SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended September 30, 1996 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______ to ______
Commission File Number 0-12081
AQUILA BIOPHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 04-3307818
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
365 Plantation Street, Worcester, MA 01605
(Address of Principal Executive Offices) (Zip Code)
(508) 797-5777
(Registrant's Telephone Number, Including Area Code)
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CAMBRIDGE BIOTECH CORPORATION
(Former Name, Former Address, and Former Fiscal
Year if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes____ No__X__
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes_X__ No_____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of November 6, 1996
Common Stock Outstanding 5,000,000
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AQUILA BIOPHARMACEUTICALS, INC.
Form 10-Q September 30, 1996
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Unaudited, Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 1996
and December 31, 1995
Consolidated Statements of Operations for three and
nine month periods ended September 30, 1996 and 1995
Consolidated Statements of Cash Flows for nine month
periods ended September 30, 1996 and 1995
Notes to Consolidated Interim Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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Item 1. Consolidated Financial Statements
The following Consolidated Financial Statements present the financial
condition as of and results from operations for the period ended
September 30, 1996 for Aquila Biopharmaceuticals, Inc. ("Aquila"). Aquila
is the successor to the biopharmaceutical business of Cambridge Biotech
Corporation ("CBC"), pursuant to CBC's Plan of Reorganization ("Plan")
consummated October 21, 1996. Aquila is the successor to CBC under the
Securities Exchange Act of 1934, and is the registrant filing this quarterly
report on Form 10-Q. The financial transactions that were a part of the
Plan consummation, including the exchange of CBC common stock (26,065,000
shares outstanding) for Aquila common stock (5,000,000 shares outstanding)
had not occurred by the date of these Consolidated Financial Statements and
are therefore not reflected herein.
AQUILA BIOPHARMACEUTICALS, INC.
(formerly Cambridge Biotech Corporation)
Consolidated Balance Sheets
(Unaudited)
(In Thousands)
Assets 9/30/96 12/31/95
------- --------
Current Assets:
Cash and cash equivalents $15,350 $ 6,856
Restricted Cash 1,000 0
Marketable Securities 0 216
Accounts receivable-
trade (net of allowance
for doubtful accounts) 2,617 2,638
Other receivables 118 126
Inventories 4,568 4,368
Prepaid expenses & other
current assets 511 695
------ ------
Total Current Assets 24,164 14,899
Investments 855 0
Property, plant, and equipment,
net 4,896 6,986
Patents and purchased
technology, net 503 1,055
Other assets 64 105
------ ------
Total Assets $ 30,482 $23,045
====== =======
Liabilities & Shareholders'
Equity
Current Liabilities:
Accounts payable $ 701 $ 851
Accrued royalties 570 1,192
Accrued professional fees 860 753
Accrued incentive
compensation 1,220 1,458
Accrued restructuring costs 201 257
Other accrued expenses 2,312 2,001
Deferred revenue-current 2,273 411
------ -----
Total Current Liabilities 8,137 6,923
Deferred revenue-Long Term 2,150 2,287
Liabilities subject to
Chapter 11 proceedings 9,531 9,880
----- -----
Total Liabilities 19,818 19,090
Minority Interest 11 9
Shareholders' Equity:
Preferred Stock, par value:
$.01 per share, authorized:
5,000,000 shares, none issued
Common Stock, par value:
$.01 per share, authorized:
40,000,000 shares,
issued: 26,065,000
shares (CBC) 261 261
Additional paid in
capital 120,382 120,382
Unearned compensation (138) (138)
Deficit (109,852) (116,559)
------- -------
Total Shareholders'Equity 10,653 3,946
------ -------
Total Liabilities and
Shareholders' Equity $30,482 $23,045
======= =======
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
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AQUILA BIOPHARMACEUTICALS, INC.
(formerly Cambridge Biotech Corporation)
Consolidated Statement of Operations
(Unaudited) (In Thousands except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Revenue: ---- ---- ---- ----
Product sales $ 443 $ 490 $ 1,449 $ 835
Research & development 1,292 1,416 3,949 3,765
Royalties 372 435 1,277 1,343
----- ----- ----- -----
2,107 2,341 6,675 5,943
Cost and expenses:
Cost of sales 480 416 1,578 1,601
Research & development 878 1,774 3,319 4,298
Sales, general &
administrative 1,307 1,400 4,000 4,269
----- ----- ----- -----
2,665 3,590 8,897 10,168
Other:
Other income and interest
expense net of interest
income 3,858 104 4,054 292
----- ------ ----- -----
Income/(loss) from continuing
operations before
reorganization items
and income tax expense 3,300 (1,145) 1,832 (3,933)
Reorganization items:
Professional fees (1,224) (343) (1,934) (952)
Interest earned on
accumulated cash
resulting from
Chapter 11 proceedings 181 84 412 291
----- ----- ----- -----
Total reorganization items (1,043) (259) (1,522) (661)
------ ----- ----- -----
Income/(loss) from continuing
operations before income
tax expense 2,257 (1,404) 310 (4,594)
Income tax (expense) 0 0 (2) 0
----- ----- ------ -----
Income/(loss) from
continuing operations 2,257 (1,404) 308 (4,594)
Discontinued operations:
Income/(loss) from
operations 369 258 1,799 (492)
Gain/(loss) on disposal 62 0 4,600 0
----- ------ ----- -----
Net Income/(loss) $2,688 ($1,146) $6,707 ($5,086)
====== ======== ====== ======
Net Income/(loss) per
weighted average number of
CBC common shares:
Continuing operations $0.09 ($0.05) $0.01 ($0.18)
Discontinued operations $0.01 $0.01 $0.25 ($0.02)
----- ------- ------- -------
Net Income/(loss) per CBC share $0.10 ($0.04) $0.26 ($0.20)
===== ======= ===== =======
Weighted average number of
CBC common shares outstanding 26,065 26,065 26,065 26,065
====== ====== ====== ======
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
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AQUILA BIOPHARMACEUTICALS, INC.
