**SECURITIES ANDEXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-K/A**

**(Amendment No. 1)**

 
| **ý** |   | **Annual Report Pursuant to Section 13 or 15 (d) of  the Securities Exchange Act of 1934 for the fiscal year ended June 30, 2003.** |
|------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

 

**OR**

 
| **o** |   | **Transition Report Pursuant to Section 13 or 15(d) of  the Securities Exchange Act of 1934 for the transition period  from             to             .** |
|-------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

**Commission file number: 000-22987**

 

**VALENTIS, INC.**

(ExactName of Registrant as Specified in Its Charter)

 

** **

| **DELAWARE**                                                    |   | **94-3156660**                        |
|-----------------------------------------------------------------|--------|---------------------------------------|
| (State or Other Jurisdiction of  Incorporation or Organization) |   | (I.R.S. Employer  Identification No.) |

 

 

**863A Mitten RoadBurlingame, California 94010**(Addressof Principal Executive Offices)

Registrant’stelephone number, including area code: **(650) 697-1900**

 

Securitiesregistered pursuant to Section 12(b) of the Act: **None**

 

Securitiesregistered pursuant to Section 12(g) of the Act: **Common Stock, $0.001 par value**

 

Indicate bycheck mark whether the Registrant: (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. ý Yes oNo

 

Indicate bycheck mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to thebest of registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K/A. o

 

Indicate bycheck mark whether the registrant is an accelerated filer (as defined in Rule12b-2 of the Exchange Act). Yes o  No ý

 

The aggregatemarket value of the voting stock held by non-affiliates of the Registrant as ofOctober 24, 2003 based on the closing sales price of the Registrant’scommon stock, as reported on the Nasdaq SmallCap Market, was approximately$8,978,230. Shares of common stock held by each officer and director have beenexcluded in that such persons may be deemed to be affiliates. Thisdetermination of affiliate status is not necessarily a conclusive determinationfor other purposes.

 

The number ofshares of Common Stock, par value $0.001 per share, of Valentis, Inc.outstanding as of October 24, 2003 was 5,777,210.

 

 

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**EXPLANATORY NOTES**

 

This AmendmentNo. 1 on Form 10-K/A is being filed by Valentis, Inc. (the“Company”) as an amendment to our Annual Report on Form 10-K for thefiscal year ended June 30, 2003 to amend and restate in its entiretyPart III.

 

**PART III**

 

ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

 

**Certain Information With Respect to Directors**

 

The followingtable sets forth certain information with respect to the members of our Boardof Directors as of September 12, 2003.

 

 
| **Name of Director**               |   | **Age** |   | **Position**                                     |   | **Director Since** |   | **Term Expiring** |
|------------------------------------|--------|---------|--------|--------------------------------------------------|--------|--------------------|--------|-------------------|
|                               |   |    |   |                                             |   |               |   |              |
| Reinaldo M.  Diaz (2)              |   | 49      |   | Director                                         |   | 2003               |   | 2003              |
| Mark D.  McDade (1)(2)             |   | 48      |   | Director                                         |   | 2000               |   | 2003              |
| Benjamin F.  McGraw, III, Pharm.D. |   | 54      |   | President,  Chief Executive Officer and Director |   | 1994               |   | 2004              |
| Dennis J.  Purcell.                |   | 48      |   | Director                                         |   | 2003               |   | 2004              |
| John S.  Schroeder, M.D (1).       |   | 66      |   | Director                                         |   | 2003               |   | 2004              |
| Patrick G.  Enright (1)            |   | 41      |   | Director                                         |   | 1998               |   | 2005              |
| Alan C.  Mendelson                 |   | 55      |   | Director                                         |   | 2001               |   | 2005              |

 

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(1)                                  Member of Audit Committee

(2)                                  Member of Compensation Committee

 

 

**Reinaldo M. Diaz**

 

Reinaldo M.Diaz, 49, has served as a director of the Company since January 2003. Mr. Diazco-founded Diaz & Altschul Capital Management (“D&A”) in 1996 and has servedas its Chief Investment Officer since then. D&A is an asset management firm that focuses on healthcarecompanies. Mr. Diaz has been active in the investment banking industry for over21 years.  From 1993 to 1996, Mr. Diazwas Managing Director and Head of the Healthcare Group at Schroder Wertheim& Co., Inc., where he was responsible for establishing and developing thefirm’s investment banking presence in the healthcare sector.  From 1981 to 1993, Mr. Diaz was withPaineWebber Incorporated.  From 1981 to1985, he was a member of the Investment Banking Department, where he focused onHealthcare and Technology clients.  In1985, Mr. Diaz co-founded PaineWebber Development Corporation (“PWDC”) and wasPWDC’s President from 1990 to 1993.  Mr.Diaz is also currently a director of Medrium, Inc., Berkeley Heart Labs, Inc.and Tenex Greenhouse Ventures LLC.  Mr.Diaz has served on the board of directors of Alkermes, Inc., Amgen DevelopmentCorporation, Genentech Development Corporation III, Genzyme DevelopmentCorporation and several private companies. Mr. Diaz is Co-Chairman of Medrium, Inc., a company focused on claimssubmission software and management practice tools for physicians.  He is a graduate of Harvard College and ofHarvard University Graduate School of Business.

 

**Patrick G. Enright**

 

Patrick G.Enright, 41, has served as a director of the Company since March 1998 andperformed consulting services for the Company from December 2001 toJune 2002. Since June 2002, Mr. Enright has been a general partnerof Pequot Ventures, where he specializes in healthcare venture capitalinvestments. From March 1998 to December 2001, Mr. Enright was amanaging member of Diaz & Altschul Group, LLC, a principal investmentgroup specializing in investments in biopharmaceutical and medical devicecompanies. From March 1995 to February 1998, Mr. Enright servedin various executive positions at the Company, including Senior Vice President,Corporate Development and Chief Financial Officer. From September 1993 toJune 1994, Mr. Enright was Senior Vice President of Finance andBusiness Development for Boehringer Mannheim Therapeutics, a pharmaceuticalcompany and a subsidiary of Corange Ltd. From September 1989 toSeptember 1993, Mr. Enright was employed at PaineWebber Incorporated,an investment banking firm, where he became a Vice President inJanuary 1992. Mr. Enright is also currently a director ofNuGen Technologies, Inc.

