Form 8-K for CELLPRO INCORPORATED filed on August 23 1999
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): March 31, 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.)
150 East 52nd St 21st Floor, New York, NY 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 877-431-2942
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22215 26th Avenue S.E., Bothell, WA 98021
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(Former name or former address, if changed since last report.)
Item 3. Bankruptcy or Receivership
On October 28, 1998, CellPro, Incorporated ("CellPro") filed for bankruptcy
protection 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 (the "Bankruptcy Court"). On May
21, 1999 the Bankruptcy Court issued an order confirming CellPro's Second
Amended Plan of Reorganization (the "Plan")dated as of May 10, 1999. The
effective date of the Plan occurred on June 1, 1999.
Item 7. Financial Statements and Exhibits.
(c) 99.1 Financial Statements
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CELLPRO, INCORPORATED
March 31, 1999
C O N T E N T S
PAGE
SIGNATURES 3
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 4
FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS 5
STATEMENT OF OPERATIONS 6
STATEMENT OF STOCKHOLDERS' EQUITY 7
STATEMENT OF CASH FLOWS 8
NOTES TO FINANCIAL STATEMENTS 9
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
CELLPRO, INCORPORATED (Registrant)
Date: August 23, 1999 /s/ Brian Lorber
Name: Brian Lorber
Title: Secretary/Treasurer
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
CellPro, Incorporated
We have audited the accompanying statement of net assets in liquidation of
CellPro, Incorporated as of March 31, 1999, and the related statements of
operations, stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
As described in note B to the financial statements, the Company filed a
voluntary petition for reorganization under Chapter 11 of the United States
Bankruptcy Code on October 28, 1998, and the Company commenced liquidation
shortly thereafter. As a result, the Company has changed its basis of accounting
for periods subsequent to October 28, 1998, from the going concern basis to a
liquidation basis.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets in liquidation of CellPro, Incorporated as
of March 31, 1999, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles
applied on the basis described in the preceding paragraph.
/s/Grant Thornton
Seattle, Washington
June 18, 1999 (except for note K, for
which the date is July 2, 1999)
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CELLPRO, INCORPORATED
STATEMENT OF NET ASSETS
March 31, 1999
AUDITED
ASSETS
Cash........................................................... $ 17,061,247
Accounts receivable, net of allowance for
doubtful accounts of $13,491.............................. 213,690
Marketable securities.......................................... 1,367,743
Prepaid expenses............................................... 222,239
Equipment...................................................... 3,000
Investment in and receivable from subsidiary................... 370,030
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TOTAL ASSETS......................................... $ 19,237,949
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LIABILITIES
Accounts payable............................................... $ 6,284
Prepetition debt............................................... 12,683,306
Other liabilities.............................................. 1,520,622
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TOTAL LIABILITIES.................................... 14,210,212
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.001 par value; 25,000,000 shares authorized;
14,633,985 shares issued and outstanding.................. 14,634
Additional paid-in capital..................................... 169,908,483
Accumulated deficit............................................ (164,895,380)
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5,027,737
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY............. $ 19,237,949
============
See accompanying notes to financial information.
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CELLPRO, INCORPORATED
STATEMENT OF OPERATIONS INFORMATION
Year Ended March 31, 1999
AUDITED
Revenue........................................................ $ 10,287,440
Costs and expenses:
Cost of goods sold........................................ 12,233,636
Selling and administrative................................ 4,903,858
Research and development.................................. 6,030,459
Employee compensation..................................... 5,891,023
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29,058,976
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OPERATING LOSS....................................... (18,771,536)
Other income/(expense):
Loss on sale of subsidiaries.............................. (2,508,157)
Litigation provision...................................... (5,533,393)
Interest income........................................... 924,788
Other expense............................................. (712,883)
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NET LOSS............................................. $(26,601,181)
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Loss per common share.......................................... $ (1.82)
============
See accompanying notes to financial information.
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<TABLE>
CELLPRO, INCORPORATED
STATEMENT OF STOCKHOLDERS' EQUITY
Year ended March 31, 1999
AUDITED
<CAPTION>
Common stock Additional
paid-in Accumulated
Shares Amount capital deficit Total
---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at April 1, 1998 14,601,643 $ 14,602 $169,813,574 $(138,294,199) $ 31,533,977
Issuance of common stock
for employee stock option
plan and 401(k) match 32,342 32 94,909 -- 94,941
Net loss for the year
ended March 31, 1999 -- -- -- (26,601,181) (26,601,181)
---------- ---------- ------------ ------------ ------------
Balance at March 31, 1999 14,633,985 $ 14,634 $169,908,483 $(164,895,380) $ 5,027,737
See accompanying notes to financial information.
