-----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, JhDEOMqibzaxwHgJnojrNZGIK4emI8MHEMilbbrjDPkafOm/QCR8CH6iBcPHx/qp UIhGbbkQmKAsv+qRVpfFlw== 0000907285-96-000006.txt : 19960809 0000907285-96-000006.hdr.sgml : 19960809 ACCESSION NUMBER: 0000907285-96-000006 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960808 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: APROGENEX INC CENTRAL INDEX KEY: 0000907285 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 760269632 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-12416 FILM NUMBER: 96605682 BUSINESS ADDRESS: STREET 1: 8000 EL RIO ST CITY: HOUSTON STATE: TX ZIP: 77054 BUSINESS PHONE: 7137485114 MAIL ADDRESS: STREET 1: 8000 EL RIO ST CITY: HOUSTON STATE: TX ZIP: 77054-4104 10QSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 Commission file number 1-12416 Aprogenex, Inc. (Exact name of Small Business Issuer as specified in its charter) Delaware 76-0269632 (State of incorporation) (I.R.S. Employer Identification Number) 8000 El Rio Street Houston, TX 77054-4104 (Address of principal executive offices) (713) 748-5114 (Issuer's telephone number) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES: X NO: As of August 5, 1996, there were 5,200,598 shares of Common Stock outstanding. Transitional Small Business Disclosure Format (check one): YES: NO: X PART I - FINANCIAL INFORMATION Item 1. Financial Statements Aprogenex, Inc. (A Delaware Corporation in the Development Stage) Balance Sheets (Unaudited) December 31, June 30, 1995 1996 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 1,301,934 $ 1,562,219 Accounts receivable and prepaid expenses 103,412 90,335 ----------- ----------- Total current assets 1,405,346 1,652,554 Property and equipment, net 956,034 787,857 Other assets, net 30,574 128,532 ----------- ----------- $ 2,391,954 $ 2,568,943 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 273,361 $ 159,456 Accrued liabilities 244,491 193,559 Current portion of capital lease obligations 176,962 174,127 ---------- ---------- Total current liabilities 694,814 527,142 Capital lease obligations, net of current portion 203,905 103,768 Convertible Notes Payable -- 1,951,837 Commitments and contingencies Stockholders' equity Undesignated Preferred Stock, 10,320,000 shares authorized, none issued -- -- Series A Convertible Preferred Stock, $.001 par value; 880,000 shares authorized; 459,000 and 449,000 shares issued and outstanding,respectively; liquidation preference of $13 per share (aggregating to $5,967,000 and $5,837,000, respectively) 459 449 Common Stock, $.001 par value; 20,000,000 shares authorized; 5,156,345 and 5,200,598 shares issued and outstanding, respectively 5,156 5,201 Additional paid-in capital 27,311,550 27,312,430 Deficit accumulated during the development stage (26,002,816) (27,575,770) Warrants to purchase Common and Preferred Stock 178,886 243,886 ----------- ----------- Total stockholders' equity (deficit) 1,493,235 (13,804) ----------- ----------- $ 2,391,954 $ 2,568,943 =========== =========== The accompanying notes are an integral part of these financial statements Aprogenex, Inc. (A Delaware Corporation in the Development Stage) Statements of Operations (Unaudited) For the Period From Inception For the Three (January 25, Months Ended June 30, 1989)Through ------------------------ June 30, 1995 1996 1996 ----------- ----------- ------------ Revenues $ 8,070 $ 13,236 $ 211,310 ----------- ----------- ------------ Costs and expenses: Research and development 959,974 520,156 16,312,036 General and administrative 499,642 279,818 10,566,733 ----------- ----------- ------------ Total costs and expenses 1,459,616 799,974 26,878,769 ----------- ----------- ------------ Loss before interest and other (1,451,546) (786,738) (26,667,459) Interest expense (20,299) (26,524) (621,112) Interest income and other,net 33,818 16,084 645,456 ----------- ----------- ------------ Net loss $(1,438,027) $ (797,178) $(26,643,115) =========== =========== ============ Net loss per Common share $ (.29) $ (.15) =========== =========== Shares used in computing net loss per Common share 5,043,340 5,200,598 =========== =========== The accompanying notes are an integral part of these financial statements. Aprogenex, Inc. (A Delaware Corporation in the Development Stage) Statements of Operations (Continued) (Unaudited) For the Period From Inception For the Six (January 25, Months Ended June 30, 1989)Through ------------------------ June 30, 1995 1996 1996 ----------- ----------- ------------ Revenues $ 8,070 $ 30,581 $ 211,310 ----------- ----------- ------------ Costs and expenses: Research and development 1,813,005 1,040,853 16,312,036 General and administrative 1,088,628 549,361 10,566,733 ----------- ----------- ------------ Total costs and expenses 2,901,633 1,590,214 26,878,769 ----------- ----------- ------------ Loss before interest and other (2,893,563) (1,559,633) (26,667,459) Interest expense (42,430) (42,022) (621,112) Interest income and other,net 50,764 28,701 645,456 ----------- ----------- ------------ Net loss $(2,885,229) $(1,572,954) $(26,643,115) =========== =========== ============ Net loss per Common share $ (.58) $ (.30) =========== =========== Shares used in computing net loss per Common share 4,993,863 5,189,923 =========== =========== The accompanying notes are an integral part of these financial statements. Aprogenex, Inc. (A Delaware Corporation in the Development Stage) Statements of Cash Flows (Unaudited) For the Period From Inception For the Three (January 25, Months Ended June 30, 1989)Through ------------------------ June 30, 1995 1996 1996 ----------- ----------- ------------ Operating Activities: Net loss $(1,438,027) $ (797,178) $(26,643,115) Adjustments to reconcile to net cash used by operating activities Depreciation and amortization 76,007 88,698 1,831,280 Interest expense on Convertible Notes payable in 199 -- 10,437 10,437 Amortization of discount on Convertible Notes -- 1,400 1,400 Amortization of deferred compensation related to certain stock options -- -- 94,300 Non-cash portion of technology acquisition -- -- 2,421,875 Interest expense on notes payable converted into preferred stock -- -- 186,154 Issuance of common stock, options, or warrants for services -- -- 48,295 Changes in assets and liabilities- (Increase) decrease in prepaid expenses, receivables and other (6,658) (12,855) (110,755) Increase (decrease) in accounts payable and accrued liabilities 194,703 66,350 353,015 ----------- ----------- ------------ Net cash used by operating activities (1,173,975) (643,148) (21,807,114) Investing Activities: Purchases of marketable securities (161,078) -- (5,018,891) Disposition of marketable securities -- -- 5,018,891 Purchases of property and equipment (38,827) -- (2,239,113) Proceeds from sale-leaseback agreement -- -- 982,416 Deferred organization costs -- -- (1,788) ----------- ----------- ------------ Net cash provided (used) by investing activities (199,905) -- (1,258,485) ----------- ----------- ------------ Financing Activities: Net proceeds from sale of preferred stock 3,835,440 -- 8,676,736 Net proceeds from sale of common stock 555,015 -- 10,511,178 Net borrowings under Convertible Notes -- 1,834,318 1,834,318 Exercise of stock options 5,859 -- 110,087 Proceeds from sale of warrants 48,786 65,000 183,886 Principal payments under capital lease obligations (40,233) (61,448) (1,045,185) Borrowings under notes payable converted into preferred stock -- -- 4,363,048 Net borrowings under Bridge Loans -- -- 570,000 Repayment of Bridge Loans -- -- (570,000) Purchase of treasury stock -- -- (6,250) ----------- ----------- ------------ Net cash provided (used) by financing activities 4,404,867 1,837,870 24,627,818 ----------- ----------- ------------ Increase (decrease) in cash and cash equivalents 3,030,987 1,194,722 1,562,219 Cash and cash equivalents, beginning of period 