 

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Codexis, Inc. and RavenBiotechnologies, Inc. Mr. Enright received his M.B.A. from the WhartonSchool of Business at the University of Pennsylvania and his B.S. in BiologicalSciences from Stanford University.

 

**Alan C. Mendelson**

 

Alan C.Mendelson, 55, has served as a director of the Company since February 2001and as Secretary of the Company from March 2000 to June 2003.Mr. Mendelson is a senior partner of Latham & Watkins LLP, aprivate law firm, and has been with that firm since May 2000. Previously,Mr. Mendelson was with Cooley Godward LLP, a private law firm, for27 years and served as the managing partner of its Palo Alto office fromMay 1990 to March 1995 and from November 1996 toOctober 1997. Mr. Mendelson served as Acting General Counsel ofCadence Design Systems, Inc., an electronic design automation softwarecompany, from November 1995 to June 1996. Mr. Mendelsonpreviously served as Secretary and Acting General Counsel of Amgen, Inc.,a biopharmaceutical company, from April 1990 to April 1991.Mr. Mendelson is a director of QLT, Inc. since April 2002.Mr. Mendelson received his J.D. from Harvard Law School and his A.B. inPolitical Science from the University of California, Berkeley.

 

**Mark D. McDade**

 

Mark D. McDade,48, has served as a director of the Company since May 2000. Since December2002, Mr. McDade has served as Chief Executive Officer of Protein Design Labs.From January 2001 to December 2002, Mr. McDade had been the ChiefExecutive Officer of Signature BioScience, Inc., a privately-held companyfocused on drug discovery. Mr. McDade was the President and ChiefOperating Officer of Corixa Corporation, a developer of immunotherapeuticproducts through 2000. As a co-founder of Corixa in September 1994, heserved as its Chief Operating Officer since that company’s inception. Prior toCorixa, Mr. McDade held various management positions at BoehringerMannheim and Sandoz Ltd. Mr. McDade also serves on the boards ofdirectors of Corixa Corporation and Akceli, Inc. Mr. McDade earned anM.B.A. from the Harvard University Graduate School of Business and a B.A. inHistory from Dartmouth College.

 

**Benjamin F. McGraw, III, Pharm.D.**

 

Benjamin F.McGraw, III, Pharm.D., 54, has served as the Company’s President and ChiefExecutive Officer since September 1994, when he joined Megabios Corp., andas Chairman since May 1997. In March 1999, Megabios merged withGeneMedicine, Inc. to form Valentis. In August 1999, Valentis mergedwith PolyMASC Pharmaceuticals, plc. Prior to Megabios, Dr. McGraw gainedexperience in R&D as Vice President, Development for Marion and Marion,Merrell Dow; in business development as Corporate Vice President, CorporateDevelopment at Allergan, Inc.; and in finance as President of CarerraCapital Management. Dr. McGraw also serves on the board of directors ofISTA Pharmaceuticals. Dr. McGraw received his Doctor of Pharmacy from theUniversity of Tennessee Center for the Health Sciences, where he also completeda clinical practice residency.

 

**Dennis J. Purcell**

 

Dennis J.Purcell, 48, has served as a director of the Company since January 2003.Since April 2000, Mr. Purcell has been senior managing partner of thePerseus-Soros BioPharmaceutical Fund, L.P. Mr. Purcell is responsible forthe overall management of the fund, which is dedicated to making private equityinvestments in the life sciences industry and is also a significant investor inthe Company. Prior to joining Perseus-Soros, Mr. Purcell served asManaging Director of Life Sciences Investment Banking at Chase H&Q(formerly Hambrecht & Quist) from 1994 to 2000, Mr. Purcell has oftenbeen cited as one of the life sciences sector’s leaders. He was honored in the“Biotech Hall of Fame” by Genetic Engineering News in June 1998 and named tothe Biotechnology All-Stars list by Forbes ASAP in May 1999. Prior to joiningH&Q, Mr. Purcell was a Managing Director in the Healthcare Group atPaineWebber, Inc. Mr. Purcell currently serves on the Bioethics Committee ofThe Biotechnology Industry Organization.

 

**John S. Schroeder, M.D.**

 

John S.Schroeder, M.D., 66, has served as a director of the Company sinceApril 2003, and had previously served as a director from June 2002 toJanuary 2003. Dr. Schroeder is a Professor of Medicine at theStanford University School of Medicine, where he was an intern and residentfrom 1962 to 1967, a postdoctoral fellow from 1967 to 1969 and became Chief ofthe Cardiovascular Medicine Clinic at Stanford after an Assistant and AssociateProfessorship of Medicine there. Dr. Schroeder is nationally andinternationally known for his research in heart transplantation, coronaryartery spasm and coronary artery disease, with over twelve books and 270scientific publications to his credit. Dr. Schroeder received his B.A.from the University of Michigan, Ann Arbor and his M.D. from the University ofMichigan Medical School.

