1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 4, 2000
NOVAVAX, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-26770 22-2816046
-------- ------- ----------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File No.) Identification No.)
8320 GUILFORD ROAD, COLUMBIA, MD 21046
-------------------------------- -----
(Address of principal executive offices) (Zip code)
(301) 854-3900
--------------
Registrant's telephone number, including area code
NOT APPLICABLE
--------------
(Former name or former address, if changed since last report)
2
NOVAVAX, INC.
ITEMS TO BE INCLUDED IN THIS REPORT
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Audited Combined Financial Statements of Fielding Pharmaceutical Company
and MB Packaging, Inc., attached hereto as Appendix I.
(1) Report of Independent Accountants dated October 20, 2000.
(2) Combined Balance Sheets as of December 31, 1999 and 1998.
(3) Combined Income Statements for the years ended December 31, 1999
and 1998.
(4) Combined Statements of Changes in Stockholders' Equity for the
two years ended December 31, 1999.
(5) Combined Statements of Cash Flows for the years ended December
31, 1999 and 1998.
(6) Notes to the Combined Financial Statements
(b) Unaudited Interim Combined Financial Statements of Fielding
Pharmaceutical Company and MB Packaging, Inc., attached hereto as
Appendix II.
(1) Unaudited Combined Balance Sheets as of September 30, 2000 and
December 31, 1999.
(2) Unaudited Combined Income Statements for the nine-month periods
ended September 30, 2000 and 1999.
(3) Unaudited Combined Statements of Cash Flows for the nine-month
periods ended September 30, 2000 and 1999.
(4) Notes to the Combined Financial Statements
(c) Unaudited Pro Forma Consolidated Financial Information of Novavax, Inc.
and Fielding Pharmaceutical Company, attached hereto as Appendix III.
(1) Unaudited Pro Forma Consolidated Statement of Operations for the
year ended December 31, 1999
(2) Unaudited Pro Forma Consolidated Statement of Operations for the
nine-month period ended September 30, 1999.
(3) Unaudited Pro Forma Consolidated Balance Sheet as of September
30, 2000.
(4) Notes to the Unaudited Pro Forma Financial Statements.
(d) Exhibits
2.1 Agreement and Plan of Merger dated as of October 4, 2000, by
and among Novavax, Inc., Fielding Acquisition Corporation (a
wholly-owned subsidiary of Novavax, Inc.), The Fielding
Pharmaceutical Company, MB Packaging Co. (an affiliate of
Fielding Pharmaceutical Company) and the Stockholders of
Fielding Pharmaceutical Company, including Melissa E.
Georges, William E. Georges, John P. Gauthier, Joe D.
Ducharme and Credit Shelter Trust A of the George P. Georges
Revocable Trust dated November 12, 1992. (Incorporated by
reference to Exhibit 2.1 filed with Novavax's Current Report
on Form 8-K dated October 4, 2000.)
23.1 Consent of PricewaterhouseCoopers LLP dated December 18,
2000.
3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NOVAVAX, INC.
Date: December 18, 2000 By: /s/ DENNIS W. GENGE
--------------------------------------
Dennis W. Genge, Vice President
And Chief Financial Officer/Treasurer
4
APPENDIX I
FIELDING PHARMACEUTICAL COMPANY AND
MB PACKAGING, INC.
INDEX TO COMBINED FINANCIAL STATEMENTS
--------
PAGE(S)
Report of Independent Accountants 1
Financial Statements:
Combined Balance Sheets 2
Combined Income Statements 3
Combined Statements of Changes in Stockholders' Equity 4
Combined Statements of Cash Flows 5
Notes to Combined Financial Statements 6-13
5
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Fielding Pharmaceutical Company and MB Packaging, Inc.
In our opinion, the accompanying combined balance sheets and the related
combined statements of income, of changes in stockholders' equity and of cash
flows, present fairly, in all material aspects, the combined financial position
of Fielding Pharmaceutical Company and MB Packaging, Inc. at December 31, 1999
and 1998, and the results of their combined operations and their combined cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America. 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 audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
October 20, 2000
1
6
FIELDING PHARMACEUTICAL COMPANY AND
MB PACKAGING, INC.
