SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

MARK ONE:

     [X]  Annual Report Under Section 13 or 15(d) of the Securities Exchange Act
          of 1934. For the Fiscal year ended December 31, 1998

     [ ]  Transaction  Report  Under  Section  13 or 15 (d)  of  the  Securities
          Exchange Act of 1934 For the transition period from  _________________
          to ________________.

                         Commission file number 0-20726

                                  CORTECH, INC.
                 (Name of small business issuer in its charter)

            DELAWARE                                             84-0894091   
---------------------------------                           -------------------
(State or other jurisdiction                                (I.R.S. Employer
of incorporation or organization)                           Identification No.)

                   6850 N. Broadway, Suite G, Denver, Colorado
          80221 (Address of principal executive offices with Zip Code)

          Issuer's telephone number, including area code (303) 650-1200

         Securities registered under Section 12(b) of the Exchange Act:

                                      NONE

              Securities registered under Section 12(g) of the Act

                     Common Stock, par value $.002 per share

     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

     Check if there is no disclosure  of  delinquent  filers in response to item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained, to the best of issuer's knowledge, in definitive proxy or information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ X ]

     Issuer's revenues for the fiscal year ended December 31, 1998 were
approximately $1,347,000.

     As of  February  26,  1999,  there were  1,852,209  shares of common  stock
outstanding.   The   aggregate   market  value  of  the  common  stock  held  by
non-affiliates  of the  issuer,  based  upon the  closing  price  on the  NASDAQ
National Market, was approximately $7.6 million.

     Traditional Small Business Disclosure Format Yes ____ No X


<PAGE>



Item 1. -  DESCRIPTION OF BUSINESS
-------    -----------------------
     
General
-------

     Except  for  the  historical  information  contained  herein,  the  matters
discussed in this Annual  Report on Form 10-KSB are  forward-looking  statements
that involve risks and uncertainties.  For a discussion of certain factors which
may affect the outcome  projected in such statements,  see Item 6 ("Management's
Discussion and Analysis of Financial  Condition and Results of  Operations")  of
this  Annual  Report,  as well as  factors  noted in the  balance of this Item 1
("Description  of Business").  Actual results may differ  materially  from those
projected. These forward-looking statements represent the Company's judgement as
of the date of the filing of this Annual Report. The Company disclaims, however,
any intent or obligation to update these forward-looking statements.

Overview
--------

     Cortech,  Inc. ("Cortech" or the "Company") is a biopharmaceutical  company
whose  research  and  development  efforts  have  focused  primarily on protease
inhibitors and bradykinin antagonists.  These efforts have produced a technology
portfolio which may have therapeutic application across a broad range of medical
conditions.  Cortech's strategy is to seek collaborative partners to conduct and
fund future  research and  development  on the components of its portfolio or to
sell the rights to certain of the  compounds in the  portfolio to third  parties
interested in funding  future  research and  development,  while  conserving the
Company's  cash. At the same time, the Company is seeking to redeploy its assets
into an operating business.

     In response to  disappointing  test  results and its loss of  collaborative
partner  support,  Cortech has  implemented a series of reductions in force over
the past  four-and-one-half  years which has  reduced  the number of  full-time,
regular employees from more than 200 down to one compensated  full-time employee
at February 28,  1999,  and  effectively  discontinued  all internal  efforts to
advance its  research  and  development  activities.  In  addition,  Cortech has
decommissioned  its laboratories and sold most of its scientific,  technical and
office equipment.  Cortech has also sold some of its leasehold  improvements and
is actively seeking to sell the remainder and to lease its unused space.

     As a result of these actions,  Cortech no longer has the staff or operative
facilities required to recommence internal research and development  activities.
Throughout 1998, Cortech retained a core group of professionals who, among other
things, were engaged in efforts to secure  collaborative  partners for Cortech's
technology   portfolio.   In  November  1998,   these  efforts   resulted  in  a
collaboration  based on CE-1037 (the  Company's lead human  neutrophil  elastase
inhibitor) with United Therapeutics Corp. ("UT") a privately held pharmaceutical
company  based in North  Carolina.  Under the  exclusive  worldwide  product and
license  agreement,  UT made an up-front  payment of  $250,000  and will pay the
future costs of  developing  the compound in pulmonary  diseases.  The agreement
also  provides  for Cortech to receive  milestone  payments  if the  compound is
successfully  advanced in development  and a royalty on product sales should the
compound be successfully  commercialized.  It is not expected that the agreement
will result in significant revenues in 1999.


<PAGE>

     In March 1999,  the Company  announced  that an agreement in principle  had
been reached with Ono  Pharmaceutical  Co., Ltd. of Osaka, Japan ("Ono") whereby
Ono will be granted  western  rights to the oral elastase  inhibitor  program on
which Ono and Cortech have  collaborated.  Previous to the  proposed  agreement,
Ono's rights were limited to Korea,  Japan,  the People's  Republic of China and
Taiwan (the "Ono Territory").  Consideration for Cortech granting western rights
to Ono is  contemplated  to  include  $2 million  upon  signing of a  definitive
agreement  and a series  of  possible  future  milestone  payments  which  could
aggregate an additional $9.5 million.  Cortech also may be entitled to royalties
at the rate of 4% of net sales of  products  developed  by Ono based on  Cortech
patents  outside  the  Territory.  It must be  pointed  out  that  the  possible
milestone  payments and royalties are probably many years in the future. The Ono
agreement in principle is subject to the signing of a definitive agreement.

     Efforts to sell or establish  partnerships for the remaining  components of
Cortech's   technology   portfolio  have  now  virtually   ceased  and  although
discussions  with  some  potential  collaborators  continue,  there  can  be  no
assurance that any transaction will be completed.

     In December 1997,  Cortech announced that it had signed a definitive merger
agreement with BioStar, Inc.  ("BioStar"),  a privately held diagnostics company
based in Boulder,  Colorado.  The merger  agreement  was mutually  terminated by
BioStar and Cortech on May 7, 1998.

     Following its Annual Meeting on September 4, 1998, the Company announced on
September  18,  1998 that  four of the  nominees  of Asset  Value  Fund  Limited
Partnership  ("AVF"),  a Delaware limited  partnership,  had been elected to the
Company's Board of Directors, constituting a majority of the Board of Directors.
Then on September 21, 1998,  the Company  announced  that three of AVF's elected
nominees,  Paul O. Koether,  Mark W. Jaindl and John W. Galuchie,  Jr., had been
elected to the positions of Chairman, Vice Chairman and President, respectively,
at the Company's annual  organizational  meeting of the Board of Directors.  The
Company also announced implementation of a one-for-ten reverse stock split which
became effective at the close of business on September 22, 1998, and elimination
of the Company's  Shareholder Rights Plan (the "Plan"). The Company redeemed all
rights issued under the Plan. The redemption  resulted in a one-time  payment of
$0.10 per share on a split adjusted basis to the Company's stockholders.

     The Company was  incorporated  in 1982 in Colorado  and  reincorporated  in
Delaware in August  1991.  Cortech has  incurred  operating  losses in each year
since its date of inception. For the year ended December 31, 1998, Cortech had a
net loss of approximately  $4.7 million and through such date has an accumulated
deficit of  approximately  $89.3 million.  The Company's  offices are located at
6850 N. Broadway, Suite G, Denver, Colorado 80221. Its telephone number is (303)
650-1200.

Cortech's Work with Protease Inhibitors
---------------------------------------

     Background.   Proteases  are  enzymes  that  cleave  peptide  bonds  within
proteins.  Since  proteins  are  one  of  the  fundamental  building  blocks  of

<PAGE>


biological  systems,  proteases  are  among  the most  important  regulators  of
biological  activity  that have  been  described.  As a result  of an  increased
understanding  of the  causative  role  proteases  play in a number  of  disease
processes,  protease  inhibition  had  become  a very  important  area  of  drug
discovery.  Cortech's  work focused  primarily on the discovery and synthesis of
inhibitors of human neutrophil  elastase  ("HNE"),  a serine protease capable of
degrading a variety of connective tissue proteins, most notably elastin. Elastin
is found in the lungs,  vasculature and skin, and therapy  directed  against HNE
may  have   therapeutic   application   in  acute   and   chronic   respiratory,
cardiovascular  and skin disorders.  As a result of its research and development
efforts in this field, Cortech has developed proprietary technology which it has
demonstrated has the potential to be applied to the discovery and synthesis of a
broader range of therapeutically interesting protease inhibitors.

     During  inflamation,  neutrophils  are  activated  and  migrate to sites of
inflamation  to help kill  micro-organisms  and eliminate  inflammatory  debris.
Neutrophils release HNE which disrupts the lining of blood vessels (endothelium)
and allows the neutrophils to reach their target destination.  Because HNE is so
potent at digesting  protein and thereby damaging  tissue,  the body possesses a
number of defenses against  excessive HNE release,  limiting its effect in minor
inflammatory  states. In certain severe inflammatory  conditions,  however,  HNE
production   overwhelms  the  body's  natural  defenses,   resulting  in  tissue
destruction.  High levels of HNE release  have also been found in cases of organ
dysfunction,  such as those associated with acute respiratory  distress syndrome
("ARDS"). Further, HNE appears to play a significant role in a number of chronic
diseases marked by tissue destruction,  including cystic fibrosis and emphysema.
HNE also appears to be involved in less severe forms of tissue destruction, such
as rheumatoid arthritis, psoriasis and periodontal disease.

     CE-1037  -  HNE  Inhibitor  for  Parenteral  Administration.   CE-1037  was
developed and advanced into early Phase II clinical trials in collaboration with
Hoechst Marion Roussel,  Inc.  ("HMRI").  HMRI terminated that  collaboration in
December 1996 following  animal  experiments  which  suggested that the compound
might  have  genotoxic  effects  at high  concentrations.  A repeat  experiment,
sponsored by Cortech but conducted by an independent  outside  laboratory failed
to show any genotoxic  effect of the compound.  Subsequently,  in November 1998,
Cortech  was  successful  in securing  United  Therapeutics  as a new  corporate
partner  for  CE-1037.   Under  the  exclusive  worldwide  product  and  license
agreement, UT made an up-front payment of $250,000 and will pay the future costs
of developing  the compound for the potential  treatment of pulmonary  diseases.
Notwithstanding  this Agreement,  there can be no assurance that CE-1037 will be
proven safe and efficacious in clinical  trials,  that the regulatory  approvals
necessary for this commercialization (if it is ever advanced to this stage)would
be  obtained  or that it  could  be  manufactured  at  acceptable  costs  and in
appropriate quantity.

     HNE Inhibitors for Oral Administration. HNE has been implicated in a number
of chronic  diseases of the  respiratory  tract  including  chronic  obstructive
pulmonary  disease and emphysema.  Optimally,  these  conditions would require a
compound that could be administered orally for a prolonged period of time. Thus,
Cortech's  research  and  development  in the area of  elastase  inhibition  was
expanded to include compounds suitable for oral administration.


<PAGE>


     In March 1995,  Cortech signed a three-year  research agreement with Ono to
develop an orally active HNE  inhibitor  using  technology  developed by Cortech
prior to initiation of the collaboration.  Under the terms of the agreement, Ono
substantially  funded  Cortech's  research  on oral  HNE  inhibitors  ultimately
providing a total of  approximately  $10 million in funding from 1995-1997.  The
agreement also granted Ono an exclusive,  royalty-free  license to make, use and
sell  a  resulting  product  in  Japan,   Korea,  Taiwan  and  China  (the  "Ono
Territory"), with Cortech retaining all rights outside of the Ono Territory.

     In April 1997,  Cortech and Ono amended  their  agreement  to transfer  all
responsibilities  for research  activities to Ono during the final six months of
the  collaborative  project  (from  September  15, 1997 through March 14, 1998.)
During the third quarter of 1997,  Cortech's  remaining  research  staff focused
their efforts  primarily on elastase  inhibition  in order to fulfill  Cortech's
responsibilities  under its  agreement  with Ono.  On  October  1,  1997,  after
fulfilling  these  responsibilities,  Cortech  implemented a further,  corporate
downsizing  (to a staff of less than 15  full-time  persons).  Although  Cortech
retains rights outside of the Ono Territory to any compounds  developed pursuant
to the agreement with Ono,  including those that might result from Ono's efforts
during  the  final  six  months of the  collaborative  project,  there can be no
assurance  that  any  research  and  development  efforts  with  respect  to HNE
inhibitors  (including  the  efforts  of Ono) will  prove  successful,  that any
potential product would be proven safe and efficacious in clinical trials,  that
the regulatory approvals necessary for the  commercialization of any product (if
any  product is ever  advanced  to this  stage)  would be  obtained  or that any
product could be manufactured at acceptable costs and with appropriate quantity.
Cortech  does not intend to  undertake  further  development  of HNE  inhibitors
without a collaborative  partner. There can be no assurance that Cortech will be
able to establish such a  collaboration  or effect any  transaction  involving a
sale of technology rights on favorable terms, if at all.

     In March 1999,  the Company  announced  that an agreement in principle  had
been  reached  with Ono whereby Ono will be granted  western  rights to the oral
elastase inhibitor program on which Ono and Cortech have collaborated.  Previous
to the  proposed  agreement,  Ono's  rights were  limited to the Ono  Territory.
Consideration  for Cortech  granting  western rights to Ono is  contemplated  to
include  $2  million  upon  signing of a  definitive  agreement  and a series of
possible  future  milestone  payments which could  aggregate an additional  $9.5
million.  Cortech  also may be  entitled to  royalties  at the rate of 4% of net
sales  of  products  developed  by Ono  based on  Cortech  patents  outside  the
Territory.  It must be pointed  out that the  possible  milestone  payments  and
royalties are probably many years in the future.  The Ono agreement in principle
is subject to the signing of a definitive agreement.

     Other Protease Targets. As part of its protease inhibitor research efforts,
Cortech  scientists  synthesized  and tested a number of  compounds.  Certain of
these compounds have been shown to have activity against other serine elastases,
such as proteinase-3  and endogenous  vascular  elastase.  Serine elastases have
been shown to play an important role in vascular  injury,  and Cortech  believes
that its  portfolio of compounds  may  potentially  provide  useful  therapeutic
interventions  for certain  acute and  chronic  vascular,  skin and  respiratory


<PAGE>

diseases.  Cortech has also  developed a  proprietary  technology  which has the
potential  to be applied to the  discovery  and  syntheses  of  inhibitors  of a
broader range of therapeutically  interesting serine and cysteine proteases such
as most cell tryptase and picorna virus proteases, interleuken-1 beta converting
enzyme, other caspases involved in apoptosis and cell death and cathepsins B, K,
L and S.

     Notwithstanding these initial findings,  there can be no assurance that any
of these compounds will be proven safe and efficacious in clinical trials,  that
the  regulatory  approvals  necessary for their  commercialization  (if any such
compounds are ever advanced to this stage) would be obtained or that it could be
manufactured at acceptable  costs and with  appropriate  quantity.  Furthermore,
Cortech  does  not  intend  to  undertake  further  development  of any of these
compounds without a collaborative partner. Although Cortech is currently seeking
to secure such a partner or purchaser of Cortech's  related  technology  rights,
there  can be no  assurance  that  Cortech  will  be able  to  establish  such a
collaboration or effect any transaction involving a sale of technology rights on
favorable terms, if at all.

