UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): February 18, 1997
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SERAGEN, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-19855 04-2662345
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
97 SOUTH STREET, HOPKINTON, MASSACHUSETTS 01748
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code; (508) 435-2331
Exhibit Index on page 6
Item 7. Financial Statements and Exhibits.
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Financial Statements.
The following unaudited proforma financial information should be read in
conjunction with the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
Pro Forma Information (unaudited):
On February 18, 1997, the Company entered into an agreement to sell its
manufacturing and clinical operations facilities to B.U. or a designated
affiliate for $5 million. The closing of the transaction is subject to, among
other things, approval by the Company's stockholders. B.U. has paid the
Company $4.5 million as a deposit and has assumed responsibility for the
facility's operations, including responsibility for operating costs. The
Company currently may use this deposit to fund its operations. At the
closing, a majority of the Company's employees involved in the manufacturing
and clinical operations will become employees of B.U. Both the deposit and
the operating costs paid by B.U. are subject to refund in the event that
conditions for closing are not met.
Simultaneously, the Company entered into a service agreement with B.U.
providing for the purchase by the Company of certain services related to
product research, development, manufacturing, clinical trials, quality
control, and quality assurance. This service contract expires in January 1999
and is subject to early termination provisions, as defined, including the
option of B.U. to terminate the agreement if losses during a contract year
exceed $9.0 million and the Company does not reimburse B.U. for the losses in
excess of $9.0 million. The service contract may be renewed for two
successive one-year terms at the option of the Company. The Company has the
option to repurchase the assets comprising the manufacture and clinical
operations facilities. The Company has agreed to pay B.U. approximately $5.5
million and $6.6 million in years 1 and 2 of this contract, respectively. The
fees can be mutually increased or decreased, but may not be reduced to less
than $4.3 million per contract year. The service agreement is expected to
substantially reduce operating costs in research and development as Seragen
will be contracting solely for the services that the Company requires for
clinical and manufacturing purposes. The Company intends to account for the
transaction upon approval by the Company's shareholders.
The following unaudited pro forma financial information reflects the
Company's balance sheet, as of December 31, 1996 and the Company's historical
statement of operations for the year ended December 31, 1996, assuming the
transactions described above were consummated on January 1, 1996. The
unaudited pro forma financial statements do not purport to be indicative of
the results which would actually have been reported if the transactions had
been effected on that date or which may be reported in the future.
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<TABLE>
SERAGEN, INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF DECEMBER 31, 1996
<CAPTION>
ASSETS HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................................................. $ 1,548,392 $ 5,000,000(a) $ 6,548,392
Restricted cash........................................................... 610,318 - 610,318
Contract receivable....................................................... 485,261 - 485,261
Unbillied contract receivalbe............................................. 33,983 - 833,983
Prepaid expenses and other current assets................................. 285,356 - 285,356
----------- --------- -----------
Total current assets................................................. 3,763,310 5,000,000 8,763,310
Property and equipment, net.................................................. 4,604,115 (4,595,594)b) 8,521
Other assets................................................................. 77,183 - 77,183
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Total assets......................................................... $ 8,444,608 $ 404,406 $ 8,849,014
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current liabilities:
Accounts payable.......................................................... 1,111,477 - 1,111,477
Current maturities of long-term debt...................................... 37,418 - 37,418
Accrued expenses.......................................................... 3,177,467 - 3,177,467
Preferred stock redemption liability...................................... 1,236,753 - 1,236,753
Short-term obligation, less unamortized discount.......................... 4,128,097 - 4,128,097
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Total current liabilities............................................ 9,691,212 - 9,691,212
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Non-current liabilities:
Lilly contract obligation................................................. 1,200,000 - 1,200,000
Canadian affiliate put option liability................................... 2,400,000 - 2,400,000
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Total non-current liabilities........................................ 3,600,000 - 3,600,000
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Commitments and contingencies
Stockholders' (deficit):
Preferred stock, $.01 par value; 5,000,000 shares authorized