 

3

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**Certain Information With Respect to Executive Officers**

 

The executiveofficers of our company as of September 12, 2003 are as follows:

 
| **Name**                           |   | **Age** |   | **Position**                                     |
|------------------------------------|--------|---------|--------|--------------------------------------------------|
|                               |   |    |   |                                             |
| Benjamin F.  McGraw, III, Pharm.D. |   | 54      |   | President,  Chief Executive Officer and Chairman |
| John J.  Reddington, PhD, DVM      |   | 49      |   | Sr. Vice  President, Development                 |
| Joseph A.  Markey                  |   | 49      |   | Senior  Director of Finance and Controller       |

 

 

The principaloccupations and positions for the past five years, and in some cases prioryears, of the executive officers named above, are as follows (unless set forthelsewhere in this report):

 

 

**Joseph A. Markey**

 

Joseph A.Markey, 49, has served as the Company’s Senior Director of Finance andController since February 2002. From April 2000 toFebruary 2002, Mr. Markey served as Director of Finance of theCompany. From July 1979 to April 2000, Mr. Markey held variousdomestic and international financial positions with International Business MachinesCorporation. Mr. Markey received an M.B.A. and a B.S. in finance from theUniversity of Scranton.

 

**John J. Reddington**

 

John J.Reddington, 49, has served as Senior Vice President since May 2003,although he has periodically consulted for the Company since its inception asMegabios. Prior to joining Valentis, Mr. Reddington served as Presidentand Chief Executive Officer for DiagXotics, Inc., a privately held veterinarybiotechnology company for 15 years. From January 1998 throughJune 2000, Mr. Reddington also served as interim CEO for a fledglingfunctional genomics company, XeneX LLC. Before founding DiagXotics,Mr. Reddington was the Director of Greenwich Biotherapeutics, Inc., abiotechnology company working in human cancer biotherapy from May 1988 toDecember 1989. Mr. Reddington received DVM and Ph.D. degrees fromWashington State University, a Masters degree from the University of Texas,Arlington, and a B.A. from Rice University in Houston, Texas.

 

**Section 16(a) Beneficial Ownership Reporting Compliance**

 

Section 16(a)of the Exchange Act of 1934 (the “Exchange Act”) requires that our executiveofficers and directors, and persons who own more than ten percent of aregistered class of our equity securities, file reports of ownership andchanges in ownership (Forms 3, 4 and 5) with the Securities and ExchangeCommission (the “SEC”). Executive officers, directors andgreater-than-ten-percent holders are required to furnish us with copies of allof these forms, which they file.

 

Based solely onour review of these reports or written representations from certain reportingpersons, we believe that during the fiscal year ended June 30, 2003,all filing requirements applicable to our officers, directors,greater-than-ten-percent beneficial owners and other persons subject to Section 16(a)of the Exchange Act were met, with the exception of Mr. Markey who filed a Form3 late in June 2003.

 

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ITEM 11. COMPENSATION OFEXECUTIVE OFFICERS

 

**Summary Compensation Table**

 

The followingtable shows for the fiscal years endedJune 30, 2003, 2002 and 2001, compensation awarded orpaid to, or earned by, the Company’s (i) Chief Executive Officer;(ii) the two most highly compensated executive officers, other than theChief Executive Officer, whose total annual salary and bonus exceeded $100,000for the fiscal year ended June 30, 2003, and (iii) two otherindividuals who would have been one of the most highly compensated except thatthey were not serving as executive officers as of June 30, 2003 (the“Named Executive Officers”):

 
|                             |   |     |   | **Annual  Compensation** |    | **Long-Term  Compensation** |   |                                |   |
|----------------------------------|--------|----------|--------|--------------------------|---------|-----------------------------|--------|-------------------------------------|--------|
| **Name  and Principal Position** |   | **Year** |   | **Salary**               |    | **Bonus  (1)**              |   | **Other  Annual  Compensation (2)** |   | **Securities  Underlying********Options/SARs** |   | **All  Other Compensation (3)** |   |
|                             |   |     |   |                     |    |                        |   |                                |   |   |   |   |   |
| Benjamin F.  McGraw, III,        |   | 2003     |   | $                        | 338,185 |                        | — |                                | — |   | 370,333 |   | $ | 255,193 | (4) |
| Pharm.D.,  President,            |   | 2002     |   | 338,185                  |    | 96,624                      |   | —                              |   | 6,100 |   | 1,380 |   |
| Chief Executive  Officer and     |   | 2001     |   | 322,081                  |    | 91,155                      |   | —                              |   | 3,167 |   | 1,380 |   |
| Chairman                         |   |     |   |                     |    |                        |   |                                |   |   |   |   |   |
|                             |   |     |   |                     |    |                        |   |                                |   |   |   |   |   |
| Joseph A. Markey                 |   | 2003     |   | $                        | 137,613 |                        | — |                                | — |   | 45,666 |   | $ | 58,844 | (5) |
| Senior Director  of              |   | 2002     |   | 126,250                  |    | $                           | 17,536 |                                | — |   | 1,473 |   | 1,484 | (6) |
| Finance and  Controller          |   | 2001     |   | 116,904                  |    | 3,625                       |   | —                              |   | — |   | 344 |   |
|                             |   |     |   |                     |    |                        |   |                                |   |   |   |   |   |
| J. Tyler Martin,  Sr., M.D.,     |   | 2003     |   | $                        | 68,927  | (7)                         | — |                                | — |   | 1,666 |   | $ | 145,056 | (8) |
| Senior Vice  President,          |   | 2002     |   | $                        | 242,175 |                        | $      | 37,803                              |   | — |   | 3,641 |   | 35,994 |   |
| Development                      |   | 2001     |   | 199,013                  |    | —                      |   | —                              |   | 5,667 |   | 427 |   |
|                             |   |     |   |                     |    |                        |   |                                |   |   |   |   |   |
| John J.  Reddington,             |   | 2003     |   | $                        | 19,395  | (9)                         | — |                                | — |   | 80,000 |   | — |   |
| Senior Vice  President,          |   |     |   |                     |    |                        |   |                                |   |   |   |   |   |
| Development                      |   |     |   |                     |    |                        |   |                                |   |   |   |   |   |
|                             |   |     |   |                     |    |                        |   |                                |   |   |   |   |   |
| Margaret M.  Snowden,            |   | 2003     |   | $                        | 168,103 | (10)                        | — |                                | — |   | 1,666 |   | $ | 173,094 | (11) |
| General Counsel                  |   | 2002     |   | $                        | 188,115 |                        | $      | 37,060                              |   | — |   | 2,919 |   | 403 |   |
|                             |   | 2001     |   | 185,300                  |    | 24,663                      |   | —                              |   | 333 |   | 383 |   |

 

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(1)                                  Bonuses reflect payment by theCompany to the named executive officer during the fiscal year for suchofficer’s performance in the prior fiscal year.

