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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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) DECEMBER 28, 1998
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CELLPRO, INCORPORATED
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(Exact name of registrant as specified in charter)
DELAWARE 0-19472 94-3087971
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
22215 26TH AVENUE S.E., BOTHELL, WA 98021
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (425) 485-7644
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N/A
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(Former name or former address, if changed since last report.)
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Item 3. Bankruptcy or Receivership.
Since October 28, 1998, CellPro, Incorporated ("CellPro") has
been operating as a debtor in possession under Chapter 11 of the United States
Bankruptcy Code, Case No. 98-13604 in the United States Bankruptcy Court for the
Western District of Washington, Judge Karen Overstreet presiding.
Item 5. Other Events.
On December 28, 1998, the Registrant filed unaudited financial
statement information as of and for each of the months ended November 30, 1998
and October 27, 1998 with related notes with the United States Bankruptcy Court.
Attached as an exhibit is the balance sheet information, statement of operations
information and related notes to financial information which was included in the
bankruptcy filing referred to above.
Item 7. Financial Statements and Exhibits.
c.) Exhibits
99.1 Unaudited Comparative Balance Sheet Information
and Unaudited Comparative Statement of
Operations Information as of and for each of
the months ended November 30, 1998 and October
27, 1998 with related Notes to Financial
Statement Information.
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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.
CellPro, Incorporated
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(Registrant)
Date: December 30, 1998 /s/ Mark J. Handfelt
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Name: Mark J. Handfelt
Title: Executive Vice
President, General
Counsel and Acting
Chief Operating
Officer
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CELLPRO, INCORPORATED
BALANCE SHEET
NOVEMBER 30, 1998 AND OCTOBER 27, 1998
(Unaudited)
<TABLE>
<CAPTION>
NOV 30, 1998 OCT 27, 1998
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents 10,046,487 6,793,206
Accounts Receivable-Trade 989,399 1,340,459
Accounts Receivable-Other 48,760 53,998
Inventories 5,955,170 6,258,450
Prepaids and Other 1,149,914 1,149,891
Intercompany Receivable 451,177 451,177
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Total Current Assets 18,640,907 16,047,181
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PROPERTY AND EQUIPMENT:
Property and Equipment 22,163,435 22,417,603
Less: Accum. Depreciation (14,002,692) (14,044,245)
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Property & Equip., Net 8,160,743 8,373,358
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OTHER ASSETS:
Restricted Cash 1,617,001 1,617,001
Investments in Subsidiaries 2,400,093 2,400,093
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Total Other Assets 4,017,094 4,017,094
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TOTAL ASSETS 30,818,744 28,437,633
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CURRENT LIABILITIES:
Prepetition Debt 12,134,084 12,112,750
POST PETITION LIABILITIES:
Accounts Payable 16,635 (4,713)
Accrued Liabilities 2,241,745 499,483
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Total Current Liabilities 14,392,464 12,607,520
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STOCKHOLDERS' EQUITY:
Common Stock 14,634 14,634
Additional Paid-In Capital 169,908,483 169,908,483
Accumulated deficit (153,496,837) (154,093,004)
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Total Stockholders' Equity 16,426,280 15,830,113
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 30,818,744 28,437,633
============ ============
</TABLE>
See accompanying notes to financial information.
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CellPro, Incorporated
Statement of Operations
MONTHS ENDED NOVEMBER 30, 1998, and OCTOBER 27, 1998
(Unaudited)
<TABLE>
<CAPTION>
Nov 30, 1998 Oct 27, 1998
<S> <C> <C>
Net Sales 1,589,374 23,060
Intercompany Sales (125,400)
Cost of Sales (594,012) (9,803)
Intercompany Cost of Sales 58,986 6,726
Royalty Costs (76,502) (119,375)
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Gross Profit (Deficit)-Product 977,846 (224,792)
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Revenue-Contract 17,120
Selling, General & Administrative (477,391) (590,812)
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Income (loss) from operations 517,575 (815,604)
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Other Income (Expense):
Interest Expense (500) (632)
Other Expense (47,059)
Interest Income 36,184 33,601
Other Income 42.908 8,216
CellPro Europe Crosscharges (823,856)
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Other, net 78,592 (829,730)
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Net Income (Loss) 596,167 (1,645,334)
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</TABLE>
See accompanying notes to financial information.
