8-K/A 1 w43666e8-ka.txt CURRENT REPORT UNDER SECTION 13 OR 15(D) 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.