COMBINED BALANCE SHEETS
--------
December 31,
-----------------------------
1999 1998
-------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,280,716 $ 414,435
Accounts receivables, net 2,201,183 707,453
Inventories 464,378 92,404
Prepaid and other current assets 7,130 17,750
-------------- -------------
Total current assets 3,953,407 1,232,042
-------------- -------------
Property and equipment, net 128,892 83,216
-------------- -------------
Total assets $ 4,082,299 $ 1,315,258
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 87,026 $ 81,414
Accrued expenses 197,515 257,727
Income taxes payable 21,517 -
Notes payable to stockholders 249,560 -
-------------- -------------
Total current liabilities 555,618 339,141
-------------- -------------
Commitments and contingencies
Stockholders' equity:
MB Packaging, Inc. stockholders' equity:
Common stock; $1.00 par value; 10 shares authorized; 2
shares issued and outstanding 2 2
Additional paid-in capital 198 198
Retained earnings 406,809 282,455
-------------- -------------
407,009 282,655
-------------- -------------
Fielding Pharmaceutical Company stockholders' equity:
Common stock; $10.00 par value; 3,000 shares authorized; 610
shares issued and outstanding 6,100 6,100
Retained earnings 3,113,572 687,362
-------------- -------------
3,119,672 693,462
-------------- -------------
Total stockholders' equity 3,526,681 976,117
-------------- -------------
Total liabilities and stockholders' equity $ 4,082,299 $ 1,315,258
============== =============
The accompanying notes are an integral part of these combined financial
statements.
2
7
FIELDING PHARMACEUTICAL COMPANY AND
MB PACKAGING, INC.
COMBINED INCOME STATEMENTS
--------
For the years ended
December 31,
----------------------------
1999 1998
------------- --------------
Net sales $ 11,568,684 $ 5,086,565
Cost of sales 2,786,534 1,384,119
------------- --------------
Gross profit 8,782,150 3,702,446
Selling and administrative expenses 5,177,406 3,167,800
------------- --------------
Operating income 3,604,744 534,646
Other (income) expense:
Interest income (23,048) (6,952)
Interest expense 6,381 2,789
------------- --------------
Income before income taxes 3,621,411 538,809
Provision for income taxes 37,147 -
------------- --------------
Net income $ 3,584,264 $ 538,809
============= ==============
The accompanying notes are an integral part of these combined financial
statements.
3
8
FIELDING PHARMACEUTICAL COMPANY AND
MB PACKAGING, INC.
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
--------
MB Packaging, Inc.
--------------------------------------------------
Common Stock Additional
--------------- Paid-in Retained
Shares Amount Capital Earnings Total
------ -------- ----------- ---------- ----------
Balance at December 31, 1997 2 $ 2 $ 198 $ 175,765 $ 175,965
Net income - - - 106,690 106,690
------ -------- ----------- ---------- ----------
Balance at December 31, 1998 2 2 198 282,455 282,655
Net income - - - 124,354 124,354
Distribution to stockholders - - - - -
------ -------- ----------- ---------- ----------
Balance at December 31, 1999 2 $ 2 $ 198 $ 406,809 $ 407,009
====== ======== =========== ========== ==========
Fielding Pharmaceutical Company
-----------------------------------------
Common Stock Total
--------------- Retained Stockholders'
Shares Amount Earnings Total Equity
------ -------- ----------- ----------- -------------
Balance at December 31, 1997 610 $ 6,100 $ 255,243 $ 261,343 $ 437,308
Net income - - 432,119 432,119 538,809
------ -------- ----------- ----------- -------------
Balance at December 31, 1998 610 6,100 687,362 693,462 976,117
Net income - - 3,459,910 3,459,910 3,584,264
Distribution to stockholders - - (1,033,700) (1,033,700) (1,033,700)
------ -------- ----------- ----------- -------------
Balance at December 31, 1999 610 $ 6,100 $ 3,113,572 $ 3,119,672 $ 3,526,681
====== ======== =========== =========== =============
The accompanying notes are an integral part of these combined financial
statements.
4
9
FIELDING PHARMACEUTICAL COMPANY AND
MB PACKAGING, INC.
COMBINED STATEMENTS OF CASH FLOWS
--------
For the years ended
December 31,
----------------------------
1999 1998
------------- -------------
Cash flows from operating activities:
Net income $ 3,584,264 $ 538,809
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 38,093 30,171
Changes in operating assets and liabilities:
Accounts receivable, net (1,493,730) (315,747)
Inventories (371,974) 58,379
Prepaid and other current assets 10,620 4,364
Accounts payable 5,612 1,862
Accrued expenses (60,212) 102,213
Income taxes payable 21,517 -
------------- -------------
Net cash provided by operating activities 1,734,190 420,051
------------- -------------
Cash flows from investing activities:
Purchases of property and equipment (83,769) (43,984)
------------- -------------
Net cash used in investing activities (83,769) (43,984)
------------- -------------
Cash flows from financing activities:
Payment of notes payable - (49,100)
Proceeds from notes payable from stockholders 249,560 -
Distribution to stockholders (1,033,700) -
------------- -------------
Net cash used in financing activities (784,140) (49,100)
------------- -------------
Net increase in cash and cash equivalents for the year 866,281 326,967
Cash and cash equivalents at beginning of year 414,435 87,468
------------- -------------
Cash and cash equivalents at end of year $ 1,280,716 $ 414,435
============= =============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 6,381 $ 2,789
Cash paid for income taxes $ 16,632 $ 2,736
The accompanying notes are an integral part of these combined financial
statements.
