No. 0-21972 ------------------------ INNOVIR LABORATORIES, INC. (Exact name of Registrant as specified in its Charter) ------------------------ Delaware 13-3536290 (State or other jurisdiction of (IRS Employer Incorporation or organization) Identification No.) 510 East 73rd Street, New York, New York 10021 (Address of principal executive offices) Registrant's telephone number, including area code: (212) 249-4703 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 Registrant's common stock outstanding on November 10, 1997 was 29,750,529. ------------------------ INNOVIR LABORATORIES, INC. and SUBSIDIARIES INDEX -----
Page Part I. Financial Information Item 1. Financial Statements: Condensed Consolidated Balance Sheets (unaudited) at September 30, 1997 and December 31, 1996 ............................... 3 Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 1997 and 1996 and for the period from January 6, 1995 (inception) through September 30, 1997...................................................... 4 Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (unaudited) for the nine months ended September 30, 1997...................................................... 5 Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 1997 and 1996 and for the period from January 6, 1995 (inception) through September 30, 1997...................................................... 6 Notes to Condensed Consolidated Financial Statements............ 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................. 9 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K................................ 12 SIGNATURES. ................................................................ 13
2 Part I. Financial Information Item 1. Financial Statements -------------------- INNOVIR LABORATORIES, INC. and SUBSIDIARIES (A Development Stage Enterprise) Condensed Consolidated Balance Sheets (unaudited)
September 30, December 31, 1997 1996 ----------------- ------------------ ASSETS: Current assets: Cash and cash equivalents $ 1,775,000 $ 6,412,000 Prepaid expenses and other current assets 62,000 203,000 ----------------- ------------------ Total current assets 1,837,000 6,615,000 Fixed assets less accumulated depreciation and amortization 2,641,000 2,439,000 Amount due from VIMRX Pharmaceuticals Inc. - 535,000 Goodwill, net 927,000 1,236,000 Other assets 244,000 249,000 ================= ================== Total assets $ 5,649,000 $ 11,074,000 ================= ================== LIABILITIES: Current liabilities: Accounts payable and accrued expenses $ 960,000 $ 1,319,000 Capital lease - current portion 492,000 472,000 Term note payable - warrantholder; current portion includes accrued 36,000 36,000 interest of $5,000 Other liabilities 91,000 - ----------------- ------------------ Total current liabilities 1,579,000 1,827,000 Amount due to VIMRX Pharmaceuticals Inc. 135,000 - Term note payable - warrantholder; includes accrued interest of $39,000 227,000 227,000 Capital leases 234,000 463,000 ----------------- ------------------ Total liabilities 2,175,000 2,517,000 ----------------- ------------------ STOCKHOLDERS' EQUITY: Preferred stock, par value $.06; 15,000,000 shares authorized Class B Convertible Preferred Stock; 2,500,000 shares designated; 17,000 18,000 280,000 shares issued and outstanding at September 30, 1997, 297,000 shares issued and outstanding at December 31, 1996 Class D Convertible Preferred Stock; 8,667,000 shares designated, -- 520,000 issued and outstanding at December 31, 1996 Common stock, par value $.013; 70,000,000 shares authorized 29,751,000 shares issued and outstanding at September 30, 1997, 17,946,000 shares issued and outstanding at December 31, 1996 387,000 233,000 Additional paid-in capital 32,083,000 29,667,000 Cumulative translation adjustment (43,000) (8,000) Unearned compensation - (181,000) Deficit accumulated during the development stage (28,970,000) (21,692,000) ----------------- ------------------ Total stockholders' equity 3,474,000 8,557,000 ================= ================== Total liabilities and stockholders' equity $ 5,649,000 $ 11,074,000 ================= ==================
3 INNOVIR LABORATORIES, INC. AND SUBSIDIARIES (A Development Stage Enterprise) Condensed Consolidated Statements of Operations (unaudited) For the Nine Months Ended September 30, 1997
Period Three months ended September 30 Nine months ended September 30 January 6, 1995 ------------------------------------ --------------------------------- (inception) through 1997 1996 1997 1996 September 30, 1997 ------------- ------------- ------------- ------------- ------------------- Operating expenses: Research and development $ 1,377,000 $ 431,000 $ 4,711,000 $ 1,041,000 $ 8,092,000 Purchased in process research and development -- 163,000 -- 3,105,000 17,374,000 General and administrative 752,000 20,000 2,289,000 312,000 3,362,000 Amortization of Goodwill 103,000 -- 309,000 -- 309,000 ------------- ------------- ------------- ------------- --------------- 2,232,000 614,000 7,309,000 4,458,000 29,137,000 ------------- ------------- ------------- ------------- --------------- Other (income) expenses: Interest income (22,000) -- (153,000) (41,000) (166,000) Interest expense -- -- 37,000 122,000 150,000 Other-net -- -- -- -- (151,000) ------------- ------------- ------------- ------------- --------------- 15,000 -- (31,000) (41,000) (167,000) ------------- ------------- ------------- ------------- --------------- Net (loss) $ (2,247,000) $ (614,000) $ (7,278,000) $ (4,417,000) $ (28,970,000) ============= ============= ============= ============= =============== Loss-per-share data: Net loss per share $ (0.08) $ (0.06) $ (0.34) $ (0.46) ------------- ------------- ------------- ------------- Weighted average number of common shares outstanding 28,055,938 9,500,000 21,374,889 9,500,000 ============= ============= ============= =============
