SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
__________________________
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR
- ----- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2001
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR
- ----- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission File No. 0-19153
________________________
NEXELL THERAPEUTICS INC.
(Exact name of Registrant as specified in its Charter)
________________________
Delaware 06-1192468
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
9 Parker, Irvine, CA 92618
(Address of principal executive offices)
Registrant's telephone number, including area code: (949) 470-9011
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 90 days.
Yes X No
------- --------
The aggregate number of Registrant's shares of Common Stock, $.001 par
value, outstanding on August 1, 2001 was 20,940,509 shares.
__________________________
NEXELL THERAPEUTICS INC.
INDEX
-----
PART I - FINANCIAL INFORMATION Page
----
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets (unaudited) as of
June 30, 2001 and December 31, 2000........................ 3
Condensed Consolidated Statements of Operations (unaudited)
for the three and six months ended June 30, 2001 and 2000.. 4
Condensed Consolidated Statements of Cash Flows (unaudited)
for the six months ended June 30, 2001 and 2000............ 5
Notes to Condensed Consolidated Financial
Statements (unaudited)..................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk.. 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings........................................... 18
Item 2. Changes in Securities and Use of Proceeds................... 19
Item 3. Defaults upon Senior Securities............................. 19
Item 4. Submission of Matters to a Vote of Security Holders......... 19
Item 5. Other Information........................................... 20
Item 6. Exhibits and Reports on Form 8-K............................ 21
SIGNATURES................................................................... 23
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NEXELL THERAPEUTICS INC. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2001 2000
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 6,065,000 $ 12,119,000
Trade receivables net of allowance for doubtful accounts of $47,000 and
$37,000 at June 30, 2001 and December 31, 2000, respectively 4,194,000 2,940,000
Receivables from related party 1,613,000 1,576,000
Inventory - finished goods 3,110,000 3,831,000
Short term marketable securities 2,057,000 3,000,000
Other current assets 4,360,000 3,953,000
------------- -------------
Total current assets 21,399,000 27,419,000
Fixed assets, net 6,959,000 8,164,000
Intangible assets, net 37,385,000 39,372,000
Other assets 1,000,000 500,000
------------- -------------
Total assets $ 66,743,000 $ 75,455,000
============= =============
LIABILITIES
Current liabilities:
Accounts payable $ 3,062,000 $ 3,812,000
Accounts payable due to related party 4,031,000 2,821,000
Accrued expenses 3,384,000 2,807,000
Capital leases - current portion 677,000 638,000
Deferred revenue - current portion 450,000 450,000
------------- -------------
Total current liabilities 11,604,000 10,528,000
Capital lease obligation - non current portion 1,563,000 1,912,000
Deferred revenue - non current portion 1,350,000 1,575,000
------------- -------------
Total liabilities 14,517,000 14,015,000
Commitments and contingencies -- --
SHAREHOLDERS' EQUITY
Convertible preferred stock; $.001 par value, 1,150,000 shares
authorized:
Series A; 78,967 issued and outstanding at June 30, 2001 and 100 100
December 31, 2000 (liquidation value $81,511,000 and $79,162,000)
Series B; 63,000 issued and outstanding at June 30, 2001 and 100 100
December 31, 2000 (liquidation value $63,194,000 and $63,194,000)
Common stock; $.001 par value, 80,000,000 shares authorized,
20,940,509 and 19,084,894 shares issued and outstanding
at June 30, 2001 and December 31, 2000, respectively. 21,000 19,000
Additional paid-in capital 262,081,800 258,188,800
Accumulated other comprehensive income 1,238,000 2,605,000
Accumulated deficit (211,115,000) (199,373,000)
------------- -------------
Total shareholders' equity 52,226,000 61,440,000
------------- -------------
Total liabilities and shareholders' equity $ 66,743,000 $ 75,455,000
============= =============
The accompanying notes are an integral part of the condensed
consolidated financial statements.
3
NEXELL THERAPEUTICS INC. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- ---------------------------------
2001 2000 2001 2000
------------- ------------- -------------- --------------
Revenue $ 4,929,000 $ 4,630,000 $ 9,768,000 $ 9,414,000
Cost of goods sold 2,748,000 2,684,000 5,452,000 5,242,000
------------- ------------- -------------- --------------
Gross profit 2,181,000 1,946,000 4,316,000 4,172,000
------------- ------------- -------------- --------------
Operating expenses:
Research and development 1,489,000 2,923,000 3,755,000 6,082,000
General and administrative 1,175,000 3,008,000 2,777,000 5,426,000
Selling, marketing and distribution 2,381,000 2,717,000 5,010,000 5,477,000
Goodwill and intangible assets amortization 1,016,000 1,016,000 2,033,000 2,033,000
Depreciation 763,000 793,000 1,630,000 1,565,000
------------- ------------- -------------- --------------
Total operating expenses 6,824,000 10,457,000 15,205,000 20,583,000
------------- ------------- -------------- --------------
Operating loss (4,643,000) (8,511,000) (10,889,000) (16,411,000)
------------- ------------- -------------- --------------
Other (income) expenses:
Royalty, licensing and other related income -- (1,000) -- (77,000)
Royalty expense -- -- -- 100,000
Interest income (111,000) (297,000) (292,000) (613,000)
Interest expense 70,000 -- 137,000 --
Other, net 52,000 41,000 63,000 164,000
------------- ------------- -------------- --------------
Total other (income) expenses 11,000 (257,000) (92,000) (426,000)
------------- ------------- -------------- --------------
Net loss (4,654,000) (8,254,000) (10,797,000) (15,985,000)
Preferred stock dividends (1,654,000) (1,587,000) (3,295,000) (3,162,000)
------------- ------------- -------------- --------------
Net loss applicable to common stock $ (6,308,000) $ (9,841,000) $ (14,092,000) $ (19,147,000)
============= ============= ============== ==============
Basic and diluted loss per share $ (0.30) $ (0.53) $ (0.69) $ (1.04)
------------- ------------- -------------- --------------
Weighted average number of shares of common stock
outstanding-basic and diluted 20,935,000 18,675,000 20,450,000 18,468,000
========== ========== =========== ===========
The accompanying notes are an integral part of the condensed
consolidated financial statements.
