EXHIBIT 99.1
INCARA PHARMACEUTICALS CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, 2000
(Dollars in thousands, except per share data)
Consolidated Pro Forma Pro Forma
Actual Adjustments As Adjusted
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ASSETS
Current assets:
Cash and cash equivalents $ 2,583 $ 4,000 $ 6,583
Marketable securities 1,606 - 1,606
Accounts receivable 105 - 105
Prepaids and other current assets 488 - 488
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Total current assets 4,782 4,000 8,782
Property and equipment, net 203 - 203
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$ 4,985 $ 4,000 $ 8,985
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 578 $ - $ 578
Accrued expenses 728 - 728
Current portion of capital lease obligations 23 - 23
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Total current liabilities 1,329 - 1,329
Long-term portion of capital lease obligations 37 - 37
Stockholders' equity:
Preferred stock, $.01 par value per share, 3,000,000 shares
authorized
Series C convertible exchangeable preferred stock, 20,000
shares authorized, no shares and 12,015 shares issued
and outstanding as of December 31, 2000 and
January 22, 2001, respectively - - -
Series B convertible preferred stock, 600,000 shares
authorized, no shares and 28,457 shares issued and
outstanding as of December 31, 2000 and
January 22, 2001, respectively - - -
Common stock, $.001 par value per share, 40,000,000
shares authorized, 7,540,849 shares and 8,365,849 shares
issued and outstanding at December 31, 2000 and
January 22, 2001, respectively 8 - 8
Additional paid-in capital 89,366 9,496 98,862
Restricted stock (209) - (209)
Accumulated deficit (85,546) (5,496) (91,042)
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Total stockholders' equity 3,619 4,000 7,619
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$ 4,985 $ 4,000 $ 8,985
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INCARA PHARMACEUTICALS CORPORATION
NOTE TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
On January 22, 2001, Incara Pharmaceuticals Corporation ("Incara") closed
on a collaborative transaction with Elan Corporation, plc, an Irish limited
liability company ("Elan"), Elan International Services, Ltd., a Bermuda
exempted limited liability company ("Elan International"), and Elan Pharma
International Limited, an Irish limited liability company ("Elan Pharma"). As
part of the transaction, Elan International and Incara formed a Bermuda exempted
limited liability company, Incara Development, Ltd. ("Incara Development"), to
develop OP2000. Incara owns all of the common stock and 60.2% of the non-voting
preferred shares of Incara Development and Elan International owns 39.8% of the
non-voting preferred shares of Incara Development. Of the outstanding combined
common and non-voting preferred shares of Incara Development, Incara owns 80.1%
and Elan International owns 19.9%. As part of the transaction, Elan, Elan Pharma
and Incara entered into license agreements under which Incara licensed to Incara
Development the OP2000 compound and Elan Pharma licensed to Incara Development
its proprietary MEDIPAD Drug Delivery System technology.
As part of the transaction, Elan International also purchased 825,000
shares of Incara's common stock, 28,457 shares of Incara Series B non-voting
convertible preferred stock ("Series B Stock") and a five-year warrant to
purchase 22,191 shares of Series B Stock at an exercise price of $72.12 per
share for an aggregate purchase price of $4,000,000. Each share of Series B
Stock is convertible into ten shares of common stock. Elan International also
purchased shares of Incara Series C convertible exchangeable non-voting
preferred stock ("Series C Stock"). The Series C Stock has a face value of
$12,015,000 and bears a mandatory stock dividend of 7%, compounded annually. The
Series C Stock is exchangeable at the option of Elan International at any time
for all of the preferred stock of Incara Development held by Incara which, if
exchanged, would give Elan International ownership of 50% of the initial amount
of combined common and preferred stock of Incara Development. After December 20,
2002, the Series C Stock is convertible by Elan International into shares of
Incara's Series B Stock at the rate of $64.90 per share. If the Series C Stock
is outstanding as of December 21, 2006, Incara will exchange the Series C Stock
and accrued dividends, at its option, for either cash or shares of stock and
warrants of Incara having a then fair market value of the amount due. The
proceeds from the issuance of the Series C Stock were contributed by Incara to
Incara Development. Consequently, the value assigned to Incara's investment in
Incara Development is the same as the value of the Series C Stock issued, which
was approximately $5,496,000. This value is the estimated fair market value of
Incara's common stock into which the Series C Stock could have converted,
calculated as of the closing date. From the date of issue up to December 21,
2006, Incara will accrete the Series C Stock from its recorded value up to its
face value plus the 7% dividend, compounded annually.
Upon the later of the completion of enrollment of a Phase 2/3 clinical
trial or December 21, 2001, Elan International will purchase $1,000,000 of
Incara's Series B Stock at a per share price that will be ten times the greater
of (a) the average per share price of Incara common stock for the day prior to
the purchase, or (b) a 25% premium to the average daily price per share of
Incara common stock for the 60 trading day period immediately prior to the
purchase, both as reported on the Nasdaq National Market. In addition, as part
of the $1,000,000 payment, Incara will issue to Elan International a five-year
warrant for 20% of the shares of Series B Stock purchased by Elan International.
The exercise price of the Series B Stock under this warrant will be equal to
twice the per share purchase price of the Series B Stock purchased on the same
date.
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Elan International and Incara intend to fund Incara Development pro rata,
based on Elan International's and Incara's respective percentage ownership of
the combined outstanding common and preferred stock of Incara Development.
Subject to mutual agreement, Elan Pharma will lend Incara up to $4,806,000 to
fund Incara's pro rata share of development funding for Incara Development. In
return, Incara issued a convertible promissory note that bears interest at 10%
compounded semi-annually on the amount outstanding thereunder. After December
20, 2002, the note is convertible at the option of Elan Pharma into shares of
Series B Stock at $43.27 per share. The note will mature on December 21, 2006,
when the outstanding principal plus accrued interest will be due and payable.
Incara has the option to repay the note either in cash or in shares of Series B
Stock having a then fair market value of the amount due.
While Incara owns 80.1% of the outstanding stock of Incara Development,
Elan and its subsidiaries have retained significant minority investor rights
that are considered "participating rights" as defined in the Emerging Issues
Task Force Consensus No. 96-16. Accordingly, Incara will not consolidate the
financial statements of Incara Development, but will instead account for its
investment in Incara Development under the equity method of accounting. Further,
since Elan can exchange its investment in Incara's Series C Stock for Incara's
30.1% preferred interest in Incara Development, Incara will only recognize 50%
of the accumulated net earnings of Incara Development unless the exchange right
expires unexercised in December 2006. Net losses of Incara Development will be
recognized by Incara at their 80.1% interest to the extent of Incara's
investments in or advances to Incara Development.
The pro forma adjustments to the balance sheet reflect the net cash
received from the above transactions. Incara immediately expensed its $5,496,000
investment in Incara Development, because the feasibility of using the
contributed technology in conjunction with OP2000 had not been established and
Incara Development had no alternative future use for the technology.
The unaudited pro forma consolidated balance sheet is provided for
informational purposes and is not necessarily indicative of what the actual
financial position would have been had the transaction described above been
completed as of December 31, 2000 and is not indicative of future financial
position.
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