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NOTES TO FINANCIAL INFORMATION
1. REORGANIZATION AND BASIS OF PRESENTATION - The accompanying financial
statements are unaudited and do not comply with generally accepted
accounting principles. The accompanying financial statements do not include
adjustments to the carrying values of assets and liabilities which will
result from their ultimate liquidation. Additionally, significant estimates
were used in the preparation of the financial statements and actual results
may vary significantly from these estimates. Operating results for the
periods presented are not indicative of the results that may be expected
for future periods.
On October 28, 1998, (the "Petition Date"), the Company filed a voluntary
petition for reorganization under Chapter 11 of the United States
Bankruptcy Code ("Chapter 11") in the United States Bankruptcy Court for
the Western District of Washington, Seattle Division. Management expects to
file a liquidating plan of reorganization in due course.
Since the Petition Date the Company has continued in possession of its
properties and, as Debtor-in-Possession, is authorized to operate and
manage its businesses and enter into all transactions (including obtaining
services, inventories and supplies) that it could have entered into in the
ordinary course of business without approval of the Bankruptcy Court.
2. PRINCIPLES OF CONSOLIDATION - The financial statements include the accounts
of CellPro, Incorporated (the "Company") but do not include the accounts of
its wholly owned foreign subsidiaries. Accordingly, intercompany
transactions and balances have not been eliminated.
3. RESTRICTED CASH EQUIVALENTS - Restricted cash equivalents at November 30,
1998 and October 27, 1998 consisted of a deposit in an escrow account
related to a partial stay of the international provisions of an injunction.
On December 16, 1998 the escrow balance was released to the Company.
4. TRADE RECEIVABLES - Trade receivables include amounts due from domestic and
international customers. The ultimate amount of bad debts cannot be
accurately estimated at this time. In light of the Company's Chapter 11
proceedings, the ultimate amount of bad debts is likely to exceed the
amount of established reserves.
5. INVENTORY - Inventory has been valued on a historical cost basis. The
inventory items have nominal value if not used in CellPro's products. As a
result of a decision by the United States Court of Appeals for the Federal
Circuit (the "Appeals Court") the Company will cease manufacturing and
sales of its principal products in the United States. Losses on inventory
will significantly exceed established reserves.
6. INVESTMENT IN SUBSIDIARIES - Investment in subsidiaries reflects the
amounts contributed to the Company's foreign subsidiaries. The Company does
not expect any return of this investment.
7. ACCRUED LIABILITIES - Accrued liabilities includes $1,738,000 of billings
in excess of product shipments related to the Distribution Agreement
discussed below.
8. PATENT LITIGATION - On September 28, 1998, the Company entered into a
Settlement Agreement with The Johns Hopkins University, Becton Dickinson
and Company and Baxter Healthcare Corporation to settle and compromise all
pending and potential disputes and differences between them related to the
civil actions then pending in the United States District Court for the
District of Delaware captioned Johns Hopkins University et.al. v. CellPro,
Civil Action-No. 94-105-RRM, and CellPro v. The Johns Hopkins University
et.al., Civil Action-No. 94-244-RRM. The Settlement Agreement provides,
among other things, for payments by the Company aggregating approximately
$15.7 million in exchange for the plaintiffs' settlement and compromise of
all claims relating to this litigation. On October 5, 1998, in partial
satisfaction of the Company's obligations under the Settlement Agreement,
plaintiffs' drew down a $9.0 million bond issued in their favor by
Insurance Company of North America and cash collateralized by the Company.
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9. SECURITIES LITIGATION - A memorandum of understanding has been entered into
in respect of the action entitled Oxford Systems, Inc. et.al. v. CellPro,
Inc. et.al., Case No. 98-298Z, pending in the United States District Court
for the Western District of Washington. Pursuant to such understanding, the
parties to the litigation have agreed to execute a Stipulation of
Settlement providing, among other things and subject to Bankruptcy Court
approval, for an agreed cash payment to be made by the defendants'
insurance carrier, and a non-cash payment to be made by the Company of $2.0
million worth of the common stock paid in consideration for the sale and
transfer of the assets conveyed pursuant to the Asset Purchase Agreement
more fully discussed below, but only in the event such sale and transfer is
made in exchange for $3.0 million of stock paid by the purchaser.
In addition, the parties to that certain action entitled Florida State
Board of Administration v. CellPro, Inc., et.al., Case No. C98-968R,
pending in the United States District Court for the Western District of
Washington have agreed, subject to Bankruptcy Court approval, to fully and
finally settle the above captioned litigation in exchange for a $175,000
payment from the Company.
