As filed with the Securities and Exchange Commission on September 14, 1999
================================================================================
Securities and Exchange Commission
Washington, D.C. 20549
------------------
FORM 8-K/A
Current Report Pursuant
To Section 13 or 15(d) of the
Securities Exchange Act of 1934
July 2, 1999
Date of report (Date of earliest event reported)
------------------------------
Emisphere Technologies, Inc.
(Exact Name of Registrant as Specified in its Charter)
------------------------------
Delaware 13-3306985
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
1-10615
(Commission File Number)
Emisphere Technologies, Inc.
765 Old Saw Mill River Road
Tarrytown, New York 10591
(Address of Principal Executive Offices) (Zip Code)
(914) 347-2220
(Registrant's Telephone Number Including Area Code)
------------------------------
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
------------------------------
================================================================================
<PAGE>
This Form 8-K/A amends Item 7 of that certain Form 8-K filed with the Securities
and Exchange Commission on July 16, 1999 by including the financial information
referred to below.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Financial Statements of Business Acquired
(a) Independent Accountants Report
(b) Balance Sheets - July 31, 1997, 1998 and (unaudited) April
30, 1999
(c) Statements of Operations for the period from September 26,
1996 (inception) through July 31, 1997, the year ended
July 31, 1998, the Nine Months Ended April 30, 1998
(unaudited) and 1999 (unaudited), and the cumulative
period (unaudited) from September 26, 1996 (inception)
through April 30, 1999.
(d) Statements of Stockholders' Deficit for the cumulative
period from September 26, 1996 (inception) to April 30,
1999, including the period from September 26, 1996
(inception) to July 31, 1997, the year ended July 31, 1998
and (unaudited) the nine months ended April 30, 1999.
(e) Statements of Cash Flows for the period from September 26,
1996 (inception) through July 31, 1997, the year ended
July 31, 1998 , the Nine Months Ended April 30, 1998
(unaudited) and 1999 (unaudited), and the cumulative
period (unaudited) from September 26, 1996 (inception)
through April 30, 1999.
(f) Notes to the Financial Statements
Pro Forma Financial Statements
(a) Introduction
(b) Unaudited Pro Forma Condensed Combined Balance Sheet at
April 30, 1999
(c) Unaudited Pro Forma Condensed Combined Statement of
Operations for the Year Ended July 31, 1998.
(d) Unaudited Pro Forma Condensed Combined Statement of
Operations for the Nine Months Ended April 30, 1999
(e) Notes to the unaudited Pro Forma Condensed Combined
Financial Statements
<PAGE>
2
Item 7 (a)
Ebbisham Limited
Table of Contents
Page
Report of independent accounts.............................................. 1
Balance sheets as of July 31, 1997
and 1998, and unaudited as of April 30, 1999............................. 2
Statements of Operations for the period from September 26, 1996
(inception) through July 31, 1997, the year ended July 31, 1998,
the Nine Months Ended April 30, 1998 (unaudited) and 1999
(unaudited) and the cumulative period (unaudited) from September
26, 1996 (inception) through April 30, 1999.............................. 3
Statements of Stockholders' Deficit for the cumulative period
from September 26, 1996 (inception) to April 30, 1999, including
the period from September 26, 1996 (inception) to July 31, 1997,
the year ended July 31, 1998 and (unaudited) the nine months
ended April 30, 1999..................................................... 4
Statements of Cash Flows for the period from September 26, 1996 (inception)
through July 31, 1997, the year ended July 31, 1998, the Nine Months ended
April 30, 1998 (unaudited) and 1999 (unaudited) and the cumulative period
(unaudited) from September 26, 1996 (inception)
through April 30, 1999................................................... 5
Notes to Financial Statements............................................... 6
<PAGE>
3
Report of Independent Accountants
October 8, 1998
To the Board of Directors and Stockholders of
Ebbisham Limited:
In our opinion, the accompanying balance sheets and the related statements of
operations, stockholders' deficit and cash flows present fairly, in all material
respects, the financial position of EBBISHAM LIMITED ("Ebbisham") (a development
stage enterprise)at July 31, 1997 and 1998, and the results of its operations
