UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________.
Commission File number: 0-19472
CPX Corp.
(Formerly Cellpro, Incorporated)
Delaware 94-3087971
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 East 52nd Street 21st Floor,
New York, New York 10022
(Address of registrant's principal executive offices) (Zip Code)
(877) 431-2942
(Registrant's telephone number, including area code)
TITLE OF CLASS
COMMON STOCK, $.001 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 60 days.
Yes [X] No [ ]
Indicate by check mark is disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained , to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form. [X]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [X] No [ ]
The number of shares of common stock issued and outstanding as of May 30,
2000 was 14,633,985.
DOCUMENTS INCORPORATED BY REFERENCE:
Definitive proxy statement to be filed pursuant to Regulation 14A in
connection with the 2000 Annual Meeting of Stockholders, Part III.
<PAGE>
CPX CORP. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I
Item 1. Business................................................... 3
Item 2. Properties................................................. 3
Item 3. Legal proceedings.......................................... 3
Item 4. Submission of Matters to a Vote of Security Holders........ 3
PART II
Item 5. Market for Registrant's Common Stock and
Related Security Holder Matters............................ 4
Item 6. Selected Financial Data.................................... 5
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 6
Item 8. Financial Statements and Supplementary Data................ 7
Item 9. Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure..................... 7
PART III
Item 10. Directors and Executive Officers of the Registrant......... 8
Item 11. Executive Compensation..................................... 8
Item 12. Security Ownership of Certain Beneficial Owners
and Management............................................. 8
Item 13. Certain Relationships and Related Transactions............. 8
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K.................................... 9
Signatures............................................................ 10
<PAGE>
CPX CORP. AND SUBSIDIARIES
PART I
ITEM 1. BUSINESS
OVERVIEW
CPX Corp. (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 a plan of reorganization shortly thereafter. On May 21,
1998, the Bankruptcy Court issued an order confirming the Company's Amended Plan
of Reorganization (the "Plan") pursuant to which the Company distributed funds
to equity holders and in September 1999 made a final distribution of funds to
equity holders from the $370,030 proceeds from the sale of its European
subsidiaries. The Company announced in June of 1999 that it has changed its name
to CPX Corp. from Cellpro, Incorporated. All former pre-petition liabilities and
contingencies have been satisfied pursuant to the Plan.
DESCRIPTION OF BUSINESS
The Company currently has no operating business. Management is pursuing
various strategic alternatives which include the possible use of the Company's
remaining net assets to acquire, merge, consolidate or otherwise combine with an
operating business or businesses; however, there is no assurance that any such
alternatives will occur.
ITEM 2. PROPERTIES
The principal executive offices of the Company are located at 150 East 52nd
Street, 21st Floor, New York, New York 10022.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
<PAGE>
CPX CORP. AND SUBSIDIARIES
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SECURITY HOLDER MATTERS
The Common Stock was listed on the Nasdaq National Market System until
October 29, 1998, at which time the Common Stock was delisted. The Common stock
traded on the NASD OTC Bulletin Board (symbol "CPRO") until October 4, 1999 when
it was delisted from the OTC Bulletin Board and is presently reported on the
NASD Pink Sheets. The Company had 336 holders of record of Common Stock on June
8, 2000. High and low bid prices of the Common Stock, as reported on the NASDAQ
OTC Bulletin Board and Pink Sheets are shown in the table below. Such prices
represent quotations between broker-dealers, do not include retail mark-ups,
markdowns or commissions, and may not necessarily reflect prices in actual
transactions.
Year ended Year ended
March 31, 2000 March 31, 1999
High Low High Low
First Quarter $.210 $.100 $4.063 $2.938
Second Quarter .290 .140 3.500 .063
Third Quarter .110 .070 .125 .020
Fourth Quarter .190 .070 .180 .030
The Company paid no dividends on its Common Stock in fiscal years 1999 or
1998. However, during the year ended March 31, 2000, the shareholders of the
Company received cash distributions of $.31 per share pursuant to the Plan.