4 INNOVIR LABORATORIES, INC. and SUBSIDIARIES (A Development Stage Enterprise) Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (unaudited) For the Nine Months Ended September 30, 1997
Class B Convertible Class D Convertible Preferred Stock Preferred Stock Common Stock --------------------------------------------------------------------------- Shares Amount Shares Amount Shares Amount ----------- ----------- ----------- ----------- ----------- ----------- Balance at December 31, 1996 297,000 $18,000 8,667,000 $520,000 17,946,000 $233,000 Exercise of options and warrants 3,131,000 41,000 Costs incurred in connection with issuance of equity securities Conversion of Class B Convertible Stock (17,000) (1,000) 26,000 Conversion of Class D Convertible Stock (8,667,000) (520,000) 8,667,000 113,000 Adjustment for shares held in escrow in connection with stockholder's litigation (19,000) Compensation expense incurred in connection with the issuance of stock options Amortization of unearned compensation Cumulative transaction adjustment Net loss for the nine months ended September 30, 1997 --------- --------- --------- --------- ---------- --------- Balance at September 30, 1997 280,000 $17,000 -- -- 29,751,000 $387,000 ========= ========= ========= ========= ========== ========= Deficit Accumulated Additional Cumulative During the Paid-in Translation Unearned Development Capital Adjustment Compensation Stage Total ----------- ------------- -------------- ------------ ---------- Balance at December 31, 1996 $29,667,000 $(8,000) $(181,000) $(21,692,000) $8,557,000 Exercise of options and warrants 1,973,000 2,014,000 Costs incurred in connection with issuance of equity securities (24,000) (24,000) Conversion of Class B Convertible Stock 1,000 -- Conversion of Class D Convertible Stock 407,000 -- Adjustment for shares held in escrow in connection with stockholder's litigation Compensation expense incurred in connection with the issuance of stock options 59,000 59,000 Amortization of unearned compensation 181,000 181,000 Cumulative transaction adjustment (35,000) (35,000) Net loss for the nine months ended September 30, 1997 $(7,278,000) $(7,278,000) ----------- --------- --------- ------------ ----------- Balance at September 30, 1997 $32,083,000 (43,000) -- $(28,970,000) $3,474,000 =========== ========= ========= ============ ===========
5 INNOVIR LABORATORIES, INC. and SUBSIDIARIES (A Development Stage Enterprise) Condensed Consolidated Statements of Cash Flows (unaudited) For the Nine Months Ended September 30, 1997
Period January 6, 1995 (inception) Nine months ended through September 30 September 30, 1997 1996 1997 ------------------ ------------------ ------------------- Cash flows from operating activities: Net (loss) $ (7,278,000) $ (4,458,000) $ (28,970,000) Adjustments to reconcile net (loss) to net cash (used in) operating activities: Depreciation 451,000 20,000 601,000 Amortization of goodwill 309,000 - 309,000 Amortization of unearned compensation 181,000 - 388,000 Purchased in process research and development - 3,105,000 17,374,000 Provision for losses on notes receivable - - 85,000 Non-cash compensation 59,000 - 59,000 Changes in operating assets and liabilities: (Decrease) increase in other current assets 140,000 (19,000) 100,000 (Decrease) in other assets 6,000 - 6,000 (Decrease) increase in accounts payable and accrued expenses (359,000) (65,000) 224,000 Increase in other current liabilities 91,000 - 92,000 ----------------- ----------------- ----------------- Net cash (used in) operating activities (6,399,000) (1,417,000) (9,732,000) ================= ================= ================= Cash flows from investing activities: Purchase of equipment (587,000) (110,000) (1,241,000) Cash acquired in acquisitions - 145,000 3,532,000 ----------------- ----------------- ----------------- Net cash provided by (used in) investing activities (587,000) 35,000 2,291,000 ----------------- ----------------- ----------------- Cash flows from financing activities: Proceeds from sales of common stock 2,014,000 - 2,026,000 Advances and contributed capital from VIMRX Pharmaceuticals Inc. 670,000 1,486,000 7,536,000 Costs incurred in connection with issuance of equity securities (24,000) - (24,000) Repayment of capital leases (275,000) - (275,000) Net cash provided by financing activities 2,385,000 1,486,000 9,263,000 Effect of exchange rate changes on cash (36,000) - (47,000) ----------------- ----------------- ----------------- Net increase in cash and cash equivalents (4,637,000) 104,000 1,775,000 Cash and cash equivalents at beginning of period 6,412,000 68,000 -- ----------------- ----------------- ----------------- Cash and cash equivalents at end of period $ 1,775,000 $ 172,000 $ 1,775,000 ================= ================= ================== Supplemental disclosure of cash flow information: Cash paid for interest $ 122,000 $ 125,000 ================= ==================