Cortech's Work with Bradykinin Antagonists
-------------------------------------------

     Background.  Inflammation  is the  body's  response  to injury of any kind,
including  injury caused by  infections,  immune  responses or physical  trauma.
Controlled  inflammation  is beneficial  because it facilitates the clearance of
pathogens  (disease-causing  agents) and the repair of damaged tissue.  However,
because  inflammation is a comprehensive  response involving numerous pathologic
mediators,  the  strength of the  response  often  converts  normal,  controlled
inflammation  into  an  abnormal,   destructive   process.   When  this  occurs,
inflammation  can cause acute or chronic  disease,  often  accompanied  by pain,
edema  (swelling)  or tissue  destruction  leading to organ failure and death in
severe cases.

     Bradykinin is generated  immediately  following tissue injury or infection.
It is a pivotal  inflammatory  mediator,  and its diverse  effects include pain,
edema,  vascular  leak,  and  hypotension or low blood pressure that can lead to
shock,  organ  dysfunction and death. The body normally  inactivates  bradykinin
within  seconds of its  generation.  However,  in  instances  of severe  injury,
bradykinin  production  outstrips the body's  capacity to inactivate it, thereby
generating sustained inflammation, pain and edema. Preclinical and clinical work
continues  to  support  the  role of  bradykinin  as an  important  mediator  of
inflammation, particularly in brain injury following trauma or acute ischemia.

     Bradycor  (TM)   (Deltibant  or  CP-0127).   Bradycor  is  Cortech's  lead,
first-generation  bradykinin  antagonist  which may potentially have therapeutic
application in the management of traumatic brain injury  ("TBI").  The rationale
for  its use in TBI is  based  on the  important  contribution  of  inflammatory
processes to the full expression of the injury.  A number of these  inflammatory
processes are mediated by bradykinin receptor  mechanisms,  including neutrophil
activation  and  migration,   stimulation  of  vascular  endothelial  cells  and
interactions  with neuronal and non-neuronal  cell populations  found within the
brain  parenchyma.  Following  brain  injury,  these  processes  result  in  the

<PAGE>

production  of  inflammatory  cytokines,  endothelial  retraction,  blood  brain
barrier  disruption and neuronal death.  Thus,  compounds such as Bradycor which
can block these  bradykinin  mediated  effects may potentially be efficacious in
ameliorating the inflammatory aspects of TBI.

     Until mid-1995,  Cortech's work on Bradycor  concentrated  primarily on the
treatment  of sepsis,  but two Phase II clinical  trials,  completed in 1994 and
1995, failed to provide  sufficient  evidence of efficacy to warrant  additional
development in that indication. Concurrent with the sepsis studies, Cortech also
undertook a small,  pilot Phase II study in patients  with large focal  cerebral
contusions  (a type of injury that  represents a subset of the spectrum of TBI).
In that study,  Bradycor  had  significant  beneficial  effects,  compared  with
placebo,  on  intra  cranial  pressure,  neurological  status  and the  need for
surgical  intervention.  In addition,  Bradycor was well tolerated and showed no
clinically   significant  adverse  effects  in  these  patients.   A  manuscript
describing   the  results  of  that  study  was   recently   published  in  Acta
Neurochisurgica.

     In November 1995, Cortech entered into a worldwide product  development and
license agreement with SmithKline Beecham ("SB") for the development of Bradycor
for the treatment of TBI and possibly stroke. Under the terms of this agreement,
SB  undertook a  multicenter,  placebo  controlled,  Phase II clinical  trial of
Bradycor  in  patients  with  severe TBI (The "TBI  Study").  Results of the TBI
Study,   which  became  available  in  March  1997,   failed  to  demonstrate  a
statistically  significant  benefit of Bradycor on intra cranial  pressure,  the
primary endpoint of the TBI Study. Based on these results, SB and Cortech agreed
to  discontinue  the  planned  development  of  Bradycor.  Moreover,  SB,  after
providing  Cortech with $4 million in funding for the  development  of Bradycor,
terminated its agreement with Cortech.

     Notwithstanding  the  initial  results of the TBI  Study,  an  analysis  of
long-term  functional outcome by the American Brain Injury Consortium  ("ABIC"),
which was completed during the third quarter of 1997,  showed positive trends in
functional  outcome for patients treated with Bradycor which were  statistically
significant in the most severely injured patients. In addition, patients treated
with Bradycor in the TBI Study showed modest (but not statistically significant)
positive  trends  in  intra  cranial  pressure  and the  requirement  for  other
interventions  to control  intra  cranial  pressure.  The study and the  results
generated by ABIC have been  described in a manuscript  which has been  accepted
for publication in the JOURNAL OF NEUROTRAUMA.

     During the term of the agreement between SB and Cortech,  SB also conducted
a number of preclinical  and other early phase  clinical  studies to broaden the
profile of Bradycor.  One of SB's  preclinical  studies in rats yielded  adverse
findings  which were  inconsistent  with the  findings of  Cortech's  toxicology
program and not supported by the safety  profile  observed in the clinic.  These
adverse  findings  led to the  premature  suspension  of the TBI Study  with 133
patients  available for analysis rather than the 160 patients planned.  However,
repeat rat studies  failed to duplicate the initially  observed  mortality or to
provide an explanation  for the adverse  findings.  Furthermore,  these results,
when  considered in the context of the entire body of  preclinical  and clinical
data available on the compound, remain anomalous.

                                                       
<PAGE>

     Cortech  does not  intend to  undertake  further  development  of  Bradycor
without a collaborative  partner. There can be no assurance that Cortech will be
able to establish such a  collaboration  or effect any  transaction  involving a
sale of technology  rights on favorable terms, if at all. In the event that such
a partnership  is secured and  development  efforts with respect to Bradycor are
continued,  there can be no  assurance  that  Bradycor  would be proven safe and
efficacious in clinical trials, that the regulatory  approvals necessary for its
commercialization (if Bradycor is ever advanced to this stage) would be obtained
or that it  could be  manufactured  at  acceptable  costs  and with  appropriate
quantity.

     In February 1992,  Cortech entered into a series of agreements with CP-0127
Development   Corporation  ("CDC")  that  govern  the  development  of  products
utilizing Bradycor. See "CP-0127 Development Corporation".

     Second  Generation  Bradykinin   Antagonist  Research.   Cortech  has  also
developed a series of peptide bradykinin antagonists that are 100 to 1,000 times
more potent than  Bradycor.  Compared to Bradycor,  these  compounds have longer
durations of action in vivo and are  expected to be less costly to  manufacture.
Cortech has identified a lead compound, CP-0597, which has been targeted for the
treatment of acute ischemic stroke where inflammatory consequences of the injury
are felt to be similar  to those  following  traumatic  injury.  Acute  ischemic
stroke is the term applied when blood supply to the brain is acutely compromised
by  the  obstruction  of  an  artery.   This   obstruction   leads  to  ischemia
(insufficient blood flow and loss of oxygen) of the brain tissue. As a result of
the ischemia,  there is neuronal  death,  neurological  impairment  and death of
brain tissue. The microvasculature in the brain is acutely sensitive to ischemia
and reacts with  endothelial  swelling and changes in  microvascular  tone which
further compromise blood supply.  There is blood brain barrier disruption in the
ischemic  territory  and an  inflammatory  response  both  at the  vascular  and
neuronal levels.

     Results from  preclinical  experiments  demonstrating  the  neuroprotective
effects of CP-0597 were reported in the July 1997 issue of STROKE. These results
indicate  that  CP-0597  may  have  significant  therapeutic  potential  in  the
treatment of stroke.  Cortech  does not,  however,  intend to undertake  further
development  of  CP-0597  without  a  collaborative  partner.  There  can  be no
assurance  that Cortech will be able to establish  such a partnership  or effect
any transaction  involving a sale of technology rights on favorable terms, if at
all.  Furthermore,  there can be no assurance  that CP-0597 would be proven safe
and efficacious in clinical trials, that the regulatory  approvals necessary for
its  commercialization  (if it is ever advanced to this stage) would be obtained
or that it  could be  manufactured  at  acceptable  costs  and with  appropriate
quantity.

Product Development Risks
-------------------------

     Cortech's compounds are in an early stage of research and development.  All
of the  compounds in Cortech's  portfolio  would  require  extensive  additional
research and development  prior to submission of any regulatory  application for
commercial  use.  At this  point,  Cortech's  compounds  could only be  advanced

<PAGE>

through  collaborative  arrangements or sale of its technology.  There can be no
assurance that Cortech will be able to establish such collaborative arrangements
or to effect a transaction  involving a sale of technology  rights on acceptable
terms, if at all. Even if Cortech enters into collaborative  arrangements and/or
receives  funds for research  and  development,  there can be no assurance  that
research or product  development efforts would be successfully  completed,  that
the compounds in Cortech's  portfolio would be proven to be safe and efficacious
in clinical trials, that required regulatory approvals for commercialization (if
products are ever advanced to this stage) could be obtained, that products could
be  manufactured  at acceptable  cost and with  appropriate  quality or that any
approved  products  could be  successfully  marketed  or would  be  accepted  by
patients, health care providers and third-party payors.

Patents, Trade Secrets and Licenses
-----------------------------------

     Cortech believes that patents and other  proprietary  rights are crucial to
its  intellectual  property  portfolio.  It  is  Cortech's  policy  to  maintain
appropriate  patent protection of proprietary  technologies and compounds in its
portfolio. In addition to patents, Cortech relies upon trade secrets,  know-how,
and licensing  opportunities  to develop and maintain its competitive  position.
The value of Cortech's  intellectual property will depend in part on its ability
to obtain patents,  maintain trade secrets and operate without infringing on the
proprietary rights of others in the United States and in other countries.

     Cortech  has  patent   protection   related  to  the  following:   protease
inhibitors,  bradykinin  antagonists and immunology  (vaccines and  treatments).
Cortech  holds seven United States  patents and  currently  has fourteen  United
States patent applications  pending which concern protease  inhibitors.  Cortech
holds five United States  patents,  has three United States patent  applications
pending and has one patent  application  which has been  allowed  which  concern
bradykinin antagonists. In addition, Cortech holds 26 foreign patents and has 40
foreign  patents   pending   concerning   protease   inhibitors  and  bradykinin
antagonists.

     The  patent  positions  of  pharmaceutical  and  biopharmaceutical   firms,
including  Cortech,  are uncertain and involve  complex  factual  questions.  In
addition,  the coverage  claimed in a patent  application  can be  significantly
reduced  before or after the  patent is  issued.  Consequently,  there can be no
assurance that any of Cortech's pending applications will result in the issuance
of patents or, if any patents are issued,  whether they will provide significant
proprietary  protection or will be  circumvented  or  invalidated.  Since patent
applications  in the United States are  maintained in secrecy until patent issue
and since  publication of  discoveries  in the  scientific or patent  literature
often lag behind actual  discoveries,  there can be no assurance that Cortech or
any  licensor  was the first  creator of  inventions  covered by pending  patent
applications  or that  Cortech  or such  licensor  was the first to file  patent
applications  for such  inventions.  There can be no  assurance  that  Cortech's
patents,  if issued,  would be held valid and  infringed by a court of competent
jurisdiction.  An adverse  outcome  with  regard to a third  party  claim  could
subject Cortech to significant  liabilities to third parties,  require  disputed
rights to be licensed from third parties or require  Cortech to cease using such
technology.



<PAGE>

     A number of pharmaceutical and biopharmaceutical companies and research and
academic  institutions  have filed patent  applications  or received  patents in
Cortech's fields.  Some of these applications or patents may be competitive with
Cortech's  applications  or may  conflict in certain  respects  with claims made
under  Cortech's  applications.  Such  conflict  could  result in a  significant
reduction of coverage of Cortech's patents,  if issued. In addition,  if patents
are issued to other companies that contain competitive or conflicting claims and
such claims are  ultimately  determined  to be valid,  there can be no assurance
that Cortech  would be able to obtain  licenses to these patents at a reasonable
cost or be able to develop or obtain alternative technology.

     Cortech also seeks to protect unpatented trade secrets and improvements and
unpatented   know-how.   It  is  Cortech's  policy  to  require  its  employees,
consultants, members of the Board of Directors, outside scientific collaborators
and  sponsored  researchers  and  other  advisors  to  execute   confidentiality
agreements upon the commencement of employment or consulting  relationships with
Cortech. These agreements provide that all confidential information developed or
made known to the individual during the course of the individual's  relationship
with  Cortech is to be kept  confidential  and not  disclosed  to third  parties
except in scientific  circumstances.  In the case of employees,  the  agreements
provide that all inventions  conceived by the individual  shall be the exclusive
property of Cortech.  There can be no assurance,  however, that these agreements
will not be breached or will provide meaningful  protection or adequate remedies
in the event of  unauthorized  use of Cortech's  trade  secrets or disclosure of
such information.  Cortech also has taken appropriate physical security measures
to protect its intellectual property.  There can be no assurance,  however, that
such security measures will be adequate.

CP-0127 Development Corporation
-------------------------------

     In February 1992, Cortech entered into a series of agreements with CDC that
govern the development of products utilizing Bradycor.  The agreements grant CDC
the right to  utilize  Bradycor  in the  United  States,  Canada  and Europe for
certain indications, while Cortech retained rights to Bradycor in other parts of
the world.  Cortech has the right to market,  sell and  license  the  technology
licensed  to CDC or to sell  products  derived  therefrom  and is  subject  or a
royalty obligation in favor of CDC.

Marketing Strategy
------------------

     Cortech's compounds are in the early stages of research and development. In
the event that any of Cortech's  compounds  are  approved  for  marketing in the
future,  Cortech will be entirely reliant upon its corporate  partners to market
those compounds.  Any revenues received by Cortech will, therefore, be dependent
on the efforts of third parties, and there can be no assurance that such efforts
will be successful.



<PAGE>



Manufacturing
-------------

     The manufacture of sufficient  quantities of new drugs can be an expensive,
time-consuming  and complex  process and may require the use of  materials  with
limited  availability  or require  dependence on sole-source  suppliers.  In the
event that any of Cortech's  compounds reach the stage of development  involving
manufacturing,  Cortech will be solely dependent upon its corporate partners for
the manufacture of compounds.

Competition
-----------

     The pharmaceutical and biopharmaceutical  industries are engaged in intense
competition   involving  multiple   technologies  and  strategies  for  compound
identification  and  development.  Many companies are focused on research in the
same  areas  as  Cortech.  Cortech's  most  significant  competitors  are  fully
integrated   pharmaceutical   companies  and  more   established   biotechnology
companies.  Smaller  companies  may also  prove to be  significant  competitors,
particularly  through  collaborative   arrangements  with  large  pharmaceutical
companies.  In addition,  Cortech faces competition from academic  institutions,
governmental  agencies, and other public and private research organizations that
conduct  research,   seek  patent   protection,   and  establish   collaborative
arrangements for product and clinical development and marketing.

     Many  of  Cortech's   competitors  have  substantially  greater  financial,
technical  and  human  resources  than  Cortech  and have  significant  products
approved or in development.

     Any of Cortech's  products that successfully gain regulatory  approval must
then compete for market  acceptance  and market share.  For certain of Cortech's
potential products, an important competitive factor will be the timing of market
introduction.  Accordingly,  Cortech expects that important  competitive factors
will be the relative speed with which companies can develop  products,  complete
the clinical testing and approval processes and supply commercial  quantities of
the product to the market.  With respect to clinical  testing,  competition  may
delay  progress by limiting  the number of clinical  investigators  and patients
available to test Cortech's potential products.

