EMISPHERE TECHNOLOGIES, INC.
15 SKYLINE DRIVE
HAWTHORNE, NEW YORK 10532
December 12, 1995
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
Pursuant to the requirments of the Securities Exchange Act of 1934, we are
transmitting herewith the attahced Form 10-Q.
Sincerely,
Emisphere Technologies, Inc.
Joseph D. Povemomo
Joseph D. Poveromo, Chief Accounting Officer
<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter period ended October 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period
from ______________ to __________________
Commission file number 1-10615
EMISPHERE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3306985
(State or jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
15 Skyline Drive
Hawthorne, New York 10532
(Address of principal (Zip Code)
executive offices)
(914) 347-2220
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be files by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that registrant
was required to file such reports) and (2) has been subject to such filing
requirements for at least the past 90 days. Yes X No ____.
APPLICABLE ONLY TO CORPORATE ISSUERS
As of November 30, 1995 there were 8,323,159 Shares of common stock, $.01
par value, of the registrant outstanding.
<PAGE>
EMISPHERE TECHNOLOGIES, INC.
TABLE OF CONTENTS
October 31, 1995
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
Condensed Balance Sheets
Condensed Statements of Operations
Condensed Statement of Stockholders' Equity
Condensed Statements of Cash Flows
Condensed Notes to Financial Statements
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
--------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Part II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
<PAGE>
EMISPHERE TECHNOLOGIES, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
ASSETS
July 31, October 31,
1995 1995
---------- -----------
Current assets:
Cash and cash equivalents $2,226,156 $11,173,363
Marketable securities 3,393,395 3,297,267
Prepaid expenses and other current assets 148,469 134,650
---------- -----------
Total current assets 5,768,020 14,605,280
Equipment and leasehold improvements,
at cost, net of accumulated depreciation
and amortization 1,704,309 1,583,588
Restricted cash equivalents 10,000 10,000
Other assets 66,243 66,243
---------- -----------
Total assets $7,548,572 $16,265,111
========== ============
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable $ 234,917 $ 235,649
Accrued compensation 203,145 144,599
Accrued expenses 156,711 197,629
Deposit from Elan plc 3,000,000
---------- -----------
Total current liabilities 594,773 3,577,877
Deferred lease liability 55,100 52,531
---------- -----------
Total liabilities 649,873 3,630,408
---------- -----------
Stockholders' equity:
Preferred stock, $.01 par value;
1,000,000 shares authorized, none
issued and outstanding
Common stock, $.01 par value; 20,000,000
shares authorized; 7,687,304 shares
issued (7,643,804 outstanding) at July 31,
1995; 8,366,659 shares issued (8,323,159
outstanding) at October 31, 1995 76,873 83,667
Additional paid-in capital 43,626,657 51,262,518
Accumulated deficit (36,628,209) (38,567,400)
Net unrealized gain on marketable
securities 16,191 48,731
----------- ------------
7,091,512 12,821,516
Less, common stock held in treasury, at
cost; 43,500 shares (192,813) (192,813)
----------- -----------
Total stockholders' equity 6,898,699 12,634,703
----------- -----------
Total liabilities and
stockholders' equity $7,548,572 $16,265,111
========== ===========
See accompanying notes to financial statements. The July 31, 1995 Condensed
Balance Sheet data was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.