(formerly Cambridge Biotech Corporation)
Consolidated Statement of Cash Flows
For the nine months ended September 30, 1996 and 1995
(Unaudited)
(In Thousands)
1996 1995
---- ----
Cash Flows From Operating
Activities:
Net Income/(Loss) $6,707 ($5,086)
Adjustments to reconcile net
income/(loss) to net cash
provided by/(used in)
operating activities:
Depreciation and
amortization 2,998 3,620
Provision for doubtful accounts 45 59
Non-cash compensation expense - 49
Gain on sale of Enterics business (4,396) -
Receipt of investments (300) -
Loss on disposition and write down
of investments (555) 1
Changes in assets and liabilities,
net of effects of disposed businesses:
Restricted cash (1,000) -
Accounts and other receivables (16) (595)
Inventories (200) (135)
Deferred revenue 1,725 (2,990)
Prepaid and other
current assets 185 (552)
Accounts payable and other accrued
expenses (1,038) 3,910
Accrued restructuring charges (55) (104)
Other non-current assets and
liabilities 41 (1)
Minority interest 2 6
Net cash provided by/(used
in) operating activities ------ ------
4,143 (1,818)
Cash Flows From Investing
Activities:
Proceeds from sale of
marketable securities 216 -
Purchases of property,
plant, and equipment (297) (394)
Patents & purchased
technology (166) (171)
Proceeds from sale of
Enterics business 4,601 -
------ ------
Net cash provided by/(used in)
investing activities 4,354 (565)
Cash Flows from Financing
Activities:
Payment on long-term
obligations (3) (3)
------- ------
Net cash (used in)
financing activities (3) (3)
------- ------
Net increase(decrease) in cash
and cash equivalents 8,494 (2,386)
Cash and cash equivalents at
the beginning of the year 6,856 8,538
----- ------
Cash and cash equivalents at
the end of the period $15,350 $6,152
====== =====
Supplemental disclosures:
Income taxes paid $ 5 $ 0
====== =====
Interest paid/(refunded) $ 1 ($ 7)
====== ======
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
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AQUILA BIOPHARMACEUTICALS, INC.
NOTES TO UNAUDITED, CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. Basis of Presentation:
The accompanying consolidated interim financial statements of Aquila
Biopharmaceuticals, Inc. ("Aquila" or the "Company"), the successor to the
biopharmaceutical business of Cambridge Biotech Corporation ("CBC"), are
unaudited and have been prepared on a basis substantially consistent with
the audited financial statements. Further, these statements are based upon
treating the retroviral and enterics businesses as discontinued operations
as discussed in Footnote 3. Certain information and footnote disclosures
normally included in the Company's annual financial statements have been
condensed or omitted pursuant to the Securities and Exchange Commission's
rules and regulations. The consolidated interim financial statements, in
the opinion of management, reflect all adjustments (including normal
recurring accruals) necessary for a fair presentation of the results for the
interim periods.
The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the fiscal year.
These consolidated interim financial statements should be read in conjunction
with the audited financial statements for the year ended December 31, 1995,
which are contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, filed with the Securities and Exchange Commission.
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2. Subsequent Events:
On October 21, 1996 the Plan of Reorganization the ("Plan"), which was
confirmed by the U.S. Bankruptcy Court on July 18, 1996, was consummated. A
number of steps were taken to consummate the transactions contemplated by the
Plan, including: (i) the issuance by Aquila of 5,000,000 shares of Aquila
common stock (together with a right to purchase a "Unit" as described below)
to CBC's equity security holders and certain CBC creditors in exchange for
their interests in and claims against CBC, and the payment of other creditors
in cash; (ii) the distribution of the assets of the biopharmaceutical business
to Aquila on the consummation date under the Plan; (iii) the sale of all of
the issued and outstanding stock of CBC to bioMerieux Viteck, Inc.
("bioMerieux") pursuant to the Master Acquisition Agreement; and (iv) the
commencement of a rights offering (the "Rights Offering") pursuant to which
the holder of each share of Aquila common stock distributed pursuant to the
Plan on account of an allowed claim or interest would be entitled to
purchase a "Unit" entitling the purchaser to one share of Aquila common stock
and a warrant to purchase one share of Aquila common stock. Each participant
in the Rights Offering would also obtain certain rights with respect to
unsubscribed Units.
3. Discontinued Operations:
Effective as of October 22, 1996, Aquila sold all of the issued and outstand-
ing stock of CBC to bioMerieux pursuant to the Master Acquisition Agreement
("Purchase Agreement") dated April 4, 1996 for approximately $6,450,000
in cash. At the same time, bioMerieux entered into a ten year lease with
Aquila for the portion of Aquila's Maryland real estate on which CBC operates
its retroviral business, which lease was simultaneously assigned by
bioMerieux to CBC. At the time of the sale, CBC's assets consisted solely
of the retroviral business, assets principally related to the manufacture
and sale of diagnostic kits for the diagnosis of retroviruses, including
those associated with AIDS. These assets include manufacturing operations
in Rockville, Maryland, inventory, equipment, patents, patent applications,
and patent rights granted to CBC, licenses and sublicenses, trademarks, and
trademark applications and registrations. In addition, pursuant to a
modification of the Purchase Agreement, $650,000 in cash, representing a
portion of a paid-up license fee, was included in the assets retained by CBC.
The results of operations of the retroviral business are reported as
discontinued operations and prior periods have been restated to reflect
that occurrence. The income from the discontinued retroviral operations for
the three and nine months ended September 30, 1996 was $369,000 and
$1,179,000 respectively, compared to income of $36,000 and a loss of $824,000
for the same periods in 1995. A gain on disposal of the retroviral business
will be recorded in the fourth fiscal quarter of 1996.
As previously reported, on June 24, 1996, Aquila sold the assets of its
enterics diagnostic business pursuant to an Asset Purchase Agreement
to Meridian Diagnostics, Inc. ("Meridian") for approximately $5,700,000 in
cash and other considerations including $1 million in cash placed in escrow
and not reported in the gain on disposal. The results from operations and
gain on disposal of the enterics business are reported as discontinued
operations and the prior periods have been restated to reflect that
occurrence. The income from the discontinued enterics operation for the
three and nine months ended September 30, 1996 was $0 and $620,000,
respectively, compared to $222,000 and $332,000, respectively, for the same
periods in 1995. A gain on disposal of approximately $4,600,000 was
recorded.
4. Inventories:
Total inventories (including Aquila inventories of biopharmaceutical
products and inventories of CBC's retroviral products) consist of the
following:
(000'S)
9/30/96 12/31/95
------- --------
Finished goods $ 891 $ 681
Work in process 2,977 2,887
Raw materials & supplies 700 800
------- -------
$4,568 $ 4,368
======= =======
5. Pro Forma Financial Statements
Attached as Exhibit 99.1 is a pro forma balance sheet that gives effect to
a) the sale by Aquila of all of the capital stock of CBC to bioMerieux, and
b) the transactions completed pursuant to the consummation of the Plan,
including the exchange of approximately 26,065,000 shares of CBC common stock
for 5,000,000 shares of Aquila common stock. The pro forma balance sheet
assumes that these transactions had been completed as of September 30, 1996.