     HNE inhibitors have been the target of research and development  efforts by
a number of large  pharmaceutical  companies.  While no company has succeeded in
developing  a small  molecular  weight HNE  inhibitor  to the point of filing an
application for marketing approval,  there can be no assurance that any of these
programs  will not  achieve  success in the  future.  In  addition,  alternative
approaches to the use of HNE inhibitors are being developed.

     At least four other companies have developed bradykinin antagonists and may
be engaged in product development activities.  Numerous companies are developing
alternative  strategies  to  treat  inflammation.  A  number  of  these  are  in
preclinical and clinical development. Any of these approached could compete with
Cortech's HNE inhibitor programs.


<PAGE>



Government Regulation
---------------------

     The Food and Drug  Administration  ("FDA") is the primary agency regulating
the  research,  development,  manufacturer,  sale and  marketing of drugs in the
United  States.  From the  time at which a  promising  compound  is  identified,
regulations  dictate its  development,  approval,  marketing  and sale.  Product
development  and approval  within this  regulatory  framework  takes a number of
years and involves the expenditure of substantial resources.  Many products that
initially  appear  promising are never approved  because they do not meet safety
and efficacy requirements of the FDA. Regulatory  requirements may change at any
stage  of  Cortech's  product  development  and may  affect  approval,  delay in
application,  or require  additional  expenditures  by  Cortech.  If approval is
obtained,  failure  to  comply  with  ongoing  regulatory  requirements,  or new
information that negatively  impacts the safety or effectiveness of the approved
drug, could cause the FDA to withdraw approval to market the product.

     The time period  between when a promising  new compound is  identified  and
when human  testing is  initiated is  generally  referred to as the  preclinical
development period. A series of pharmacologic  studies are also performed during
preclinical  development  to  identify  the  essential  characteristics  of  the
compound's  behavior.  In  addition,  both in vitro and in vivo animal  toxicity
studies are  required to  characterize  the  toxicity  profile of the  compound.
Preclinical  studies  are  regulated  by the FDA under a series  of  regulations
called  Good  Laboratory  Practice  ("GLP")  regulations.  Violations  of  these
regulations can, in come cases,  lead to invalidation of the studies,  requiring
those studies to be repeated. During this time, a manufacturing process which is
capable of producing the compound in an adequately  pure and well  characterized
form for human use is  developed.  Production  of compounds for use in humans is
governed by a series of FDA  regulations  known as Good  Manufacturing  Practice
("GMP") regulations, which regulate all aspects of the manufacturing process.

     The  entire  body  of  preclinical  development  work  is  summarized  in a
submission   to  the  FDA   called  a  Notice  of  Claimed   Exemption   for  an
Investigational New Drug ("IND"). FDA regulations allow human clinical trials to
begin 30 days  following  the  submission  of the IND,  unless the FDA  requests
additional  information,  clarification  or  additional  time to review the IND.
There is no  assurance  that the  submission  of an IND will  allow a company to
commence clinical trials.  Once trials have started,  the company or the FDA may
decide to stop the trials because of concerns about the safety of the product or
the adequacy of the trial design. Such action can substantially delay individual
trials, as well as the entire development  program for the compound and, in some
cases, may require abandonment of a product.

     Clinical  testing of new compounds in humans is designed to establish  both
safety and efficacy in treating a specific  disease or condition.  These studies
are usually conducted in three phases of testing.  In Phase I, a small number of
healthy  subjects or patients  with the specific  condition  being  targeted are
given the new  compound  to  determine  the  pharmacokinetic  and  pharmacologic


<PAGE>

actions of the drug in humans, the side effects associated with increasing doses
and if possible,  to gain early  evidence of  effectiveness.  In Phase II, small
numbers of patients with the targeted disease are given the compound to test its
efficacy in treating the targeted  disease,  to determine the common  short-term
side effects and risks associated with the drug, and to establish effective dose
levels.  Phase III studies are larger studies designed to confirm the compound's
efficacy  and safety for the targeted  disease and to provide an adequate  basis
for physician labeling.

     When a drug is  being  developed  for a  condition  that  is life or  organ
threatening,  or for which  there is no  alternative  therapy,  the FDA may,  in
certain  cases,  grant an accelerated  approval  process.  However,  there is no
assurance that any of Cortech's  products would be eligible for this accelerated
approval process.

     Once adequate data have been  obtained in clinical  testing to  demonstrate
that the compound is both safe and  effective  for the intended  use, all of the
data available is submitted to the FDA in an New Drug Application  ("NDA").  The
FDA  reviews  this  application  and,  once it decides  that  adequate  data are
available which show that the new compound is both safe and effective,  approves
the drug for  marketing.  The approval  process may take several  years and is a
function of a number of variables  including the quality of the  submission  and
data  presented,  the  potential  contribution  that the  compound  will make in
improving the treatment of the disease in question,  and the extent of agreement
between  the  sponsor  and  the FDA on the  product  labeling.  There  can be no
assurance  that any new drug will  successfully  proceed  through this  approval
process or that it will be approved in any specific period of time.

     The FDA may, during its review of an NDA, ask for additional  data, and may
also require  postmarketing  testing,  including  potentially expensive Phase IV
studies.  In  addition,  postmarketing  surveillance  to monitor  the safety and
effectiveness  of the  drug  must be done  by the  sponsor.  The FDA may in some
circumstances impose additional  restrictions on the use and or promotion of the
drug that may be difficult and expensive to administer.

     Before  marketing  approval  is  granted,  the  facility  in which the drug
product is  manufactured  must be inspected by the FDA and deemed to be adequate
for the manufacture,  holding and distribution of drugs in compliance with GMPs.
Manufacturers  must  continue  to expend  time,  money and effort in the area of
production,  and quality  control,  labeling,  advertising and promotion of drug
product to ensure full compliance with GMP requirements.  Failure to comply with
applicable  requirements  can lead to FDA demands that  production  and shipment
cease,  that products be recalled,  or to  enforcement  actions that can include
seizures, injunctions, or criminal prosecution. Such failures or new information
that  negatively  impact the safety and  effectiveness  of the drug that becomes
available  after  approval may lead to FDA  withdrawal of approval to market the
product.

     To  market  its  product  abroad,  Cortech  also  must  satisfy  regulatory
requirements   implemented  by  foreign  regulatory  authorities.   The  foreign
regulatory  approval  process  includes  all of the  risks  associated  with FDA
approval set forth above,  and may introduce  additional  requirements of risks.
There is no  assurance  that a  foreign  regulatory  body will  accept  the data
developed  by  Cortech  for any of its  products.  Approval  by the FDA does not

<PAGE>

ensure  approval in other  countries,  nor does  approval  by any other  country
ensure approval decisions by FDA.

     In  Europe,  human   pharmaceutical   products  are  subject  to  extensive
regulations of testing, manufacture, safety, efficacy, labeling, storage, record
keeping,  advertising  and  promotion.  Effective in January 1995,  the European
Union enacted new regulations  providing for a centralized  licensing procedure,
which is mandatory for certain kinds of products,  and a decentralized  (country
by  country)  procedure  for all other  products.  A license  granted  under the
centralized  procedure  authorizes marketing of the product in all of the member
states of the  European  Union.  Under the  decentralized  procedure,  a license
granted in one member state can be extended to additional member states pursuant
to a simplified  application process. The assessment of products filed under the
centralized  procedure is coordinated by the European Medicine Evaluation Agency
("EMEA").

     In addition to regulations  enforced by the FDA, Cortech is also subject to
regulation  under the  Occupational  Safety and Health  Act,  the  Environmental
Protection Act, the Toxic Substances Control Act, the Resource  Conservation and
Recovery  Act,  regulations  promulgated  by the  United  States  Department  of
Agriculture,  and other related federal,  state or local regulations.  Cortech's
research and  development  involved the controlled  use of hazardous  materials,
chemicals, viruses and various radioactive compounds.  Although Cortech believes
that its safety procedures for handling and disposing of such materials complied
with the  standards  prescribed  by state and federal  regulations,  the risk of
accidental  contamination  or injury from these  materials  cannot be completely
eliminated.

Third-Party Reimbursement
-------------------------

     The business and financial  condition of  pharmaceutical  and biotechnology
companies  will  continue  to be  affected  by the  efforts  of  government  and
third-party  payors to contain or reduce the cost of health care through various
means.  For example,  in certain  foreign markets  pricing or  profitability  of
prescription  pharmaceuticals is subject to government  control.  In particular,
individual  pricing  negotiations  are often  required  in each  country  of the
European Union, even if approval to market the drug under the EMEA's centralized
procedure  is  obtained.  In the United  States,  there have been,  and  Cortech
expects that there will continue to be, a number of federal and state  proposals
to implement similar government control. In addition,  an increasing emphasis on
managed  care in the United  States has  increased  and will likely  continue to
increase the pressure on  pharmaceutical  pricing.  While Cortech cannot predict
whether any such  legislative  or  regulatory  proposals  will be  adopted,  the
announcement  or adoption  of such  proposals  or efforts  could have a material
adverse  effect  on  pharmaceutical  companies  that are  prospective  corporate
partners for Cortech.  Therefore,  Cortech's  ability to establish  and maintain
strategic alliances may be adversely affected. In addition, in the United States
and elsewhere,  sales of prescription  pharmaceuticals  are dependent in part on
the availability of reimbursement to the consumer from third-party  payors, such
as government and private insurance plans that mandate  predetermined  discounts
from list prices. In addition,  third-party payors are increasingly  challenging
the prices  charged for medical  products and services.  If Cortech  succeeds in



<PAGE>

bringing  one or more  products to the market,  there can be no  assurance  that
these  products  will be considered  cost  effective  and  reimbursement  to the
consumer  will be available or will be  sufficient  to allow Cortech to sell its
products on a competitive basis.

Human Resources
---------------

     At  its  peak  in  July  1994,  Cortech  employed  206  full-time,  regular
employees.  Over the past  four-and-one-half  years,  Cortech has  implemented a
series of reductions  in force which  reduced the number of  full-time,  regular
employees to one compensated  full-time employee as of February 28, 1999. During
this time,  these  employees  were  primarily  engaged in  management,  business
development and  administrative  efforts  including the archiving of records and
liquidation of non-cash tangible assets.

ITEM 2. -         DESCRIPTION OF PROPERTY
-------           -----------------------

     As of February 28, 1999,  the Company  occupies 4,150 square feet of leased
administrative  space in Denver,  Colorado.  This  lease is on a  month-to-month
basis and the  Company  has given the  landlord  notice that it will vacate this
space during April 1999. Additionally,  the Company is liable for lease payments
on 5,700  square feet of warehouse  space  through  April 30, 1999.  Attempts to
sublease this space have been unsuccessful so far.

ITEM 3. -         LEGAL PROCEEDINGS
------            -----------------

     On February 27, 1998, a complaint was filed in the Court of Chancery of the
State of Delaware,  naming the Company, the Company's then current directors and
BioStar as  defendants.  The  complaint,  filed by a stockholder of the Company,
claims to be on behalf of a class of all the Company's stockholders and contends
that the then current  directors of the Company  breached their fiduciary duties
to the  Company's  stockholders  when they  unanimously  approved  the  proposed
combination with BioStar. The complaint originally sought to enjoin the proposed
combination  with BioStar as well as the operation of the Company's  stockholder
rights plan and sought an order rescinding the proposed combination with BioStar
upon its  consummation as well as compensatory  damages and costs. The complaint
was amended  following  termination  of the proposed  BioStar  merger to seek to
force an auction of the Company's  assets and other relief.  Prior management of
the Company believed that the claims are without merit. Recently elected members
of the Board of  Directors,  who  comprise  a majority  of the  board,  have not
determined  the  merits of the  claims  nor  whether  they would have a material
adverse effect on the Company's financial position or results of operations.


ITEM 4. -         SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-------           ---------------------------------------------------

     There were no matters  submitted to a vote of security  holders  during the
fourth quarter of the year ended December 31, 1998.



<PAGE>

                                     PART II
                                     -------

ITEM 5. -         MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
-------           --------------------------------------------------------

     At February 26, 1999, the Company had  approximately  500  stockholders  of
record.  The Company's  common stock  currently  trades on the NASDAQ / National
Market System under the symbol  "CRTQ".  On February 26, 1999, the closing price
per share of the common stock was $5.875.

     The following  table sets forth the high and low bid and ask prices for the
common  stock for the periods  indicated,  as  reported by the  Over-the-Counter
Bulletin  Board.  The Company's  common stock was traded on the NASDAQ  National
Market System until July 13, 1998.  (See separate  table below.) All prices have
been adjusted to reflect the one-for-ten stock split.

         Calendar Quarter Ended:
                                              Bid                     Ask      
                                       -----------------         -------------
                                       Low          High         Low      High
                                       ---          ----         ---      ----
         1998
                  September 30         $3.90      $5.8125      $4.10    $6.65625
                  December 31           4.25       6.625        4.8125   6.75


     The  following  table  sets forth the high and low  closing  prices for the
common  stock for the periods  indicated,  as reported by NASDAQ on the National
Market System.  All closing prices have been adjusted to reflect the one-for-ten
stock split.


         Calendar Quarter Ended:
                                                Low                 High 
                                                ---                 ----
         1998

                  March 31                    $  3.75             $ 6.875
                  June 30                        4.375              5.625
 
         1997

                  March 31                    $  8.44             $20.00
                  June 30                        5.94               9.38
                  September 30                   5.00               8.13
                  December 31                    5.31               8.44



<PAGE>

     On July  13,  1998,  the  NASDAQ  Stock  Market,  Inc.  ("NASDAQ")  Listing
Qualification  Panel (the "Panel")  notified the Company that as of the close of
business on such date,  the  Company's  Common Stock  ("Common  Stock") would be
delisted  from  the  NASDAQ  National  Market.  NASDAQ's  maintenance  standards
require,  among other things,  that the common stock of companies  listed on the
NASDAQ  National  Market must have a bid price of at least $1.00 per share,  and
the basis for the Panel's  decision  was that the bid price of the common  stock
was less than $1.00 per share.  As a result of the  delisting,  the Common Stock
traded  on the  Over-the-Counter  Bulletin  Board.  The  Company  implemented  a
one-for-ten  stock split,  as approved by the  stockholders,  as of the close of
business on September 22, 1998. On January 21, 1999,  NASDAQ approved  Cortech's
Common Stock for re-listing on the NASDAQ National Market,  and the shares began
trading on January 25, 1999.

     On September 29, 1998, the Board of Directors  authorized the redemption of
all  outstanding  preferred  share purchase rights issued pursuant to the Rights
Agreement,  dated  as of  June  13,  1995,  between  the  Company  and  American
Securities  Transfer,  Inc.,  as  Rights  Agent,  effective  as of the  close of
business on October 13, 1998, with the redemption price of $.01 ($.10 on a split
adjusted  basis) per right to be paid in cash on October 14, 1998 to the holders
of record of Common  Stock of the Company as of the close of business on October
13, 1998.

     The Company has not paid any cash  dividends  on its Common Stock since its
inception  and does not  intend  to pay any cash  dividends  in the  foreseeable
future.