The Company intends to retain any future earnings for working capital needs
and to finance potential future acquisitions and presently does not intend to
pay cash dividends on its Common Stock for the foreseeable future.
<PAGE>
CPX CORP. AND SUBSIDIARIES
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected financial data of the
Company and should be read in conjunction with the related Consolidated
Financial Statements of the Company and accompanying Notes to Consolidated
Financial Statements included elsewhere herein.
<TABLE>
<CAPTION>
Consolidated
Statements of March 31, March 31, March 31, March 31, March 31,
Operations Data: 2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $ -- $ 10,287,440 $ 11,021,260 $ 9,662,374 $ 12,843,585
Cost of product sales -- 12,233,636 4,993,462 5,161,389 3,723,421
Other cost of sales -- -- 3,059,678 -- --
Research and development -- 6,030,459 13,817,562 16,243,501 16,474,133
Selling, general &
admin. expenses 770,542 4,903,858 13,671,379 15,379,650 12,515,870
Litigation provision 1,217,165 5,533,393 -- 17,000,000 --
Employee compensation -- 5,891,023 -- -- --
------------- -------------- ------------- ------------- -------------
Total costs & expenses 1,987,707 34,592,369 35,542,081 53,784,540 32,713,424
------------- -------------- ------------- ------------- -------------
Operating loss (1,987,707) (24,304,929) (24,520,821) (44,122,166) (19,869,839)
Interest income, net 94,578 924,788 2,218,138 3,544,104 4,077,500
Loss on sale of subsidiary -- (2,508,157) -- -- --
Gain on legal settlement 1,400,000 -- -- -- --
Other income(expense), net 1,246,044 (712,883) (221,703) (337,322) 139,679
------------- -------------- ------------- ------------- -------------
Net income (loss) $ 752,915 $ (26,601,181) $ (22,524,386) $ (40,915,384) $ (15,652,660)
============= ============== ============= ============= =============
Basic and diluted
net earnings (loss)
per common share $ .05 $ (1.82) $ (1.55) $ (2.84) $ (1.13)
============= =============== ============= ============= =============
Consolidated As of As of As of As of As of
Balance Sheet March 31, March 31, March 31, March 31, March 31,
Data: 2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Cash, cash equivalents
and marketable
securities $ 1,276,667 $ 18,428,990 $ 20,209,344 $ 54,043,175 $ 74,143,851
Total assets 1,276,667 19,237,949 49,844,146 76,123,697 97,941,349
Long-term debt, net
of current portion -- -- 233,852 152,943 208,001
Total stockholders'
equity 1,244,116 5,027,737 30,504,996 52,780,648 92,213,233
</TABLE>
<PAGE>
CPX CORP. AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
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 a plan of reorganization shortly thereafter. On May 21, 1998, the
Bankruptcy Court issued an order confirming the Company's Amended Plan of
Reorganization (the "Plan") pursuant to which the Company distributed funds to
equity holders and in September 1999 made a final distribution of funds to
equity holders from the $370,030 proceeds from the sale of its European
subsidiaries. The Company announced in June of 1999 that it has changed its name
to CPX Corp. from Cellpro, Incorporated. All former pre-petition liabilities and
contingencies have been satisfied pursuant to the Plan.
Except for disclosures that report the Company's historical results, the
statements set forth in this section are forward-looking statements. Actual
results may differ materially from those projected in the forward-looking
statements. Additional information concerning factors that may cause actual
results to differ materially from those in the forward-looking statements are
set forth in the section entitled "Investment Considerations" in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 2000, and in the
Company's other filings with the Securities and Exchange Commission. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company assumes no obligation to update
any such forward-looking statements or comment on the reasons why actual results
may differ therefrom.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $1,276,667 as of March 31,
2000 and $17,061,247 as of March 31, 1999. Payment of current liabilities,
pre-petition debts and distributions to stockholders combined to account for the
decrease in cash. At March 31, 2000 the Company's working capital balance was
$1,244,116. The Company is seeking an acquisition or other business combination
and management believes its cash position is sufficient to cover administrative
expenses and current obligations for the foreseeable future. There can be no
assurance that the Company will be able to locate or purchase a business, or
that any such business will be profitable. In order to finance an acquisition,
the Company may be required to incur or assume indebtedness or issue securities.
