UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 June 30, 1996
OR
[ ] TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from----------------------to-----------------------.
Commission File Number: 0-22788
ARRIS PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 22-2969941
- -------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
385 OYSTER POINT BOULEVARD
SOUTH SAN FRANCISCO, CALIFORNIA 94080
(Address of principal executive offices)
(415) 829-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required 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. [x] Yes [ ] No
The number of outstanding shares of the registrant's Common Stock, $0.001 par
value, was 14,052,905 as of July 31, 1996.
1
ARRIS PHARMACEUTICAL CORPORATION
INDEX
PAGE
----
PART I: FINANCIAL INFORMATION
- ------------------------------
ITEM 1. Financial Statements (unaudited) *
Consolidated Balance Sheets - June 30, 1996 and December 31, 1995... 3
Consolidated Statements of Operations - Three and six months
ended June 30, 1996 and 1995 ........................ 4
Consolidated Statements of Cash Flows - Six months ended
June 30, 1996 and 1995 .............................. 5
Notes to Consolidated Financial Statements - June 30, 1996 ......... 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................. 9
PART II: OTHER INFORMATION..................................................14
- ---------------------------
ITEM 1. Legal Proceedings
ITEM 2. Changes in Securities
ITEM 3. Defaults Upon Senior Securities
ITEM 4. Submission of Matters to a Vote of Security Holders
ITEM 5. Other Information
ITEM 6. Exhibits and Reports on Form 8-K
SIGNATURES...................................................................16
* The financial information should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Report on Form 10-K for the year ended December 31, 1995, filed on March 14,
1996.
2
ARRIS PHARMACEUTICAL CORPORATION
PART 1: FINANCIAL INFORMATION
- -------------------------------
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(unaudited)
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
ASSETS (IN THOUSANDS)
Current assets:
Cash and cash equivalents $ 10,421 $ 21,706
Short-term marketable investments 39,414 9,399
Prepaid expenses and other current assets 2,414 798
-------- --------
Total current assets 52,249 31,903
Marketable investments 18,808 --
Property and equipment, net 8,004 7,423
Other assets 869 967
-------- --------
TOTAL ASSETS $ 79,930 $ 40,293
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 838 $ 872
Accrued compensation 1,834 1,718
Other accrued liabilities 1,473 2,651
Current portion of deferred revenue 9,706 8,585
Current portion of capital lease and debt obligations 2,618 2,699
-------- --------
Total current liabilities 16,469 16,525
Deferred revenue, net of current portion 4,250 5,472
Capital lease and debt obligations, net of current portion 4,342 3,263
Convertible acquisition liability 6,185 6,185
Minority interest payable 1,570 1,570
Stockholders' equity:
Preferred stock, $.001 par value; 10,000,000 shares authorized,
none issued or outstanding -- --
Common stock, $.001 par value; 30,000,000 shares authorized,
14,000,899 shares and 10,169,076 shares issued and outstanding
at June 30, 1996 and December 31, 1995, respectively 107,216 64,389
Note receivable from officer (200) (200)
Deferred compensation -- (35)
Accumulated deficit (59,902) (56,876)
-------- --------
Total stockholders' equity 47,114 7,278
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 79,930 $ 40,293
-------- --------
-------- --------
See accompanying notes to consolidated financial statements.
3
ARRIS PHARMACEUTICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------------
1996 1995 1996 1995
------ ------ ------ ------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Revenues $ 5,990 $3,948 $11,034 $ 7,821
Operating expenses:
Research and development 6,867 3,627 12,511 7,195
General and administrative 1,385 1,050 2,590 2,139
------- ------ ------- -------
Total operating expenses 8,252 4,677 15,101 9,334
------- ------ ------- -------
Operating loss (2,262) (729) (4,067) (1,513)
Interest income 962 323 1,319 642
Interest expense (163) (55) (278) (125)
------- ------ ------- -------
Net loss $(1,463) $ (461) $(3,026) $ (996)
------- ------ ------- -------
------- ------ ------- -------
Net loss per share $ (0.11) $(0.05) $ (0.25) $(0.11)
------- ------ ------- -------
------- ------ ------- -------
Shares used in computing net loss per share 13,870 8,691 12,137 8,681
------- ------ ------- -------
------- ------ ------- -------
See accompanying notes to consolidated financial statements.