ITEM 6. -         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-------           -----------------------------------------------------------
                  AND RESULTS OF OPERATIONS
                  -------------------------

     The following  discussion and analysis  should be read in conjunction  with
Cortech's Financial Statements and Notes thereto included elsewhere in this Form
10-KSB. When used in this discussion, the word "expects" and similar expressions
are intended to identify forward-looking statements. Such statements are subject
to risks and uncertainties  that could cause actual results to differ materially
from those  projected and include,  but are not limited to, the risks  discussed
below,  the  risks  discussed  in the  section  of  this  Form  10-KSB  entitled
"Description of Business" and risks discussed elsewhere in this Form 10-KSB.

General
-------

     Cortech,  Inc. ("Cortech" or the "Company") is a biopharmaceutical  company
whose primary focus has been the discovery and development of novel therapeutics
for the treatment of inflammatory disorders.  Specifically, Cortech has directed
its research and development  efforts principally toward protease inhibitors and
bradykinin  antagonists.   These  efforts  have  produced  certain  intellectual
property  rights.  (See Item 1. - Description of Business - "Cortech's Work with
Protease Inhibitors" and "Cortech's Work with Bradykinin Antagonists.")



<PAGE>

     In response to  disappointing  test  results and its loss of  collaborative
partner  support,  Cortech has  implemented a series of reductions in force over
the past  four-and-one-half  years  (which has  reduced the number of full time,
regular employees from more than 200 down to one compensated full-time employee)
and effectively  discontinued  all internal  efforts to advance its research and
development   activities.   In   addition,   Cortech  has   decommissioned   its
laboratories, and sold most of its scientific, technical and office equipment.

     Cortech has also sold most of its  leasehold  improvements  and is actively
seeking to sell the  remainder  and lease its unused  space.  As of December 31,
1998,  all fixed  assets  had been  written-off.  As a result of these  actions,
Cortech no longer has the staff or operative  facilities  required to recommence
internal  research and  development  activities.  Cortech's  strategy is to seek
collaborative  partners to conduct and fund future  research and  development on
the  components  of its  portfolio  or to sell  the  rights  to  certain  of the
compounds  in the  portfolio  to third  parties  interested  in  funding  future
research and  development,  while conserving the Company's cash. There can be no
assurance that any particular agreement will be completed. At the same time, the
Company is seeking to redeploy its assets into an operating business.

Results of Operations
---------------------

Revenues
--------

     Revenues  from  sponsored  research  and  development  decreased  from $3.5
million in 1997 to $22,000 in 1998. This decrease in revenues resulted primarily
from  an  April  1997  amendment  to the Ono  Agreement  (defined  below)  which
terminated the obligation of Ono  Pharmaceutical  Company,  Ltd. ("Ono") to make
further research payments to the Company, and the  discontinuation,  as of March
1997, of the Company's collaboration with SmithKline Beecham ("SB"). The Company
expects no further payments from Ono or SB in connection with sponsored research
and development activities.

     Cortech  received $1.5 million from Ono for work  performed in 1997 under a
contract to develop an oral elastase  inhibitor (the "Ono Agreement").  Pursuant
to the Ono  Agreement,  Cortech had received an additional  $1.3 million in 1996
which was recorded as revenue in 1997 (as a result of work  performed in 1997 by
Cortech).  Under the terms of the Ono Agreement, as amended in 1997, Ono assumed
all  responsibilities  for research  activities  conducted  during the final six
months  of the  collaborative  project  (terminating  on March 14,  1998).  As a
result,  Ono was not required to pay Cortech the last  scheduled $1.5 million in
research  funding  previously  provided  for under the Ono  Agreement  to offset
certain costs that Cortech would otherwise have incurred.

     Interest income  decreased from $939,000 in 1997 to $695,000 in 1998. Lower
invested balances with lower yields on investments accounted for the decrease.

     The  disposition of property and equipment  relating to the sale of certain
leasehold  improvements and equipment  resulted in gains of $380,000 during 1998
and losses of $530,000 during 1997.  During 1997, the Company  commenced selling
property  and  equipment  previously  used in research and  development  and for
administrative purposes.


<PAGE>

     During 1998, the Company recorded  $250,000 in license revenues it received
from an unrelated third party,  United  Therapeutics Corp. ("UT"), in connection
with the  signing of an  exclusive  worldwide  product  development  and license
agreement for Cortech's elastase inhibitor, CE-1037, for the potential treatment
of emphysema and other diseases.  The agreement  provided for certain  milestone
payments in the event the  compound is  successfully  advanced  and a royalty on
product  sales should the  compound be  successfully  commercialized.  It is not
expected that this agreement will result in significant revenues in 1999.

     Research and development  related  expenses  decreased from $7.6 million in
1997 to $436,000 in 1998.  The  decrease was due  primarily to the  ceasation of
on-site research and development activities by the Company in late 1997.

     General and administrative  expenses increased from $3.1 million in 1997 to
$5.6  million  in 1998.  The $2.5  million  increase  was  primarily  due to the
following expenses:  severance payment for former employees and officers of $1.1
million  (including  $605,000 to the Company's former Chief Executive  Officer);
certain costs related to the proposed  combination  with BioStar,  Inc. that was
terminated on May 7, 1998 of $328,000;  costs related to stockholder  litigation
of $185,000;  Directors and Officers  liability run-off policy,  approved by the
prior Board of Directors of $198,000;  and $258,000 in expenses  incurred by the
prior Board of Directors for the  solicitation of proxies in connection with the
Annual Meeting of Stockholders which included additional legal fees of $100,000.

Liquidity and Capital Resources
-------------------------------

     At December 31, 1998,  the Company had cash and cash  equivalents  of $11.6
million.  Cash equivalents  consisted of Federal  Treasury  Obligation Funds and
Repurchase  Agreements with yields ranging from 4.65% to 4.85%. In January 1999,
all cash  equivalents  were  transferred  to U.S.  Treasury  Bills with original
maturities of three months or less. Net working capital at December 31, 1998 was
approximately  $10.5 million.  Management believes its cash and cash equivalents
are  sufficient  for its  remaining  business  activities  and for the  costs of
seeking an acquisition of an operating business.

     Net cash of approximately  $4.1 million was used in operations in 1998. The
net loss of $4.7 million and the decrease in accounts payable of $549,000,  were
the primary  reasons  for the use of cash,  although  these uses were  partially
offset by depreciation  and  amortization of $623,000 and an increase in accrued
liabilities  of $656,000.  In 1997, net cash of  approximately  $6.4 million was
used in  operations.  In 1997, the net loss of $6.8 million and the decreases in
advances from a corporate partner of $928,000 and unearned income of $1,323,000,
were the primary reasons for the use of cash, although these uses were partially
offset by  depreciation  and  amortization  of $1.5  million  and a decrease  in
prepaid expenses and other assets of $537,000.

     Net cash provided by investing activities was approximately $4.3 million in
1998,  primarily due to the sales of short-term  investments of $3.9 million and
the proceeds from the sale of property and equipment of $491,000, which resulted
in a net gain on the disposition of equipment of $380,000.  In 1997, net cash of
approximately $10.2 million was provided by investing  activities  primarily due
to the sales of  short-term  investments  of $24.9 million and the proceeds from

<PAGE>

the  sale of  property  and  equipment  of  $890,000,  offset  by  purchases  of
short-term investments of $15.5 million. Sales of property and equipment in 1997
resulted in a net loss of $530,000.

     Net cash used in  financing  activities  was  $189,000 in 1998,  due to the
redemption of the preferred share purchase rights. See Part II, Item 5. - Market
for Common Equity and Related  Stockholder  Matters for more  information on the
redemption.  In 1997,  net cash of $4,000 was provided by financing  activities,
due to the issuance of common stock.

Other Matters
-------------

     Net Operating Loss Carryforwards and Tax Credits:  As of December 31, 1998,
Cortech had approximately $86.6 million of net operating loss carry forwards for
income tax purposes  which expire from 1999 through 2013.  In addition,  Cortech
has   approximately   $2.9  million  of  research  and  development  tax  credit
carryforwards  available  to  offset  future  federal  income  tax,  subject  to
limitations  for  alternative  minimum  tax.  Cortech's  use of  operating  loss
carryforwards and tax credit  carryforwards is subject to limitations imposed by
the Internal Revenue Code.

     Impact of Year 2000: The year 2000 will impact  computer  programs  written
using two digits rather than four to define the  applicable  year.  Any programs
with  time-sensitive  software may  recognize a date using "00" as the year 1900
rather   than  the  year  2000.   This  could   result  in  system   failure  or
miscalculations   causing  disruptions  of  operation,   including  a  temporary
inability to process  transactions,  send  invoices or engage in other  ordinary
activities.  This problem largely affects  software  programs written years ago,
before  the  issue  came to  prominence.  Insofar  as  Cortech  has  effectively
discontinued  all  internal  efforts to advance  its  research  and  development
activities,  Cortech does not believe that it has  significant  risk  associated
with the year 2000 problem.


<PAGE>


ITEM 7. -         FINANCIAL STATEMENTS
-------           --------------------

         The financial statements filed with this item are listed below:

         Reports of Independent Accountants

         Financial Statements:

                  Balance Sheet as of December 31, 1998

                  Statements of Operations for the Years ended December 31, 1998
                  and 1997

                  Statements of Stockholders' Equity for the Years ended
                  December 31, 1998 and 1997

                  Statements of Cash Flows for the Years ended December 31, 1998
                  and 1997

                  Notes to Financial Statements


<PAGE>

                                                      PricewaterhouseCoopers LLP
                                                      400 Campus Drive
                                                      P.O. Box 988
                                                      Florham Park, NJ  07932
                                                      Telephone (973) 236 4000
                                                      Facsimile (973) 236 5000


                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareowners and Directors of 
Cortech, Inc.

In our opinion,  the  accompanying  balance sheet and the related  statements of
operations,  of  stockholders'  equity and of cash flows present fairly,  in all
material respects,  the financial  position of Cortech,  Inc. (the "Company") at
December 31, 1998,  and the results of its operations and its cash flows for the
year ended December 31, 1998, in conformity with generally  accepted  accounting
principles.  These financial  statements are the responsibility of the Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements  based on our audit.  We conducted  our audit of these  statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion  expressed
above.




/s/ PricewaterhouseCoopers LLP

Florham Park, New Jersey
February 26, 1999



<PAGE>

                              ARTHUR ANDERSEN LLP


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


We have audited the accompanying statements of operations,  stockholders' equity
and cash flows of  Cortech,  Inc. (a  Delaware  corporation)  for the year ended
December 31, 1997.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the results of  operations  and cash flows of Cortech,
Inc.,  for the year ended  December  31,  1997,  in  conformity  with  generally
accepted accounting principles.




                                                         /s/ Arthur Andersen LLP
                                                           

Denver, Colorado,
  February 12, 1998.



<PAGE>



                                  CORTECH, INC.
                                  BALANCE SHEET
                                December 31, 1998
                 (in $000's, except share and per share amounts)



ASSETS

Current assets:
    Cash and cash equivalents                                   $11,597
    Prepaid expenses and other                                       77
                                                                -------
         Total current assets                                   $11,674
                                                                =======

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                            $   151
    Accrued liabilities                                             485
    Accrued severance and other compensation                        497
                                                                -------
         Total current liabilities                                1,133
                                                                -------

Commitments and Contingencies (Notes 6 and 7)                         

Stockholders' equity (Note 4):
    Preferred stock, $.002 par value 2,000,000 shares
      authorized, none issued                                         -
    Common stock, par value $.002;
      5,000,000 shares authorized;
      1,852,209 shares issued and outstanding                         4
    Additional paid-in capital                                   99,830
    Accumulated deficit                                        ( 89,293)
                                                                -------
         Total stockholders' equity                              10,541
                                                                -------
         Total liabilities and stockholders' equity             $11,674
                                                                =======




                 See accompanying notes to financial statements


<PAGE>

                                  CORTECH, INC.
                            STATEMENTS OF OPERATIONS
                      (in $000's, except per share amounts)



                                                       Years Ended December 31, 
                                                       ------------------------
                                                         1998           1997 
                                                        ------         ------

Revenues:
    Sponsored research and development                 $     22       $ 3,451
    Interest income                                         695           939
    Gain (loss)on disposition of property
      and equipment                                         380      (    530)
    Technology license revenue (Note 3)                     250             -
                                                        -------       -------
         Total revenues                                   1,347         3,860
                                                        -------       -------

Expenses:
    Research and development (Note 7)                       436         7,552
    General and administrative                            5,565         3,086
                                                        -------       -------
         Total expenses                                   6,001        10,638
                                                        -------       -------

         Net loss                                      ($ 4,654)     ($ 6,778)
                                                        =======       =======

Basic net loss per share                               ($  2.51)     ($  3.65)
                                                        =======       =======

Weighted average common shares
  outstanding                                             1,852         1,852
                                                        =======       =======




                 See accompanying notes to financial statements.

                                  
<PAGE>

<TABLE>
<CAPTION>

                                                                      CORTECH, INC.
                                                       STATEMENTS OF STOCKHOLDERS' EQUITY (NOTE 4)
                                                          (in 000's, except per share amounts)


                                                                           Additional
                                          Common Stock                      Paid-In         Deferred        Accumulated
                                      Shares       Amount     Warrants      Capital       Compensation        Deficit         Total
                                      ------       ------     --------     ----------    --------------    ------------       -----

<S>                                   <C>           <C>        <C>           <C>             <C>             <C>            <C>   
Balance, December 31, 1996            1,852         $ 4        $2,330        $97,692         ($ 40)          ($ 77,861)     $22,125

Reversal of deferred
 compensation in connection
 with resignation of a
 director and other                       -           -             -       (      7)            3                   -     (      4)

Amortization of deferred
 compensation                             -           -             -              -            36                   -           36

Issuance of common stock
 at $6.60 per share pursuant
 to employee stock purchase
 plan                                     -           -             -               4            -                   -            4

Contribution of certain
 warrants                                 -           -       (   175)            175            -                   -            -

Expiration of certain CDC
 warrants                                 -           -       ( 1,078)          1,078            -                   -            -

Net loss                                  -           -             -               -            -           (   6,778)    (  6,778)
                                     ------         ---        ------         -------         ----            --------      -------

Balance, December 31, 1997            1,852           4         1,077          98,942        (   1)          (  84,639)      15,383

Amortization of deferred
 compensation                             -           -             -               -            1                   -            1

Redemption of preferred share
 purchase rights                          -           -             -        (    189)           -                   -     (    189)

Expiration of CDC warrants                -           -       ( 1,077)          1,077            -                   -            -

Net loss                                  -           -             -               -            -           (   4,654)    (  4,654)
                                     ------         ---        ------         -------         ----            --------      -------

Balance, December 31, 1998            1,852         $ 4             -         $99,830            -           ($ 89,293)    ($10,541)
                                     ======         ===        ======         =======         ====            ========      =======


                                                  See accompanying notes to financial statements.