and its cash flows for the period from September 26, 1996 (inception) to July
31, 1997, and the year ended July 31, 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of Ebbisham's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
<PAGE>
4
Ebbisham Limited
(a development stage enterprise)
Balance Sheets
<TABLE>
<CAPTION>
July 31, April 30,
---------------------------- ------------
1997 1998 1999
------------ ------------ ------------
Assets: (Unaudited)
<S> <C> <C> <C>
Current Assets:
Cash $ 708,424 $ 741,184 $ 4,217,164
------------ ------------ ------------
Total assets $ 708,424 $ 741,184 $ 4,217,164
============ ============ ============
Liabilities and Stockholders' Deficit:
Current Liabilities:
Due to Elan Corporation plc $ 639,549 $ 1,698,462 $ 562,925
Due to Emisphere Technologies, Inc. 648,786 7,710,056 8,474,463
Accounts payable 31,365
------------ ------------ ------------
Total current liabilities 1,288,335 9,408,518 9,068,753
Subordinated debt 4,500,000 4,500,000 14,500,000
------------ ------------ ------------
Total liabilities 5,788,335 13,908,518 23,568,753
------------ ------------ ------------
Stockholders' deficit
"A"Ordinary shares, par value $1.00 per share,
5,000,000 shares authorized, 10,000 shares
issued and outstanding at July 31, 1997 and
1998, and April 30, 1999 10,000 10,000 10,000
"B" Ordinary shares, par value $1.00 per share,
5,000,000 shares authorized, 10,000 shares
issued and outstanding at July 31, 1997 and
1998, and April 30, 1999 10,000 10,000 10,000
Deficit accumulated during development stage (5,099,911) (13,187,334) (19,371,589)
------------ ------------ ------------
Total stockholders' deficit (5,079,911) (13,167,334) (19,351,589)
------------ ------------ ------------
Total liabilities and stockholders' deficit $ 708,424 $ 741,184 $ 4,217,164
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
5
Ebbisham Limited
(a development stage enterprise)
Statements of Operations
<TABLE>
<CAPTION>
For the For the
period from period from
September September 26,
26, 1996 1996
(inception) (inception)
through July Year Ended Nine months ended April 30, through April
31, July 31, ---------------------------- 30,
1997 1998 1998 1999 1999
------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Interest income $ 72,045 $ 32,760 $ 24,000 $ 106,000 $ 210,805
------------ ------------ ------------ ------------ ------------
Expenses:
Research and development (5,171,956) (8,120,183) (6,364,000) (6,290,255) (19,582,394)
------------ ------------ ------------ ------------ ------------
Net loss $ (5,099,911) $ (8,087,423) $ (6,340,000) $ (6,184,255) $(19,371,589)
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
6
Ebbisham Limited
(a development stage enterprise)
Statements of Stockholders' Deficit
For the cumulative period from September 26, 1996 (inception) to April 30, 1999,
including the period from September 26, 1996 (inception) to July 31, 1997, the
year ended July 31, 1998 and (unaudited) for the nine months ended
April 30, 1999
<TABLE>
<CAPTION>
Number of Shares
----------------------------
Ordinary Ordinary Total Share Accumulated
"A" "B" Capital Deficit Total
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Ordinary shares issued in
consideration for cash 10,000 10,000 $ 20,000 $ 20,000
Net loss for the period from
September 26, 1996
(inception) to July 31, 1997 $ (5,099,911) (5,099,911)
------------ ------------ ------------ ------------ ------------
Balance at July 31, 1997 10,000 10,000 20,000 (5,099,911) (5,079,911)
Net loss for the year ended
July 31, 1998 (8,087,423) (8,087,423)
------------ ------------ ------------ ------------ ------------
Balance at July 31, 1998 10,000 10,000 20,000 (13,187,334) (13,167,334)
Net loss for the nine
months ended April 30,
1999 (unaudited) (6,184,255) (6,184,255)
------------ ------------ ------------ ------------ ------------
Balance at April 30, 1999
(unaudited) 10,000 10,000 $ 20,000 $(19,371,589) $(19,351,589)
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
7
Ebbisham Limited
(a development stage enterprise)
Statements of Cash Flows
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Cumulative for
For the period the period
from from
September 26, September 26,
1996 1996
(inception) Year Ended (inception)
through July July 31, Nine months ended April 30, through April
31, ---------------------------- 30,
1997 1998 1998 1999 1999
------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (5,099,911) $ (8,087,423) $ (6,340,000) $ (6,184,255) $(19,371,589)