4
ARRIS PHARMACEUTICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
SIX MONTHS ENDED
JUNE 30,
-----------------
1996 1995
-------- ------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,026) $ (996)
Adjustments to reconcile net loss to net cash and
cash equivalents used in operating activities:
Depreciation and amortization 2,021 1,183
Stock grants issuable to employees -- 37
Loss on fixed assets 182 50
Changes in assets and liabilities:
Prepaid expenses and other current assets (1,616) 17
Other assets 98 (12)
Accounts payable, accrued liabilities and
deferred revenue (1,197) (4,138)
-------- -------
Net cash and cash equivalents used in operating activities (3,538) (3,859)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Available-for-sale securities:
Purchases (9,973) (8,808)
Maturities -- 7,155
Purchase of held-to-maturity security
Purchases (67,071) (3,506)
Maturities 28,221 --
Expenditures for property and equipment (2,749) (1,733)
-------- -------
Net cash and cash equivalents used in investing activities (51,572) (6,892)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 42,827 175
Proceeds from note payable and lease financing 2,886 1,569
Principal payments on note payable and capital leases (1,888) (981)
-------- -------
Net cash and cash equivalents provided by
(used in) financing activities 43,825 763
-------- -------
Net decrease in cash and cash equivalents (11,285) (9,988)
Cash and cash equivalents, beginning of period 21,706 17,165
-------- -------
Cash and cash equivalents, end of period $ 10,421 $ 7,177
-------- -------
-------- -------
See accompanying notes to consolidated financial statements.
5
ARRIS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30,1996
(unaudited)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Arris Pharmaceutical Corporation, a Delaware corporation ("Arris" or the
"Company") uses an integrated drug discovery approach combining
structure-based drug design, combinatorial chemistry and its proprietary
Delta Technology to discover and develop a number of diverse synthetic small
molecule therapeutics for commercially important disease categories where
existing therapies have significant limitations. Arris' product development
programs include: (1) protease-based discovery programs targeting the
inhibition of enzymes implicated in inflammatory and other diseases, and (2)
receptor-based discovery programs including those designed to discover small
molecule drugs that mimic important therapeutic proteins that are already
successful products.
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiary, Arris Protease, Inc., and its 50%-owned
subsidiary, Arris Pharmaceuticals Canada, Inc. ("Arris Canada") which have
been consolidated based on the Company's ability to demonstrate effective
control over these entities. All significant intercompany accounts and
transactions have been eliminated (See Subsequent Event).
BASIS OF PRESENTATION
The unaudited consolidated financial statements included herein have been
prepared by the Company according to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in complete financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations. The financial statements
reflect, in the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to state fairly the financial
position and results of operations as of and for the periods indicated. The
results of operations for the three and six month periods ended June 30, 1996
are not necessarily indicative of the results to be expected for subsequent
quarters or the full fiscal year.
These financial statements should be read in conjunction with the audited
financial statements and the notes thereto included in the Company's 1995
Annual Report on Form 10-K filed with the Securities and Exchange Commission.
6
ARRIS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. CASH AND CASH EQUIVALENTS AND MARKETABLE SECURITIES
The Company considers all highly liquid investments with maturities of three
months or less at the date of purchase to be cash equivalents. Marketable
securities consist of U.S. treasury and agency securities, municipal
obligations and high-grade corporate obligations. Amortization of premiums
and accretion of discounts to maturity are included in interest income.
SECURITIES HELD-TO-MATURITY: Management determines the appropriate
classification of debt securities at the time of purchase and reevaluates
such designation as of each balance sheet date. Debt securities are
classified as held-to-maturity when the Company has the positive intent and
ability to hold the securities to maturity. Held-to-maturity securities are
stated at amortized cost.