 

(2)                                  As permitted by rulespromulgated by the SEC, no amounts are shown where the amounts constituteperquisites and do not exceed the higher of 10% of the sum of the salary andbonus column or $50,000.

 

(3)                                  Unless otherwise indicated,amount represents insurance premiums paid by the Company with respect to grouplife insurance for the benefit of the Named Executive Officers.

 

(4)                                  Represents payments that havebeen deferred to a future date for compensation of $253,639 earned byDr. McGraw during fiscal year ended June 30, 2003 associated withDr. McGraw’s continued retention and employment with the Company.Continued retention and employment compensation was applicable to all retainedemployees, was expensed in fiscal year ended June 30, 2003 and ispayable in the future upon the mutual agreement of Company and Dr. McGraw.Also represents $1,554 in insurance premiums paid by the Company with respectto group life insurance for the benefit of Dr. McGraw.

 

(5)                                  Represents (i) a payment thathas been deferred to a future date for compensation of $31,563 earned byMr. Markey during fiscal year ended June 30, 2003 associated withMr. Markey’s continued retention and employment with the Company, and (ii)a payment of $26,767 for compensation earned by Mr. Markey during fiscal yearended June 30, 2003 associated with Mr. Markey's continued retention andemployment with The Company. Continued retention and employment compensationwas applicable to all retained employees and expensed in fiscal year endedJune 30, 2003. The $31,563 is payable in the future upon the mutualagreement of Company and Mr. Markey. Also represents $514 in insurancepremiums paid by the Company with respect to group life insurance for thebenefit of Mr. Markey.

 

(6)                                  Represents (i) a $1,120payment for dependant care benefits and (ii) $364 in insurance premiums paidby the Company with respect to group life insurance for the benefit ofMr. Markey.

 

(7)                                  Represents actual compensationreceived by Dr. Martin during fiscal year ended June 30, 2003.Dr. Martin left the Company in October 2002. His annualized salary for thefiscal year ended June 30, 2003 was $242,175.

 

(8)                                  Represents (i) a $121,087severance payment by the Company to Dr. Martin, (ii) $23,817 payment foraccrued vacation time, and (iii) $152 in insurance premiums paid by the Companywith respect to group life insurance for the benefit of Dr. Martin.

 

(9)                                  Represents actual compensationreceived by Mr. Reddington during fiscal year ended June 30, 2003.Mr. Reddington joined the Company in June 2003. Mr. Reddington’sannualized salary for fiscal year ended June 30, 2003 was $245,000.

 

(10)                            Represents actual compensationreceived by Ms. Snowden during fiscal year ended June 30, 2003. Ms. Snowdentransitioned out of her role as General Counsel and Officer of the Company asof April 2003 and currently serves in a consulting capacity to Valentis. Ms.Snowden’s annualized salary for fiscal year ended June 30, 2003 was $204,124.

 

(11)                            Represents compensation of$157,097 earned by Ms. Snowden during fiscal year ended June 30, 2003associated with Ms. Snowden’s continued retention and employment with theCompany until April 2003. This compensation was paid in fiscal year endedJune 30, 2003. Also represents (i) $15,644 payment for accrued vacation time,and (ii) $353 in insurance premiums paid by the Company with respect to grouplife insurance for the benefit of Ms. Snowden.

 

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**STOCK OPTION GRANTS AND EXERCISES**

 

The Companygrants options to its executive officers under its 1997 Equity Incentive Planand its 2001 Nonstatutory Incentive Plan (the “Incentive Plans”). As ofOctober 15, 2003, options to purchase a total of 809,683 shares wereoutstanding under the Incentive Plans and options to purchase 586,922 sharesremained available for grant thereunder.

 

The following tablesshow for the fiscal year ended June 30, 2003, certain informationregarding options granted to, exercised by, and held at year end by, the NamedExecutive Officers:

 

