UNITED STATES
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
Date of Report: November 4, 1996
Commission file number 0-20772
CYPROS PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
California
(State or other jurisdiction of incorporation or
organization)
33-0476164
(I.R.S. Employer Identification No.)
2714 Loker Avenue West
Carlsbad, California 92008
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(619) 929-9500
TABLE OF CONTENTS
Item Page
1. Changes in Control of Registrant. *
2. Acquisition or Disposition of Assets. 3
3. Bankruptcy or Receivership. *
4. Changes in Registrant's Certifying *
Accountant.
5. Other Events. *
6. Resignations of Registrant's Directors. *
7. Financial Statements and Exhibits.
(a) Financial statements of businesses 3
acquired.
(b) Pro forma financial information. 3
(c) Exhibits. 3
Signatures 12
* No information provided due to inapplicability of item.
Item 2. Acquisition or Disposition of Assets.
On November 4, 1996, the Company acquired the New Drug
Application and U.S. trademark for Ethamolin Injection (the
"Ethamolin Assets") and the finished goods inventory on hand
at closing from Schwarz Pharma, Inc., a Delaware
corporation. The acquisition was accomplished in an arm's
length negotiation through a purchase of assets and
accounted for using the purchase method of accounting. The
total purchase price was $3,286,642, of which the Company
paid $2,086,642 in cash and issued a $1,200,000 note bearing
interest at 8% per annum at closing. The principal and
accrued interest on the note are due and payable on November
3, 1997. Repayment of the principal and interest on the
note is secured by the Ethamolin Assets. The Company used
its working capital to make the cash payment at closing.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Index to the Financial Statements of
Schwarz Pharma, Inc. Ethamolin Product Line
Sequentiall
Document y Numbered
Page
Financal Statements 4
............................................
Report of Independent Auditors 6
.................................
Statement of Assets Acquired 7
...................................
Statement of Operating Revenue and Expenses
Directly Related to Acquired Business 8
.......................
Notes to Financial Statements 9
..................................
(b) Proforma financial information.
Index to the Proforma
Financial Statements of
Cypros Pharmaceutical Corporation
and Schwarz Pharma, Inc. Ethamolin Product Line
Sequentiall
Document y Numbered
Page
Proforma Condensed Balance Sheets
and explanatory notes 10
.....................
Proforma Condensed Statements of Operations
and explanatory notes 11
......................
(c) Exhibits.
None
Financial Statements
Schwarz Pharma, Inc.
Ethamolin Product Line
For the year ended July 31, 1996
Schwarz Pharma, Inc.
Ethamolin Product Line
Financial Statements
For the year ended July 31, 1996
Contents
Report of Independent Auditors 1
..................................
Statement of Assets Acquired 2
....................................
Statement of Operating Revenue and Expenses Directly
Related to Acquired Business 3
..............................
Notes to Financial Statements 4
...................................
Report of Ernst & Young LLP, Independent Auditors
Board of Directors and Shareholders
Schwarz Pharma, Inc.
We have audited the accompanying statement of assets
acquired of the Schwarz Pharma, Inc. Ethamolin Product Line
(the Product Line) as of July 31, 1996, and the related
statement of operating revenue and expenses directly related
to the acquired business, for the year then ended. These
financial statements are the responsibility of the Product
LineOs management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards 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. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
As described in Note 2, these financial statements were
prepared solely to present the assets acquired by Cypros
Pharmaceutical Corporation pursuant to a product line
purchase agreement and are not intended to be a complete
presentation of the Product Line's assets, operating
revenues and expenses.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the assets
acquired of the Product Line at July 31, 1996, and its
operating revenue and its expenses directly related to the
acquired business for the year then ended.
ERNST & YOUNG LLP
San Diego, California
November 27, 1996
Schwarz Pharma, Inc.
Ethamolin Product Line
Statement of Assets Acquired
Year ended July 31, 1996
Assets
Inventory $59,127
Total assets acquired $59,127
See accompanying notes.
Schwarz Pharma, Inc.
Ethamolin Product Line
Statement of Operating Revenue and Expenses
Directly Related to Acquired Business
Year ended July 31, 1996
Net sales $1,126,76
6
Cost of sales 142,116
Promotion/royalties 153
Excess of operating revenue over expenses
directly $
related to acquired business 984,497
See accompanying notes.
Schwarz Pharma, Inc.
Ethamolin Product Line
Notes to Financial Statements
1. Nature of Business
Ethamolin is a product being distributed by Schwarz Pharma, Inc.,
a Delaware Corporation. Ethamolin is an acute-care injectable
drug approved by the U.S. Food and Drug Administration for the
treatment of bleeding esophageal varices.