450,540 367,497 -- ----------- ----------- ------------ Cash and cash equivalents, end of period $ 3,481,527 $ 1,562,219 $ 1,562,219 =========== =========== ============ The accompanying notes are an integral part of these financial statements. Aprogenex, Inc. (A Delaware Corporation in the Development Stage) Statements of Cash Flows (Continued) (Unaudited) For the Period From Inception For the Six (January 25, Months Ended June 30, 1989)Through ------------------------ June 30, 1995 1996 1996 ----------- ----------- ------------ Operating Activities: Net loss $(2,885,229) $(1,572,954) $(26,643,115) Adjustments to reconcile to net cash used by operating activities Depreciation and amortization 150,885 178,652 1,831,280 Interest expense on Convertible Notes payable in 199 -- 10,437 10,437 Amortization of discount on Convertible Notes -- 1,400 1,400 Amortization of deferred compensation related to certain stock options -- -- 94,300 Non-cash portion of technology acquisition -- -- 2,421,875 Interest expense on notes payable converted into preferred stock -- -- 186,154 Issuance of common stock, options, or warrants for services -- -- 48,295 Changes in assets and liabilities- (Increase) decrease in prepaid expenses, receivables and other (83,623) 13,077 (110,755) Increase (decrease) in accounts payable and accrued liabilities 92,326 (164,837) 353,015 ----------- ----------- ------------ Net cash used by operating activities (2,725,641) (1,534,225) (21,807,114) Investing Activities: Purchases of marketable securities (161,078) -- (5,018,891) Disposition of marketable securities 1,000,000 -- 5,018,891 Purchases of property and equipment (46,360) (2,751) (2,239,113) Proceeds from sale-leaseback agreement -- -- 982,416 Deferred organization costs -- -- (1,788) ----------- ----------- ------------ Net cash provided (used) by investing activities 792,562 (2,751) (1,258,485) ----------- ----------- ------------ Financing Activities: Net proceeds from sale of preferred stock 3,835,440 -- 8,676,736 Net proceeds from sale of common stock 555,015 -- 10,511,178 Net borrowings under Convertible Notes -- 1,834,318 1,834,318 Exercise of stock options 43,546 915 110,087 Proceeds from sale of warrants 48,786 65,000 183,886 Principal payments under capital lease obligations (83,734) (102,972) (1,045,185) Borrowings under notes payable converted into preferred stock -- -- 4,363,048 Net borrowings under Bridge Loans -- -- 570,000 Repayment of Bridge Loans -- -- (570,000) Purchase of treasury stock -- -- (6,250) ----------- ----------- ------------ Net cash provided (used) by financing activities 4,399,053 1,797,261 24,627,818 ----------- ----------- ------------ Increase (decrease) in cash and cash equivalents 2,465,974 260,285 1,562,219 Cash and cash equivalents, beginning of period 1,015,553 1,301,934 -- ----------- ----------- ------------ Cash and cash equivalents, end of period $ 3,481,527 $ 1,562,219 $ 1,562,219 =========== =========== ============ The accompanying notes are an integral part of these financial statements. Condensed Notes to Financial Statements 1. Description of Business and Certain Significant Risks Aprogenex, Inc. (Aprogenex or the Company) was incorporated as Molecular Analysis Incorporated on August 1, 1988, and commenced operations on January 25, 1989. The Company was organized to research, develop, and market medical diagnostic products using DNA probes to detect and identify diseases and genetic disorders. The proprietary technology of Aprogenex includes methods of in situ hybridization using synthesized DNA probes. Aprogenex is in the development stage and has only generated limited revenues from the sale of research-use-only products. The future success of the Company is dependent upon many factors, including the protection of its proprietary technology, the ability to practice its technology without infringing patents issued to others, the successful identification and development of saleable products using this technology, obtaining regulatory approvals to market such products, the penetration of markets for these products, and obtaining funds necessary to complete these activities. The Company's technology can be utilized to develop products that serve various markets ranging from genetics to infectious diseases. The potential customers for the Company's product candidates are generally laboratories throughout the world, and such laboratories may require a broader range of products or instrumentation than is available from the Company. Additionally, the Company's product candidates must compete with products from other companies developed using similar technologies, as well as with products developed using other technologies. Most competitors have substantially greater resources than the Company, which will make penetration of markets for the Company's products difficult. The Company estimates that, as of June 30, 1996, it has cash resources to fund its normal operations through the end of 1996. Accordingly, the Company will require additional funding to complete its product development activities or to sustain operations through the commercialization of such products. The Company from time to time is engaged in activities to raise funds through the sale of equity or debt or the license of portions of its technology. The ability of the Company to continue its activities, to realize or recover its investment in property and equipment, or to continue as a going concern is dependent upon its ability to obtain additional funding. There can be no assurance that the Company will be able to obtain such funding, or the terms upon which any such funding may occur. As previously disclosed in the Company's Form 10-KSB for the year ended December 31, 1995, as filed with the Securities and Exchange Commission, the opinion of Arthur Andersen LLP, the independent public accountants for the Company, included an explanatory fourth paragraph that indicated that the Company's continued operations is dependent upon its ability to obtain additional working capital to complete the research and development and other activities and to attain successful future operations. 2. Basis of Presentation The accompanying unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission"). Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations. This financial information should be read in conjunction with the Financial Statements included within the Company's Form 10-KSB for the year ended December 31, 1995. In the opinion of the management of the Company, the accompanying financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair presentation of financial position and the results of operations for the periods presented. 3. Sale of Convertible Notes and Warrants On June 12, 1996, the Company issued $2,005,000 principal amount of Convertible Notes due on May 29, 1998 (the "Convertible Notes") and warrants to acquire 130,323 shares of Common Stock (the "1996 Warrants") for total consideration of $2,005,000. The Convertible Notes bear interest at the rate of 10% per annum, based on a 365 day year, compounded quarterly. Interest is payable at maturity or upon prepayment. The principal and accrued interest on the Convertible Notes are convertible into the Common Stock of the Company at the rate of one share of Common Stock for every $1.10 in principal and accrued interest. On the twentieth business day prior to the maturity date of the Convertible Notes (the "Reset Date"), the conversion price will be adjusted to the average of the closing price of the Common Stock on the American Stock Exchange (or such other trading forum as may be applicable at that time) for the ten trading days prior to the Reset Date (the "Reset Conversion Price") if and only if such new Reset Conversion Price is lower than the then-current Conversion Price. However, such price shall not be less than 50% of the then-Conversion Price. The