4
NEXELL THERAPEUTICS INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended June 30,
------------------------------------
2001 2000
-------------- -------------
Cash flows from operating activities:
Net loss................................................................... $ (10,797,000) $ (15,985,000)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization........................................... 3,717,000 3,685,000
Noncash compensation.................................................... 28,000 128,000
Loss from disposal of equipment......................................... 107,000 19,000
Amortization of deferred revenue........................................ (225,000) --
Asset impairment charge................................................. -- 90,000
Changes in operating assets and liabilities:
Increase in trade receivables.......................................... (1,254,000) (1,045,000)
(Increase) decrease in receivable from related party................... (37,000) 432,000
Decrease in inventory.................................................. 721,000 930,000
Increase in other current assets and other assets...................... (1,007,000) (1,499,000)
Increase (decrease) in accounts payable and accrued expenses........... (173,000) 333,000
Increase in accounts payable to related party.......................... 1,210,000 730,000
--------------- -------------
Net cash used in operating activities.................................... (7,710,000) (12,182,000)
Cash flows from investing activities:
Purchases of equipment..................................................... (584,000) (712,000)
Proceeds from sales of equipment........................................... 53,000 77,000
--------------- -------------
Net cash used in investing activities................................... (531,000) (635,000)
Cash flows from financing activities:
Proceeds from issuance of common stock in connection with the
exercise of warrants/options.............................................. -- 3,083,000
Proceeds from issuance of common stock, net................................ 3,867,000 --
Payment of preferred dividends............................................. (945,000) (945,000)
Repayment of capital leases................................................ (310,000) --
--------------- -------------
Net cash provided by financing activities............................... 2,612,000 2,138,000
Effect of exchange rate changes on cash...................................... (425,000) (14,000)
--------------- -------------
Net decrease in cash and cash equivalents.................................... (6,054,000) (10,693,000)
Cash and cash equivalents at beginning of period............................. 12,119,000 28,695,000
--------------- -------------
Cash and cash equivalents at end of period................................... $ 6,065,000 $ 18,002,000
=============== =============
Supplemental disclosure of cash flow information:
Cash paid for interest $137,000 --
Cash paid for income taxes $ 22,000 $75,000
. Non-cash investing and financing activities:
. The Company recognized a net unrealized loss on securities held for
investment of $943,000 and a net unrealized gain of $3,849,000 in the six
months ended June 30, 2001 and 2000, respectively, which are included as a
component of comprehensive loss.
The accompanying notes are an integral part of the condensed
consolidated financial statements
5
NEXELL THERAPEUTICS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001
(unaudited)
(1) Financial Statement Presentation
The unaudited condensed consolidated financial statements and notes thereto
of Nexell Therapeutics Inc. ("Nexell") and subsidiaries (collectively, the
"Company") herein have been prepared pursuant to the rules and regulations
of the Securities and Exchange Commission ("SEC"), and in the opinion of
management, reflect all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the results of operations for the
interim periods presented. Certain information and footnote disclosures
normally included in financial statements, prepared in accordance with
accounting principles generally accepted in the United States of America,
have been condensed or omitted pursuant to such rules and regulations.
However, management believes that the disclosures are adequate to make the
information presented not misleading. These condensed consolidated
unaudited financial statements and notes thereto have been prepared in
conformity with the accounting principles applied in our 2000 Annual Report
on Form 10-K for the year ended December 31, 2000 and should be read in
conjunction with such Report. The results for the interim periods are not
necessarily indicative of the results for the full fiscal year. Certain
prior year amounts have been reclassified to conform with the current year
presentation.
(2) Principles of Consolidation
These condensed consolidated financial statements include the accounts of
Nexell, Nexell of California, Inc. ("NCI") and its subsidiaries, VIMRX
Genomics, Inc. ("VGI"), Innovir Laboratories, Inc. ("Innovir") and its
subsidiaries. All significant intercompany balances and transactions have
been eliminated.
6
(3) Comprehensive Loss
Comprehensive loss consists of net loss, net unrealized gain (loss) on
investment securities and foreign currency translation adjustments and is
presented in the table below. Accumulated other comprehensive loss is
included as a component of shareholders' equity.
Three Months Ended June 30, Six Months Ended June 30,
----------------------------------------------------------------------
2001 2000 2001 2000
----------------------------------------------------------------------
Net loss $(4,654,000) $( 8,254,000) $(10,797,000) $(15,985,000)
Translation adjustment (250,000) (16,000) (424,000) (31,000)
Net unrealized gain (loss) in
investment securities 300,000 3,849,000 (943,000) 3,849,000
----------- ------------ ------------ ------------
Total comprehensive loss $(4,604,000) $ (4,421,000) $(12,164,000) $(12,167,000)
=========== ============ ============ ============
The cumulative foreign currency translation adjustment included as a
component of accumulated other comprehensive loss was $(605,000) and
$(181,000) at June 30, 2001 and December 31, 2000, respectively. The
cumulative net unrealized gain in investment securities included as a
component of accumulated other comprehensive loss was $1,843,000 and
$2,786,000 at June 30, 2001 and December 31, 2000, respectively.
No income tax expense or benefit was allocated to the foreign currency
translation adjustments or to the net unrealized gain (loss) in investments
recorded in 2001 and 2000 due to the Company's significant net operating
loss tax carryforwards.
(4) Per Share Information
Basic net loss per share is computed using the weighted average number of
shares of common stock outstanding during the period. Diluted net loss per
share is computed using the weighted average number of shares of common
stock outstanding and potentially dilutive common shares outstanding during
the period. Potentially dilutive common shares consist of stock options and
warrants using the treasury stock method but are excluded if their effect
is antidilutive.
Stock options and warrants, excluding Class A performance warrants, to
purchase 6,117,347 and 4,394,163 shares of Nexell Common Stock ("Common
Stock") were outstanding at June 30, 2001 and 2000, respectively. Stock
options and warrants outstanding were not included in the computation of
diluted earnings per share as the Company incurred losses in all periods
presented.
(5) Investments
The Company owns 457,143 shares of the common stock of Epoch
Pharmaceuticals, Inc., representing an approximately 2% ownership at June
30, 2001. Included in comprehensive loss for the six months ended June 30,
2001 is the unrealized gain recorded for this investment to adjust to fair
market value at June 30, 2001. The above investment is included in "short
term marketable securities" on the accompanying condensed consolidated
balance sheet and is accounted for as an available-for-sale security under
Statement of Financial Accounting Standards No. 115-"Accounting for Certain
Investments in Debt and Equity Securities". Accordingly, this investment is
reported at fair value, with the unrealized gain reported as a component of
accumulated other comprehensive loss, a separate component of shareholders
equity.
