-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BpBpRtfo/fUk+Hi8UOawDrVaHXRlxPzkkSlReBpMfCalPoRotS+jCfElaPAKh7xg TUA/6RvT/NojESMv1DN6jA== 0000950129-03-003522.txt : 20030703 0000950129-03-003522.hdr.sgml : 20030703 20030703150033 ACCESSION NUMBER: 0000950129-03-003522 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030423 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENCYSIVE PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000887023 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 133532643 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-20117 FILM NUMBER: 03775184 BUSINESS ADDRESS: STREET 1: 6700 WEST LOOP SOUTH STREET 2: 4TH FLOOR CITY: BELLAIRE STATE: TX ZIP: 77401 BUSINESS PHONE: 7137968822 FORMER COMPANY: FORMER CONFORMED NAME: TEXAS BIOTECHNOLOGY CORP /DE/ DATE OF NAME CHANGE: 19930328 8-K/A 1 h07178e8vkza.txt ENCYSIVE PHARMACEUTICALS INC.- AMENDMENT 04/23/03 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 Date of Report (Date of earliest event reported): April 23, 2003 (April 22, 2003) ENCYSIVE PHARMACEUTICALS INC. (Exact name of registrant as specified in its charter) DELAWARE 0-20117 13-3532643 (State of Incorporation) (Commission File Number) (IRS Employer Identification No.) - -------------------------------------------------------------------------------------------------
6700 WEST LOOP, 4TH FLOOR BELLAIRE, TEXAS 77401 (Address of Registrant's principal executive offices) (713) 796-8822 (Registrant's telephone number, including area code) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On April 23, 2003, Texas Biotechnology Corporation, a Delaware corporation (the "Company"), and ICOS Corporation, a Delaware corporation ("ICOS"), issued a joint press release announcing that they have entered into a Purchase and Sale Agreement (the "Agreement"), pursuant to which the Company purchased from ICOS its 50% interest in ICOS-Texas Biotechnology L.P., a Delaware limited partnership (the "Partnership"). This transaction returns to the Company full ownership rights to the endothelin receptor antagonist program, including the experimental pulmonary arterial hypertension (PAH) drug, sitaxsentan, and TBC3711. The press release is filed as an exhibit hereto and is incorporated herein by reference. Under the terms of the Agreement, ICOS-ET-GP LLC, a Washington limited liability company, sold and transferred its .1% partnership interest in the Partnership to TBC-ET, Inc., a Delaware corporation and wholly-owned subsidiary of TBC, and ICOS-ET-LP LLC, a Washington limited liability company, sold and transferred its 49.9% partnership interest in the Partnership to the Company in exchange for (i) $4 million paid to ICOS on April 22, 2003 (the "Closing Date"), and (ii) $6 million to be paid to ICOS in two payments, a payment of $4 million on April 22, 2004, and a payment of $2 million on October 22, 2004. The $6 million payments to ICOS are evidenced by a Secured Promissory Note in the principal amount of $6 million (the "Note"), which will accrue interest at the 3-month LIBOR (as defined in the Note) rate plus 150 basis points beginning on the Closing Date and continuing to (but not including) the date on which the principal amount outstanding under the Note is paid in full. The interest rate on the Note will be adjusted on the first business day of each April, July, October and January to reflect the 3-month LIBOR rate in effect at the end of the preceding quarter. In addition, interest on the principal amount outstanding under the Note will be payable on or before the tenth day after the first business day of each April, July, October, and January after the Closing Date. The Company may prepay, in whole or in part, without penalty, the principal amount outstanding under the Note; provided that, any such prepayment will also include all accrued and unpaid interest due on the amount prepaid. In addition, upon the occurrence of a Change of Control (as defined in the Note) of the Company, the principal amount outstanding under the Note and all accrued and unpaid interest thereon will be paid by the Company to ICOS within ten days after the occurrence of such Change of Control. The Note is secured by an irrevocable standby letter of credit issued by JPMorgan Chase Bank for the account of the Company in favor of ICOS. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS a) Financial statements of business acquired. 1. The historical financial statements of ICOS-TBC, L.P. (a development stage limited partnership) including its balance sheets at December 31, 2002 and 2001, the statements of operations, cash flows and partners' deficit for the years then ended, for the period from June 6, 2000 (inception) through December 31, 2000, and the period from June 6, 2000 (inception) through December 31, 2002 were previously filed with the Securities and Exchange Commission on March 28, 2003 as Item 15(d) to the Annual Report on Form 10-K for the fiscal year ended December 31, 2002. 2. The unaudited condensed financial statements of Encysive, L.P., formerly ICOS-TBC, L.P. including its unaudited balance sheet at March 31, 2003 and the unaudited statements of operations and cash flows for the three month periods ended March 31, 2003 and 2002 are being filed as Exhibit 99.4 to this Form 8-K (and are incorporated herein by reference). b) Pro forma financial information The unaudited pro forma condensed combined consolidated statements of Encysive Pharmaceuticals Inc., formerly Texas Biotechnology Corporation, as of and for the three months ended March 31, 2003 and for the year ended December 31, 2002 giving effect to the acquisition as a purchase of Encysive, L.P. in accordance with Article 11 of Regulation S-X (17 C.F.R. Section 210.11) are being filed as Exhibit 99.5 to this Form 8-K and are incorporated herein by reference. c) Exhibits 99.1* Press Release. 99.2* Purchase and Sale Agreement dated as of April 22, 2003, made by and between Texas Biotechnology Corporation, TBC-ET, Inc., ICOS Corporation, ICOS-ET-LP LLC, ICOS-ET-GP LLC, and ICOS Technology Services LLC. 99.3* Secured Promissory Note of Texas Biotechnology Corporation dated April 22, 2003, in the principal amount of $6,000,000 and payable to ICOS Corporation. 99.4 Unaudited Condensed Financial Statements of Encysive, L.P. for the three months ended March 31, 2003 and 2002. 99.5 Unaudited Pro Forma Condensed Consolidated Financial Statements for the three months ended March 31, 2003 and for the year ended December 31, 2002. * Previously Filed. [SIGNATURE PAGE FOLLOWS] SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date July 3, 2003 ENCYSIVE PHARMACEUTICALS INC. /s/ Stephen L. Mueller ------------------------------------------ Stephen L. Mueller Vice-President, Finance and Administration Secretary and Treasurer INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION - ----------- ----------- 99.1* Press Release. 99.2* Purchase and Sale Agreement dated as of April 22, 2003, made by and between Texas Biotechnology Corporation, TBC-ET, Inc., ICOS Corporation, ICOS-ET-LP LLC, ICOS-ET-GP LLC, and ICOS Technology Services LLC. 99.3* Secured Promissory Note of Texas Biotechnology Corporation dated April 22, 2003, in the principal amount of $6,000,000 and payable to ICOS Corporation. 99.4 Unaudited Condensed Financial Statements of Encysive, L.P. for the three months ended March 31, 2003 and 2002. 99.5 Unaudited Pro Forma Condensed Consolidated Financial Statements for the three months ended March 31, 2003 and for the year ended December 31, 2002.