Convertible Notes contain provisions to protect the holders against dilution by adjusting the number of shares issuable upon conversion thereof. The Company has the right to prepay principal and accrued interest upon twenty days notice to the holders of the Convertible Notes. However, the holders have the right to convert the Convertible Notes into Common Stock as set forth above prior to such redemption. The principal and accrued interest of the Note become immediately due and payable upon the insolvency of the Company, the commission of any act of bankruptcy by the Company, the execution by the Company of a general assignment for the benefit of creditors, the filing by or against the Company of any petition in bankruptcy or any petition for relief under the provisions of the federal bankruptcy act or any other state or federal law for the relief of debtors and the continuation of such petition without dismissal for a period of thirty (30) days or more, or the appointment of a receiver or trustee to take possession of the property or assets of the Company. The 1996 Warrants entitle the holders thereof to purchase Common Stock at $1.10 per share and are exercisable at any time, but such exercise must occur prior to the close of business on May 28, 1999. The 1996 Warrants contain provisions to protect the holders thereof against dilution by adjusting the price at which the 1996 Warrants are exercisable and the number of shares issuable upon exercise thereof upon the occurrence of certain events. Commencing September 10, 1996, the holders of the May Warrants will have "piggyback" registration rights to require the Company to include the Common Stock underlying such warrants in certain registration statements filed by the Company. The net proceeds from the sale of the Convertible Notes and the 1996 warrants totaled approximately $1.8 million after deducting the expenses and fees related to the offering. The Company expects the proceeds from the sale to fund its normal operations through 1996. See Forward-Looking Statements herein. The Company has assigned a value of approximately $.50 per share of Common Stock to the 1996 Warrants, or a total of $65,000. This valuation was based on review of the trading history of the Common Stock, the non-transferable provisions of the 1996 Warrants, and various other factors. The value assigned to the 1996 Warrants was treated as issue discount on the Convertible Notes and amortized as additional interest on the Convertible Notes. Such amortization will increase the effective interest rate on the Convertible Notes to approximately 11.7%, assuming the Convertible Notes remain outstanding until maturity. Item 2. Management's Discussion and Analysis or Plan of Operation Liquidity and Capital Resources At June 30, 1996, the Company had cash resources of $1,562,000 available to it and had net working capital of $1.1 million. To date, the Company has financed its operations primarily through private placements of its equity and debt securities and its initial public offering in 1993. The Company has raised approximately $25.5 million in net proceeds through these transactions, including $4.5 million of such sales consummated through the conversion of the Company's debt securities into equity. Additionally, the Company has financed $1.3 million of its approximately $2.6 million of capital expenditures since inception through equipment leases. The Company has expended and will continue to expend in the future substantial funds to continue the research and development of its products, conduct clinical investigations, make capital expenditures, and manufacture and market its products. Its products are in various stages of development. Additional amounts will be expended in research activities, continuing development of products, testing of these existing and other products in field trials and clinical investigations, seeking regulatory approval of successfully tested products, and the manufacturing and marketing of products approved for sale. If regulatory approvals are obtained, the Company expects to expend substantial funds on marketing and distribution activities. The amount and timing of anticipated expenditures will depend upon numerous factors both within and outside the Company's control. Factors within the Company's control include the number of products under development, the timing of the commencement of clinical investigations and regulatory filings, and the extent of pre-marketing or marketing activities. Factors generally beyond the control of the Company include the results of research and development activities, the extent of clinical investigations and the regulatory process to obtain FDA or other approvals of products and technological advances of, and products developed by, its competitors. Moreover, even if the Company's activities are successful, the ability to generate income from the sale of products will be dependent upon, among other things, acceptance of products by customers, access to distribution channels for products and the Company's ability to obtain reimbursement approval from government and third-party payers. The necessity for instrumentation to be used with the Company's products may also affect capital requirements. In addition to the foregoing, the Company's working capital requirements during the next 12 months may vary depending upon numerous additional factors, including the progress of the Company's research and development program, the results of laboratory testing, the time and cost required to seek regulatory approvals, the need to obtain licenses to proprietary rights held by others, any required adjustments to the Company's operating plan to respond to the competitive pressures or technological advances, the time of pre-marketing and marketing activities, and the success of the Company in developing collaborative arrangements with others for the development of its technology. The Company's cash and marketable securities as of June 30, 1996, are expected to be used as set forth in "Plan of Operations" below. The Company anticipates that its resources will be sufficient to fund its activities through the 1996. The report of the Company's independent auditors on the financial statements for the year ended December 31, 1995 included an explanatory paragraph with respect to the need for future financing. The Company expects to seek additional financing in 1996 to fund its operations during 1997. The Company will seek to obtain additional funds through equity or debt financing, collaborative or other arrangements with corporate partners and others, and from other sources. If additional funds are raised by issuing equity securities, dilution to stockholders may occur. The Board of Directors of the Company is empowered, without stockholder approval (other than in certain cases approvals of the holders of the Series A Convertible Preferred Stock), to issue additional shares of Series A Preferred Stock or other series of preferred stock with dividend, liquidation, conversion, voting and other rights that could adversely affect the voting power or other rights of the holders of the Company's securities. If debt securities are issued, a portion of the Company's cash flow will have to be dedicated to payment of principal and interest on such indebtedness and the Company may be subject to certain restrictive financial and operating restrictions in the agreements and instruments relating to such indebtedness. There can be no assurance that there will be significant sales of the Company's products or that such revenues will be sufficient for operations. In such event, the Company would also be required to seek additional funds. There can be no assurance that additional financing, whenever required, will be available when needed or on terms acceptable to the Company. If adequate funds are not available, the Company may be required