10-K405 1 b38166ime10-k405.txt IMMULOGIC PHARMACEUTICAL CORP. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 Commission file number: 0-19117 IMMULOGIC PHARMACEUTICAL CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 13-3397957 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 12 ALFRED STREET, SUITE 300, WOBURN, MASSACHUSETTS 01801 (781) 933-1772 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ------------------------ Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $.01 Preferred Stock Purchase Rights Par Value $.01 (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 ___. Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. [X] The aggregate market value of the Common Stock held by non-affiliates of the registrant, based on the last sale price of the Common Stock reported on the Nasdaq over-the-counter bulletin board on January 31, 2001 was $1,027,539. The number of shares of Common Stock outstanding as of January 31, 2001 was 20,550,773. DOCUMENTS INCORPORATED BY REFERENCE - None 2 PART I ITEM 1. BUSINESS GENERAL ImmuLogic Pharmaceutical Corporation ("ImmuLogic" or the "Company") is a biopharmaceutical company, incorporated under the laws of the State of Delaware on March 26, 1987. On February 5, 1999, the Company announced that its Board of Directors had decided to conclude the business activities of the Company as soon as practicable. On March 23 1999, the Board of Directors approved a plan to liquidate and dissolve the Company (the "Plan"). The Plan was approved by a majority of the stockholders of the Company on August 25, 1999. The key features of the Plan are (1) the conclusion of all business activities, other than those in execution of the Plan; (2) the sale or disposition of all of the Company's assets; (3) the satisfaction of all outstanding liabilities; (4) the payment of liquidating distributions to stockholders in complete redemption of the Common Stock; and (5) the authorization of the filing of Certificate of Dissolution with the State of Delaware. As a result of the adoption of the Plan and the imminent nature of the liquidation, the Company adopted the liquidation basis of accounting effective July 1, 1999, whereby assets are valued at their estimated net realizable values and liabilities are valued at their estimated settlement amounts. The valuation of assets and liabilities requires many estimates and assumptions by management and there are substantial uncertainties in carrying out the provisions of the Plan. The amount and timing of future liquidating distributions will depend upon a variety of factors including, but not limited to, the actual proceeds from the sale of any of the Company's assets, the ultimate settlement amounts of the Company's liabilities and obligations, and actual costs incurred in connection with carrying out the Plan, including management fees and administrative costs during the liquidation period. The Company is a Delaware corporation and Delaware law requires that the Company stay in existence as a non-operating entity for three years from August 27, 1999, the date the Company filed a certificate of dissolution in Delaware. During the dissolution period, the Company will attempt to convert its remaining net assets to cash as expeditiously as possible. On September 1, 1999, the Company returned to its stockholders the sum of $39.9 million (or $1.94 per share, based on 20,550,773 shares of Common Stock then outstanding) to stockholders of record as of August 25, 1999. On September 1, 2000 the Company returned to its stockholders the sum of $9.7 million (or $.47 per share, based on 20,550,773 shares of Common Stock then outstanding) to stockholders of record as of August 25, 2000. On December 2, 2000 the Company returned to its stockholders the sum of $1.85 million (or $.09 per share, based on 20,550,773 shares of Common Stock then outstanding) to stockholders of record as of November 30, 2000. Future distributions to stockholders, if any, will be made by the Board of Directors of the Company as the Company's net assets are converted to cash. The actual amount and timing of future distributions, if any, cannot be predicted at this time. The Company intends to distribute pro rata to its stockholders, in cash or in-kind, or sell or otherwise dispose of, all of its property and net assets. The liquidation should be concluded prior to August 27, 2002 by a final liquidating distribution either directly to the stockholders or to one or more liquidating trusts. Details regarding the plan to liquidate and dissolve the Company can be found in the Company's Proxy Statement for its 1999 Annual Meeting of Stockholders filed with the Securities and Exchange Commission and mailed to stockholders on July 15, 1999. 2 3 PATENTS AND PROPRIETARY RIGHTS ImmuLogic's material proprietary rights consisted of patents and licenses to patents in the following areas: general immunotherapy and autoimmune, allergy and drug abuse therapy. The Company's rights relating to general immunotherapy were licensed from Washington University and the Massachusetts Institute of Technology ("MIT"). The licenses from Washington University and MIT terminated in 1999. The Company's patents relating to allergy therapy were transferred to Heska Corporation ("Heska") in 1999. The Company received $300,000 in cash in exchange for the transfer of these patents and the Company's agreement to relinquish certain of its rights to receive license fees and royalties under a license agreement signed with Heska in 1998. The Company's patents relating to drug abuse therapy were sold to Cantab Pharmaceuticals plc ("Cantab") on February 2, 1999. See the description of this transaction set forth under the heading "Risk Factors" below. RISK FACTORS The Company's plan is to conclude the business activities of the Company and distribute the Company's net assets to its stockholders. The Company and its future plans are subject to a number of risks and uncertainties, including those set forth below: The Company no longer satisfies the requirements for listing of its common stock on the Nasdaq National Market ("Nasdaq"). The Company was delisted on January 22, 2000. Because Nasdaq has delisted the Company's common stock, the ability of stockholders to buy and sell shares may be materially impaired. The Company's common stock is now traded on the Nasdaq over-the-counter bulletin board. Trading in the Company's common stock will cease altogether upon the earlier of (i) a final liquidating distribution either to the Company's stockholders or to a liquidating trust or (ii) August 27, 2002. Any future payments which the Company may receive under its agreements with Cantab and Heska, and, therefore, any future value which may be returned to the Company's stockholders with respect to those agreements, are dependent upon the successful development and commercialization of the products licensed or sold to such companies, as the case may be. The respective ability of Cantab and Heska to develop and commercialize their products is subject to all of the risks and uncertainties inherent in the biotechnology industry, including those associated with the early stage of development of such products, government regulation, competition, patents and proprietary rights, manufacturing and marketing, additional financing requirements and access to capital, product liability and third-party reimbursement. There can be no assurance that any of these products