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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) MARCH 15, 1999
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CELLPRO, INCORPORATED
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(Exact name of registrant as specified in charter)
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<S> <C> <C>
DELAWARE 0-19472 94-3087971
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
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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 March 15, 1999, the Registrant filed unaudited financial
statement information as of and for each of the months ended February 28, 1999
and January 31, 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 February 28, 1999 and
January 31, 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
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(Registrant)
Date: March 17, 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 Sheets
February 28, 1999 and January 31, 1999
UNAUDITED
ASSETS
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<CAPTION>
FEB 28, 1999 JAN 31, 1999
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Current assets:
Cash and cash equivalents .............. $16,526,579 $16,510,916
Marketable securities-VIMRx ............ 2,784,256 3,000,000
Accounts receivable-trade .............. 104,718 129,563
Accounts receivable-other .............. 470,714 4,460
Prepaids and other ..................... 418,255 555,589
Intercompany receivable ................ 478,094 459,848
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Total current assets............... 20,782,616 20,660,376
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Property and equipment ................... 79,007 525,669
Investments in subsidiaries .............. 2,400,093 2,400,093
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Total assets ............................. $23,261,716 $23,586,138
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Prepetition debt ......................... $ 12,267,314 $ 12,160,064
Post petition liabilities:
Accounts payable ......................... 15,479 (2,533)
Accrued liabilities ...................... 418,974 407,456
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Total current liabilities............ 12,701,767 12,564,987
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Stockholders' equity:
Common stock ............................. 14,634 14,634
Additional paid-in capital ............... 169,908,483 169,908,483
Accumulated deficit ...................... (159,363,168) (158,901,966)
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Total stockholders' equity........... 10,559,949 11,021,151
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Total liabilities & stockholders' equity ... $ 23,261,716 $ 23,586,138
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See accompanying notes to financial information.
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CellPro, Incorporated
Statements of Operations
Months Ended February 28, 1999 and January 31, 1999
UNAUDITED
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<CAPTION>
Feb 28, 1999 Jan 31, 1999
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Net sales .................................... $ -- $ 25,000
Cost of sales ................................ -- (24,791)
Royalty costs ................................ -- (500)
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Gross profit-product ......................... -- (291)
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Revenue-contract ............................. -- 2,960
Selling, general & administrative ............ (245,945) (411,145)
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Income (loss) from operations................. (245,945) (408,476)
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Other income (expense):
Interest income .............................. 57,889 63,901
Interest expense ............................. (125,306)
Other, net ................................... (147,838) 3,052,302
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(215,255) 3,116,203
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Net income (loss) ............................ $ (461,200) $ 2,707,727
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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 a
Plan of Reorganization (the "Plan") and the proposed Disclosure Statement
on February 19, 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 is comprised of 1,882,215
shares of VIMRx Pharmaceuticals, Inc. ("VIMRx") common stock. This includes
1,254,810 shares which are expected to be delivered to plaintiffs in
partial settlement of the class action lawsuit discussed below in Note 10,
and which 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. The
remaining 627,405 shares are expected to be sold in due course. The
February 28, 1999 valuation was based on the closing price as quoted on the
NASDAQ exchange. Gains and losses are 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 and are expected to be received in March 1999. This amount has
been included in accounts receivable-other as of February 28, 1999.
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.
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
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4.24% on certain classes of prepetition debt in accordance with the
provisions of the recently filed Plan. The interest accrual covers the
period from October 28, 1998 through February 28, 1999. Additional accruals
will be made in future months, through the date of Plan confirmation, in a
manner consistent with the current Plan.
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.
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
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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. 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.
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 ultimately intends to sell all of
its furniture, equipment and other assets not subject to the Asset Purchase
Agreement, the Lease Termination Agreement and which otherwise have not
been sold as of February 28, 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 $700,000. 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. The Company anticipates that claims
related to its rejection of certain executory contracts will be made
against the Company and that 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 is
anticipating a significant loss for the year ending 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 February 28, 1999, a preliminary
analysis prepared by PricewaterhouseCoopers indicates that there has been
no change in control under Section 382 of the Internal Revenue Code. There
can be no assurance that a change in control 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 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 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
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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.