6 INNOVIR LABORATORIES, INC. and SUBSIDIARIES (A Development Stage Enterprise) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) The condensed consolidated financial statements of Innovir Laboratories, Inc. and Subsidiaries (the "Company") reflect all adjustments, consisting only of normal recurring accruals, which are, in the opinion of the Company's management, necessary for a fair presentation of the Company's results of operations for the respective periods presented. Operating results for any interim period are not necessarily indicative of results for a full year. These notes do not include all the information required by generally accepted accounting principles. The condensed interim consolidated financial statements should be read in conjunction with the audited financial statements included in the Company's Annual Report on Form 10-K for the year ended September 30, 1996 and in the transition report for the transition period from October 1, 1996 to December 31, 1996, filed on Form 10-Q. (2) Statements of Cash Flows - Supplemental schedule of noncash activities: During the nine months ended September 30, 1997, the Company converted 17,000 shares of Class B Convertible Preferred Stock into 26,000 shares of Common Stock. All of the outstanding Class D Convertible Preferred Stock ("D Preferred Stock") was automatically converted to 8,666,667 shares of Common Stock effective July 1, 1997. The D Preferred Stock was issued in connection with the transaction between the Company, VIMRX Pharmaceuticals Inc. ("VIMRX") and certain stockholders of the Company whereby VIMRX acquired a majority holding in the Company. In August 1997, warrants to purchase 1,000,000 shares of Common Stock at $1.00 per share were exercised by VIMRX. In addition, VIMRX owns warrants to purchase 1,000,000 shares of Common Stock at an exercise price of $2.00 per share. In August 1997, warrants to purchase 2,000,000 shares of Common Stock at $0.50 per share were exercised by certain other shareholders. VIMRX owns approximately 65% of the Company's common stock at September 30, 1997. (3) Contingency: The Company may be considered to be in violation of the terms of its office and laboratory sublease by not obtaining the required approval from the owner of the property prior to the consummation of the transactions with VIMRX whereby VIMRX acquired a majority holding in Innovir Laboratories, Inc. ("Innovir") and Innovir acquired all of the issued and outstanding shares of VIMRX Holding, Ltd. ("VHL"), a wholly owned subsidiary of VIMRX, in December 1996. In addition, the owner of the property has alleged, and the Company's sublandlord disputes, that the sublandlord may also be in breach of its lease with the owner of the property. If the sublandlord is evicted, the Company would lose its right to occupy its current space. While the Company believes these matters may be resolved without a materially adverse effect on the Company's business or financial position, no assurance can be given as to the ultimate outcome. (4) During February 1996, Innovir was named as defendant in an action filed by an investor alleging that Innovir wrongfully refused to honor the investor's request to convert certain shares of Innovir's preferred stock into Innovir's Common Stock. During February 1997, the investor and Innovir settled the action at no material cost to the Company. In connection with the settlement, 19,000 shares of Common Stock, which had been held in escrow pending the resolution of the action, were returned to the Company. 7 INNOVIR LABORATORIES, INC. and SUBSIDIARIES (A Development Stage Enterprise) (5) In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 128, "Earnings Per Share." This Statement establishes standards for computing and presenting earnings per share (EPS) and applies to entities with publicly held common stock or potential common stock. This Statement simplifies the standards for computing earnings per share previously found in APB Opinion No. 15, "Earnings Per Share," and makes them comparable to international EPS standards. It replaces the presentation of primary EPS with a presentation of basic EPS. It also requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. This Statement is effective for financial statements issued for periods ending after December 15, 1997, including interim periods; earlier application is not permitted. This Statement requires restatement of all prior-period EPS data presented. The adoption of this Statement will not have any impact on the Company's EPS disclosure, as the Company's stock options and warrants are anti-dilutive and will be excluded from the denominator of earnings per share; thus, earnings per common share is equal to basic earnings per share as computed under SFAS No. 128. The FASB recently issued three new accounting standards, Statement No. 129, Disclosure of Information about Capital Structure, Statement No. 130, Reporting Comprehensive Income, and Statement No. 131, Disclosures about Segments of an Enterprise and Related Information, and if adopted will be effective for the period presented after December 31, 1997. The Company is evaluating the effect of these new statements. 