**Option Grants in Fiscal Year Ended June 30, 2003**

 
|                       |   | **Individual Grants**                                       |   |                                                               |                 |       |   |        |    |                                                                                                      |   |
|----------------------------|--------|-------------------------------------------------------------|--------|--------------------------------------------------------------------|----------------------|------------|--------|-------------|---------|-----------------------------------------------------------------------------------------------------------|--------|
|                       |   | **Number of  Securities  Underlying  Options  Granted (#)** |   | **% of Total  Options  Granted to  Employees in  Fiscal Year (2)** |                 |       |   |        |    | **Potential Realizable Value at  Assumed Annual Rates of  Stock Price Appreciation for  Option Term (1)** |   |
|                       |   |                                                        |   |                                                               |                 |       |   |        |
|                       |   |                                                        |   | **Exercise or  Base Price  ($/share) (3)**                         |                 |       |   |        |
|                       |   |                                                        |   |                                                               | **Expiration  Date** |       |   |
| **Name**                   |   |                                                        |   |                                                               |                 | **5% ($)** |   | **10% ($)** |    |
|                       |   |                                                        |   |                                                               |                 |       |   |        |    |                                                                                                      |   |   |   |
| Benjamin F. McGraw, III,   |   | 3,333                                                       |   | 0.36                                                               | %                    | $          | 31.20  |        | 7/11/12 |                                                                                                      | $      | 65,399 |   | $ | 165,733 |   |
| Pharm.D.                   |   | 367,000                                                     |   | 39.66                                                              |                 | 3.52       |   | 6/4/13      |    | 812,431                                                                                                   |   | 2,058,860 |   |
|                       |   |                                                        |   |                                                               |                 |       |   |        |    |                                                                                                      |   |   |   |
| Joseph A. Markey           |   | 1,666                                                       |   | 0.18                                                               |                 | 31.20      |   | 7/11/12     |    | 32,689                                                                                                    |   | 82,841 |   |
|                       |   | 24,580                                                      |   | 2.66                                                               |                 | 3.52       |   | 6/4/13      |    | 54,413                                                                                                    |   | 137,893 |   |
|                       |   | 19,420                                                      |   | 2.10                                                               |                 | 3.52       |   | 6/4/13      |    | 42,990                                                                                                    |   | 108,946 |   |
|                       |   |                                                        |   |                                                               |                 |       |   |        |    |                                                                                                      |   |   |   |
| J. Tyler Martin, Sr., M.D. |   | 1,666                                                       |   | 0.18                                                               |                 | 31.20      |   | 7/11/12     |    | 32,689                                                                                                    |   | 82,841 |   |
|                       |   |                                                        |   |                                                               |                 |       |   |        |    |                                                                                                      |   |   |   |
| John J. Reddington         |   | 40,000                                                      |   | 4.32                                                               |                 | 3.52       |   | 6/4/13      |    | 88,548                                                                                                    |   | 224,399 |   |
|                       |   | 40,000                                                      |   | 4.32                                                               |                 | 3.39       |   | 6/4/13      |    | 85,278                                                                                                    |   | 216,111 |   |
|                       |   |                                                        |   |                                                               |                 |       |   |        |    |                                                                                                      |   |   |   |
| Margaret M. Snowden        |   | 1,666                                                       |   | 0.18                                                               |                 | 31.20      |   | 7/11/12     |    | 32,689                                                                                                    |   | 82,841 |   |
|                            |        |                                                             |        |                                                                    |                      |            |        |             |         |                                                                                                           |        |  |  |  |  |  |

 

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(1)                                  Reflects the value of the stockoption on the date of grant assuming (i) for the 5% column, a five-percentannual rate of appreciation in the Company’s Common Stock over the ten-yearterm of the option and (ii) for the 10% column, a ten-percent annual rateof appreciation in the Company’s Common Stock over the ten-year term of theoption, in each case without discounting to net present value and before incometaxes associated with the exercise. The 5% and 10% assumed rates ofappreciation are based on the rules of the SEC and do not represent theCompany’s estimate or projection of the future Common Stock price. The amountsin this table may not necessarily be achieved.

 

(2)                                  Based on options to purchase925,388 shares of the Company’s Common Stock granted in fiscal year endedJune 30, 2003.

 

(3)                                  All options were granted at thefair market value at the date of grant.

 

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**Aggregated Option Exercises in Last Fiscal Year and FiscalYear End Option Values**

 

 
| **Name**                         |   | **Shares  Acquired on  Exercise (#)** |   | **Value  Realized  ($) (1)** |   | **Number of Securities  Underlying Unexercised  Options at June 30, 2003 (#)  Exercisable/Unexercisable** |   | **Value of Unexercised In -  the-Money Options at  June 30, 2003 (2) ($)  Exercisable/Unexercisable** |   |
|----------------------------------|--------|---------------------------------------|--------|------------------------------|--------|-----------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|--------|
|                             |   |                                  |   |                         |   |                                                                                                      |   |                                                                                                  |   |
| Benjamin F. McGraw III, Pharm.D. |   | —                                |   | —                       |   | 102,136 / 283,043                                                                                         |   | $35,783 / $107,348                                                                                    |   |
| Joseph A. Markey                 |   | —                                |   | —                       |   | 12,550 / 35,787                                                                                           |   | $4,290 / $12,870                                                                                      |   |
| J. Tyler Martin, Sr., M.D.       |   | —                                |   | —                       |   | 3,958 / 0                                                                                                 |   | $0 / $0                                                                                               |   |
| John J. Reddington               |   | —                                |   | —                       |   | 20,000 / 60,000                                                                                           |   | $5,200 / $15,600                                                                                      |   |
| Margaret M. Snowden              |   | —                                |   | —                       |   | 2,965 / 0                                                                                                 |   | $0 / $0                                                                                               |   |

 

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(1)                                  Calculated on the fair marketvalue of the Company’s Common Stock on date of exercise minus the exerciseprice.

(2)                                  Calculated on the fair marketvalue of the Company’s Common Stock on June 30, 2003, which was $3.91,minus the exercise price of the options.

 

**COMPENSATION OF DIRECTORS**

 

Eachnon-employee director of the Company receives a quarterly retainer of $3,000and a per meeting fee of $1,000. The members of the Board of Directors are alsoeligible for reimbursement for their expenses incurred in connection withattendance at Board meetings in accordance with Company policy.

 

Under theCompany’s 1998 Non-Employee Directors’ Stock Option Plan as amended andrestated in May 2003, on the date following the annual stockholders’ meeting ofeach year, each non-employee director will automatically be granted, withoutfurther action by the Company, its stockholders or the Board of Directors, anoption to purchase 2,600 shares of Common Stock. In addition, each newnon-employee director will receive a one-time grant to purchase 26,000 sharesof Common Stock on the date of the annual stockholders’ meeting at which suchnew director is elected to the Board of Directors. The exercise price of theoptions granted to the non-employee directors is 100% of the fair market valueof the Common Stock on the date of the option grant.

 

Mr. Enright,one of the Company’s directors, performed consulting services for the Companyfrom December 2001 through June 2002. Mr. Enright receivedoptions to purchase 3,333 shares of the Company’s Common Stock as considerationfor his consulting services. Mr. Enright did not exercise his optionwithin the eligible exercise period and the option grant was terminated consistentwith the terms of the option agreement.

 

**Compensation Committee Interlocks and Insider Participation**

 

During the yearended June 30, 2003, none of the Company’s executive officers served onthe board of any entities whose directors or officers serve on the Company’sCompensation Committee. No current or former executive officer or employee ofthe Company serves on the Compensation Committee.