7
(6) License Agreement
On March 28, 2001, the Company reached an agreement whereby it was granted
a non-exclusive license to certain cancer antigens for use in the Company's
dendritic cell vaccine program by Epimmune, Inc. In consideration of this
agreement the Company committed to payment of an up front license fee and
future royalties and milestone payments based on future sales, if any.
(7) Common Stock Purchase Agreement and Subsequent Termination
On January 8, 2001, the Company entered into a Common Stock Purchase
Agreement with Acqua Wellington North American Equities Fund, Ltd. ("Acqua
Wellington") pursuant to which it could, from time to time and at the
Company's sole discretion, beginning in January 2001 and ending November
2002, present Acqua Wellington with draw down notices constituting an offer
to purchase its common stock over an agreed to number of consecutive
trading days. Acqua Wellington was required to purchase a pro rata portion
of shares on each day during the trading period on which the daily weighted
average price of the common stock exceeded a threshold price determined by
the Company and set forth in the draw down notice. In addition, the Company
could, at its sole discretion, grant Acqua Wellington an option to purchase
additional shares during such trading period. The aggregate amount Acqua
Wellington would be required to invest during any draw down period would
depend on the threshold price established by the Company for the draw down
period. Acqua Wellington could, at its sole discretion, elect not to
purchase shares if the threshold price was set at less than $3.00 per
share. The aggregate amount to be invested by Acqua Wellington under terms
of this agreement was up to a maximum of $23 million in addition to a $2
million draw down, representing 749,063 shares of the Company's common
stock, executed on the date of the agreement. From January 2001 through
March 29, 2001, the Company sold an additional 1,091,552 shares of its
common stock for $2,000,000 under this agreement. Effective with the
Company's March 30, 2001 filing of its Annual Report on Form 10-K for the
year ended December 31, 2000, the Company's registration statement on Form
S-3 was rendered ineffective as a result of the Company not meeting SEC
requirements for use of a Form S-3 registration statement. Due to the
Company's resultant inability to sell registered shares of common stock to
Acqua Wellington as provided for in the Common Stock Purchase Agreement,
the Company terminated its agreement with Acqua Wellington as of May 14,
2001. There were no penalties or other liabilities associated with this
termination.
8
(8) Geographic Information
The Company operates in one industry segment: the development,
manufacture, marketing and distribution of specialized instruments,
biologicals, reagents, sterile plastic sets and related products used in
ex vivo cell research and therapies. Assets assigned to geographic
segments have not changed materially since December 31, 2000. Summary
comparative operating results for the United States and the rest of the
world follows:
Three Months Ended Six Months Ended
-------------------------------- -----------------------------------
June 30, June 30, June 30, June 30,
2001 2000 2001 2000
---------- ---------- ----------- -----------
Revenues by Geographic Area:
United States $2,824,000 $3,032,000 $ 5,561,000 $ 5,894,000
Europe 1,516,000 1,520,000 3,287,000 3,268,000
Rest of World 589,000 78,000 920,000 252,000
---------- ---------- ---------- -----------
$4,929,000 $4,630,000 $ 9,768,000 $ 9,414,000
========== ========== =========== ===========
Operating loss by Geographic Area:
United States $3,161,000 $6,899,000 $ 7,548,000 $13,156,000
Europe 1,091,000 1,499,000 2,697,000 2,934,000
Rest of World 391,000 113,000 644,000 321,000
---------- ---------- ---------- -----------
$4,643,000 $8,511,000 $10,889,000 $16,411,000
========== ========== =========== ===========
(9) Agreement with Baxter Healthcare Corporation and Business Restructure
On June 12, 2001, the Company announced that it had signed a letter of
intent to transfer worldwide sales, marketing and distribution rights for
its cell processing products, including the Isolex(R) 300i Magnetic Cell
Selection System, to Baxter Healthcare Corporation. On August 7, 2001, the
Company announced signing of a definitive agreement pursuant to the letter
of intent. Subject to obtaining certain third party consents and
fulfillment of certain closing conditions, this transaction is intended to
allow the Company to outsource most near-term market support requirements
to enable it to focus on clinical development of specific therapeutic
applications of its proprietary technology. The Company expects closing of
the transaction to occur by October 1, 2001. The Company expects to
realize net proceeds of approximately $4.3 million in exchange for the
transfer of certain assets at net book value under this agreement.
Concurrently, on June 12, 2001, the Company announced its intent to
restructure its business to streamline ongoing operations and reduce
spending. The Company plans to reduce staffing by approximately two-
thirds, including a reduction of 18 employees on July 24, 2001, focusing
its organization exclusively on therapeutic product development. Certain
existing Nexell employees are expected to be offered employment with
Baxter pursuant to the definitive agreements announced on August 7, 2001.
Upon implementation of this restructure plan, the Company will take a
charge related to severance and/or related costs and the transfer of
distribution responsibilities, with the impact of spending reductions
expected to be reflected in operating results in the quarter following
implementation.
(10) Anti-Dilution Adjustments
As a result of the issuance by the Company of common stock during the
first quarter of 2001 to Acqua Wellington North American Equities Fund,
Ltd., and certain stock options to employees
9
during the first half of 2001, the exercise price for the Company's
publicly traded warrants (Nasdaq: NEXLW), which had been $5.416 per share,
has been adjusted to $5.105 per share, and each Warrant now entitles the
holder to purchase .2938 of a share of common stock of the Company,
instead of .2769 of a share of common stock of the Company.
There have also been comparable adjustments to the Company's privately
placed Series B Preferred Stock and Class B Warrants. The conversion price
of the Series B Preferred Stock has been adjusted from $11 to $10.218, and
the aggregate number of shares of common stock into which the Series B
Preferred Stock may be converted has changed from 5,727,272 to 6,165,590.
The exercise price for the Class B Warrants has been adjusted from $12 to
$11.129 and the aggregate number of shares of common stock for which the
Class B Warrants may be exercised has changed from 750,000 to 808,676.
