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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) JANUARY 22, 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 January 22, 1999, the Registrant filed unaudited financial
statement information as of and for each of the months ended December 31, 1998
and November 30, 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 December 31, 1998 and
November 30, 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: January 27, 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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EXHIBIT 99.1
CELLPRO, INCORPORATED
BALANCE SHEETS
DECEMBER 31, 1998 AND NOVEMBER 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
DEC 31, 1998 NOV 30, 1998
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<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents 11,873,112 10,046,487
Accounts Receivable - Trade 668,266 989,399
Accounts Receivable - Other 25,152 48,760
Inventories 5,955,170
Prepaids and Other 704,556 1,149,914
Intercompany Receivable 434,304 451,177
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Total Current Assets 13,705,390 18,640,907
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PROPERTY AND EQUIPMENT:
Property and Equipment 5,300,000 22,163,435
Less: Accumulated Depreciation (14,002,692)
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Property & Equipment, Net 5,300,000 8,160,743
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OTHER ASSETS:
Restricted Cash 1,617,001
Investments in Subsidiaries 2,400,093 2,400,093
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Total Other Assets 2,400,093 4,017,094
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TOTAL ASSETS 21,405,483 30,818,744
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CURRENT LIABILITIES:
Prepetition Debt 12,161,109 12,134,084
POST PETITION LIABILITIES:
Accounts Payable 22,153 16,635
Accrued Liabilities 908,796 2,241,745
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Total Current Liabilities 13,092,058 14,392,464
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STOCKHOLDERS' EQUITY:
Common Stock 14,634 14,634
Additional Paid-In Capital 169,908,483 169,908,483
Accumulated Deficit (161,609,692) (153,496,837)
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Total Stockholders' Equity 8,313,425 16,426,280
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 21,405,483 30,818,744
============ ===========
</TABLE>
See accompanying notes to financial information.
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CellPro, Incorporated
Statements of Operations
MONTHS ENDED DECEMBER 31, 1998 AND NOVEMBER 30, 1998
UNAUDITED
<TABLE>
<CAPTION>
Dec 31, 1998 Nov 30, 1998
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<S> <C> <C>
Net Sales 1,972,832 1,589,374
Cost of Sales (830,763) (594,012)
Intercompany Cost of Sales 58,986
Royalty Costs (92,294) (76,502)
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Gross Profit - Product 1,049,775 977,846
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Revenue - Contract 17,120
Selling, General & Administrative (829,010) (477,391)
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Income from operations 220,765 517,575
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Other Income (Expense):
Interest Expense (500)
Interest Income 78,254 36,184
Other, net (8,411,876) 42,908
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(8,333,622) 78,592
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Net Income (Loss) (8,112,857) 596,167
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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. RESTRICTED CASH EQUIVALENTS - Restricted cash equivalents at November 30,
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 and is reflected in Cash and Cash
Equivalents at December 31, 1998.
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 at November 30, 1998 was 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 ceased
manufacturing and sales operations in December 1998. All inventory on hand
as of December 31, 1998 has been written-off and charged to other expense.
6. 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.
7. PROPERTY AND EQUIPMENT - The balance in property and equipment at December
31, 1998 reflects the Company's current estimate of liquidation value. This
is based on the proceeds received from the Company's landlord under a lease
termination agreement, net proceeds from a public auction of certain assets
and estimates of liquidation value of assets which remain to be sold. The
difference between depreciated cost and estimated liquidation value has been
charged to other expense. There can be no assurance that the remaining
assets will yield the amount estimated.
8. 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.
9. ACCRUED LIABILITIES - Accrued liabilities at November 30, 1998 included
$1,738,000 of billings in excess of product shipments related to the
Distribution Agreement discussed below.
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10. 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.
11. 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.
12. 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. Baxter has, however, ordered 175 additional vials of antibody.
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.
13. 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
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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, but has not yet closed.
14. 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.
15. 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 December 31, 1998. 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.