RESULTS OF OPERATIONS
Net income (loss) for the years ended March 31, 2000 and 1999, were
$752,915 and $(26,601,181), respectively. The income during the year ended March
31, 2000 primarily resulted from a legal settlement and interest income which
exceeded administrative expenses.
Total operating expenses for the year ended March 31, 2000 were $770,542
and consisted of $414,526 legal and $291,676 general and administrative related
to costs of the bankruptcy. Administrative expenses not related to the
bankruptcy were approximately $64,000. Other income and expenses included income
from a legal settlement of $1,400,000, realized gains on transfer of marketable
securities of $1,217,165, interest income of $211,604, and interest expense of
$117,026. The Company had no operating income for the year ended March 31, 2000,
and therefore, comparison to the years ended March 31, 1999 and 1998 is not
meaningful.
At March 31, 1999, all but $3,000 of the Company's property and equipment
had been sold, disposed of, or liquidated. At March 31, 1999 the Company's
financial statements were recorded on the liquidation basis of accounting. All
bankruptcy costs were accrued for during the year ended March 31, 1999.
Management believes that annual expenditures for the near future will be
limited to legal, auditing and accounting and minor administrative costs in the
range of approximately $50,000 to $100,000, and interest income should be
approximately $40,000 to $60,000. Other expenditures may include costs and due
diligence related to potential investment opportunities.
<PAGE>
CPX CORP. AND SUBSIDIARIES
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Company's consolidated financial statements contained elsewhere
herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
The Company has not been able to obtain the predecessor auditors' fiscal
1998 signed financial statement audit opinion. Accordingly, the Company has not
included the required audited statements of operations, stockholders' equity and
cash flows for the year ended March 31, 1998.
<PAGE>
CPX CORP. AND SUBSIDIARIES
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item will be included under the captions
"ELECTION OF DIRECTORS" and "EXECUTIVE OFFICERS" in the Company's definitive
proxy statement to be filed with the Securities and Exchange Commission within
120 days after the end of the Company's fiscal year covered by this report and
is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be included under the caption
"EXECUTIVE COMPENSATION" in the Company's definitive proxy statement to be filed
with the Securities and Exchange Commission within 120 days after the end of the
Company's fiscal year covered by this report and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item will be included under the captions
"PRINCIPAL STOCKHOLDERS" and "BENEFICIAL OWNERSHIP OF DIRECTORS AND MANAGEMENT"
in the Company's definitive proxy statement to be filed with the Securities and
Exchange Commission within 120 days after the end of the Company's fiscal year
covered by this report and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is will be included under the caption
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" in the Company's definitive
proxy statement to be filed with the Securities and Exchange Commission within
120 days after the end of the Company's fiscal year covered by this report and
is incorporated herein by reference.
<PAGE>
CPX CORP. AND SUBSIDIARIES
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule (filed as part of the
electronic filing only).
(b) Reports on Form 8-K
None
<PAGE>
CPX CORP. AND SUBSIDIARIES
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 thereunto duly authorized.
CPX, Corp. (Registrant)
By /s/Warren G. Lichtenstein
-------------------
Warren G. Lichtenstein
President,
By /s/Brian Lorber
-------------------
Brian Lorber
Secretary/Treasurer
Date: July 13, 2000
<PAGE>
CPX CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants.................. F-2
Consolidated Statements of Financial Condition...................... F-3
Consolidated Statements of Operations............................... F-4
Consolidated Statements of Stockholders' Equity..................... F-5
Consolidated Statements of Cash Flows............................... F-6 - F-7
Notes to Consolidated Financial Statements.......................... F-8 - F-12
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
CPX Corp.