will be successfully developed or commercialized or that the Company will receive any value with respect to them during the liquidation period. The Company sold certain assets related to its drugs of addiction vaccine programs for the treatment of nicotine and cocaine addiction to Cantab in 1999. In exchange for these assets and cash totaling $6,000,000, the Company received 2,566,845 new Cantab Ordinary Shares of 2p each, which were represented by 855,615 American Depository Shares ("ADSs"). The Company has since sold all of these shares. In addition, ImmuLogic is entitled to receive additional payments if Cantab achieves certain 3 4 milestones in its cocaine and nicotine clinical development. These payments may, at the option of Cantab, be paid in ADSs. These ADS's will be subject to certain contractual limitations with respect to their disposition. Furthermore, the value of these ADSs, if any, will depend upon the relative success of Cantab and cannot be determined at this time. The actual timing of future distributions, if any, cannot be predicted at this time. The Company intends to distribute pro rata to its stockholders, in cash or in-kind, or sell or otherwise dispose of, all of its property and net assets. The liquidation should be concluded prior to the third anniversary thereof by a final liquidating distribution either directly to the stockholders or to one or more liquidating trusts. Details regarding the plan to liquidate and dissolve the Company can be found in the Company's Proxy Statement for its 1999 Annual Meeting of Stockholders filed with the Securities and Exchange Commission and mailed to stockholders on July 15, 1999. EMPLOYEES As of January 31, 2001, the Company had two part-time consultants and no full-time employees. ITEM 2. PROPERTIES In February 1998, the Company entered into a phased sublease agreement with Anadys Pharmaceuticals, Inc. (formerly Scriptgen Pharmaceuticals, Inc.) for the Company's 85,000 square foot headquarters and research and development facility located in Waltham, Massachusetts. The entire facility was subleased to Anadys effective August 1, 1999. Under the terms of the sublease, Anadys has assumed the Company's obligation under the lease in addition to reimbursing the Company for a portion of the Company's leasehold improvements. The Company negotiated with the landlord and Anadys an arrangement, which eliminated the Company's liability for the lease in the event that Anadys were to default on its sublease obligations. In consideration for such arrangement, the Company expects to receive $55,000 per month through August 2002 or approximately $1.25 million in the aggregate. If Anadys were to default on its lease agreement or if the Company sold its interest in the lease, the Company would receive less than or none of the $1.25 million. As of December 31, 2000, the Company has recorded $856,000 as the estimated net realizable value of the sublease for the purpose of liquidation basis accounting. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 4 5 EXECUTIVE OFFICER OF THE REGISTRANT The sole executive officer of the Company and his age and position with the Company as of January 31, 2001 are as follows:
NAME AGE POSITION WITH THE COMPANY ----------------------------------------------------------------------------------- J. Richard Crowley 45 President, Treasurer and Secretary
J. RICHARD CROWLEY, a consultant to ImmuLogic, holds the position of President, Treasurer and Secretary and previously served as ImmuLogic's interim Chief Financial Officer through April 1999. Mr. Crowley is President of Keystone Consulting, a contract financial and operational management services firm. Mr. Crowley's experience from 1983 to 1995 includes senior financial and operational positions with the LittlePoint Corporation, TransNational Financial Services and the Crosby Vandenburgh Group. From 1979 to 1983, Mr. Crowley was employed by Price Waterhouse, during which time he obtained his C.P.A. Mr. Crowley holds a B.A. in Economics from Providence College. Mr. Crowley is also a member of the Board of Directors of ImmuLogic. Executive officers of the Company are elected by the Board of Directors on an annual basis and serve at the discretion of the Board of Directors. There is no family relationship among any of the officers or directors. 5 6 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is currently traded on the Nasdaq over-the-counter bulletin board under the symbol IMUL. From May 1992 through January 22, 2000, the Company's Common Stock was traded on the Nasdaq National Market under the symbol IMUL. The Company's stock was delisted from the Nasdaq National Market on January 22, 2000. The following table sets forth for the periods indicated the range of high and low closing sale prices per share of the Common Stock as reported by Nasdaq.
HIGH LOW ---------------------------------------------------------------------- 2000 ---- First Quarter $ .75 $ .41 Second Quarter .66 .34 Third Quarter .66 .16 Fourth Quarter .17 .05 1999 ---- First Quarter $ 1.94 $ 1.25 Second Quarter 1.97 1.84 Third Quarter 2.09 .19 Fourth Quarter .75 .16
On December 31, 2000, there were approximately 331 holders of record of the Company's Common Stock. On September 1, 1999, the Company returned to its stockholders the sum of $39.9 million (or $1.94 per share, based on 20,550,773 shares of Common Stock then outstanding) to stockholders of record as of August 25, 1999. On September 1, 2000 the Company returned to its stockholders the sum of $9.7 million (or $.47 per share, based on 20,550,773 shares of Common Stock then outstanding) to stockholders of record as of August 25, 2000. On December 2, 2000 the Company returned to its stockholders the sum of $1.85 million (or $.09 per share, based on 20,550,773 shares of Common Stock then outstanding) to stockholders of record as of November 30, 2000. Future distributions to stockholders, if any, will be made by the Board of Directors of the Company as the Company's net assets are converted to cash. The actual amount and timing of future distributions, if any, cannot be predicted at this time. The Company intends to distribute pro rata to its stockholders, in cash or in-kind, or sell or otherwise dispose of, all of its property and net assets. The liquidation should be concluded prior to August 27, 2002 by a final liquidating distribution either directly to the stockholders or to one or more liquidating trusts. Details regarding the plan to liquidate and dissolve the Company can be found in the Company's Proxy Statement for its 1999 Annual Meeting of Stockholders filed with the Securities and Exchange Commission and mailed to stockholders on July 15, 1999. 6 7 ITEM 6. SELECTED FINANCIAL DATA The following selected financial data of the Company as of and for the five years ended December 31, 2000 are derived from the financial statements of the Company. The information set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included as Item 7 and the financial statements and related footnotes included as Item 8 in this Form 10-K. Effective July 1, 1999, the Company adopted the liquidation basis of accounting and as a result does not reflect full year operating results for 1999 in the selected financial data shown below. For the six months ended December 31, 1999, the Company recorded an increase in net assets of approximately $6 million relating to the adoption of liquidation basis accounting.