</TABLE>
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<TABLE>
CELLPRO, INCORPORATED
STATEMENT OF CASH FLOWS
Year ended March 31, 1999
AUDITED
<S> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Net loss...................................................................... $ (26,601,181)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization............................................ 1,664,859
Write-off of inventory................................................... 5,581,887
Loss on sale of subsidiaries............................................. 2,508,157
Loss on sale of equipment................................................ 2,682,750
Loss on investments...................................................... 1,004,852
Gain on sale of intellectual property.................................... (3,000,000)
Changes in assets and liabilities:
Accounts receivable.................................................... 1,298,945
Receivables from subsidiaries.......................................... 3,790,667
Inventories............................................................ 125,612
Prepaid expenses....................................................... 74,606
Accounts payable....................................................... (531,926)
Other liabilities...................................................... (825,238)
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Net cash used in operating activities............................. (12,226,010)
Cash flows from investing activities
Purchase of equipment......................................................... (93,939)
Proceeds from sale of equipment............................................... 5,565,462
Proceeds from sale of investments............................................. 8,373,284
Investment in subsidiaries.................................................... (2,076,020)
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Net cash provided by investing activities......................... 11,768,787
Cash flows from financing activities
Net payments on prepetition debt.............................................. (2,835,993)
Proceeds from issuance of common stock........................................ 94,941
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Net cash used in financing activities............................. (2,741,052)
Net decrease in cash............................................................ (3,198,275)
Cash at beginning of period..................................................... 20,259,522
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Cash at end of period........................................................... $ 17,061,247
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Supplemental disclosure of cash flow information:
Cash paid during the period for interest...................................... $ 42,294
============
See accompanying notes to financial information.
</TABLE>
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CELLPRO, INCORPORATED
NOTES TO FINANCIAL INFORMATION
March 31, 1999
NOTE A - THE COMPANY AND SUMMARY OF ACCOUNTING POLICIES
CellPro, Incorporated (the Company), a Delaware corporation, was a
biotechnology company, which specialized in developing, manufacturing, and
marketing proprietary continuous-flow, cell-selection systems for use in a
variety of therapeutic, diagnostic, and research applications. The Company's
principal product, the CEPRATE (R) SC Stem Cell Concentration System, was
primarily sold in the United States, Canada, and Europe. On June 1, 1999, the
Company changed its name to CPX Corporation as a result of the plan of
reorganization under Chapter 11 of the United States Bankruptcy Code as
described in note B.
A summary of significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
1. Basis of Presentation
The Company's financial statements have been prepared on the liquidation
basis of accounting in accordance with generally accepted accounting principles.
2. Cash Equivalents
For purpose of the statement of cash flows, the Company considers all
short-term investments purchased with a maturity of three months or less to be
cash equivalents.
3. Equipment
Equipment is stated at the lower of cost or its liquidation value.
Depreciation was provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives ranging from
two to five years. Leasehold improvements were amortized on a straight-line
basis over the expected remaining term of the related lease. At March 31, 1999,
all but $3,000 of the Company's property and equipment had been sold, disposed
of or liquidated.
4. Use of Estimates
In preparing the Company's financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
5. Research and Development
Research and development expenditures are charged to operations as
incurred.
6. Loss Per Common Share
Loss per common share is based on the weighted average number of shares
outstanding during each period and income available to common stockholders. The
weighted average number of common shares outstanding was 14,628,054 for the year
ended March 31, 1999. The inclusion of potentially dilutive common stock
equivalents in the computation for loss per common share for the year ended
March 31, 1999 was anti-dilutive; and therefore, is not included.
7. Fair Value of Financial Instruments
The carrying amount of all significant financial instruments approximates
fair value under the requirements of Statement of Financial Accounting Standards
No. 107 - Disclosure About Fair Value of Financial Instruments.