* Previously Filed. EX-99.4 3 h07178exv99w4.txt UNAUDITED CONDENSED FINANCIAL STATEMENTS EXHIBIT 99.4 ENCYSIVE, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) Table of Contents Unaudited Balance Sheets as of March 31, 2003 and December 31, 2002 Unaudited Statements of Operations for the three months ended March 31, 2003 and March 31, 2002 Unaudited Statements of Cash Flows for the three months ended March 31, 2003 and March 31, 2002 Notes to Financial Statements ENCYSIVE, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) UNAUDITED BALANCE SHEETS
(in thousands) March 31, December 31, 2003 2002 ------------ ------------ ASSETS Current assets - cash $ 1,020 $ 1 ============ ============ LIABILITIES AND PARTNERS' DEFICIT Current liabilities - accrued expenses payable to partners $ 3,407 $ 5,235 Partners' deficit: General partner interests: ICOS-ET-GP LLC -- (47) Encysive-ET, Inc. (5) (47) Limited partner interests: ICOS-ET-LP LLC -- (2,570) Encysive Pharmaceuticals Inc. (2,382) (2,570) ------------ ------------ Total partners' deficit (2,387) (5,234) ------------ ------------ $ 1,020 $ 1 ============ ============
ENCYSIVE, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) UNAUDITED STATEMENTS OF OPERATIONS
(in thousands) Three Months Ended March 31, --------------------------- 2003 2002 --------- --------- Operating expenses: Research and development Encysive Pharmaceuticals Inc. $ 1,138 $ 1,122 ICOS Corporation 1,121 3,886 General and administrative Encysive Pharmaceuticals Inc. 46 -- ICOS Corporation 81 12 --------- --------- Total operating expenses 2,386 5,020 --------- --------- Net loss $ (2,386) $ (5,020) ========= =========
ENCYSIVE, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) UNAUDITED STATEMENTS OF CASH FLOWS
(in thousands) Three Months Ended March 31, ---------------------------- 2003 2002 ---------- --------- Cash flows from operating activities: Net loss $ (2,386) (5,020) Adjustments to reconcile net loss to net cash used in operating activities: Accrued expenses payable to partners (1,828) 438 ---------- --------- Net cash used in operating activities (4,214) (4,582) ---------- --------- Cash flows from financing activities: Partner contributions 5,233 4,582 ---------- --------- Net cash provided by financing activities 5,233 4,582 ---------- --------- Net increase in cash 1,019 0 Cash at beginning of period 1 1 ---------- --------- Cash at end of period $ 1,020 1 ========== =========
ENCYSIVE, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS MARCH 31, 2003 (1) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Encysive L.P. (the "Partnership") have been prepared in accordance with accounting principles generally accepted in the United States of America ("USA") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and notes required by accounting principles generally accepted in the USA for complete financial statements. It is recommended that these interim condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Texas Biotechnology Corporation Annual Report on Form 10-K for the year ended December 31, 2002. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements included therein. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2003 are not necessarily indicative of the results that may be expected for any other interim period, or for the year ending December 31, 2003. (2) ORGANIZATION AND BUSINESS OPERATIONS Encysive, L.P. (the "Partnership") is a development stage limited partnership that was formed on June 6, 2000 by Encysive Pharmaceuticals Inc., formerly Texas Biotechnology Corporation, a Delaware corporation ("Encysive") and ICOS-ET-LP LLC, a Washington limited liability company ("ICOS-LP"), as limited partners, and Encysive-ET Inc., a Delaware corporation ("ENCY-GP"), and ICOS-ET, GP LLC, a Washington limited liability company ("ICOS-GP"), as general partners. The Partnership was organized to develop and globally commercialize endothelin receptor antagonists. The Partnership was managed jointly by Encysive-GP and ICOS-GP. ICOS is the sole member of both ICOS-LP and ICOS-GP. Encysive is the sole member of Encysive-GP. Both Encysive and ICOS provide the Partnership with research and development services. From its inception through December 31, 2002, losses were allocated based on respective ownership interests. In January 2003, ICOS announced its conclusion that joint development of the endothelin receptor antagonist program through the Partnership should not continue. Pursuant to a letter agreement between ICOS and Encysive dated February 14, 2003 (the "Letter Agreement"), Encysive agreed to be responsible for all losses incurred by the Partnership subsequent to December 31, 2002. (3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (b) RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed as incurred. ENCYSIVE, L.P. (A DEVELOPMENT STAGE LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS MARCH 31, 