<PAGE>
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 (Date of earliest event reported): October 20, 1995
----------------------------
CYTOGEN CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-14879 22-2322400
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.
600 College Road East, CN5308, Princeton, New Jersey 08540-5308
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 987-8200
----------------
<PAGE>
Item 2. Acquisition or Disposition of Assets.
------------------------------------
On October 20, 1995, Cytogen Corporation ("Cytogen") completed its
acquisition of Cellcor, Inc. ("Cellcor") by merging Cellcor with and into
Cellcor Acquisition Corp. ("Sub"), a wholly-owned subsidiary of Cytogen,
pursuant to the previously announced Agreement and Plan of Merger dated June 15,
1995, as amended, by and among Cytogen, Sub and Cellcor.
Upon the merger of Cellcor with and into Sub (the "Merger"), each then
outstanding share of Cellcor Common Stock was converted into the right to
receive .60 shares of Cytogen common stock, par value $.01 per share ("Cytogen
Common Stock"), and each then outstanding share of Cellcor Convertible Preferred
Stock was converted into the right to receive 218.94 shares of Cytogen Common
Stock.
Cellcor used its property and equipment in its business of developing
and commercializing autolymphocyte therapy, a proprietary immunotherapy using a
patient's own immune cells to treat cancer and certain infectious diseases.
Cytogen intends to continue such use of the property and equipment.
Fees, expenses and other costs related to the Merger are expected to
be funded by Cytogen from a combination of available cash and cash equivalents.
A copy of the press release of Cytogen announcing completion of the
Merger is filed as an exhibit hereto and is incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
------------------------------------------------------------------
(a) Financial Statements -- The financial statements required to be
filed were previously reported in Cytogen's Registration Statement on Form S-4,
File No. 33-62617 (the "S-4"), which S-4 was declared effective by the
Securities and Exchange Commission on September 14, 1995. Copies of such
financial statements are filed as exhibits hereto and are incorporated herein by
reference.
(b) Pro Forma Financial Information -- The pro forma financial
statements required to be filed are filed as an exhibit hereto and are
incorporated herein by reference.
(c) Exhibits:
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Merger, dated June 15, 1995, by and among
Cytogen Corporation, Small-C Acquisition Corp. and Cellcor,
Inc. (1)
2.2 First Amendment to Agreement and Plan of Merger dated as of
September 7, 1995 by and among Cytogen Corporation, Cellcor
Acquisition Corp. and Cellcor, Inc. (2)
23 Consent of KPMG Peat Marwick LLP.
99.1 Press release issued by Cytogen Corporation on October 23, 1995.
<PAGE>
99.2 Certificate of Merger of Cellcor, Inc. with and into Cellcor
Acquisition Corp. as filed with the Secretary of State of the
State of Delaware on October 20, 1995.
99.3 Cellcor Audited Balance Sheets as of December 31, 1994 and 1993,
Statements of Operations for each of the three years in the
three-year period ended December 31, 1994, Statements of Cash
Flows for each of the three years in the three-year period ended
December 31, 1994, Statements of Stockholders' Equity for each of
the three years in the three-year period ended December 31, 1994
and related Notes to Financial Statements.
99.4 Cellcor Unaudited Balance Sheets as of June 30, 1995 and December
31, 1994, Statements of Operations for the six months ended June
30, 1995 and June 30, 1994, Statements of Cash Flows for the six
months ended June 30, 1995 and June 30, 1994 and related Notes to
Financial Statements.
99.5 Cytogen Corporation and Subsidiaries Unaudited Pro Forma
Condensed Combined Balance Sheet as of June 30, 1995, Statements
of Operations for the year ended December 31, 1994 and the six
months ended June 30, 1995 and related Notes to Financial
Statements.
- ------------------------------------------------
(1) Filed as an exhibit to Cytogen's Current Report on Form 8-K, filed with the
Securities and Exchange Commission on June 27, 1995, and incorporated
herein by reference.
(2) Filed as Annex A to the Joint Proxy Statement/Prospectus constituting part
of the Registration Statement on Form S-4 (File No. 33-62617), which was
declared effective by the Securities and Exchange Commission on September
14, 1995, and incorporated herein by reference.
<PAGE>
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.
CYTOGEN CORPORATION
By: /s/ T. Jerome Madison
----------------------------
T. Jerome Madison
Vice President,
Chief Financial Officer and
Secretary
Date: November 3, 1995
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
23 Consent of KPMG Peat Marwick LLP.
99.1 Press release issued by Cytogen
Corporation on October 23, 1995.
99.2 Certificate of Merger of Cellcor, Inc.
with and into Cellcor Acquisition Corp.
as filed with the Secretary of State of
the State of Delaware on October 20, 1995.
99.3 Cellcor Audited Balance Sheets
as of December 31, 1994 and 1993,
Statements of Operations for each
of the three years in the three-year
period ended December 31,
1994, Statements of Cash Flows for
each of the three years in the
three-year period ended December 31,
1994, Statements of Stockholders'
Equity for each of the three years
in the three-year period ended
December 31, 1994 and related Notes
to Financial Statements.
99.4 Cellcor Unaudited Balance Sheets as
of June 30, 1995 and December 31, 1994,
Statements of Operations for the six
months ended June 30, 1995 and June 30,
1994, Statements of Cash Flows for the
six months ended June 30, 1995 and June 30,
1994 and related Notes to Financial
Statements.
99.5 Cytogen Corporation and Subsidiaries
Unaudited Pro Forma Condensed Combined
Balance Sheet as of June 30, 1995,
Statements of Operations for the year
ended December 31, 1994 and the six
months ended June 30, 1995 and related
Notes to Financial Statements.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
The Board of Directors
Cellcor, Inc.:
We consent to the incorporation by reference in the registration statements
(Nos. 33-30595, 33-52574, 33-57004 and 33-63321) on Form S-8 and (Nos. 33-35140
and 33-77396) on Form S-3 of Cytogen Corporation of our report dated January 20,
1995, with respect to the balance sheets of Cellcor, Inc., as of December 31,
1994 and 1993, and the related statements of operations, stockholders' equity
(deficit), and cash flows for each of the years in the three-year period ended
December 31, 1994, which report appears in the Form 8-K of Cytogen Corporation
dated October 20, 1995.
Our report dated January 20, 1995 contains an explanatory paragraph that states
the Company and certain of its officers are defendants in a class action lawsuit
seeking damages in unspecified amounts, alleging that the prospectus used to
sell the Company's stock in the initial public offering contained false and
misleading statements and omitted material facts. It is impossible to predict
the outcome of the lawsuit at this time. Accordingly, no provision for any
liability that may result upon adjudication has been recognized in the
accompanying financial statements.
Our report dated January 20, 1995 contains an explanatory paragraph that states
that the Company's recurring losses from operations, decreasing cash reserves
and need for additional capital to fund continuing operations raise substantial
doubt about the entity's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
November 1, 1995
<PAGE>
Exhibit 99.1
Pamela M. Murphy
CYTOGEN Corporation
609-987-8221
For Immediate Release
PRINCETON, N.J., October 23, 1995 -- CYTOGEN Corporation (NASDAQ: CYTO)
announced today that it had completed its acquisition of Cellcor by merging
Cellcor into a wholly-owned subsidiary of CYTOGEN pursuant to the terms of its
merger agreement with Cellcor.
CYTOGEN is a biopharmaceutical company engaged in the marketing and development
of products for the targeted delivery of diagnostic and therapeutic substances
directly to sites of disease. CYTOGEN uses its patented and proprietary
technologies to develop specific cancer diagnostic imaging and therapeutic
products.
###
<PAGE>
Exhibit 99.2
CERTIFICATE OF MERGER
OF
CELLCOR, INC.
INTO
CELLCOR ACQUISITION CORP.
***********
The undersigned corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY THAT:
1. The name and state of incorporation of each of the constituent
corporations of the merger is as follows:
Name State of Incorporation
---- -----------------------
Cellcor, Inc. Delaware
Cellcor Acquisition Corp. Delaware
(formerly known as Small-C Acquisition Corp.)
2. An Agreement and Plan of Merger, as amended (the "Agreement of
Merger") by and among Cytogen Corporation, a Delaware corporation ("Cytogen"),
Cellcor Acquisition Corp., a wholly-owned subsidiary of Cytogen, and Cellcor,
Inc., the parties to the merger, has been approved, adopted, certified, executed
and acknowledged by each of the constituent corporations in accordance with the
requirements of subsection (c) of Section 251 of the General Corporation Law of
the State of Delaware.
3. The name of the surviving corporation of the merger is CELLCOR
ACQUISITION CORP.