8 INNOVIR LABORATORIES, INC. and SUBSIDIARIES (A Development Stage Enterprise) Item 2. Management's Discussion and Analysis of Financial Condition and Results ----------------------------------------------------------------------- of Operations ------------- This report contains forward-looking statements which involve risks and uncertainties. Such statements are subject to certain factors which may cause the Company's plans to differ. Factors that may cause such differences include, but are not limited to, the progress of the Company's research and development programs, the Company's ability to obtain additional funds, the Company's ability to compete successfully, the Company's ability to attract and retain qualified personnel, the Company's ability to successfully enter into collaborations with third parties, the Company's ability to enter into and progress in clinical trials, the time and costs involved in obtaining regulatory approvals, the costs involved in obtaining and enforcing patents and any necessary licenses, the Company's ability to establish development and commercialization relationships, the cost of manufacturing, and those other risks discussed under the heading Risk Factors included in the Company's Form S- 3 Registration Statement (Reg. No. 333-12865). The following discussion and analysis should be read in conjunction with the financial statements and notes thereto contained herein and the Company's Annual Report on Form 10-K for the year ended September 30, 1996 and the transition report for the transition period from October 1, 1996 to December 31, 1996, filed on Form 10-Q. Background On December 23, 1996, Innovir, VIMRX and certain stockholders of Innovir ("The Aries Funds") consummated a transaction (the "Transaction") whereby VIMRX acquired 68% of the outstanding stock of Innovir and Innovir acquired all of the issued and outstanding shares of VHL, a wholly-owned subsidiary of VIMRX. Innovir's acquisition of VHL and VIMRX's partial acquisition of Innovir have been accounted for as a purchase in accordance with APB Opinion No. 16, Business Combinations and Emerging Issues Task Force Issue No. 90-13, Accounting for Simultaneous Common Control Mergers ("EITF No. 90-13"). The application of APB No. 16 and EITF No. 90-13 requires that the Transaction be accounted for as a reverse acquisition and accordingly, for accounting purposes, (i) VHL is deemed to be the acquirer and surviving entity, (ii) because Innovir is deemed to be the legal acquirer, VHL's historic capital accounts have been retroactively restated (recapitalized) to reflect Innovir's capital accounts and the equivalent number of shares received by VIMRX in the Transaction, (iii) Innovir has fair valued its assets and liabilities to the extent acquired by VIMRX (68%) and (iv) the assets and liabilities of VHL are carried at VHL's historic cost. Since VHL is deemed to be the surviving entity, the statement of operations includes the operations of VHL for the period from January 6, 1995 (inception). The operations of Innovir are included only since the date of acquisition, i.e., for the period from December 23, 1996 to September 30, 1997. For accounting purposes, VHL assumed the name of Innovir Laboratories, Inc. and Subsidiaries, and, for purposes of this Quarterly Report, all references to the "Company" shall mean the consolidated entity consisting of Innovir, VHL and subsidiaries. On February 11, 1997, Innovir elected to change its fiscal year end date from September 30 to December 31 of each year, effective January 1, 1997. This change was made to conform Innovir's 9 INNOVIR LABORATORIES, INC. and SUBSIDIARIES (A Development Stage Enterprise) fiscal year end date with that of VHL. This Quarterly Report on Form 10-Q covers the first nine months of the new fiscal year, that is January 1 to September 30, 1997. Results of Operations Since its inception, substantially all of the Company's resources have been applied to research and development, patents and licensing and other general and administrative matters. The Company has no commercially viable therapeutic products and does not anticipate having any for several years. The Company is developing the technology to be used as a research tool to facilitate determination of gene function and to validate drug targets. No significant revenues have been earned from this use. The Company has had no operating revenues to date and has sustained net losses since its inception. The Company expects losses to continue for the foreseeable future. Three Month Period Ended September 30, 1997 vs. September 30, 1996 Research and development expenses increased $946,000 due to the acquisition of Innovir's operations in December 1996 ($918,000) and an increase in spending in