 

7

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| ITEM 12. |   | SECURITY  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER  MATTERS |
|----------|--------|--------------------------------------------------------------------------------------------------|

 

 

**EQUITY COMPENSATION PLAN INFORMATION**

 

The followingtable sets forth information as of June 30, 2003 with respect to theCompany’s compensation plans under which equity securities of the Company areauthorized for issuance:

 
| **Plan category**                                               |   | **Number of securities to be  issued upon exercise of  outstanding options,  warrants and rights** |   | **Weighted-average exercise  price of outstanding  options, warrants and rights** |   | **Number of securities remaining  available for future issuance  under equity compensation plans  (excluding securities reflected in column (a))** |    |
|-----------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|---------|
|                                                            |   | **(a)**                                                                                            |   | **(b)**                                                                           |   | **(c)**                                                                                                                                            |    |
|                                                            |   |                                                                                               |   |                                                                              |   |                                                                                                                                               |    |
| Equity compensation plans approved by security holders (1)      |   | 694,808                                                                                            |   | $                                                                                 | 28.30  |                                                                                                                                               | 274,467 |   |
|                                                            |   |                                                                                               |   |                                                                              |   |                                                                                                                                               |    |
| Equity compensation plans not approved by security holders  (2) |   | 307,519                                                                                            |   | $                                                                                 | 7.90   |                                                                                                                                               | 382,481 |   |
|                                                            |   |                                                                                               |   |                                                                              |   |                                                                                                                                               |    |
| Total                                                           |   | 1,002,327                                                                                          |   | $                                                                                 | 22.04  |                                                                                                                                               | 656,948 |   |

 

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(1)                                  Consists of the 1997 EquityIncentive Plan, the 1998 Non-Employee Directors’ Stock Option Plan and theGeneMedicine 1993 Stock Option Plan. These equity compensation plans are morefully described in Note 11 to Consolidated Financial Statements includedin the Company’s Annual Report on Form 10-K.

 

(2)                                  In May 2001, the Board ofDirectors adopted the 2001 Nonstatutory Incentive Plan (the “NQ Plan”) covering100,000 shares of common stock of Valentis. An additional 590,000 shares wereadded to the plan as approved by the Board of Directors in May 2003, whenthe plan was amended and restated. The NQ Plan provides for grants of nonstatutorystock options, stock bonuses, rights to purchase restricted stock, or acombination of the foregoing (each, a "Stock Award") to employees andconsultants of Valentis who are not officers and directors. The exercise priceof options granted under the NQ Plan is determined by the Board of Directorsbut cannot be less than 100% of the fair market value of the common stock onthe date of the grant. Options under the NQ Plan generally vest 25% one yearafter the date of grant and on a pro rata basis over the following36 months and expire ten years after the date of grant or 90 daysafter termination of employment. Stock awards granted under the plan cannot berepriced without the prior approval of Valentis’ stockholders. Upon achange in control of Valentis, the surviving corporation or acquiringcorporation is required to assume any Stock Awards outstanding under the NQPlan or substitute similar Stock Awards for any Stock Awards outstanding. Ifany surviving or acquiring corporation refuses to assume such Stock Awards orsubstitute similar Stock Awards, then such Stock Awards shall be terminated ifnot exercised prior to the change of control. Upon a change in control notapproved by the Board of Directors, each outstanding Stock Award shall becomefully vested immediately prior to the consummation of such change in control. As of June 30, 2003,options for 307,519 shares had been granted under this plan.

 

The foregoing summary is qualified in its entirety byreference to the full text of the NQ Plan. The Company will provide, withoutcharge, to each person to whom this proxy statement is delivered, upon requestof such person and by first class mail within one business day of receipt ofsuch request,a copy of the NQ Plan. Any such request should be directed as follows: InvestorRelations, Valentis, Inc., 863A Mitten Road, Burlingame, California 94010;telephone number (650) 697-1900.

 

**SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT**

 

The followingtable sets forth certain information regarding the beneficial ownership of theCompany’s Common Stock as of October 15, 2003 by: (i) each director and nomineefor director; (ii) each of the executives officers named in the SummaryCompensation Table; (iii) all executive officers and directors of the Company asa group; and (iv) all those known by the Company to be beneficial owners ofmore than five percent of its Common Stock. Unless indicated otherwise below,the address of each officer or director listed below is c/o Valentis, Inc.,863A Mitten Road, Burlingame, California 94010.

 

**BENEFICIAL OWNERSHIP**

** **
|                                                                                                                        |   | **Beneficial Ownership (1)** |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|
| **Name and Address of Beneficial Owner**                                                                                    |   | **Number of Shares**         |   | **Percent of Total** |   |
|                                                                                                                        |   |                         |   |   |   |
| Reinaldo M. Diaz (2)                                                                                                        |   | 1,449,903                    |   | 25.1 | % |
| Patrick G. Enright (3)                                                                                                      |   | 19,148                       |   |   | * |
| Joseph A. Markey (4)                                                                                                        |   | 13,754                       |   |   | * |
| Mark D. McDade (5)                                                                                                          |   | 7,912                        |   |   | * |
| Benjamin F. McGraw, III, Pharm.D. (6)                                                                                       |   | 116,860                      |   | 2.0 | % |
| Alan C. Mendelson (7)                                                                                                       |   | 7,942                        |   |   | * |
| Dennis J. Purcell (8)                                                                                                       |   | 1,423,626                    |   | 24.6 | % |
| John J. Reddington (9)                                                                                                      |   | 20,110                       |   |   | * |
| John S. Schroeder, M.D (10).                                                                                                |   | 6,794                        |   |   | * |
| All executive officers and directors as a group (9  persons)                                                                |   | 3,066,049                    |   | 53.1 | % |
|                                                                                                                        |   |                         |   |   |   |
| State of Wisconsin Investment Board (11)  P.O. Box 7842  Madison, WI 53707                                                  |   | 318,131                      |   | 5.5 | % |
|                                                                                                                        |   |                         |   |   |   |
| Entities Affiliated with Wellington Trust Company, N.A.  (12)  75 State Street  Boston, Massachusetts 02109                 |   | 317,300                      |   | 5.5 | % |
|                                                                                                                        |   |                         |   |   |   |
| Entities Affiliated with Diaz & Altschul Advisors, LLC  (13)  Penthouse Suite  29 West 57th Street  New York, NY 10019  |   | 1,449,903                    |   | 25.1 | % |
|                                                                                                                        |   |                         |   |   |   |
| Entities Affiliated with Perseus-Soros BioPharmaceutical  Fund, LP (14)  888 Seventh Avenue, 29th Floor  New York, NY 10106 |   | 1,423,626                    |   | 24.6 | % |

 

8

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*                                         Less than one percent.