The following is a summary of held-to-maturity debt securities at June 30,
1996 and December 31, 1995:
HELD-TO-MATURITY SECURITIES
-------------------------------------------------
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------- ---------- ---------- ---------
(IN THOUSANDS)
Balances at June 30, 1996
U.S. treasury securities $19,187 $ -- $ (9) $19,178
U.S. agency securities 8,414 -- (12) 8,402
U.S. corporate securities 20,647 -- (16) 20,631
------- ---------- ------ -------
$48,248 $ -- $ (37) $48,211
------- ---------- ------ -------
------- ---------- ------ -------
Balances at December 31, 1995
U.S. treasury securities $ 5,015 $ -- $(101) $ 4,914
U.S. agency securities 7,392 -- (23) 7,369
U.S. corporate securities 11,487 -- (14) 11,473
------- ---------- ------ -------
$23,894 $ -- $(138) $23,756
------- ---------- ------ -------
------- ---------- ------ -------
At June 30, 1996, $39,414,000 were in short-term marketable investments and
$8,834,000 were considered non-current marketable investments. At December
31, 1995, $14,495,000 were included in cash equivalents, of the total amount
of cash and cash equivalents of $21,706,000 and $9,399,000 were in short-term
marketable investments. As of June 30, 1996, the average remaining portfolio
duration of held-to-maturity securities was approximately nine months.
SECURITIES AVAILABLE-FOR-SALE: Debt securities not classified as
held-to-maturity are classified as available-for-sale. Available-for-sale
securities are stated at fair market value, with the unrealized gains and
losses included in accumulated deficit. The Company had $9,974,000 in
7
ARRIS PHARMACEUTICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
U.S. treasury notes at June 30, 1996, and the fair value of these securities
approximates cost. These securities are included in non-current marketable
investments at June 30, 1996. The Company had no securities classified as
available-for-sale at December 31, 1995.
3. SUBSEQUENT EVENT
On July 9, 1996 the Minority Interest Investors in Arris Canada exercised
their right to exchange their interest in Arris Canada for 161,418 shares of
the Company's common stock. Upon conversion of their shares, Arris Canada
will become a wholly owned subsidiary of the Company. The fair value of the
shares issued to the minority interest investors exceeds the book value of
the minority interest in Arris Canada by $230,000. This amount will be
expensed in the third quarter of 1996.
8
ARRIS PHARMACEUTICAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS, IN ADDITION TO HISTORICAL
INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.
THE COMPANY'S ACTUAL RESULTS COULD DIFFER SIGNIFICANTLY FROM THE RESULTS
DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO THOSE DISCUSSED
BELOW AS WELL AS THOSE DISCUSSED IN THE COMPANY'S PROPECTUS DATED MARCH 22,
1996.
OVERVIEW
Since its inception in April 1989, the Company has devoted substantially all
of its resources to its research and development programs. To date, the
Company's only source of revenue has been its corporate collaborations with
Pharmacia & Upjohn, Inc. and its predecessors ("PNU"), Amgen, Inc. ("Amgen"),
Bayer AG ("Bayer") and a new collaboration with SmithKline Beecham ("SB").
Its collaborations have taken a variety of forms including in each case
certain of the following elements: payments to the Company of an up-front
fee, purchase of the Company's common stock (PNU human growth hormone
collaboration only), research funding payments, milestone payments, if and
when received and royalties upon the sale of any resulting products. Where
appropriate, the up-front fees have been recorded as deferred revenue until
earned.
In June 1996, the Company announced a new collaboration agreement with SB to
explore the application of the Company's proprietary Delta technology to
intracellular antiviral protease targets. The agreement provides for a
license fee and an intial proof-of-concept phase. Assuming success in the
proof-of-concept phase, the agreement then provides for a research and
development collaboration, with potential milestone payments and royalties
upon the sale of any resulting products.