the European operations. General and administrative expenses increased $732,000 due to the acquisition of Innovir ($689,000) and a increase in VHL expenses related to the European operations ($43,000). Purchases in process research and development in the three months ended September 30, 1996 relate to the acquisition of Ribonetics GmbH; in May 1996, VHL had acquired Ribonetics GmbH and had incurred expenses in connection therewith. Amortization of goodwill relates to the asset recorded in the transaction with VIMRX described under "Background" above. Nine Month Period Ended September 30, 1997 vs. September 30, 1996 Research and development expenses increased $3,670,000 due to the acquisition of Innovir's operations in December 1996 ($3,014,000) and increased spending in the European operations ($656,000). General and administrative expenses increased $1,977,000 due to the acquisition of Innovir ($2,223,000) and a decrease in European expenses from 1996. Amortization of goodwill relates to the asset recorded in the transaction with VIMRX described under "Background" above. Liquidity and Capital Resources At September 30, 1997, the Company had cash and cash equivalents of $1,775,000 as compared to $6,412,000 at December 31, 1996. The Company had working capital of $258,000 at September 10 INNOVIR LABORATORIES, INC. and SUBSIDIARIES (A Development State Enterprise) 30, 1997, as compared to working capital of $4,788,000 at December 31, 1996. The decrease in cash and working capital positions resulted from cash expended for operations and capital assets, net of $2,000,000 provided by the exercise of warrants. The Company may be considered to be in violation of the terms of its sublease for its principal office and laboratory space by not obtaining the required approval from the owner of the property prior to the consummation of the transactions with VIMRX in December 1996. See the notes to the Company's financial statements. In addition, the owner of the property has alleged, and the Company's sublandlord disputes, that the sublandlord may also be in breach of its lease with the owner of the property. If the sublandlord is evicted, the Company would lose its right to occupy its current space. While the Company believes that these matters may be resolved without a materially adverse effect on the Company's business or financial position, no assurances can be given as to the ultimate outcome. The Company expects to incur substantial expenditures in the foreseeable future for the research and development and commercialization of its proposed products. As of September 30, 1997, the Company had cash and cash equivalents of approximately $1.8 million. Based on current projections, which are subject to change (such change may be significant), the Company's management believes that this and continued funding by VIMRX, will be sufficient to fund its operations into the second quarter of the year ended December 31, 1998. Thereafter, the Company will require additional funds, which it may seek to raise through public or private equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. There can be no assurance that such additional financing can be obtained on terms reasonable to the Company, if at all. In the event the Company is unable to raise additional capital, planned operations would need to be scaled back or discontinued during 1998. 11 Part II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits: -------- 10 Separation Agreement, dated September 1997, by and between the Company and Allan R. Goldberg. 27 Financial Data Schedule. (b) Reports on Form 8-K: ------------------- During the quarter for which this report is filed, the Company filed a current report on Form 8-K, dated September 26, 1997 as filed on October 3, 1997, regarding the appointment of the Company's new President and Chief Executive Officer; no financial statements were filed in connection with such report. All other Items of this report are inapplicable. 12 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. November 14, 1997 Innovir Laboratories, Inc. By: /s/ THOMAS R. SHARPE ----------------------------------------------- Name: Thomas R. Sharpe, Ph.D. Title: President and Chief Executive Officer (Principal executive officer) By: /s/ FRANCIS M. O'CONNELL ----------------------------------------------- Name: Francis M. O'Connell Title: Chief Financial Officer (Principal financial and accounting officer) 13 EX-10 2 SEPARATION AGREEMENT - DATED SEPTEMBER 1997 Exhibit 10 SEPARATION AGREEMENT -------------------- THIS SEPARATION AGREEMENT (this "Agreement"), effective as of October 1, 1997, by and between INNOVIR LABORATORIES, INC., a Delaware corporation having offices at 510 East 73rd Street, New York, New York 10021 (the "Company"), and ALLAN R. GOLDBERG, residing at 200 East 66th Street, Apt. E1607, New York, New York 10021 ("Consultant"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, Consultant is presently Chief Executive Officer and Chairman of the Board of Directors of the Company pursuant to that certain Amended and Restated Employment Agreement, made as of December 1, 1996, between the Company and Consultant (the "Employment Agreement"); WHEREAS, the