5
10
FIELDING PHARMACEUTICAL COMPANY AND MB PACKAGING, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
--------
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
DESCRIPTION OF BUSINESS
Fielding Pharmaceutical Company, a Missouri corporation ("Fielding"), is a
women's health care specialty pharmaceutical company focused on the
marketing, distribution and sale of prescription products, including
pre-natal vitamins.
MB Packaging, Inc. ("MB Packaging") is a Missouri Corporation, which
repackages pharmaceutical products for Fielding.
BASIS OF PRESENTATION
The combined financial statements include the accounts of Fielding
Pharmaceutical Company and MB Packaging, Inc. ("the Company"). Stockholders'
equity of each company has been shown separately. All intercompany
transactions have been eliminated in combination.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments having original
maturities of 90 days or less at the date of acquisition to be cash
equivalents. The carrying value of cash equivalents approximates fair value.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost determined
by the first-in, first-out method. Inventories are reduced by allowances,
when necessary, for slow-moving or obsolete products. No such allowances
were deemed necessary at December 31, 1999 and 1998.
TRADEMARKS
The Company has trademarks for various products. As the Company has no cost
basis in these trademarks, no amounts have been included in the Company's
balance sheets at December 31, 1999 and 1998.
Continued
6
11
FIELDING PHARMACEUTICAL COMPANY AND MB PACKAGING, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
--------
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Furniture and equipment and
automobiles are depreciated using the straight-line method over the
estimated useful lives, generally three to seven years. Leasehold
improvements are amortized using the straight-line method over the terms of
the leases or the estimated useful lives of the assets, if shorter.
Repair and maintenance costs are expensed as incurred while major
improvements, which extend the useful lives of the assets are capitalized.
At the time of retirement or other disposal of property and equipment, the
cost and related accumulated depreciation are removed from their respective
accounts and any resulting gain or loss is included in operations.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically evaluates the recoverability of its long-lived
assets. The Company considers historical performance and anticipated future
results in its evaluation of potential impairment. Accordingly, when
indicators of impairment are present, the Company evaluates the carrying
value of these assets in relation to the operating performance of the
business and future undiscounted cash flows expected to result from the use
of these assets. Impairment losses are recognized when the sum of expected
discounted future cash flows are less than the assets' carrying value. No
such impairment losses have been recognized to date.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred.
REVENUE RECOGNITION
The Company earns revenue from the sale of pharmaceutical products. The
Company recognizes revenue, net of returns, discounts and rebates, only
after the product is delivered, provided that no significant Company
obligations remain and collection of the receivable is reasonably assured.
SEGMENT INFORMATION
Effective January 1, 1998, the Company adopted the provisions of SFAS No.
131, Disclosures about Segments of an Enterprise and Related Information.
The Company operates in a single business segment.
Continued
7
12
FIELDING PHARMACEUTICAL COMPANY AND MB PACKAGING, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
--------
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial instruments, including cash
and cash equivalents, accounts receivable, accounts payable and accrued
expenses are carried at cost which approximates fair value due to the short
maturities of these instruments.
ADVERTISING EXPENSES
The Company expenses the cost of advertising its products as incurred. Such
costs are included in selling and administrative expenses in the income
statements and amounted to $83,555 and $18,776 for the years ended December
31, 1999 and 1998, respectively.
INCOME TAXES
Fielding is an S Corporation, as defined under the Internal Revenue Code
("IRC"). As a consequence, all revenues and expenses pass directly through
to the stockholders and, as such, no tax liability or tax expense is
reflected for Fielding in the combined financial statements.
MB Packaging recognizes deferred taxes by the asset and liability method of
accounting for income taxes. Under the asset and liability method, deferred
income taxes are recognized for differences between the financial statements
and tax bases of assets and liabilities at enacted statutory tax rates in
effect for the years in which the differences are expected to reverse. A
valuation allowance on net deferred tax assets is established when it is
more likely than not that such assets will not be recognized.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of
revenues and expenses during the reporting period. Significant estimates
include allowance for uncollectible accounts. Actual results could differ
from those estimates.
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to
concentration of credit risk, consist primarily of cash and cash equivalents
and accounts receivable. The Company maintains its cash and cash equivalents
in bank accounts which, at times, may exceed federally insured limits. The
Company has not experienced any such losses on these accounts.
Continued
8
13
FIELDING PHARMACEUTICAL COMPANY AND MB PACKAGING, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
--------
The Company monitors the balances of individual accounts receivable to
assess any collectibility issues. The Company has not experienced
significant losses related to these accounts in the past.
Concentration of accounts receivable as of December 31, 1999 and 1998 and
revenue for the years then ended, as a percentage of total accounts
receivable and revenue, respectively, are as follows:
Accounts receivable Revenue
------------------------------ ---------------------------
1999 1998 1999 1998
--------------- ------------- ------------- -------------
Customer A 17.8% 30.6% 38.8% 33.0%
Customer B 17.4% <10% <10% 13.2%
Customer C 10.6% <10% <10% <10%
Customer D - 11.8% <10% <10%
Customer E <10% - 11.2% 21.6%
Customer F <10% <10% 13.1% <10%
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities, as
amended by SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133. These
statements provide the accounting and reporting requirements for derivative
financial instruments and for derivative instruments used as hedges for
fiscal years beginning after June 15, 2000. Currently, the Company does not
utilize derivative financial instruments, therefore the adoption of SFAS No.
