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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) FEBRUARY 16, 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 February 16, 1999, the Registrant filed unaudited financial
statement information as of and for each of the months ended January 31, 1999
and December 31, 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 Balance Sheet Information and Unaudited
Statement of Operations Information as of and for each
of the months ended January 31, 1999 and December 31,
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: February 18, 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
January 31, 1999 and December 31, 1998
UNAUDITED
ASSETS
<TABLE>
<CAPTION>
JAN 31, 1999 DEC 31, 1998
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents 16,510,916 11,873,112
Marketable Securities-VIMRx 3,000,000
Accounts Receivable-Trade 129,563 668,266
Accounts Receivable-Other 4,460 25,152
Prepaids and Other 555,589 704,556
Intercompany Receivable 459,848 434,304
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Total Current Assets 20,660,376 13,705,390
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Property and Equipment 525,669 5,300,000
Investments in Subsidiaries 2,400,093 2,400,093
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Total Assets 23,586,138 21,405,483
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Prepetition Debt 12,160,064 12,161,109
Post Petition Liabilities:
Accounts Payable (2,533) 22,153
Accrued Liabilities 407,456 908,796
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Total Current Liabilities 12,564,987 13,092,058
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Stockholders' Equity:
Common Stock 14,634 14,634
Additional Paid-In Capital 169,908,483 169,908,483
Accumulated Deficit (158,901,966) (161,609,692)
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Total Stockholders' Equity 11,021,151 8,313,425
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Total Liabilities & Stockholders' Equity 23,586,138 21,405,483
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</TABLE>
See accompanying notes to financial information.
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CellPro, Incorporated
Statements of Operations
Months Ended January 31, 1999 and December 31, 1998
UNAUDITED
<TABLE>
<CAPTION>
JAN 31, 1999 DEC 31, 1998
<S> <C> <C>
Net Sales 25,000 1,972,832
Cost of Sales (24,791) (830,763)
Royalty Costs (500) (92,294)
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Gross Profit-Product (291) 1,049,775
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Revenue-Contract 2,960
Selling, General & Administrative (411,145) (829,010)
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Income (loss) from operations (408,476) 220,765
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Other Income (Expense):
Interest Income 63,901 78,254
Other, net 3,052,302 (8,411,876)
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3,116,203 (8,333,622)
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Net Income (Loss) 2,707,727 (8,112,857)
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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 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. MARKETABLE SECURITIES - Marketable securities is comprised of 1,882,215
shares of VIMRx Pharmaceuticals, Inc. ("VIMRx") common stock. This stock
has been valued based on the pricing formula included in the Asset
Purchase Agreement discussed below. There can be no assurance that the
Company will ultimately realize $3 million from the conversion of this
asset to cash.
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. The difference between depreciated cost and
estimated liquidation value was charged to other expense in December 1998.
There can be no assurance that the remaining assets will yield the amount
estimated.
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. 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
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down a $9.0 million bond issued in their favor by Insurance Company of
North America and cash collateralized by the Company.
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 (valued as of the date of transfer to the
Company by NTI (defined below in Note 11)) 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 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)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 has liquidated substantially
all of its 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 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.
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.
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
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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.
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, the Lease Termination Agreement and which
otherwise have not been sold as of January 31, 1999. The Company has
ceased all international operations and is also in the process of
liquidating the assets associated with such operations.
14. 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.
15. DISPUTED CLAIMS - The Company has received approximately $200,000 in
claims which are currently disputed and which have not been reflected in
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.
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.
