SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: December 29, 2000 Commission File No.
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000-22347
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(Date of earliest event reported)
ASCENT PEDIATRICS, INC.
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(Exact name of Registrant as Specified in Charter)
Delaware 04-3047405
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(State or Other Jurisdiction of (IRS Employer
Identification No.)
Incorporation)
187 Ballardvale Street, Wilmington, Massachusetts 01887
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(Address of Principal Executive Offices) (Zip Code)
(978) 658-2500
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(Registrant's telephone number, including area code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 29, 2000, Ascent Pediatrics, Inc. ("Ascent") entered into a
series of agreements with Alpharma USPD Inc. ("Alpharma USPD"), a wholly-owned
subsidiary of Alpharma, Inc. ("Alpharma"), including a Product Purchase
Agreement. Pursuant to the terms of the Product Purchase Agreement, Ascent sold
its Feverall product line in an asset sale to Alpharma USPD in exchange for the
cancellation by Alpharma USPD of $12.0 million of indebtedness owed to Alpharma
USPD by Ascent under a note issued pursuant to the Loan Agreement, dated as of
February 16, 1999, as amended, by and among Ascent, Alpharma USPD and Alpharma
(the "Loan Agreement"). The consideration paid under the Product Purchase
Agreement was determined based on the arms-length negotiation between the
parties. Under the terms of the Product Purchase Agreement, Ascent has the
option to repurchase the Feverall product line at anytime within the next 12
months for $12.0 million.
On December 29, 2000, Ascent also entered into a Termination Agreement with
Alpharma USPD, Alpharma, the Original Lenders (as defined therein) and State
Street Bank and Trust Company ("State Street") terminating the strategic
alliance that Ascent had entered into with Alpharma USPD in February 1999.
Pursuant to the terms of the Termination Agreement, the parties terminated the
(i) Loan Agreement, (ii) Master Agreement, dated as of February 16, 1999, as
amended, by and among Ascent, Alpharma USPD and Alpharma, (iii) Guaranty
Agreement, dated as of February 16, 1999, as amended, by Alpharma for the
benefit of Ascent, (iv) Registration Rights Agreement, dated as of February 16,
1999, as amended, by and between Ascent and Alpharma USPD, (v) Subordination
Agreement, dated as of February 16, 1999, as amended, by and among Ascent,
Alpharma and the Original Lenders (as defined therein), (vi) covenants and
obligations of the parties under the Supplemental Agreement, dated as of July 1,
1999, by and among Ascent, Alpharma USPD, Alpharma, the Original Lenders (as
defined therein) and State Street and (vii) Second Supplemental Agreement, dated
as of October 15, 1999, by and among Ascent, Alpharma USPD, Alpharma, the
Original Lenders (as defined therein) and State Street (collectively, the
"Ascent-Alpharma Agreements").
In addition, under the Termination Agreement, Alpharma USPD agreed that it
would not exercise its option to acquire Ascent pursuant to the Depositary
Agreement, dated as of February 16, 1999, as amended, by and among Ascent,
Alpharma USPD and State Street, and that Mr. Anderson, president of Alpharma
USPD, would resign as a director of Ascent effective as of December 29, 2000.
Ascent agreed that upon the consummation of any Change of Control (as defined in
the Termination Agreement) of Ascent, Ascent would pay to Alpharma USPD a fee
equal to 2% of the aggregate consideration received by Ascent upon such event in
excess of $65.0 million.
ITEM 5. OTHER EVENTS.