------------ ------------ ------------ ------------ ------------
Changes in assets and liabilities:
Increase (decrease) in payable to Elan
Corporation plc 639,549 1,058,913 991,543 (1,135,557) 562,905
Increase in payable to
EmisphereTechnologies, Inc. 648,786 7,061,270 5,372,680 764,427 8,474,483
Increase in accounts payable 31,365 31,365
------------ ------------ ------------ ------------ ------------
Net cash (used in) provided by operating
activities (3,811,576) 32,760 24,223 (6,524,020) (10,302,836)
------------ ------------ ------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of share capital 20,000 20,000
Proceeds from issuance of subordinated
debt 4,500,000 10,000,000 14,500,000
------------ ------------ ------------ ------------ ------------
Net cash provided by financing activities 4,520,000 10,000,000 14,520,000
------------ ------------ ------------ ------------ ------------
Net increase in cash 708,424 32,760 24,223 3,475,980 4,217,164
Cash at beginning of period 0 708,424 708,424 741,184 0
------------ ------------ ------------ ------------ ------------
Cash at end of period $ 708,424 $ 741,184 $ 732,647 $ 4,217,164 $ 4,217,164
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
8
Ebbisham Limited
(a development stage enterprise)
Notes to Financial Statements
(Interim data is unaudited)
1) ORGANIZATION AND BUSINESS
Ebbisham Limited ("Ebbisham"), an Irish corporation, is an equally
owned joint venture between Elan Corporation plc ("Elan") and Emisphere
Technologies, Inc. ("Emisphere") (collectively the "Partners") formed
in September 1996 to develop and market heparin projects utilizing
technologies contributed by the Partners. Ebbisham is managed by a
committee ("Management Committee") consisting of equal representation
from the Partners. The purpose of the Management Committee is to govern
all activities of Ebbisham including the research and development
activities undertaken by Ebbisham as well as the approval of budgets
and determining the necessary financing to be provided by the Partners.
As a development stage enterprise, Ebbisham's primary efforts to date
have been devoted to research and development and raising capital.
Ebbisham has limited capital resources and recurring net operating
losses. Since inception, Ebbisham has received financial support from
the Partners and is dependent upon receipt of additional capital
investment from Elan and Emisphere to fund planned research activities.
Ebbisham has received assurances from Emisphere that it will provide
the necessary financial support to enable Ebbisham to continue to
operate through December 1, 1999. In addition to the normal risks
associated with a new business venture, there can be no assurance that
the Company's drug delivery technology will be commercially viable. In
addition, the Company operates in an environment of rapid change in
technology and is dependent upon the services of its employees and
consultants.
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements of Ebbisham were prepared in
accordance with generally accepted accounting principles in the United
States.
CASH
The carrying amount reported in the balance sheet for cash approximates
its fair value. Cash subjects Ebbisham to concentrations of credit
risk.
INCOME TAXES
Ebbisham accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109"). SFAS 109 requires that Ebbisham recognize
deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities
and assets are determined on the basis of the difference between the
tax basis of assets and liabilities and their respective
financial-reporting amounts ("temporary differences") at enacted tax
rates in effect for the years in which the temporary differences are
expected to reverse.
<PAGE>
9
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
3) SUBORDINATED DEBT:
On September 26, 1996 (inception) Ebbisham issued $4,500,000 of
subordinated debt ("Subordinated Debt") to Elan, which is due on
September 26, 2006.
The subordinated debt is interest-free until Ebbisham has sufficient
equity, as defined, and has earned a profit after tax in the preceding
financial year of not less than $100,000. The rate of interest in a
given financial year is as follows:
-5% if profits after tax for that financial year exceed $100,000 but do
not exceed $5,000,000.
-10% if profits after tax for that financial year exceed $5,000,000 but
do not exceed $10,000,000.
-15% if profits after tax for that financial year exceed $10,000,000.
The debt is subordinated to the claims of all other creditors of
Ebbisham.