</TABLE>


<PAGE>


<TABLE>
<CAPTION>

                                  CORTECH, INC.
                            STATEMENTS OF CASH FLOWS
                                   (in 000's)


                                                                Year Ended December 31,
                                                                -----------------------
                                                                 1998             1997
                                                                ------           ------

<S>                                                            <C>             <C>
Cash flows from operating activities:
   Net loss                                                    ($ 4,654)       ($ 6,778)
   Adjustments:
       Depreciation and amortization                                623           1,545
       (Gain)loss on disposition of equipment                  (    380)            530
       Research and compensation expense related
          to grant of options, including
          amortization of deferred compensation                       1              32
       Decrease in prepaid expenses and
          other assets                                              231             537
       Decrease in accounts payable                            (    549)       (     80)
       Decrease in advances from corporate partner             (     36)       (    928)
       Increase in accrued liabilities, accrued
          severance and other compensation                          656              35
       Decrease in unearned income                                    -        (  1,323)
                                                                -------         -------
       Net cash used in operating activities                   (  4,108)       (  6,430)
                                                                -------         -------

Cash flows from investing activities:
   Purchases of property and equipment                               -         (     39)
   Proceeds from sale of property and equipment                    491              890
   Purchases of short-term investments                        (      9)        ( 15,505)
   Sales of short-term investments                               3,850           24,850
                                                               -------          -------
       Net cash provided by investing activities                 4,332           10,196
                                                               -------          -------

Cash flows from financing activities:
   Proceeds from issuance of common stock                            -                4
   Redemption of preferred share purchase rights              (    189)               -
                                                               -------          -------
       Net cash provided by (used in)financing
          activities                                          (    189)               4
                                                               -------          -------

Net increase in cash and cash equivalents                           35            3,770
Cash and cash equivalents, beginning of
   period                                                       11,562            7,792
                                                               -------          -------
Cash and cash equivalents, end of period                       $11,597          $11,562
                                                               =======          =======

Supplemental disclosure of noncash
   financing activities:
   Contribution of 562,576 warrants to the
     Company                                                         -          $   175
                                                               =======          =======

</TABLE>


                 See accompanying notes to financial statements.



<PAGE>


                                 CORTECH, INC.
                          NOTES TO FINANCIAL STATEMENTS

                     Years Ended December 31, 1998 and 1997


1.   Organization
     ------------

     Cortech,  Inc. ("Cortech" or the "Company") is a biopharmaceutical  company
     whose  primary  focus  has  been the  discovery  and  development  of novel
     therapeutics  for the treatment of  inflammatory  disorders.  Specifically,
     Cortech has  directed  its research  and  development  efforts  principally
     toward protease inhibitors and bradykinin  antagonists.  These efforts have
     produced certain intellectual property rights.

     In response to  disappointing  test  results and its loss of  collaborative
     partner  support,  Cortech has  implemented a series of reductions in force
     over the past  four-and-one-half  years  (which  reduced the number of full
     time,  regular  employees  from  more  than  200  down  to one  compensated
     full-time  employee) and effectively  discontinued  all internal efforts to
     advance its research and development activities.  In addition,  Cortech has
     decommissioned its laboratories, and sold most of its scientific, technical
     and office equipment.  Cortech has sold most of its leasehold  improvements
     and is actively  seeking to sell the  remainder and lease its unused space.
     As of December  31,  1998,  all fixed  assets have been  written  off. As a
     result  of these  actions,  Cortech  no longer  has the staff or  operative
     facilities   required  to  recommence  internal  research  and  development
     activities. Cortech's strategy is to seek collaborative partners to conduct
     and fund future research and development on the components of its portfolio
     or to sell the rights to certain of the compounds in the portfolio to third
     parties  interested  in funding  future  research  and  development,  while
     conserving the Company's cash,  although there can be no assurance that any
     particular  agreement  will be completed.  At the same time, the Company is
     seeking to redeploy its assets into an operating business.

2.   Significant Accounting Policies
     -------------------------------

     Use of Estimates
     ----------------

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial  statements  and the  reported  amounts of revenue  and  expenses
     during  the  reporting  period.  Actual  results  could  differ  from those
     estimates.  Prior years  financial  statements  have been  reclassified  to
     conform to the current year's presentation.

     Cash and Cash Equivalents
     -------------------------

     Cash and cash equivalents consist primarily of cash on hand, cash in banks,
     Treasury  Obligation Funds and Repurchase  Agreements.  As of January 1999,
     cash equivalents  consist of U.S. Treasury Bills purchased with an original
     maturity of three months or less.



<PAGE>
                                  CORTECH, INC.
                          NOTES TO FINANCIAL STATEMENTS

                     Years Ended December 31, 1998 and 1997


     Research and Development Expenses
     ---------------------------------

     Costs incurred in connection with research and  development  activities are
     expensed as  incurred.  These costs  consist of direct and  indirect  costs
     associated with specific  projects as well as fees paid to various entities
     that perform certain  research on behalf of the Company.  On-site  research
     and  development  activities  were  terminated by the Company in the fourth
     quarter of 1997.

     Sponsored Research and Development Revenue
     ------------------------------------------

     The Company  recognizes  revenue from sponsored research and development as
     research  activities  are  performed  or  as  development   milestones  are
     completed under the terms of the research and development agreements. Costs
     incurred in  connection  with the  performance  of  sponsored  research and
     development are expensed as incurred and were approximately $2,882,000, for
     the year ended December 31, 1997 and zero in 1998.  Such costs are included
     in research  and  development  expense in the  accompanying  statements  of
     operations.

     Basic Net Loss Per Share
     ------------------------

     Basic net loss per share is computed  using the weighted  average number of
     shares of common  stock  outstanding  during the period as adjusted for the
     one-for-ten  reserve stock split.  Excluded from the calculation of the net
     loss per share are 117,149 and 214,509  common stock  options,  in 1998 and
     1997 respectively  which, if included,  would have an antidilutive  effect.
     (See Note 4.)

     Income Taxes
     ------------

     The Company recognizes  deferred tax assets and liabilities  related to the
     expected future tax consequences of events that have been recognized in the
     Company's  financial  statements  and tax returns.  However,  if it is more
     likely  than not that some  portion or all of the net  deferred  tax assets
     will not be  realized,  a valuation  allowance is  established  and the tax
     benefit is not recognized in the statements of operations.

3.   Sponsored Research and Development
     ----------------------------------

     Ono Pharmaceutical Co., Ltd. ("Ono")
     ------------------------------------

     In March  1995,  Cortech  entered  into a  research  agreement  with Ono to
     develop  an  orally  active  human  neutrophil   elastase  inhibitor  using
     Cortech's protease inhibitor research capabilities.  Upon entering into the
     agreement,  Ono paid the Company $500,000 for research previously conducted
     by the  Company.  Under the  agreement  as amended  in 1996,  Ono paid $4.3
     million in 1996 and an  additional  $1.5 million was paid in March 1997 for

<PAGE>

                                  CORTECH, INC.
                          NOTES TO FINANCIAL STATEMENTS

                     Years Ended December 31, 1998 and 1997


     work that was performed in the second and third quarters of 1997. Under the
     terms of the  agreement,  as  amended  in  April,  1997,  Ono  assumed  all
     responsibilities for research activities during the final six months of the
     collaborative  project,  which terminated on March 14, 1998. As a result of
     this  reallocation of  responsibilities,  Ono was no longer required to pay
     the Company the last scheduled $1.5 million in research funding  previously
     provided for under the  agreement to offset  certain costs that the Company
     would  otherwise  have incurred  under the  agreement.  Cortech  expects no
     further payments from Ono under the agreement.

     Under the terms of the agreement, Ono will have an exclusive,  royalty-free
     license to make, use and sell a resulting product in Japan,  Korea,  Taiwan
     and China (the "Ono Territory"). Cortech has retained all other rights.

     In March 1999,  the Company  announced  that an agreement in principle  had
     been  reached  with Ono whereby Ono will be granted  western  rights to the
     oral elastase inhibitor program on which Ono and Cortech have collaborated.
     Previous to the  proposed  agreement,  Ono's rights were limited to the Ono
     Territory.  Consideration  for Cortech  granting  western  rights to Ono is
     contemplated  to include $2 million upon signing of a definitive  agreement
     and a series of possible future milestone payments which could aggregate an
     additional  $9.5 million.  Cortech also may be entitled to royalties at the
     rate of 4% of net  sales of  products  developed  by Ono  based on  Cortech
     patents  outside the  Territory.  The  receipt of  milestone  payments  and
     royalties, if any, are probably many years in the future. The Ono agreement
     in principle is subject to the signing of a definitive agreement.

4.   Stockholders' Equity
     --------------------

     Preferred Stock
     ---------------

     The  Company is  authorized  to issue  2,000,000  shares of $.002 par value
     preferred  stock  which may be  issued  with  various  terms in one or more
     series, as the Board of Directors may determine.

     On June 2, 1995, the Company's Board of Directors  approved the adoption of
     a Preferred Share Rights Plan under which  stockholders  received one Right
     to purchase one  one-hundredth  (one-tenth on a split  adjusted basis - see
     "Common Stock" below) of a share of Series A Junior Participating Preferred
     Stock  ("Junior  Preferred  Stock") for each  outstanding  share of Cortech
     common  stock of record  held at the close of  business  on June 26,  1995.
     These rights were  distributed  as a  non-taxable  dividend and were set to
     expire in June  2005.  The rights  would  separate  from  shares of Cortech
     common  stock  and  become  exercisable  at  $20.00  each  ($200 on a split

<PAGE>

                                 CORTECH, INC.
                          NOTES TO FINANCIAL STATEMENTS

                     Years Ended December 31, 1998 and 1997


     adjusted basis - see "Common Stock" below),  subject to future  adjustment,
     only if a person or group acquired 15 percent or more of the Cortech common
     stock.  Cortech's Board of Directors could terminate the plan or redeem the
     rights, at a nominal  redemption price, prior to the time a person acquires
     more  than  15  percent  of the  Cortech  common  stock.  The  Company  had
     designated 500,000 shares of its Preferred Stock as Junior Preferred Stock.

     On September 29, 1998, the Board of Directors  authorized the redemption of
     all  outstanding  rights,  effective as of the close of business on October
     13, 1998, with the redemption price of $.01 ($.10 on a split adjusted basis
     - see "Common  Stock"  below) per right paid in cash on October 14, 1998 to
     the  holders  of record of Common  Stock of the  Company as of the close of
     business on October 13, 1998.

     Common Stock
     ------------

     The stockholders of the Company approved a one-for-ten  reverse stock split
     which was effective as of the close of business on September 22, 1998. Also
     on this date, the Company's  authorized shares were reduced from 50,000,000
     to 5,000,000.  Accordingly,  all common share information has been restated
     to reflect this reverse stock split.

     Stock Option Plans
     ------------------

     On September 22, 1998,  the Company  effected a  one-for-ten  reverse stock
     split.  All stock  option  information  has been  restated to reflect  this
     reverse stock split.

     In October 1995, the Financial  Accounting Standards Board issued Statement
     of  Financial  Accounting  Standards  ("SFAS")  No.  123,  "Accounting  for
     Stock-Based  Compensation".  This  new  standard  encouraged,  but  did not
     require,  companies to recognize  compensation expense for grants of stock,
     stock options and other equity  instruments based on a fair-value method of
     accounting.

     Companies that do not adopt the new expense  recognition  rules of SFAS No.
     123 will  continue to apply the  existing  rules  contained  in  Accounting
     Principles  Board  ("APB")  Opinion No. 25, but will be required to provide
     pro forma  disclosures of the  compensation  expense  determined  under the
     fair-value provisions of SFAS No. 123, if material.  APB No. 25 requires no
     recognition of compensation  expense for most of the  stock-based  employee
     compensation  arrangements  provided  by the  Company,  namely  broad-based
     employee  stock option grants and stock  purchase  plans where the exercise
     price is equal to the market price at the date of grant.

     The Company adopted the disclosure provisions of SFAS No. 123 for the years
     ended  December 31, 1998 and 1997.  The Company will continue to follow the

<PAGE>


                                  CORTECH, INC.
                          NOTES TO FINANCIAL STATEMENTS

                     Years Ended December 31, 1998 and 1997


     accounting provisions of APB No. 25 for stock-based compensa- tion and will
     furnish the pro forma disclosures required under SFAS No. 123.

     The Company  applies APB No. 25 and related  Interpretations  in accounting
     for its plans.  Had  compensation  cost for the Company's  our  stock-based
     compensation  plans  been  determined  based on the fair value at the grant
     dates for awards under those plans  consistent  with the method of SFAS No.
     123,  the  Company's  net  loss  and net loss per  share  would  have  been
     increased to the pro forma amounts indicated below:


<TABLE>
<CAPTION>
                                                          1998                 1997
                                                          ----                 ----
                                                    (In 000's, except per share amounts)


          <S>                                          <C>                  <C>      
          Net loss - as reported                       ($ 4,654)            ($ 6,778)

          Net loss - pro forma                         ($ 5,053)            ($ 7,577)

          Net loss per share - as reported             ($  2.51)            ($  3.65)

          Net loss per share - pro forma               ($  2.73)            ($  4.09)

</TABLE>

     The Company's 1986 Stock Option Plan ("1986 Plan")  authorizes the grant of
     stock  options to  officers  and  employees  of the  Company to purchase an
     aggregate of 150,000  shares of common stock.  Although  40,710 shares were
     available  under the 1986 Plan as of December  19,  1997,  on such date the
     Board of Directors effectively suspended future grants of options under the
     1986 Plan to the  extent  that any such  grant  would  increase  the shares
     subject to outstanding grants above the figure as of such date.

     The Company's 1993 Equity  Incentive  Plan ("1993  Plan"),  approved by the
     stockholders  on May 10, 1994,  authorizes  the issuance of 170,000  shares
     through the grant of options to purchase common stock,  stock bonuses,  and
     rights to purchase restricted stock. The options outstanding as of December
     31, 1998 generally  become  exercisable in varying amounts over a five-year
     period from the date of grant.  Although 37,085 shares were available under
     the 1993 Plan as of December 19, 1997,  on such date the Board of Directors
     effectively  suspended further grants of options under the 1993 Plan to the
     extent that any such grant would increase the shares subject to outstanding
     grants above the figures as of such date.

     The stock options  granted from either plan may be incentive  stock options
     ("ISO") or nonstatutory  stock options ("NSO").  The Board of Directors may
     set the rate at which the options expire,  subject to limitations discussed
     below. However, no options shall be exercisable after the tenth anniversary

<PAGE>

                                  CORTECH, INC.
                          NOTES TO FINANCIAL STATEMENTS

                     Years Ended December 31, 1998 and 1997


     of the  date of grant  or,  in the case of  ISOs,  three  months  following
     termination  of  employment,  except in cases of death or  disability,  for
     which  the  time  or  exercisability  is  extended.   In  the  event  of  a
     dissolution,  liquidation  or other  corporate  reorganization,  all  stock
     options  outstanding  under the 1986 Plan and the 1993  Plan  would  become
     exercisable in full.

     ISOs may not be granted at an  exercise  price of less than the fair market
     value of the common stock at the date of grant.  If an ISO is granted to an
     employee who owns more than 10% of the Company's  total voting stock,  such
     exercise  price shall be at least 110% of fair  market  value of the common
     stock, and the ISO shall not be exercisable until after five years from the
     date of grant.  The exercise  price of each NSO may not be less than 85% of
     the fair market  value of the common  stock at the date of grant.  The ISOs
     outstanding  as of December  31,  1998,  generally  become  exercisable  in
     varying amounts over a two-to-five year period from the date of grant. NSOs
     also generally become exercisable over a two-to-five year period.