On December 29, 2000, Ascent entered into a Loan Agreement with FS Ascent
Investments LLC, which is comprised in part of funds affiliated with ING Furman
Selz Investments ("FS Investments"), and a Fifth Amendment to the Series G
Securities Purchase Agreement, dated as of May 13, 1998, as amended (the "Series
G Agreement"), by and among, Ascent, FS Investments, funds affiliated with ING
Furman Selz Investments, BancBoston Ventures Inc. and Flynn Partners. Pursuant
to the Loan Agreement and the Fifth Amendment, Ascent will receive up to $10.25
million in financing from FS Investments. The financing will be in the form of
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$6.25 million of 7.5% secured notes ($2.0 million of which was advanced to
Ascent on January 2, 2001) and $4.0 million of Series H Preferred Stock. Under
the terms of the notes, Ascent will pay interest quarterly and repay the
outstanding principal of the notes on December 31, 2001, unless extended to no
later than June 30, 2002 by FS Investments, or earlier upon a Change in Control
(as defined in the Loan Agreement) of Ascent or certain other conditions. The
notes will be secured by Ascent's Primsol product line, including intellectual
property rights of Ascent pertaining to Primsol, pursuant to a Security
Agreement, dated as of December 29, 2000, by and between Ascent and FS
Investments. The $6.25 million to be advanced to Ascent under the Loan Agreement
will be obtained by FS Investments from Alpharma USPD under a loan agreement
between FS Investments and Alpharma USPD. Under the terms of the Series H
Preferred Stock, Ascent will be entitled to, and the holders of the Series H
Preferred Stock will be entitled to cause Ascent to redeem the Series H
Preferred Stock for a price equal to the liquidation amount of the Series H
Preferred Stock, plus $10.0 million. In connection with the financing, Ascent
will issue warrants to FS Investments to purchase up to 10,950,000 depositary
shares of Ascent at an exercise price of $.05 per share (of which warrants to
purchase 1,950,000 depositary shares were issued on December 29, 2000) and
reduce the exercise price of outstanding warrants to purchase a total of
5,600,000 depositary shares issued under the Series G Agreement from $3.00 to
$.05 per share.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) PRO FORMA FINANCIAL INFORMATION.
The following unaudited pro forma condensed financial statements have
been prepared to give effect to the transactions described above in Item 2,
are based on the historical results of Ascent Pediatrics, Inc. and reflect
the preliminary estimates and assumptions set forth in the notes to the
statements provided below, which estimates and assumptions have been made
solely for the purposes of developing this pro forma information. The unaudited
pro forma condensed financial statements are not necessarily indicative of the
results that would have been achieved had these transactions been consummated as
of the dates indicated or that which may be achieved in the future.
The unaudited pro forma condensed balance sheet and unaudited pro forma
condensed statements of operations and the accompanying notes thereto should be
read in conjunction with the historical financial statements of Ascent
Pediatrics, Inc. and notes thereto.
The unaudited pro forma condensed balance sheet as of September 30, 2000
gives effect to these transactions as if such transactions had occurred on
September 30, 2000.
The unaudited pro forma condensed statement of operations for the year
ended December 31, 1999 gives effect to these transactions as if such
transactions had occurred on January 1, 1999.
The unaudited pro forma condensed statement of operations for the nine
months ended September 30, 2000 gives effect to these transactions as if such
transactions had occurred on January 1, 2000, as applicable.
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ASCENT PEDIATRICS, INC.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS TOTAL
------------- ------------- -------------
ASSETS
<S> <C> <C> <C> <C>
Current assets
Cash and cash equivalents. . . . . . . . . . . . . . $ 892,149 $ 892,149
Accounts receivable, net . . . . . . . . . . . . . . 536,457 (374,605) 1 (a) 161,852
Inventory. . . . . . . . . . . . . . . . . . . . . . 1,810,832 (249,172) 1 (a) 1,561,660
Other current assets . . . . . . . . . . . . . . . . 179,161 179,161
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Total current assets. . . . . . . . . . . . . . 3,418,599 (623,777) 2,794,822
Fixed assets, net . . . . . . . . . . . . . . . . . . . . 508,015 508,015
Debt issue costs, net . . . . . . . . . . . . . . . . . . 1,610,005 (1,077,816) 1 (b) 532,189
Intangibles, net. . . . . . . . . . . . . . . . . . . . . 9,363,159 (9,355,972) 1 (c) 7,187
Other assets. . . . . . . . . . . . . . . . . . . . . . . 45,300 45,300
------------- -------------
Total assets. . . . . . . . . . . . . . . . . . $ 14,945,078 $(11,057,565) $ 3,887,513
============= ============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable . . . . . . . . . . . . . . . . . . $ 1,255,953 $ (121,835) 1 (d) $ 1,134,118
Interest payable . . . . . . . . . . . . . . . . . . 917,963 917,963
Accrued expenses . . . . . . . . . . . . . . . . . . 863,550 863,550
Deferred revenue . . . . . . . . . . . . . . . . . . 661,967 661,967