Company and Consultant mutually agree that Consultant shall no longer serve as an executive officer and director of the Company, effective October 1, 1997 (the "Separation Date"); and WHEREAS, the Company desires to have Consultant's advice and services available to it, and Consultant is desirous of providing such advice and services to the Company; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the parties hereto agree as follows: 1. Effective as of the Separation Date, Consultant hereby resigns as Chief Executive Officer, Chairman of the Board and director of the Company, and the Employment Agreement is hereby terminated and shall have no further force or effect, except as otherwise provided herein. Consultant acknowledges that, except as provided herein, he is not entitled to any additional payments or compensation from the Company, whether pursuant to the Employment Agreement or otherwise. 2. (a) The Company hereby retains Consultant for a period of one (1) year (the "Consulting Period") commencing on the Separation Date and ending September 30, 1998 (the "Termination Date") as a consultant and advisor to the Company, including its subsidiaries and other affiliates, in areas relating to the Company's scientific research and development efforts and any other matters as may from time to time be requested by the Chief Executive Officer, President or the Board of Directors of the Company. The Consulting Period may be extended on mutually acceptable terms and conditions. The Company acknowledges that, subject to the other provisions of this Agreement, Consultant may accept full- time employment or perform certain services, including consulting and advisory services, for other persons or entities during the Consulting Period. 14 (b) In addition, Consultant hereby covenants that Consultant shall: (i) cooperate fully with the Company to transition its business and operations under the management of the new Chief Executive Officer; (ii) cooperate fully with the Company in the event of any litigation against the Company, its parent, subsidiaries or other affiliates, and/or any of their officers, directors, stockholders, employees, agents or other representatives; (iii) in the sole discretion of, and to the extent required by, the Company, serve on the Science Advisory Board of the Company; (iv) refrain from making, or causing to be made, directly or indirectly, any negative or disparaging statements, whether orally or in writing, concerning the Company, its parent, subsidiaries or other affiliates, and/or any of their officers, directors, stockholders, employees, agents or other representatives; (v) refrain from disparaging or tortiously interfering in any way with the present or future business activities or operations of the Company, its parent, subsidiaries or other affiliates; (vi) comply in all respects with the provisions of Sections 7 (Confidential Information), 9 (Employment with Competitors), 10 (Post- ------------------------ --------------------------- ----- Employment Hiring or Solicitation of Employer Employees and ----------------------------------------------------------- Representatives) and 11 (Inventions, Ideas and Patents) of the --------------- ----------------------------- Employment Agreement; (vii) release and forever discharge the Company, its parent, subsidiaries and other affiliates, and/or any of their officers, directors, stockholders, employees, agents or other representatives (collectively, "Releasees") of and from all actions, claims, causes of action, demands and obligations of all kinds, arising at law or in equity, whether known or unknown, which Consultant has, ever had and ever in the future may have, directly or indirectly, against Releasees, arising up to and including the Separation Date (collectively, "Claims"), including, without limitation, Claims arising under the Age Discrimination in Employment Act and the Older Workers Benefit Protection Act. Consultant hereby acknowledges that he has been provided an opportunity to consult with an attorney or other advisor of his choice regarding the terms and conditions of this Agreement and that he has been given twenty-one (21) days in which to consider this release. This release shall become effective and enforceable upon the expiration of seven (7) days following the date of Consultant's execution hereof; provided, that Consultant shall not have revoked this release prior to such date by delivering written notice of his revocation to the Company at the address set forth above. In the event of such revocation, the Agreement, including this release, shall be null and void as of the date hereof and shall have no force or effect; and (viii) refrain from encouraging or voluntarily participating in any legal action, charge or complaint by third parties against Releasees in any forum whatsoever. In the event any such actions, charges or complaints are asserted in the future, in addition to any other remedies available, Releasees shall be entitled to receive from Consultant the reasonable attorneys' fees incurred by Releasees in defending such action, charge or complaint. 