133 is not expected to have a material impact on the financial statements.
In April 1999, the Company adopted SOP 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use, which provides
guidance on accounting for the cost of computer software developed or
obtained for internal use. SOP 98-1 was effective for fiscal years beginning
after December 15, 1998. The adoption of SOP 98-1 did not have a material
impact on the Company's financial statements.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial
Statements, which summarizes certain of the SEC staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. In March 2000, the SEC issued
Continued
9
14
FIELDING PHARMACEUTICAL COMPANY AND MB PACKAGING, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
--------
SAB 101A, Revenue Recognition in Financial Statements, which defers the
effective date of SAB 101 from January 1, 2000 to April 1, 2000. In June
2000, the SEC issued SAB 101B, Second Amendment: Revenue Recognition in
Financial Statements, which further defers the effective date to January 1,
2001. The Company believes its revenue recognition policies are consistent
with SAB 101 and does not expect that implementation of SAB 101 will have a
material impact on its financial condition, results of operations or cash
flows.
In March 2000, the FASB issued FIN No. 44, Accounting for Certain
Transactions Involving Stock Compensation - an Interpretation of APB Opinion
No. 25. The Interpretation clarifies the application of Opinion 25 for
certain issues. FIN No. 44 is effective July 1, 2000, but certain
conclusions must be applied earlier. The Company does not believe the
adoption of FIN No. 44 will have a material effect on the Company's
financial condition, results of operations or cash flows.
3. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following at December 31:
1999 1998
-------------- --------------
Accounts receivable $ 2,664,919 $ 807,453
Less: allowance for doubtful accounts (463,736) (100,000)
-------------- --------------
Accounts receivable, net $ 2,201,183 $ 707,453
============== ==============
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
1999 1998
------------ -------------
Furniture and equipment $ 338,032 $ 254,263
Leasehold improvements 11,773 11,773
Automobiles 67,985 67,985
------------ -------------
417,790 334,021
Less accumulated depreciation and amortization (288,898) (250,805)
------------ ------------
Property and equipment, net $ 128,892 $ 83,216
============ ============
Continued
10
15
FIELDING PHARMACEUTICAL COMPANY AND MB PACKAGING, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
--------
Depreciation and amortization expense for the years ended December 31, 1999
and 1998 amounted to $38,093 and $30,171, respectively.
5. COMMITMENTS AND CONTINGENCIES
The Company leases vehicles under non-cancelable operating lease agreements
expiring at various dates through 2004. Future minimum lease payments under
non-cancelable leases are as follows:
Year Ended December 31
2000 $ 133,291
2001 91,021
2002 86,649
2003 69,417
2004 15,671
-------------
Total minimum lease payments $ 396,049
=============
The Company rents office space month-to-month from a corporation owned by
two officers of the Company (see Note 10). Rent expense for all operating
leases amounted to $395,351 and $187,136 for the years ended December 31,
1999 and 1998, respectively.
6. LINE OF CREDIT
In March 1997, the Company entered into a $250,000 line of credit with a
financial institution. The line of credit matured on March 24, 2000, accrues
interest at prime rate plus 0.75% (9.25% and 8.50% at December 31, 1999 and
1998, respectively) and is collateralized by the Company's inventory and
property and equipment. No amounts were outstanding under this line of
credit as of December 31, 1999 and 1998. Subsequent to year end, the line of
credit was increased to $350,000, extended to June 24, 2000 and expired
unused.
In April 1999, the Company entered into a $200,000 line of credit with a
financial institution. The line of credit matured on March 24, 2000 and
accrues interest at 9% per annum. No amount was outstanding under this line
of credit as of December 31, 1999. Subsequent to December 31, 1999, the line
was reduced to $100,000 and extended to March 24, 2001.
Continued
11
16
FIELDING PHARMACEUTICAL COMPANY AND MB PACKAGING, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
--------
7. EMPLOYEE BENEFITS
The Company has a defined contribution 401(k) plan ("the 401(k) Plan")
available to employees who are at least 21 years of age and have three
months of service with the Company. The 401(k) Plan allows employees to
contribute, on a tax-deferred basis, up to 15% of their annual compensation,
subject to certain regulatory and plan limitations. Employer contributions
to the plan are at the discretion of management. The Company contributed
$36,359 and $29,328 for the years ended December 31, 1999 and 1998,
respectively.
The Company also sponsors a qualified noncontributory profit-sharing plan
("the Plan") which covers all employees of the Company who are at least 21
years of age and have completed one year of service with the Company.