2003 (c) INCOME TAXES No Federal income tax expense or benefit is included in the financial statements since such taxes, if any, are payable or recoverable by each partner. (4) FINANCING The Partnership has experienced recurring losses from operations and has a partner's deficit of $2.4 million at March 31, 2003, which raises substantial doubt about its ability to continue as a going concern. Pursuant to the terms of the Letter Agreement, Encysive agreed to be responsible for 100% of all costs and expenses of the Partnership incurred after December 31, 2002, through June 30, 2003, or earlier termination of the Letter Agreement upon mutual consent of both parties. (5) SUBSEQUENT EVENTS On April 22, 2003, Encysive and ICOS executed a purchase and sale agreement (the "Agreement") pursuant to which Encysive purchased the partnership interest of ICOS and its subsidiaries in Encysive, L.P. (the "Acquisition"). Under the Agreement, Encysive agreed to pay to ICOS a purchase price of $10 million, of which $4 million was paid on April 22, 2003. The remaining $6 million is payable pursuant to a secured promissory note (the "Note") which requires a payment of $4 million on April 22, 2004, and a payment of $2 million on October 22, 2004. The outstanding principal balance of the Note shall accrue interest at a rate which approximates the three-month London interbank offering rate for U.S. Dollars (LIBOR) plus 1.5%. The interest rate was established on April 22, 2003 at approximately 2.82% and will be adjusted on the first business day of each April, July, October and January thereafter (the LIBOR Adjustment Dates). Interest is payable on or before the tenth day after each LIBOR Adjustment Date. Encysive's obligations under the Note are secured with an irrevocable standby letter of credit, for which the Company has pledged marketable securities with a value of approximately $7 million. Pursuant to the Agreement, the partnership name was changed from ICOS-Texas Biotechnology, L.P. to Encysive, L.P. EX-99.5 4 h07178exv99w5.txt UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FIN. EXHIBIT 99.5 UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS On April 22, 2003, Encysive Pharmaceuticals Inc., formerly Texas Biotechnology Corporation, (collectively with its subsidiaries, "Encysive" or the "Company") and ICOS Corporation ("ICOS") executed a purchase and sale agreement (the "Acquisition") pursuant to which the Company purchased the partnership interest of ICOS and its subsidiaries in Encysive, L.P. ("ELP"). Under the Acquisition agreement, the Company agreed to pay to ICOS a purchase price of $10,000,000, of which $4,000,000 was paid on April 22, 2003. The remaining $6,000,000 is payable pursuant to a secured promissory note (the "Note") which requires a payment of $4,000,000 on April 22, 2004, and a payment of $2,000,000 on October 22, 2004. The following unaudited pro forma condensed combined consolidated balance sheet data as of March 31, 2003 and the unaudited pro forma condensed combined consolidated statements of operations data for the three months ended March 31, 2003 and for the year ended December 31, 2002 are based on the historical financial statements of the Company and ELP after giving effect to the Acquisition using the purchase method of accounting and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined consolidated financial statements. The unaudited pro forma condensed combined consolidated balance sheet data as of March 31, 2003 is presented to give effect to the Acquisition as if it occurred on March 31, 2003. The unaudited pro forma condensed combined consolidated statement of operations data of Encysive and ELP for the three months ended March 31, 2003 and for the year ended December 31, 2002 is presented as if the combination had taken place on January 1, 2002 and combines the historical results of Encysive and the historical results of ELP for the periods presented. ELP was organized to develop and globally commercialize endothelin receptor antagonists. Its activities have been primarily research and development, and costs have been expensed as incurred. The Company has determined that the net purchase price paid to ICOS, as discussed in Note 1 to these unaudited pro forma condensed combined consolidated financial statements, represents payment for in-process research and development activities and, accordingly, should be expensed upon the consummation of the Acquisition. The unaudited pro forma condensed combined consolidated financial statement data should be read in conjunction with the historical consolidated financial statements and accompanying notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2002, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2003. The unaudited pro forma condensed combined consolidated financial statement data are not intended to represent or be indicative of the consolidated results of operations or financial condition of the Company that would have been reported had the Acquisition been completed as of the dates presented, and should not be taken as representative of the future consolidated results of operations or financial condition of the Company. UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET DATA OF ENCYSIVE PHARMACEUTICALS INC. AND ENCYSIVE, L.P. MARCH 31, 2003 (IN THOUSANDS, EXCEPT SHARE AND PER-SHARE DATA)