NOTE B - LIQUIDATION OF THE COMPANY
On September 28, 1998, the Company entered into a Patent Settlement
Agreement with The Johns Hopkins University, Becton Dickinson and Company and
Baxter Healthcare Corporation (the Plaintiffs) 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 related to patent infringement. On October 5, 1998, the Company also
entered into a Securities Settlement Agreement with Oxford Systems, Inc., and
various stockholders (Representative Plaintiffs) to settle all claims in a class
action suit against the Company (see note H). On October 28, 1998, the Company
filed a voluntary petition for reorganization under Chapter 11 of the United
States Bankruptcy Code. From the Petition Date to March 31, 1999, the Company
was authorized to operate and manage its businesses and enter into all
transactions that it could have entered into in the ordinary course of business
without the approval of the Bankruptcy Court. Subsequent to the petition date,
the Company began liquidating all inventory, property and equipment, and
intellectual property. As a result, the Company changed its basis of accounting
from a going concern basis to a liquidation basis of accounting. By March 31,
1999, a majority of the Company's assets had been liquidated into cash and cash
equivalents. On May 21, 1999, the Company entered into a plan of reorganization,
which went into effect on June 1, 1999. The plan calls for distribution of net
available cash and cash equivalents realized from the remaining assets of the
Company. The distribution date commenced on June 18, 1999.
NOTE C - MARKETABLE SECURITIES
Marketable securities at March 31, 1999 were comprised of 1,254,810 shares
of VIMRx Pharmaceuticals, Inc.'s common stock, which were delivered to the
Representative Plaintiffs on June 18, 1999 in partial settlement of the
Securities Settlement Agreement as discussed in note H. The securities are
considered trading securities and accordingly are measured at fair market value,
which totaled $1,367,743 at March 31, 1999. Unrealized holding losses of
$632,257 are included in other expenses in the Statement of Operations for the
year ended March 31, 1999. The market value per share was $1.09 and $2.06 as of
March 31, 1999 and June 18, 1999, respectively.
NOTE D - INVESTMENT IN AND RECEIVABLE FROM SUBSIDIARIES
The Company had several subsidiaries in Europe to coordinate international
marketing and clinical trials. Subsequent to October 28, 1998, the subsidiaries
also discontinued their operations and began liquidating their assets. As of
March 31, 1999, the Company had a net investment in the subsidiaries of
$100,300, which was the agreed-upon sales price of the subsidiaries according to
a settlement agreement entered into on June 17, 1999, and a receivable of
$270,000, which was also to be collected in conjunction with the sale agreement.
The remaining inter-company balances not realized in the transaction totaled
$2,508,157 for the year ended March 31, 1999. The Company is currently seeking
approval of the transaction from the Bankruptcy Court. The settlement monies
will be distributed to stockholders as described in note I.
NOTE E - PREPETITION DEBT
Prepetition debt totaled $12,683,306, includes accrued interest of
approximately $226,600 at March 31, 1999. Beginning October 28, 1998, interest
was accrued at 8% on all unsecured claims and 5% on the settlement claim with
the plaintiffs. Prepetition debt was paid in full on June 18, 1999.
NOTE F - OTHER LIABILITIES
Other liabilities consisted of the following at March 31, 1999:
Accrued compensation $ 203,648
Accrued legal fees 1,248,510
Other 68,464
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$ 1,520,622
NOTE G - STOCK OPTIONS
In 1989, the Company adopted a stock option plan administered by a plan
administrator designated by the Board of Directors. A total of 4,155,000 shares
were available for issuance under the Plan. Options generally vested over
periods ranging from 1 to 4 years and had a term of ten years from the date of
grant.
The stock option plan is accounted for under APB Opinion 25 and related
Interpretations. The options are exercisable at not less than the market value
of the Company's common stock on the date of the grant. Accordingly, no
compensation cost has been recognized for the plan. Had compensation cost for
the plan been determined based on the fair value of the options at the grant
dates consistent with the method required by Statement of Financial Accounting
Standards 123, Accounting for Stock-Based Compensation (SFAS 123), the effect on
the Company's net loss would have been immaterial.
NOTE G - STOCK OPTIONS - Continued
As of March 31, 1999, all stock options had been cancelled or forfeited
with the exception of 116,532 shares outstanding to the remaining employees of
the Company. On June 1, 1999, the stock option plan was cancelled in accordance
with the Bankruptcy Plan, and all outstanding stock options were cancelled.