Other current liabilities. . . . . . . . . . . . . . 36,397 36,397
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Total current liabilities . . . . . . . . . . . 3,735,830 (121,835) 3,613,995
Subordinated secured notes. . . . . . . . . . . . . . . . 30,957,926 (12,000,000) 1 (e) 18,957,926
Other liabilities . . . . . . . . . . . . . . . . . . . . 14,080 14,080
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Total liabilities . . . . . . . . . . . . . . . 34,707,836 (12,121,835) 22,586,001
Stockholders' deficit
Preferred stock, $.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding at
September 30, 2000. . . . . . . . . . . . . . . - -
Common stock, $.00004 par value; 60,000,000
shares authorized; 9,781,814 shares issued and
outstanding at September 30, 2000 . . . . . . . 390 390
Additional paid-in capital . . . . . . . . . . . . . 57,837,961 57,837,961
Accumulated deficit. . . . . . . . . . . . . . . . . (77,601,109) 1,064,270 1 (f) (76,536,839)
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Total stockholders' deficit . . . . . . . . . . (19,762,758) 1,064,270 (18,698,488)
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Total liabilities and stockholders' deficit . . $ 14,945,078 $(11,057,565) $ 3,887,513
============= ============= =============
</TABLE>
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ASCENT PEDIATRICS, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Pro forma Pro forma
Historical Adjustments Total
------------- ------------- -------------
<S> <C> <C> <C> <C>
Product revenue, net. . . . . . . . . . . $ 3,039,678 (2,891,370) (2) $ 148,308
Co-promotional revenue. . . . . . . . . . 4,007,500 4,007,500
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Total net revenue . . . . . . . . . . . . 7,047,178 (2,891,370) 4,155,808
Costs and expenses
Costs of product sales . . . . . . . 1,626,339 (1,188,017) (2) 438,322
Selling, general and administrative. 15,808,252 (1,177,291) (2) 14,630,961
Research and development . . . . . . 3,833,310 3,833,310
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Total costs and expenses . . . . . . 21,267,901 (2,365,308) 18,902,593
Loss from operations. . . . . . (14,220,723) (526,062) (14,746,785)
Interest income . . . . . . . . . . . . . 67,617 67,617
Interest expense. . . . . . . . . . . . . (1,499,574) 384,780 (3) (1,114,794)
Other income. . . . . . . . . . . . . . . - -
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Net loss. . . . . . . . . . . . (15,652,680) (141,282) (15,793,962)
Preferred stock dividend. . . . . . . . . 418,958 418,958
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Net loss to common stockholders $(16,071,638) $ (141,282) $(16,212,920)
============= ============= =============
Results per common share:
Historical - basic and diluted:
Net loss. . . . . . . . . . . . $ (1.91) $ (1.93)
Preferred stock dividend. . . . $ (0.05) $ (0.05)
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Net loss to common stockholders $ (1.96) $ (1.98)
============= =============
Weighted average shares outstanding-
basic and diluted. . . . . . . . . . . 8,182,085 8,182,085
============= =============
</TABLE>
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ASCENT PEDIATRICS, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Pro forma Pro forma
Historical Adjustments Total
------------- ------------- -------------
<S> <C> <C> <C> <C>
Product revenue, net. . . . . . . . . . . $ 1,994,623 (1,703,397) (2) $ 291,226
Co-promotional revenue. . . . . . . . . . 1,068,563 1,068,563
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Total net revenue . . . . . . . . . . . . 3,063,186 (1,703,397) 1,359,789
Costs and expenses
Costs of product sales . . . . . . . 969,907 (698,710) (2) 271,197
Selling, general and administrative. 9,447,419 (573,996) (2) 8,873,423
Research and development . . . . . . 1,941,200 1,941,200
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Total costs and expenses . . . . . . 12,358,526 (1,272,706) 11,085,820
Loss from operations. . . . . . (9,295,340) (430,691) (9,726,031)
Interest income . . . . . . . . . . . . . 48,317 48,317
Interest expense. . . . . . . . . . . . . (2,132,789) 666,581 (3) (1,466,208)
Other income. . . . . . . . . . . . . . . 41,164 41,164
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Net loss. . . . . . . . . . . . (11,338,648) 235,890 (11,102,758)
Preferred stock dividend. . . . . . . . . - -
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Net loss to common stockholders $(11,338,648) $ 235,890 $(11,102,758)
============= ============= =============
Results per common share:
Historical - basic and diluted:
Net loss. . . . . . . . . . . . $ (1.16) $ (1.14)
Preferred stock dividend. . . . $ - $ -
------------- -------------
Net loss to common stockholders $ (1.16) $ (1.14)
============= =============
Weighted average shares outstanding-
basic and diluted. . . . . . . . . . . 9,739,256 9,739,256
============= =============
</TABLE>
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PRO FORMA ADJUSTMENTS AND ASSUMPTIONS:
The pro forma adjustments to the unaudited pro forma condensed balance
sheet, assuming these transactions occurred on September 30 ,2000, are as
follows:
1 (a) Adjustment to write down accounts receivable and inventory to net
realizable value as a result of these transactions.
