FORM 8-K
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
the Securities and Exchange Act of 1934
 
Date of Report (Date of earliest event reported) October 31, 2002
 
INCARA PHARMACEUTICALS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
 
Delaware
(State or other jurisdiction of incorporation)
 
0-27410
  
56-1924222
(Commission File Number)
  
(I.R.S. Employer Identification Number)
P.O. Box 14287
79 T.W. Alexander Drive
4401 Research Commons, Suite 200
Research Triangle Park, NC 27709
(Address of principal executive office) (Zip Code)
 
Registrant’s telephone number, including area code 919-558-8688
 

 
This Report contains, in addition to historical information, statements by us with respect to expectations about our business and future results, which are “forward-looking” statements under the Private Securities Litigation Reform Act of 1995. These statements and other statements made elsewhere by us or our representatives, which are identified or qualified by words such as “likely,” “will,” “suggests,” “expects,” “might,” “believe,” “could,” “should,” “may,” “estimates,” “potential,” “predict,” “continue,” “would,” “anticipates” or “plans,” or similar expressions, are based on a number of assumptions that are subject to risks and uncertainties. Actual results could differ materially from those currently anticipated or suggested due to a number of factors, including those set forth herein, those set forth in our Annual Report on Form 10-K and in our other SEC filings, and including risks relating to uncertainties relating to the need for additional funds for operations, scientific research, uncertainties of clinical trials and product development activities. All forward-looking statements are based on information available as of the date hereof, and we do not assume any obligation to update such forward-looking statements.
 
Item 2.    Acquisition or Disposition of Assets
 
On October 31, 2002, Incara Pharmaceuticals Corporation (the “Company”) completed the sale of substantially all of the assets of its wholly owned subsidiary, Incara Cell Technologies, Inc. (“ICT”), to Vesta Therapeutics, Inc. (“Vesta”). The Company received total proceeds of $3,313,000, which consisted of $2,845,000 of cash payments and $468,000 of reduction in the Company’s debt. This divestiture will allow Incara Pharmaceuticals to focus on its catalytic antioxidant programs and reduce its overall expenditure rate by approximately 40%.
 
Item 7.    Financial Statements and Exhibits
 
(a)  Exhibits
 
Exhibit 10.92
   
Amendment No. 1 dated October 30, 2002 to Asset Purchase Agreement between Incara Cell Technologies, Inc. and Vesta Therapeutics, Inc.
Exhibit 99.1
   
Press release issued November 1, 2002
 
(b)  Pro Forma Financial Statements
 
The following unaudited pro forma financial statements reflect the elimination of revenue and expenses related to Incara Cell Technologies, Inc. (“ICT”) for the nine months ended June 30, 2002 and for the year ended September 30, 2001, as if the sale of substantially all of the assets of ICT to Vesta Therapeutics, Inc. (“Vesta”) had occurred on October 1, 2000, which was the beginning of the year ended September 30, 2001. The unaudited pro forma financial statements are provided for informational purposes and are not necessarily indicative of what the actual financial statements would have been had the ICT sale been completed on October 1, 2000 and is not indicative of future results.

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INCARA PHARMACEUTICALS CORPORATION
 
PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited)
June 30, 2002
(In thousands, except share data)
 
    
Consolidated
Actual
     
Pro Forma
Adjustments
     
Pro Forma
As Adjusted
  
ASSETS
                           
Current assets:
                           
Cash and cash equivalents
   
$
1,343
 
   
$
2,845
 
   
$
4,188
 
Accounts receivable from Incara Development
   
 
764
 
   
 
—  
 
   
 
764
 
Prepaids and other current assets
   
 
224
 
   
 
—  
 
   
 
224
 
    
  
  
Total current assets
   
 
2,331
 
   
 
2,845
 
   
 
5,176
 
Property and equipment, net
   
 
1,313
 
   
 
(590
)
   
 
723
 
Other assets
   
 
356
 
   
 
—  
 
   
 
356
 
    
  
  
    
$
4,000
 
   
$
2,255
 
   
$
6,255
 
    
  
  
LIABILITIES, EXCHANGEABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
                           
Current liabilities:
                           
Accounts payable
   
$
829
 
   
$
—  
 
   
$
829
 
Accrued expenses
   
 
509
 
   
 
—  
 
   
 
509
 
Accumulated losses of Incara Development in excess of investment
   
 
638
 
   
 
—  
 
   
 
638
 
Current portion of capital lease obligations
   
 
23
 
   
 
—  
 
   
 
23
 
Current portion of notes payable
   
 
141
 
   
 
(116
)
   
 
25
 
    
  
  
Total current liabilities
   
 
2,140
 
   
 
(116
)
   
 
2,024
 
Long-term portion of notes payable
   
 
324
 
   
 
(324
)
   
 
—  
 
Series C redeemable convertible exchangeable preferred stock, 20,000 shares authorized; 12,015 issued and outstanding (liquidation value of $13,327)
   
 
13,327
 
   
 
—  
 
   
 
13,327
 
Stockholders’ deficit:
                           
Preferred stock, $.01 par value per share, 3,000,000 shares authorized:
                           
Series B nonredeemable convertible preferred stock, 600,000 shares authorized; 503,544 shares issued and outstanding
   
 
5
 
   
 
—  
 
   
 