10. DISTRIBUTION AGREEMENT - On October 28, 1998, the Company and Baxter
Healthcare Corporation ("Baxter") executed and delivered a Distribution
Agreement providing for the appointment of Baxter during the term of the
Distribution Agreement as the exclusive worldwide distributor of disposable
kits and antibody for use with the Company's CEPRATE(R)SC System. Pursuant
to the Distribution Agreement, Baxter is obligated to purchase from the
Company, and the Company is obligated to sell to Baxter, 800 disposable
kits for use with the CEPRATE(R)System for a purchase price of $4,084.27
per kit. To the extent available, Baxter may also purchase from the Company
additional vials of antibody for use with the CEPRATE(R)SC System for a
purchase price of $945 per vial. Baxter had an option to purchase up to an
additional 800 disposable kits (and additional antibody) on the same terms
and conditions as the initial 800 kits (and additional antibody). Baxter
has informed the Company that they do not wish to purchase additional
disposable kits. They have, however, placed an order for approximately 175
additional vials of antibody.
The Company estimates that its manufacturing responsibilities under the
Distribution Agreement will be satisfied in December 1998. The Distribution
Agreement also requires that CellPro satisfy, and use reasonable efforts to
retain the employees reasonably necessary for fulfillment of, the Company's
technical support and equipment service and regulatory reporting and
compliance responsibilities until the earlier to occur of the date (i) that
is one year from the closing of the sale of the assets subject to the
Purchase Agreement or (ii) of final liquidation of substantially all the
Company's assets.
11. ASSET PURCHASE AGREEMENT - On October 28, 1998 the Company entered into an
Asset Purchase Agreement with Nexell Therapeutics, Inc. ("NTI") to sell,
subject to overbid and approval of the Bankruptcy Court, all of its
intellectual property and certain related tangible and intangible assets.
In exchange, NTI will transfer to the Company shares of registered common
stock of VIMRx Pharmaceuticals, Inc. with a value of $3.0 million. The
number of shares to be issued at closing will be calculated based on the
average of the closing prices for such stock on the 15 trading days ending
three business days prior to closing the sale and transfer of such assets.
For 180 days after such closing, the shares will be subject to certain
trading restrictions limiting the number of shares that the Company may
sell into the public market on any day. The Company intends to monetize
certain of the shares, and to otherwise exchange certain of the shares in
satisfaction of outstanding liabilities of the Company. The Asset Purchase
Agreement was approved by the Bankruptcy Court on December 10, 1998 and is
expected to be closed in early January, 1999.
12. LEASE TERMINATION AGREEMENT - On October 28, 1998 the Company entered into
a Lease Termination Agreement with CarrAmerica Realty Corporation. Pursuant
to such Lease Termination Agreement the Company agreed, subject to approval
of the Bankruptcy Court, in exchange for a $4.0 million cash payment to the
Company by CarrAmerica, to terminate its leasehold interests in its two
U.S. facilities on agreed dates, and to surrender to CarrAmerica tenant
improvements and certain equipment installed on such premises. The Lease
Termination Agreement was approved by the Bankruptcy Court on December 16,
1998.
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13. LIQUIDATION OF OTHER ASSETS - The Company is currently pursuing the sale of
all of its furniture, equipment and other assets not subject to the Asset
Purchase Agreement and Lease Termination Agreement. The Company has ceased
all international operations and is also in the process of liquidating the
assets associated with such operations.
INVESTMENT CONSIDERATIONS
The Company desires to take advantage of certain provisions of the Private
Securities Litigation Reform Act of 1995, enacted in December 1995 (the "Reform
Act") that provided a "safe harbor" for forward-looking statements made by or on
behalf of the Company. The Company hereby cautions stockholders, prospective
investors in the Company and other readers that certain important factors in
some cases have affected, and in the future could affect, the Company's stock
price or cause the Company's actual results for the fiscal year ending March 31,
1999, to differ materially from those expressed in any forward-looking
statements, oral or written, made by or on behalf of the Company. Stockholders,
prospective investors and other readers should note that the Company intends to
file a liquidating plan of reorganization in connection with its filing for
protection under Chapter 11 of the Bankruptcy Code. This plan may have the
effect of compromising creditor claims in the event liquidation proceeds are
insufficient to pay creditors in full, which would likely result in a total loss
of any shareholder investment. A more extensive discussion of investment
considerations is set forth in the Company's Annual Report on Form 10-K for the
year ended March 31, 1998 in the section titled "Investment Considerations."
Particular attention should be given to the Investment Considerations labeled
"Legal Proceedings," "Patents and Proprietary Technology," "Future Capital
Needs; Potential Inability to Access Capital Markets; Possible Insolvency" and
"Dependence on CEPRATE(R) SC System" in CellPro's annual report.