<PAGE>
EMISPHERE TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months
ended October 31,
1994 1995
---------- -----------
Revenues:
Research and development - -
Cost and expenses:
General and administrative expenses $ 553,552 $ 615,900
Research and development 1,386,664 1,383,409
----------- ------------
Total operating expenses 1,940,216 1,999,309
----------- ------------
Operating loss (1,940,216) (1,999,309)
----------- ------------
Other income:
Investment income 42,036 60,118
----------- ------------
Total other income 42,036 60,118
----------- ------------
Net loss (1,898,180) (1,939,191)
=========== ============
Net loss per share ($ .25) ($ .25)
=========== ============
Weighted average number of share's outstanding 7,574,867 7,746,457
=========== ============
See accompanying notes to the financial statements
<PAGE>
EMISPHERE TECHNOLOGIES, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
For the three months ended October 31, 1995
<TABLE>
Net
Unrealized
Additional Gain on Common Stock
Common Stock Paid-in Accumulated Marketable Held in Treasury
Shares Amount Capital Deficit Securities Shares Amount Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
--------- ------ ------------ ------------ ----------- ------- ---------- ----------
Balance, July 31, 1995 7,687,304 $76,873 $ 43,626,657 $ (36,628,209) $ 16,191 43,500 $ (192,813) $6,898,699
Sale of common stock
under employee stock
purchase plans 79,355 794 178,861 179,655
Issuance of common stock
to Elan International
Services Ltd., net
of expenses 600,000 6,000 7,457,000 7,463,000
Unrealized gain 32,541 32,541
Net loss for the three months
ended October 31, 1995 (1,939,191) (1,939,191)
--------- ------- ----------- ------------ ----------- ------ ----------- -----------
Balance, October 31, 1995 8,366,659 $83,667 $51,262,518 $(38,567,400) $ 48,732 43,500 $ (192,813) $12,643,704
========= ======= =========== ============ =========== ====== =========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
EMISPHERE TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months
ended October 31,
--------------------
1994 1995
----------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,898,180) $(1,939,191)
------------ ------------
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Depreciation and amortization 136,428 134,799
Increase (decrease) in deferred
lease liability 618 ( 2,569)
Realized loss(gain) on sales of
marketable securities 27,528 ( 335)
Change in Assets and Liabilities:
Prepaid expenses and other current assets 18,146 13,819
Accounts payable and accrued expenses 139,826 ( 16,897)
Deposit from Elan plc 3,000,000
----------- -----------
Total adjustments 322,546 3,128,817
---------- ----------
Net cash (used in) provided by
operating activities (1,575,634) 1,189,626
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ( 33,406) ( 14,078)
Purchase of marketable securities (1,141,844)
Proceeds from sales of marketable
securities 2,638,264 129,004
----------- ----------
Net cash provided by investing activities 1,463,014 114,926
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common
stock and warrants to Elan
International Services ltd. - 7,463,000
Proceeds from exercise of options and
warrants, and employee stock purchases 179,655
Purchase of treasury stock ( 123,438)
----------- -----------
Net cash (used in) provided by
financing activities ( 123,438) 7,642,655
----------- -----------
Net (decrease)increase in cash
and cash equivalents ( 236,058) 8,947,207
CASH AND CASH EQUIVALENTS,
beginning of period 272,607 2,226,156
----------- -----------
CASH AND CASH EQUIVALENTS,
end of period $ 36,549 $ 11,173,363
=========== ============
See accompanying notes to financial statements
<PAGE>
EMISPHERE TECHNOLOGIES, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
1. Interim Financial Statements:
The interim Condensed Statements of Operations and Condensed Statements of
Cash Flows for the three months ended October 31, 1994 and 1995, and the
Condensed Balance Sheets as of July 31, and October 31, 1995, of Emisphere
Technologies, Inc. (the "Company"), have been prepared in accordance with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all information and disclosures Necessary
for a presentation of the Company's financial position, results of
operations and cash flows in conformity with generally accepted accounting
principles. In the opinion of management, these financial statements
reflect all adjustments, consisting only of normal recurring accruals,
necessary for a fair presentation of the Company's financial position,
results of operations and cash flows for such periods. The results of
operations for any interim period are not necessarily indicative of the
results for the full year. These financial statements should be read in
conjunction with the financial statements and notes thereto contained in the
Company`s Annual Report on Form 10-K for the fiscal year ended
July 31, 1995.
2. Marketable Securities:
The following table summarizes the aggregate fair value of marketable
securities, gross unrealized holding gains and losses, and the amortized
cost basis of marketable securities at October 31, 1995.
Amortized Fair Unrealized Holding
Cost Basis Value Gains Losses Net
Maturities within
one year:
U.S. Government
securities $ 2,649,732 $ 2,686,381 $ 37,098 $( 449) $ 36,649
Maturities between
one and two years:
U.S. Government
securities 598,804 610,886 12,082 12,082
----------- ----------- -------- -------- ---------
$ 3,248,536 $ 3,297,267 $ 49,180 $( 449) $ 48,731
=========== =========== ======== ======== =========
The aggregate net unrealized gain of $48,732 has been included as an
addition to stockholders' equity at October 31, 1995.
<PAGE>
3. Strategic Alliance Elan plc:
During October 1995, the Company entered into a letter of intent with Elan
plc ("Elan") which, among other things, provides for a strategic alliance
with the Company for the development of the oral formulation of a specific
drug. The term and provisions of the strategic alliance are presently
being negotiated. The Company recieved $3 million from Elan which has been
recorded as a deposit until such time as the terms of the strategic
alliance are finalized.