     Each of these plans also provides for stock appreciation  rights, which may
     be granted with respect to any stock option. No stock  appreciation  rights
     have been granted as of December 31, 1998.

     During 1991, a Nonemployee  Directors' Stock Option Plan was approved which
     authorized  the grant of stock  options to purchase up to 15,000  shares of
     common stock to the  nonemployee  directors  of the  Company.  The exercise
     price of the options is equal to the fair market value of the shares on the
     date of grant,  which is generally  the later of  initiation of the plan or
     the date of election to the Board of Directors. In March 1993, the Board of
     Directors  suspended further grants under this plan. Vesting of the options
     occurred upon the  participation  by a director in a Board  meeting.  As of
     December 31, 1998,  options to purchase  10,800  shares of common stock had
     been granted and were fully  vested.  The Company  recorded the  difference
     between  the fair  market  value of the  underlying  common  stock  and the
     exercise price as compensation expense over the vesting period.

     The Company's 1992 Nonemployee  Directors' Stock Option Plan authorizes the
     granting of options to purchase up to 40,000  shares of common stock to the
     nonemployee  directors of the Company.  The plan was originally approved by
     the stockholders on May 17, 1993, and an amendment to the plan was approved
     by the  stockholders  on May 10, 1994. No options were granted during 1998.
     During 1997,  options to purchase 2,750 shares of common stock were granted
     to  nonemployee  directors.  During 1994, in order to effect a repricing of
     certain of these options, options to purchase 16,225 shares of common stock
     were amended to become options to purchase 14,854 shares of common stock at
     an exercise price of $17.50 per share.

<PAGE>

                                  CORTECH, INC.
                          NOTES TO FINANCIAL STATEMENTS

                     Years Ended December 31, 1998 and 1997


     The amended  options  generally  become  exercisable  from one to two years
     later  than  as  originally   granted.   The  Company   recorded   deferred
     compensation in 1993 of approximately $114,000 based on the amount that the
     fair market value of the Company's common stock exceeded the exercise price
     on the date the  options  were  approved by the  stockholders.  The Company
     began  in  July  1993  to  amortize   such   deferred   compensation   over
     approximately  five  years  and  has  recorded   compensation   expense  of
     approximately $1,000 and $6,000 in 1998 and 1997,  respectively.  There are
     currently  options to purchase  19,054  shares of common stock  outstanding
     under the plan at exercise  prices ranging from $14.70 to $87.50 per share.
     By its terms, the plan terminated on December 31, 1997 (although such event
     does not affect outstanding options granted under the plan).

     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes  option-pricing model with the following weighted-average
     assumptions:

                                                1997
                                                ----

             Expected life (years)              1.0
             Interest rate                      5.54%
             Volatility                        93.10%

     During 1998, no options were granted.

     A  summary  of the  status  of the  Company's  1986  Plan,  1993  Plan  and
     nonemployee directors' stock option plans as of December 31, 1998, 1997 and
     changes during the years ended on those dates is presented below:

<TABLE>
<CAPTION>

                                        1998                              1997           
                             ----------------------------      ---------------------------
                                         Weighted-Average                 Weighted-Average
Options                      Shares       Exercise Price       Shares      Exercise Price  
-------                      ------      ----------------      ------     ----------------
<S>                       <C>                 <C>            <C>               <C>     
Options
  outstanding
  at beginning
  of year                    199,951          $20.60           244,270         $20.80
  Granted                          -               -             4,680          13.90
  Forfeited/canceled      (   96,128)          21.30         (  48,999)         20.80
                           ---------                          --------
Outstanding at
  end of year                103,823           20.20           199,951          20.60
                           =========                          ========
Options exercisable
  at year end                 93,608           20.30           144,157          20.90
                           =========                          ========

Weighted-average
  fair value of
  options granted
  during the year                                  -                           $ 5.20

</TABLE>

<PAGE>


                                  CORTECH, INC.
                          NOTES TO FINANCIAL STATEMENTS

                     Years Ended December 31, 1998 and 1997


     The Company granted other options to certain directors and consultants:


<TABLE>
<CAPTION>
                                        1998                              1997            
                             ----------------------------     ----------------------------
                                         Weighted-Average                 Weighted-Average
Options                      Shares       Exercise Price      Shares       Exercise Price  
-------                      ------      ----------------     ------      ----------------
<S>                         <C>              <C>             <C>               <C>  
Outstanding
  beginning of
  year                       14,559          $37.10           16,059           $39.20
  Forfeited/canceled        ( 1,233)          21.50          ( 1,500)           60.00
                             ------                           ------
Outstanding at
  end of year                13,326           38.40           14,559            37.10
                             ======                           ======
Options exercisable
  at year end                13,326           38.40           13,175            38.60
                             ======                           ======


</TABLE>


     The following table summarizes  information about stock options outstanding
     at December 31, 1998:

<TABLE>
<CAPTION>


                                  Options Outstanding                                       Options Exercisable               
                      --------------------------------------------------      -----------------------------------------------------
                            Number       Weighted-Average    Weighted-              Number       Weighted-Average       Weighted-
       Range of         Outstanding at    Remaining Life      Average           Outstanding at    Remaining Life         Average
    Exercise Prices   December 31, 1998     (in years)    Exercise Price      December 31, 1998     (in years)       Exercise Price
    --------------------------------------------------------------------      -----------------------------------------------------
    <S>                   <C>                <C>             <C>                   <C>                <C>               <C>         
       $10 - $20           78,444            5.84            $ 17.10                73,246            5.7               $ 17.20
    $20.01 - $30           31,622            5.5             $ 25.30                26,605            5.12              $ 25.50
    $30.01 - $40            2,125            5.45            $ 34.70                 2,125            5.45              $ 34.70  
    $80 - $87.50            4,958            3.31            $ 80.60                 4,958            3                 $ 80.60
                          -------                                                  ------- 
                          117,149                                                  106,934
                          =======                                                  =======

</TABLE>

     During 1992,  the Company  granted  options to purchase 5,000 shares of the
     Company's  common stock at $26.00 per share to the former  president of the
     Company. These options began vesting upon the occurrence of certain events.
     The  Company  recorded  $170,000  in  deferred  compensation  based  on the
     difference  between the fair value of the  underlying  common  stock on the
     date the  specified  event  incurred and the  exercise  price of $26.00 per
     share.  Deferred  compensation  was amortized over the  applicable  vesting
     periods.   In  connection   with  these  options,   the  Company   recorded
     amortization expense of approximately $20,000 in 1997.

     Stock Purchase Plan
     -------------------

     In  December  1992,  the Board of  Directors  approved  an  employee  stock
     purchase plan. Under the terms of the plan,  30,000 shares of the Company's
     common  stock  were  authorized  for  purchase  by  eligible  employees  as
     specified by the Board of Directors.  Eligible  employees  were granted the
     right to purchase shares with a percentage of such  employees'  earnings at
     the  lesser  of 85% of the fair  market  value of the  common  stock on the

<PAGE>

                                  CORTECH, INC.
                          NOTES TO FINANCIAL STATEMENTS

                     Years Ended December 31, 1998 and 1997


     offering date or exercise  date.  Under the plan,  employees  purchased 584
     shares  of the  Company's  common  stock in 1997 at  $6.60  per  share.  In
     November 1997, the employee stock purchase plan was  effectively  suspended
     pending further action by the Board of Directors.

     For disclosure purposes under SFAS No. 123, compensation cost is recognized
     for the fair value of the employees'  purchase rights,  which was estimated
     using the Black-Scholes model with the following assumptions:

                                                            1997
                                                            ----

                  Expected life (years)                     1.0
                  Interest rate                             5.54%
                  Volatility                               93.10%
                  Weighed-average fair value              $ 3.30


     Registration Rights
     -------------------

     Investors in the CP-0127 Development  Corporation ("CDC") offering (Note 7)
     are  entitled to certain  "piggyback"  registration  rights with respect to
     shares of common stock they hold. At December 31, 1998, CDC investors owned
     75 shares of common  stock.  Furthermore,  21,969  common  shares  acquired
     through the  exercise  of warrants  carry  similar  piggyback  registration
     rights.

5.   Income Taxes
     ------------

     As of December 31, 1998, the Company has approximately $86.6 million of net
     operating   loss   carryforwards   ("NOL")  for  income  tax  purposes  and
     approximately   $2.9  million  of  research  and   development  tax  credit
     carryforwards  available to offset future  federal  income tax,  subject to
     limitations for alternative minimum tax. The NOL's and credit carryforwards
     are subject to  examination  by the tax  authorities  and expire in various
     years from 1999 through 2013.

     The  components  of the net deferred  income tax asset at December 31, 1998
     were as follows (in $000's):

          Net operating loss carryforwards           $29,441
          Research and development credits             2,880
          Other                                          403
          Less: Valuation allowance                 ( 32,724)
                                                     -------

          Net deferred tax asset                     $     -
                                                     =======

<PAGE>


                                  CORTECH, INC.
                          NOTES TO FINANCIAL STATEMENTS

                     Years Ended December 31, 1998 and 1997


     The  Company  has  not yet  achieved  profitable  operations.  Accordingly,
     Management  believes the deferred tax assets as of December 31, 1998 do not
     satisfy the realization criteria set forth in SFAS No. 109 and has recorded
     a valuation allowance for the entire net tax asset.

     By  recording a  valuation  allowance  for the entire  amount of future tax
     benefits,  the Company has not recognized a deferred tax benefit for income
     taxes in its statements of operations. The difference between the Company's
     recorded  income tax benefit and that  computed by applying  the  statutory
     Federal income tax rate to its loss before income taxes is due primarily to
     the valuation  allowance  established  to offset the Company's net deferred
     tax asset.

     Included in the net  operating  loss  carryforward  is  approximately  $1.7
     million  related to income tax  deductions  for the Company's  stock option
     plans.  The tax benefit of such  deductions will be recorded as an increase
     in additional paid-in capital when realized.

     The Tax Reform Act of 1986 contains  provisions  that may limit the NOL and
     credit  carryforwards  available  to be used in any  given  year  upon  the
     occurrence of certain events, including significant changes in ownership of
     a company of  greater  than 50% within a  three-year  period  results in an
     annual  limitation  on the  Company's  ability to utilize  its NOLs and tax
     credit carryforwards from tax periods prior to the ownership change.

6.   Commitments
     -----------

     The Company has various noncancellable  operating leases for its office and
     laboratory  space.  Rent  expense for these  facilities  was  approximately
     $314,000 and $427,000 in 1998 and 1997,  respectively.  Future minimum cash
     obligations under these leases are $34,000 for the year ending December 31,
     1999, all of which has been expensed in 1998.

7.   CP-0127 Development Corporation
     -------------------------------

     In February  1992,  the Company  completed a private  placement  of 709,687
     units (as discussed  below) to unrelated third parties  representing  total
     subscriptions of approximately  $8,516,000.  Each unit was comprised of one
     share of CDC common stock and three warrants for Cortech  common stock,  of
     which one warrant  expired each on December  31, 1998,  1997 and 1996 (Note
     4). The net proceeds received by CDC were allocated to CDC as consideration
     for its common stock and to the Company for the issuance of the warrants in
     the amounts of approximately $5,284,000 and $3,232,000,  respectively. Such
     allocation  was based on the relative  fair market  value of the  Company's
     warrants and the CDC common stock.


<PAGE>

                                  CORTECH, INC.
                          NOTES TO FINANCIAL STATEMENTS

                     Years Ended December 31, 1998 and 1997


     In connection  with the formation of CDC, the Company granted to CDC, under
     the terms of a  technology  license  agreement,  an  exclusive  license  to
     certain  technology for human  pharmaceutical use within the United States,
     Canada  and  Europe  for  $1,000,000.  CDC,  in turn,  granted to Cortech a
     worldwide  exclusive  right and license to the technology that is developed
     by Cortech.

     In connection with the technology  license agreement referred to above, the
     Company entered into a research and  development  agreement with CDC. Since
     December 31, 1997, the Company was not engaged in active development of any
     compounds covered by the license agreement.

     The Company was granted an option by the purchasers of the CDC common stock
     to purchase all, but not less than all, of the 709,687 shares of CDC common
     stock  outstanding.  The purchase option was exercisable at any date before
     December  31, 1998,  based on an exercise  price of $75.40 per share of CDC
     common stock in 1998. The option has expired unexercised.

8.   Employee Retirement Plan 
     ------------------------

     The  Company  provides  a defined  contribution  401(k)  plan for  eligible
     employees.  Employee  contribution  to the plan is voluntary.  In 1994, the
     Company  voluntarily began contributing an amount equal to 25% of a covered
     employee's  contribution to a maximum of 1% of compensation.  The Company's
     contributions to the plan totaled $6,000 in 1998 and $21,000 in 1997.


<PAGE>



ITEM 8. -         CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS
-------           ON ACCOUNTING AND FINANCIAL DISCLOSURE
                  --------------------------------------

     On January 14, 1999,  Arthur Andersen LLP ("Arthur  Andersen")  resigned as
independent  auditors  of  the  financial  statements  of  Cortech,   Inc.  (the
"Company") as of and for the year ended  December 31, 1998. On January 14, 1999,
the  Board of  Directors  of the  Company  retained  PricewaterhouseCoopers  LLP
("PwC"),  Certified  Public  Accountants,  as its certifying  accountant for the
fiscal year ended December 31, 1998.

     No report  on the  financial  statements  of the  Company  issued by Arthur
Andersen  during  the last two fiscal  years  contained  an  adverse  opinion or
disclaimer  of opinion,  or was qualified or modified as to  uncertainty,  audit
scope or accounting principles, nor were there any disagreements during the last
two fiscal years and through  January 14, 1999,  between Arthur Andersen and the
Company concerning any matter of accounting  principles or practices,  financial
statement disclosure, or auditing scope or procedure, which disagreements if not
resolved  would have required  Arthur  Andersen to make reference to the subject
matter thereof in connection  with its report.  During the last two fiscal years
and through January 14, 1999, none of the events listed in items (1) through (3)
of Item  304(b) of  Regulation  S-K have  occurred;  and during  such period the
Company  has not  consulted  with PwC  concerning  any matter  referred to under
paragraphs (i) or (ii) of Item 304(a)(2) of Regulation S-K.



<PAGE>



                                    PART III
                                    --------

ITEM 9. - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
-------   PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE 
          EXECUTIVE ACT
          -------------

Election of Directors
---------------------

     The Company's  Restated  Certificate of Incorporation  and Bylaws,  each as
amended,  provide  that the  Board of  Directors  shall be  divided  into  three
classes, each class consisting, as nearly as possible, of one-third of the total
number of directors,  with each class having a three-year term. Vacancies on the
Board may be filled  only by  persons  elected by a  majority  of the  remaining
directors.  A director  elected by the Board to fill a vacancy  will serve until
such director's successor is elected and qualified.

     The Board of  Directors  is presently  composed of seven  members.  Messrs,
Koether,  Jaindl,  Galuchie and Bicksler were elected at the 1998 Annual Meeting
of  Stockholders.  Directors  will serve until their terms expire or until their
successors are duly elected and qualified. The Company's officers are elected by
and serve at the leave of the Board.

     There is no arrangement or understanding  between any executive officer and
any other person pursuant to which such officer was elected.