We have audited the accompanying consolidated statements of financial condition
of CPX Corp. and subsidiaries (formerly Cellpro, Incorporated) as of March 31,
2000 and 1999, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years ended March 31, 2000 and
1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 audits provide 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 the period from October 28, 1998 to June 1, 1999, the effective date of the
confirmed "Debtor's Second Amended Plan of Reorganization", from the going
concern basis to a liquidation basis. Subsequent to June 1, 1999 the financial
statements have been prepared on the going concern basis.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CPX Corp. and
subsidiaries as of March 31, 2000 and 1999, and the results of their operations
and their cash flows the year ended March 31, 2000 and 1999 ended in conformity
with accounting principles generally accepted in the United States of America.
Grant Thornton LLP
Edison, New Jersey
June 9, 2000
<PAGE>
CPX CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
MARCH 31,
ASSETS
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash and cash equivalents $ 1,276,667 $ 17,061,247
Accounts receivable, net of allowance for
doubtful accounts $13,491 in 1999 -- 213,690
Marketable securities -- 1,367,743
Prepaid expenses -- 222,239
Equipment -- 3,000
Investment in and receivable from subsidiary -- 370,030
--------------- --------------
Total assets $ 1,276,667 $ 19,237,949
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 32,551 $ 6,284
Prepetition debt -- 12,683,306
Other liabilities -- 1,520,622
--------------- --------------
Total liabilities 32,551 14,210,212
Stockholders' equity:
Preferred stock, $.001 par value; 1,000,000
shares authorized and unissued -- --
Common stock, $.001 par value; 29,000,000
shares authorized; 14,633,985 shares issued
and outstanding 14,634 14,634
Additional paid-in capital 165,371,947 169,908,483
Accumulated deficit (164,142,465) (164,895,380)
------------ ------------
Total stockholders' equity 1,244,116 5,027,737
--------------- --------------
Total liabilities and stockholders' equity $ 1,276,667 $ 19,237,949
=============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CPX CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31,
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Product sales $ -- $ 10,287,440
Contract revenue -- --
--------------- --------------
Total revenues -- 10,287,440
Costs and expenses:
Cost of product sales -- 12,233,636
Other cost of sales -- --
Research and development -- 6,030,459
Selling, general and administrative 770,542 4,903,858
Employee compensation -- 5,891,023
--------------- --------------
Total costs and expenses 770,542 29,058,976
--------------- --------------
Loss from operations (770,542) (18,771,536)
Other income (expense):
Loss on sale of subsidiaries -- (2,508,157)
Gain on legal settlement 1,400,000 --
Litigation provision (1,217,165) (5,533,393)
Interest income 211,604 924,788
Interest expense (117,026) --
Other, net 1,246,044 (712,883)
--------------- ---------------
Total other income (expense) 1,523,457 (7,829,645)
--------------- ---------------
Net income (loss) $ 752,915 $(26,601,181)
=============== ============
Net income (loss) per share - basic and diluted $ .05 $ (1.82)
Weighted average number of common shares
outstanding during the period - basic and diluted 14,633,985 14,628,054
=============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CPX CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<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 -- -- -- (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
Distribution to shareholders -- -- (4,536,536) -- (4,536,536)
Net income -- -- -- 752,915 752,915
-------------- ------------- ------------- ------------- -------------
Balance at March 31, 2000 14,633,985 $ 14,634 $ 165,371,947 $(164,142,465) $ 1,244,116
============== ============ ============ ============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
CPX CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31,
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 752,915 $ (26,601,181)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization -- 1,664,859
Stock contribution to 401(k) plan -- --
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 213,690 1,298,945
Receivables from subsidiaries 370,030 3,790,667
Inventories -- 125,612
Other current assets -- --
Prepaid expenses 222,239 74,606
Accounts payable 26,267 (531,926)
Other liabilities (1,520,622) (825,238)