(11) New Accounting Standards
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 141, Business Combinations (SFAS
---------------------
141), and SFAS 142, Goodwill and Other Intangible Assets. SFAS 141
------------------------------------
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 as well as all purchase method
business combinations completed after June 30, 2001. SFAS 141 also
specifies criteria intangible assets acquired in a purchase method
business combination must meet to be recognized and reported apart from
goodwill, noting that any purchase price allocable to an assembled
workforce may not be accounted for separately. SFAS 142 will require that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in
accordance with the provisions of SFAS 142. SFAS 142 will also require
that intangible assets with definite useful lives be amortized over their
respective estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with SFAS No. 121, Accounting for
--------------
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
---------------------------------------------------------------
Disposed Of.
-----------
The Company is required to adopt the provisions of SFAS 141 immediately,
except with regard to business combinations initiated prior to July 1,
2001, which it expects to account for using the pooling-of-interests
method, and SFAS 142 effective January 1, 2002. Furthermore, any goodwill
and any intangible asset determined to have an indefinite useful life that
are acquired in a purchase business combination completed after June 30,
2001 will not be amortized, but will continue to be evaluated for
impairment in accordance with the appropriate pre-SFAS 142 accounting
literature. Goodwill and intangible assets acquired in business
combinations completed before July 1, 2001 will continue to be amortized
prior to the adoption of SFAS 142.
SFAS 141 will require, upon adoption of SFAS 142, that the Company
evaluate its existing intangible assets and goodwill that were acquired in
a prior purchase business combination, and to make any necessary
reclassifications in order to conform with the new criteria in SFAS 141
for recognition apart from goodwill. Upon adoption of SFAS 142, the
Company will be required to reassess the useful lives and residual values
of all intangible assets acquired in purchase business combinations, and
make any necessary amortization period adjustments by the end of the first
interim period after adoption. In addition, to the extent an intangible
asset is identified as having an indefinite useful life, the Company will
be required to test the intangible asset for impairment in accordance with
the provisions of SFAS 142 within the first interim period. Any impairment
loss will be measured as of the date of adoption and recognized as the
cumulative effect of a change in accounting principle in the first interim
period.
10
In connection with the transitional goodwill impairment evaluation, SFAS
142 will require the Company to perform an assessment of whether there is
an indication that goodwill is impaired as of the date of adoption. To
accomplish this the Company must identify its reporting units and
determine the carrying value of each reporting unit by assigning the
assets and liabilities, including the existing goodwill and intangible
assets, to those reporting units as of the date of adoption. The Company
will then have up to six months from the date of adoption to determine the
fair value of each reporting unit and compare it to the reporting unit's
carrying amount. To the extent a reporting unit's carrying amount exceeds
its fair value, an indication exists that the reporting unit's goodwill
may be impaired and the Company must perform the second step of the
transitional impairment test. In the second step, the Company must compare
the implied fair value of the reporting unit's goodwill, determined by
allocating the reporting unit's fair value to all of it assets (recognized
and unrecognized) and liabilities in a manner similar to a purchase price
allocation in accordance with SFAS 141, to its carrying amount, both of
which would be measured as of the date of adoption. This second step is
required to be completed as soon as possible, but no later than the end of
the year of adoption. Any transitional impairment loss will be recognized
as the cumulative effect of a change in accounting principle in the
Company's statement of operations.
As of the date of adoption, the Company expects to have unamortized
goodwill in the amount of $25,122,000 and unamortized identifiable
intangible assets in the amount of $10,177,000 all of which will be
subject to the transition provisions of SFAS 141 and 142. Amortization
expense related to goodwill was $2,955,000 for the year ended December 31,
2000 and $739,000 and $1,478,000 for the three and six months ended June
30, 2001, respectively. Because of the extensive effort needed to comply
with adopting SFAS 141 and 142, it is not practicable to reasonably
estimate the impact of adopting these Statements on the Company's
financial statements at the date of this report, including whether any
transitional impairment losses will be required to be recognized as the
cumulative effect of a change in accounting principle.
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto included elsewhere in this Quarterly
Report on Form 10-Q and with the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000.
On June 12, 2001, the Company announced that it had signed a letter of intent to
transfer worldwide sales, marketing and distribution rights for its cell
processing products, including the Isolex(R) 300i Magnetic Cell Selection
System, to Baxter Healthcare Corporation. On August 7, 2001, the Company
announced signing of a definitive agreement pursuant to the letter of intent.
The Company expects closing of the transaction to occur by October 1, 2001. The
Company expects to realize net proceeds of approximately $4.3 million in
exchange for the transfer of certain assets at net book value under this
agreement. Upon closing of this transaction, substantially all of the Company's
current revenue-producing activities will cease and the Company will focus on
development of new cellular therapy products.
The Company intends to restructure its business to streamline ongoing operations
with that focus and reduce spending. Accordingly, the Company plans to reduce
staffing by approximately two-thirds, which commenced with a reduction of 18
employees on July 24, 2001. Certain existing Nexell employees are expected to be
offered employment with Baxter pursuant to the definitive agreements announced
on August 7, 2001. Upon closing of the transaction with Baxter, the Company will
take a one-time charge related to severance and/or related costs and the
transfer of distribution responsibilities, with the impact of spending
reductions expected to be reflected in operating results in the quarter
following implementation. It is expected that this transaction, when fully
implemented, will result in a decrease in cash use from historical levels.
Three Months Ended June 30, 2001 and 2000
- -----------------------------------------
Sales were $4,929,000 for the quarter ended June 30, 2001, an increase of
$299,000 or 6% from $4,630,000 for the quarter ended June 30, 2000. Included in
net sales for the quarters ending June 30, 2001 and 2000 are potentially non-
recurring sales of raw materials to a manufacturer, some of which the
manufacturer uses in the production of finished goods which are subsequently
sold to the Company and others. These sales are sporadic in nature as they are
dependent, among other factors, on the customer's production schedule, which in
turn is somewhat dependent on the Company's sales forecasts. In the second
quarter of 2001, these sales totaled $341,000 versus $359,000 for the comparable
period in the prior year.
Gross profit was $2,181,000 or 44% for the quarter ended June 30, 2001, an
increase of $235,000 from $1,946,000 or 42% for the quarter ended June 30, 2000.
This increase was principally the result of changes in sales mix.
Total operating expenses were $6,824,000 for the three months ended June 30,
2001, a decrease of $3,633,000 or 35% over the quarter ended June 30, 2000. This
decrease primarily was due to focused headcount and employee related expense
reductions as a result of the Company's strategic planning process which was
implemented in October 2000.