     The directors  and  executive  officers of the Company at February 28, 1999
were as follows:

                                           Position and Office
                                             Presently holds          Director
    Name of Person              Age         with the Company           Since 
    --------------              ---        -------------------        --------

    Paul O. Koether             62         Chairman and Director        1998

    Mark W. Jaindl              39         Vice Chairman and
                                           Director                     1998

    John W. Galuchie, Jr.       46         President and
                                           Director                     1998

    James L. Bicksler, Ph.D.    60         Director                     1998

    Bert Fingerhut              55         Director                     1988

    Edward Finkelstein          61         Director                     1998

    John E. Repine, MD          54         Director                     1998

    Sue Ann Itzel               35         Treasurer and
                                           Secretary                       -

                                             

<PAGE>



Set forth below is biographical information for each Director by class:

CLASS I DIRECTORS (Continuing in office until the 2001 Annual Meeting)


     Paul O. Koether, Chairman and Director of the Company since September 1998,
is principally engaged in the following businesses: (i) as Chairman and director
of Kent Financial  Services,  Inc.  ("Kent") since July 1987 and President since
October  1990 and the  general  partner  since 1990 of Shamrock  Associates,  an
investment  partnership  which  is the  principal  stockholder  of Kent and (ii)
various positions with affiliates of Kent,  including  Chairman since 1990 and a
registered   representative  since  1989  of  T.  R.  Winston  &  Company,  Inc.
("Winston") and since July 1992, a director of American  Metals  Service,  Inc.,
("AMS")  which was an  indirect,  majority-owned  subsidiary  of Kent before its
shares  were  distributed  to  Kent's  stockholders.  Mr.  Koether  is also  the
President of Asset Value Management  ("AVM"), a wholly owned subsidiary of Kent,
AVM the sole general partner of Asset Value Fund Limited Partnership  ("AVFLP").
Mr. Koether also has been Chairman  since April 1988,  President from April 1989
to February  1997 and  director  since March 1988 of Pure  World,  Inc.,  ("Pure
World") and since  December  1994 has been a director and since January 1995 has
been Chairman of Pure World's majority-owned  subsidiary,  Pure World Botanicals
Inc.("PWBI") a manufacturer  and  distributor  of natural  products.  He is also
Chairman  and a director of Pure  World's  principal  stockholder,  Sun Equities
Corporation,  ("Sun") a private  company.  Mr.  Koether served as Chairman and a
director of  NorthCorp  Realty  Advisors,  Inc.,  an asset  management  company,
("NorthCorp")  from June 1992 when it was  acquired by Pure World until  August,
1994 when it was merged and renamed Crown NorthCorp, Inc.

     Mark W. Jaindl,  Vice Chairman and Director of the Company since  September
1998, is the President and Chief  Executive  Officer of the American Bank of the
Lehigh Valley, a commercial bank. He has served as Senior Vice President of Pure
World from June 1992 until May 1995 and as a director since October 1994. He was
Senior Vice  President of PWBI from  December 1994 until May 1995 and a director
of PWBI since  December  1994 and he has served as a director  of AMS since July
1992. Mr. Jaindl was a director of NorthCorp from June 1992 until September 1994
and was Interim  President of NorthCorp  from  February  1994 until August 1994.
From May 1982 to  October  1991 and again  since May 1995 he has served as Chief
Financial Officer of Jaindl Farms,  which is engaged in diversified  businesses,
including the operation of a 12,000-acre turkey farm, a mobile home park, a John
Deere  dealership  and a grain  operation.  Mr.  Jaindl also served as the Chief
Financial Officer of Jaindl Land Company, a developer of residential, commercial
and industrial properties in eastern Pennsylvania.

     John W.  Galuchie,  Jr., a certified  public  accountant  and President and
Director of the Company  since  September  1998, is  principally  engaged in the
following businesses:  (i) Winston, as President since January 1990 and director
since September 1989; (ii) Kent, in various executive positions since 1986 and a
director from June 1989 until August 1993;  (iii) Pure World,  as Executive Vice
President  since April 1988,  director  from January 1990 until October 1994 and
for more than five years as Vice President and director of Sun; (iv) AMS as Vice
President,  Treasurer and a director since July 1992.  Mr.  Galuchie is also the

<PAGE>

Vice  President  and  Secretary of AVM, the sole general  partner of AVFLP.  Mr.
Galuchie  served  as  a  director  of  Crown  NorthCorp,   Inc.,  the  successor
corporation to NorthCorp from June 1992 to August 1996. Since December 1998, Mr.
Galuchie has been a director of HealthRite, Inc.

   CLASS II DIRECTORS (Continuing in office until the 1999 Annual Meeting)

     Bert Fingerhut, has been a Director of the Company since 1988 and served as
Chairman  of the Board from June 1991 to April  1997.  Mr.  Fingerhut  presently
pursues private business and conservation  interests.  From 1984 to 1985, he was
Special Limited Partner and Senior Vice President of Odyssey Partners, a private
investment  partnership.  From 1965 to 1983,  he was General  Partner,  Managing
Director,  Executive  Vice  President and Director of Research of  Oppenheimer &
Company,  Inc., an investment  banking  firm.  Mr.  Fingerhut is Chairman of the
Board of Directors of Toxics Targeting,  a private company based in Ithaca, N.Y.
that tracks and provides  information  on toxic waste  sites.  He is currently a
member of the  Executive  Committee of the Governing  Council of the  Wilderness
Society,  the  Vice-Chairman  of the Board of  Directors  of the  Southern  Utah
Wilderness  Alliance,  a Director of the Grand  Canyon  Trust and Trustee of the
Alaska Conservation Foundation.

     John E. Repine,  M.D.,  has been a Director of the Company since July 1998.
Dr.  Repine has been the  President  since 1993 and  Director  since 1989 of the
Webb-Waring  Institute for cancer, aging and anti-oxidant  research.  He is also
the James J. Waring  Professor in the  Department of Medicine and  Pediatrics at
the University of Colorado Health Science Center.  Dr. Repine was elected to the
American  Society of  Clinical  Investigation  and the  Association  of American
Physicians.  He is also the recipient of an Established  Investigator Award from
the American Heart Association, the Basil O'Connor Research Award from the March
of Dimes and the  Bonfils-Stanton  Award  for his  outstanding  contribution  to
medicine and science.  Dr. Repine serves on the scientific  advisory boards of a
number of biotechnology companies. He currently holds 6 patents.


CLASS III DIRECTORS (Continuing in office until the 2000 Annual Meeting)

     James L. Bicksler,  Ph.D., Director of the Company since September 1998, is
a Professor of Economics and Finance,  Graduate  School of  Management,  Rutgers
University, a position he has held since 1969.

     Edward Finkelstein, has been a Director of the Company since July 1998. Mr.
Finkelstein  has been a managing  partner of REM, a real estate holding  company
since 1986, and the President and Chief Executive Officer of Edmark Development,
a commercial real estate development and management company,  since 1990. He has
also served as the President and Chief Executive  Officer of Central  Motors,  a
holding company of Midwestern car dealerships,  since 1991, and the Chairman and
Chief Executive Officer of Rollabind, Inc., the largest manufacturer of patented
disc  binding  systems  worldwide,  since  1996.  Between  1972  and  1991,  Mr.
Finklestein was President and Chief Executive Officer of Michigan Sporting Goods
Distributors,  Inc., the parent company of MC Sports,  one of the largest retail
sporting good chains in the world.

<PAGE>



OFFICERS

     Sue Ann Itzel, a certified public accountant and Secretary and Treasurer of
the Company  since  September  1998,  is  principally  engaged in the  following
businesses:  (i)  Secretary  of Kent and  Winston  since  September  1995;  (ii)
Assistant  Secretary and Assistant Treasurer of Pure World since September 1995;
(iii) Assistant Secretary of PWBI since September 1995; (iv) Assistant Secretary
and  Assistant  Treasurer  of AVM,  the sole  general  partner  of  AVFLP  since
September  1995, and (v) Assistant  Secretary of AMS since  September 1995. From
1992 through 1995, Ms. Itzel was employed in various positions at First Fidelity
Bank, lastly as Assistant Vice President.

BOARD COMMITTEES AND MEETINGS

     During the fiscal year ended December 31, 1998, the Board of Directors held
ten meetings. The Board currently has an Audit Committee composed of Mr. Jaindl,
as Chairman, Dr. Bicksler and Dr. Repine.

     The Audit Committee meets with the Company's  independent auditors at least
annually  to review the results of the annual  audit and  discuss the  financial
statements; recommends to the Board the independent auditors to be retained; and
receives and considers  the  accountants'  comments as to controls,  adequacy of
staff and management  performance,  and procedures in connection  with audit and
financial  controls.  The Audit Committee,  which was previously composed of Mr.
Fingerhut and a former director, met once during 1998.

     During the year ended December 31, 1998, each Board member,  except Mr. von
Roy and Dr. Gold,  attended 75% or more of the  aggregate of the meetings of the
Board and of the committees on which he served, held during the period for which
each was a director or committee member, respectively.

Compliance with the Reporting Requirements of Section 16(a)
-----------------------------------------------------------

     Section  16(a) of the  Securities  Exchange  Act of 1934 (the  "1934  Act")
requires the Company's  directors and  executive  officers,  and persons who own
more than ten percent of a registered class of the Company's equity  securities,
to file with the SEC  initial  reports of  ownership  and  reports of changes in
ownership of Common Stock and other equity securities of the Company.  Officers,
directors  and  greater  than  ten  percent  stockholders  are  required  by SEC
regulation  to furnish the Company  with copies of all Section  16(a) forms they
file.

     To the Company's knowledge,  based solely on a review of the copies of such
reports  furnished  to the  Company and  written  representations  that no other
reports were  required,  during the fiscal year ended  December  31,  1998,  all
Section 16(a) filing  requirements  applicable  to its  officers,  directors and
greater than ten percent beneficial owners were complied with.


<PAGE>



ITEM 10. -   EXECUTIVE COMPENSATION
-------      ----------------------
   
Compensation of Directors
-------------------------

     Until the current Board of Directors was elected by the stockholders at the
1998 Annual Meeting,  each  non-employee  director  received options to purchase
Common Stock of the Company  under the 1992  Amended and  Restated  Non-Employee
Directors'  Stock Option Plan (the "1992  Directors'  Plan") as compensation for
his or her  services as a director and received  additional  options  under such
plans for service on certain committees of the Board. Options may also have been
granted  to  non-employee  directors  outside of such  Plan.  Outside  directors
received  $1,000 per Board  meeting  attended and $1,000 per  committee  meeting
attended  if held on a  non-Board  meeting  occasion  and an  additional  $6,000
annually.  On September 23, 1998, the current Board of Directors agreed that all
directors fees and granting of stock options to directors would be suspended.

     Option  grants  under  the  1992   Directors'   Plan  were   automatic  and
non-discretionary. Each person who was a non-employee director of the Company as
of the adoption date of the 1992 Directors'  Plan was granted options  generally
covering  2,500 shares,  with  adjustments  to equalize the  directors'  overall
options in light of options  previously  granted to them. Such options generally
became exercisable ("vest") in year-end installments of 500 shares. For services
as Chairman,  Mr.  Fingerhut  received an option  covering an  additional  2,125
shares (the "Chairman  Option"),  vesting at the rate of 41.67 shares per month,
and each  member of the  Compensation  and  Audit  Committees  received  options
covering  an  additional  50 shares for each  committee  on which he served.  In
addition,  (a)  each  person  subsequently  elected  for  the  first  time  as a
non-employee  director  was  granted an option on the date of his or her initial
election as a director to purchase a pro rata portion of 2,500 shares, depending
upon when he or she was  elected,  which  options  generally  vested in year-end
installments of 500 shares; (b) each person  subsequently  elected for the first
time to the Audit or Compensation Committee was granted an option to purchase 50
shares if elected before July 1, or a portion  thereof,  prorated on a quarterly
basis,  if elected  after such date,  vesting in full on  December  31; (c) each
non-employee director received an annual option to purchase an additional number
of shares,  determined by multiplying 500 by a fraction,  the numerator of which
was $200 and the denominator of which was the fair market value per share of the
Common Stock on the grant date, subject to minimum and maximum limits of 250 and
500  shares,  respectively,  vesting  quarterly  over five  years;  and (d) each
non-employee  director who was a member of the Company's  Audit or  Compensation
Committee  received an annual  option to purchase 50 shares,  vesting in full on
December  31.  Vesting of all  options  was  subject to  continued  service as a
non-employee  director or employee of the Company during the vesting period and,
in the case of options granted for service on a committee,  to continued service
on the  applicable  committee.  As of December  31,  1997,  165 options had been
exercised under the 1992 Directors'  Plan. By its terms,  the plan terminated on
December  31,  1997  (although  such event does not affect  outstanding  options
granted under the plan.)



<PAGE>



     All  non-employee  directors are reimbursed for their expenses  incurred in
attending Board of Directors meetings.

     Directors  who  are  employees  of  the  Company  do not  receive  separate
compensation for their services as directors.

     During the fiscal year ended  December  31,  1997,  non-employee  directors
received  options  pursuant to the 1992  Directors'  Plan as follows:  Dr. Cohen
received  options  covering 500 shares at an exercise price of $14.69 per share;
Mr.  Fingerhut  received  options  covering 600 shares at $14.69 per share;  Dr.
Misher received options covering 550 shares at $14.69 per share; and Dr. Kennedy
received options covering 550 shares at $14.69 per share.

Compensation of Executive Officers
----------------------------------

     The  following  table shows for the fiscal  years ended  December 31, 1998,
1997 and 1996,  compensation  awarded or paid to, or earned by,  each person who
served as (i) the Company's  Chief  Executive  Officer during 1998, and (ii) the
Company's other most highly compensated  executive officers at December 31, 1998
(the "Named Executive Officers"):

<TABLE>
<CAPTION>

                                                                          Long-Term Compensation
                                      Annual Compensation                         Awards             
                                -------------------------------      ------------------------------
Name and                                                             Securities
Principal                                                            Underlying        All other
Position                         Year       Salary        Bonus       Options       Compensation(1)
---------                        ----       ------        -----      ----------     ---------------

<S>                              <C>       <C>          <C>              <C>            <C>     
Paul O. Koether                  1998      $     -      $     -              -          $      -
 Chief Executive (2)
 Officer and
 Chairman of the
 Board

John W. Galuchie,Jr.(2)          1998      $     -      $     -              -          $      -
 President

Kenneth R., Lynn(3)              1998      $135,975     $     -              -          $459,887
 Former President,               1997       265,513      65,000              -             1,141
 Chief Executive Officer         1996       265,006      65,000          7,500             1,174
 and Chairman of
 the Board

Joseph L. Turner(4)              1998      $      -     $     -              -          $      -
 Former Vice President,          1997       165,537           -              -             2,165
 Finance and                     1996       154,533      25,000          4,000             2,399
 Administration
 Chief Financial
 Officer and
 Secretary

Diarmuid Boran(5)                1998      $140,375     $     -              -          $  1,707
 Former Vice President,          1997       140,364      30,000              -             1,708
 Corporate                       1996       140,046      25,000          4,000             1,707
 Development and
 Planning

</TABLE>

                              

<PAGE>

--------------------

(1)  Includes matching payments by the Company under its 401(k) Plan and premium
     paid by the Company for group term life  insurance.  For 1998,  the amounts
     were  $664 and  $456,  respectively,  for Mr.  Lynn and  $1,404  and  $304,
     respectively,  for Mr.  Boran.  In  addition,  for Mr.  Lynn,  this  amount
     includes severance benefits as more fully described in (3) below.