4) STOCKHOLDERS' DEFICIT:
Ebbisham's certificate of incorporation provides for the issuance of
five million ordinary "A" shares and five million ordinary "B" shares.
The rights and terms of both types of shares are identical except that
Elan holds the ordinary "A" shares and Emisphere holds the ordinary "B"
shares.
5) INCOME TAXES:
Ebbisham is subject to the provisions of tax laws in Ireland.
Accordingly, in the event that Ebbisham earns royalty income for its
patents in the future, such amounts may be exempt from income tax under
certain circumstances. In addition, in the event that taxable profits
are derived from Ebbisham's manufacture of products, a tax would be
imposed on profits earned at tax rates ranging from 10% to 32%.
As of July 31, 1998, Ebbisham has available net operating loss
carry-forwards of approximately $13 million, which under certain
circumstances, may be available to offset taxable income arising in the
future. As a result of the uncertainty of whether Ebbisham will have
future taxable income and whether the net operating losses being
carried forward will be available to offset such taxable income,
Ebbisham has established a valuation allowance equal to the total
deferred tax asset. The total deferred tax asset, net of the valuation
allowance, was not material.
6) RELATED-PARTY TRANSACTIONS:
On September 26, 1996 (inception), Ebbisham entered into certain
agreements with Elan and Emisphere relating to the research and
development of an oral heparin product under development. In accordance
with these agreements, the Partners perform certain research and
development activities on behalf of Ebbisham. During the period from
September 26, 1996 (inception) through July 31, 1997, Ebbisham incurred
research and development expenses for work performed by Elan and
Emisphere of $1,172,223 and $3,999,733, respectively. For the year
ended July 31, 1998, Ebbisham incurred research and development
expenses for work performed by Elan and Emisphere of $1,058,913 and
$7,061,270, respectively.
<PAGE>
10
7) SUBSEQUENT EVENT
On August 5, 1998, Elan and Emisphere each advanced $5 million to
Ebbisham in exchange for notes payable which are due in full on July
31, 1999. The notes payable do not bear interest, and may be repaid by
Ebbisham prior to July 31, 1999 without penalties or premiums. If the
funds are not available for Ebbisham to repay the notes by July 31,
1999, Emisphere has agreed to extend the terms of the notes to December
1, 1999 and to provide the necessary funding to repay amounts due Elan.
NOTES TO INTERIM FINANCIAL STATEMENTS (UNAUDITED):
8) BASIS OF PRESENTATION
The interim financial statements are unaudited and reflect adjustments
consisting of normal recurring accruals, which are, in the opinion of
Ebbisham's management, necessary for a fair presentation of the
financial position and results of operations for the periods presented.
Operating results for any interim period are not necessarily indicative
of the results for the full year.
9) SUBORDINATED DEBT:
In August 1998 Ebbisham received $5,000,000 from each of Elan and
Emisphere. The $10,000,000 was contributed to fund past costs incurred
by the operations of Ebbisham as well as expected future operations.
The debt has terms identical to the Subordinated Debt.
In July 1999, Ebbisham received approximately $2,450,000 from each of
Elan and Emisphere. The $4,900,000 was contributed to fund past costs
incurred by Ebbisham. The debt has terms identical to the Subordinated
Debt.
10) RELATED-PARTY TRANSACTIONS:
For the nine months ended April 30, 1998 and April 30, 1999 Ebbisham
incurred research and development expenses for work performed by Elan
and Emisphere of $993,763, $4,660,121, $432,588 and $15,732,805,
respectively. Cumulatively, for the period from September 26, 1996
(inception) through April 30, 1999 Ebbisham incurred research and
development expenses for work performed by Elan and Emisphere of
$2,663,724 and $16,793,808, respectively.
11) CHANGE OF CONTROL:
On July 2, 1999, Emisphere acquired the 50% interest of Ebbisham
Limited owned by Elan plc. After the change of control of Elan's 50%
interest in Ebbisham, Emisphere has 100% ownership of Ebbisham
<PAGE>
11
Item 7(b)
The following unaudited pro forma condensed combined financial data give effect
to the acquisition of Ebbisham Limited ("Acquistion") by Emisphere Technologies,
Inc which occurred on July 2, 1999, pursuant to various change of control
agreements.