Employer contributions to the Plan are voluntary and determined by
management. For the years ended December 31, 1999 and 1998, the Company
contributed $40,000 and $75,000, respectively, to the Plan.
8. STOCKHOLDERS' EQUITY
In June 2000, MB Packaging, Inc. amended its Articles of Incorporation to
authorize two classes of common stock as follows: (i) 10 shares of $1.00 par
value Class A voting common stock; and (ii) 100 shares of $1.00 par value
Class B nonvoting common stock. Subsequent to this amendment, 98 shares of
Class B common stock were issued as bonus compensation to two employees of
MB Packaging, Inc.
9. INCOME TAXES
The provision (benefit) for income taxes consists of the following:
Year ended
December 31,
----------------------
1999 1998
---------- -----------
Current tax provision:
United States $ 30,956 $ -
State 6,191 -
---------- -----------
Total provision for income taxes $ 37,147 $ -
============ ===========
Continued
12
17
FIELDING PHARMACEUTICAL COMPANY AND MB PACKAGING, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
--------
A reconciliation between income taxes from operations computed using the
federal statutory income tax rate and the Company's effective tax rate as of
December 31, is as follows:
1999 1998
---------- ----------
Federal tax at statutory rate 34.0% 34.0%
State tax, net of federal benefit 6.0% 6.0%
Permanent differences for S Corporation status (39.0%) (40.0%)
---------- ----------
Provision for income taxes 1.0% -%
========== ==========
10. RELATED PARTY TRANSACTIONS
In 1999, the Company leased its manufacturing and administrative facility
from a corporation which is owned by two officers of the Company. The lease
is month-to-month. Rent expense for this facility amounted to $133,395 for
the year ended December 31, 1999. Such costs are included in selling and
administrative expenses in the income statement.
During 1999, two stockholders lent the Company $249,560 to meet short-term
operating needs. These notes payable are non-interest bearing and were
repaid subsequent to year end.
11. SUBSEQUENT EVENT
On October 4, 2000, the Company signed a definitive agreement to sell the
stock of the Company to Novavax, Inc. ("Novavax"), a publicly traded
biopharmaceutical drug delivery company engaged in the research and
development of differentiated drug products primarily in the field of
women's health, infectious diseases and cancer. Under the terms of the
agreement, Novavax will acquire all of the outstanding shares of common
stock of the Company for $31.5 million, consisting of $13 million in cash
and the remainder of common stock of Novavax. An additional $5 million in
either cash or common stock will be paid to former stockholders of the
Company upon successful and timely achievement of certain financial
performance over the next 12 to 18 months.
13
18
APPENDIX II
FIELDING PHARMACEUTICAL COMPANY AND
MB PACKAGING, INC.
INDEX TO COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
--------
PAGE(S)
Financial Statements:
Combined Balance Sheets 2
Combined Income Statements 3
Combined Statements of Cash Flows 4
Notes to Combined Financial Statements 5
19
FIELDING PHARMACEUTICAL COMPANY AND
MB PACKAGING, INC.
COMBINED BALANCE SHEETS
--------
September 30 December 31,
-------------- -------------
2000 1999
-------------- -------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 1,569,863 $ 1,280,716
Accounts receivables, net 1,250,853 2,201,183
Inventories 294,346 464,378
Prepaid and other current assets 103,000 7,130
-------------- -------------
Total current assets 3,218,062 3,953,407
-------------- -------------
Property and equipment, net 116,892 128,892
-------------- -------------
Total assets $ 3,334,954 $ 4,082,299
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 64,062 $ 87,026
Accrued expenses -- 197,515
Income taxes payable -- 21,517
Notes payable to stockholders -- 249,500
-------------- -------------
Total current liabilities 64,062 555,618
-------------- -------------
Commitments and contingencies
Stockholders' equity:
MB Packaging, Inc. stockholders' equity:
Common stock; $1.00 par value; 10 shares authorized; 2
shares issued and outstanding 2 2
Additional paid-in capital 198 198
Retained earnings 919,940 406,809
-------------- -------------
920,140 407,009
-------------- -------------
Fielding Pharmaceutical Company stockholders' equity:
Common stock; $10.00 par value; 3,000 shares authorized; 610
shares issued and outstanding 6,100 6,100
Retained earnings 2,344,652 3,113,572
-------------- -------------
2,350,752 3,119,672
-------------- -------------
Total stockholders'equity 3,270,892 3,526,681
-------------- -------------
Total liabilities and stockholders' equity $ 3,334,954 $ 4,082,299
============== =============
The accompanying notes are an integral part of these combined
financial statements.
2
20
FIELDING PHARMACEUTICAL COMPANY AND
MB PACKAGING, INC.