The Company has not been profitable since inception and expects to incur
substantial losses for at least the next several years, primarily due to the
cost of its research and development programs, including preclinical studies
and human clinical trials. The Company expects that losses will fluctuate
from quarter to quarter, that such fluctuations may be substantial, and that
results from prior quarters may not be indicative of future operating
results. As of June 30, 1996, the Company's accumulated deficit was
approximately $59.9 million.
RESULTS OF OPERATIONS
The Company's revenues increased to $6.0 million and $11.0 million for the
three- and six-month periods ended June 30, 1996, respectively, as compared
to $3.9 million and $7.8 million, respectively for periods in 1995. These
increases for 1996 were primarily due to: (i) the full effect in the 1996
periods of the high throughput screening collaboration with PNU initiated in
April 1995, (ii) commencement in August 1995 of the collaboration with PNU
for the discovery and development of oral antithrombotics, (iii) commencement
in March 1996 of the combinatorial chemistry collaboration with PNU and (iv)
the commencement in June of 1996 of the collaboration with SB, described
above, to apply Delta technology to certain viral proteases.
9
ARRIS PHARMACEUTICAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Revenues in the second half of 1996, are expected to be approximately the
same as that of the first half of 1996.
Research and development expenses increased to $6.9 million and $12.5 million
for the three- and six-month period ended June 30, 1996 respectively, from
$3.6 and $7.2 million in the comparable periods in 1995. This increase was
primarily due to (i) the expansion of the Company's research efforts in new
and existing programs and the expenses of programs and facilities added as
part of the December 22, 1995 acquisition of Khepri Pharmaceuticals, Inc.
("Khepri"), (ii) ramp up costs associated with the additional collaborations
commencing in the first half of 1996, and (iii) certain severance costs. The
Company expects its research and development costs to increase during the
remainder of 1996 and into 1997 due to expansion of its research programs and
the conduct of additional preclinical studies and clinical trials.
The Company's general and administrative expenses increased to $1.4 million
and $2.6 million for the three-and six-month periods ended June 30, 1996 from
$1.1 and $2.1 million in the comparable periods in 1995. General and
administrative expenses as a percentage of total expenses has decreased in
the six months period to 17% in 1996 from 23% in 1995. The increase in
expense was primarily due to the acquisition of Khepri, and the addition of
general and administrative personnel in support of the Company's expanded
research and development efforts. The Company expects its general and
administrative costs to increase for the remainder of 1996 and into 1997.
Interest income increased to $962,000 and $1.3 million, respectively, for the
three- and six-months ended June 30, 1996 from $323,000 and $642,000 in the
comparable periods in 1995. The increase was largely due to the higher
average cash balances resulting from receipt of net proceeds of approximately
$36 million from the follow-on offering of 3,000,000 shares of the Company's
common stock which closed on March 27, 1996, approximately $5.5 million from
the exercise on April 24, 1996 by the underwriters of the over allotment
option in the offering of 450,000 shares and to the receipt of commitment
fees collected under new collaborations. Interest expense increased to
$163,000 and $278,000, respectively for the three- and six-months ended June
30, 1996 from $55,000 and $125,000 in the comparable period of 1995 as a
result of higher average debt balances incurred to finance the expansion of
the Company's facilities and acquisition of lab equipment.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception primarily through
private and public offerings of its capital stock and through corporate
collaborations. As of June 30, 1996, the Company had realized approximately
$89.4 million in net proceeds from offerings of its capital stock.
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ARRIS PHARMACEUTICAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
In addition, the Company has realized $52.6 million from its corporate
collaborations. (excluding the $5.4 million equity investment in the Company
made by PNU).
The Company's principal sources of liquidity are its cash and investments,
which totaled $68.6 million as of June 30, 1996. The Company currently has
approximately $2.1 million available under various capital lease and debt
lines. Net cash used by operating activities during the six month period
ended June 30, 1996 was $3.5 million. This included receipt of an up-front
commitment fee from PNU in connection with the combinatorial chemistry
collaboration agreement which was initiated in March 1996. Cash used in
operating activities is expected to fluctuate from quarter to quarter
depending, in part, upon the timing of cash received from new or expanded
collaboration agreements. There can be no assurances that such payments will
be received on a quarterly basis or at all. The Company also spent
approximately $2.7 million for the purchase of property, plant and equipment.