In connection with the letter of intent, the Company entered into a Purchase
Agreement with Elan International Services Ltd., an affiliate of Elan. The
terms of the Purchase Agreement provided for the Company to sell 6000,000
shares of its common stock, and issue 250,000 warrants to purchase shares of
the Company's common stock at $16.25 per share, in consideration for $7.5
million. The warrants contain antidilutive provisions, are exercisable upon
issuance, and expire on October 18, 2000.
4. Impact of the Future Adoption of Recently Issue Accounting Standard:
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
("FAS 123") in October 1995. The Company will be required to adopt the
provisions of FAS 123 at the beginning of the year ending July 31,
1997. FAS 123 requires companies to estimate the fair value of common
stock, stock options, or other equity instruments ("Equity Instruments")
issued to employees using pricing models which take into account various
factors such as current price of the common stock, volatility and expected
life of the Equity Instrument. FAS 123 permits companies to either provide
pro forma note disclosure or adjust operating results for the amortization
of the estimated value of the Equity Instument, as compensation expense,
over the vesting period of the Equity Instrument. The Company has not fully
evaluated the impact that the future adoption of FAS 123 will have on its
financial position or results of operations at this time.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS.
General
Emisphere Technologies, Inc. is a drug delivery company engaged in the research
and development of its proprietary technologies with the goal of commercializing
its drug delivery technologies.
Results of Operations:
The Company has since its inception generated significant losses from
operations. The Company does not expect to achieve sustained profitability for
the foreseeable future. Profitability in the long term will depend on the
Company's ability to attract pharmaceutical companies willing to enter into
agreements with the Company to produce and market their drugs utilizing the
Company's drug delivery technologies. There can be no assurance that any
pharmaceutical company will be willing to undertake the clinical testing and
other product development activities necessary to develop a marketable product
or enter into an agreement acceptable to the Company or that the agreements, if
entered into, will result in the ultimate profitability of the Company.
The ability of the Company to reduce its operating losses in the near term will
be dependent upon, among other things, its ability to attract new pharmaceutical
and non-pharmaceutical companies who are willing to provide funding to the
Company for a portion of the Company's research and development with respect to
specific projects. While the Company is consistently engaged in discussions
with pharmaceutical and non-pharmaceutical companies, there can be no assurance
that the Company will enter into any additional agreements or that the
agreements will provide research and development revenues to the Company.
Three Months Ended October 31, 1995 vs. Three Months Ended October 31, 1994:
For the three months ended October 31, 1995, and October 31, 1994, the Company
had no research and development revenues.
Total operating expenses for the fiscal quarter ended October 31, 1995,
increased by approximately $59,000, or 3%, as compared to the fiscal quarter
ended October 31, 1994. The details of this increase are as follows:
General and administrative expenses increased by approximately $62,000, or 11%,
in the fiscal quarter ended October 31, 1995, as compared to the fiscal quarter
ended October 31, 1994. This increase is primarily the result of legal and
professional fees incurred in connection with , among other things the
settlement of a class action lawsuit and the cmpletion of the letter of intent
with Elan plc ("Elan").
Research and development costs decreased by approximately $3,000, or less than
1%, in the fiscal quarter ended October 31, 1995, as compared to the fiscal
quarter ended October 31, 1994. The reduced cost is attributable to decreased
funding of outside consultants and universities engaged to conduct studies to
help advance the Company's scientific research efforts and a decrease in usage
of laboratory supplies as a result of a reduction in the number of projects on
which the Company is actively working. The Company also experienced a decrease
in personnel and related expenses due, in part, to a staff reduction in May
1995. These lower costs were offset by an increase in costs related to the
Company's clinical development program for heparin. The Company believes that
this level of research and development spending will continue for the
foreseeable future and may increase if operations are expanded.
<PAGE>
The Company's other income in the quarter ended October 31, 1995 increased by
approximately $18,000 from that of the fiscal quarter ended October 31, 1994.
The increase was due to better returns on the Company's smaller investment
portfolio plus losses on the sale of investment securtities which the Company
realized in the quarted ended October 31, 1994 did not occur during the quarter
ended October 3, 1995. Based on the above factors, the Company sustained a net
loss for the first quarter of fiscal 1996 of $1,939,191, a 2% increase from
$1,898,180 net loss of the 1995 fiscal first quarter.