to delay or to eliminate expenditures for certain of its products, to license to third parties the rights to commercialize additional products or technologies that the Company would otherwise seek to develop itself or if no other reasonable alternative is available, to cease operations. Additionally, depending on market conditions or future business opportunities, the Company may decide to issue additional equity or debt securities for cash or to acquire assets or technology of others. The working capital of the Company may also be used to acquire such assets or technology, reducing the funds available for alternative use. The Company from time to time engages in discussions with diagnostic companies regarding collaborative arrangements for the development and sale of applications of the Company's technology which, depending upon the terms and requirements of such arrangements, could expand the Company's research activities. Such arrangements, if consummated, could significantly reduce the amount of capital that would be required for the development and commercialization of certain applications. It is possible, however, that the net proceeds ultimately derived from any such arrangement could be less than would be the case if the Company undertook and completed development of such products itself. There can be no assurance as to the ability of the Company to consummate any such arrangement, or the terms or timing of any such arrangement. Additionally, from time to time the Company engages in exploratory discussions with others regarding mergers, acquisitions, joint ventures, dispositions and other transactions. There can be no assurance, however, that any such transaction will be effected by the Company or on what terms. The Company's liquidity will be reduced as amounts are expended for continuing activities. While not currently anticipated, the Company's liquidity could also be substantially reduced if significant amounts are expended for additional facilities, equipment or to license or acquire proprietary technology owned by others or to legally defend its proprietary technology. Plan of Operations During the next 12 months, the principal focus of the Company's activities is currently expected to be (i) the development and marketing of research-use-only HIV products, (ii) the development of clinical HIV products for submission to regulatory authorities as therapeutic monitoring products, (iii) the marketing of DNA probe products to other companies for use in their genetics programs, (iv) the development of other products and enhancements to the Company's technology, and (v) if any of the foregoing development activities are successful, conducting field trials for, seeking any required regulatory approvals of, and the marketing of these products. Such planned activities may change depending upon business opportunities that present themselves, the success of development activities, the financial position of the Company and other matters that may arise in the future. As indicated, these planned activities reflect an increased emphasis on the development of HIV and other products and a reduced emphasis on the continued development of genetics products. For a discussion of certain of the factors that affect the timing of any sales of the Company's products, see the Company's Form 10- KSB for the year ended December 31, 1995. The Company expects to either renew its lease for its facilities in 1996 or to move to a new location. Any move would require the construction of new manufacturing and laboratory facilities and may require the expenditure of approximately $1.0 million or more. Capital expenditures of other equipment are not expected to exceed $500,000 during the next 12 months. However, all such expenditures will vary based on the success of the Company's efforts, its financial resources, changes in manufacturing, research or development programs, and other factors. The Company does not believe that it is likely that the sales of its For Research Use Only genetic testing products will provide sufficient commercialization to fund its operations. The Company can not currently predict the success or market acceptance of its "For Research Use Only" HIV product. There can be no assurance that the Company will ever achieve profitability or that its products will be marketed successfully or become commercially viable. There can be no assurance that the Company will not encounter substantial expenses related to further testing and development, regulatory compliance, production and marketing problems, and competition or defense of the Company's license and patent rights. As of August 5, 1996, the Company employed 14 full and part-time employees and engaged three contract personnel. If the Company is successful in its development and marketing activities, the number of employees and temporary personnel will increase. The number of such personnel will depend on the progress of the Company's efforts and cannot be forecast with certainty. The foregoing plan of operation includes certain objectives of the Company, and there can be no assurance that these objectives will be achieved within the stated period, if at all. Furthermore, this plan of operation is subject to change based on future events and circumstances, many of which are beyond the control of the Company. See Forward Looking Statements below. Results of Operations The Company's net losses for the three month periods ended June 30, 1995, March 31, 1996, and June 30, 1996 were $1,438,000, $776,000, and $797,000, respectively. The decrease in losses from the 1995 period is principally the result of reduced activities in developing prenatal genetic testing products partially offset by increased research on Human Immunodeficiency Virus (HIV) products. See the Company's Form 10-KSB for the year ended December 31, 1995 and the discussion below. The Company expects to incur substantial operating losses into at least 1997 as it continues the activities discussed in Plan of Operations above. The Company expects to incur additional losses thereafter until such time, if ever, as there is sufficient commercialization of its products to offset its research and development activities. There can be no assurance that the Company will be able to achieve or sustain profitability. Revenues for the three month periods ended June 30, 1995, March 31, 1996, and June 30, 1996 were $8,000, $17,000 and $13,000, respectively. Such amounts were obtained from Research Use Only sales of the Company's products. For a discussion of the market potential for these products, see the Company's Form 10-KSB for the year ended December 31, 1995. Research and development expenditures have varied with the nature and scope of the Company's research activities. These amounts include the costs of basic and product-related research, process development efforts, and costs associated with field trials. Research and development expenditures for the three month periods ended June 30, 1995, March 31, 1996, and June 30, 1996 were $960,000, $521,000 and $520,000, respectively. The decrease from the second quarters of 1995 to the first and second quarter of 1996 is principally attributable to reduced expenditures for development of an enrichment component to the Company's prenatal genetic testing product using fetal cells from maternal blood (GenSite). While development efforts for the enrichment component of GenSite constituted a significant portion of the Company's resources prior to 1996, such efforts constituted a small portion of the Company's efforts in 1996. During mid-1996, the Company ended its efforts for the development of its own enrichment system as well as any efforts to license the enrichment systems of others; both such efforts were ended in 1996 in conjunction with the Company's collaboration efforts with other companies developing enrichment systems. The Company expects