YEAR ENDED SIX MONTHS ENDED CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION DATA DECEMBER 31, 2000 DECEMBER 31, 1999 ----------------------------------------------------------------------------------------------------------------- (IN THOUSANDS) Net assets in liquidation, beginning of period $ 16,901 $ 48,943 Cash distribution to shareholders 11,509 39,868 Cash received from sale of Cantab stock (10,364) -- CHANGES IN LIQUIDATION BASIS ACCOUNTING ESTIMATES: (Decrease) increase in estimated net realizable value of Cantab stock (1,636) 7,000 Decrease in milestones and royalties 1,500 -- Net assets in liquidation, end of period $ 2,692 $ 16,901 -----------------------------------------------------------------------------------------------------------------
SIX MONTHS CONSOLIDATED STATEMENT OF OPERATIONS DATA ENDED JUNE 30, YEARS ENDED DECEMBER 31, ---------------------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 1998 1997 1996 Total revenues $ 1,088 $ 4,345 $ 2,049 $ 9,239 Research and development expenses 1,088 5,198 17,103 25,882 General and administrative expenses 2,179 2,161 6,390 6,830 Net loss (2,060) (310) (18,119) (18,870) Basic and diluted net loss per share (0.10) (0.02) (0.89) (0.93) Weighted average number of common Shares outstanding 20,376 20,362 20,273 20,206 ----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF NET CONSOLIDATED BALANCE SHEET ASSETS IN LIQUIDATION (IN THOUSANDS, EXCEPT CASH DISTRIBUTION DATA) 2000 1999 1998 1997 1996 ----------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents and short-and long-term investments $ 1,009 $ 2,168 $48,628 $52,293 $70,047 Total assets 3,449 18,621 56,195 59,588 79,654 Net Assets in liquidation 2,692 16,901 -- -- -- Long-term obligations -- -- 275 325 375 Stockholders' equity -- -- 53,758 54,019 71,926 Cash distributions, per share (1) $ .56 $ 1.94 -- -- -- ------------------------------------------------------------------------------
(1) Cash distributions based on 20,550,773 shares outstanding in the amount of $11,508,433 and $39,868,500 in 2000 and 1999, respectively. 7 8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Since inception, the Company had focused on the research and clinical development of products to treat allergies, autoimmune diseases, and vaccines for the management of drugs of abuse. On February 5, 1999, the Company announced that its Board of Directors had decided to conclude the business activities of the Company as soon as practicable. On March 23 1999, the Board of Directors approved a plan to liquidate and dissolve the Company (the "Plan"). The Plan was approved by a majority of the stockholders of the Company on August 25, 1999. The key features of the Plan are (1) the conclusion of all business activities, other than those in execution of the Plan; (2) the sale or disposition of all of the Company's assets; (3) the satisfaction of all outstanding liabilities; (4) the payment of liquidating distributions to stockholders in complete redemption of the Common Stock; and (5) the authorization of the filing of Certificate of Dissolution with the State of Delaware. As a result of the adoption of the Plan and the imminent nature of the liquidation, the Company adopted the liquidation basis of accounting effective July 1, 1999, whereby assets are valued at their estimated net realizable values and liabilities are valued at their estimated settlement amounts. The valuation of assets and liabilities requires many estimates and assumptions by management and there are substantial uncertainties in carrying out the provisions of the Plan. The amount and timing of future liquidating distributions will depend upon a variety of factors including, but not limited to, the actual proceeds from the sale of any of the Company's assets, the ultimate settlement amounts of the Company's liabilities and obligations, and actual costs incurred in connection with carrying out the Plan, including management fees and administrative costs during the liquidation period. The Company is a Delaware corporation and Delaware law requires that the Company stay in existence as a non-operating entity for three years from August 27, 1999, the date the Company filed a certificate of dissolution in Delaware. During the dissolution period, the Company will attempt to convert its remaining net assets to cash as expeditiously as possible. On September 1, 1999, the Company returned to its stockholders the sum of $39.9 million (or $1.94 per share, based on 20,550,773 shares of Common Stock then outstanding) to stockholders of record as of August 25, 1999. On September 1, 2000 the Company returned to its stockholders the sum of $9.7 million (or $.47 per share, based on 20,550,773 shares of Common Stock then outstanding) to stockholders of record as of August 25, 2000. On December 2, 2000 the Company returned to its stockholders the sum of $1.85 million (or $.09 per share, based on 20,550,773 shares of Common Stock then outstanding) to stockholders of record as of November 30, 2000. Future distributions to stockholders, if any, will be made by the Board of Directors of the Company as the Company's net assets are converted to cash. The actual amount and timing of future distributions, if any, cannot be predicted at this time. The Company intends to distribute pro rata to its stockholders, in cash or in-kind, or sell or otherwise dispose of, all of its property and net assets. The liquidation should be concluded prior to August 27, 2002 by a final liquidating distribution either directly to the stockholders or to one or more liquidating trusts. Details regarding the plan to liquidate and dissolve the Company can be found in the Company's Proxy Statement for its 1999 Annual Meeting of Stockholders filed with the Securities and Exchange Commission and mailed to stockholders on July 15, 1999. 8 9 LIQUIDITY AND CAPITAL RESOURCES The Company's primary objectives are (i) to liquidate its net assets in an efficient manner that optimizes the values for such assets and (ii) to reduce and control operating costs. The period of time to liquidate the assets and distribute the proceeds of the Company's assets is subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control. As of December 31, 2000, the Company had cash and cash equivalents of $1,009,000 invested primarily in money market funds. In December 1998, the Company signed an agreement with Cantab for the sale of the Company's assets and the transfer of control over the programs related to its drugs of addiction vaccine programs for the treatment of nicotine and cocaine addiction (the "Nicotine and Cocaine Programs"). The assets sold consisted primarily of patents and other intellectual property, as well as certain equipment and materials used in these programs. In connection with this sale, the Company remitted $6,000,000 in cash to Cantab in 1999 and received 2,566,845 Cantab ordinary shares in the form of 855,615 American Depository Shares ("ADSs"). One ADS is equal to approximately three ordinary shares. Under the terms of the Company's agreement with Cantab, the Company could not sell any of the ADSs or Cantab ordinary shares represented by the ADSs prior to August 2, 1999. Thereafter, the Company could immediately sell up to 25% of the ADSs, and then could sell an additional 25% every 90 days thereafter. In addition, the Company was obligated to sell such shares through a broker or brokers designated by Cantab and approved by the Company, and in a manner to be agreed upon by the Company and Cantab that is mutually advantageous to the Company and Cantab, considering the desire for the Company to sell and the desire of Cantab to avoid undue disruption of the market for such securities. On June 16, 2000, the Company converted 785,615 of its total 855,615 ADSs of Cantab Pharmaceuticals Plc ("Cantab") into 2,356,845 Ordinary Shares of Cantab and sold 1,300,000 of such Ordinary Shares on the London Stock Exchange for aggregate gross proceeds of approximately $7,215,000. In addition, ImmuLogic sold the remaining 70,000 ADSs to a private buyer in the United States for aggregate gross proceeds of approximately $1,165,000. In the third and fourth quarters of 2000, the Company sold the remaining 1,056,845 Ordinary Shares of Cantab on the London Stock Exchange for aggregate net proceeds of approximately $2,019,000. The Company has no remaining holdings of Cantab as of December 31, 2000. The Company could receive up to a maximum of $11 million in milestone payments contingent upon Cantab's successful development to the end of Phase II clinical trials of the Nicotine and Cocaine Programs sold to Cantab. These payments may be made in cash or in additional ADSs or a combination thereof at Cantab's discretion. The Company would receive the following for successful completion of the Phases as defined in the agreement as follows: Cocaine............................Phase II $2 million Nicotine...........................Phase I $3 million Nicotine...........................Phase II $6 million