On a pro forma basis, Aquila had working capital of $17,876,000, a current
ratio of 4.33 to 1, and a cash value and a book value per Aquila share
(5,000,000 outstanding) $3.42 and $3.59, respectively.
Attached as Exhibit 99.2 is a pro forma statement of operations for the
nine months ended September 30, 1996 that gives effect to a) the sale by
Aquila of all of the capital stock of CBC to bioMerieux and b) the sale of
the assets of the enterics business to Meridian. The pro forma statement of
operations assumes that these transactions occurred immediately prior to the
beginning of the nine month period ended September 30, 1996. On a pro forma
basis, Aquila earned $.06 per Aquila share from continuing operations for
the nine months ended September 30, 1996, including certain non-recurring
items reflected in Other Income.
Certain of the pro forma adjustments represent estimates, and therefore may
not be indicative of the results that would have been achieved had these
transactions actually occurred on or before September 30, 1996.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
- -------
Aquila, a Delaware corporation is the successor to the biopharmaceutical
business of CBC pursuant to the terms of the Plan and is the successor to CBC
under the Securities Exchange Act of 1934 and Rule 12g-3(a) thereunder.
On or about October 21, 1996, CBC's Biopharmaceutical Business (as defined
in the Plan) was transferred to Aquila, free and clear of liens, encumbrances,
claims and interests, except as otherwise provided in the Plan or Confirmation
Order. Included among the assets transferred to Aquila was the Maryland real
estate on which CBC operates its Retroviral Business (as defined in the Plan).
Pursuant to the Plan, Aquila common stock was exchanged for CBC common stock;
and, as a result, CBC became a wholly-owned subsidiary of Aquila. Effective
as of October 22, 1996, Aquila sold all of the issued and outstanding stock
of CBC to bioMerieux pursuant to the Purchase Agreement for $6,450,000. At
the same time bioMerieux entered into a ten year lease with Aquila for a
portion of the Maryland real estate which lease was simultaneously assigned
by bioMerieux to CBC.
At the time of the sale to bioMerieux, CBC's assets consisted of the
Retroviral Business (as defined in the Plan), which include all assets and
business of CBC principally relating to the manufacture and sale of
diagnostic kits for the diagnosis of retroviruses, including those associated
with AIDS. The assets include manufacturing operations in Rockville,
Maryland, inventory, equipment, patents, patent applications, and patent
rights granted to CBC, licenses and sublicense, trademarks and trademark
applications and registrations, and certain equipment relating to the
manufacturing of the retroviral diagnostic products. In addition, pursuant
to a modification of the Purchase Agreement, Six Hundred and Fifty Thousand
Dollars ($650,000) in cash representing a portion of a paid-up license fee
was included in the assets retained by CBC at the time of the sale.
Results of Operations
- ---------------------
The Consolidated Statement of Operations presents Aquila's results from
operations exclusive of both the enterics and retroviral diagnostic
businesses, which are presented as Discontinued Operations in the statement.
Revenues, costs, expenses, and other items reflect the results of Aquila's
biopharmaceutical business and administrative functions only, as more
fully described below.
Three and Nine Months Ended September 30, 1996 and 1995
- -------------------------------------------------------
Revenues were $2,107,000 for the three months ended September 30, 1996
compared to $2,341,000 in the same period in 1995. Revenues for the nine
months ended September 30, 1996 were $6,675,000 compared to $5,943,000 in
the same period in 1995.
Product sales decreased to $443,000 in the third quarter of 1996 from
$490,000 for the same period in 1995, a decrease of approximately 10%, that
is primarily due to the discontinuation of reference laboratory services in
the second quarter of 1996. Product sales for the first nine months of 1996
increased to $1,449,000 from $835,000 for the same period in 1995. The
increase from 1995 is primarily attributable to increased sales of FeLV
antigen to a marketing partner.
Research and Development ("R&D") revenues were $1,292,000 in the third
quarter of 1996 compared to $1,416,000 for the same period in 1995.
R&D revenue for the first nine months of 1996 increased to $3,949,000 from
$3,765,000 for the same period in 1995. The increase from 1995 is primarily
attributable to a license payment from MicroGenesys. The decrease in the
third quarter of 1996 from 1995 is attributable to reduced revenue from
research contracts that expired in 1996 and lower expenses on a funded
research program.
Royalty revenue decreased to $372,000 in the third quarter of 1996 compared
to $435,000 for the same period in 1995, and to $1,277,000 for the first
nine months of 1996 compared to $1,343,000 for the same period in 1995.
Cost of products sold as a percentage of product sales was 108% for the
three months ended September 30, 1996 compared to 85% for the same period
in 1995. For the nine months ended September 30, 1996 and 1995, the cost of
products sold as a percentage of product sales was 109% and 192%, respect-
ively. During the first six months of 1995, production problems associated
with certain animal health products resulted in both higher costs and lower
sales volumes than were experienced historically. In 1996, costs as a
percent of product sales were negatively affected by production problems
early in the year, and more recently by lower unit prices resulting from
volume increases needed to compensate for reduced shipments in 1995 on
certain animal health products.
Research and development expenses decreased to $878,000 in the third quarter
of 1996 from $1,774,000 for the same period in 1995. For the first nine
months of 1996 compared to the same period in 1995, research and development
expenses were $3,319,000 and $4,298,000, respectively. The decrease in the
third quarter of 1996 is due to a reduction in contract work on the funded
research project mentioned above. The decrease over the entire period is
primarily due to the accrual of expenses related to Aquila's employee
stock incentive plan for research and development employees that occurred in
1995 and the reduction in scope or completion of certain research contracts.
General and administrative expenses decreased to $1,307,000 in the
third quarter of 1996 from $1,400,000 for the same period in 1995. For the
first nine months of 1996, general and administrative expenses decreased to
$4,000,000 from $4,269,000 for the same period in 1995. The decrease is
primarily due to the accrual of expenses related to Aquila's employee stock
incentive plan for administrative employees that occurred in 1995 and
decreased personnel expenses in 1996.