Research and development expenses decreased by $1,434,000 or 49% from $2,923,000
for the three months ended June 30, 2000 to $1,489,000 for the three months
ended June 30, 2001. The decrease
12
was primarily the result of the expense reductions initiated in October 2000 and
more focused research and development efforts resulting from following
completion of the Company's strategic planning process.
General and administrative expenses decreased by $1,833,000 or 61% from
$3,008,000 in the second quarter of 2000 to $1,175,000 in the second quarter of
2001. This decrease was primarily the result of headcount and other spending
reductions initiated in October 2000.
Selling, marketing and distribution expenses decreased by $336,000 or 12% from
$2,717,000 in the second quarter of 2000 to $2,381,000 in the second quarter of
2001. This decrease was primarily the result of headcount and other spending
reductions initiated in October 2000, although this category of expenses was
less impacted by the expense reductions of October 2000 as management considered
sales, marketing and distribution expenditures to be at an appropriate level
based upon continued focus on revenue stabilization and growth.
Other expense was $11,000 in the second quarter of 2001 compared to other income
of $257,000 in the second quarter of 2000. This was principally the result of a
decrease in interest income related to carrying lower cash balances in 2001 and
interest expense on capital lease obligations entered into in December 2000.
The foregoing resulted in a net loss of $4,654,000 and a net loss applicable to
common stock of $6,308,000 for the quarter ended June 30, 2001. This represented
a decrease in net loss of $3,600,000 or 44% and a decrease in the net loss
applicable to common stock of $3,533,000 or 36% from the quarter ended June 30,
2000.
Six Months Ended June 30, 2001 and 2000
- ---------------------------------------
Sales were $9,768,000 for the six months ended June 30, 2001, an increase of
$354,000 or 4% from $9,414,000 for the six months ended June 30, 2000. Included
in net sales for the periods ending June 30, 2001 and 2000 are potentially non-
recurring sales of raw materials to a manufacturer, as discussed above. In the
first six months of 2001, these sales totaled $807,000 versus $654,000 for the
comparable period in the prior year. Management cannot predict the amount and
timing of such future sales, if any.
Gross profit was $4,316,000 or 44% for the six months ended June 30, 2001, an
increase of $144,000 from $4,172,000 or 44% for the six months ended June 30,
2000.
Total operating expenses were $15,205,000 for the six months ended June 30,
2001, a decrease of $5,378,000 or 26% over the six months ended June 30, 2000.
This decrease was primarily due to focused headcount and employee related
expense reductions as a result of the Company's strategic planning process which
was implemented in October 2000.
Research and development expenses decreased by $2,327,000 or 38% from $6,082,000
for the six months ended June 30, 2000 to $3,755,000 for the six months ended
June 30, 2001. The decrease was primarily the result of the expense reductions
initiated in October 2000 and more focused research and development efforts
following completion of the Company's strategic planning process.
General and administrative expenses decreased by $2,649,000 or 49% from
$5,426,000 in the first six months of 2000 to $2,777,000 in the first six months
of 2001. This decrease was primarily the result
13
of headcount and other spending reductions initiated in October 2000.
Selling, marketing and distribution expenses decreased by $467,000 or 9% from
$5,477,000 in the first six months of 2000 to $5,010,000 in the first six months
of 2001. This decrease was primarily the result of headcount and other spending
reductions initiated in October 2000, although this category of expenses was
less impacted by the expense reductions of October 2000 as management considered
sales, marketing and distribution expenditures to be at an appropriate level
based upon continued focus on revenue stabilization and growth.
Other income was $92,000 in the first six months of 2001 compared to $426,000 in
the first six months of 2000. This was principally the result of a decrease in
interest income related to carrying lower cash balances in 2001 and interest
expense on capital lease obligations entered into in December 2000.
The foregoing resulted in a net loss of $10,797,000 and a net loss applicable to
common stock of $14,092,000 for the six months ended June 30, 2001. This
represented a decrease in net loss of $5,188,000 or 32% and a decrease in the
net loss applicable to common stock of $5,055,000 or 26% from the six months
ended June 30, 2000.
Liquidity and Capital Resources
- -------------------------------
The Company had $6,065,000 in cash and cash equivalents as of June 30, 2001 as
compared to $12,119,000 as of December 31, 2000. Working capital was $9,795,000
at June 30, 2001 as compared to $16,891,000 at December 31, 2000. The $6,054,000
decrease in cash and cash equivalents in the first six months of 2001 resulted
from cash used in the operations of the Company of $7,710,000 and net purchases
of equipment totaling $531,000. These were partially offset by cash proceeds of
$3,867,000 from the sale of common stock less payments of preferred dividends of
$945,000 and capital lease obligations of $310,000. The decrease in working
capital of $7,096,000 resulted principally from the decrease in cash and cash
equivalents.
Net cash used in operations was $7,710,000 in the first six months of 2001
compared to $12,182,000 in the first six months of 2000, a decrease of
$4,472,000. Operating cash used decreased in the six months ended June 30, 2001
as compared to the six months ended June 30, 2000 primarily as a result of the
decrease in net loss of $5,188,000. This was partially offset by timing factors
affecting the balances in operating assets and liabilities.
Net cash used in investing activities was $531,000 in the first six months of
2001 compared to cash used in investing activities of $635,000 in the first six
months of 2000.
Net cash provided by financing activities was $2,612,000 in the six months ended
June 30, 2001 compared to $2,138,000 in the six months ended June 30, 2000. Cash
provided by financing activities in the first six months of 2001 consisted of
net proceeds from the issuance of common stock to an investor of $3,867,000
partially offset by payments on capital lease obligations of $310,000 and
payment of preferred dividends of $945,000. In the first six months of 2000, the
Company realized proceeds from issuance of common stock in connection with
option and warrant exercises of $3,083,000 that were partially offset by
preferred dividend payments of $945,000.
Cash dividends are payable on the Company's Series B Preferred Stock at the rate
of 3% of the
14
liquidation preference, payable semi-annually and will be approximately
$1,890,000 per year.
The Company, in the ordinary course of business, routinely explores possible
business transactions that may lead to an acquisition. In general, in order to
conserve cash the Company's preference is to use its stock as consideration for
any potential acquisition or similar corporate transaction.