HISTORICAL -------------------------- PRO FORMA PRO FORMA ASSETS ENCYSIVE ELP ADJUSTMENTS COMBINED ------------ ------------ ---------------------- ------------ Current assets: Cash and cash equivalents $ 27,030 $ 1,021 $ (4,000) (i) $ 24,051 Short-term investments 19,713 -- -- 19,713 Accounts receivable 1,139 -- -- 1,139 Other current receivables 131 -- -- 131 Receivable from related party under collaborative arrangement 1,248 -- (1,248) (iii) -- Prepaids 2,235 -- -- 2,235 ------------ ------------ ------------ ------------ Total current assets 51,496 1,021 (5,248) 47,269 Long-term investments 13,105 -- -- 13,105 Equipment and leasehold improvements, net 5,454 -- -- 5,454 Other assets 736 -- -- 736 ------------ ------------ ------------ ------------ Total assets $ 70,791 $ 1,021 $ (5,248) $ 66,564 ============ ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 812 $ -- $ -- $ 812 Accrued expenses 2,335 3,396 (1,248) (iii) 4,483 Deferred revenue from related party 591 -- (591) (ii) -- Deferred revenue from unrelated parties 927 -- -- 927 Payable to related party 2,375 -- (2,375) (iii) -- Current maturity on long-term debt -- -- 4,000 (i) 4,000 ------------ ------------ ------------ ------------ Total current liabilities 7,040 3,396 (214) 10,222 Long-term debt -- -- 2,000 (i) 2,000 Deferred revenue from related party 1,046 -- (1,046) (ii) -- Deferred revenue from unrelated parties 2,787 -- -- 2,787 Minority interest in Revotar 2,418 -- -- 2,418 Commitments and contingencies Stockholders' equity: Preferred stock, par value $.005 per share. At March 31, 2003 5,000,000 shares authorized; none outstanding -- -- -- -- Common stock, par value $.005 per share. At March 31, 2003 75,000,000 shares authorized; 44,458,644 shares issued 222 -- -- 222 Additional paid-in capital 212,282 -- -- 212,282 Deferred compensation expense (319) -- -- (319) Treasury stock, at cost, 213,000 shares at March 31, 2003 (1,602) -- -- (1,602) Partner's deficit -- (2,375) 2,375 (iii) -- Other comprehensive gain 62 -- -- 62 Accumulated deficit (153,145) -- (8,363) (i),(ii) (161,508) ------------ ------------ ------------ ------------ Total stockholders' equity 57,500 (2,375) (5,988) 49,137 ------------ ------------ ------------ ------------ Total liabilities and stockholders' equity $ 70,791 $ 1,021 $ (5,248) $ 66,564 ============ ============ ============ ============
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS DATA ENCYSIVE PHARMACEUTICALS INC. AND ENCYSIVE, L.P. YEAR ENDED DECEMBER 31, 2002 (IN THOUSANDS, EXCEPT PER-SHARE DATA)
HISTORICAL ------------------------- PRO FORMA PRO FORMA ENCYSIVE ELP ADJUSTMENTS COMBINED --------- --------- -------------- --------- Revenues: Research agreements $ 3,570 $ -- $ $ 3,570 Collaborative research and development from related party 1,090 -- (1,090) (vi) -- Royalty income 3,514 -- -- 3,514 License fees, milestones and grants 2,259 -- (1,109) (iv) 1,150 --------- --------- --------- --------- Total revenue 10,433 -- (2,199) 8,234 Expenses: Research and development 20,066 16,633 (1,090) (vi) 35,609 Equity in loss of Encysive, L.P. 8,557 -- (8,557) (v) -- General and administrative 8,976 483 -- 9,459 --------- --------- --------- --------- Total expenses 37,599 17,116 (9,647) 45,068 --------- --------- --------- --------- Operating loss (27,166) (17,116) 7,448 (36,834) --------- --------- --------- --------- Investment income, net 2,472 -- -- 2,472 --------- --------- --------- --------- Loss before minority interest (24,694) (17,116) 7,448 (34,362) Minority interest in loss of Revotar 1,225 -- -- 1,225 --------- --------- --------- --------- Net loss $ (23,469) $ (17,116) $ 7,448 $ (33,137) ========= ========= ========= ========= Net loss per share basic and diluted $ (0.54) $ (0.76) ========= ========= Weighted average common shares used to compute loss per share basic and diluted 43,741 43,741 ========= =========
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS DATA ENCYSIVE PHARMACEUTICALS INC. AND ENCYSIVE, L.P. THREE MONTHS ENDED MARCH 31, 2003 (IN THOUSANDS, EXCEPT PER-SHARE DATA)