2. Significant Accounting Policies
Basis of Accounting
The financial statements were prepared in accordance with
Securities and Exchange Commission Rule 3-05 of Regulation S-X
for acquired businesses not accounted for as a separate product
line by the previous owner. Accordingly, the statement of assets
acquired reflects only those assets purchased and does not
include allocations for such items as intangible property,
accounts receivable, accounts payable and debt. The statement of
operating revenue and expenses directly related to the acquired
business does not include allocations for overhead, selling and
general administration expenses, interest expense and income
taxes.
Inventory
Inventory consists entirely of finished goods and is valued at
the lower of first-in, first-out cost or market value.
3. Significant Customers
In 1996, approximately 84% of net sales was to three customers.
4. Subsequent Events
On November 4, 1996, the Ethamolin product line was sold to
Cypros Pharmaceutical Corporation, including all inventory on
hand as of that date.
Cypros
Pharmaceutical
Corporation
PROFORMA CONDENSED
BALANCE SHEETS
July 31, 1996
The
Ethamoli
n
Product
Line
Cypros of
Pharmaceuti Schwarz
cal
Corporation Pharma, Proforma Proforma
Inc. Adjustments Adjusted
ASSETS
Cash and cash $ $ - (1) $6,220,062
equivalents 8,306,752 $(2,086,690
)
Short-term 7,690,297 - - 7,690,297
investments
Purchased (2)
technology, net 2,629,427 - 3,214,048 5,843,475
(3)
Other assets 1,120,038 59,127 13,515 1,192,680
Total Assets $ $59,127 $
19,746,514 1,140,873 $20,946,514
LIABILITIES AND SHAREHOLDER EQUITY
S'
Total liabilities $ $ - $ (4) $2,436,064
1,236,064 1,200,000
Shareholders'
equity:
Common stock - - 21,838,493
21,838,493
Mandatorily
convertible notes 7,458,498 - - 7,458,498
Deferred
compensation - - (304,309)
(304,309)
Retained
earnings/ - - (10,482,232
(Accumulated (10,482,232 )
deficit) )
Total shareholders'
equity - - 18,510,450
18,510,450
Total liabilities
and shareholders' $ $ - $ $20,946,514
equity 19,746,514 1,200,000
(1) Assumes that the transaction closed on July 31, 1996 and
represents the value of cash consideration paid at closing for
Ethamolin.
(2) Represents the full price of the acquisition, including a
$1,200,000 promissory note issued to Schwarz Pharma, Inc. at
closing (the "Note"), net of the Ethamolin inventory received at
closing. This asset will be amortized by the Company over seven
(7) years.
(3) Represents the value of Ethamolin inventory acquired at
closing.
(4) Represents the Company's obligation to pay the Note.
Cypros
Pharmaceutical
Corporation
PROFORMA
CONDENSEDSTATEMENTS
OF OPERATIONS
Year Ended July 31,
1996
The
Ethamolin
Cypros Product
Line
Pharmaceuti of Schwarz Proforma Proforma
cal
Corporation Pharma, Adjustmen Adjusted
Inc. ts
>
Sales $ $ $ $
1,275,240 1,126,766 - 2,402,006
Cost of Goods Sold
405,142 142,116 - 547,258
Gross Margin
870,098 984,650 1,854,748
Selling, general
and administrative 2,597,054 153 458,997 (1 3,056,204
)
Clinical testing
and regulatory 1,389,128 - - 1,389,128
Research and
development 1,002,226 - - 1,002,226
Income (Loss) from
operations (4,118,310) 984,497 (3,592,810
)
Other income
(expense):
Research grant 270,510 - - 270,510
income
Interest income, 757,692 - (210,768) (2 642,924
net )
Net Loss $ $ $ $(2,679,37
(3,090,108) 984,497 344,229 6)
Loss per share $ $
(0.27) (0.23)
Weighted average
shares outstanding 11,518,169 11,518,169
(1) Represents the substitution of the historical selling,
general and administrative expenses for the amortization of
purchased technology for the year ended July 31, 1996.
(2) Represents the decrease in interest income resulting from an
assumed closing of the transaction at the beginning of the year
instead of at the end of the year, and thus, less funds available
for investment during the year. Also includes $96,000 of
interest expense related to the Note.
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, in the
City of Carlsbad, County of San Diego, State of California, on
the 16th day of January, 1997.
CYPROS PHARMACEUTICAL CORPORATION
(Signature)
David W. Nassif
Vice President, Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