4. The Certificate of Incorporation of Cellcor Acquisition Corp. as
in effect immediately prior to the effective time of the merger shall be the
Certificate of Incorporation of the surviving corporation and will thereafter
continue to be its Certificate of Incorporation until changed as provided by
law, except that Article 1 is hereby amended in its entirety to read as follows:
"1. Name. The name of the Corporation is Cellcor, Inc."
----
5. The executed Agreement of Merger is on file at the principal
place of business of the surviving corporation. The address of the principal
place of business of the surviving corporation is 200 Wells Avenue, Newton, MA
02159.
<PAGE>
6. A copy of the Agreement of Merger will be furnished by the
surviving corporation on request and without cost to any stockholder of any
constituent corporation.
Dated: October 19, 1995
CELLCOR ACQUISITION CORP.
By: /s/ Thomas J. McKearn
--------------------------
Thomas J. McKearn,
President
ATTEST:
By: /s/ T. Jerome Madison
---------------------------
T. Jerome Madison, Secretary
<PAGE>
Exhibit 99.3
Independent Auditors' Report
----------------------------
The Board of Directors
Cellcor, Inc.:
We have audited the financial statements of Cellcor, Inc. as listed in the
accompanying index. In connection with our audits of the financial statements,
we also audited the financial statement schedule as listed in the accompanying
index. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statement and financial statement schedule based on
our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cellcor, Inc. as of December
31, 1994 and 1993, and the results of its operations and its cash flows for each
of the years in the three-year period ended December 31, 1994, in conformity
with generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respect, the
information set forth therein.
As discussed in note 13 to the financial statements, the Company and certain of
its officers are defendants in a class action lawsuit, seeking damages in
unspecified amounts, alleging that the prospectus used to sell the Company's
common stock in the initial public offering contained false and misleading
statements and omitted material facts. It is impossible to predict the outcome
of the lawsuit at this time. Accordingly, no provision for any liability that
may result upon adjudication has been recognized in the accompanying financial
statements.
The accompanying financial statements have been prepared assuming that Cellcor,
Inc. will continue as a going concern. As discussed in note 3 to the financial
statements, the Company's recurring losses from operations, decreasing cash
reserves and need for additional capital to fund continuing operations raise
substantial doubt about the entity's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 3. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
January 20, 1995
99.3-1
<PAGE>
CELLCOR, INC. 1994 ANNUAL REPORT
<TABLE>
<CAPTION>
BALANCE SHEETS
December 31,
------------
ASSETS 1994 1993
---------------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,225,674 $ 4,668,046
Marketable securities at cost (market
value of $2,668,241 in 1994) 2,669,873 -
Certificate of deposit (note 8) - 125,000
Accounts receivable, net of allowances 22,177 1,182
Inventories 73,072 69,084
Prepaid expenses and other current
assets 252,121 157,369
Current portion of notes receivable
(Note 6) 13,542 48,754
------------ ------------
Total current assets 4,256,459 5,069,435
------------ ------------
Property and equipment (Notes 5 and 9) 3,009,192 2,979,911
Less accumulated depreciation and
amortization 2,016,085 1,615,694
------------ ------------
Net property and equipment 993,107 1,364,217
------------ ------------
Other assets:
Notes receivable, less current portion
(Note 6) - 13,542
Other assets 118,447 113,681
------------ ------------
118,447 127,223
------------ ------------
Total assets $ 5,368,013 $ 6,560,875
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: $ $
Notes payable (Note 8) - 83,331
Accounts payable 300,191 425,311
Accrued expenses (Note 7) 1,124,069 571,808
Deferred revenue (Note 4) 155,000 -
Current maturities of capital lease
obligation (Note 9) 90,177 137,332
------------ ------------
Total current liabilities 1,669,437 1,217,782
Capital lease obligation, less current
maturities (Note 9) 366,432 474,818
------------ ------------
Total liabilities 2,035,869 1,692,600
------------ ------------
Commitments and Contingencies (Notes 4,
9, and 13)
Stockholders' equity (Note 10):
Convertible Preferred stock, $.01 par
value. Authorized 1,000,000 shares;
issued 5,250 in 1994 and 0 in 1993 53 -
Common stock, $.01 par value. Authorized
20,000,000 shares; issued 5,452,797
in 1994 and 5,436,276 in 1993 54,528 54,363
Additional paid-in capital 54,825,489 49,548,334
Unearned stock option compensation (173,805) (381,372)
Accumulated deficit (51,374,121) (44,353,050)
------------ ------------
Total stockholders' equity 3,332,144 4,868,275
------------ ------------
Total liabilities and stockholders'
equity $ 5,368,013 $ 6,560,875
============ ============
</TABLE>
See accompanying notes to financial statements.
99.3-2
<PAGE>
CELLCOR, INC. 1994 ANNUAL REPORT
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
Years ended December 31,
-----------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Revenue (Note 4)
Technology Development Fees $ 775,000 - -
Net Product Revenue 96,859 - 2,689,992
------------ ----------- ------------
Total Revenue 871,859 - 2,689,992
------------ ----------- ------------
Cost of patient services - - 4,530,541
Research and development 5,602,053 4,803,028 4,065,288
General and administrative 2,394,588 2,836,851 4,506,787
Restructuring expense (Note 14) - - 2,300,000
------------ ----------- ------------
Loss from operations (7,124,782) (7,639,879) (12,712,624)
------------ ----------- ------------
Other income (expense):
Interest income 135,513 316,319 539,473
Other income 8,000 - -
Interest expense (39,802) (82,524) (151,684)
Interest expense - stockholders - - (194,121)
------------ ----------- ------------
Total other income 103,711 233,795 193,668
------------ ----------- ------------
Net loss ($7,021,071) ($7,406,084) ($12,518,956)
============ =========== ============
Net loss per share (Note 2(j)) ($1.33) ($1.36) ($2.65)
============ =========== ============
Weighted average shares used in
calculation 5,441,853 5,436,191 4,718,299
============ =========== ============
</TABLE>
See accompanying notes to financial statements.
99.3-4
<PAGE>
CELLCOR, INC. 1994 ANNUAL REPORT
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Years ended December 31,
---------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ($7,021,071) ($7,406,084) ($12,518,956)
Adjustments to reconcile net loss to net cash used
in operating activities:
Write down of fixed assets - - 745,100
Depreciation and amortization 408,010 425,520 632,594
Deferred compensation expense 207,567 207,569 207,567
Changes in assets and liabilities:
(Increase) decrease in accounts receivable, net (20,995) 420,964 390,615
(Increase) decrease in inventories (3,988) 76,428 50,897
(Increase) decrease in prepaid expense and other
current assets (94,752) 229,763 (229,267)
Increase (decrease) in accounts payable (125,120) 151,817 (36,008)
Increase (decrease) in accrued expenses 552,261 (1,762,381) 1,854,001
Increase in deferred revenue 155,000 - -
------------ ------------ -------------
Net cash used in operating activities $ (5,943,088) $ (7,656,404) $ (8,903,457)
------------ ------------ -------------
Cash flows from investing activities:
Proceeds from the maturity of certificate of deposit 125,000 - -
Additions to property and equipment, net (36,900) (21,599) (189,490)
(Increase) decrease in other assets (4,766) 44,345 (23,166)
Decrease in notes receivable 48,754 65,542 33,491
(Increase) decrease in marketable securities (2,669,873) 9,063,306 (9,063,306)
------------ ------------ -------------
Net cash provided by (used in) investing
activities (2,537,785) $ 9,151,594 (9,242,471)
------------ ------------ -------------
Cash flows from financing activities:
Proceeds from sale of convertible preferred
stock 5,250,000 - -
Principal payments under capital lease obligations (155,541) (198,157) (184,911)
Proceeds from notes payable from stockholders - - 2,000,000
Principal payments on notes payable (83,331) (391,731) (264,758)
Proceeds from the exercise of stock options 2,373 501 64,280
Proceeds from sale of common stock 25,000 - 19,988,048
------------ ------------ -------------
Net cash provided by (used in) financing
activities 5,038,501 $ (589,387) 21,602,659
------------ ------------ -------------
Net increase (decrease) in cash and cash equivalents (3,442,372) 905,803 3,456,731
Cash and cash equivalents at beginning of year 4,668,046 3,762,243 305,512
------------ ------------ -------------
Cash and cash equivalents at end of year $ 1,225,674 $ 4,668,046 $ 3,762,243
============ ============ =============
Supplemental disclosure of cash flow information:
Interest paid $ 39,802 $ 82,524 $ 151,684
============ ============ =============
Property and equipment acquired under capital
leases $ - $ - $ 68,395
============ ============ =============
Conversion of notes payable to stockholders
and accrued interest payable to common stock $ - $ - $ 11,053,922
============ ============ =============
</TABLE>
See accompanying notes to financial statements.