 

(1)                                  This table is based uponinformation supplied by officers, directors and principal stockholders andSchedules 13D and 13G, if any, filed with the SEC. Unless otherwise indicatedin the footnotes to this table and subject to community property laws whereapplicable, the Company believes that each of the stockholders named in thistable has sole voting and investment power with respect to the shares indicatedas beneficially owned. Applicable percentages are based on 5,777,210 sharesoutstanding on October 24, 2003, adjusted as required by rules promulgatedby the SEC.

 

(2)                                  Represents: (i) 905,244 shares(including 7,512 shares issuable upon the exercise of immediately exercisablewarrants) owned by Delta Opportunity Fund, Ltd. (“Delta Ltd.”); (ii) 534,659shares (including 4,411 shares issuable upon the exercise of immediately exercisablewarrants) owned by Delta Opportunity Fund (Institutional), LLC (“DeltaInstitutional”); and (iii) 3,500 shares issuable upon the exercise of animmediately exercisable warrant owned by Diaz &Altschul Capital Management,LLC. Diaz & Altschul Advisors, LLC, an affiliate of Diaz & AltschulCapital Management, LLC, provides portfolio management services to Delta Ltd.and Delta Institutional and therefore may be deemed the beneficial owner of theshares held by Delta Ltd. and Delta Institutional. Mr. Diaz is a managingmember of Diaz & Altschul Capital Management, LLC. Mr. Diaz disclaimsbeneficial ownership of these securities except to the extent of his pecuniaryinterest therein. Also, represents 6,500 shares issuable upon the exercise ofstock options granted to Mr. Diaz that are currently exercisable or exercisablewithin 60 days of October 15, 2003. Excludes 19,500 shares issuable upon theexercise of stock options granted to Mr. Diaz that are not currentlyexercisable and will not be exercisable within 60 days of October 15, 2003.

 

(3)                                  Represents: (i) 5,555 sharesowned by Mr. Enright; (ii) 283 shares held in trust for the benefit of one Mr.Enright’s children for which Mr. Enright and his spouse serve as co-trustees;(iii) 246 shares held in trust for the benefit of one of Mr. Enright’s childrenfor which Mr. Enright and his spouse serve as co-trustees; (iv) 66 shares heldin a partnership of which Mr. Enright is a general partner; (v) 3,500 sharesissuable upon the exercise of an immediately exercisable warrant issued to Mr.Enright; and (vi) 9,498 shares issuable upon the exercise of stock optionsgranted to Mr. Enright that are currently exercisable or exercisable within 60days of October 15, 2003. Excludes 19,500 shares issuable upon theexercise of stock options granted to Mr. Enright that are not currentlyexercisable and will not be exercisable within 60 days ofOctober 15, 2003.

 

(4)                Represents:(i) 281 shares owned by Mr. Markey; and (ii) 13,473 shares issuable upon theexercise of stock options granted to Mr. Markey that are currently exercisableor exercisable within 60 days of October 15, 2003. Excludes 34,864shares issuable upon the exercise of stock options granted to Mr. Markey thatare not currently exercisable and will not be exercisable within 60 days ofOctober 15, 2003.

 

(5)                Represents:7,912 shares issuable upon the exercise of stock options granted to Mr. McDadethat are currently exercisable or exercisable within 60 days ofOctober 15, 2003. Excludes 19,587 shares issuable upon the exerciseof stock options granted to Mr. McDade that are not currently exercisable andwill not be exercisable within 60 days of October 15, 2003.

 

(6)                                  Represents: (i) 1,535 sharesowned by Dr. McGraw; (ii) 10,505 shares and 404 shares held in an irrevocable trustand in a children’s trust, respectively, for the benefit of Dr. McGraw’schildren for which Dr. McGraw and his spouse serve as co-trustees; and (iii)104,416 shares issuable upon the exercise of stock options granted to Dr.McGraw that are currently exercisable or exercisable within 60 days ofOctober 15, 2003. Excludes 280,763 shares issuable upon the exerciseof stock options granted to Dr. McGraw that are not currently exercisable andwill not be exercisable within 60 days of October 15, 2003.

 

(7)                                  Represents: (i) 537 shares ownedby Mr. Mendelson; and (ii) 7,405 shares issuable upon the exercise of stockoptions granted to

 

9

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Mr. Mendelsonthat are currently exercisable or will be exercisable within 60 days of October15, 2003. Excludes 19,761 shares issuable upon the exercise of stock optionsgranted to Mr. Mendelson that are not currently exercisable and will not beexercisable within 60 days of October 15, 2003.

 

(8)                                  Represents: (i) 1,422,953 shares(including 11,923 shares subject to immediately exercisable warrants and 6,500shares issuable upon the exercise of stock options granted to Mr. Purcell thatare currently exercisable or exercisable within 60 days of October 15, 2003)beneficially owned by Perseus-Soros BioPharmaceutical Fund, LP, and (ii) 673shares owned by Mr. Purcell. Mr. Purcell is a senior managing partner ofPerseus-Soros BioPharmaceutical Fund, LP. Mr. Purcell disclaims beneficialownership of these securities except to the extent of his pecuniary interesttherein. Excludes 19,500 shares issuable upon the exercise of stock optionsgranted to Mr. Purcell that are not currently exercisable and will not beexercisable within 60 days of October 15, 2003.