the level of research and development expenditures, exclusive of acquisition costs, during the next twelve months to depend on its financial resources, the success of its development and testing activities for certain products, and market acceptance of its products and the need for product enhancements, and such expenditures may increase as a result of such activities. Expenses could increase as a result of any additional acquisitions of intellectual property or other research costs. The cost of materials sold is currently included in research and development costs because such materials manufactured are principally used for development activities. The costs associated with products sold in 1995 and 1996 were not material. General and administrative expenses for the three month periods ended June 30, 1995, March 31, 1996, and June 30, 1996 were $500,000, $270,000 and $280,000, respectively. The decrease from the second quarter of 1995 to the first and second quarters of 1996 is principally attributable to reduced administrative, marketing and legal costs. The Company's President, who resigned in September, 1995, was not replaced until April, 1996, reducing administrative expenses through March 31, 1996. The Company eliminated two marketing and business development related positions in 1995 as a result of delays in the expected marketing of its prenatal genetic testing product, and instead relied upon part-time consulting arrangements to market its "Research Use Only" products in certain areas. Additionally, legal expenses declined because of lower patent prosecution fees. The Company's selling expenses are included in selling, general and administrative expenses, but have not been material to date. The Company expects selling expenses to increase as the number of research-use-only products available for sale increases, as regulatory approvals of its products are obtained and the Company commences the commercialization of its products. The Company currently intends to employ distributors for certain products, and selling expenses will vary depending upon the success of this strategy. Interest expense for the three month periods ended June 30, 1995, March 31, 1996, and June 30, 1996 were $20,000, $15,000, and $27,000, respectively. Such amounts are principally interest on capitalized leases, and the amounts declined from the second quarter of 1995 to the second quarter of 1996 as a result of the expiration of certain leases and principal payments on the remaining leases, partially offset by the $12,000 of interest expense on the Convertible Notes during the quarter ended June 30, 1996. Such amounts are payable upon maturity of the Convertible Notes. See Part II Other Information - Item 2. Changes in Securities. Interest income and other, net, for the three month periods ended June 30, 1995, March 31, 1996, and June 30, 1996 were $34,000, $13,000, and $16,000, respectively. The decrease from the second quarter of 1995 is the result of lower funds available for investment. Forward-Looking Statements The statements contained in all parts of this document regarding future products and product developments, financial performance, future regulatory approvals, business strategies, market acceptance, business arrangements, and results and other statements which are not historical facts are forward-looking statements. The words expect, project, estimate, predict, anticipate, beieves, and similar expressions are also intended to identify forward looking statements. The forward looking statements involve risks and uncertainties, including, but not limited to, those relating to: the Company's products being in the early stage of development; uncertainty of developing markets; the need for additional financing and limited access to capital funding; the Company's limited operating history; its accumulated deficit and anticipated losses; government regulation (including that the Company's products are subject to extensive regulation and required government approvals, that there is no assurance of regulatory approvals and that failure to obtain such approvals will have an adverse effect; uncertainty of the type of, timing or receipt of FDA approval; that the Company will be subject to numerous international regulations and that other regulations may adversely affect the Company); the Company's reliance on distributors and collaborative partners; license patents and trade secrets (including the uncertainty of domestic and international patent protection, the possibility of patent infringement claims against the Company, the Company's reliance on trade secrets and proprietary know-how and that there is no assurance of confidentiality); the potential adverse effects of technological change and competition; potential of limited third-party reimbursement; use of hazardous materials; possibility of product liability claims; dependence on key personnel; limited manufacturing and marketing experience; uncertainty relating to health care reform measures; and other factors detailed in the Company's Securities and Exchange Commission filings. PART II - OTHER INFORMATION Item 2. Changes in Securities On June 12, 1996, Aprogenex, Inc. (the Company) completed the sale of $2,005,000 of convertible notes (the Convertible Notes) and warrants to acquire 130,323 shares of Common Stock, $.001 par value (the 1996 Warrants) in a private placement. The following sections describe certain of the principal terms of the transaction and the securities. Principal Terms of the Convertible Convertible Notes. On June 12, 1996, the Company issued $2,005,000 principal amount of Convertible Notes due on May 29, 1998. The Convertible Notes bear interest at the rate of 10% per annum, based on a 365 day year, compounded quarterly. Interest is payable at maturity or upon prepayment. The Convertible Notes are convertible into Common Stock at the option of the holder at any time after the earlier of (i) the approval for listing by the American Stock Exchange (the "AMEX") of the Common Stock issuable upon conversion of the Convertible Notes, or (ii) if the Common Stock of the Company ceases to be listed for trading on the AMEX, on the day of such de-listing. However, the Convertible Notes may not be converted after the close of business on the fifth business day prior to either the scheduled maturity or any scheduled redemption. The Convertible Notes are convertible into Common Stock at a rate of one share of Common Sock for every $1.10 in principal and accrued interest (the "Conversion Price"). Accordingly, the Convertible Notes are initially convertible into a total of 1,822,727 shares of Common Stock, but such number of shares will increase as a result of interest on the Convertible Notes and may be further adjusted by changes in the Conversion Price as set forth herein. All or part of the principal amount of the Convertible Notes may be converted at the election of the holder, but accrued interest applicable to the converted principal amount will also be converted into Common Stock. On the twentieth business day prior to the maturity date of the Convertible Notes (the Reset Date), the Conversion Price will be adjusted to the average of the closing price of the Common Stock on the AMEX (or such other trading forum as may be applicable at that time) for the ten trading days prior to the Reset Date (the Reset Conversion Price) if and only if such new Reset Conversion Price is lower than the then-current Conversion Price. However, such price shall not be less than 50% of the then-Conversion Price. The Convertible Notes contain provisions to protect the holders against dilution by adjusting the number of shares issuable upon conversion thereof. The Company has the right to prepay principal and accrued interest upon twenty days notice to the holders of the Convertible Notes. However, the holders have the right to convert the Convertible Notes into