COMBINED INCOME STATEMENTS
(UNAUDITED)
--------
For the nine months ended
September 30,
----------------------------
2000 1999
------------- --------------
Net sales $ 7,924,559 $ 8,386,991
Cost of sales 1,534,107 2,162,686
------------- --------------
Gross profit 6,390,452 6,224,305
Selling and administrative expenses 5,233,990 3,242,194
------------- --------------
Operating income 1,156,462 2,982,111
Interest income - net (11,689) (16,667)
------------ -------------
Income before income taxes 1,168,151 2,998,778
Provision for income taxes -- 37,147
------------- --------------
Net income $ 1,168,151 $ 2,961,631
============= ==============
The accompanying notes are an integral part of these combined
financial statements.
3
21
FIELDING PHARMACEUTICAL COMPANY AND
MB PACKAGING, INC.
COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
--------
For the nine months ended
September 30,
----------------------------
2000 1999
------------- -------------
Cash flows from operating activities:
Net income $ 1,168,151 $ 2,961,631
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 12,000 10,000
Changes in operating assets and liabilities:
Accounts receivable, net 950,330 (1,444,636)
Inventories 170,032 (139,758)
Prepaid and other current assets (95,870) 10,620
Accounts payable (22,964) 5,612
Accrued expenses (197,515) (95,193)
Income taxes payable (21,517) --
------------- -------------
Net cash provided by operating activities 1,962,647 1,308,275
------------- -------------
Cash flows from investing activities:
Purchases of property and equipment -- (55,676)
------------- -------------
Net cash used in investing activities -- (55,676)
------------- -------------
Cash flows from financing activities:
Payment of notes payable (249,560) --
Distribution to stockholders (1,423,940) (638,462)
------------- -------------
Net cash used in financing activities (1,673,500) (638,462)
------------- -------------
Net increase in cash and cash equivalents for the year 289,147 614,137
Cash and cash equivalents at beginning of the period 1,280,716 414,435
------------- -------------
Cash and cash equivalents at end of the period $ 1,569,863 $ 1,028,572
============= =============
The accompanying notes are an integral part of these combined
financial statements.
4
22
FIELDING PHARMACEUTICAL COMPANY AND
MB PACKAGING, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
DESCRIPTION OF BUSINESS
Fielding Pharmaceutical Company, a Missouri corporation ("Fielding"), is a
women's health care specialty pharmaceutical company focused on the
marketing, distribution and sale of prescription products, including
pre-natal vitamins.
MB Packaging, Inc. ("MB Packaging") is a Missouri Corporation, which
repackages pharmaceutical products for Fielding.
BASIS OF PRESENTATION
The combined financial statements include the accounts of Fielding
Pharmaceutical Company and MB Packaging, Inc. ("the Company"). Stockholders'
equity of each company has been shown separately. All intercompany
transactions have been eliminated in combination.
These statements have been prepared by the Company, without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission, and
reflect all adjustments, which, in the opinion of management, are necessary
for a fair presentation of the results for the interim periods presented.
All such adjustments are of a normal recurring nature. Interim results are
not necessarily indicative of the results for a full year.
Certain information in footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles has been condensed or omitted pursuant to such rules and
regulations, although the Company believes the disclosures are adequate to
make the information presented not misleading. It is suggested that these
financial statements be read in connection with the Company's combined
financial statements and the notes thereto for the year ended December 31,
1999.
5
23
APPENDIX III
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The Unaudited Pro Forma Consoldated Statements of Operations assume that
the acquisition of Fielding Pharmaceutical Company and MB Packaging, Inc.
("Fielding") had occurred on January 1, 1999, consonsolidating the results of
operations of Novavax, Inc. (the "Company") and Fielding for the year ended
December 31, 1999 and for the nine months ended September 30, 2000. The
Unaudited Pro Forma Consoldated Balance Sheet as of September 30, 2000
reflects the acquisition as if it had occurred on September 30, 2000.
On October 4, 2000 the Company entered into an Agreement and Plan of
Merger by and among the Company, Fielding, each of the existing stockholders of
Fielding (the "Stockholders") and Fielding Acquisition Corporation, a Delaware
corporation and wholly-owned subsidiary of the Company ("Newco"), which provides
for the merger of Fielding with and into Newco. The stockholders of Fielding
will receive cash and shares of common stock of the Company in exchange for
shares of common stock of Fielding. Of the total consideration of $31.5 million
to be paid by the Company to the Fielding stockholders, $13 million will be paid
in cash and $18.5 million will be paid in stock of the Company. In addition, the
stockholders of Fielding could also receive up to an additional $5 million worth
of stock of the Company, if Newco's earnings and revenues from the sale of
Fielding products achieve certain targets following the closing of the merger.
The Agreement and Plan of Merger requires that the Company enter into a two-year
Employment Agreement with each of the four key members of the Fielding
management team. It also requires that the Company sign a two-year lease for the
facility presently used by Fielding in St. Louis, Missouri. The merger and
obligations of the Company are contingent upon the Company obtaining third-party
financing, upon terms and conditions satisfactory to the Company, in the amount
of approximately $13.0 million or such other amount as shall be acceptable to
the Company in its sole discretion. The acquisition will be recorded using the
purchase method of accounting for business combinations.