Chapter 11 related professional fees and interest earned on accumulated
cash were $1,224,000 and $181,000, respectively for the three months ended
September 30, 1996, compared to $343,000 and $84,000 for the same period
in 1995. For the first nine months of 1996 compared to the same period in
1995, Chapter 11 related professional fees and interest earned on
accumulated cash were $1,934,000 and $412,000 compared to $952,000 and
$291,000, respectively. The increase in professional fees in 1996 is due to
the increased effort expended by Aquila and its legal counsel to emerge from
Chapter 11 in the third quarter of 1996.
Other income and interest expense net of interest income includes $3,250,000
received in the third quarter of 1996 from Abbott Laboratories under an
amendment to a sublicense agreement which granted Abbott a fully paid-up
sublicense for the non-exclusive diagnostic use of certain HIV-related
technology.
The Company earned $2,257,000 or $0.09 per share (based on approximately
26,065,000 shares outstanding prior to Plan consummation) from continuing
operations and had net income of $2,688,000 or $0.10 per share in the third
quarter of 1996 including the income and gain from disposal from discontinued
operations, as compared to a loss of $1,404,000 or ($0.05) per share from
continuing operations and a net loss of $1,146,000 or ($0.04) per share
including the income from discontinued operations for the same period in 1995.
For the first nine months of the year, Aquila had net income of $308,000 or
($0.01) per share from continuing operations and had net income of $6,707,000
or $.26 per share including the income and gain from disposal from
discontinued operations, compared to a loss of $4,594,000 or ($0.18) per
share from continuing operations and a net loss of $5,086,000 or ($0.20)
per share including the loss from discontinued operations for the
same period in 1995. All per share amounts discussed above are based on
approximately 26,065,000 CBC shares outstanding prior to Plan Consummation.
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Liquidity and Capital Resources
- -------------------------------
The ability of Aquila to fund its long term operations is dependent upon
several factors, including the success of the Rights Offering and Aquila's
ability to attract funding through additional public or private financing
or by establishing corporate partnerships and collaborative arrangements.
There can be no assurance that such additional funding can be obtained on
acceptable terms.
Cash and cash equivalents were $15,350,000 at September 30, 1996 compared to
$6,856,000 at December 31, 1995, with the increase resulting primarily from
the sale of the enterics business, the receipt of a license payment from a
large pharmaceutical partner, and the receipt of a paid-up license fee from
a sub-licensee of certain diagnostic technology.
The net cash provided by operating activities was $4,143,000 for the nine
months ended September 30, 1996 as compared to net cash used in operating
activities of $1,818,000 for the same period in 1995. The primary items
included in net income or loss that are not operating sources or uses of
cash were depreciation and amortization of $2,998,000 and $3,620,000 for
nine months ended September 30, 1996 and 1995, respectively and the
$4,396,000 gain from the sale of the enterics business. In addition, cash
increased due to a $3,500,000 license payment received in 1996 which was
recorded as deferred revenue and is taken to income pro rata throughout
1996, and the $1,000,000 in deferred revenue from the escrowed portion of
the enterics purchase price. Accounts payable and accrued expenses
increased in 1995 due to patent related milestone obligations, employee
retention bonuses, and timing of expenditures.
Aquila's investing activities provided cash of $4,354,000 for the nine
months ended September 30, 1996, compared to using cash of $565,000 for
the same period in 1995. The sale of the enterics business and of
certain marketable securities were the primary reasons for the increase
in cash provided by investing activities.
Aquila had total working capital of $16,027,000 and current ratio of
2.97 to 1 at September 30, 1996, compared to $7,976,000 and 2.15 to 1 at
December 31, 1995. However, CBC had approximately $9,531,000 in liabilities
subject to Chapter 11 proceedings as of September 30, 1996 and if all of
these liabilities were considered current liabilities, the current ratio
would have been 1.37 to 1 at September 30, 1996, compared to 0.89 to 1 at
December 31, 1995.
Aquila's discussions as to management's plans and objectives for Aquila's
business after the date hereof are forward looking statements. Actual
results may differ from those projected by Aquila as a result of the
effect of economic conditions, risks in product and technology
development and other risks identified in Aquila's Securities and Exchange
Commission filings and the exhibits thereto.
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
As reported above (see Part I. Item I) CBC's plan of reorganization was
consummated during the week of October 21, 1996. See Current Report on
Form 8-K dated October 21, 1996, for a summary of the steps taken to
consummate the Plan.
Four parties appealed from the Bankruptcy Court's July 18, 1996 order
confirming the Plan. Of these, the appeals taken by Alfa Laval Agri AB
and Behring Diagnostics, Inc. have either been dismissed or are to be
dismissed under agreements with CBC that have been approved by the
Bankruptcy Court. The appeal by Deloitte & Touche, LLP ("Deloitte")
remains pending before the United States District Court for the District of
Massachusetts (No. 96-40192-NMG) ("the District Court"). Deloitte contests
the right of counsel to Class 5 Claimants to bring an action against
Deloitte on behalf of CBC as provided in the Plan.
An appeal taken by Institut Pasteur and Pasteur Sanofi Diagnostics
(collectively "Pasteur") was dismissed and the confirmation order affirmed,
after hearing, by the District Court by order dated September 27, 1996 (No.
96-40176-NMG). Pasteur has since taken a further appeal to the First Circuit
Court of Appeals, which by order dated October 9, 1996, denied Pasteur's
request for a stay of the confirmation order pending appeal. Pasteur
contests the confirmation of the Plan to the extent that it provides for
CBC's assumption of certain patent licences from Pasteur. On
October 28, 1996, CBC filed a motion to dismiss the Pasteur appeal as moot.
Aquila intends to file a similar motion to dismiss in the Deloitte appeal.
Oral argument on Pasteur's appeal and CBC's motion to dismiss is scheduled
for November 5, 1996. Aquila believes that the likelihood of either of the
remaining appeals resulting in the unraveling of the Plan, or any part of
the Plan, is remote, although there can be no assurance that that will not
occur.
Item 2. Changes in Securities
Aquila was organized by CBC as a new Delaware corporation of which CBC was
the sole stockholder on March 7, 1996. Pursuant to the Plan, on
October 21, 1996, 100% of all then issued and outstanding shares of CBC
were deemed transferred to Aquila in exchange for 3,442,305 shares of
Aquila Common Stock (and related Rights described below). Effective
October 22, 1996, Aquila delivered to bioMerieux a stock certificate
representing all of the issued and outstanding capital stock in CBC in
exchange for $6,450,000 in immediately available funds.