Common Stock as set forth above prior to such redemption. On or prior to August 11, 1996, the Company intends to file a Registration Statement on Form S-3 to register the resale of Common Stock issuable upon conversion of the Convertible Notes. The principal and accrued interest of the Convertible Notes become immediately due and payable upon the insolvency of the Company, the commission of any act of bankruptcy by the Company, the execution by the Company of a general assignment for the benefit of creditors, the filing by or against the Company of any petition in bankruptcy or any petition for relief under the provisions of the federal bankruptcy act or any other state or federal law for the relief of debtors and the continuation of such petition without dismissal for a period of thirty (30) days or more, or the appointment of a receiver or trustee to take possession of the property or assets of the Company. Principal Terms of the 1996 Warrants. Warrants to acquire 130,323 shares of Common Stock were issued in conjunction with the Convertible Notes, or warrants for approximately 6,500 shares for every $100,000 of principal. The 1996 Warrants entitle the holders thereof to purchase Common Stock at $1.10 per share and are exercisable at any time after the earlier of (i) the approval for listing by the American Stock Exchange (the AMEX) of the Common Stock issuable upon exercise of the warrants, or (ii) if the Common Stock of the Company ceases to be listed for trading on the AMEX, on the day of such de- listing, but such exercise must occur prior to the close of business on May 28, 1999. The 1996 Warrants contain provisions to protect the holders thereof against dilution by adjusting the price at which the 1996 Warrants are exercisable and the number of shares issuable upon exercise thereof upon the occurrence of certain events. Commencing September 10, 1996, the holders of the May Warrants will have piggyback registration rights to require the Company to include the Common Stock underlying such warrants in certain registration statements filed by the Company. Purchases by Affiliates. A substantial part of the Convertible Notes and 1996 Warrants were purchased by existing stockholders and affiliates of the Company. W.S. Farish and Company purchased $1,170,000 of Convertible Notes and 1996 Warrants to acquire 76,050 shares of Common Stock. W.S. Farish and Company was the beneficial owner of approximately 9.3% of the outstanding Common Stock prior to the purchase. This purchase will increase the beneficial ownership of W.S. Farish and Company to approximately 25.5% as of June 12, 1996. Terry Ward is the Financial Vice President of W.S. Farish and Company, and is a director and Chairman of the Board of the Company. Mr. Ward purchased $70,000 of Convertible Notes and 1996 Warrants to acquire 4,550 shares of Common Stock. Including the shares beneficially owned by W.S. Farish and Company, Mr. Ward beneficially owned 9.8% of the Common Stock of the Company prior to the purchase and 26.8% of the Common Stock after the purchase. Mr. Ward disclaims such beneficial ownership of securities owned by W.S. Farish and Company. Additionally, Mr. W.S. Farish and members of his family acquired $150,000 of the Convertible Notes and 1996 Warrants to acquire 9,750 shares of Common Stock. Mr. Farish is a director and stockholder in W.S. Farish and Company. Further information with respect to the security ownership of purchasers of Convertible Notes and 1996 Warrants may be available through any filings of these parties pursuant to the Securities and Exchange Act of 1934. Item 6. Submission of Matters to a Vote of Security- Holders On July 12, 1996, the annual meeting of stockholders was held in Houston, Texas. There were 5,200,598 shares of Common Stock and 449,000 shares of Series A Convertible Preferred Stock (each of which is entitled to 4.26 votes) issued, outstanding and entitled to vote at the meeting. Three items were acted upon by the stockholders. The first action was the election of Directors of the Company. All of the nominees were elected in uncontested elections, and the votes cast for and against were as follow: Nominees No. of Votes For Withheld Dr. Michael E. Hogan 4,118,320 22,653 Christopher T. Kelly 4,118,320 22,653 David Leech 4,118,320 22,653 J. Donald Payne 4,118,320 22,653 Terry Ward 4,118,320 22,653 The second action was the approval of the amended and restated Directors Stock Option Plan and the increase by 50,000 in the number shares of Common Stock authorized for issuance under the plan. At the meeting, there were 3,681,308 votes for the approval of the increase, 425,315 votes against the approval of the increase, 34,350 votes abstained and no shares did not vote. The final action was the approval of Arthur Andersen LLP as the independent public accountants for Aprogenex, Inc. for the Company for 1996. At the meeting, there were 4,135,143 votes for the approval of Arthur Andersen LLP, 2,530 votes against, 3,300 votes abstained, and no shares did not vote. Item 7. Exhibits and Reports on Form 8-K a.) Exhibits Exhibit Number Document Description 4.1 Director Stock Option Plan, as Amended and Restated on July 12, 1996. 4.2(a)* Convertible Note Subscription Agreement dated as of May 1, 1996 among Aprogenex, Inc. and the various purchasers (Incorporated by reference from Exhibit 4.1(a) to the Company's Form 8-K dated as of June 12, 1996). 4.2(b)* Form of Convertible Note dated as of June 12, 1996 (Incorporated by reference from Exhibit 4.1(b) to the Company's Form 8-K dated as of June 12, 1996). 4.3* Warrant Agreement dated as of May 1, 1996 among Aprogenex, Inc. and the various warrantholders (Incorporated by reference from Exhibit 4.2 to the Company's Form 8-K dated as of June 12, 1996). 27 Financial Data Schedule. * Incorporated by reference from a previous filing as indicated. b.) Reports on Form 8-K A Form 8-K was filed as of April 1, 1996 regarding the appointment of David Leech to the Board of Directors and as Acting President and Chief Executive Officer. Additionally, a Form 8-K was filed as of June 12, 1996 describing the sale of the Convertible Notes and 1996 Warrants. SIGNATURES In accordance with the requirements of the Exchange Act, the Company has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Aprogenex, Inc. August 8, 1996 By: /s/ J. Donald Payne -------------------------- J. Donald Payne Vice President - Finance and Chief Financial Officer (Principal Financial and Accounting Officer) Exhibit Index Exhibit Number Document Description 4.1 Director Stock Option Plan, as Amended and Restated on July 12, 1996. 4.2(a)* Convertible Note Subscription Agreement dated as of May 1, 1996 among Aprogenex, Inc. and the various purchasers (Incorporated by reference from Exhibit 4.1(a) to the Company's Form 8-K dated as of June 12, 1996). 4.2(b)* Form of Convertible Note dated as of June 12, 1996 (Incorporated by reference from Exhibit 4.1(b) to the Company's Form 8-K dated as of June 12, 1996). 4.3* Warrant Agreement dated as of May 1, 1996 among Aprogenex, Inc. and the various warrantholders (Incorporated by reference from Exhibit 4.2 to the Company's Form 8-K dated as of June 12, 1996). 27 Financial Data Schedule. * Incorporated by reference from a previous filing as indicated. EX-4 2 EXHIBIT 4.1 APROGENEX, INC. DIRECTOR STOCK OPTION PLAN Amended and Restated as of July 12, 1996 1. Purpose. The purpose of this Director Stock Option Plan (the "Plan") of Aprogenex, Inc. (the "Company"), is to encourage ownership in the Company by outside directors of the Company whose services are considered essential to the Company's continued progress and thus to provide them with a further incentive to continue to serve as directors of the Company. The Plan is also intended to assist the Company through utilization of the incentives provided by the Plan to attract and retain experienced and qualified candidates to fill vacancies in the Board which may occur in the future. 