(2)  Mr.  Koether and Mr.  Galuchie were elected to their  current  positions on
     September 20, 1998 and receive no compensation or fees for their services.

(3)  Mr.  Lynn  left all  positions  with the  Company  as of May 18,  1998.  In
     accordance with the prior Board's  determination  that Mr. Lynn's departure
     constituted  a  Termination  Event  under the  Executive  Compensation  and
     Benefits Agreement dated as of October 14, 1997 between the Company and Mr.
     Lynn,  Mr. Lynn was entitled to receive the benefits  provided  thereunder,
     subject to the  modifications  set forth in the letter  agreement dated May
     18,  1998  between  Mr.  Lynn  and the  Board:  (i)  the  lump  sum  salary
     continuation  payment was limited to 20 months salary or $441,667,  (ii) no
     pro rata bonus was paid, and (iii) all outstanding options held by Mr. Lynn
     were terminated and  extinguished.  Pursuant to the letter  agreement,  Mr.
     Lynn  agreed to make  himself  available  as a  consultant  to the  Company
     through  June  30,  1998 at a rate  equal  to half  of his  former  rate of
     compensation; consulting fees totaling $17,100 were paid to Mr. Lynn during
     such period. In addition,  the Company entered into an indemnity  agreement
     with Mr. Lynn whereby it agreed to indemnify him against  claims arising in
     connection with acts or omissions arising out of his service as a director,
     executive, employee, consultant and/or agent of the Company.

(4)  Mr.  Turner  resigned  as an  officer  and  employee  of the  Company as of
     December 1, 1997. At such time, Mr. Turner and the Company  entered into an
     agreement pursuant to which Mr. Turner served as a consultant and continued
     to receive his former salary  through June 30, 1998.  Stock options held by
     Mr. Turner at the time of his resignation  continued to vest until June 30,
     1998.

(5)  Mr. Boran became an executive  officer in 1995. In May 1998,  Mr. Boran was
     appointed Chief Operating Officer and Acting Chief Financial Officer of the
     Company.  Mr. Boran resigned  effective December 31, 1998 and received as a
     severance  benefit  approximately  nine  months  salary  which  included an
     arrangement  to provide  consulting  services to the Company.  No severance
     benefits were paid to Mr. Boran in 1998.


     Stock Option Grants and Exercises
      --------------------------------

     No options were granted to or  exercised  by the Named  Executive  Officers
during 1998 or 1997.


                                          

<PAGE>



     The table below contains  information  concerning the fiscal year-end value
of unexercised options held by the Executive Officers.

<TABLE>
<CAPTION>

                                               Fiscal Year-End Options Values           
                                 ------------------------------------------------------------
                                                                    Value of Unexercised
                                   Number of Unexercised               In-the-Money
                                    Options at 12/31/98             Options at 12/31/98
                                 Exercisable/Unexercisable       Exercisable/Unexercisable(1) 
                                 ------------------------------------------------------------

         Name
         ----
         <S>                        <C>                                    <C>
         Paul O. Koether                 -   /       -                     -   /   -
         John W. Galuchie, Jr.           -   /       -                     -   /   -
         Kenneth R. Lynn                 -   /       -                     -   /   -                                
         Joseph L. Turner           16,400   /  13,400                     -   /   -
         Diarmuid Boran                  -   /       -                     -   /   -


         No options were exercised during 1998.

         (1)      There were no In-the-Money options at December 31, 1998.


</TABLE>
 
<PAGE>



ITEM 11. -        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------          --------------------------------------------------------------

     The following table sets forth the beneficial  ownership of Common Stock of
the Company as of February 28, 1999, by each person who was known by the Company
to  beneficially  own more than 5% of the Common  Stock,  by each  director  and
officer and directors and officers as a group.

                                         Number of Shares          Approximate
 Name and Address of                     of Common Stock             Percent
 Beneficial Owner                      Beneficially Owned(1)        of Class 
--------------------                   ---------------------      -------------

 Asset Value Fund Limited                     441,650                  23.84%
  Partnership(2)
  376 Main Street
  PO Box 74
  Bedminster, NJ 07921

 Paul O. Koether (3)                          441,650                  23.84%
  211 Pennbrook Road
  PO Box 97
  Far Hills, NJ 07931

 Mark W. Jaindl (2)                            25,000                   1.35%
  3150 Coffeetown Road 
  Orefield, PA 18069

 James L. Bicksler                                  -                       -
  96 Inwood Ave
  Upper Montclair, NJ 07043

 John W. Galuchie, Jr.(3)                     441,650                  23.84%
  376 Main Street
  PO Box 74
  Bedminster, NJ 07921

 Bert Fingerhut(4)                             56,440                   3.02%
  1520 Silver King Drive
  Aspen, CO 81611-1049

 Edward Finkelstein                            44,402                   2.40%
  17842 Argyll Terrace
  Boca Raton, FL 33496-1415

 John E. Repine, M.D.(5)                          500                       *
  2275 Cherry Hills Farm Drive
  Englewood, CO 80110

 Sue Ann Itzel(3)                             441,650                  23.84%
  376 Main Street
  PO Box 74
  Bedminster, NJ 07921

 All directors and officers
 as a group (8 persons)(6)                    552,071                  29.81%
 -----------------------------------
 * Represents less than one percent.


<PAGE>




(1)  This table is based upon  information  supplied by the Company's  officers,
     directors  and principal  stockholders  and Schedule 13D and 13G filed with
     the Securities Exchange Commission (the "SEC").  Unless otherwise indicated
     in the footnotes to this table and subject to community property laws where
     applicable,  the Company  believes that each of the  stockholders  named in
     this table has sole voting and investment  power with respect to the shares
     indicated  as  beneficially  owned.  Applicable  percentages  are  based on
     1,852,209 shares outstanding on February 28, 1999,  adjusted as required by
     rules promulgated by the SEC.

(2)  The sole general  partner of Asset Value Fund Limited  Partnership  ("Asset
     Value") is Asset Value Management, Inc. ("AVM"), a Delaware corporation and
     wholly  owned  subsidiary  of Kent  Financial  Services  Inc.  ("Kent"),  a
     Delaware corporation. Mr. Koether is the Chairman and President of Kent and
     the President of AVM. Mr.  Galuchie is the Vice  President and Treasurer of
     Kent and  Treasurer of AVM and Ms.  Itzel is the  Assistant  Secretary  and
     Assistant  Treasurer of AVM and  Secretary  of Kent.  On February 10, 1998,
     Mark W. Jaindl and  Frederick  J.  Jaindl  acquired,  respectively,  25,000
     shares and 52,000 shares of the Company's  Common Stock from Asset Value in
     a privately negotiated transaction.  Mark Jaindl is the son of Fred Jaindl.
     Mark and Fred Jaindl disclaim beneficial ownership of each others shares.

(3)  Includes 441,650 shares held by Asset Value.

(4)  Includes options to purchase 15,571 shares, which are exercisable within 60
     days of the  date of this  table.  Also  includes  300  shares  held by Mr.
     Fingerhut's wife and 1,700 shares by Mr. Fingerhut's minor daughter.

(5)  Includes  options to purchase 500 shares,  which are exercisable  within 60
     days of the date of this table.

(6)  Includes  options  to  purchase  a  total  of  15,921  shares,   which  are
     exercisable  within 60 days of the date of this table by executive officers
     and directors.

ITEM 12. -        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
--------          ----------------------------------------------

Indemnification
---------------

     The Company's Certificate of Incorporation and Bylaws provide,  among other
things,  that the Company will  indemnify  each  officer or director,  under the
circumstances  and to the extent  provided for therein,  for expenses,  damages,
judgments,  fines  and  settlements  he may be  required  to pay in  actions  or
proceedings to which he is or may be made a party by reason of his position as a
director,  officer or other  agent of the  Company,  and  otherwise  to the full
extent permitted under Delaware law.

<PAGE>

Severance Agreements
--------------------

     Kenneth R. Lynn and Diarmuid  Boran have entered into certain  arrangements
with Cortech which provide for certain payments and benefits.  Joseph L. Turner,
Cortech's  former Vice President,  Finance and  Administration,  Chief Financial
Officer and Secretary,  entered into a consulting  arrangement with Cortech upon
his    resignation    on   December   1,   1997   (see   Item   10    "Executive
Compensation-Compensation of Executive Officers").

             

<PAGE>

                                    PART IV
                                    -------


ITEM 13. -   EXHIBITS
--------     --------

The following exhibits are filed as part of this report:

Exhibit
Number                     Description of Document
-------                    -----------------------

   3.1    (a)              Certificate of Incorporation of Cortech, Inc. as
                           amended.(1)

          (b)              Certificate of Amendment of Certificate of
                           Incorporated of Cortech, Inc.(11)

   3.3                     Certificate of Designation for Series A Junior
                           Participating Preferred Stock.(6)

   3.4                     Amended and Restated ByLaws of Cortech, Inc.(9)

   4.1                     Reference is made to Exhibits 3.3 and 10.30(9)

   4.2                     Specimen certificate for the Common Stock of
                           Cortech, Inc.(1)

   10.28                   Sponsored Research and License Agreement,
                           dated February 13, 1987, between The John
                           Hopkins University and the Company.(1)

   10.29                   License Agreement, dated June 30, 1997
                           between The Research Foundation of the
                           State University of New York and the Company.(1)

   10.30                   Stock Purchase Agreement dated July 8, 1994,
                           between the Company and the Research
                           Foundation of State University of New York.(5)

   10.31                   Royalty Buyout Agreement dated July 8, 1994,
                           between the Company and the Research
                           Foundation of State University of New York.(5)

   10.39                   Amended and Restated 1986 Incentive Stock Option
                           Plan of the Company.(1)**

   10.40                   1991 Non-employee Directors' Stock Option Plan
                           of the Company.(2)**

   10.41                   Amended and Restated 1992 Non-employee Directors'
                           Stock Option Plan of the Company.(4)**
                           

<PAGE>

Exhibit
Number                     Description of Document
-------                    -----------------------

   10.42                   1993 Employee Stock Purchase Plan of the Company,
                           as amended.(3)**

   10.43                   1993 Equity Incentive Plan of the Company,
                           as amended.(10)**

   10.47                   Executive Officers' Severance Benefit Plan.(7)**

   10.55                   Amendment No. 1 To Executive Officers' Severance
                           Benefit Plan.(7)**

   10.57                   Second Amendment of the Research, Development
                           and License Agreement dated April 23, 1997,
                           between Ono and the Company.(8)*

   10.94                   Executive Compensation Benefits Continuation
                           Agreement between the Company and Kenneth R. Lynn,
                           dated October 14, 1997, as amended February 12,
                           1998.(9)**

   10.97                   Form of Option Agreement for Directors' Non-Plan
                           Options.(10)**

   10.98                   Termination Agreement between the Company and
                           Diarmuid Boran dated January 29, 1999.(11)**

   27.1                    Financial Data Schedule.(11)

   Reports on Form 8-K

     On January  15,  1999,  the  Company  filed Form 8-K  reporting a change in
     accountants  from Arthur  Andersen LLP to  PricewaterhouseCoopers  LLP. See
     Item 8 "Changes in and  Disagreements  with  Accountants  on Accounting and
     Financial Disclosure".

     On October 5, 1998,  the Company filed Form 8-K reporting that the Board of
     Directors  authorized the  redemption of all  outstanding  preferred  share
     purchase rights issued pursuant to the Rights  Agreement,  dated as of June
     13, 1995, between the Company and American  Securities  Transfer,  Inc., as
     Rights  Agent,  effective  as of the close of business on October 13, 1998,
     with the  redemption  price of $.10 per right paid in cash on  October  14,
     1998 to the  holders  of record of Common  Stock of the  Company  as of the
     close of business on October 13, 1998. 

--------------------------

(1)  Filed as an exhibit to the  Company's  Registration  Statement of Form S-1,
     filed October 13, 1992,  file number  33-53244,  or amendments  thereto and
     incorporated herein by reference.


<PAGE>



(2)  Filed as an exhibit  to the  Company's  annual  report on Form 10-K for the
     year ended December 31, 1992, and incorporated herein by reference.

(3)  Filed as an exhibit to the  Company's  Registration  Statement on Form S-8,
     filed March 29,  1993,  file number  33-60242,  or  amendments  thereto and
     incorporated herein by reference.

(4)  Filed as an exhibit  to the  Company's  annual  report on Form 10-K for the
     year ended December 31, 1993, and incorporated herein by reference.

(5)  Filed as an exhibit to the Company's  quarterly report on Form 10-Q for the
     quarter ended September 30, 1994, and incorporated herein by reference.

(6)  Filed as an exhibit to Cortech  Inc.'s  annual  report on Form 10-K for the
     year ended December 31, 1995, and incorporated herein by reference.

(7)  Filed as an exhibit to Cortech,  Inc.'s  annual report on Form 10-K for the
     year ended December 31, 1996, and incorporated herein by reference.

(8)  Filed as an exhibit to Cortech,  Inc.'s  quarterly  report on Form 10-Q for
     the quarter ended June 30, 1997, and incorporated herein by reference.

(9)  Filed as an exhibit to the  Company's  Registration  Statement on Form S-4,
     filed February 17, 1998,  file number 33-46445 and  incorporated  herein by
     reference.

(10) Filed as an exhibit to Cortech,  Inc.'s  annual report on Form 10-K for the
     year ended December 31, 1997, and incorporated herein by reference.

(11) Filed herewith.

*    Subject to Confidential Treatment Order.

**   Compensatory Plan.





<PAGE>

                                   SIGNATURES


     Pursuant  to the  requirements  of  Section  13 or 15(d) 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.


                                              CORTECH, INC.

March 29, 1999                                By: /s/ Paul O. Koether
                                                  --------------------
                                                  Paul O. Koether
                                                  Chairman and Chief
                                                  Executive Officer


March 29, 1999                                By: /s/ Sue Ann Itzel
                                                  ------------------
                                                  Sue Ann Itzel
                                                  Treasurer
                                                  (Principal Financial and
                                                  Accounting Officer)


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed by the  following  persons in the  capacities  and on the
dates indicated.

       Signature                       Capacity                     Date     
-----------------------          ---------------------         ---------------

 /s/ Paul O. Koether             Chairman and Director         March 29, 1999 
 --------------------            (Principal Executive
 Paul O. Koether                 Officer)


 /s/ Mark W. Jaindl              Vice Chairman                 March 29, 1999
 -------------------             and Director
 Mark W. Jaindl


 /s/ John W. Galuchie, Jr.       President and Director        March 29, 1999
 -------------------------
 John W. Galuchie, Jr.


 /s/ James L. Bicksler           Director                      March 29, 1999
 ---------------------
 James L. Bicksler


 /s/ Bert Fingerhut              Director                      March 29, 1999
 ---------------------
 Bert Fingerhut


 /s/ Edward Finkelstein          Director                      March 29, 1999
 ----------------------
 Edward Finkelstein

                      
 /s/ John E. Repine, M.D.        Director                      March 29, 1999
 ------------------------
 John E. Repine, M.D.