In January 2001, the Company entered into a Common Stock Purchase Agreement with
Acqua Wellington North American Equities Fund, Ltd. ("Acqua Wellington")
pursuant to which it would, from time to time and at the Company's sole
discretion, beginning in January 2001 and ending November 2002, present Acqua
Wellington with draw down notices constituting an offer to purchase its Common
Stock over an agreed to number of consecutive trading days. Acqua Wellington
would be required to purchase a pro rata portion of shares on each day during
the trading period on which the daily weighted average price of the Common Stock
exceeded a threshold price determined by the Company and set forth in the draw
down notice. In addition, the Company could, at its sole discretion, grant Acqua
Wellington an option to purchase additional shares during such trading period.
The aggregate amount Acqua Wellington would be required to invest during any
draw down period would depend on the threshold price established by the Company
for the draw down period. Acqua Wellington could, at its sole discretion, elect
not to purchase shares if the threshold price was set at less than $3.00 per
share. The aggregate amount to be invested by Acqua Wellington under terms of
this agreement was up to a maximum of $23 million in addition to a $2 million
draw down, representing 749,063 shares of the Company's common stock, executed
on the date of the agreement. From January 2001 through March 29, 2001, the
Company sold an additional 1,091,552 shares of its Common Stock for $2,000,000
under this agreement.
The Common Stock Purchase Agreement that the Company entered into with Acqua
Wellington provided that Acqua Wellington could purchase shares of Common Stock
at a discount of up to 11.0%, to be determined based on the Company's market
capitalization at the start of the draw-down period. Additionally, the Company
could, at its sole discretion, offer discounts in excess of this amount and on
March 28, 2001 did sell 444,444 shares at a discount of 22.5% from the volume
weighted average share price for March 26, 2001 which was established as the
draw down pricing period. As a result, the Company's existing common
stockholders would experience immediate dilution upon the purchase of any shares
of the Common Stock by Acqua Wellington.
Effective with the Company's March 30, 2001 filing of its Annual Report on Form
10-K for the year ended December 31, 2000, the Company's registration statement
on Form S-3 was rendered ineffective as a result of the Company not meeting SEC
requirements for use of a Form S-3 registration statement. Due to the Company's
resultant inability to sell registered shares of Common Stock to Acqua
Wellington as provided for in the Common Stock Purchase Agreement, the Company
terminated its agreement with Acqua Wellington as of May 14, 2001. There were no
penalties or other liabilities associated with this termination.
15
The Company expects to incur substantial expenditures in the foreseeable future
for the research and development and ultimate commercialization of its proposed
cellular therapy products. Based on current projections, which include closing
of the transaction with Baxter by October 1, 2001 and which are subject to
change, decreased spending as a result of the Baxter transaction and the
Company's planned restructure and management's ability to liquidate certain
assets if necessary, the Company's management believes that the current balance
of cash and cash equivalents is sufficient to fund its remaining operations
through at least fiscal 2001. Thereafter, the Company will require additional
funds, which it may seek to raise through public or private equity or debt
financings, collaborative or other arrangements with corporate sources, or
through other sources of financing. There can be no assurance that such
additional funds will be available to the Company on terms favorable to the
Company, or at all, and the Company's operations could be negatively materially
impacted by the need to further adjust spending and/or liquidate assets.
New Accounting Standards
- ------------------------
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 141, Business Combinations (SFAS 141),
---------------------
and SFAS 142, Goodwill and Other Intangible Assets. SFAS 141 requires that the
------------------------------------
purchase method of accounting be used for all business combinations initiated
after June 30, 2001 as well as all purchase method business combinations
completed after June 30, 2001. SFAS 141 also specifies criteria intangible
assets acquired in a purchase method business combination must meet to be
recognized and reported apart from goodwill, noting that any purchase price
allocable to an assembled workforce may not be accounted for separately. SFAS
142 will require that goodwill and intangible assets with indefinite useful
lives no longer be amortized, but instead tested for impairment at least
annually in accordance with the provisions of SFAS 142. SFAS 142 will also
require that intangible assets with definite useful lives be amortized over
their respective estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with SFAS No. 121, Accounting for the
------------------
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
- ---------------------------------------------------------------------------
The Company is required to adopt the provisions of SFAS 141 immediately, except
with regard to business combinations initiated prior to July 1, 2001, which it
expects to account for using the pooling-of-interests method, and SFAS 142
effective January 1, 2002. Furthermore, any goodwill and any intangible asset
determined to have an indefinite useful life that are acquired in a purchase
business combination completed after June 30, 2001 will not be amortized, but
will continue to be evaluated for impairment in accordance with the appropriate
pre-SFAS 142 accounting literature. Goodwill and intangible assets acquired in
business combinations completed before July 1, 2001 will continue to be
amortized prior to the adoption of SFAS 142.
SFAS 141 will require, upon adoption of SFAS 142 on January 1, 2002, that the
Company evaluate its existing intangible assets and goodwill that were acquired
in a prior purchase business combination, and to make any necessary
reclassifications in order to conform with the new criteria in SFAS 141 for
recognition apart from goodwill. Upon adoption of SFAS 142, the Company will be
required to reassess the useful lives and residual values of all intangible
assets acquired in purchase business combinations, and make any necessary
amortization period adjustments by the end of the first interim period after
adoption. In addition, to the extent an intangible asset is identified as having
an indefinite useful life, the Company will be required to test the intangible
asset for impairment in accordance with the provisions of SFAS 142 within the
first interim period. Any impairment loss will be measured as of the date of
adoption and recognized as the cumulative effect of a change in accounting
principle in the first interim period.
In connection with the transitional goodwill impairment evaluation, SFAS 142
will require the Company to perform an assessment of whether there is an
indication that goodwill is impaired as of the date of
16
adoption. To accomplish this the Company must identify its reporting units and
determine the carrying value of each reporting unit by assigning the assets and
liabilities, including the existing goodwill and intangible assets, to those
reporting units as of the date of adoption. The Company will then have up to six
months from the date of adoption to determine the fair value of each reporting
unit and compare it to the reporting unit's carrying amount. To the extent a
reporting unit's carrying amount exceeds its fair value, an indication exists
that the reporting unit's goodwill may be impaired and the Company must perform
the second step of the transitional impairment test. In the second step, the
Company must compare the implied fair value of the reporting unit's goodwill,
determined by allocating the reporting unit's fair value to all of it assets
(recognized and unrecognized) and liabilities in a manner similar to a purchase
price allocation in accordance with SFAS 141, to its carrying amount, both of
which would be measured as of the date of adoption. This second step is required
to be completed as soon as possible, but no later than the end of the year of
adoption. Any transitional impairment loss will be recognized as the cumulative
effect of a change in accounting principle in the Company's statement of
operations.