99.3-3
<PAGE>
CELLCOR INC. 1994 ANNUAL REPORT
STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Class A Class B Class C Class D
Convertible Convertible Convertible Convertible Convertible
preferred stock preferred stock preferred stock preferred stock preferred stock
Shares Par Value Shares Par Value Shares Par Value Shares Par Value Shares Par Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 687,500 $68,750 383,142 $38,314 644,641 $64,464 319,118 $31,912
Conversion of preferred
shares to common stock [687,500] [68,750][383,142] [38,314][644,641] [64,464] [319,118] [31,912]
Sale of common stock - - - - - - - -
Conversion of notes and
interest payable to
stockholders (Note 8) - - - - - - - -
Common stock options
exercised - - - - - - - -
Deferred compensation
expense - - - - - - - -
Net Loss - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992 - - - - - - - -
Sale of common stock - - - - - - - -
Deferred compensation
expense - - - - - - - -
Net Loss - - - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 - - - - - - - -
Sale of Common Stock
Sale of Preferred Stock 5,250 53
Deferred Compensation
Expense
Net Loss
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 - - - - - - - - 5,250 53
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Additional Unearned Total
Common stock paid in stock option Accumulated stockholder's
Shares Par Value capital compensation deficit equity (deficit)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 293,092 $2,931 $18,289,575 [$796,508] [$24,428,010] [$6,728,572]
Conversion of preferred
shares to common stock 2,034,396 20,344 183,096 - -
Sale of common stock 2,000,000 20,000 19,968,048 - - 19,988,048
Conversion of notes and
interest payable to
stockholders (Note 8) 1,004,905 10,049 11,043,873 - - 11,053,922
Common stock options
exercised 103,215 1,032 63,248 - - 64,280
Deferred compensation
expense - - - 207,567 - 207,567
Net Loss - - - - [12,518,956] [12,518,956]
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1992 5,435,608 54,356 49,547,840 [588,941] [36,946,966] 12,066,289
Sale of common stock 668 7 494 - - 501
Deferred compensation
expense - - - 207,569 - 207,569
Net Loss - - - - [7,406,084] [7,406,084]
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 5,436,276 $54,363 $49,548,334 [$ 381,372] [$44,353,050] $4,868,275
Sale of Common Stock 16,521 165 27,208 27,373
Sale of Preferred Stock 5,249,947 5,250,000
Deferred Compensation
Expense 207,567 207,567
Net Loss [7,021,071] [7,021,071]
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 5,452,797 $54,528 $54,825,489 [$173,805] [$51,374,121] $3,332,144
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
99.3-5
<PAGE>
CELLCOR, INC.
NOTES TO FINANCIAL STATEMENTS
(1) Nature of Business
Cellcor, Inc. (the "Company") is a biotechnology company engaged in the
development and commercialization of cellular therapies ("ALT") with initial
application in the treatment of various forms of cancer and potential
application in the areas of infectious disease and AIDS.
(2) Summary of Significant Accounting Policies
(a) Technology Development Fees
Technology Development Fees are recorded over the applicable contractual
periods as specified by the agreement, net of related commissions.
(b) Net Product Revenue
The Company is recording the cost recovery related to treatment of patients
receiving ALT for metastatic Renal Cell Carcinoma under a compassionate protocol
based on expected payments from third-party payors and patients.
(c) Cash and Cash Equivalents
Cash and cash equivalents includes cash, money market funds and marketable
securities with original maturity dates of three months or less.
(d) Marketable Securities
Marketable securities are purchased with the intention to hold to maturity
and are stated at amortized cost which approximates market. These securities
include only United States Treasury government securities. Accordingly, the
investments are subject to minimal credit and market risk.
(e) Property and Equipment
Property and equipment is carried at cost and depreciated using the
straight-line method over the estimated useful lives of the related assets.
Leasehold improvements are amortized over the shorter of the useful life, or the
lease term.
(f) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
(g) Intangibles
Patents are amortized using the straight-line method over a five-year period
from the date the patent is granted.
(h) Research and Development
Research and development costs are charged to expense as incurred.
(i) Income Taxes
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes."
Statement 109 requires a change from the deferred method of accounting for
income taxes of APB Opinion 11 to the asset and liability method of accounting
for income taxes. Under the asset and liability method of Statement 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
99.3-6
<PAGE>
CELLCOR, INC.
NOTES TO FINANCIAL STATEMENTS
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.
Effective January 1, 1993, the Company adopted Statement 109. There
was no net cumulative effect associated with this change.
Pursuant to the deferred method under APB 11, which was applied in
1992 and prior years, deferred income taxes are recognized for income and
expense items that are reported in different years for financial reporting
purposes and income tax purposes using the tax applicable in the year of
calculation. Under the deferred method, deferred taxes are not adjusted for
subsequent changes in tax rates.
Research and development tax credits are reflected as a reduction of
federal income taxes in the year utilized.
(j) Net Loss Per Common Share
The net loss per common share is computed by dividing net loss after
adjusting for preferred stock dividends by the weighted average number of common
shares outstanding. Common stock equivalent shares are not included in the per
share calculations where the effect of their inclusion would be antidilutive.
(3) Liquidity
While the Company believes that its current cash balance will be
sufficient to meet its operating requirements through the middle of 1995, the
Company will need to raise substantial additional funds to support its product
development and commercialization programs. The Company is currently pursuing
additional equity or debt financing, collaborative or other arrangements with
corporate partners or from other sources, which may not be available when needed
or on terms acceptable to the Company. The Company's inability to raise
sufficient funds could require it to delay, scale back or eliminate certain
clinical studies, research and development programs or to license third parties
to commercialize products or technologies that the Company would otherwise
develop or commercialize itself. The Company's cash requirements may vary
materially from those now planned because of results of clinical testing,
changes in focus and direction of the Company's research and development
programs, competitive and technological advances, patent developments, the FDA
regulatory process or other developments.
There can be no assurances that the Company will be able to raise
additional funds to complete its clinical development program or maintain its
current level of operation. The Company's longer term working capital
requirements will depend on numerous factors including the timely and
satisfactory completion of its clinical trials.
(4) Revenue
Technology Development Fees
In March 1994, the Company signed a technology licensing and service
agreement with SRL Inc. of Tokyo. Under this agreement, Cellcor will help SRL
establish a core capability in patient specific Good Manufacturing Practices
(GMP) cell processing in Japan. The agreement provides for periodic payments to
Cellcor, and, if SRL exercises more than one of the development options
contained in the agreement, additional payments. Cellcor is recognizing the
revenue from the SRL agreement over applicable contractual periods as specified
by the agreement, net of related commissions. Cash payments received by the
Company prior to being earned are recognized as deferred revenue.
Product Revenue
In September 1993, Cellcor received authorization from the Food and
Drug Administration for cost recovery related to treatment of patients receiving
autolymphocyte therapy (ALT) for metastatic Renal Cell Carcinoma (mRCC) under a
99.3-7
<PAGE>
CELLCOR, INC.
NOTES TO FINANCIAL STATEMENTS
compassionate protocol. During 1994, revenue is recorded in net product revenue.
The cost of sales related to the treatments is recorded in research and
development expense.
During 1992, ALT was provided to patients on a commercial basis and a
substantial majority of the Company's revenue was received from third-party
payors. This revenue was recognized net of contractual allowances. The cost to
treat these patients is recorded in cost of patient services.
During and prior to 1992, the Company received Medicare reimbursement
through host hospitals from certain Medicare intermediaries. However, the
ultimate Medicare reimbursement amount is not determined until those
intermediaries review the cost reports submitted to the hospitals, which
generally does not occur for at least one year after the initial payment is
made. It is possible that after reviewing certain cost reports, Medicare may
deny reimbursement for ALT. If this were to occur, the host hospital would be
required to repay any amounts previously reimbursed by Medicare. The Company
would have a maximum liability to reimburse approximately $295,000 to host
hospitals.
(5) Property and Equipment
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Laboratory equipment $1,142,346 $1,137,027
Furniture and fixtures 758,183 740,852
Leasehold improvements 1,108,663 1,102,032
---------- ----------
3,009,192 $2,979,911
========== ==========
</TABLE>
The repair and maintenance expense was $69,800, $64,000 and $76,000 in
1994, 1993 and 1992, respectively.
(6) Notes Receivable
The following is a summary of notes receivable at December 31:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
9% demand note due from an officer.
This note is being forgiven on a pro
rata basis through June 1995 as long
as the officer remains an employee. 13,542 51,042
9% demand note due from an officer.