Convertible preferred stock, Series A, $.01 par value; issued
and outstanding 3,105 shares at December 31, 1996, $2,015,522
liquidation preference................................................. 2,015,522 - 2,015,522
Convertible preferred stock Series B, $.01 par value; issued
and oustanding 23,800 shares at December 31, 1996, $23,800,000
liquidation preference................................................. 23,800,000 - 23,800,000
Convertible preferred stock Series C, $.01 par value; issued
and oustanding 5,000 shares at December 31, 1996, $5,100,000
liquidation preference................................................. 5,100,000 - 5,100,000
Common stock, $.01 par value; 70,000,000 shares authorized; issued
17,199,458 shares at December 31, 1996................................. 171,994 - 171,994
Additional paid in capital................................................... 151,323,022 404,406(c) 151,727,428
Accumulated deficit.......................................................... (187,254,811) - (187,254,811)
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(4,844,273) 404,406 (4,439,867)
Less-treasury stock (777 shares at cost at December 31, 1996................. (2,331) - (2,331)
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Total stockholders' (deficit)..................................... (4,846,604) 404,406 (4,442,198)
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Total liabilities and stockholders' (deficit)..................... $ 8,444,608 $ 404,406 $ 8,849,014
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</TABLE>
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The following pro forma adjustments are required to reflect the sale of the
majority of the Company's property and equipment, the assignment of certain
capital and operating leases to Boston University and the Company's service
contract with Boston University as discussed in Note B in the Company's
Financial Statements in the Annual Report on Form 10-K for the year ended
December 31, 1996. The net book value and estimated disposition costs are
based on the estimated fair value, as determined by the management of the
Company. Such allocation will be revised to reflect changes in assets through
the date of closing and the determination of actual disposition costs.
Notes to Pro Forma Balance Sheet
(a) Reflects an increase in cash for the receipt of the
purchase price. $5,000,000
(b) Reflects a reduction in property and equipment for the
net book value of assets sold. $4,595,594
(c) Reflects the excess of the purchase price over the net
book value of the asset sold as additional paid in capital. $ 404,406
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SERAGEN, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
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<S> <C> <C> <C>
Revenue:
Contract revenue and license fees ....... $ 10,542,315 $ - $ 10,542,315
Operating expenses:
Cost of contract revenue and license fees 5,704,243 - 5,704,243
Research and development ................ 13,959,405 (13,236,892)(a) 722,513
Contract R&D with affiliate ............. - 5,521,342 (b) 5,521,342
General and administrative .............. 7,208,465 (1,669,337)(a) 5,539,128
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26,872,113 (9,384,887) 17,487,226
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Loss from operations ................. (16,329,798) 9,384,887 (6,944,911)
Loss incurred in connection with
Canadian affiliate ...................... 2,923,864 - 2,923,864
Interest income ........................... 120,740 - 120,740
Interest expense .......................... 5,453,638 - 5,453,638
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Net loss ............................. (24,586,560) 9,384,887 (15,201,673)
============ ============ ============
Preferred stock dividends ................. 10,394,918 - 10,394,918
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Net loss applicable to common stockholders $(34,981,478) $ 9,384,887 $(25,596,591)
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Net loss per common share ................. $ (2.09) $ - $ (1.53)
============ ============ ============
Weighted average common shares used
in computing net loss per share ........ 16,724,493 - 16,724,493
============ ============ ============
</TABLE>
The following pro forma adjustments are required to reflect the sale of the
majority of the Company's property and equipment, the assignment of certain
capital and operating leases to Boston University, the Company's service
contract with Boston University and the transfer of the majority of the
Company's employees to B.U. as discussed in Note B in the Company's Financial
Statements in the Annual Report on Form 10-K for the year ended December 31,
1996. The pro forma adjustments will be revised to reflect changes in assets
through the date of closing and the determination of actual disposition costs.
Notes to Pro Forma Statement of Operations
(a) Reflects the estimated reduction of operating expenses due to
the sale of property and equipment, the transfer of employees
to B.U. and reductions in the related research and development
and general and administrative activities. $14,906,229
(b) Reflects the contracted cost for the initial contract year of
research and development activities to be received through the
service contact with B.U. $ 5,521,342
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Exhibits.
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Seragen, Inc.
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(Registrant)
Date: May 2, 1997 /s/ Reed R. Prior
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Reed R.Prior
Chairman of the Board and
Chief Executive Officer
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