1 (b) Adjustment to write down debt issue costs associated with the
$12.0 million Alpharma debt instrument as a result of these transactions.
1 (c) Adjustment to reflect the sale of certain intangible assets
related to the Feverall product line.
1 (d) Adjustment to write down payables related primarily to Feverall
product purchases.
1 (e) Adjustment to record the cancellation of the $12.0 million of
indebtedness owed to Alpharma USPD.
1 (f) Adjustment to record the pro forma gain on the sale and
disposition of the net assets offset by the related write-offs as a result of
these transactions.
The pro forma adjustments to the unaudited pro forma condensed statements
of operations, assuming these transactions had occurred on January 1, 1999 and
January 1, 2000, are as follows:
(2) Reflects the elimination of revenue, cost of sales, amortization expense
related to the intangible assets and advertising and promotion expenses directly
related to the Feverall product line.
(3) Reflects the elimination of interest expense related to the $12.0
million Alpharma debt instrument.
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(c) EXHIBITS. The following exhibits are incorporated herein by
reference:
2.1 Product Purchase Agreement, dated as of December 29, 2000, by
and between Ascent Pediatrics, Inc. and Alpharma USPD Inc.
4.1 Certificate of Designation, Voting, Powers, Preferences and
Rights of Series H Preferred Stock, as filed with the Secretary of State of
the State of Delaware on December 29, 2000.
4.2 Form of 7.5% Subordinated Note issued to FS Ascent Investments
LLC (included in Exhibit 10.2).
4.3 Form of Warrants to purchase Depositary Shares issuable to FS
Ascent Investments LLC under the Fifth Amendment to the Series G
Securities Purchase Agreement, dated as of May 13, 1998, as amended, by and
between Ascent Pediatrics, Inc. and the Purchasers named therein.
10.1 Termination Agreement, dated as of December 29, 2000, by and
among Ascent Pediatrics, Inc., Alpharma USPD Inc., Alpharma, Inc., State
Street Bank and Trust Company and the Original Lenders (as defined therein).
10.2 Loan Agreement, dated as of December 29, 2000, by and between
Ascent Pediatrics, Inc. and FS Ascent Investments LLC.
10.3 Fifth Amendment, dated as of December 29, 2000, to the Series
G Securities Purchase Agreement, dated as of May 13, 1998, as amended, by
and between Ascent Pediatrics, Inc. and the Purchasers named therein.
10.4 Security Amendment, dated as of December 29, 2000, by and
between Ascent Pediatrics, Inc. and FS Ascent Investments LLC.
99.1 Press release dated January 2, 2001.
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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 hereunto duly authorized.
Dated: January 16, 2001 ASCENT PEDIATRICS, INC.
By: /s/ Emmett Clemente_______________
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Its: Chief Executive Officer
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INDEX TO EXHIBITS
Exhibit
No. Description
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2.1 Product Purchase Agreement, dated as of December 29, 2000, by
and between Ascent Pediatrics, Inc. and Alpharma USPD Inc.
4.1 Certificate of Designation, Voting, Powers, Preferences and
Rights of Series H Preferred Stock, as filed with the Secretary of State of
the State of Delaware on December 29, 2000.
4.2 Form of 7.5% Subordinated Note issued to FS Ascent Investments
LLC (included in Exhibit 10.2).
4.3 Form of Warrants to purchase Depositary Shares issuable to FS
Ascent Investments LLC under the Fifth Amendment to the Series G
Securities Purchase Agreement, dated as of May 13, 1998, as amended, by and
between Ascent Pediatrics, Inc. and the Purchasers named therein.
10.1 Termination Agreement, dated as of December 29, 2000, by and
among Ascent Pediatrics, Inc., Alpharma USPD Inc., Alpharma, Inc., State
Street Bank and Trust Company and the Original Lenders (as defined therein).
10.2 Loan Agreement, dated as of December 29, 2000, by and between
Ascent Pediatrics, Inc. and FS Ascent Investments LLC.
10.3 Fifth Amendment, dated as of December 29, 2000, to the Series
G Securities Purchase Agreement, dated as of May 13, 1998, as amended, by
and between Ascent Pediatrics, Inc. and the Purchasers named therein.
10.4 Security Amendment, dated as of December 29, 2000, by and
between Ascent Pediatrics, Inc. and FS Ascent Investments LLC.
99.1 Press release dated January 2, 2001.
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