As a result of the consummation of the Plan and the assumption by Aquila of
the registration of CBC's common stock under the Securities Exchange Act of
1934 pursuant to Rule 12g-3 thereunder, the authorized capital stock of the
registrant now consists of 30,000,000 shares of common stock, $.01 par value
per share ("Aquila Common Stock") and 5,000,000 shares of Preferred Stock,
$.01 par value per share ("Aquila Preferred Stock").
The following description summarizes certain information regarding the
Aquila Common Stock, Aquila Preferred Stock, and the Rights and Warrants
being distributed pursuant to the Plan. This information is subject in its
entirety to the applicable provisions of the Aquila Articles of
Incorporation, the Aquila By-Laws, and the Rights and Warrant Agreement
(all of which were previously filed as Exhibit 2 to Current Report on
Form 8-K, dated July 18, 1996, File No. 0-12081), as well as the provisions
of the Delaware General Corporation Law.
Common Stock
- ------------
As of the Initial Distribution Date, after giving effect to the
reorganization, there were 5,000,000 shares of Aquila Common Stock
outstanding.
The holders of Aquila Common Stock are entitled to one vote per share on
all matters to be voted upon by the stockholders and are entitled to receive
such dividends, if any, as may be declared from time to time by the board
of directors of Aquila from funds legally available therefore. Upon
liquidation or dissolution of Aquila, the holders of Aquila Common Stock are
entitled to receive all assets available for distribution to the stockholders,
subject to any preferential or other rights of the holders of Preferred
Stock. The Aquila Common Stock has no preemptive or other subscription
rights, and there are no conversion rights or sinking fund provisions with
respect to such shares.
Rights
- ------
As of the Initial Distribution Date, October 29, 1996, there were 4,989,474
Rights outstanding.
Each Right entitles the holder thereof to purchase during the Rights Exercise
Period (including any extension) one Unit (each Unit consisting of one share
of Aquila Common Stock and a Warrant to purchase one additional share of
Aquila Common Stock). The Rights Exercise Period extends for 20 days after
the Initial Distribution Date or until November 18, 1996, unless extended
by Aquila for up to 15 additional calendar days. The Rights are exercisable
at a price of $9.49. In addition, each holder of a Right (or beneficial
owner in the case of securities held in street name) who has fully
exercised his basic right to purchase one Unit for each Right received
also will have the right to purchase any desired number of Units that have
not been subscribed for by the holders of other Rights, subject to proration
if oversubscribed. Aquila reserves the right to reduce the subscription
price for the Units in certain circumstances. The Rights are freely
transferable, although they will not be listed on any established market.
Warrants
- --------
Each Warrant issuable on exercise of a Right will entitle the registered
holder thereof to purchase one share of Aquila common stock at a price
equal to 150% of the Unit subscription price, subject to adjustment in
certain circumstances. The Warrants will be issued as part of an offering
of Rights to purchase a Unit, each Unit consisting of one share of Common
Stock of Aquila and one warrant to purchase a share of Common Stock (the
"Units"). The Warrants are separately tradeable immediately upon issuance.
The Warrants which are exercisable at any time after the date of
distribution, expire on the third anniversary of the Initial Distribution
Date.
The Rights and the Warrants will be issued in registered form pursuant to
the terms of the Rights and Warrants Agreement (the "Warrant Agreement")
between Aquila and First National Bank of Boston as Rights Agent and
Warrant Agent. The Warrant Agreement, (which was filed as Exhibit 2 to
Current Report on Form 8-K dated July 18, 1996, File No. 0-12081) is
incorporated herein by reference and its description herein is qualified
in its entirety by reference to the Warrant Agreement.
Aquila may redeem outstanding Warrants at any time upon not less than 30
days written notice, at a price of $.10 per Warrant, provided that the
Warrants may not be redeemed by Aquila unless the Warrants are then
exercisable and the Daily Market Price (as defined in the Warrant Agreement)
of the Aquila Common Stock shall have been at least 150% of the Warrant
Exercise Price for 20 consecutive Business Days ending within 10 Business
Days of the date of the notice of redemption. If Aquila exercises its right
to redeem the Warrants, the Warrants will be exercisable until 4:00 p.m.
Eastern Time on the Business Day immediately preceding the date fixed for
redemption in such notice. If any Warrant called for redemption is not
exercised by such time, it will cease to be exercisable, and the holder
thereof will be entitled only to the redemption price. The exercisable
price and number of shares of Aquila Common Stock or other securities
issuable on exercise of the Warrants are subject to adjustment in certain
circumstances, including in the event of a stock dividend, stock split,
recapitalization, merger or consolidation of Aquila.
Preferred Stock
- ---------------
There are no shares of Preferred Stock outstanding. The board of directors
of Aquila has the authority to issue Preferred Stock in one or more series
and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rates, voting rights,
terms of redemption, redemption prices, liquidation preferences and number
of shares constituting each series, or the designation of such series,
without further action by stockholders. Although Aquila has no intention
at the present time of doing so, it could issue Preferred Stock that could,
depending on its terms, either impede or facilitate the completion of a
merger, tender offer or other takeover attempt. Although the board of
directors is required to make any determination to issue such stock based
on its judgment as to the best interests of the stockholders of Aquila, the
board of directors could act in a manner that would discourage a transaction
that some, or a majority, of the stockholders might believe to be in their
best interests.
However, until the conclusion of Aquila's 1997 annual meeting, the board of
directors may establish a class or series of Preferred Stock only if it is
approved by a specified vote of the board of directors which, in effect,
requires at least one director who was either elected by stockholders after
the Consummation Date or was selected by the Equity Committee in CBC's
Chapter 11 case to vote in favor of the action.
Provisions Affecting Changes of Control
- ---------------------------------------
In addition to the Preferred Stock described above, the Aquila Certificate
of Incorporation, Aquila By-Laws, and Delaware law contain provisions that
could have certain anti-takeover effects. The board of directors has no
current plans to formulate or effect additional measures that could have
anti-takeover effects.
1. Classified Board of Directors. The Aquila Certificate of Incorporation
provides that the directors shall be divided into three classes as nearly
equal in number as possible, elected for staggered three-year terms. This
has the effect of deferring the time when an acquirer of a majority of the
capital stock could gain control of Aquila.