This note is being forgiven on a pro
rata basis through March 1994 . - 1,254
Non interest-bearing note due from a
stockholder on November 1, 1995. This
note is being forgiven beginning
November 1992 on a prorate basis
through October 1994 - 10,000
------- -------
13,542 62,296
Less current portion 13,542 48,754
------- -------
Notes receivable, less current portion $ - $13,542
======= =======
</TABLE>
99.3-8
<PAGE>
CELLCOR, INC.
NOTES TO FINANCIAL STATEMENTS
(7) Accrued Expenses
Accrued expenses consist of the following at December 31:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Accrued clinical trial expense $ 643,579 $ 43,624
Accrued payroll 110,614 87,565
Accrued vacation expense 64,612 64,612
Accrued rent 70,349 83,965
Accrued restructuring expense - 60,000
Other accruals 234,915 232,042
---------- --------
$1,124,069 $571,808
========== ========
</TABLE>
(8) Notes Payable
Notes Payable, Bank
The Company had a note payable with a bank, payable in monthly installments of
$16,667 plus interest at the bank's prime rate plus 3% through April 1994. The
note was secured by certain corporate assets, plus cash collateral equivalent of
at least 25% of amounts outstanding to be held at the bank. At December 31,
1993, a certificate of deposit of $125,000 was restricted for that purpose.
During 1994, the note was paid off in full.
Notes Payable, Stockholders
In 1991 and 1992, the Company borrowed $10,500,000 from certain stockholders.
The demand notes payable were at an interest rate of 9%. In conjunction with
the Company's initial public offering, the $10,500,000 of notes payable and
$554,000 of related interest were converted to common stock.
99.3-9
<PAGE>
CELLCOR, INC.
NOTES TO FINANCIAL STATEMENTS
(9) Lease Commitments
The Company leases its facilities and certain equipment under noncancelable
agreements which expire at various dates through 2000. The assets and
liabilities under capital leases are recorded at the lower of the present value
of the minimum lease payments or the fair value of the asset. The assets are
amortized over the lower of their related lease terms or their estimated
productive lives. Amortization of assets under capital leases is included in
depreciation expense.
Property and equipment include the following amounts for leases which have
been capitalized at December 31:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Laboratory equipment $ 234,890 $ 234,890
Leasehold improvements 800,000 800,000
---------- ----------
1,034,890 1,034,890
Less accumulated amortization (496,091) (373,033)
---------- ----------
$ 538,799 $ 661,857
========== ==========
</TABLE>
At December 31, 1994, future minimum lease payments under all noncancelable
capital and operating leases were as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------ ------
<S> <C> <C>
Year ended December 31:
1995 $123,128 $ 411,379
1996 114,554 409,489
1997 105,981 409,489
1998 98,974 408,747
1999 91,967 408,500
Thereafter 14,645 204,250
-------- ----------
Total minimum lease payments 549,249 $2,251,854
==========
Less amount representing interest 92,640
--------
456,609
Less current maturities 90,177
--------
Capital lease obligation, less current
maturities $366,432
========
</TABLE>
Rental expense was approximately $327,000, $431,000 and $638,000 for years
ended December 31, 1994, 1993 and 1992.
(10) Stockholders' Equity
Capital Stock
In March 1992, the Company completed a public offering of 2,000,000 shares of
its common stock at a price of $11.00 per share. The proceeds of the offering,
after deducting offering related costs, were approximately $19,988,000. In
conjunction with the closing of the public offering all outstanding shares of
convertible preferred stock of the Company were converted to common stock.
On January 28, 1992, the Company's Board of Directors adopted, and its
stockholders approved, an amendment to the Company's Certificate of
Incorporation authorizing the issuance of up to 1,000,000 shares of blank check
preferred stock subject to any limitations prescribed by law, without further
stockholder approval. Each such series of preferred stock shall have such
rights, preferences, privileges and restrictions, including voting rights,
dividend rights, conversion rights, redemption privileges and liquidation
preferences, as shall be determined by the Board of Directors.
99.3-10
<PAGE>
CELLCOR, INC.
NOTES TO FINANCIAL STATEMENTS
On July 20, 1994, the Company sold 5,250 shares of convertible preferred
stock, $.01 par value, for $1,000 per share to certain existing stockholders.
Dividends accrue annually at $100 per share and are payable when and as declared
by the Board of Directors. Such dividends shall accrue and shall be cumulative
from the date of issuance of each share of convertible preferred stock whether
or not declared. At December 31, 1994, cumulative preferred stock dividends
totaled $234,700. The preferred stockholders have liquidation preference over
common stockholders but have no voting rights other than as provided by Delaware
law and other than for certain events that would adversely affect the rights of
the preferred stock.
The preferred stock is convertible into common stock at any time at the option
of the holders. The number of shares of common stock is determined by dividing
the preferred stock purchase price plus accrued and unpaid dividends thereon by
$3.00. If the Company sells at least $2,000,000 of an equity security to
investors unaffiliated with the preferred stock investors, all outstanding
shares of preferred stock automatically convert into such equity security. The
number of shares of the equity security into which a share of preferred stock is
convertible is determined by dividing the purchase price of the preferred stock,
plus accrued but unpaid dividends thereon, by the lesser of (i) $3.00 or (ii)
the purchase price of the equity security.
Stock Options and Warrants
In January 1988, the Company adopted the 1988 Stock Option Plan (the "1988
Plan"). The 1988 Plan provides for the issuance of incentive stock options, as
defined in Section 422 of the Internal Revenue Code of 1986, to key employees
and the issuance of non-qualified options to directors, officers, employees and
consultants. Incentive stock options must be granted at not less than the fair
market value of the common stock at the time of the grant (110% in the case of a
10% owner). Non-qualified options must be granted at not less than 90% of the
fair market value of the common stock at the time of grant, and option price
shall not be less than par value per share. A total of 600,000 shares of common
stock may be subject to options granted under the 1998 Plan. As of December 31,
1994, 352,985 options were granted at exercise prices ranging from $.01 to
$9.50.
During 1991, the Company granted options for 161,908 shares of its common
stock at an option price below fair market value. Accordingly, the Company
recorded deferred compensation expense of $830,268 for the difference between
the market value of the stock at the time of the grants and the option prices.
The Company is amortizing the deferred compensation expenses over a four-year
period.
On January 28, 1992, the Company adopted the 1992 Director Stock Option Plan
(the "Director Plan"). The Director Plan provides for the automatic grant of
options to purchase common stock of the Company to non-employee directors who
are unaffiliated with The Hillman Company or Boston University. There are
100,000 shares of common stock reserved for issuance upon exercise of options
granted under the Director Plan. Under the Director Plan, each eligible
director as of the closing of the Company's initial public offering in March
1992 received an option for 10,000 shares of common stock on such date and will
receive an option for 10,000 shares on each successive second anniversary of
such date. Each eligible director first elected to the Board of Directors after
the closing of the Company's public offering will receive an option for 10,000
shares on the initial election date and on each successive second anniversary of
such date. The exercise price per share for all options granted under the
Director Plan is equal to the fair market value of the value of the common stock
as of the date of grant. One-third of the shares covered by an option vest on
the first anniversary of the date of grant, and one-eighth of the remaining
shares vest on each succeeding quarter thereafter until fully vested on the
third anniversary of the date of grant. The term of each option will be for a
period of ten years from the date of grant. As of December 31, 1994, 20,000
options were granted under this plan, at an exercise prices ranging from $1.18
to $8.75.
On January 28, 1992, the Company adopted the 1992 Stock Option and Restricted
Stock Plan (the "1992 Plan") for employees of the Company. A maximum of 500,000
shares of common stock may be issued pursuant to the 1992 Plan upon the exercise
of options or in connection with awards of restricted stock. Under the 1992
Plan, incentive stock options may be granted to employees and officers of the
Company and non-qualified stock options and awards of stock may be granted to
consultants, employees and officers of the Company. As of December 31, 1994,
508,735 options were granted under the 1992 Plan, at exercise prices ranging
from $.50 to $11.00.
99.3-11
<PAGE>
CELLCOR, INC.
NOTES TO FINANCIAL STATEMENTS
On March 2, 1993, the Compensation Committee of the Board of Directors voted
to offer all employees who received options to purchase shares of common stock
at the initial public offering price ($11.00 per share) the right to exchange
those options for new options to purchase 10% of the number of shares covered by
their respective options (the "New Options"). The exercise price of the New
Options is $1.38 per share (the closing sale price for the Company's common
stock on the Nasdaq National Market on March 2, 1993). The New Options are the
same type as the existing options, with the same vesting schedule. Pursuant to
this offer, New Options for the purchase of an aggregate of 19,000 shares of
Common Stock were granted to the officers in exchange for the options for the
190,000 shares listed in the table below. The transaction was treated as
cancellation of 171,000 shares in the table below.