The following summarizes management's preliminary allocation of the purchase
price based on the Fielding's September 30, 2000 Balance Sheet.
(AMOUNTS IN THOUSANDS)
Cost Estimated lives
---- ---------------
Current assets, net of current liabilities $ 3,154 --
Property and equipment $ 117 3-7 years
Goodwill and other intangible assets $30,029 15 years
Property and equipment consists primarily of packaging and warehouse
equipment that the Company believes will continue to be used in the operations
of Fielding. Goodwill and other intangible assets are being amortized over their
preliminary average useful lives of fifteen years.
24
The pro forma information is based on the historical financial statements of
the Company and Fielding after giving effect to the acquisition using the
purchase method of accounting and assumptions and adjustments considered
appropriate by the Company, certain of which are described in the accompanying
Notes to Unaudited Pro Forma Consolidated Financial Statements. The pro forma
information is provided for illustrative purposes only and is not necessarily
indicative of the results of operations or financial condition that actually
would have been obtained if the acquisition had occurred on the dates indicated
or of the results that may be obtained in the future.
The Unaudited Pro Forma Consolidated Financial Information should be read in
conjunction with the historical financial statements and the related notes
thereto of the Company and Fielding. The historical financial statements of
Fielding and the related notes thereto are included herein. The historical
financial statements of Novavax, Inc. and the related notes thereto have been
previously filed with the Securities and Exchange Commission and are available
from the Company upon written request.
25
NOVAVAX, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(AMOUNTS IN THOUSANDS)
PRO FORMA
NOVAVAX FIELDING ADJUSTMENTS PRO FORMA
---------- --------------- ------------ -----------
ASSETS
Current Assets:
Cash and cash equivalents $10,059 $1,570 $ 15,000 (a) $11,829
(14,800) (b)
Accounts receivable 613 1,251 1,864
Inventories -- 294 294
Prepaid expenses and other current
assets 34 103 137
---------- --------------- ------------ -----------
Total current assets 10,706 3,218 200 14,124
Property and equipment, net 1,549 117 1,666
Patent costs, net 1,603 -- 1,603
Goodwill and other intangible assets 30,029 (d) 30,029
Other assets 629 -- 629
---------- --------------- ------------ -----------
Total assets $14,487 $3,335 $30,229 $48,051
---------- =============== ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 1,925 64 1,989
Accrued payroll 102 -- 102
---------- --------------- ------------ -----------
Total current liabilities 2,027 64 -- 2,091
---------- --------------- ------------ -----------
Note Payable 15,000 (a) 15,000
Commitments and contingencies
Stockholders' equity:
Common stock 200 -- 23 (c) 223
Additional paid-in capital 67,194 -- 18,477 (c) 85,671
Accumulated deficit (50,098) 3,271 (3,271) (d) (50,098)
Deferred compensation of stock
option (1) -- (1)
Treasury stock (4,835) -- (4,835)
---------- --------------- ------------ -----------
Total stockholders' equity 12,460 3,271 15,229 30,960
---------- --------------- ------------ -----------
Total liabilities and stockholders'
equity $14,487 $3,335 $30,229 $48,051
========== =============== ============ ===========
26
NOVAVAX, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
FIELDING PRO FORMA
NOVAVAX PHARMACEUTICAL ADJUSTMENTS PRO FORMA
----------- --------------- ------------ ------------
Net sales $1,668 $7,925 $ -- $9,593
Cost of sales -- 1,534 -- 1,534
----------- --------------- ------------ ------------
Gross profit 1,668 6,391 -- 8,059
----------- --------------- ------------ ------------
Operating expenses:
General and administrative 2,765 5,234 1,501 (e) 9,500
Research and development 6,561 -- 6,561
----------- --------------- ------------ ------------
Total operating expenses 9,326 5,234 1,501 16,061
----------- --------------- ------------ ------------
Operating (loss) profit (7,658) 1,157 (1,501) (8,002)
Interest income (expense) 454 11 (675) (f) (210)
----------- --------------- ------------ ------------
Income before provision for income
taxes (7,204) 1,168 (2,176) (8,212)
(Benefit) provision for income taxes -- -- -- --
----------- --------------- ------------ ------------
Net (loss) income ($7,204) $1,168 ($2,176) ($8,212)
=========== =============== ============ ============
Per share information: basic and
diluted
Net (loss) income ($0.38) $0.51 ($0.39)
=========== =============== ============
Weighted average number of common
shares outstanding
18,727,414 2,312,500 21,039,914
=========== =============== ============
27
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
FIELDING PRO FORMA
NOVAVAX PHARMACEUTICAL ADJUSTMENTS PRO FORMA
----------- --------------- ------------ ------------
Net sales $1,181 $11,569 -- $12,750
Cost of sales -- 2,787 -- 2,787
----------- --------------- ------------ ------------
Gross profit 1,181 8,782 -- 9,963
----------- --------------- ------------ ------------
Operating expenses
General and administrative 2,393 5,177 2,002 (e) 9,572
Research and development 3,354 -- -- 3,354
----------- --------------- ------------ ------------
Total operating expenses 5,747 5,177 2,002 12,926
----------- --------------- ------------ ------------
Operating (loss) profit (4,566) 3,605 (2,002) (2,963)
Interest income (expense) 60 16 (900) (f) (824)
----------- --------------- ------------ ------------
Income before provision for income
taxes (4,506) 3,621 (2,902) (3,787)
(Benefit) provision for income taxes -- 37 -- 37
----------- --------------- ------------ ------------
Net (loss) income ($4,506) $3,584 ($2,902) ($3,824)
=========== =============== ============ ============
Per share information: basic and
diluted
Net (loss) income ($0.31) $1.55 ($0.23)
=========== =============== ============
Weighted average number of common
shares outstanding 14,511,081 2,312,500 16,823,581
=========== =============== ============
28
NOVAVAX, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
Novavax, Inc., a Delaware corporation, ("Novavax" or the "Company"), is a
biopharmaceutical company engaged in the research and development of
differentiated drug products primarily in the fields of women's health,
infectious diseases and cancer. Fielding Pharmaceutical Company and MB
Packaging, Inc. ("Fielding") is a women's health care specialty pharmaceutical
company focused on the marketing, distribution and sale of prescription
products, including prenatal vitamins and other products.