Upon receipt of the Phase II Cocaine or Phase I Nicotine milestones in the form of Cantab stock or ADSs, the Company may sell up to 25% of such shares in each of the four quarters following the 9 10 expiration of an initial six-month period. There would be no lock-up on shares paid in respect of any additional milestones. The Company could potentially also receive a share of net royalties Cantab may receive from vaccine sales proportionate to the level of worldwide product sales achieved. While the Company will attempt to monetize these potential royalty streams, the Company does not anticipate receiving significant value for them and thus has not recorded any net realizable value for the royalty streams. The Company estimates that the range of value to be received from these milestones and royalties to be $0 to $11 million based on the contract terms. This reduction is due to the uncertainty surrounding Cantab's future resulting from the discontinuance of certain Cantab programs announced in the fourth quarter of 2000. Due to the Cantab program failures and uncertainty regarding the future of Cantab, the Company recorded $1.5 million as the estimated net realizable value for the purpose of liquidation basis accounting. In February 1998, the Company entered into a phased sublease agreement with Anadys Pharmaceuticals, Inc. (formerly Scriptgen Pharmaceuticals, Inc.) for the Company's 85,000 square foot headquarters and research and development facility located in Waltham, Massachusetts. The entire facility was subleased to Anadys effective August 1, 1999. Under the terms of the sublease, Anadys has assumed the Company's obligation under the lease in addition to reimbursing the Company for a portion of the Company's leasehold improvements. The Company negotiated with the landlord and Anadys an arrangement, which eliminated the Company's liability for the lease in the event that Anadys were to default on its sublease obligations. In consideration for such arrangement, the Company expects to receive $55,000 per month through August 2002 or approximately $1.25 million in the aggregate. If Anadys were to default on its lease agreement or if the Company sold its interest in the lease, the Company would receive less than the $1.25 million. As of December 31, 2000, the Company has recorded $856,000 as the estimated net realizable value of this sublease for the purpose of liquidation basis accounting. At December 31, 2000, the Company estimates that it will incur approximately $650,000 of costs including management compensation, professional fees, insurance, and facility costs to be incurred during the remaining liquidation period through August 26, 2002. Accrued expenses and other current liabilities consist primarily of costs incurred through June 30, 1999, including severance costs and other operating costs incurred prior to the liquidation of the Company. RESULTS OF OPERATIONS Changes in Net Assets in Liquidation for the Twelve Months ended December 31, 2000 Net assets in liquidation decreased in 2000 by approximately $14 million. This decrease was primarily due to cash distributions to shareholders of approximately $11.5 million and changes in liquidation basis accounting estimates. The primary changes in liquidation basis accounting estimates included decreases in the net realizable value of Cantab Stock of approximately $1.6 million, the estimated milestone and royalty receivable from Cantab of $1.5 million and the estimated costs to be incurred during liquidation period of approximately $200,000. The milestone and royalty receivable reduction is due to the uncertainty surrounding Cantab's future resulting from the discontinuance of certain Cantab programs announced in the fourth quarter of 2000 and the delay by Cantab in the development of the nicotine and cocaine programs. While based on the aforementioned business issues, the reduction in the milestone and royalty receivable and the balance at December 31, 2000 was based on subjective judgements by 10 11 management of the Company. The decrease in estimated costs to be incurred during liquidation of approximately $200,000 is primarily due to the Company's revised estimates of the various potential future costs expected to be incurred through the liquidation period. No single item constituted the majority of the decrease. Changes in Net Assets in Liquidation for the Six Months ended December 31,1999 Net assets in liquidation decreased by approximately $32 million. This decrease was primarily due to a cash distribution to shareholders of approximately $39.9 million, offset by an estimated increase in the net realizable value of the Cantab stock of $7 million. Six Months Ended June 30, 1999 (the last period in which the Company had operations) All significant changes between 1999 and 1998 were due to the accrual of estimated costs to liquidate the Company as discussed under the heading "Liquidity and Capital Resources" and other costs incurred in discontinuing the operations of the Company as discussed below. Revenues for the six months ending June 30, 1999 were $1,088,000 which were entirely generated from research and development services performed for Cantab. These services terminated on June 30, 1999. Research and development expenses for the six months ended June 30, 1999 were $1,088,000, relating entirely to research and development services performed for Cantab. These services terminated on June 30, 1999. General and administrative expenses for the six months ended June 30, 1999 were $2,179,000 which included approximately $1,006,000 in severance for 15 employees, including the former President and Chief Executive Officer of the Company. During the first six months of 1999, a net write-off of $966,000 was recorded in connection with the disposition of the Company's Lease. For the first six months of 1999, interest income was $1,085,000 resulting from interest earned on an average cash and investment balance of approximately $45,458,000. FUTURE RESULTS This Annual Report on Form 10-K contains forward-looking statements. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," expects," "intends", "estimates", and similar expressions are intended to identify forward-looking statements. The Company's plan is to conclude the business activities of the Company and distribute the Company's net assets to its stockholders. There are a number of important factors that could affect the future activities of the Company, including, without limitation, the factors set forth below. The Company no longer satisfies the requirements for listing of its common stock on the Nasdaq National Market ("Nasdaq"). The Company was delisted on January 22, 2000. Because Nasdaq has delisted the Company's common stock, the ability of stockholders to buy and sell shares may be materially impaired. 11 12 The Company's common stock is now traded on the Nasdaq over-the-counter bulletin board. Trading in the Company's common stock will cease altogether upon the earlier of (i) a final liquidating distribution either to the Company's stockholders or to a liquidating trust or (ii) August 27, 2002. Any future payments which the Company may receive under its agreements with Cantab and Heska, and, therefore, any future value which may be returned to the Company's stockholders with respect to those agreements, are dependent upon the successful development and commercialization of the products licensed or sold to such companies, as the case may be. The respective ability of Cantab and Heska to develop and commercialize their products is subject to all of the risks and uncertainties inherent in the biotechnology industry, including those associated with the early stage of development of such products, government regulation, competition, patents and proprietary rights, manufacturing and marketing, additional financing requirements and access to capital, product liability and third-party reimbursement. There can be no assurance that any of these products will be successfully developed or commercialized or that the Company will receive any value with respect to them during the liquidation period. The Company sold certain assets related to its drugs of addiction vaccine programs for the treatment of nicotine and cocaine addiction to Cantab. ImmuLogic is entitled to receive up to $11 million in additional payments if Cantab achieves certain milestones in its cocaine and nicotine clinical development. These payments may, at the option of Cantab, be paid in ADSs. In addition, the ADSs which may be issued to the Company, are subject to extreme price and volume fluctuations. Furthermore, the value of these ADSs, if any, will depend upon the relative success of Cantab and cannot be determined at this time. The actual timing of future distributions cannot be predicted at this time. The Company intends to distribute pro rata to its stockholders, in cash or in-kind, or sell or otherwise dispose of, all of its property and net assets. The liquidation should be concluded prior to the third anniversary thereof by a final liquidating distribution either directly to the stockholders or to one or more liquidating trusts. Details regarding the plan to liquidate and dissolve the Company can be found in the Company's 1999 Proxy Statement filed with the Securities and Exchange Commission and mailed to stockholders on July 15, 1999. Item 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company's investment policy specifies credit quality standards for the Company's investments and limits the amount of credit exposure to any single issue, issuer or type of investment. The Company does not believe that it has any material exposure to market risk with respect to derivative or other financial instruments which would require disclosure under this item. 12 13 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of ImmuLogic Pharmaceutical Corporation: We have audited the accompanying consolidated statements of net assets in liquidation of ImmuLogic Pharmaceutical Corporation (the "Company") as of December 31, 2000 and 1999, and the related consolidated statements of changes in net assets in liquidation for the year ended December 31, 2000 and the six months ended December 31, 1999. In addition, we have audited the consolidated statements of operations, cash flows and stockholders' equity for the six months ended June 30, 1999 and the year ended December 31, 1998. 