On October 14, 1994, the Board of Directors adopted, subject to stockholder
approval, the 1995 Stock Incentive Plan (the "1995 Plan") which provides for the
grant of incentive stock options, non-qualified stock options, stock
appreciation rights, performance shares and awards of restricted and
unrestricted stock (collectively, the "Awards"). The 1995 Plan provides that a
total of 1,500,000 shares of common stock may be issued under the 1995 Plan.
The maximum number of shares of common stock with respect to which Awards may be
granted to any employee may not exceed 300,000 during any calendar year.
Incentive stock options must be granted at not less than the fair market value
of the common stock at the time of the grant and option price shall not be less
than the par value per share. Under the 1995 Plan, incentive stock options may
be granted to employees and officers of the Company and non-qualified stock
options and other Awards may be granted to consultants, employees and officers
of the Company. Pursuant to the 1995 Plan, the Board of Directors voted to
grant to certain officers of the Company, options to purchase 819,600 shares of
common stock at $3.63, the fair market value of the stock on date of grant. The
stock option grants are subject to the approval of the 1995 Plan by stockholders
of the Company at its 1995 Annual Meeting.
A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
Exercise
Shares Price Range
------ -----------
<S> <C> <C>
Options outstanding at December 31, 1991 480,715 $ .01- 1.70
Options granted 418,496 $1.70- 11.50
Options canceled (16,628) $ .75- 8.75
Options exercised (103,215) $ .01- 1.70
Options outstanding at December 31, 1992 779,368 $ .01- 11.50
Options granted 327,853 $ .50- 2.00
Options canceled (260,917) $ .01- 11.50
Options exercised (668) $ .75- 1.25
Options outstanding at December 31, 1993 845,636 $ .50 - $11.00
Options granted 898,425 $ .94 - 3.63
Options canceled (40,033) $ .50 - 8.75
Options exercised (2,708) $ .50 - 1.70
---------
Options outstanding at December 31, 1994 1,701,320
=========
Weighted average exercise price $3.05
=====
Exercisable December 31, 1994 611,361
=========
</TABLE>
In February 1990, the Company granted to an affiliate of its majority
stockholder a warrant in exchange for the stockholder's guarantee of certain
obligations under its lease agreement for office and lab space. The warrant,
which expires on February 15, 1995, allows the stockholder to purchase up to 15%
of the principal balance of the obligations guaranteed, at an exercise price of
$12.41 per share.
99.3-12
<PAGE>
CELLCOR, INC.
NOTES TO FINANCIAL STATEMENTS
In June 1991, the Company issued a warrant for the purchase of 8,500 shares of
common stock to a bank in connection with a long-term debt agreement. The
exercise price of the warrant is $14.00 per share, and the warrant expires in
June 1996.
(11) Income Taxes
As discussed in Note 2, the Company adopted Statement 109 as of January 1,
1993. There was no cumulative effect in adopting Statement 109. Accordingly,
there is no cumulative effect of a change in accounting method reflected in the
statement of operations for the year ended December 31, 1993. Prior years'
financial statements have not been restated to apply the provisions of Statement
109. The reconciliation of differences between the statutory U.S. federal
income tax rate and the Company's effective tax rate under Statement 109 is
immaterial.
The tax effects of temporary differences that give rise to significant
portions of gross deferred tax assets at December 31, 1994 and 1993 are
presented below:
<TABLE>
<CAPTION>
1994 1993
Current Non-Current Current Non-Current
------------------------ ------------------------
<S> <C> <C> <C> <C>
Deferred tax assets
Reserves and accruals (cash basis) $ 518,851 $ - $ 352,339 $ -
Accelerated depreciation on property
equipment - 574,740 - 492,307
Deferred revenue - 247,586 - 162,771
Federal net operating loss carryforwards - 16,232,017 - 13,783,799
General business credits - 722,698 - 635,306
State net operating loss carryforwards - 2,034,498 - 1,311,858
State credit carryforwards - 177,318 - 135,689
--------- ------------ --------- ------------
Total gross deferred tax assets $ 518,851 $ 19,988,857 $ 352,339 $ 16,521,730
--------- ------------ --------- ------------
Less valuation allowance (518,851) (19,988,857) (352,339) (16,521,730)
--------- ------------ --------- ------------
Net deferred tax assets after valuation $ - $ - $ - $ -
========= ============ ========= ============
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1994 was
$16,874,069. The net change in the total valuation allowance for the years
ended December 31, 1994 and 1993 was an increase of $3,633,639 and 2,951,560,
respectively.
At December 31, 1994, the Company had net operating loss carryforwards and
research credit forwards for federal income tax purposes of approximately
$47,700,000 and $723,000, respectively. The operating loss and research credit
carryforwards will expire in varying amounts through the year 2009. However, if
changes in the company's stock ownership exceed 50% of the value of the
Company's stock during any three-year period, the utilization of the net
operating loss and research credit carryforwards may be subject to limitation.
99.3-13
<PAGE>
CELLCOR, INC.
NOTES TO FINANCIAL STATEMENTS
(12) Malpractice
The Company maintains a claims-made basis insurance policy to provide
professional liability insurance in the aggregate amount of $5 million per
occurrence and per year. The cost of the insurance policy is recognized as
expense over the effective period of the policy.
(13) Legal Proceedings
On September 18, 1992, a stockholder of the Company brought suit against the
Company, the Company's directors and Furman Selz Incorporated, individually and
as representative of the 26 underwriters of the Company's initial public
offering in March 1992, in the Court of Chancery of Delaware as a class action
(on behalf of all other stockholders similarly situated). The suit alleges
among other things, that the prospectus used to sell the Company's Common Stock
in the initial public offering contained false and misleading statements and
omitted material facts necessary to make statements contained in the prospectus
not misleading and that the defendants violated Sections 11 and 12(2) of the
Securities Act of 1933. The plaintiffs are seeking, among other relief,
rescission of their purchases of Common Stock in the public offering. The
plaintiffs amended their complaint on November 3, 1992 and again in January
1994. Under the terms of the Underwriting Agreement among the Company and the
underwriters of the public offering, the Company is required to indemnify Furman
Selz Incorporated and the other underwriters for losses, costs and damages
arising out of the lawsuit. The Company has filed a motion for summary judgment
with the court and seeks to have all the plaintiffs' claims dismissed.
On September 9, 1994, the Court dismissed 23 out of the 26 allegations in the
lawsuit. On March 10, 1995, the Court entered an order allowing the Section 11
claim to proceed on a class basis but declined to certify a class on the Section
12(2) and state law claims. The trial is scheduled to begin on April 24, 1995.
Management will continue to vigorously contest this action. At this time, the
Company's legal counsel can offer no opinion regarding the eventual outcome of
this case and no estimate of the Company's potential liability. Accordingly, no
provision for any liability that may result upon adjudication has been
recognized in the accompanying financial statements.
(14) Company Restructuring
In 1992, the Company recorded at $2.3 million restructuring charge relating to
its decision in March 1993 to cease commercial operations of ALT. The Company
restructured its operations in order to focus on its strategy of achieving
regulatory approval of ALT and providing additional confirmatory data to the
medical community on the effectiveness of ALT. The restructuring charge
included the net loss from patient service incurred in the first quarter of
1993, severance costs and the disposition of various assets at its facilities.
99.3-14
<PAGE>
Exhibit 99.4
CELLCOR, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $949,102 $1,225,674
Marketable securities at cost - 2,669,873
Accounts receivable-net of allowances 29,624 22,177
Inventories 65,854 73,072
Prepaid expenses and other current assets 441,697 252,121
Current portion of notes receivable - 13,542
---------- ----------
Total current assets 1,486,277 4,256,459
Property and equipment 3,088,363 3,009,192
Less: accumulated depreciation and amortization (2,131,277) (2,016,085)
---------- ----------
Net property and equipment 957,086 993,107
Other assets 149,478 118,447
---------- ----------
Total assets $2,592,841 $5,368,013
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to stockholders (Note 5) $1,000,000 $ -
Accounts payable 799,360 300,191
Accrued restructuring expenses (Note 4) 819,328 -
Accrued expenses 1,073,252 1,124,069
Deferred revenue - 155,000
Current maturities of capital lease obligations 109,076 90,177
---------- ----------
Total current liabilities 3,801,016 1,669,437
Capital lease obligations, less current maturities 396,021 366,432
------- -------
Total liabilities 4,197,037 2,035,869
--------- ---------
Stockholders' equity (deficit):
Convertible preferred stock 53 53
Common stock 54,634 54,528
Additional paid-in capital 54,838,189 54,825,489
Unearned stock option compensation (86,905) (173,805)
Accumulated deficit (56,410,167) (51,374,121)
----------- -----------
Total stockholders' equity (deficit) (1,604,196) 3,332,144
---------- ----------
Total liabilities and stockholders' equity $2,592,841 $5,368,013
========== ==========
</TABLE>
See accompanying notes to financial statements.
