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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) APRIL 15, 1999
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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 April 15, 1999, the Registrant filed unaudited financial
statement information as of and for each of the months ended March 31, 1999 and
February 28, 1999 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 Balance Sheet Information and Unaudited
Statement of Operations Information as of and for
each of the months ended March 31, 1999 and February
28, 1999 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
(Registrant)
Date: April 19, 1999 /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 Information
March 31, 1999 and February 28, 1999
UNAUDITED
ASSETS
<TABLE>
<CAPTION>
March 31, 1999 February 28, 1999
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 17,061,247 $ 16,526,579
Marketable securities-VIMRx 2,000,000 2,784,256
Accounts receivable-trade 72,785 104,718
Accounts receivable-other 116,945 470,714
Prepaids and other 304,146 418,255
Intercompany receivable 478,094 478,094
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Total current assets 20,033,217 20,782,616
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Property and equipment 3,000 79,007
Investments in subsidiaries 2,400,093 2,400,093
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Total assets $ 22,436,310 $ 23,261,716
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Prepetition debt $ 13,161,549 $ 12,267,314
Post petition liabilities:
Accounts payable 6,284 15,479
Accrued liabilities 405,527 418,974
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Total current liabilities 13,573,360 12,701,767
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Stockholders' equity:
Common stock 14,634 14,634
Additional paid-in capital 169,908,483 169,908,483
Accumulated deficit (161,060,167) (159,363,168)
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Total stockholders' equity 8,862,950 10,559,949
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Total liabilities & stockholders' equity $ 22,436,310 $ 23,261,716
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</TABLE>
See accompanying notes to financial information.
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CELLPRO, INCORPORATED
Statement of Operations Information
Months Ended March 31, 1999 and February 28, 1999
UNAUDITED
<TABLE>
<CAPTION>
March 31, 1999 February 28, 1999
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<S> <C> <C>
Net sales $ $
Cost of sales
Royalty costs
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Gross profit-product
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Revenue-contract
Selling, general & administrative (986,091) (245,945)
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Income (loss) from operations (986,091) (245,945)
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Other income (expense):
Interest income 61,326 57,889
Interest expense (46,630) (125,306)
Other, net (725,602) (147,838)
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(710,906) (215,255)
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Net income (loss) $(1,696,997) $(461,200)
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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
all adjustments to the carrying values of assets and liabilities which may
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 filed an Amended Plan
of Reorganization (the "Plan") and the proposed Disclosure Statement on
March 23, 1999.
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. MARKETABLE SECURITIES - Marketable securities at March 31, 1999 was
comprised of 1,254,810 shares of VIMRx Pharmaceuticals, Inc. ("VIMRx")
common stock, which are expected to be delivered to plaintiffs in partial
settlement of the class action lawsuit discussed below in Note 10. These
shares have been valued at an amount equal to the amount recorded in the
financial statements for the underlying liability associated with settlement
of such lawsuit. Accordingly, no adjustments have been made to the carrying
value of this component of marketable securities. On March 26, 1999 the
Company sold 627,405 shares for $627,405. Unrealized and realized losses
have been included in other income (expense), net. There can be no assurance
that the Company will ultimately realize the amounts presented from this
asset.
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. INTERCOMPANY RECEIVABLE - The intercompany receivable represents amounts due
from the Company's European subsidiaries. The Company does not expect to
collect any of this receivable.
6. PROPERTY AND EQUIPMENT - The balance in property and equipment reflects the
Company's estimate of liquidation value of assets which remain to be sold on
the dates presented. There can be no assurance that the remaining assets
will yield the amount estimated. An auction of personal property was held on
February 23, 1999. The net auction proceeds are currently estimated at
$419,000. In March, 1999 $402,269 of the proceeds were received. The balance
is expected in April. The unpaid portion of the proceeds has been included
in accounts receivable-other.
7. 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.
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8. PREPETITION DEBT - Prepetition debt includes the Company's best estimate of
debts outstanding as of the Petition Date, October 28, 1998. In February,
1999 the Company accrued interest at a rate of 4.242% on certain classes of
prepetition debt in accordance with the provisions of the Plan. The interest
accrual covered the period from October 28, 1998 through February 28, 1999.
An additional accrual was made as of March 31, 1999 for interest for the
month of March at 4.242%. Future accruals will be made in future months,
through the Effective Date, in a manner consistent with the Plan. The
Company has reached an agreement to compromise a significant claim filed in
response to its rejection of an executory contract. The settlement resulted
in an increase in prepetition debt of $850,000 and has been included in
prepetition debt as of March 31, 1999.
9. 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.
10. 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 1,254,810 shares of common
stock paid in consideration for the sale and transfer of the assets conveyed
pursuant to the Asset Purchase Agreement more fully discussed below.
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.
11. 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 was obligated to purchase from the
Company, and the Company was obligated to sell to Baxter, 800 disposable
kits for use with the CEPRATE(R) SC System for a purchase price of $4,084.27
per kit. To the extent available, Baxter could 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.
The Company completed its manufacturing responsibilities under the
Distribution Agreement 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. As
of January 29, 1999 the Company had liquidated substantially all of its
assets.
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12. 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 agreed to transfer to the Company shares of registered common
stock of VIMRx Pharmaceuticals, Inc. with a value of $3.0 million. This
transaction closed on January 29, 1999. The Company received 1,882,215
shares of VIMRx common stock. The number of shares issued was 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. The Company sold
627,405 shares on March 26, 1999 and intends to exchange the remaining
1,254,810 shares in satisfaction of outstanding liabilities of the Company.
13. 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. The Company received $3,950,000 of the proceeds from the Lease
Termination Agreement in January 1999. The remaining $50,000 is payable upon
removal of any hazardous materials from the premises. Such hazardous
materials have been removed and the Company is awaiting payment.
14. LIQUIDATION OF OTHER ASSETS - The Company has sold substantially all of its
furniture, equipment and other assets as of March 31, 1999. The Company has
ceased all international operations and its European subsidiaries are
liquidating their respective assets associated with such operations.
15. EMPLOYEE OBLIGATIONS - The Company has remaining commitments under the
court-approved retention pay program totaling approximately $225,000 as of
March 31, 1999. The Company recognizes expenses associated with such program
when amounts become payable thereunder.
16. DISPUTED CLAIMS - The Company has received approximately $200,000 in
prepetition claims which are currently disputed and which have not been
reflected in prepetition liabilities. Additional claims related to the
Company's rejection of certain executory contracts may be made against the
Company. The amount of such claims may be material but cannot be currently
estimated.
17. NET OPERATING LOSS CARRYFORWARD- The Company's net operating loss
carryforward as of March 31, 1998, the date of the most recently filed tax
return, was approximately $122,200,000. In addition, the Company had a
significant loss for the year ended March 31, 1999. The Company's ability to
use its net operating losses to offset future taxable income is subject to
restrictions enacted in the United States Internal Revenue Code of 1986 as
amended (the "Code"). These restrictions could limit the future use of the
net operating losses if certain stock ownership changes described in the
Code occur. As of March 8, 1999, a preliminary analysis prepared by
PricewaterhouseCoopers LLP indicated that at such time owner-shifts in the
Company's equity securities fell below the threshold set forth in Section
382 of the Internal Revenue Code which would otherwise require such
restrictions. There can be no assurance that a change in control has not
occurred since that date or that one will not occur in the future.
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 future periods to differ
materially from those expressed in any forward-looking statements, oral or
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written, made by or on behalf of the Company. Stockholders, prospective
investors and other readers should note that the Company has filed a plan of
reorganization providing for liquidation of all its assets 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.
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