EXHIBIT 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
give effect to the merger of the Company and Old Discovery pursuant to the
Merger Agreement. The unaudited pro forma condensed consolidated balance sheet
gives effect to the Merger as if it occurred on October 31, 1997. The unaudited
pro forma condensed consolidated statements of operations gives effect to the
Merger as if it occurred on January 1, 1996 and January 1, 1997, respectively.
The pro forma condensed consolidated financial statements are based on the
historical financial statements of the Company and Old Discovery. They give
effect to the Merger under the purchase method of accounting and apply the
assumptions and adjustments as discussed in the accompanying notes to the pro
forma condensed consolidated financial statements. The pro forma condensed
consolidated financial statements for the year ended December 31, 1996 have been
prepared based upon the audited financial statements of the Company and the
audited financial statements of Old Discovery for the year then ended. The pro
forma condensed consolidated financial statements as of and for the ten months
ended October 31, 1997 have been prepared based upon the unaudited condensed
financial statements of the Company and the unaudited condensed consolidated
financial statements of Old Discovery as of October 31, 1997 and for the ten
months then ended.
The Merger will be accounted for using the purchase method of accounting.
Although the Company was the surviving corporate entity, Old Discovery's former
stockholders own approximately 92% of the merged entity. Accordingly, the
transaction will be accounted for as an acquisition of the Company by Old
Discovery. The unaudited pro forma condensed consolidated financial statements
have been prepared on the basis of assumptions described in the notes thereto
and include assumptions relating to the allocation of the consideration paid for
the assets and liabilities of the Company based on preliminary estimates of
their fair value. The actual allocation of such consideration may differ from
that reflected in the unaudited pro forma condensed consolidated financial
statements after final valuation procedures are completed following the closing
of the Merger. The final allocations of the aggregate purchase price for the
Merger is not expected to differ materially from the preliminary allocations. In
the opinion of the Company, all adjustments necessary to present fairly the
unaudited pro forma condensed consolidated financial statements have been made
based on the proposed terms and structure of the Merger.
The pro forma information is presented for illustrative purpose only and is
not necessarily indicative of the operating results or financial position that
would have occurred if the Merger had been consummated on January 1, 1996,
January 1, 1997 or October 31, 1997, respectively, nor is it necessarily
indicative of future operating results or financial position.
The pro forma condensed consolidated financial statements should be read in
conjunction with the historical financial statements and the related noted
thereto of the Company and Old Discovery in the Amendment No. 2 to the Ansan
Pharmaceuticals, Inc. Form S-4 dated October 24, 1997, portions of which are
incorporated herein by reference, and Managment's Discussion and Analysis of
Financial Condition and Plan of Operations included therein.
UNAUDITED PRO FORMA COMBINED CONDENSED
BALANCE SHEET
October 31, 1997
(in thousands)
Pro Forma
Ansan Discovery Pro Forma Combined
Pharmaceuticals Laboratories Adjustments Reflecting Merg
--------------- ------------ ----------- ---------------
ASSETS
------
Current assets
Cash and Cash equivalents $ 681 $ 368 $1049
$(1246)(A)
Short-term investments 1600 12,744 (1300)(D) 11,798
Prepaid expenses and
other current assets 43 32 ---- 75
------ ------ -------- ------
Total current assets 2324 13,144 (2546) 12,922
Furniture and equipment net 76 125 201
Other assets 30 30
Deferred merger costs 386 327 (713)(C) ------
------ ------ -------- ------
$2786 $13,626 $(3259) $13,153
------ ------- ------- -------
LIABILITIES AND STOCKHOLDERS
EQUITY
Current liabilities
Accounts payable and accrued
expenses $264 $528 $412(C) $1204
Payable to Titan Pharmaceuticals, Inc. 246 --- (246)(A) ---
Other accrued liabilities 14 --- --- 14
Debenture payable to Titan
Pharmaceuticals Inc. 1,000 --- (1,000)(A) ---
----- --------
Total current liabilities 1524 528 (834) 1218
Commitments
Minority Interest --- 2,200 --- 2,200
Stockholders' Equity
Preferred Stock 1300 2 (1300)(D) 2
Common Stock 3 7 (6)(E) 3
(1)(D)
Additional paid-in capital 10,697 19,001 (10,697)(B) 21,464
2457(B)
6(E)
Deficit accumulated during the
development stage (10,738) (8112) 10,738 (11,734)
------ ------ (3622)(B) ------
-------
Total stockholders' equity 1262 13098 (2425) 11,935
----- ----- ------ -----
$2786 $13626 $(3259) $13153
===== ===== ====== =====
- ---------------
(A) Reflects the repayment of obligations to Titan Pharmaceuticals, Inc. in
connection with the Merger.
(B) Reflects the allocation of the estimated purchase price of approximately
$2.9 million to the historical Ansan balance sheet. The adjustment includes
approximately $3.6 million of purchased in-process research and
development. Also reflects the elimination of Ansan's stockholders' equity
accounts.