99.4-1
<PAGE>
CELLCOR, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, 1995 June 30,1994 June 30, 1995 June 30, 1994
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenue
Net technology development fees $95,000 $232,500 $750,000 $310,000
Net product sales 23,656 28,308 51,707 45,187
------------- ----------- ----------- -----------
Total revenue 118,656 260,808 801,707 355,187
------------- ----------- ----------- -----------
Research and development expenses 1,571,543 1,144,668 3,145,917 2,339,378
General and administrative expenses 914,973 597,448 1,882,970 1,273,193
Restructuring expense 825,250 - 825,250 -
------------- ----------- ----------- -----------
Total operating costs and
expenses 3,311,766 1,742,116 5,854,137 3,612,571
------------- ----------- ----------- -----------
Operating loss (3,193,110) (1,481,308) (5,052,430) (3,257,384)
Other income (expense):
Interest income 7,516 17,294 42,979 38,642
Other income - 3,000 - 6,000
Interest expense (15,157) (8,946) (26,594) (19,595)
----------- ----------- ----------- -----------
Total other income (expense) (7,641) 11,348 16,385 25,047
----------- ----------- ----------- -----------
Net loss $(3,200,751) $(1,469,960) $(5,036,045) $(3,232,337)
============ ============ ============ ============
Net loss per common share* $ (0.61) $ (0.27) $ (0.97) $ (0.59)
Weighted average shares 5,453,390 5,436,432 5,453,132 5,436,354
</TABLE>
* 1995 net loss per common share is computed by dividing net loss after
adjusting for undeclared dividends on the convertible preferred stock of
$130,725 in the second quarter and $260,400 for the six months.
See accompanying notes to financial statements.
99.4-2
<PAGE>
CELLCOR INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30, 1995 June 30, 1994
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(5,036,045) $(3,232,337)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 160,179 202,683
Deferred compensation expense 86,900 103,783
Increase in accounts receivable (7,447) (17,411)
Increase in prepaid expenses and other
current assets (176,034) (178,633)
(Increase) decrease in accounts payable 499,169 (238,654)
(Increase) decrease in accrued expenses 768,511 (128,596)
(Decrease) increase in deferred revenue (155,000) 341,000
Decrease in inventory 7,218 3,982
----------- -----------
Net cash used in operating activities (3,852,549) (3,144,183)
----------- -----------
Cash flows from investing activities:
Maturity and sale of short-term investments 2,669,873 125,000
Purchases of property and equipment (24,659) (18,897)
(Increase) decrease in other assets (31,031) 24,666
----------- -----------
Net cash provided by investing activities 2,614,183 130,769
----------- -----------
Cash flows from financing activities:
Proceeds from notes payable from stockholder 1,000,000 -
Capital lease obligation payments (51,012) (101,273)
Payments of notes payable - (83,331)
Sale of stock 12,806 85
----------- -----------
Net cash provided by (used in) financing activities 961,794 (184,519)
----------- -----------
Net decrease in cash and cash equivalents (276,572) (3,197,933)
Cash and cash equivalents beginning of period 1,225,674 4,668,046
----------- -----------
Cash and cash equivalents end of period $ 949,102 $ 1,470,113
=========== ===========
Supplemental cash flow information
Interest paid $ 26,594 $ 19,595
Supplemental schedule of non-cash
Investing and financing activities:
Property and equipment acquired under
capital lease $ 99,500
</TABLE>
See accompanying notes to financial statements.
99.4-3
<PAGE>
CELLCOR, INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
a. The unaudited financial statements presented herein should be read in
conjunction with the financial statements and notes thereto included in the
Cellcor, Inc. (the "Company" or "Cellcor") Annual Report on Form 10-K. Certain
information and footnote disclosure normally included in the financial
statements prepared in accordance with generally accepted accounting principles
has been condensed or omitted pursuant to the Securities and Exchange Commission
rules and regulations, although the Company believes the disclosures which have
been made are adequately presented and not misleading.
The financial statements for the three months ended June 30, 1995 and
1994 and the six months ended June 30, 1995 and 1994 are unaudited. However, in
the opinion of management, all adjustments (consisting of only normally
recurring adjustments) necessary for a fair presentation of the Company's
financial position and results of operations for the periods presented have been
made. Interim results are not necessarily indicative of results for a full year.
b. Loss Per Share
The net loss per common share is computed by dividing net loss after
adjusting for preferred stock dividends by the weighted average number of shares
outstanding. Common stock equivalent shares are not included in the per share
calculations where the effect of their inclusion would be antidilutive.
2. REVENUE RECOGNITION
a. Technology development fees.
Revenues from technology development fees were derived from a
collaborative agreement with SRL, Inc., a Japanese corporation. The Company is
recognizing the revenue from the SRL Agreement over contractual periods as
specified by the agreement, net of related commissions.
3. SALE OF COMPANY
Cellcor entered into an Agreement and Plan of Merger dated June 15,
1995 with a wholly-owned subsidiary of Cytogen Corporation (the "Merger
Subsidiary"), which provides that, upon the satisfaction or waiver of certain
conditions set forth therein, the Merger Subsidiary will be merged with and into
Cellcor (the "Merger"), whereupon Cellcor will become a wholly-owned subsidiary
of Cytogen. At that time, each outstanding share of Cellcor common stock will be
converted into the right to receive .60 shares of Cytogen common stock and each
outstanding share of Cellcor Convertible Preferred Stock will be converted into
the right to receive 218.94 shares of Cytogen common stock. Hillman Medical
Ventures partnerships and certain of their affiliates (collectively, the
"Principal Stockholders") own 50.5% of the Cellcor common stock and 95.2% of the
Cellcor preferred stock. The Principal Stockholders have agreed to vote such
shares in favor of the Merger.
In connection with the Merger, holders of record of Cellcor common
stock on August 17, 1995, will be granted the non-transferable right to purchase
for cash shares of Cytogen common stock (the "Subscription Offering"). Each
holder of Cellcor common stock will be entitled to purchase 1.118 shares of
Cytogen common stock for each share of Cellcor common stock held by such holder
at the close of business on August 17, 1995, the Subscription Offering record
date (rounded down to the nearest whole number) at a price of $3.89 per share of
Cytogen common stock. Consummation of the Merger is conditioned upon the
purchase of at least $12.0 million of
99.4-4
<PAGE>
the Subscription Offering. Certain of the Principal Stockholders have committed
to purchase $12.0 million of the shares in the Subscription Offering. These
transactions also remain subject to, among other things, the effectiveness of a
registration statement and a joint proxy statement, which has been filed with
the Securities and Exchange Commission (the "SEC"), certain other regulatory
approvals, and the approval of both sets of stockholders
4. RESTRUCTURING
The Company restructured its operations in June 1995, in anticipation
of the Merger. The Company's primary goal remains achieving regulatory approval
for ALT, with a secondary goal of completing the Phase I/II trial in chronic
hepatitis B. The Phase I/II trial in advanced kidney cancer utilizing Organon
Teknika/Biotechnology Research Institute's Active Specific Immunotherapy
followed by ALT was discontinued. The Company accrued the following expenses
related to this restructuring at June 30, 1995:
<TABLE>
<S> <C>
Employee severance related to personnel reductions in operations andadministration $817,000
Operational costs related to discontinuing clinical trial 8,250
--------
$825,250
=======
</TABLE>
5. NOTE PAYABLE TO STOCKHOLDERS
During June 1995, the Company issued a promissory note to certain
affiliates of the Hillman Medical Ventures partnerships in the aggregate
principal amount of $4,967,118 (the "Promissory Note"). This note allows Cellcor
to draw down funds for research and development and working capital, from time
to time aggregating not more than $4,967,118. Cellcor will pay interest at an
annual rate of 6.37% on the borrowed funds. The note shall be due and payable
upon the later of (i) effectiveness of the Merger and the closing of the
Subscription Offering, provided however, that the Subscription Offering produces
aggregate proceeds to Cytogen of not less than $12,000,000, and (ii) December
31, 1995. At June 30, 1995, Cellcor had utilized $1,000,000 of the $4,967,118
available.