2. Size of Board, Vacancies, and Removal of Directors. The Aquila
Certificate of Incorporation provides that the size of the board of
directors will be fixed by the directors, that vacancies on the board
can only be filled by the remaining directors, and that, subject to any
right hereafter granted to any class or series of preferred stock to
elect or remove directors, a director may only be removed, with or
without cause, by vote of two-thirds of the directors then in office or
the holders of 66 2/3% of the total voting power of all outstanding
shares of capital stock entitled to vote.
3. No Stockholder Action by Written Consent; Special Meetings. The
Aquila Certificate of Incorporation prohibits stockholder action by
written consent in lieu of a meeting. This provision may have the
effect of delaying consideration of a stockholder proposal until the
next annual meeting unless a special meeting is called and would also
prevent the holders of a majority of the outstanding shares of Aquila
Stock from using the written consent procedure to take stockholder action
without giving all the stockholders of Aquila entitled to vote on a
proposed action the opportunity to participate in determining such
proposed action. It also provides that a special meeting may be called
only by the board of directors, Chairman, President or the holders of
66 2/3% of the total voting power of all outstanding shares of capital
stock entitled to vote.
4. Advance Notice Requirements for Stockholders' Proposals and Director
Nominations. The Aquila By-Laws establish an advance notice procedure with
regard to the nomination, other than by or at the direction of the board of
directors or a committee thereof, of candidates for election as directors and
with regard to certain matters to be brought before a meeting of stockholders
of Aquila. These procedures provide that the notice of proposed stockholder
nominations for the election of directors or stockholder proposals to bring
business before a meeting must be timely given in writing to the Secretary
of Aquila prior to the meeting. Notice must be received not less than 60
days prior to the date of the stockholders' meeting or 10 days after the
date on which notice of the meeting is first given.
5. Amendment of Certain Provisions of the Certificate of Incorporation and
By-Laws. Any amendment of the Aquila Certificate of Incorporation to change
the provisions relating to the rights and preferences of capital stock, the
corporate governance provisions of Articles Sixth and Seventh and the
amendment provisions of Article Ninth will require the affirmative vote of
holders of at least 66 2/3% of the total voting power of all outstanding
shares of capital stock entitled to vote. Further, any amendment of the
Aquila By-Laws by shareholders requires the same 66 2/3% vote. These
provisions will make it more difficult for stockholders to make changes
in the Aquila Certificate of Incorporation and Aquila By-Laws and mean that
the holders of a minority of the voting stock can prevent the holders of a
majority of the capital stock from amending such provisions.
6. Section 203 of the Delaware General Corporation Law. Aquila is subject
to the provisions of Section 203 of the Delaware Corporation Law. This
statute generally prohibits, under certain circumstances, a Delaware corp-
oration whose stock is publicly traded, from engaging in a "business
combination" with an "interested stockholder" for a period of three years
after the date of the transaction in which the person became an interested
stockholder, unless (i) the corporation has elected in its certificate of
incorporation or by-laws not to be governed by this Delaware law (Aquila
has not made such an election), (ii) prior to the time the stockholder
became an interested stockholder, the board of directors approved either the
business combination or the transaction which resulted in the person becoming
an interested stockholder, (iii) the stockholder owned at least 85% of the
outstanding voting stock of the corporation (excluding shares held by
directors who were also officers or held in certain employee stock plans
upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, or (iv) the business combination was
approved by the board of directors and by two-thirds of the outstanding
voting stock of the corporation (excluding shares held by the interested
stockholder). An "interested stockholder" is a person who, together with
affiliates and associates, owns (or any time within the prior three years
did own) 15% of more of the corporation's outstanding voting stock. The
term "business combination" is defined generally to include mergers,
consolidations, stock sales, asset based transactions, and other
transactions resulting in a financial benefit to the interested stockholders.
- -----------------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
2. Confirmed Reorganization Plan (consisting of Reorganization Plan
dated May 20, 1996, and Modification dated July 15, 1996) (incor-
porated by reference to Exhibit 2 to Current Report on Form 8-K
dated July 18, 1996, File No. 0-12081).
3.1 Articles of Incorporation of Aquila Biopharmaceuticals, Inc.
(incorporated by reference to Exhibit 2 to Current Report on
Form 8-K dated July 18, 1996, File No. 0-12081.)
3.2 By-Laws of Aquila Biopharmaceuticals, Inc. (incorporated by
reference to Exhibit 2 to Current Report on Form 8-K dated
July 18, 1996, File No. 0-12081.)
4.1 Form of certificate for Aquila Common Stock (incorporated by
reference to Exhibit 4 to Current Report on Form 8-K dated
October 21, 1996, File No. 0-12081).
4.2 Form of certificate for Warrant to Purchase Common Stock
(incorporated by reference to Exhibit 2 to Current Report on
Form 8-K dated July 18, 1996, File No. 0-12081).
4.3 Form of Certificate for Right to Purchase a Unit (incorporated
by reference to Exhibit 2 to Current Report on Form 8-K dated
July 18, 1996, File No. 0-12081).
4.4 Rights and Warrants Agreement dated July 29, 1996, between Aquila
Biopharmaceuticals, Inc. and The First National Bank of Boston
(incorporated by reference to Exhibit 2 to Current Report on
Form 8-K dated July 18, 1996, File No. 0-12081).
10.1 Master Acquisition Agreement by and among bioMerieux Vitex, Inc.
Aquila Biopharmaceuticals, Inc. and Cambridge Biotech Corporation
dated as of April 4, 1996. (incorporated by reference to Exhibit
10.1. Quarterly Report on Form 10Q for quarter ending
June 30, 1996, File No. 0-12081).
10.2 Asset Purchase Agreement between Meridian Diagnostics, Inc. and
Cambridge Biotech Corporation dated as of June 24, 1996
(incorporated by reference to Exhibit 2.1 to Current Report on
Form 8-K, dated June 24, 1996, File No. 01-12081).
27. Financial Data Schedule
99.1 Pro Forma Balance Sheet
99.2 Pro Forma Statement of Operations
- -----------------------------------------------------------------------------
(b) Reports on Form 8-K
During the quarter ended September 30, 1996 and subsequent thereto,
CBC filed the following reports on Form 8-K:
1. Current Report on Form 8-K dated 07/18/96
2. Current Report on Form 8-K dated 10/21/96
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
undersigned thereunto duly authorized.