3. (a) In consideration of the services to be rendered, and the covenants to be performed, by Consultant hereunder, the Company agrees to pay to Consultant the sum of $16,667.00 per month during the Consulting Period, payable in accordance with normal Company practice. 15 (b) (i) In connection with the execution and delivery of this Agreement, the Company and Consultant shall amend Consultant's Regular Option (as defined in the Employment Agreement), pursuant to which amendment Consultant shall be entitled to purchase an aggregate of 200,000 shares of the Company's common stock, $.013 par value per share, at an exercise price of $1.30 per share ("Common Stock"), pursuant to the Company's 1993 Stock Option Plan, as amended from time to time (the "1993 Plan"). The Regular Option as so amended shall hereinafter be referred to as the "Amended Option" and shall be in the form of Exhibit A attached hereto. - --------- (ii) The Amended Option shall vest as follows: with respect to 166,667 shares of Common Stock, the Amended Option shall be immediately exercisable as of the Separation Date; and with respect to the remaining 33,333 shares of Common Stock, the Amended Option shall vest on October 1, 1998; provided, however, that in the event Consultant breaches any of his obligations hereunder prior to October 1, 1998, to the extent not yet vested, the Amended Option shall immediately terminate, without further action by the Company, as of the time of such breach. With respect to all other provisions of the Amended Option, including the term of the Amended Option, the Amended Option shall be identical to the Regular Option. (iii) Consultant acknowledges that any and all stock options to acquire capital stock of the Company held by Consultant prior to the Separation Date, including, without limitation, the Regular Option (except as and to the extent amended hereby) and the Milestone Option (as defined in the Employment Agreement), shall be terminated and surrendered to the Company as of the Separation Date. (c) Consultant shall be entitled to reimbursement for reasonable out-of-pocket expenses in accordance with normal Company policy as in effect from time to time. Major travel and expense expenditures shall be precleared and incurred in accordance with normal Company travel and expense policies. (d) The Company shall pay, and Consultant shall be entitled to receive, accrued vacation pay with respect to thirty-five (35) days of accrued vacation, in accordance with normal Company policy. (e) In partial consideration for the services to be provided by Consultant hereunder, the Company shall pay through the Termination Date the premiums owed in connection with the continuation of the term life insurance policy previously paid by the Company on behalf of Consultant. In addition, until August 31, 1998, the Company shall continue to provide for lease payments and related expenses for the automobile currently used by Consultant in connection with services rendered by Consultant hereunder. As of the Separation Date, Consultant shall not be entitled to any other fringe benefits provided by the Company. 16 (f) The Company hereby covenants that it shall refrain from making, or causing to be made, directly or indirectly, any negative or disparaging statements, whether orally or in writing, concerning Consultant. 4. (a) On the Separation Date, in connection with the execution of this Agreement, the Company shall purchase from Consultant, and Consultant shall sell to the Company, all the equipment listed on Exhibit A to the Employment Agreement for an aggregate consideration equal to $34,000.00. Such consideration shall be paid by the Company to Consultant on the Separation Date. (b) Consultant represents and warrants that, as of the Separation Date, pursuant to Section 8 (Return of Materials) of the Employment Agreement, ------------------- Consultant has delivered to the Company all of the Company's materials, documents, plans, records, notes, drawings or papers and any copies thereof which constitute or embody Confidential Information (as defined in the Employment Agreement) and are in Consultant's possession or control. 5. (a) Consultant acknowledges and agrees that in the event he breaches any of his obligations hereunder, all obligations of the Company herein shall immediately terminate without further action by the Company. (b) The Company acknowledges that failure of the Company to avail itself of Consultant's services hereunder shall not in any way reduce the sums payable to Consultant hereunder. 6. (a) Consultant agrees that all data, reports, equipment and other property furnished to Consultant by the Company or produced by Consultant in connection with his consulting services hereunder shall remain the property of the Company. (b) Consultant agrees to disclose to the Company all Inventions (as defined below) made or conceived, first reduced to practice or learned by him as a result of the consulting services performed hereunder. Consultant agrees that all Inventions shall be the property of the Company. "Inventions" shall mean all formulas, processes, know-how, data, analyses and inventions, whether patentable or not. 7. The Company and Consultant acknowledge and agree that Consultant is retained and engaged by the Company only for the purposes and to the extent set forth in this Agreement and that, during the Consulting Period, Consultant's relation to the Company shall be that of an independent contractor in the performance of each and every part of this Agreement. 