 

(9)                                  Represents: (i) 110 shares ownedby Mr. Reddington; and (ii) 20,000 shares issuable upon the exercise of stockoptions granted to Mr. Markey that are currently exercisable or exercisablewithin 60 days of October 15, 2003. Excludes 60,000 shares issuableupon the exercise of stock options granted to Mr. Reddington that are notcurrently exercisable and will not be exercisable within 60 days ofOctober 15, 2003.

 

(10)                            Represents: 6,794 sharesissuable upon the exercise of stock options granted to Dr. Schroeder that arecurrently exercisable or exercisable within 60 days ofOctober 15, 2003. Excludes 20,039 shares issuable upon the exerciseof stock options granted to Dr. Schroeder that are not currently exercisableand will not be exercisable within 60 days of October 15, 2003.

 

(11)                            Based solely on an amendedSchedule 13G filed on March 7, 2003 with the SEC.

 

(12)                            Based solely on an amendedSchedule 13G filed on February 12, 2003 with the SEC.

 

(13)                            Based solely on aSchedule 13G filed on February 3, 2003 with the SEC.

 

(14)                            Based solely on aSchedule 13G filed on February 3, 2003 with the SEC.

 

 

ITEM13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

For the fiscalyear ended June 30, 2003, the Company paid an aggregate of $1,229,784 tothe law firm of Latham & Watkins for the provision of legal servicesduring that period. Mr. Mendelson, one of the Company’s directors, is apartner of Latham & Watkins.

 

The Company hasentered into indemnity agreements with certain officers and directors whichprovide, among other things, that the Company will indemnify such officer ordirector, under the circumstances and to the extent provided for therein, forexpenses, damages, judgments, fines and settlements he or she may be requiredto pay in actions or proceedings which he or she is or may be made a party byreason of his or her position as a director, officer or other agent of theCompany, and otherwise to the full extent permitted under Delaware law and theCompany’s Bylaws.

 

Mr. Enright,one of the Company’s directors, performed consulting services for the Companyfrom December 2001 through June 2002. Mr. Enright receivedoptions to purchase 100,000 shares of the Company’s Common Stock asconsideration for his consulting services. Mr. Enright did not exercisehis option within the eligible exercise period and option grant was terminatedconsistent with the terms of the option agreement.

 

10

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**SIGNATURES**

 

Pursuant to therequirements of Section 13 or 15(d) of the Securities Act of 1934, the Registranthas duly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized, on October 28, 2003.

 
|   | VALENTIS, INC. |
|--------|----------------|
|   | By:            |   |
|   |           | /s/ BENJAMIN F. MCGRAW |
|   |           | Benjamin F. McGraw, III, Pharm.D. |
|   |           | *President and Chief Executive Officer* |

 

 

Pursuant to therequirements of the Securities Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the registrant and in thecapacities and on the dates indicated.

 

 
| **Signature**                     |   | **Title**                                                       |   | **Date**          |
|-----------------------------------|--------|-----------------------------------------------------------------|--------|-------------------|
|                              |   |                                                            |   |              |
| /s/ BENJAMIN F. MCGRAW            |   | Chairman of  the Board of Directors, President and Chief        |   | October 28,  2003 |
| Benjamin F. McGraw, III, Pharm.D. |   | Executive  Officer (Principal Executive Officer)                |   |              |
|                              |   |                                                            |   |              |
| /s/ JOSEPH A. MARKEY              |   | Senior  Director of Finance and Controller (Principal Financial |   | October 28,  2003 |
| Joseph A. Markey                  |   | and  Accounting Officer)                                        |   |              |
|                              |   |                                                            |   |              |
| /s/ REINALDO M. DIAZ              |   | Director                                                        |   | October 28,  2003 |
| Reinaldo M. Diaz                  |   |                                                            |   |              |
|                              |   |                                                            |   |              |
| /s/ PATRICK G. ENRIGHT            |   | Director                                                        |   | October 28,  2003 |
| Patrick G. Enright                |   |                                                            |   |              |
|                              |   |                                                            |   |              |
| /s/ MARK MCDADE                   |   | Director                                                        |   | October 28,  2003 |
| Mark D. McDade                    |   |                                                            |   |              |
|                              |   |                                                            |   |              |
| /s/ ALAN C. MENDELSON             |   | Director                                                        |   | October 28,  2003 |
| Alan C. Mendelson                 |   |                                                            |   |              |
|                              |   |                                                            |   |              |
| /s/ DENNIS J. PURCELL             |   | Director                                                        |   | October 28,  2003 |
| Dennis J. Purcell                 |   |                                                            |   |              |
|                              |   |                                                            |   |              |
| /s/ JOHN SCHROEDER                |   | Director                                                        |   | October 28,  2003 |
| John Schroeder, M.D.              |   |                                                            |   |              |

 

 
| *By:   |                              |   |
|--------|-----------------------------------|--------|
|   | /s/ BENJAMIN F. MCGRAW            |   |
|   | Benjamin F. McGraw, III, Pharm.D. |   |
|   | *Attorney-In-Fact*                |   |

 

11

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ExhibitIndex

 
| **Exhibit Number** |   | **Description of  Document**                                |
|--------------------|--------|-------------------------------------------------------------|
|               |   |                                                        |
| 31.1               |   | Certification  of Principal Executive Officer Sections 302. |
|               |   |                                                        |
| 31.2               |   | Certification  of Principal Financial Officer Section 302.  |
|               |   |                                                        |
| 32.1               |   | Certification  of Principal Executive Officer Section 906.  |
|               |   |                                                        |
| 32.2               |   | Certification  of Principal Financial Officer Section 906.  |

 

 

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