The unaudited pro forma condensed combined balance sheet reflects the historic
financial position of the Company pro forma for the effects of the change of
control, as if it had occurred on April 30, 1999.
The unaudited pro forma condensed combined statements of operations combine the
historical operating results of Emisphere Technologies, Inc. and Ebbisham
Limited for the year ended July 31, 1998 and the nine months ended April 30,
1999 as if the Acquisition had occurred on August 1, 1997 and August 1, 1998
respectively.
The unaudited pro forma condensed combined financial data do not reflect cost
savings, synergies or other financial benefits which may be achieved from the
acquisition of Ebbisham nor do they report to be indicative of the operating
results or the financial position that would have been realized had the Ebbisham
acquisition been consummated as of the date or for the period for which the pro
forma data is presented. The unaudited pro forma adjustments described in the
notes are based upon current estimates and contain assumption that the Company's
management believe are reasonable in such circumstances.
The unaudited pro forma condensed combined financial data are based on and
should be read in conjunction with the Company's Annual Report on Form 10-K for
the year ended July 31, 1998, previously filed with the Securities and Exchange
Commission, and the financial statements of Ebbisham Limited included in this
report.
The following pro forma financial data is provided:
Unaudited Pro Forma Condensed Combined Balance Sheet as of April 30,
1999.
Unaudited Pro Forma Condensed Combined Statement of Operations for the
Year Ended July 31, 1998.
Unaudited Pro Forma Condensed Combined Statement of Operations for the
Nine Months Ended April 30, 1999.
Unaudited notes to pro forma condensed combined financial data.
<PAGE>
12
Emisphere Technologies, Inc.and Subsidiaries
Unaudited Pro Forma Condensed Combined Balance Sheet
as of April 30, 1999
<TABLE>
<CAPTION>
The Company Ebbisham Pro Forma The Company
Historical Historical Adjustments Notes Pro Forma
------------ ------------ ------------- ----- ------------
<S> <C> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 3,541,377 $ 4,217,164 $ 2,449,233 (1)
(562,925) (2)
20,000,000 (3)
(11,949,233) (4)
(8,060,767) (5) $ 9,634,849
Marketable securities 13,348,117 13,348,117
Receivable from Ebbisham Ltd. 8,474,463 (8,474,463) (2)
Other current assets 1,259,244 1,259,244
------------ ------------ ------------
Total current assets 26,623,201 4,217,164 24,242,210
Fixed assets, net 11,705,592 11,705,592
Intangible assets 8,442,317 (5) 8,442,317
Due from Ebbisham Ltd. 5,000,000 2,449,233 (1)
11,949,233 (4)
(19,398,466) (6)
Other assets 93,788 93,788
------------ ------------ ------------
Total assets $ 43,422,581 $ 4,217,164 $ 44,483,907
============ ============ ============
Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts payable and other current liabilities $ 4,658,341 $ 9,068,753 (9,037,388) (2)
380,000 (5) 5,069,706
Investment deficiency in Ebbisham Ltd. 9,675,795 9,675,794 (5)
(19,351,589) (6)
------------ ------------ ------------
Total current liabilities 14,334,136 9,068,753 5,069,706
Subordinated debt 14,500,000 4,898,466 (1)
(19,398,466) (6)
Note payable 20,000,000 (3) 20,000,000
Deferred lease liability 1,974,858 1,974,858
------------ ------------ ------------
Total liabilities 16,308,994 23,568,743 27,044,564
------------ ------------ ------------
Stockholders' Deficit:
Common stock 121,538 20,000 (20,000) (6)
121,538
Additional paid in capital 98,727,408 98,727,408
Accumulated deficit (71,581,339) (19,371,589) (9,674,244) (5)
19,371,589 (6) (81,255,583)
Other stockholders' equity (154,020) (154,020)
------------ ------------ ------------
27,113,587 (19,351,589) 17,439,343
------------ ------------ ------------