NOTE H - COMMITMENTS AND CONTINGENCIES
1. Securities Settlement Agreement
On March 16, 1998, the Representative Plaintiffs filed a lawsuit in United
States District Court against the Company, certain of the Company's officers and
directors, and the law firm that represented the Company in prior patent
disputes. On October 5, 1998, the actions had been settled in principle and the
District Court primarily approved the settlement on May 19, 1999. The hearing
for the final approval of the settlement is currently scheduled for August 6,
1999. The settlement called for a cash payment of $1.5 million to be deposited
into an escrow account on or before October 15, 1998 in addition to the transfer
of 1,254,810 shares of VIMRx Pharmaceutical, Inc.'s common stock as described in
note C.
2. Patent Settlement Agreement
On September 28, 1998, the Company entered into a settlement agreement with
the Plaintiffs. 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. The Company has partially satisfied it's obligations with a $9
million bond issued in their favor by Insurance Company of North America and
cash collateralized by the Company. As of March 31, 1999, the Company has
accrued approximately $8 million to satisfy its remaining obligation, which is
included in prepetition debt.
3. Disputed and Disallowed Claims
The Bankruptcy Court ordered that all claims against the Company must
either have been properly listed in the Schedules by the Company or have filed a
proof of claim with the Bankruptcy Court on or before December 31, 1998. Legal
counsel has advised the Company as of June 18, 1999, that all prepetition claims
that were timely filed against the Company have been evaluated and resolved.
Certain persons have filed claims against the Company after December 31, 1998.
The Company's legal counsel has and will continue to object to such claims as
they are asserted on, among other grounds, the fact that they were not timely
filed. It is legal counsel's experience that such claims will continue to be
filed, from time to time, and certain of these claimants may contest the
disallowance of their claim. No assurances can be given that all late filed
claims will be disallowed by the Bankruptcy Court. The Company has established a
reserve of $100,000 held in escrow for satisfaction of claims that are in
dispute or claims that have not yet been ruled as allowed claims.
4. Executory Contracts
The Bankruptcy Code authorizes the Company to "reject" executory contracts
and unexpired leases and to have the resulting liability from the rejection
(anticipatory breach) of the contract or lease to be treated as a prepetition
unsecured claim. On February 7, 1999, the Bankruptcy Court approved the
rejection of over 300 executory contracts as of December 23, 1998. Pursuant to
an Order of Court, claims related to those rejections had to be filed no later
than March 7, 1999. As of June 18, 1999, all such rejected claims that were
timely-filed have been evaluated and resolved. The bankruptcy plan filed on May
21, 1999, which went into effect on June 1, 1999, also provided for rejection of
any executory contracts that had not specifically been assumed or rejected. The
Company was not aware of any such executory contracts and no claim arising out
of such rejection has yet been asserted. The deadline established by the Plan
for asserting such claims is until July 1, 1999.
NOTE I - STOCKHOLDER DISTRIBUTIONS
In accordance with the plan of reorganization described in note B, all
holders of the Company's common stock are to receive a pro rata distribution of
the available cash as of the distribution date. On June 18, 1999, the Company
distributed $3,073,137 or $.21 per share for the total outstanding shares of
14,633,985 to the stockholders. On a date to be determined by the Company, a
final distribution of the remaining cash realized from the liquidation or
resolution of the remaining assets less any costs incurred will also be
distributed to the stockholders.
NOTE J - INCOME TAXES
The Company accounts for income taxes on the liability method, as provided
by Statement of Financial Accounting Standards 109, Accounting for Income Taxes
(SFAS 109). At March 31, 1999, the Company had accumulated net operating loss
carryforwards of approximately $151 million, which expire through 2019. The
Company also has cumulative research and development tax credit carryforwards of
approximately $5 million, which expire through 2019. Differences between the tax
bases of assets and liabilities and their financial statement amounts are
reflected as deferred income taxes based on enacted tax rates. The principal
differences in bases result from changes in various accrued liabilities. The
accumulated net operating loss, research and development credit carryforwards
and the differences between tax and financial reporting bases of litigation
accruals result in net deferred income tax assets of approximately $61.9 million
which have been reduced by a valuation allowance of an equal amount.
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
Company's future use of its net operating losses if certain stock ownership
changes described in the Code occur.
NOTE K - SUBSEQUENT EVENTS
On July 2, 1999 the Company entered into a settlement agreement with Lyon &
Lyon LLP (Lyon), whereby Lyon agreed to settle all claims with the Company by
paying a cash settlement to the Company of $1.4 million. The funds will be
distributed to the stockholders on a pro rata basis as described in note I.