2. Administration. The Plan will be administered by the Board of Directors (the "Board") of the Company. Subject to the express provisions of the Plan, the Board will have complete authority to interpret the Plan; to prescribe, amend, and rescind rules and regulations relating to it; to determine the terms and provisions of the respective option agreements in accordance with the provisions of the Plan; and to make all other determinations necessary or advisable for the administration of the Plan. The Board's determination on the matters referred to in this Section 2 will be conclusive. 3. Participation in the Plan. The Directors of the Company who are not employees of the Company or any Parent or Subsidiary of the Company (within the meaning of Section 424(e) or (f) of the Internal Revenue Code of 1986, as amended) ("Eligible Directors") shall be eligible to participate in the Plan. A director who is or has been an employee of the Company or any Parent or Subsidiary of the Company shall not be eligible to become an Eligible Director unless and until such director is elected to a new term of office as a director while no longer serving as an employee of the Company. 4. Stock Subject to the Plan. The stock subject to the Plan shall consist of 150,000 shares of the $0.001 par value common stock of the Company ("Common Stock"). Such shares may, as the Board shall from time to time determine, be either authorized and unissued shares of Common Stock or issued shares of Common Stock which have been reacquired by the Company. If any option granted under the Plan expires or terminates for any reason without having been exercised in full, the shares subject to, but not delivered under, such option may again become available for the grant of other options under the Plan. 5. Stock Options. Each option granted under this Plan shall be evidenced by a written agreement in such form as the Board shall from time to time approve, which agreements shall comply with and be subject to the following terms and conditions: A. Option Grant Dates. For each Eligible Director who is elected to the Board of Directors after the date of approval of the Plan, as amended and restated, by the stockholders of the Company (such date hereinafter referred to as the "Effective Date"), options shall be granted to each such Eligible Director on the day of his or her initial election or appointment to the Board of Directors (or, if such date falls on a non-business day, the first business day thereafter) (the "Grant Date"). If the election or appointment is subject to or conditioned upon the acceptance by the Eligible Director, then the Grant Date for all purposes herein (other than the determination of Fair Market Value as set forth in Section 5C herein) shall be such date of acceptance. Initially, for each Eligible Director serving on the Effective Date, the Effective Date shall be the Grant Date for such Eligible Director. B. Number of Shares Earned. On the Grant Date, each Eligible Director shall be awarded an option to purchase 10,000 shares of Common Stock. Such grant is a one-time grant and not an annual grant. C. Option Price per Share. The options granted hereunder shall be exercisable at a price per share equal to the Fair Market Value of the Common Stock on the Grant Date (except that for Eligible Directors whose term of service starts after the date of appointment or election, the date of such appointment or election shall be the date for determination of the Fair Market Value). For purposes of this Plan, the "Fair Market Value" of a share on a particular date shall be deemed to be, (i) if the Common Stock is listed on a national securities exchange, the closing selling price per share of the Common Stock on any such national securities exchange on that date, as reported in The Wall Street Journal or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported, or (ii) if the Common Stock is not so listed, the closing selling price (or, if not so reported, the mean between the closing bid and asked price) on that date, or, if there are no quotations available for such date, on the last preceding date on which such quotations shall be available, as reported by NASDAQ, or, if not reported by NASDAQ, by the National Quotation Bureau, Inc. D. Options Nontransferable. Each option granted under the Plan by its terms shall not be transferable by the optionee otherwise than by will, or by the laws of descent and distribution, and shall be exercisable during the lifetime of the optionee only by the optionee. While living, no option or interest therein may be transferred, assigned, pledged, or hypothecated by the optionee, whether by operation of law or otherwise, or be made subject to execution, attachment, or similar process. E. Exercisability and Term of Options. Each option granted under the Plan shall vest as follows: (i) options as to 5,000 shares shall vest and be exercisable on the first anniversary of the Grant Date; and (ii) options as to the remaining 5,000 shares shall vest and be exercisable on the second anniversary of the Grant Date. If not previously exercised or forfeited pursuant to the provisions of Sections 5F, 5G and 5H herein, such options shall expire on the fifth anniversary of the Grant Date. F. Termination of Status as a Director. In the event of termination of an optionee's status as an Eligible Director (regardless of whether such termination is by resignation, removal, failure to nominate or reelect upon the end of any term or by becoming an employee of the Company) prior to such option or portion thereof becoming exercisable pursuant to the provisions of Section 5E or 5G herein, then such option or portion thereof which was not exercisable as of the date of such termination shall be forfeited. Any portion of the option which was exercisable as of the date of such termination shall continue to be exercisable until the earlier of (i) the expiration of such option pursuant to Section 5E herein or (ii) six months after the death of such optionee pursuant to the provisions of section 5H herein. G. Disability of Optionee. In the event of the total and permanent disability (as defined in Section 22(e)(3) of the Internal Revenue Code of 1986) of an Eligible Director, regardless of whether the Eligible Director continues to serve as a director of the Company, all of such option shall become fully exercisable and may be exercised at any time prior to the earlier of (i) the expiration of the option as set forth in Section 5E herein or (ii) six months after the death of such optionee pursuant to the provisions of section 5H herein. H. Death. In the event of the death of an optionee during the term of the option who is at the time of his death an Eligible Director of the Company, the option shall become fully exercisable (regardless of the extent of the right to exercise that had accrued as of the date of death), and all of such option may be exercised at any time within six (6) months following the date of death, by the optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance. In the event of the death of an optionee during the term of the option who is not at the time of his death an Eligible Director of the Company, the option may be exercised at any time within six (6) months following the date of death, by the optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent that the right to exercise that had accrued as of the date of death. However, in no event may an option be exercised after the expiration of such option pursuant to the provisions of section 5E herein. I. Exercise of Options. Options may be exercised only by written notice to the Company at its corporate office accompanied by payment of the full consideration for the shares as to which they are exercised, including any federal, state and/or local income tax withholding amount due in connection with the exercise. The purchase price, together with any income tax withholding amount due, is to be paid in full to the Company upon the exercise of the option by cash payment, which may take the form of a personal check payable to the order of the Company. J. Nonstatutory Options. All options granted hereunder shall be non-statutory options not intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). 