Total liabilities and stockholders' deficit $ 43,422,581 $ 4,217,164 $ 44,483,907
============ ============ ============
</TABLE>
See Notes to Pro forma Condensed Financial Data
<PAGE>
13
Emisphere Technologies, Inc. and Subsidiaries
Unaudited Pro Forma Combined Statement of Operations
For the Year Ended July 31, 1998
<TABLE>
<CAPTION>
Ebbisham
The Company Limited Pro Forma The Company
Historical Historical Adjustment Notes Pro Forma
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Contract research revenue $ 15,868,310 $ (7,061,270) (7) $ 8,807,040
------------ ------------ ------------ ------------
Costs and expenses:
Research and development $ 15,189,811 $ 8,120,183 $ (7,061,270) (7)
563,000 (9) $ 16,811,724
Loss in Ebbisham Ltd. 4,043,712 (4,043,712) (7)
General and administrative 5,344,665 5,344,665
------------ ------------ ------------ ------------
24,578,188 8,120,183 22,156,389
------------ ------------ ------------ ------------
Operating loss (8,709,878) (8,120,183) (13,349,349)
------------ ------------ ------------ ------------
Other income and expense:
Investment income 1,879,840 32,760 1,912,600
Interest expense (236,250) (3,112,500) (8) (3,348,750)
------------ ------------ ------------ ------------
1,643,590 32,760 (1,436,150)
------------ ------------ ------------ ------------
Net loss $ (7,066,288) $ (8,087,423) $(14,785,499)
============ ============ ============ ============
</TABLE>
See Notes to Pro forma Condensed Financial Data
<PAGE>
14
Emisphere Technologies, Inc. and Subsidiaries
Unaudited Pro Forma Combined Statement of Operations
For the Nine Months Ended April 30, 1999
<TABLE>
<CAPTION>
Ebbisham
The Company Limited Pro Forma The Company Pro
Historical Historical Adjustment Notes Forma
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Contract research revenue $ 9,554,925 $ (5,733,000) (10) $ 3,821,925
------------ ------------ ------------ ------------
Costs and expenses:
Research and development $ 17,428,285 $ 6,290,255 $ (5,733,000) (10)
422,000 (12) $ 18,407,540
Loss in Ebbisham Ltd. 3,092,125 (3,092,125) (10)
General and administrative 4,236,180 4,236,180
------------ ------------ ------------ ------------
24,756,590 6,290,255 22,643,720
------------ ------------ ------------ ------------
Operating loss (15,201,665) (6,290,255) (18,821,795)
------------ ------------ ------------ ------------
Other income and expense:
Investment income 1,179,729 106,000 1,285,729
Interest expense (562,372) 2,306,250 (11) (2,868,622)
Rental income 126,372 126,372
------------ ------------ ------------ ------------
743,729 106,000 (1,456,521)
------------ ------------ ------------ ------------
Net loss $(14,457,936) $ (6,184,255) $(20,278,316)
============ ============ ============ ============
</TABLE>
See Notes to Pro forma Condensed Financial Data
<PAGE>
15
Emisphere Technologies, Inc. and Subsidiaries
Unaudited Notes to Pro Forma Condensed Financial Data
On July 2, 1999, the Company acquired the 50% interest of Ebbisham Limited owned
by Elan Corporation plc. Prior to the change of control, each partner
contributed capital to Ebbisham in exchange for a notes payable. Also prior to
the change of control, Ebbisham repaid Elan and Emisphere, for work done prior
to the asset change of control. After the acquisition of Elan's 50% interest in
Ebbisham, Emisphere will have 100% ownership of Ebbisham. For the purpose of
preparing the unaudited pro forma condensed balance sheet, the Ebbisham Limited
acquisition has been accounting for in accordance with the purchase method
whereby the purchase price of approximately $18.1 million ($20,380,000,
including transaction costs, net of purchasing accounting adjustments for
liabilities not requiring cash funding of $2,263,439) has been allocated to in
process research and development and a intangible asset.