6. LEGAL PROCEEDINGS
On September 18, 1992, a stockholder of the Company brought suit
against the Company, the Company's directors and Furman Selz Incorporated,
individually and as representative of the 26 underwriters of the Company's
initial public offering in March 1992, in the Court of Chancery of Delaware as a
class action (on behalf of all other stockholders similarly situated). The suit
alleged, among other things, that the prospectus used to sell the Company's
Common Stock in the initial public offering contained false and misleading
statements and that the defendants violated Sections 11 and 12(2) of the
Securities Act of 1933. The plaintiffs were seeking, among other relief,
rescission of their purchase of Common Stock in the public offering. The
plaintiffs amended their complaint on November 3, 1992 and again in January
1994. Under the terms of the Underwriting Agreement among the Company and the
underwriters of the public offering, the Company is required to indemnify Furman
Selz Incorporated and the other underwriters for losses, costs and damages
arising out of the lawsuit. The Company filed a motion for summary judgment with
the court and sought to have all the plaintiffs' claims dismissed.
On September 9, 1994, the Court dismissed 23 out of the 26 allegations
in the lawsuit. On March 10, 1995, the Court entered an order allowing the
Section 11 claim to proceed on a class basis but declined to certify a class on
the Section 12(2) and state law claims.
On April 24, 1995, the Company announced it had reached agreement to
settle this stockholder class action litigation. The settlement which is subject
to certain conditions, including final approval by Delaware's Court of Chancery,
provides for a $700,000 cash payment to the members of the plaintiff class in
return for dismissal of all claims against the defendants. Of the payment,
almost two-thirds have been made by the Company's insurance carrier, with the
balance paid by the Company. The amount paid by the Company was accrued for at
March 31, 1995.
99.4-5
<PAGE>
Exhibit 99.5
CYTOGEN CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
(Unaudited)
The accompanying Pro Forma Condensed Combined Balance Sheet as of June 30,
1995, and the related Pro Forma Condensed Combined Statements of Operations for
the year ended December 31, 1994 and for the six months ended June 30, 1995 give
effect to the merger ("Merger A") of CytoRad Incorporated ("CytoRad") into a
wholly-owned subsidiary of Cytogen Corporation ("Cytogen"), which was
consummated on February 27, 1995, and the merger ("Merger B") of Cellcor, Inc.
("Cellcor") with and into a wholly-owned subsidiary of Cytogen, as if these
transactions had occurred as of June 30, 1995 in the case of the Pro Forma
Condensed Combined Balance Sheet or as of January 1, 1994 in the case of the Pro
Forma Condensed Combined Statements of Operations. The Pro Forma Condensed
Combined Balance Sheet as of June 30, 1995 presents only the historical
financial position of Cytogen and Cellcor (and not CytoRad) inasmuch as the
Cytogen Form 10-Q for the quarter ended June 30, 1995 (the "Cytogen June 30,
1995 Form 10-Q"), which reflects the consummation of Merger A, has previously
been filed with the Securities and Exchange Commission.
The Pro Forma Condensed Combined Financial Statements have been prepared by
Cytogen management and should be read in conjunction with the historical
financial statements of Cytogen, CytoRad and Cellcor. The Pro Forma Condensed
Combined Financial Statements are based on certain assumptions and estimates.
These statements do not purport to be indicative of the financial position or
results of operations that might have occurred, nor are they indicative of
future results. See Notes to Pro Forma Condensed Combined Financial Statements.
99.5-1
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED BALANCE SHEET
June 30, 1995
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Historical (Note 1) Pro Forma
--------------------- -------------------------
Cytogen Cellcor Adjustments Combined
------- ------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents.............................. $ 9,243 $ 949 $ 20,012(G) $ 26,969
(2,235)(C)
(1,000)(H)
Short-term investments................................. 1,321 --- --- 1,321
Accounts receivable, net............................... 533 30 --- 563
Inventory.............................................. 2,157 66 --- 2,223
Other current assets................................... 592 442 --- 1,034
-------- ------- --------- --------
Total current assets................................ 13,846 1,487 16,777 32,110
Property, plant and equipment, net....................... 5,215 957 --- 6,172
Other assets............................................. 1,847 149 --- 1,996
-------- ------- --------- --------
$ 20,908 $ 2,593 $ 16,777 $ 40,278
======== ======= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Note payable to stockholders....................... $ --- $ 1,000 $ (1,000) $ ---
Accounts payable and accrued liabilities........... 6,741 2,692 --- 9,433
Other current liabilities.......................... 2,231 109 --- 2,340
-------- -------- --------- --------
Total current liabilities..................... 8,972 3,801 (1,000) 11,773
-------- -------- --------- --------
Long-term liabilities.............................. 4,768 396 --- 5,164
-------- -------- --------- --------
Redeemable common stock (pro forma),
250,000 shares issued and outstanding, at
redemption value................................. 2,000 --- --- 2,000
-------- -------- --------- --------
Stockholders' Equity (Deficit):
Preferred stock (pro forma), $.01 par value,
5,400,000 shares outstanding, no shares
issued and outstanding........................... --- --- --- ---
Convertible preferred stock........................ --- --- --- ---
Common stock (pro forma), $.01 par value,
69,600,000 shares authorized, 41,554,000 shares
issued and outstanding........................... 317 55 44(F)(G) 416
Additional paid-in capital......................... 193,911 54,838 (56,410)(D) 235,122
42,783(F)(G)
Deferred compensation.............................. --- (87) --- (87)
Unrealized gains on investments.................... 28 --- --- 28
Accumulated deficit................................ (189,088) (56,410) 56,410(D) (214,130)
(25,050)(G)
-------- -------- --------- --------
Total stockholders' equity (deficit).......... 5,168 (1,604) 17,777 21,349
-------- -------- --------- --------
$ 20,908 $ 2,593 $ 16,777 $ 40,286
======== ======== ========= ========
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements
99.5-2
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1994
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical (Note 1) Pro Forma
----------------------------------------- ---------------------------
Cytogen CytoRad Cellcor Adjustments Combined
----------- ----------- ----------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
Product related................ $ 1,411 $ --- $ 97 $ --- $ 1,508
License and contract........... 1,047 --- 775 --- 1,822
------- ---------- ------ ----------- --------
Total revenues............ 2,458 --- 872 --- 3,330
------- ---------- ------ ----------- --------
Operating expenses:
Research and development........ 20,321 --- 5,602 --- 25,923
Selling and marketing........... 5,536 --- --- --- 5,536
Reacquisition of technology and
marketing rights............. 4,647 --- --- --- 4,647
General and administrative...... 4,290 1,415 2,427 --- 8,132
Merger costs................... --- 696 --- (696)(A) ---
------- ---------- ------ ----------- --------
Total operating expenses.. 34,794 2,111 8,029 (696) 44,238
------- ---------- ------ ----------- --------
Non-operating income........... (470) 960 136 --- 626
------- ---------- ------ ----------- --------
Net loss....................... $(32,806) $ (1,151) $ (7,021) $ 696 $(40,282)
======== ========== ========= =========== ========
Net loss per common share....... $ (1.38) $ (0.29) $ (1.33) $ (1.07)
========= ========== ========= ========
Weighted average common shares
outstanding................... 23,822 4,025 5,442 37,657
========= ========== ========= ========
</TABLE>
NOTE: The pro forma adjustments exclude a nonrecurring charge of approximately
$19.7 million for acquired research and development resulting from Merger
A, which was charged to the statement of operations in the Cytogen March
31, 1995 Form 10-Q, which has previously been filed with the Securities
and Exchange Commission (see Note 2).
The pro forma adjustments also exclude a nonrecurring charge for acquired
research and development which will be charged to the statement of
operations upon the effective time (the "Effective Time") of Merger B.
Based on $4.50, the last sale price per share of Cytogen Common Stock on
October 20, 1995, the Effective Time, this amount would be $25,050,000 or
$(0.67) per share. This charge to expense will change due to
a change from Cellcor's stockholders' deficit balance at June 30, 1995
(see Note 3).
See Notes to Pro Forma Condensed Combined Financial Statements.