Liquidity and Capital Resources
As of October 31, 1995, the Company had working capital of approximately
$11,027,000 as compared with approximately $5,173,000 at July, 31, 1995. Cash
and cash equivalents and marketable securities were approximately $14,471,000
as of October 31, 1995, compared to approximately $5,620,000 at July 31, 1995.
The increase in the Company's cash and cash equivalents and marketable
securities is a result of the letter of intent entered into by Company with Elan
which provides for the development of an oral formulation of heparin. The
termns of the letter of intent initially require Elan to finance $7.5 million
the development work of heparin. It is anticipated that subsequent financing
needs for the development work will be shared equally by the Company and Elan.
In connection with the letter of intent, the Company entered into a Purchase
Agreement with Elan International Services Ltd., an affiliate of Elan. The
terms of the Purchase Agreement provided for the Company to sell 600,000 shares
of its common stock and issue 250,000 warrants to purchase shares of the
Company's common stock at $16.25 per share, in consideration for $7.5 million.
The Company expects to incur substantial research and development expenses
associated with development of the Company's oral drug delivery system. As the
result of the ongoing research and development efforts of the Company,
management believes that the Company will continue to incur operating losses and
that, potentially, such losses could increase.
The Company expects that cash, cash equivalents and marketable securities will,
under the Company's present operating assumptions, be adequate to meet its
liquidity and capital requirements at least through the end of the second
quarter of fiscal 1998.
While the Company does not currently foresee any major capital expenditures, the
Company expects to need substantial resources to continue its research and
development efforts. Should circumstances warrant it, the Company would seek
additional funds primarily in the public and private equity markets, and to the
extent necessary and available, through debt financing. The Company has no firm
agreements with respect to any additional financing and there can be no
assurance that the Company would be able to obtain adequate funds on acceptable
terms.
<PAGE>
If adequate funds were not available, the Company would be required to delay,
scale back, or eliminate one or more of its research or development programs, or
obtain funds, if available, through arrangements with collaborative partners or
others that may require the Company to relinquish rights to certain of its
technologies, product candidates, or products that the Company would not
otherwise relinquish.
The Company does not maintain any credit lines with financial institutions.
<PAGE>
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-k
(a) Exhibits
11. Statement of computation of per share data
27. Financial Data Schedule
(b) Reports
No reports on form 8-k were filed by the Registrant during the
quarter ended October 31, 1994.
Exhibit 11
EMISPHERE TECHNOLOGIES, INC.
STATEMENT OF COMPUTATION OF PER SHARE DATA
Three months ended
---------------------------------------------------------
October 31, 1994 October 31, 1995
--------------------------- --------------------------
Primary Fully Diluted Primary Fully Diluted
Net loss ($1,898,180) ($1,898,180) ($1,939,191) ($1,939,191)
============ ============ ============ ============
Weighted average
number of shares 7,574,867 7,574,867 7,746,457 7,746,457
Shares issuable upon
exercise of options
and warrants (A) 349,669
Shares assumed
to be repurchased
under the treasury
stock method 201,871
------------ ------------ ------------ ------------
7,574,867 7,574,867 7,76,457 7,894,255
============ ============ ============ ============
NET LOSS PER SHARE ($.25) ($.25) ($.25) ($.25)
=========== ============ ============ ============
(A) As of, and for the quarter ended October 31, 1994 all previously issued
and outstanding options had exercise prices above the current fair market
value of the common stock.
<PAGE>
SIGNATURE
Pursuant to the requirement 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.
Emisphere Technologies, Inc.
Dated: December 12, 1995 Michael M. Goldberg, M.D.
-------------------------
Michael M. Goldberg, M.D.
Chairman, and Chief Executive Officer
Joseph D. Poveromo, C.P.A.
--------------------------
Joseoh D. Poveromo, C.P.A.
Controller (Principal Financial
and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> OCT-31-1995
<CASH> 11,173,363
<SECURITIES> 3,297,267
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 134,650
<PP&E> 1,583,588
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,265,111
<CURRENT-LIABILITIES> 3,577,876
<BONDS> 0
<COMMON> 83,667
0
0
<OTHER-SE> 13,551,037
<TOTAL-LIABILITY-AND-EQUITY> 16,265,111
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 1,999,309
<OTHER-EXPENSES> (60,118)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,939,191)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,939,191)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,939,191)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
</TABLE>