Additional equipment will be needed as the Company increases its research
and development activities. The Company received net financing of $998,000,
net of principal repayments under new and existing line of credit and lease
agreements.
The Company's contract revenues presently are attributable to collaborations
with PNU, Amgen, Bayer and SB. PNU recently exercised an option to extend the
human growth hormone collaboration for one year through April 1997. Amgen
and Arris recently restructured their erythropoetin collaboration to extend
through mid-February 1997. The proof of concept phase of the SB
collaboration ends in June 1997 and can be extended beyond that into a
research phase. All of the Company's other collaborations extend beyond the
next 12 months. If the Company is unable to renew any of these
collaborations or extend the SB collaboration into the research phase, such
events may have a material adverse effect on the Company's business and
financial condition.
The cash received by the Company under collaborations for the six months
ended June 30, 1996 was approximately $10.4 million, which includes an
up-front payment from PNU for the combinatorial chemistry agreement signed
February 29, 1996. The aggregate collaboration funding to be received by the
Company in 1996 is expected to be approximately $16 million, excluding
payments which may be received upon the achievement of certain milestones.
There can be no assurance that the research support or any milestone payments
will be realized on a timely basis or at all.
The Company expects that its existing capital resources, including research
and development revenues from existing collaborations, will enable the
Company to maintain current and planned operations through at least the next
48 months. The Company may need to raise substantial additional capital to
fund its operations before the end of such period. The Company expects that
it will seek such additional funding through new collaborations, through the
extension of existing collaborations or through public or private equity or
debt financing.
11
ARRIS PHARMACEUTICAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
There can be no assurance that additional financing will be available on
acceptable terms or at all. If additional funds are raised by issuing
equity securities, further dilution to stockholders may result. If adequate
funds are not available, the Company may be required to delay, to reduce the
scope of or to eliminate one or more of its research or development programs
or to obtain funds through arrangements with collaborative partners or others
that may require the Company to relinquish rights to certain of its
technologies or products that the Company would otherwise seek to develop or
commercialize itself.
RECENT EVENTS
On July 9, 1996 the Minority Interest Investors in Arris Pharmaceutical
Canada, Inc. ("Arris Canada"), exercised their right to exchange their
interest in Arris Canada for 161,418 shares of the Company's common stock.
Upon conversion of their shares, Arris Canada will become a wholly owned
subsidiary of the Company. The fair value of the shares issued to the
Minority Interest Investors exceeds the book value of the minority interest
in Arris Canada by $230,000. This amount will be expensed in the third
quarter of 1996.
CERTAIN BUSINESS RISKS
The Company is at an early stage of development. The Company's technologies
are, in many cases, new and still under development. All of the Company's
proposed products are in research or development and will require significant
additional research and development efforts prior to any commercial use,
including extensive preclinical and clinical testing as well as lengthy
regulatory approval. There can be no assurance that the Company's research
and development efforts will be successful, that any of its proposed products
will prove to be safe and efficacious in the clinical trials or that any
commercially successful products will ultimately be developed by the Company.
In addition, many of the Company's currently proposed products are subject
to development and licensing arrangements with the Company's collaborators.
Therefore, the Company is dependent on the research and development efforts
of these collaborators. Moreover, the Company is entitled only to a portion
of the revenues, if any, realized from the commercial sale of any of the
proposed products covered by the collaborations. The Company has experienced
significant operating losses since its inception and expects to incur
significant operating losses over at least the next several years. The
development of the Company's technology and proposed products will require a
commitment of substantial funds to conduct these costly and time consuming
activities. All of the Company's revenues to date have been received
pursuant to the Company's collaborations.