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 in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in Note A to the consolidated financial statements, the Company's stockholders have approved a plan of complete liquidation and dissolution of the Company. As a result, the Company has changed its basis of accounting from the going concern basis to the liquidation basis effective July 1, 1999, under which the consolidated financial statements reflect assets at estimated net realizable amounts and liabilities at estimated settlement amounts. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the net assets in liquidation of ImmuLogic Pharmaceutical Corporation at December 31, 2000 and 1999, the changes in its net assets in liquidation for the year ended December 31, 2000 and the six months ended December 31, 1999 and the results of its operations and its cash flows for the six months ended June 30, 1999 and the year ended December 31, 1998 in conformity with accounting principles generally accepted in the United States of America on the bases described in the preceding paragraph. /s/ PRICEWATERHOUSECOOPERS LLP ------------------------------- PRICEWATERHOUSECOOPERS LLP February 6, 2001 13 14 IMMULOGIC PHARMACEUTICAL CORPORATION CONSOLIDATED STATEMENTS OF NET ASSETS IN LIQUIDATION (IN THOUSANDS)
DECEMBER 31, DECEMBER 31, 2000 1999 ------------ ------------ ASSETS Cash and cash equivalents $ 1,009 $ 2,168 Cantab stock -- 12,000 Milestones and royalties receivable 1,500 3,000 Landlord receivable 856 1,400 Other assets 84 53 ------- ------- Total assets $ 3,449 $18,621 ------- ------- LIABILITIES Estimated costs to be incurred during liquidation period 650 1,215 Accounts payable and accrued expenses 107 505 ------- ------- Total liabilities 757 1,720 ------- ------- NET ASSETS IN LIQUIDATION $ 2,692 $16,901 ======= =======
The accompanying notes are an integral part of the consolidated financial statements. 14 15 IMMULOGIC PHARMACEUTICAL CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION (IN THOUSANDS)
TWELVE MONTHS SIX MONTHS ENDED ENDED DECEMBER 31, DECEMBER 31, 2000 1999 ------------- ------------ Net assets in liquidation, beginning of period $ 16,901 $ 48,943 Cash distribution to shareholders (11,509) (39,868) Other net changes in cash and cash equivalents 10,350 115 Cash received from milestones -- (300) Cash received from landlord (544) (272) Net cash received from the sale of Cantab stock (10,364) -- Net change in other assets and liabilities (133) -- Payment of estimated costs to be incurred and accrued expenses 759 1,283 CHANGES IN LIQUIDATION BASIS ACCOUNTING ESTIMATES: Increase (decrease) in estimated net realizable value of Cantab stock (1,636) 7,000 Decrease in estimated costs to be incurred during the liquidation period 204 -- Decrease in milestones and royalty receivable (1,500) -- Increase in investment income receivable 164 -- -------- -------- Net assets in liquidation December 31, 2000 $ 2,692 $ 16,901 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 15 16 IMMULOGIC PHARMACEUTICAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (GOING CONCERN BASIS) (IN THOUSANDS), EXCEPT PER SHARE DATA
YEAR ENDED SIX MONTHS ENDED DECEMBER 31, ------------------------------------ JUNE 30, 1999 1998 ------------------------------------ Revenues: Sponsored research revenues $ 1,088 $ 1,145 Sale of programs -- 3,000 License revenues -- 200 ------------ ------------ Total revenues 1,088 4,345 ------------ ------------ Operating expenses: Proprietary research and development -- 4,053 Sponsored research and development 1,088 1,145 General and administrative 2,179 2,161 Loss on leasehold improvements, net 966 -- ------------ ------------ Total operating expenses 4,233 7,359 ------------ ------------ Operating loss (3,145) (3,014) Interest income 1,085 2,704 ------------ ------------ Net loss $ (2,060) $ (310) ------------ ------------ Basic and diluted net loss per common share $ (0.10) $ (0.02) ------------ ------------ Weighted average number of common shares outstanding 20,376,323 20,362,157 ------------ ------------ Comprehensive loss: Net loss $ (2,060) $ (310) Other comprehensive loss: Unrealized loss on Cantab stock (871) -- ------------ ------------ Comprehensive loss $ (2,931) $ (310) ------------ ------------
The accompanying notes are an integral part of the consolidated financial statements. 16 17 IMMULOGIC PHARMACEUTICAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (GOING CONCERN BASIS) (In thousands)
YEAR ENDED SIX MONTHS ENDED DECEMBER 31, ---------------------------------- JUNE 30, 1999 1998 ---------------------------------- Cash flows for operating activities: Net loss $ (2,060) $ (310) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 72 680 Write-off of leasehold improvements 1,446 201 Shares issued for 401(k) employer match 11 48 Gain on sale of equipment (14) (70) Changes in assets and liabilities: Prepaid expenses and other assets 219 (2,790) Accounts payable and accrued expenses 331 (3,082) Reduction in deferred rent (616) -- Other current and long-term liabilities (325) (50) -------- -------- Total adjustments 1,124 (5,064) -------- -------- Net cash used in operating activities (936) (5,373) Cash flows from investing activities: Purchase of Cantab stock (6,000) -- Rent received for leasehold improvements 463 480 Proceeds from sale of equipment 133 1,227 Purchase of short-term investments -- (23,934) Redemption of short-term investments 8,219 34,783 Purchase of long-term investments -- (2,871) Redemption of long-term investments 4,142 6,107 -------- -------- Net cash provided by investing activities 6,957 15,792 Cash flows from financing activities: Proceeds from exercise of stock options 1 -- -------- -------- Net cash provided by financing activities 1 -- -------- -------- Net increase (decrease) in cash and cash equivalents 6,022 10,419 Cash and cash equivalents at beginning of period 18,856 8,437 -------- -------- Cash and cash equivalents at end of period $ 24,878 $ 18,856 -------- --------
The accompanying notes are an integral part of the consolidated financial statements. 17 18 IMMULOGIC PHARMACEUTICAL CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (GOING CONCERN BASIS)
No. of Shares of Common Additional Unrealized Accumulated Total Stock- Common Stock Stock Paid-in Loss on Cantab Deficit holders' Equity Capital Stock BALANCE AT DECEMBER 31, 1997 20,340,727 203,407 185,250,346 -- (131,434,613) 54,019,140 401(k) employer match 26,945 270 48,167 48,437 Net loss (309,574) (309,574) ================================================================================================ BALANCE AT DECEMBER 31, 1998 20,367,672 203,677 185,298,513 -- (131,744,187) 53,758,003 Exercise of common stock options 1,750 17 1,383 1,400 401(k) employer match 8,624 86 10,435 10,521 Unrealized loss on Cantab stock (871,658) (871,658) Net loss (2,059,558) (2,059,558) ------------------------------------------------------------------------------------------------ BALANCE AT JUNE 30, 1999 20,378,046 $ 203,780 $185,310,331 $(871,658) $(133,803,745) $50,838,708 ================================================================================================