AQUILA BIOPHARMACEUTICALS, INC.
Date: November 6, 1996
/s/ Alison Taunton-Rigby
------------------------------------------
Alison Taunton-Rigby
President and Chief Executive Officer
/s/ Stephen J. DiPalma
------------------------------------------
Stephen J. DiPalma
Chief Financial Officer, Vice President of
Finance and Treasurer
- ------------------------------------------------------------------------------
Exhibit Index
-------------
2. Confirmed Reorganization Plan (consisting of Reorganization Plan
dated May 20, 1996, and Modification dated July 15, 1996) (incor-
porated by reference to Exhibit 2 to Current Report on Form 8-K
dated July 18, 1996, File No. 0-12081).
3.1 Articles of Incorporation of Aquila Biopharmaceuticals, Inc.
(incorporated by reference to Exhibit 2 to Current Report on
Form 8-K dated July 18, 1996, File No. 0-12081.)
3.2 By-Laws of Aquila Biopharmaceuticals, Inc. (incorporated by
reference to Exhibit 2 to Current Report on Form 8-K dated
July 18, 1996, File No. 0-12081.)
4.1 Form of certificate for Aquila Common Stock (incorporated by
reference to Exhibit 4 to Current Report on Form 8-K dated
October 21, 1996, File No. 0-12081).
4.2 Form of cert0ficate for Warrant to Purchase Common Stock
(incorporated by reference to Exhibit 2 to Current Report on
Form 8-K dated July 18, 1996, File No. 0-12081).
4.3 Form of Certificate for Right to Purchase a Unit (incorporated
by reference to Exhibit 2 to Current Report on Form 8-K dated
July 18, 1996, File No. 0-12081).
4.4 Rights and Warrants Agreement dated July 29, 1996, between Aquila
Biopharmaceuticals, Inc. and The First National Bank of Boston
(incorporated by reference to Exhibit 2 to Current Report on
Form 8-K dated July 18, 1996, File No. 0-12081).
10.1 Master Acquisition Agreement by and among bioMerieux Vitex, Inc.
Aquila Biopharmaceuticals, Inc. and Cambridge Biotech Corporation
dated as of April 4, 1996. (incorporated by reference to Exhibit
10.1. Quarterly Report on Form 10Q for quarter ending
June 30, 1996, File No. 0-12081).
10.2 Asset Purchase Agreement between Meridian Diagnostics, Inc. and
Cambridge Biotech Corporation dated as of June 24, 1996
(incorporated by reference to Exhibit 2.1 to Current Report on
Form 8-K, dated June 24, 1996, File No. 01-12081).
* 27. Financial Data Schedule
* 99.1 Pro Forma Balance Sheet
* 99.2 Pro Forma Statement of Operations
* Filed herewith
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Unaudited Consolidated Financial Statements filed herewith and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 16350
<SECURITIES> 0
<RECEIVABLES> 2790
<ALLOWANCES> (173)
<INVENTORY> 4568
<CURRENT-ASSETS> 24164
<PP&E> 24434
<DEPRECIATION> (19538)
<TOTAL-ASSETS> 30482
<CURRENT-LIABILITIES> 8138
<BONDS> 4018
0
0
<COMMON> 261
<OTHER-SE> 10391
<TOTAL-LIABILITY-AND-EQUITY> 30482
<SALES> 1449
<TOTAL-REVENUES> 6675
<CGS> 2238
<TOTAL-COSTS> 2238
<OTHER-EXPENSES> 9253
<LOSS-PROVISION> 15
<INTEREST-EXPENSE> 14
<INCOME-PRETAX> 1172
<INCOME-TAX> 2
<INCOME-CONTINUING> (350)
<DISCONTINUED> 6399
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6707
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
Exhibit 99.1 Pro Forma Balance Sheet
The following unaudited pro forma balance sheet of Aquila Biopharmaceuticals,
Inc. ("Aquila") gives effect to the consummation of CBC's reorganization
plan (which occurred on October 21, 1996), and to the sale by Aquila of all
of the capital stock of Cambridge Biotech Corporation ("CBC") to bioMerieux
Vitek (which occurred on October 22, 1996), as of September 30, 1996.
Aquila's investment in the retroviral business is shown as a single
investment.
This pro forma balance sheet is not necessarily indicative of Aquila's actual
financial position had these transactions occurred at September 30, 1996, as
it relies upon certain assumptions and estimates by Aquila's management.
AQUILA BI0PHARMACEUTICALS, INC.
(formerly Cambridge Biotech Corporation)
Pro Forma Balance Sheet
As of September 30, 1996
(Unaudited), (In Thousands)
Aquila Consummation Retroviral
Assets As Reported Adjustments Adjustments Pro Forma
- ------ ----------- ------------ ----------- ---------
Current Assets:
Cash and cash
equivalents $15,350 ($4,031) $5,800 $17,119
Restricted Cash 1,000 1,000
Accounts receivable-
trade (net of
allowance for
doubtful accounts) 2,617 2,617
Other receivables 118 118
Inventories 4,568 (2,692) 1,876
Prepaid expenses
& other current
assets 511 511
------ ------ ----- -----
Total Current Assets 24,164 (4,031) 3,108 23,241
Investments 855 855
Property, plant,
and equipment, net 4,896 (325) 4,571
Patents and purchased
technology, net 503 (167) 336
Other assets 64 64
------ ------ ----- -----
Total Assets $ 30,482 ($4,031) $2,616 $29,067
====== ====== ====== ======
Liabilities &
Shareholders'Equity
Current Liabilities:
Accounts payable $ 701 $ 701
Accrued royalties 570 570
Accrued professional
fees 860 (549) 311
Accrued incentive
compensation 1,220 (1,220) 0
Accrued
restructuring costs 201 (201) 0
Other accrued expenses 2,312 (802) 1,510
Deferred revenue-current 2,273 2,273
------ ----- ----- -----
Total Current
Liabilities 8,137 (2,772) 0 5,365
Deferred revenue-L.T. 2,150 (600) 1,550
Long-term Debt-less
current maturities 0 4,200 4,200
Liabilities subject to
Chapter 11 proceedings 9,531 (9,531) 0
----- ----- ----- -----
Total Liabilities 19,818 (8,703) 0 11,115
Minority Interest 11 (11) 0
Shareholders'Equity:
CBC common stock,
par value:
$.01 per share,
authorized:
40,000,000
shares, issued:
26,065,000 shares 261 (261) 0
Aquila common
stock, par value:
$.01 per share,
authorized:
30,000,000 shares,
issued: 5,000,000
shares 50 50
Additional paid in
capital 120,382 2,783 123,165
Unearned
compensation (138) 138 0
Deficit (109,852) 1,962 2,627 (105,263)
------- ------- ----- -------
Total Shareholders'
Equity 10,653 4,672 2,627 17,952
------ ------ ----- ------
Total Liabilities and
Shareholders' Equity $30,482 ($4,031) $2,616 $29,067
======= ======= ===== ======
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
- -----------------------------------------------------------------------------
Exhibit 99.2 Pro Forma Statement of Operations
The following unaudited pro forma statement of operations of Aquila gives
effect to the sale by Aquila of certain assets of its enterics business to
Meridian Diagnostics, Inc. and of all the capital stock of CBC to
bioMerieux Vitek, Inc. immediately prior to the beginning of the
fiscal year ended December 31, 1995 and the nine month period ended
September 30, 1996 by excluding from Discontinued Operations the results
of both the enterics business and the retroviral business.