1. To record capital contribution each partner was required to
make, prior to the change of control, to fund certain
liabilities. Each partner contributed approximately $2.45
million. The Transaction is summarized in the following chart:
Due from Suborinated Cash
Ebbisham Ltd Debt Net
Emisphere Contribution $2,449,233 $2,449,233
Elan Contribution 2,449,233 $2,449,233
---------- ---------- ----------
$2,449,233 $4,898,466 $2,449,233
========== ========== ==========
2. To record payments by Ebbisham to each partner for past work
performed by the partners on behalf of Ebbisham. Elan received a
payment of $562,905 and Emisphere received $8,474,463. The
Transaction is summarized in the following chart:
Accounts Receivable Cash
Payable from Ebbisham Net
Emisphere $8,474,463 $8,474,463
Elan 562,905 $562,905
---------- ---------- --------
$9,037,388 $8,474,463 $562,905
========== ========== ========
<PAGE>
16
3. To record exchange of note payable to Elan International
services of $20,000,000, interest at 15% per annum, compounded
semi annually.
4. To record Emisphere's capital contribution and subsequent
repayment of subordinated debt due Elan. The Transaction is
summarized in the following chart:
Subordinated Due From Cash
Debt Ebbisham Net
Emisphere $ 11,949,233 $11,949,233
Elan (11,949,233) $(11,949,233)
------------ ----------- ------------
$ 0 $11,949,233 $(11,949,233)
============ =========== ============
5. The table below summarizes the purchase price and the estimated
allocation thereof:
Cash $ 8,060,767
Transaction cost 380,000
Investment deficiency (a) 9,675,794
--------------
Total purchase price $ 18,116,561
==============
Estimated allocation of the purchase price:
In process research and development $ 9,674,244
Intangible assets 8,442,317
--------------
$ 18,116,561
==============
(a) The investment deficiency is Ebbisham's deficit on April 30,
1999 attributable to Elan.
6. To record elimination of inter-company balances.
<PAGE>
17
For the purpose of preparing the unaudited pro forma condensed combined
statement of operations for the year ended July 31, 1998, and the nine months
ended April 30, 1999 the Ebbisham Limited acquisition has been accounting for in
accordance with the purchase method whereby the purchase price of approximately
$18.1 million ($20,380,000, including transaction cost, net of purchasing
accounting adjustments for liabilities not requiring cash funding of $2,263,439)
has been allocated to in process research and development and a intangible
asset. The unaudited pro forma operating statements for the year and nine months
ended July 31, 1998 and April 30, 1999 exclude a non-recurring charge of
approximately $9.7 million in connection with acquired in process research and
develepment.
7. To eliminate inter-company transactions that took place in the
year ended July 31, 1998. In the twelve months ended July 31,
1998 Emishphere recorded revenues of approximately $7.05 million
dollars from work performed on Ebbisham's behalf. Ebbisham
recorded the same amount as research and development expense.
Emisphere also recorded its 50% interest in the loss of Ebbisham
of approximately $4.05 million for the twelve months ended July
31, 1998.
8. To record the interest expense related to the note exchanged
with Elan of $20.0 million. The note carries a interest rate of
15%, compounded semiannually.
9. To record the amortization expense related to the intangible
assets acquired in the change of control of Ebbisham. The
Company has determined the patents acquired in the transaction
have a remaining life of approximately 15 years. The
straight-line method has been chosen to amortize the $8.45
million of intangibles.
10. To eliminate inter-company transactions that took place in the
nine months ended April 30, 1999. In the nine months ended April
30, 1999 Emisphere recorded revenues of approximately $5.7
million dollars from work performed on Ebbisham's behalf.
Ebbisham recorded the same amount as research and development
expense. Emisphere also recorded its 50% interest in the loss of
Ebbisham of approximately $3.1 million for the nine months ended
April 30, 1999.
11. To record the interest expense related to the note exchanged
with Elan of $20.0 million. The note carries a interest rate of
15%, compounded semiannually.
12. To record the amortization expense related to the intangible
assets acquired in the change of control of Ebbisham. The
company has determined the patents acquired in the transaction
have a remaining life of approximately 15 years. The
straight-line method has been chosen to amortize the $8.45
million of intangibles.
<PAGE>
SIGNATURE
Under the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned.
EMISPHERE TECHNOLOGIES, INC.
By: /s/ Joseph D. Poveromo
----------------------
Name: Joseph D. Poveromo
Title: Controller and Chief Accounting
Officer (Principal Accounting
Officer)
By: /s/ Charles H. Abdalian, Jr.
----------------------------
Name: Charles H. Abdalian, Jr.
Title: Chief Financial Officer
(Principal Financial Officer)
Date: September 14, 1999
18