(C) Reflects the estimated costs incurred by Ansan and discovery to complete
the Merger.
(D) Reflects the elimination of Discovery's investment in Ansan Series A
preferred stock
(E) To reflect the 1-for-3 reverse stock split:
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS
Ten Months Ended October 31, 1997
(in thousands, except share and per share amounts)
Pro Forma
Ansan Discovery Pro Forma Combined
Pharmaceuticals Laboratories Adjustments Reflecting Merg
--------------- ------------ ----------- ---------------
Costs and expenses
Research and development $ 836 $ 3742 ____ $4578
General and administrative 840 1711 ____ 2551
--- ---- ----
Loss from operations (1676) (5453) ____ (7129)
Other income/expenses)
Interest income 85 595 (42)(F) 638
Interest expense (67) ____ 67(F) ___
--------------- ------------ ----------- ---------------
Net Loss (1658) (4858) $25 $(6491)
=============== ============ =========== ===============
Net loss per share $1.97 $1.85 $2.04
Shares used in computing net loss per share 840,856 2,629,772 3,176,203
_______
(F) Reflects the net reduction of interest expense as a result of the repayment
of the Titan Debenture in connection with the Merger
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
PRO FORMA
ANSAN DISCOVERY PRO FORMA COMBINED
PHARMACEUTICALS LABORATORIES ADJUSTMENTS REFLECTING MERGER
--------------- ------------ ----------- -----------------
Costs and expenses
Research and
development.......... $ 1,181 $ 2,740 $-- $ 3,921
General and
administrative....... 1,257 692 -- 1,949
---------- ---------- ---- ----------
Loss from operations.... (2,438) (3,432) -- (5,870)
Other income/(expenses)
Interest income....... 157 205 -- 362
Interest expense...... (11) -- (11)
---------- ---------- ---- ----------
Loss before minority
interest............... (2,281) (3,238) -- (5,519)
Minority interest in
loss of subsidiary..... -- 2 -- 2
---------- ---------- ---- ----------
Net loss................ $ (2,281) $ (3,236) $-- $ (5,517)
========== ========== ==== ==========
Net loss per share...... $ (0.94) $ (0.65) $ (0.84)
========== ========== ==========
Shares used in computing
net loss............... 2,431,447 4,943,768 6,583,068
========== ========== ==========
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
Note 1
The unaudited pro forma condensed combined balance sheet of the Company and
Old Discovery has been prepared as if the Merger was completed as of October 31,
1997. The Merger will be accounted for as a purchase of the Company by Old
Discovery, as Old Discovery's former stockholders own approximately 92% of the
merged entity notwithstanding that the Company survived the Merger. The total
cost of the proposed merger is estimated to be approximately $2.9 million,
including transaction costs incurred by Old Discovery of approximately $400,000
which includes financial advisory, legal, and accounting fees.
The purchase cost of the Company has been determined based on the estimated
fair market value of Company stock at the time of the announcement of the
Merger. The estimated purchase price consists of the following (in thousands):
Estimated value of Common Stock to be held by pre-existing
current Company stockholders following the Merger
(1,639,300 shares of Common stock at $1.50 per
share) $2459
Estimated transaction costs to be incurred by
Old Discovery 400
-----
(Net of prior Old Discovery investment
in the Company) $2859
=====
Based on a preliminary analysis of tangible and intangible assets the
allocation of the purchase price is as follows:
Tangible assets of the Company $1100
In-process research & development 3622
Liabilities of the Company assumed
(including transaction costs) (1863)
------
$ 2859
======
The in-process research and development will be charged against earnings.
Such charge has not been reflected in the pro forma condensed statement of
operations as such charge is a non-recurring charge directly attributable to the
Merger.
The pro forma adjustments include accrued liabilities of $1,125,000 to
reflect the estimated costs incurred by both the Company and Old Discovery to
complete the Merger.
The pro forma adjustments include the repayment of approximately $1,200,000
in debt owned to Titan.
No pro forma adjustment has been included to reflect the Titan Sublicense
Agreement as there is no effect on the pro forma periods presented.
Note 2
The unaudited pro forma condensed consolidated statements of operations of
the Company and Old Discovery have been prepared as if the Merger was completed
as of January 1, 1996 and January 1, 1997, respectively. The condensed
consolidated statement of operations for the ten months ended October 31, 1997,
includes an adjustment to reduce interest expense to reflect the repayment of
Titan indebtedness in connection with the Merger.
Note 3
Combined pro forma net loss per share for the year ended December 31, 1996
and the ten-month period ended October 31, 1997 is computed using the historical
weighted average number of Old Discovery Common Stock outstanding, adjusted for
the exchange ratio applicable to Common Stock in the Merger plus the
shares of the Company Common Stock outstanding following the cancellation of
Titan's holding in the Company. In addition, combined pro forma net loss per
share for the ten-month period ended October 31, 1997 has been adjusted for the
reverse stock split. Preferred stock and other common stock equivalents issued
in the Merger are not included, as their effect is antidilutive.