The Unaudited Pro Forma Consolidated Statements of Operations assume that the
acquisition of Fielding had occurred on January 1, 1999, combining the results
of operations of Novavax and Fielding for the year ended December 31, 1999 and
for the nine months ended September 30, 2000. The Unaudited Pro Forma
Consolidated Balance Sheet as of September 30, 2000 reflects the acquisition
as if it had occurred on September 30, 2000.
NOTE 2. ACQUISITION OF FIELDING PHARMACEUTICALS COMPANY
On October 4, 2000 the Company entered into an Agreement and Plan of
Merger by and among the Company, Fielding, each of the existing stockholders of
Fielding (the "Stockholders") and Fielding Acquisition Corporation, a Delaware
corporation and wholly-owned subsidiary of the Company ("Newco"), which provides
for the merger of Fielding with and into Newco. The stockholders of Fielding
will receive cash and shares of common stock of the Company in exchange for
shares of common stock of Fielding. Of the total consideration of $31.5 million
to be paid by the Company to the Fielding stockholders, $13 million will be paid
in cash and $18.5 million will be paid in stock of the Company. In addition, the
stockholders of Fielding could also receive up to an additional $5 million worth
of stock of the Company, if Newco's earnings and revenues from the sale of
Fielding products achieve certain targets following the closing of the merger.
The Agreement and Plan of Merger requires that the Company enter into a two-year
Employment Agreement with each of the four key members of the Fielding
management team. It also requires that the Company sign a two year lease for the
facility presently used by Fielding in St. Louis, Missouri. The merger and
obligations of the Company are contingent upon the Company obtaining third-party
financing, upon terms and conditions satisfactory to the Company, in the amount
of approximately $13.0 million or such other amount as shall be acceptable to
the Company in its sole discretion.
29
NOVAVAX, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 2. ACQUISITION OF FIELDING PHARMACEUTICALS COMPANY, CONTINUED
The following summarizes management's preliminary allocation of the
purchase price based on the Fielding's September 30, 2000 Balance Sheet.
(AMOUNTS IN THOUSANDS)
COST ESTIMATED LIVES
---- ---------------
Current assets, net of current liabilities $ 3,154
Property and equipment $ 117 3-7 years
Goodwill and other intangible assets $ 30,029 15 years
Property and equipment consists primarily of packaging and warehouse
equipment that the Company believes will continue to be used in the operations
of Fielding. Goodwill and other intangible assets are being amortized over their
preliminary average useful lives of fifteen years.
NOTE 3. PRO FORMA ADJUSTMENTS
(a) Proceeds from the issuances of $15 million of 6% notes payable, to fund the
Fielding acquisition.
(b) Estimated payments related to the acquisition of Fielding. Includes
$13,000,000 paid to the Fielding stockholders and payment of direct
transaction costs of $1,800,000.
(c) Represents $18,500,000 of Novavax common stock (2,312,500 shares at $8.00
per share) issued to the Fielding stockholders in connection with the
acquisition of Fielding.
(d) Preliminary allocation of gross purchase price:
Cash paid for acquisition $13,000,000
Stock issued for acquisition 18,500,000
Direct transaction costs 1,800,000
---------
Gross purchase price 33,300,000
Net assets acquired (3,271,000)
-----------
Goodwill and other intangible assets $30,029,000
===========
(e) Represents amortization of goodwill and other intangible assets over
their preliminary average useful lives of fifteen-years.
(f) Interest expense on 6% notes payable for the periods shown.