Accrual for litigation claim and costs -- --
--------------- --------------
Net cash provided by (used in) operating activities 64,519 (12,226,010)
--------------- --------------
Cash flows from investing activities:
Purchase of property and equipment -- (93,939)
Proceeds from sales and maturities
of securities available for sale -- 8,373,284
Purchase of securities available for sale -- --
Proceeds from sale of fixed assets 3,000 5,565,462
Purchase of restricted cash equivalents -- --
Investment in subsidiaries -- (2,076,020)
Change in other assets -- --
--------------- --------------
Net cash provided by investing activities 3,000 11,768,787
--------------- --------------
</TABLE>
(continued)
<PAGE>
CPX CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
YEARS ENDED MARCH 31,
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash flows from financing activities:
Proceeds from long-term debt -- --
Principal payments on long-term debt -- --
Payments on pre-petition debt, net (11,315,563) (2,835,993)
Issuance of Common Stock, net of issuance costs -- 94,941
Distribution to shareholders (4,536,536) --
Other -- --
--------------- --------------
Net cash (used in) provided by financing activities (15,852,099) (2,741,052)
--------------- --------------
Net decrease in cash and cash equivalents (15,784,580) (3,198,275)
Cash and cash equivalents:
Beginning of period 17,061,247 20,259,522
--------------- ----------
End of period $ 1,276,667 $ 17,061,247
=============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 117,026 $ 42,294
=============== ==============
</TABLE>
In 2000, the Company transferred its 1,254,810 shares of VIMRx Pharmaceuticals,
Inc. in satisfaction of a pre-petition debt. Such shares had a fair value of
$1,367,743 at March 31, 1999, and $2,584,908 at the date of transfer.
The accompanying notes are an integral part of these financial statements.
<PAGE>
CPX CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 and 1999
NOTE A - SUMMARY OF ACCOUNTING POLICIES
CPX Corp. (formerly 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 October 28,
1998, the Company filed for protection under Chapter 11 of the United States
Bankruptcy Court. On May 21, 1998 the Bankruptcy Court issued an order
confirming the Company's Amended Plan of Reorganization (the "Plan). On June 1,
1999, the Company changed its name to CPX Corp. as part of the Plan under
Chapter 11 of the United State 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, 2000,
all 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 were charged to operations as
incurred.
6. INCOME (LOSS) PER COMMON SHARE
The Company computes net income (loss) per share in accordance with
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"), Earnings
Per Share ("EPS"). Under the provisions of SFAS No. 128, basic net income (loss)
per share is computed by dividing the net income (loss) for the period by the
weighted-average number of common shares outstanding during the period. Diluted
net income (loss) per share is computed by dividing the net income (loss)for the
<PAGE>
CPX CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
MARCH 31, 2000 and 1999
period by the weighted-average number of common and common equivalent shares
outstanding during the period. However, common shares that are considered
anti-dilutive are excluded from the computation of diluted EPS. The loss per
common share diluted for the year ended March 31, 1999 did not include any
potentially dilutive securities since they are anti-dilutive. For the year ended
March 31, 2000, all potentially dilutive common stock equivalents (approximately
29,000 options) were not included in the calculation since their exercise price
exceeded the Company's market price.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments (principally consisting of cash
and cash equivalents, short-term investments, accounts receivable and payable
and debt) approximates fair value because of the short-term nature of these
items.
NOTE B - REORGANIZATION 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 (the "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. At 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 a distribution of net
available cash and cash equivalents realized from the remaining assets of the
Company. The distribution date commenced on June 18, 1999 and was completed
during fiscal year 2000. In accordance with the plan of reorganization the
Company changed its name from CellPro, Incorporated to CPX Corp. In addition,
the Company distributed funds to equity holders in June and September 1999.