5
 
Common stock, $.001 par value per share, 80,000,000 shares authorized; 14,057,908 shares issued and outstanding
   
 
14
 
   
 
—  
 
   
 
14
 
Additional paid-in capital
   
 
104,677
 
   
 
—  
 
   
 
104,677
 
Restricted stock
   
 
(266
)
   
 
—  
 
   
 
(266
)
Accumulated deficit
   
 
(116,221
)
   
 
2,695
 
   
 
(113,526
)
    
  
  
Total stockholders’ equity (deficit)
   
 
(11,791
)
   
 
2,695
 
   
 
(9,096
)
    
  
  
    
$
4,000
 
   
$
2,255
 
   
$
6,255
 
    
  
  
 
The pro forma adjustments to the balance sheet reflect the proceeds received by the Company upon the sale of substantially all of ICT’s assets on October 31, 2002 and the elimination of the related asset and liability balances as of June 30, 2002. The Company received total proceeds of $3,313,000, which consisted of $2,845,000 of cash payments and $468,000 of reductions in the Company’s debt. The adjustment to accumulated deficit of $2,695,000 as of June 30, 2002 reflects the difference between the proceeds received and the assets transferred to Vesta, using the June 30, 2002 balances. The notes payable were paid in full on October 31, 2002.

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INCARA PHARMACEUTICALS CORPORATION
 
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the nine months ended June 30, 2002
(In thousands, except per share data)
 
    
Consolidated
Actual
     
Pro Forma
Adjustments
     
Pro Forma
As Adjusted
  
Revenue:
                           
Cell processing revenue
   
$
40
 
   
$
40
 
   
$
—  
 
    
  
  
Costs and expenses:
                           
Research and development
   
 
5,872
 
   
 
3,320
 
   
 
2,552
 
General and administrative
   
 
2,213
 
   
 
14
 
   
 
2,199
 
    
  
  
Total costs and expenses
   
 
8,085
 
   
 
3,334
 
   
 
4,751
 
    
  
  
Loss from operations
   
 
(8,045
)
   
 
(3,294
)
   
 
(4,751
)
Equity in loss of Incara Development
   
 
(865
)
   
 
—  
 
   
 
(865
)
Investment income (expense), net
   
 
(29
)
   
 
(29
)
   
 
—  
 
Other income
   
 
150
 
   
 
—  
 
   
 
150
 
    
  
  
Net loss
   
 
(8,789
)
   
 
(3,323
)
   
 
(5,466
)
Preferred stock dividend accreted
   
 
(660
)
   
 
—  
 
   
 
(660
)
    
  
  
Net loss attributable to common stockholders
   
$
(9,449
)
   
$
(3,323
)
   
$
(6,126
)
    
  
  
Net loss per weighted share attributable to common stockholders:
                           
Basic and diluted
   
$
(0.74
)
            
$
(0.48
)
    
           
Weighted average common shares outstanding:
                           
Basic and diluted
   
 
12,834
 
            
 
12,834
 
    
           
 
The pro forma adjustments to the statement of operations reflect the elimination of revenue and expenses related to ICT’s operations for the nine months ended June 30, 2002, as if the sale had occurred at the beginning of the nine months ended June 30, 2002.

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INCARA PHARMACEUTICALS CORPORATION
 
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the year ended September 30, 2001
(In thousands, except per share data)
 
    
Consolidated
Actual
     
Pro Forma Adjustments
     
Pro Forma As Adjusted
  
Revenue:
                           
Cell processing revenue
   
$
44
 
   
$
44
 
   
$
—  
 
    
  
  
Costs and expenses:
                           
Research and development
   
 
7,520
 
   
 
3,093
 
   
 
4,427
 
General and administrative
   
 
3,077
 
   
 
20
 
   
 
3,057
 
    
  
  
Total costs and expenses
   
 
10,597
 
   
 
3,113
 
   
 
7,484
 
    
  
  
Loss from operations
   
 
(10,553
)
   
 
(3,069
)
   
 
(7,484
)
Equity in loss of Incara Development
   
 
(12,650
)
   
 
—  
 
   
 
(12,650
)
Investment income (expense), net
   
 
223
 
   
 
—  
 
   
 
223
 
Other income
   
 
767
 
   
 
—  
 
   
 
767
 
    
  
  
Net loss
   
 
(22,213
)
   
 
(3,069
)
   
 
(19,144
)
Preferred stock dividend accreted
   
 
(652
)
   
 
—  
 
   
 
(652
)
    
  
  
Net loss attributable to common stockholders
   
$
(22,865
)
   
$
(3,069
)
   
$
(19,796
)
    
  
  
Net loss per weighted share attributable to common stockholders:
                           
Basic and diluted
   
$
(2.78
)
            
$
(2.40
)
    
           
Weighted average common shares outstanding:
                           
Basic and diluted
   
 
8,233
 
            
 
8,233
 
    
           
 
The pro forma adjustments to the statement of operations reflect the elimination of revenue and expenses related to ICT’s operations for the year ended September 30, 2001, as if the sale had occurred at the beginning of the year ended September 30, 2001.

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SIGNATURE
 
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.
 
       
INCARA PHARMACEUTICALS CORPORATION
Date:
  
November 11, 2002
      
By:
  
/s/    Richard W. Reichow        
               
Richard W. Reichow, Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)

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