As of the date of adoption, the Company expects to have unamortized goodwill in
the amount of $25,122,000 and unamortized identifiable intangible assets in the
amount of $10,177,000 all of which will be subject to the transition provisions
of SFAS 141 and 142. Amortization expense related to goodwill was $2,955,000
for the year ended December 31, 2000 and $739,000 and $1,478,000 for the three
and six months ended June 30, 2001, respectively. Because of the extensive
effort needed to comply with adopting SFAS 141 and 142, it is not practicable to
reasonably estimate the impact of adopting these Statements on the Company's
financial statements at the date of this report, including whether any
transitional impairment losses will be required to be recognized as the
cumulative effect of a change in accounting principle.
Disclosure Regarding Forward Looking Statements
This Report on Form 10-Q contains certain statements that are "Forward Looking
Statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Although the Company believes that the expectations reflected in Forward Looking
Statements are reasonable, management can give no assurance that such
expectations will prove to have been correct. Generally, these statements relate
to business plans or strategies, including the proposed transaction with Baxter,
projected or anticipated benefits or other consequences of such plans or
strategies, or projections involving anticipated revenues, expenses, earnings,
levels of capital expenditures, liquidity or indebtedness or other aspects of
operating results or financial position. All phases of the operations of the
Company are subject to a number of uncertainties, risks and other influences
(including the response of the market to the Company's new business strategy,
ability of the Company to develop new cellular therapy products, timely
commencement and success of the Company's clinical trials and other research
endeavors, delays in receiving FDA or other regulatory approvals, the
development of competing therapies and/or technologies, the terms of any future
strategic alliances, the need for or availability of additional capital, and the
volatility in the market price for the Company's securities) many of which are
outside the control of the Company and any one of which, or a combination of
which, could materially affect the results of the Company's operations and
whether the Forward Looking Statements made by the Company ultimately prove to
be accurate.
17
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
In the normal course of business, operations of the Company are exposed to risks
associated with fluctuations in interest rates and foreign currency exchange
rates.
Interest Rate Risk
- ------------------
The Company maintains excess cash in a mutual fund, the "BlackRock Low Duration
Bond Portfolio" (the "fund"), which invests in asset backed securities, bonds
and various other commercial obligations. The fund may, from time to time, use
certain derivatives in its investment strategy. Additionally, the Company
maintains excess cash required for short-term needs in daily money market funds
with financial institutions.
Two of the main risks disclosed by the fund are interest rate risk and credit
risk. Typically, when interest rates rise, there is a corresponding decline in
the market value of bonds such as those held by the fund. Credit risk refers to
the possibility that the issuer of the bond will not be able to make principal
and interest payments. The Company addresses these risks by actively monitoring
the fund's performance and investment holdings. The Company does not enter into
financial instruments for trading or speculative purposes.
The Company's interest income is most sensitive to fluctuations in the general
level of U.S. interest rates. In this regard, changes in the U.S. interest
rates affect the interest earned on the Company's cash as well as the value of
the mutual fund in which excess cash is invested.
The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's investment of excess cash in a mutual fund, which
invests in asset backed securities, bonds and various other commercial
obligations. The fund may, from time to time, use certain derivatives in its
investment strategy. The fund's portfolio managers make all investment
decisions and the Company has no control over such investment decisions or the
fund's use of derivatives.
Foreign Currency Risk
- ---------------------
Changes in foreign exchange rates, and in particular a strengthening of the U.S.
dollar, may negatively affect the Company's consolidated sales and gross margins
as expressed in U.S. dollars. To date, the Company has not entered into any
foreign exchange contracts to hedge its exposure to foreign exchange rate
fluctuations. However, if its international operations grow, the Company may
enter into foreign exchange contracts to manage its foreign exchange risk.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
On March 2, 2000, the Company filed suit in the U.S. District Court in Delaware
(civil case number 00-141) against Miltenyi Biotec GmbH of Germany and its
related U.S. companies, Miltenyi Biotec, Inc. and AmCell Corporation
(collectively "Miltenyi"). The suit charges Miltenyi with patent infringement
(U.S. Patents 4,714,680 and 4,965,204), breach of contract and deceptive trade
practices. Becton Dickinson and The Johns Hopkins University, both of whom have
proprietary rights associated with the Company's technology, have joined with
the Company in the suit. The Company is seeking damages and injunctive relief.
Miltenyi Biotec GmbH of Germany is contesting whether
18
jurisdiction is proper in the Delaware court. In the fall of 2000, AmCell
Corporation moved for summary judgment of non-infringement of the patents. The
Company opposed this motion and itself moved for summary judgment of
infringement of the patents. In an opinion dated April 23, 2001 concerning these
motions, the court declined to resolve the question of whether AmCell's
activities constitute infringement under the patent laws, choosing instead to
defer such resolution to the Food and Drug Administration ("FDA"). The court
further indicated, however, that the Company can revisit these issues with the
court depending on the FDA's response to its consideration of these issues.
Therefore, with recognition of the Company's right to renew its claim for relief
depending on the outcome from the FDA, the court granted AmCell's motion for
summary judgment and denied the Company's motion for summary judgment. Following
the entry of an order pursuant to the grant and denial of these cross-motions,
the Company moved to amend the order to clarify certain matters raised therein.
The Company's motion remains pending at this time. Also following entry of the
court's order, inquiry was made at the FDA concerning the court's deference to
the FDA on the question of infringement under the relevant patent laws. In this
regard, the Company has received notification from the FDA that the FDA declines
to engage in the activity requested in the court's order. It is unclear at this
time how the court shall respond to this notification from the FDA.
Item 2. Changes in Securities and Use of Proceeds.