99.5-3
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1995
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Historical (Note 1) Pro Forma
----------------------------------- ----------------------------
Cytogen CytoRad Cellcor Adjustments Combined
----------- --------- ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Product related................. $ 728 $ --- $ 52 $ --- $ 780
License and contract............ 792 --- 750 --- 1,542
-------- --------- -------- -------- ---------
Total revenues............... 1,520 --- 802 --- 2,322
-------- --------- -------- -------- ---------
Operating Expenses:
Research and development........ 10,296 --- 3,146 --- 13,442
Selling and marketing........... 1,720 --- --- --- 1,720
Reacquisition of technology
and marketing rights........... 19,663 --- --- (19,663)(B) ---
General and administrative...... 3,189 529 1,883 --- 5,601
Restructuring expense........... --- --- 825 --- 825
Merger costs.................... --- 1,923 --- (1,923)(A) ---
-------- --------- -------- -------- ---------
Total operating expenses..... 34,868 2,452 5,854 (21,586) 21,588
-------- --------- -------- -------- ---------
Non-operating income............ 80 148 16 --- 244
-------- --------- -------- -------- ---------
Net loss........................ $(33,268) $ (2,304) $ (5,036) $ 21,586 $ (19,022)
======== ========= ======== ======== =========
Net loss per common share....... $ (1.11) $ (0.57) $ (0.97) $ (0.48)
======== ========= ======== =========
Weighted average common shares
outstanding.................... 29,982 4,025 5,453 39,792
======== ========= ======== =========
</TABLE>
NOTE: The pro forma adjustments exclude a nonrecurring charge of approximately
$19.7 million for acquired research and development, which was charged to
the statement of operations in the Cytogen March 31, 1995 Form 10-Q,
which has previously been filed with the Securities and Exchange
Commission (see Note 2).
The pro forma adjustments also exclude a nonrecurring charge for acquired
research and development which will be charged to the statement of
operations upon the Effective Time of Merger B. Based on $4.50, the last
sale price per share of Cytogen Common Stock on October 20, 1995, the
Effective Time, this amount would be $25,050,000 or $(0.67) per share.
This charge to expense will change due to a change from Cellcor's
stockholders' deficit balance at June 30, 1995 (see Note 3).
See Notes to Pro Forma Condensed Combined Financial Statements.
99.5-4
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
1. Historical
The historical balances represent the results of operations for each company
and were derived from the respective financial statements for the indicated
periods for Cytogen and Cellcor and for the year ended December 31, 1994 and the
period from January 1, 1995 to February 26, 1995 for CytoRad. The CytoRad
historical results of operations from February 27, 1995 to June 30, 1995 have
been consolidated with those of Cytogen and have previously been filed with the
Securities and Exchange Commission as part of the Cytogen June 30, 1995
Form 10-Q, which reflects Merger A.
2. CytoRad Merger
Merger A was consummated on February 27, 1995 and resulted in the former
CytoRad stockholders obtaining a minority ownership of Cytogen. Merger A was
accounted for as a purchase transaction with Cytogen treated as the acquirer.
Based on the $3.69 per share closing price of Cytogen Common Stock on February
27, 1995, the total purchase price of CytoRad was approximately $30,900,000,
which consisted of the following: (i) the $22,263,000 market value of the
shares of Cytogen Common Stock which were issued to the CytoRad stockholders
(6,037,500 shares of Cytogen Common Stock multiplied by $3.69 per share);
(ii) the $7,446,000 estimated fair value of the warrants to purchase Cytogen
Common Stock and the contingent value rights; and (iii) Cytogen transaction
costs of approximately $1,191,000. In addition, Cytogen charged approximately
$1,400,000 of legal and investment banking fees relating to Merger A to expense
in 1994. The total purchase price has been allocated to the fair market value of
the assets acquired and liabilities assumed. The book value of CytoRad's
tangible assets and liabilities after payment of merger transaction costs
approximated their fair market value. Based on the foregoing purchase price, the
amount allocated to acquired research and development of $19.7 million was
charged to the statement of operations in the Cytogen March 31, 1995 Form 10-Q,
which was previously filed with the Securities and Exchange Commission.
The following pro forma adjustments are reflected as if Merger A had
occurred as of January 1, 1994, in the case of the pro forma condensed combined
statements of operations:
(A) Elimination of nonrecurring merger costs incurred by CytoRad.
(B) Elimination of nonrecurring charge for acquired research and
development.
3. Cellcor Merger
Merger B will result in the former Cellcor stockholders obtaining a minority
ownership of Cytogen. Merger B will be accounted for as a purchase transaction
with Cytogen treated as the acquirer. Based on $4.50, the last sale price per
share of Cytogen Common Stock on October 20, 1995, the estimated total purchase
price of Cellcor would be $23,446,000, which consists of the following: (i) the
$21,211,000 market value of the shares of Cytogen Common Stock which will be
issued to the Cellcor stockholders (4,713,565 shares of Cytogen Common Stock
multiplied by $4.50 per share); and (ii) estimated transaction costs of
$2,235,000. The estimated total purchase price has been allocated to the fair
market value of the assets acquired and liabilities assumed. It is anticipated
that the book value of Cellcor's tangible assets and liabilities after payment
of merger transaction costs will approximate their fair market value. Based on
the foregoing estimated purchase price, the amount allocated to acquired
research and development of $25,050,000 will be charged to the statement of
operations upon the Effective Time of Merger B. This charge to expense will
change due to a change from Cellcor's stockholders' deficit balance at June 30,
1995.
Concurrent with the consummation of Merger B, Cytogen will make an offer
(the "Subscription Offering") to the holders of Cellcor Common Stock enabling
such stockholders to purchase 1.118 shares of Cytogen Common Stock
99.5-5
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
for each share of Cellcor Common Stock held by such stockholder, at a price of
$3.89 per share of Cytogen Common Stock. As a condition to entering into Merger
B, certain Cellcor stockholders have purchased 5,144,388 shares of Cytogen
Common Stock for $20,012,000 ($3.89 per share) as part of the Subscription
Offering.
The pro forma financial statements do not reflect any additional
indebtedness (under an available promissory note provided by certain of the
principal stockholders of Cellcor) or interest thereon which will be incurred
between July 1, 1995 and the Effective Time of the Merger for operating
purposes. As of June 30, 1995, Cellcor had incurred $1,000,000 of indebtedness
under this note. The pro forma financial statements also do not reflect the
issuance and sale of 1,800,000 shares of Cytogen Common Stock for $7.3 million
to Fletcher Capital Markets, Inc. ("Fletcher Capital") in August 1995 upon the
exercise of the option granted to Fletcher Capital by Cytogen in May 1994 or of
665,352 shares of Cytogen Common Stock for $2.7 million to Fletcher Fund, L.P.
in September 1995.
The following pro forma adjustments are reflected as if Merger B had
occurred as of June 30, 1995, in the case of the pro forma condensed combined
balance sheet or as of January 1, 1994, in the case of the pro forma condensed
combined statements of operations:
(C) Payment of transaction costs of approximately $2,235,000. Includes
approximately $735,000 of transaction costs incurred by Cellcor that
will be charged to Cellcor's statement of operations in the period when
these costs are incurred.
(D) Elimination of Cellcor's accumulated deficit due to the application of
purchase accounting.
(E) Portion of purchase price allocated to acquired research and
development, which will be charged to the statement of operations upon
the consummation of Merger B. This amount is not included in the pro
forma condensed combined statement of operations inasmuch as it
represents a one-time nonrecurring charge.
(F) Issuance of 4,713,565 shares of Cytogen Common Stock to Cellcor
stockholders and related adjustments to additional paid-in capital.
This entry reflects the net increase in the pro forma stockholders'
equity which equals (i) the value of common stock issued to Cellcor
stockholders ($21,211,000) minus (ii) the Cellcor historical
stockholders' deficit as of June 30, 1995 ($1,604,000).
(G) Issuance of 5,144,388 shares of Cytogen Common Stock for $20,012,000 in
connection with the Subscription Offering.
(H) Payment under note payable to shareholders.
4. Income Taxes
The Pro Forma Condensed Combined Statements of Operations do not reflect tax
benefits for the pro forma losses of Cytogen inasmuch as the realization of such
benefits is uncertain. As a result of the consummation of Merger A, the
availability in any one year of CytoRad's net operating loss carryforward will
be limited due to a change in ownership. The effect of the limitation has not
yet been quantified. However, such limitation is not expected to have a
material effect on Cytogen's ability to ultimately utilize this carryforward.
Upon the consummation of Merger B, the availability in any one year of Cellcor's
net operating loss carryforward will be limited due to a change in ownership.
Cellcor's net operating loss carryforward available after the consummation of
Merger B will approximate
99.5-6
<PAGE>
CYTOGEN CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
the fair market value of Cellcor Common Stock outstanding prior to the
consummation of Merger B, subject to certain annual limitations. The effect of
the limitation is to restrict the future use of the net operating loss to an
amount equal to the fair market value of Cellcor's stock multiplied by a
federally-prescribed interest rate, resulting in the amount of net operating
loss that may be used in each year of the remaining carryforward period.
99.5-7