These distributions included a final payment from the proceeds of a legal
settlement and the sale of its European subsidiaries. All material liabilities
and contingencies have been satisfied in full during fiscal 2000.
NOTE C - MARKETABLE SECURITIES
Marketable securities at March 31, 1999 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 Notes B and H. The securities
are considered trading securities and accordingly are measured at fair market
value, which totaled $1,367,743 at March 31, 1999 and $2,584,908 at June 18,
1999, the date of the transfer. Unrealized holding gains (losses) of $1,217,165
and ($632,257) are included in other income (expenses) in the Statement of
Operations for the years ended March 31, 2000 and 1999, respectively. The market
value per share of VIMRx Pharmaceuticals, Inc. 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
$100,030, 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
<PAGE>
CPX CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
MARCH 31, 2000 and 1999
$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 and were written off in the year ended March 31, 1999. The settlement
monies of these balances were collected in 2000, and then were distributed to
stockholders.
NOTE E - PREPETITION DEBT
Prepetition debt totaled $12,683,306 including 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.
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
----------------
$ 1,520,622
================
All such items have been satisfied at March 31, 2000. During the year ended
March 31, 2000, the Company received a refund of $250,000 of previously paid
legal fees, which has been reflected as a reduction of selling, general and
administrative expenses.
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 were 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 for year ended March 31,
1999.
As of March 31, 1999, all stock options had been cancelled or forfeited
with the exception of 116,532 shares outstanding, at an average strike price of
$5.26 per share, 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.
During fiscal year 2000, the Company proposed to adopt, pending stockholder
approval, the 1999 Stock Option Plan and the 1999 Directors Stock Option Plan.
The Company has reserved 1,500,000 and 750,000 options under these plans,
respectively. As of March 31, 2000 these plans were still awaiting stockholder
approval.
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 approved the settlement on May 19, 1999. The settlement called
for a cash payment of $1.5 million to be deposited into an escrow account on or
<PAGE>
CPX CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
MARCH 31, 2000 and 1999
before October 15, 1998 and the transfer of 1,254,810 shares of VIMRx
Pharmaceutical, Inc.'s common stock as described in Note C. As of March 31, 2000
the Company has satisfied all requirements of the settlement.
2. PATENT SETTLEMENT AGREEMENT
On September 28, 1998, the Company entered into a settlement agreement with
the Plaintiffs. The settlement agreement provided, 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 had partially satisfied its obligations with a $9
million bond issued in their favor by Insurance Company of North America and
cash held by the Company. As of March 31, 1999, the Company had accrued
approximately $8 million to satisfy its remaining obligation, which is included
in prepetition debt, and was paid in full in 2000.
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 advised the Company as of June 18, 1999, that all prepetition claims
that were timely filed against the Company had been evaluated and resolved. It
is legal counsel's experience that prepetition 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.
4. EXECUTORY CONTRACTS
The Bankruptcy Code authorized 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 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 were 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 passed on 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 received 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 on the total outstanding shares of
14,633,985 to the stockholders. On September 30, 1999, a final distribution,
based on the proceeds of a legal settlement and the sale of its European
subsidiaries, of $1,463,399 or $.10 per share was distributed to the
stockholders.
NOTE J - RELATED PARTY TRANSACTIONS
The Company is related to an affiliate through common ownership and
management. The affiliate paid $70,000 in various legal expenses for the Company
during the bankruptcy period. The Company has reimbursed in full the affiliate
as of March 31, 2000.
NOTE K - 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 $160 million, which expire through 2020. This
amount will be reduced by pre-petition debts forgiven or settled at less than
<PAGE>
CPX CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
MARCH 31, 2000 and 1999
the original value as approved in the Plan. The Company also has cumulative
research and development tax credit carryforwards of approximately $5 million,
which expire through 2013. 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 $61.6 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.