This pro forma statement of operations is not necessarily indicative of
Aquila's actual financial position had these transactions occurred at
September 30, 1996, as it relies upon certain assumptions and estimates
by Aquila's management.
AQUILA BIOPHARMACEUTICALS, INC.
(formerly Cambridge Biotech Corporation)
Pro Forma Statement of Operations
For the Nine Month Period Ended September 30, 1996
(Unaudited)
(In Thousands, except per share amounts)
Aquila
Aquila Pro
Historical Enterics Retroviral Forma
Revenue: ---------- -------- ---------- ------
Product sales $1,449 $ $ $ 1,449
Research & development 3,949 3,949
Royalties 1,277 1,277
----- ----- ----- -----
6,675 0 0 6,675
Cost and expenses:
Cost of sales 1,578 1,578
Research & development 3,319 3,319
General & administrative 4,000 4,000
----- ----- ----- -----
8,897 0 0 8,897
Other:
Other income and interest
expense net of interest
income 4,054 4,054
----- ------ ----- -----
Income from continuing
operations before
reorganization items
and income tax expense 1,832 0 0 1,832
Reorganization items:
Professional fees (1,934) (1,934)
Interest earned on
accumulated cash
resulting from
Chapter 11 proceedings 412 412
----- ----- ----- -----
Total reorganization items (1,522) 0 0 (1,522)
------ ----- ----- -----
Income from continuing
operations before income
tax expense 310 0 0 310
Income tax expense (2) (2)
----- ----- ------ -----
Income from
continuing operations 308 0 0 308
Discontinued operations:
Income from operations 1,799 (620) (1,179) 0
Gain on disposal 4,600 (4,600) 0
----- ------ ----- -----
Net Income/(loss) $6,707 ($5,220) ($1,179) $308
====== ======== ====== ======
Net Income per weighted
average number of
common shares:
Continuing operations $0.01 $0.06
Discontinued operations $0.25 $0.00
----- -------
Net Income per share $0.26 $0.06
===== =======
Weighted average number of
common shares outstanding 26,065 5,000
====== ======
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
- -----------------------------------------------------------------------------
AQUILA BIOPHARMACEUTICALS, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
Note A. Basis of Presentation
On June 24, 1996, Aquila sold the assets of the enterics diagnostics business
to Meridian Diagnostics, Inc. for approximately $5,700,000 in cash and other
considerations. The Company reported income for discontinued enterics
operations of $620,000 for the nine months ended September 30, 1996 and a
gain on disposal of $4,600,000.
On October 22, 1996, Aquila sold all of the equity of Cambridge Biotech
Corporation ("CBC"), to bioMerieux Vitek, Inc. for approximately $6,450,000
in cash. At the time of the sale, CBC's assets consisted solely of the
retroviral business. The Company reported income for discontinued
retroviral operations of $1,179,000 for the nine months ended
September 30, 1996, and will recognize a gain on this transaction in the
fourth fiscal quarter of 1996.
On October 21, 1996, CBC consummated a reorganization plan that was confirmed
by the United States Bankruptcy Court on July 18, 1996. The consummation
of the plan involved completing a number of transactions, including the
restructuring or payment in cash or stock of all allowed secured, unsecured,
administrative and priority tax claims. As a result of these transactions,
the Company paid out approximately $4,031,000 in cash, and will recognize
a gain on reorganization in the fourth fiscal quarter of 1996.
The unaudited Pro Forma Statements of Operations reflect the Company's
results of operations for the nine months ended September 30, 1996,
on a pro forma basis assuming the transactions had been completed as of
December 31, 1995. The unaudited Pro Forma Balance Sheet at
September 30, 1996, assumes that the transactions had been completed on that
date.
These pro forma financial statements are intended to present management's
estimates of the results from operations and financial condition of the
enterics and retroviral businesses, and of the impact of the Plan consum-
mation on the financial condition of Aquila. Certain of the pro forma
adjustments presented represent allocations and management's estimates
of costs, expenses, assets or liabilities. As a result, the financial
statements presented may not be indicative of the results that would have
been achieved if Aquila had operated as a non-affiliated entity during
the nine months ended September 30, 1996, or if the consummation had
occurred on or before September 30, 1996.
Note B. Pro Forma Adjustments:
The balance sheet as of September 30, 1996 gives effect to the following
pro forma adjustments related to the consummation of the reorganization
plan:
(a) to record the expenditure of cash for the satisfaction of pre-petition
and administration claims and professional fees
(b) to record the reduction of liabilities related to paid claims and the
adjustment of certain estimated liabilities
(c) to record the effect on shareholders' equity of the exchange of Aquila
shares for CBC shares
(d) to record the estimated pro forma gain on reorganization
The balance sheet as of September 30, 1996 gives effect to the following
pro forma adjustments related to the sale of the capital stock of CBC:
(e) to record the sale of selected assets of the business
(f) to record the net cash proceeds as an addition to cash
(g) to record the estimated pro forma gain on the sale of the retroviral
business
The statement of operations for the period ended September 30, 1996 gives
effect to the following pro forma adjustments related to the sale of the
capital stock of CBC and the enterics assets:
(h) to exclude income of $1,799,000 from Income from Discontinued
Operations
(i) to exclude $4,600,000 related to the sale of the enterics assets from
Gain from Disposal of Discontinued Operations