As a result of the issuance by the Company of (i) common stock on January 8,
2001, March 6, 2001 and March 28, 2001 to Acqua Wellington North American
Equities Fund, Ltd., and (ii) certain stock options to employees through April
27, 2001, the exercise price for the Company's publicly traded warrants (Nasdaq:
NEXLW), which had been $5.40 per share, has been adjusted to $5.105 per share,
and each Warrant entitles the holder to purchase .2938 of a share of common
stock of the Company, instead of .2769 of a share of common stock of the
Company. These additional 22,000 shares issuable upon exercise of the warrants
have not been registered under the Securities Act of 1933 and unless and until
such time as a registration statement pertaining to such shares is in effect
under the Securities Act, such shares will constitute "restricted securities"
under the Securities Act and may only be sold or transferred in accordance with
the Securities Act or an exemption therefrom.
There have also been comparable adjustments to the Company's privately placed
Series B Preferred Stock and Class B Warrants. The conversion price of the
Series B Preferred Stock has been adjusted from $11 to $10.218, and the
aggregate number of shares of common stock into which the Series B Preferred
Stock may be converted has changed from 5,727,272 to 6,165,590. The exercise
price for the Class B Warrants has been adjusted from $12 to $11.129 and the
aggregate number of shares of common stock for which the Class B Warrants may be
exercised has changed from 750,000 to 808,676.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
The 2001 annual meeting of stockholders of the Company was held on June 21,
2001. The following matters were voted upon at the meeting: (i) to elect as
directors of the Company of each of Richard L. Dunning, Eric A. Rose, M.D.,
Victor W. Schmitt, C. Richard Piazza, Joseph A. Mollica, M.D., Richard L. Casey,
Daniel Levitt and William A. Albright, Jr.; (ii) to approve an amendment to the
Company's 1997 Incentive and Non-Incentive Stock Option Plan to increase the
number of shares
19
of Common Stock issuable thereunder from 1,312,500 shares to 2,262,500 shares;
and (iii) to ratify the appointment of KPMG LLP as independent auditors of the
Company for the year ended December 31, 2001.
Authority
Matter Voted Votes Cast For Withheld
========================================================================
1. Election of Directors
- ------------------------------------------------------------------------
Richard L. Dunning 18,705,120 361,245
- ------------------------------------------------------------------------
Eric A. Rose, M.D. 18,605,515 460,850
- ------------------------------------------------------------------------
Victor W. Schmitt 18,626,513 439,852
- ------------------------------------------------------------------------
C. Richard Piazza 18,705,926 360,439
- ------------------------------------------------------------------------
Joseph A. Mollica, M.D. 18,707,939 358,426
- ------------------------------------------------------------------------
Richard L. Casey 18,705,146 361,219
- ------------------------------------------------------------------------
Daniel Levitt 18,701,024 365,341
- ------------------------------------------------------------------------
William A. Albright, Jr. 18,688,605 377,760
- ------------------------------------------------------------------------
Votes Cast Broker
- -----------------------------------------------------------------------------------
For Against Abstentions Non-Votes
===================================================================================
2. Approval of amendment to 18,007,736 998,997 59,632 --
1997 Option Plan
- -----------------------------------------------------------------------------------
3. Ratification of KPMG LLP 18,956,325 63,459 46,581 --
- -----------------------------------------------------------------------------------
Item 5. Other Information.
Not applicable.
20
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
--------
2.4 Asset Purchase Agreement dated October 10, 1997 by and
among Baxter Healthcare Corporation ("Baxter"), the
Company and NCI (1)
2.5 Asset Acquisition Agreement dated February 18, 1999, by
and among Baxter, the Company and NCI (1)
2.6 Securities Agreement dated as of November 24, 1999 among
the Company and the Purchasers named in Schedule I
thereto (certain schedules are omitted and the Company
agrees to furnish supplementally a copy to the
Commission upon request) (1)
3.1 The Company's Amended and Restated Certificate of
Incorporation as amended to date (1)
3.2 The Company's Amended and Restated By-Laws as amended to
date (1)
4.4 Warrant Agreement dated June 17, 1996 between the
Company and American Stock Transfer & Trust Company (1)
4.5 The Certificate of Amendment of the Certificate of
Incorporation of the Company filed with the Delaware
Secretary of State on December 16, 1997 creating the
Series A Preferred Stock and amendments subsequent
thereto (included in Exhibit 3.1 above)
4.6 The Certificate of Amendment of the Certificate of
Incorporation of the Company filed with the Delaware
Secretary of State on May 25, 1999 modifying the
Series A Preferred Stock (included in Exhibit 3.1 above)
4.7 The Company's Series 1 6 1/2% Convertible Subordinated
Debenture Due November 30, 2004 issued May 28, 1999 to
Baxter (1)
4.8 The Company's Series 2 6 1/2% Convertible Subordinated
Debenture Due November 30, 2004 issued May 28, 1999 to
Baxter (1)
4.9 The Company's Certificate of Designation filed with the
Delaware Secretary of State on November 24, 1999
creating the Series B Preferred Stock (included in
Exhibit 3.1 above)
10.87 Termination Letter with Acqua Wellington North American
Equities Fund, Ltd.
10.88 The Company's 1997 Incentive and Non-Incentive Stock
Option Plan, as amended to date (incorporated by
reference to Exhibit 4.3 to the Company's Registration
Statement on Form S-8 (Registration No. 333-64138) filed
with the Commission on June 29, 2001).
(1) Filed as the same numbered Exhibit to the Company's
Annual Report on Form 10-K for the year ended December
31, 2000 and incorporated herein by reference thereto
(b) Reports on Form 8-K:
-------------------
The Company filed a Current Report on Form 8-K on June 14, 2001, under Item 5,
announcing a letter of intent with Baxter Healthcare Corporation.
21
EXHIBIT INDEX
-------------
10.87 Termination Letter with Acqua Wellington North American
Equities Fund, Ltd.
10.88 The Company's 1997 Incentive and Non-Incentive Stock Option
Plan, as amended to date (incorporated by reference to
Exhibit 4.3 to the Company's Registration Statement on
Form S-8 (Registration No. 333-64138) filed with the
Commission on June 29, 2001)
22
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.
Dated: August 14, 2001
NEXELL THERAPEUTICS INC.
a Delaware Corporation
(Registrant)
By: /s/ William A. Albright, Jr.
---------------------------------------------
William A. Albright, Jr.
Chief Executive Officer and Chief Financial
Officer (principal financial officer and
authorized to sign on behalf of the registrant)
23