6. Assignment. The rights and benefits of a participant under this Plan may not be assigned and any attempted assignment of such rights and benefits shall be null and void. 7. Limitation of Rights. A. No Right to Continue as a Director. Neither the Plan, nor the granting of an option nor any other action taken pursuant to the Plan, shall constitute or be evidence of any agreement or understanding, express or implied, that the Company will retain a Director for any period of time, or at any particular rate of compensation. B. No Stockholder's Rights for Optionees. An optionee or the optionee's representative shall have no rights as a stockholder with respect to the shares covered by the options until the date of the issuance to the optionee or the optionee's representative of a stock certificate therefore, and no adjustment will be made for dividends or other rights for which the record date is prior to the date such certificate is issued. 8. Changes in Present Stock. A. Corporate Acts. The existence of outstanding options shall not affect in any manner the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the capital stock of the Company or its business or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock (whether or not such issue is prior to, on a parity with or junior to the Common Stock) or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding of any kind, whether or not of a character similar to that of the acts or proceedings enumerated above. B. Adjustments. In the event of any subdivision or consolidation of outstanding shares of Common Stock or declaration of a dividend payable in shares of Common Stock or capital reorganization or reclassification or other transaction involving an increase or reduction in the number of outstanding shares of Common Stock, the Board shall adjust proportionally (i) the number of shares of Common Stock reserved under this Plan and covered by outstanding options denominated in Common Stock; (ii) the exercise price in respect of such options; and (iii) the appropriate Fair Market Value and other price determinations for such options. In the event of any consolidation or merger of the Company with another corporation or entity or the adoption by the Company of a plan of exchange affecting the Common Stock or any distribution to holders of Common Stock of securities or property (other than normal cash dividends or dividends payable in Common Stock), the Board shall make such adjustments as it may deem equitable, including adjustments to avoid fractional shares, to give proper effect to such event. In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Board shall be authorized to issue or assume stock options, regardless of whether in a transaction to which Section 424(a) of the Code applies, by means of substitution of new options for previously issued options or an assumption of previously issued options. 9. Effective Date, Transition for Current Directors, and Duration of the Plan. A. Effective Date. The Plan, as amended and restated, shall take effect on the date of approval of the Plan by the affirmative votes of the holders of a majority of the outstanding shares of the Company present, or represented, and entitled to vote at a meeting of the Company's stockholders, or by the written consent of the holders of a majority of the outstanding shares of the Company entitled to vote. B. Transition Provisions. Upon the adoption of the Plan as set forth herein, it is anticipated that current or previous Eligible Directors during 1996 would otherwise be entitled to compensation under the provisions of the Plan prior to its amendment and restatement. For any Eligible Directors serving as a director as of such date of adoption, any authorized or anticipated grants of options for service in 1996 pursuant to the provisions of the Plan prior to such amendment and restatement shall be superseded by the provisions of this Plan as amended and restated. For any Eligible Directors whose service as a director in 1996 terminated prior to such amendment and restatement, any authorized or anticipated grants of options pursuant to the provisions of the Plan prior to such amendment shall be made and governed by the provisions of this Plan prior to this amendment and restatement. Any grants to Eligible Directors under the provisions of the Plan prior to this amendment and restatement shall continue to be governed by the provisions of the Plan before such amendment and restatement. C. Termination. The Plan shall terminate when all Common Stock subject to the Plan is subject to an option to purchase (unless earlier discontinued by the Board) but such termination shall not affect the rights of the holder of any option outstanding on such date of termination. If, on a date on which options would normally be granted, there is not a sufficient number of shares available to grant each person otherwise eligible to receive an option on that date an option to purchase the full number of shares to which he or she would normally be entitled, options shall be prorated among optionees according to the number of shares available on such date of grant. Such optionees shall be deemed to have received the full amount due to them on such date of grant. All options granted under the Plan are subject to and may not be exercised before. 10. Amendment of the Plan. The Board may suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that to the extent required by Rule 16b-3 under the Securities Exchange Act of 1934, as amended ("Rule 16b-3"), the provisions of this Plan relating to the class of persons eligible to participate in this Plan and the amount, price, and timing of awards may not be amended more often than once every six months except to comport with changes in the Code, the Employee Retirement Income Security Act or rules promulgated thereunder; and provided, further, that no revision or amendment to the Plan shall be effective without stockholder approval to the extent required by Rule 16b-3. 11. Requirements of Law. The granting of options and the issuance of shares of Common Stock upon the exercise of an option shall be subject to all applicable laws, rules and regulations and to such approvals by any governmental agencies or national securities exchanges as may be required. 12. Notice. Any written notice to the Company required by any of the provisions of this Plan shall be addressed to the Secretary of the Company and shall become effective when it is received. 13. Governing Law. This Plan and all determinations made and actions taken pursuant hereto shall be governed by the law of the State of Delaware and construed accordingly. APROGENEX, INC. As approved by the Board of Directors of the Company on May 30, 1996 /s/ J. Donald Payne - -------------------- Secretary As approved by the stockholders of the Company on July 12, 1996 /s/ J. Donald Payne - -------------------- Secretary EX-27 3
5 This schedule contains summary financial information extracted from the unaudited Balance Sheet as of June 30, 1996 and the unaudited Statement of Operations for the six months ended June 30, 1996 and is qualified in its entirety by reference to such financial statements. 6-MOS DEC-31-1996 JUN-30-1996 1562219 0 90335 0 0 1652554 787857 0 2568943 527142 2055605 0 449 5201 (19454) 2568943 30581 30581 0 0 0 0 42022 (1572954) 0 (1572954) 0 0 0 (1572954) (.30) (.30) Net of accumulated depreciation.
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