The accompanying notes are an integral part of the consolidated financial statements. 18 19 IMMULOGIC PHARMACEUTICAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. NATURE OF BUSINESS ImmuLogic Pharmaceutical Corporation ("ImmuLogic" or the "Company") is a company which was in the biopharmaceutical industry to develop novel products with a primary emphasis on the diagnosis and treatment of allergies and on the immunological treatment of addiction. Since inception, the Company did not derive any revenues from product sales and has incurred significant operating losses. On March 23 1999, the Board of Directors of ImmuLogic Pharmaceutical Corporation (the "Company") approved a plan to liquidate and dissolve the Company (the "Plan"). The Plan was approved by a majority of the stockholders of the Company on August 25, 1999. The Plan was the end result of the restructuring which began in 1997 and included the sale of the Company's programs to Cantab Pharmaceuticals plc ("Cantab"), the sub-lease of its Waltham, Massachusetts facility and a reduction in workforce. The key features of the Plan are (1) the conclusion of all business activities, other than those in execution of the Plan; (2) the sale or disposition of all of the Company's assets; (3) the satisfaction of all outstanding liabilities; (4) the payment of liquidating distributions to stockholders in complete redemption of the Common Stock; and (5) the authorization of the filing of Certificate of Dissolution with the State of Delaware. B. LIQUIDATION BASIS OF ACCOUNTING The consolidated financial statements for fiscal 1998 and for the six months ended June 30, 1999 were prepared on the going concern basis of accounting which contemplates realization of assets and satisfaction of liabilities in the normal course of business. As a result of the adoption of the Plan and the imminent nature of the liquidation, the Company adopted the liquidation basis of accounting effective July 1, 1999. This basis of accounting is considered appropriate when, among other things, liquidation of a company appears imminent and the net realizable value of assets are reasonably determinable. Under this basis of accounting, assets are valued at their estimated net realizable values and liabilities are valued at their estimated settlement amounts. The conversion from the going concern to liquidation basis of accounting has required management to make significant estimates and judgements. In order to record assets at estimated net realizable value and liabilities at estimated settlement amounts under liquidation basis accounting, on July 1, 1999 the Company recorded the following adjustments: recorded a $3.1 million decrease in the value of the Cantab stock, recorded a $3.2 million receivable for milestones and royalties, and recorded an accrual of $1.3 million for costs to be incurred during the liquidation period. Due to the significant increase in the trading value of the Cantab stock in the fourth quarter of 1999, the Company recorded an adjustment to increase the net estimated realizable value of the Cantab stock from $5 million to $12 million. In 2000 the Company sold its entire position in Cantab for approximately $10,364,000. Additionally in 2000, the Company reduced the estimated 19 20 receivable for milestones and royalties by $1.5 million and decreased its estimate for estimated costs to be incurred by $204,000 to $650,000 for the remainder of the liquidation period through August 26, 2002. The decrease in estimated costs to be incurred during liquidation of approximately $200,000 is primarily due to the Company's revised estimates of the various potential future costs expected to be incurred through the liquidation period. The amount and timing of future liquidating distributions will depend upon a variety of factors including, but not limited to, the actual proceeds from the sale of any of the Company's net assets, the ultimate settlement amounts of the Company's liabilities and obligations, actual costs incurred in connection with carrying out the Plan, including management fees and administrative costs during the liquidation period, and the timing of the liquidation and dissolution. A summary of significant estimates and judgements utilized in preparation of the December 31, 2000 consolidated financial statements on a liquidation basis follows: Milestones & Royalties The Company could receive up to a maximum of $11 million in milestone payments contingent upon Cantab's successful development to the end of Phase II clinical trials of the Nicotine and Cocaine Programs sold to Cantab. These payments may be made in cash or in additional ADSs or a combination thereof at Cantab's discretion. The Company would receive the following for successful completion of the Phases as defined in the agreement as follows: Cocaine............................Phase II $2 million Nicotine...........................Phase I $3 million Nicotine...........................Phase II $6 million
Upon receipt of the Phase II Cocaine or Phase I Nicotine milestones in the form of Cantab stock or ADSs, the Company may sell up to 25% of such shares in each of the four quarters following the expiration of an initial six-month period. There would be no lock-up on shares paid in respect of any additional milestones. The Company could potentially also receive a share of net royalties Cantab may receive from vaccine sales proportionate to the level of worldwide product sales achieved. While the Company will attempt to monetize these potential royalty streams, the Company does not anticipate receiving significant value for them and thus has not recorded any net realizable value for the royalty stream. The Company estimates that the range of value to be received from these milestones and royalties to be $0 to $11 million based on the contract terms. During 2000 the Company has reduced the net realizable value of these milestones from the $3 million recorded as of December 31, 1999 to $1.5 million. This reduction is due to the uncertainty surrounding Cantab's future resulting from the discontinuance of certain Cantab programs announced in the fourth quarter of 2000 and the delay by Cantab in the development of the nicotine and 20 21 cocaine programs. While based on the aforementioned business issues, the reduction in the milestone and royalty receivable and the balance at December 31, 2000 was based on subjective judgements by management of the Company. Cash Distribution On September 1, 1999, the Company returned to its stockholders the sum of $39.9 million (or $1.94 per share, based on 20,550,773 shares of Common Stock currently outstanding) to stockholders of record as of August 25, 1999. On September 1, 2000 the Company returned to its stockholders the sum of $9.7 million (or $.47 per share, based on 20,550,773 shares of Common Stock currently outstanding) to stockholders of record as of August 25, 2000. On December 2, 2000 the Company returned to its stockholders the sum of $1.85 million (or $.09 per share, based on 20,550,773 shares of Common Stock currently outstanding) to stockholders of record as of November 30, 2000. Future distributions to stockholders would be made by the Board of Directors of the Company as the Company's net assets are converted to cash. The actual amount and timing of future distributions cannot be predicted at this time. The Company intends to distribute pro rata to its stockholders, in cash or in-kind, or sell or otherwise dispose of, all of its property and net assets. The liquidation should be concluded prior to August 27, 2002 by a final liquidating distribution either directly to the stockholders or to one or more liquidating trusts. Details regarding the plan to liquidate and dissolve the Company can be found in the Company's 1999 Proxy Statement filed with the Securities and Exchange Commission and mailed to stockholders on July 15, 1999. Landlord Receivable In February 1998, the Company entered into a phased sublease agreement with Anadys Pharmaceuticals, Inc. (formerly Scriptgen Pharmaceuticals, Inc.) for the Company's 85,000 square foot headquarters and research and development facility located in Waltham, Massachusetts. The entire facility was subleased to Anadys effective August 1, 1999. Under the terms of the sublease, Anadys has assumed the Company's obligation under the lease in addition to reimbursing the Company for a portion of the Company's leasehold improvements. The Company negotiated with the landlord and Anadys an arrangement, which eliminated the Company's liability for the lease in the event that Anadys were to default on its sublease obligations. In consideration for such arrangement, the Company expects to receive $55,000 per month through August of 2002 or approximately $1.25 million in the aggregate. If Anadys were to default on its lease agreement or if the Company sold its interest in the lease, the Company would receive less than or none of the $1.25 million. As of December 31, 2000, the Company has recorded $856,000 as the estimated net realizable value for the purpose of liquidation basis accounting. Liabilities At December 31, 2000, the Company estimates that there are $650,000 of costs remaining to be incurred during the remaining liquidation period through August 26, 2002. 21 22 C. ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, ImmuLogic Securities Corporation. All intercompany accounts and transactions have been eliminated. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles for liquidation requires management to make certain estimates and assumptions that affect the net realizability of assets and estimated costs to be incurred during the liquidation period and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. CASH As of December 31, 2000, the Company had cash and cash equivalents of $1,009,000 invested primarily in money market funds. REVENUE RECOGNITION Payments associated with rights to license or sublicense the Company's technology were recognized as revenue when payments were received. Payments in connection with sponsored research and the sale of programs were recognized as revenue when earned under the terms of the agreements. RESEARCH AND DEVELOPMENT All research and development costs were expensed as incurred. INCOME TAXES The Company follows the liability method of accounting for income taxes whereby a deferred tax liability is measured by the enacted tax rates which will be in effect when any differences between the financial statements and tax basis of assets reverse. The deferred tax liability can be reduced by net operating losses being carried forward for tax purposes. The measurement of deferred tax assets is reduced by a valuation allowance if, based upon weighted available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. NET LOSS PER COMMON SHARE As explained in Note B, effective July 1, 1999 the Company adopted the liquidation basis of accounting. Accordingly, the presentation of per common share information on a liquidation basis is not considered meaningful and has been omitted. 22 23 The basic loss per common share, for periods prior to July 1, 1999 was computed based upon the weighted average number of common shares outstanding. The Company had 0, 0, and 1,532,018 options outstanding at December 31, 2000, 1999 and 1998, respectively. These options were not included in the calculation of dilutive common equivalent shares however, since the effect of their inclusion would have been anti-dilutive. D. PROPERTY AND EQUIPMENT During 1999, all of the Company's equipment and furniture was sold. In addition, the Company recorded a loss on leasehold improvements in the amount of $1,446,000 to record the leaseholds at their net realizable value for liquidation basis accounting. Depreciation and amortization expense associated with property and equipment was approximately $72,000, and $680,000, 1999 and 1998, respectively. E. STOCKHOLDERS' EQUITY COMMON STOCK At December 31, there were 20,550,773 common shares issued and outstanding for the years 2000 and 1999, respectively. PREFERRED STOCK The Company has authorized a single class of preferred stock, par value $.01, consisting of 1,000,000 shares. This preferred stock may be issued in series with such rights, preferences and privileges as the Board of Directors may determine. SHAREHOLDER RIGHTS PLAN On July 11, 1995, the Board of the Company declared a dividend of one preferred stock purchase right (a Right) for each outstanding share of the Company's Common Stock to stockholders of record at the close of business on August 1, 1995. The Company adopted the plan to protect shareholders against unsolicited attempts to acquire control of the Company that do not offer what the Company believes to be an adequate price to all shareholders. Each Right entitles the registered holder to purchase from the Company a unit consisting of one one-thousandth of a share of Series A Junior Participating Preferred Stock, $.01 par value (the Preferred Stock), at a purchase price of $75 in cash per unit subject to adjustment. Initially, the Rights will be attached to all Common Stock certificates representing shares then outstanding, and no separate Rights Certificates will be distributed. The Rights will separate from the Common Stock and a Distribution Date will occur upon the earlier of (i) 10 days following a public announcement that a person or group of affiliated or associated persons (an Acquiring Person) has acquired, or obtained the right to acquire, beneficial ownership of 20% or more of the outstanding shares of Common Stock, or (ii) 10 business days following the commencement of a tender offer or exchange offer that would result in a person or group beneficially owning 30% or more of such outstanding shares of Common Stock. 23 24 The Rights are not exercisable until the Distribution Date and will expire at the close of business on August 1, 2005, unless earlier redeemed or exchanged by the Company as described below. In the event that any stockholder becomes an Acquiring Person, except pursuant to a Permitted Offer, each Right will thereafter entitle the holder thereof to receive, upon exercise, that number of shares of Common Stock which equals the exercise price of the Right divided by one-half of the current market price (as defined in the Rights Agreement) of the Common Stock at the date of the occurrence of the event. Preferred Stock purchasable upon exercise of the Rights will not be redeemable. Each share of Preferred Stock will be entitled to a minimum preferential quarterly dividend payment of $10 per share and will be entitled to an aggregate dividend of 1,000 times the dividend declared per share on Common Stock. In the event of liquidation, the holders of the Preferred Stock will be entitled to a minimum preferential liquidation payment of $1,000 per share and will be entitled to an aggregate payment of 1,000 times the payment made per share of Common Stock. Each share of Preferred Stock will have 1,000 votes, voting together with the Common Stock. Finally, in the event of any merger, consolidation, or other transaction in which Common Stock is exchanged, each share of Preferred Stock will be entitled to receive 1,000 times the amount received per share of Common Stock. These rights are subject to adjustment for any stock split, stock dividend, recapitalization, or similar event. At December 31, 2000, 20,550,773 preferred stock purchase rights were outstanding. STOCK OPTIONS As of December 31, 2000, there were no stock options outstanding. The Company's stock option plan activity is summarized as follows:
Number Weighted Average of Options Exercise Price ---------------------------------------------------------------------------- Outstanding at December 31, 1997 1,993,218 $ 8.25 Granted during 1998 313,000 1.44 Exercised during 1998 -- -- Canceled during 1998 (774,200) 9.17 ---------- -------- Outstanding at December 31, 1998 1,532,018 7.98 Granted during 1999 -- -- Exercised during 1999 (174,477) 1.44 Canceled during 1999 (1,357,541) 7.03 ---------- -------- Outstanding at December 31, 1999 -- $ -- Granted during 2000 -- -- Exercised during 2000 -- -- Canceled during 2000 -- -- ---------- -------- Outstanding at December 31, 2000 -- $ -- ========== ========
24 25 F. EMPLOYEE BENEFITS The Company had a 401(k) savings plan (the Plan) which was available to all of its qualified permanent employees. Participants could contribute up to 15 percent of their annual compensation to the Plan, subject to certain limitations. The employer match to the Plan was in the form of Company Common Stock and was calculated as the lesser of up to one-half of six percent of a participant's total compensation or $2,000 annually in value of Common Stock. The fair market value on the date of issuance of the Common Stock pursuant to the matching contributions totaled approximately $11,000 and $25,000 in 1999 and 1998, respectively. Due to the Company's liquidation, the Plan was terminated during 1999. The Company has distributed the assets of the Plan. G. INCOME TAXES At December 31, 2000 the Company had available for federal income tax purposes net operating loss carryforwards of approximately $137,000,000 expiring in the years 2002 through 2019, which are available to reduce future federal taxable income. The Company also has available research and experimentation tax credits of approximately $3,700,000 at December 31, 2000, expiring in the years 2002 through 2018. The net operating loss carryforwards are subject to limitation in any given year in the event of significant changes in ownership. The Company has established a valuation reserve against the entire deferred tax asset arising from these carryforwards due to the uncertainty of earning sufficient taxable income and accordingly, has not given recognition to these tax benefits in the accompanying financial statements. The Company does not believe these operating loss carryforwards have material value and any benefit relating to these operating losses could be lost due to failure to meet the continuity of business requirements. Significant components of the Company's deferred tax assets and liabilities are as follows:
DECEMBER 31, 2000 1999 ---------------------------------------------------------------------------------------------- Deferred tax assets and liabilities: Net operating loss and tax credit carryforwards $ 54,723,900 $ 60,369,608 Accrued expenses 302,800 612,000 Accrued revenue (942,404) (1,760,000) Other 9,054 12,482 ------------ ------------ Total deferred tax assets and liabilities 54,093,350 59,234,090 ------------ ------------ Valuation allowance (54,093,350) (59,234,090) ------------ ------------ Net deferred tax assets and liabilities $ -- $ -- ============ ============
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III 25 26 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth the names, ages and positions of the executive officers and directors of the Company as of January 31, 2001.