8. Unless otherwise agreed, this Agreement shall terminate on the Termination Date. Consultant acknowledges and agrees that subsections (ii), (iv), (v), (vi) with respect to Section 7 of the Employment Agreement, (vii) and (viii) of Section 2(b) hereof shall survive the expiration or termination of this Agreement. In the event of Consultant's death or permanent disability resulting in Consultant's inability to perform consulting services by reason of illness or other incapacity during the Consulting Period, the obligations of the Company set forth in Section 3 hereof shall continue. 9. All provisions of this Agreement are separate terms and conditions, and in the event any provision shall be held illegal, invalid or unenforceable, all other provisions hereof shall remain in full force and effect as if the illegal, invalid or unenforceable provision were not a part hereof. If, moreover, anyone or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so 17 as to be enforceable to the maximum extent allowed by the applicable law as it shall then appear. 10. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company. This Agreement shall not be assignable by Consultant. 11. This Agreement shall be construed and interpreted in all respects according to the laws of the State of New York. 12. This Agreement embodies the entire agreement of the parties hereto relating to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, whether oral or written. No amendments or modification of this Agreement shall be valid or binding unless in writing and signed by the parties hereto. 13. This Agreement may be executed in several counterparts, all of which taken together shall constitute one and the same agreement. INNOVIR LABORATORIES, INC. Dated: September 24, 1997 By: /s/ Francis M. O'Connell ---------------------------------------- Dated: September 24, 1997 /s/ Allan R. Goldberg -------------------------------------------- Allan R. Goldberg, Ph.D. 18 EXHIBIT A Amendment No. 1 to Innovir Laboratories, Inc. Non-Incentive Stock Option Agreement This Amendment No. 1 (this "Amendment"), by and between Innovir Laboratories, Inc. (the "Company") and Allan R. Goldberg ("Consultant"), amends the Non-Incentive Stock Option Agreement, effective as of November 21, 1996 (the "Option Agreement"), issued by the Company to Consultant. WHEREAS, the Company and Consultant have entered into that certain Separation Agreement, effective as of October 1, 1997 (the "Separation Agreement"); and WHEREAS, in connection with the execution and delivery of the Separation Agreement, the Company and Consultant desire to amend certain terms of the Option Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the parties hereto agree as follows: 1. The first sentence of the introductory paragraph of the Option Agreement is hereby deleted in its entirety and hereby amended to read as follows: "We are pleased to inform you that by the determination of the Board of Directors of Innovir Laboratories, Inc. (the "Company") an option to purchase 200,000 shares of the Common Stock, par value $.013 per share, of the Company (the "Common Stock"), at the price of $1.30 per share, has, as of November 21, 1996, been granted to you." 2. Paragraph 2 of the Option Agreement is hereby deleted in its entirety and hereby amended to read as follows: "The option granted to you hereunder may be immediately exercised, in whole or in part, as to 166,667 shares of Common Stock and may be exercised on or after October 1, 1998 as to the remaining 33,333 shares of Common Stock; provided, however, that you may not sell any shares issued to you pursuant to an exercise of this option until November 21, 1997; and further provided, however, that this option may not be exercised as to less than 100 shares at any one time. In the event that you breach prior to October 1, 1998 any of the provisions of that certain Separation Agreement, effective as of October 19 1, 1997, by and between you and the Company, to the extent not yet vested, this option shall immediately terminate, without further action by the Company, as of the time of such breach. Notwithstanding anything to the contrary contained herein, this option expires at the end of ten years from the date of grant whether or not it has been duly exercised. To the extent exercisable, you may exercise this option at any time during such term of this option." 3. Paragraphs 5, 6 and 7 of the Option Agreement are hereby deleted in their entirety. Effective as of October 1, 1997 AGREED TO ACCEPTED BY: INNOVIR LABORATORIES, INC. By: ------------------------------------- Allan R. Goldberg, Ph.D. 20 EX-27 3 FINANCIAL DATA SCHEDULE
5 12-MOS DEC-31-1997 SEP-30-1997 1,775,000 0 0 0 0 1,837,000 4,370,000 1,729,000 5,649,000 1,579,000 0 0 17,000 387,000 3,070,000 5,649,000 0 0 0 0 7,156,000 0 122,000 (7,278,000) 0 0 0 0 0 (7,278,000) (0.34) (0.34)
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