HISTORICAL ------------------------- PRO FORMA PRO FORMA TBC ICOS-TBC ADJUSTMENTS COMBINED --------- --------- -------------- --------- Revenues: Research agreements $ 742 $ -- $ -- $ 742 Collaborative research and development from related party 664 -- (664) (vi) -- Royalty income 1,148 -- -- 1,148 License fees, milestones and grants 662 -- (135) (iv) 527 --------- --------- --------- --------- Total revenue 3,216 -- (799) 2,417 Expenses: Research and development 4,219 2,259 (644) (vi) 5,814 Equity in loss of Encysive, L.P. 2,386 -- (2,386) (v) -- General and administrative 2,154 127 -- 2,281 --------- --------- --------- --------- Total expenses 8,759 2,386 (3,050) 8,095 --------- --------- --------- --------- Operating loss (5,543) (2,386) 2,251 (5,678) --------- --------- --------- --------- Investment income, net 373 -- -- 373 --------- --------- --------- --------- Loss before minority interest (5,170) (2,386) 2,251 (5,115) Minority interest in loss of Revotar 190 -- -- 190 --------- --------- --------- --------- Net loss $ (4,980) $ (2,386) $ 2,251 $ (5,115) ========= ========= ========= ========= Net loss per share basic and diluted $ (0.11) $ (0.12) ========= ========= Weighted average common shares used to compute loss per share basic and diluted 43,945 43,945 ========= =========
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Pro Forma Presentation On April 22, 2003, the Company purchased the partnership interest of ICOS in ELP in a transaction to be accounted for under the purchase method. The purchase price of $10,000,000 is payable in three payments: an initial payment of $4,000,000 was made on the date of acquisition, with the remaining $6,000,000 payable pursuant to the terms of a note, under which $4,000,000 is due on April 22, 2004, and the remaining $2,000,000 is due on October 22, 2004. Before the Acquisition, the Company accounted for its investment in ELP using the equity method. Because the Company had no basis in the technology transferred to ELP as the Company's original investment, the Company did not record an amount for its original investment. The Company recorded its share of the ELP loss as a liability to related party until the Company funded its portion of the loss. ELP paid a license fee and a milestone payment to the Company in 2000 and 2001, respectively. Because the Company had continuing obligations to ELP, the Company deferred these amounts and amortized them into revenue over the estimated developmental period of the underlying technology. Approximately $1,637,000 in remaining deferred license fee and milestone income received from ELP at the date of the Acquisition was recognized as an offset to the $10,000,000 purchase price paid to ICOS, resulting in a net in-process research and development charge of $8,363,000. Under the purchase method of accounting, the total purchase price is allocated to ELP's net tangible and intangible assets based on their estimated fair values as of the date of the Acquisition. ELP had no tangible assets, other than approximately $1,000 in cash, and its only intangible assets consist of in-process research and development activities. Since the in-process research and development activities relate to projects which have not yet reached technological feasibility and may lack alternative uses, the purchase price allocated to in-process research and development activities was charged to expense upon consummation of the Acquisition. 2. Pro Forma Adjustments Pro Forma adjustments are necessary to reflect the net purchase price, to eliminate the equity in loss of ELP included in the Company's historical consolidated statements of operations, and to eliminate the Company's receivable from, and payable to ELP. No pro forma adjustments were required to conform ELP's accounting policies to the Company's accounting policies. The pro forma adjustments included in the unaudited pro forma condensed combined consolidated financial statement data are as follows: (i) Reflect the cash purchase price and loan indebtedness incurred as a result of the purchase price paid to ICOS. The portion of the purchase price allocated to in-process research and development has not been included in the unaudited pro forma combined statements of operations data as the amount is considered a material nonrecurring charge and will be included in the Company's results of operations for the three months ended June 30, 2003. The unaudited pro forma condensed combined balance sheet data includes a reduction in stockholders' equity as a result of the charge for in-process research and development. (ii) Record unamortized deferred revenue as a reduction of the purchase of in-process research and development (iii) Eliminate intercompany balances. (iv) Eliminate amortization of deferred revenue included in historical consolidated financial statements. (v) Eliminate the equity in loss of ELP included in the Company's historical consolidated financial statements. (vi) Eliminate revenue included in the Company's historical consolidated financial statements and the related research and development expense reported in ELP's historical financial statements. 3. Pro Forma Loss per Share The pro forma basic and diluted loss per share is based on the weighted average number of shares of Encysive common stock outstanding during the period. -----END PRIVACY-ENHANCED MESSAGE-----