12
ARRIS PHARMACEUTICAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Should the Company or its collaborators fail to perform in accordance with
the terms of any of their agreements, any consequent loss of revenue under
the agreements could have a material adverse effect on the Company's results
of operations. The proposed products under development by the Company have
never been manufactured on a commercial scale and there can be no assurance
that such products can be manufactured at a cost or in quantities necessary
to make them commercially viable. The Company has no sales, marketing or
distribution capability. If any of its products subject to collaborative
agreements are successfully developed, the Company must rely on its
collaborators to market such products.
If the Company develops any products which are not subject to collaborative
agreements, it must either rely on other large pharmaceutical companies to
market such products or must develop a marketing and sales force with
technical expertise and supporting distribution capability in order to market
such products directly. The foregoing risks reflect the Company's early stage
of development and the nature of the Company's industry and products. Also
inherent in the Company's stage of development is a range of additional
risks, including competition, uncertainties regarding protection of patents
and proprietary rights, government regulation and uncertainties regarding
health care reform.
13
ARRIS PHARMACEUTICAL CORPORATION
PART II: OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's 1996 Annual Meeting of Stockholders was held on June 5, 1996.
Stockholders were asked (i) to elect directors to serve for the ensuing year
and until their successors are elected, (ii) to approve the issuance of a
sufficient number of shares to satisfy the payment of the second stock
payment, pursuant to the Company's recent acquisition of Khepri
Pharmaceutical, Inc., (iii) to approve the issuance of a sufficient number of
shares to satisfy the exercise of certain exchange rights of the Class B
Shareholders of Khepri Pharmaceuticals Canada, Inc., (iv) to approve the
Company's 1989 Stock Plan, as amended, to increase the aggregate number of
shares of Common Stock authorized for issuance under such plan by 550,000
shares, to 2,667,500 shares, (v) to approve the Company's Employee Stock
Purchase Plan, as amended, to increase the number of shares of Common Stock
authorized for issuance under such plan by 100,000 shares, to 250,000 shares,
(vi) to ratify the selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending December 31, 1996.
All of the matters were approved by the stockholders of the Company. The
number of shares voted for, against and withheld for each matter were:
FOR WITHHOLD
------------------------------
Election of Directors:
John P. Walker 9,401,288 306,283
Michael J. Ross, Ph.D. 9,401,134 307,437
Brook H. Byers 9,401,288 306,283
Anthony B. Evnin, Ph.D. 9,401,288 306,283
Vaughn M. Kailian 9,401,288 306,283
Hans U. Sievertsson, Ph.D. 9,400,588 306,983
14
ARRIS PHARMACEUTICAL CORPORATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (CONTINUED)
BROKER/
FOR AGAINST ABSTAIN NON-VOTES
--------------------------------------
Approve Shares for Second Payment
in connection with the acquisition of
Khepri Pharmaceuticals, Inc. 7,856,809 10,047 7,231 861,200
Approve Shares for exchange rights for
Khepri Pharmaceuticals, Canada, Inc. 7,551,799 312,647 9,641 861,200
Approve Amendment to the 1989 Stock Plan 8,335,543 1,759,918 9,701 861,200
Approve Amendment to the Employee
Stock Purchase Plan 10,063,469 51,367 10,326 861,200
Selection of Ernst & Young LLP 10,352,439 5,015 21,545 709,200
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
27 Financial Data Schedule
b) Reports on Form 8-K
The Company filed no reports on Form 8-K for the
quarter ended June 30, 1996.
15
ARRIS PHARMACEUTICAL CORPORATION
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.
ARRIS PHARMACEUTICAL CORPORATION
Date: August 13, 1996 By: /s/ John P. Walker
-----------------------------------
John P. Walker
President, Chief Executive Officer and Director
Date: August 13, 1996 By: /s/ Daniel H. Petree
-----------------------------------
Daniel H. Petree
Executive Vice President, Corporate
Development and Chief Financial Officer
(Principal Financial and Accounting Officer)
16