Name Age Position ---- --- -------- J. Richard Crowley 45 Director, President, Secretary and Treasurer of the Company Carl S. Goldfischer, M.D. 42 Director Daniel J. Korpolinski 58 Director
Mr. J. Richard Crowley, a consultant to the Company, served as the Company's interim Chief Financial Officer from May 1997 until April 1, 1999, when he was appointed President, Secretary and Treasurer. Mr. Crowley is President of Keystone Consulting, a contract financial and operational management services firm which he founded in 1995. Mr. Crowley's experience from 1983 to 1995 includes senior financial and operational positions with the LittlePoint Corporation, a children's consumer products company, TransNational Financial Services, a marketer of financial products to affinity groups, and the Crosby Vandenburgh Group, a contract publisher. From 1979 to 1983, Mr. Crowley was with Price Waterhouse, during which time he obtained his C.P.A. Mr. Crowley holds a B.A. in Economics from Providence College. Mr. Crowley also serves on the Company's Board of Directors. Dr. Carl S. Goldfischer became a member of the Company's Board of Directors in March 1997. Dr. Goldfischer is currently a private investor. From May 1996 until December 2000, Dr. Goldfischer served as Vice President, Finance and Strategic Planning and Chief Financial Officer of ImClone Systems, Inc., a publicly held biotechnology company. From June 1994 until May 1996, Dr. Goldfischer served as a health care analyst with Reliance Insurance, an insurance company. From June 1991 until June 1994, Dr. Goldfischer was Director of Research for D. Blech & Co., a securities firm. Dr. Goldfischer received a doctorate of medicine from Albert Einstein College of Medicine in 1988 and served as a resident in radiation oncology at Montefiore Hospital of the Albert Einstein College of Medicine until 1991. Daniel L. Korpolinski became a member of the Company's Board of Directors in September 1999. Mr. Korpolinski is currently the President and Chief Executive Officer of StressGen Biotechnologies. From August 1998 to January 2000 Mr. Korpolinski served as the President and Chief Executive Officer, and a director, of Copley Pharmaceutical Inc., a publicly held pharmaceutical company. From June 1996 to August 1998, Mr. Korpolinski served as President and Chief Executive Officer of Prodromics On Line, a health informatics company with databases for the diagnosis of mental and physical disease. From October 1991 to June 1996, Mr. Korpolinski served as President and Chief Executive Officer of CoCensys, Inc., a biopharmaceutical company. 26 27 Item 11. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following sets forth certain information regarding compensation paid during each of the Company's last three fiscal years to each person who served as the Company's sole executive officer (the "Named Executive Officer"). SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION AWARDS SHARES SUBJECT NAME AND PRINCIPAL ANNUAL COMPENSATION TO OPTIONS ALL OTHER POSITION YEAR SALARY BONUS GRANTED COMPENSATION(1) ------------------ ---- ------------------- ----- -------------- --------------- J. Richard Crowley 2000 $170,573 $ 25,000 -- -- President, Secretary and 1999 176,386 43,000 -- -- Treasurer(1) 1998 101,386 -- 17,273(2) --
-------------------------------------------------------------------------------- (1) Mr. Crowley joined the Company as interim Chief Financial Officer in 1997. Mr. Crowley was appointed President, Secretary and Treasurer effective April 1, 1999. Mr. Crowley also serves on the Company's Board of Directors. (2) Mr. Crowley agreed to the termination of his options in April 1999. 27 28 OPTION GRANTS IN LAST FISCAL YEAR No options were granted to the Named Executive Officer in 2000. AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUES AT FISCAL YEAR-END The Named Executive Officer held no unexercised options at December 31, 2000. EMPLOYMENT, TERMINATION AND CHANGE-IN-CONTROL ARRANGEMENTS The Company entered into an employment agreement with its former CEO, Dr. Joseph Marr on July 3, 1996, as amended, relating to the obligations of the Company to Dr. Marr in the event of termination of his employment. The agreement provided that if the Company terminated Dr. Marr's employment for cause, the Company would be obligated to pay Dr. Marr his compensation and benefits through the last day of his actual employment. If Dr. Marr terminated his employment for "good reason" (as defined in the agreement), or his employment was terminated (other than for "cause," as defined in the agreement) upon a "change in control" (as defined in the agreement), Dr. Marr would receive a lump-sum cash payment equal to 12 months of compensation at the level of compensation immediately prior to termination (the "Base Compensation"). In addition, Dr. Marr would be eligible to receive an amount equal to the Base Compensation in accordance with the Company's normal payroll procedures beginning 12 months after the date of termination and ending 24 months after the date of termination. Compensation paid during this 12-month period would be offset by other compensation earned in an employment or consulting arrangement during such period. Furthermore, the Company would continue to provide medical and other benefits to Dr. Marr for a period of up to 24 months. Finally, all unvested stock options held by Dr. Marr would vest upon termination and would be exercisable for 12-months after the date of termination. At the request of the Board of Directors and as a result of the significant diminution of his responsibilities, Dr. Marr resigned from the Company for "good reason" effective April 1, 1999 and is entitled to receive amounts payable under this agreement, including acceleration in full of the vesting of all options held by him, which were subsequently cancelled in December 1999 by letter agreement between the Company and Dr. Marr. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION No member of the Compensation Committee of the Board of Directors of the Company was at any time during 2000, or formerly, an officer or employee of the Company or any subsidiary of the Company, nor has any member of the Compensation Committee had any relationship with the Company requiring disclosure under Item 404 of Regulation S-K under the Securities Exchange Act of 1934 (as amended, the "Exchange Act"). No executive officer of the Company has served as a director or member of the Compensation Committee (or other Committee serving an equivalent function) of any other entity, whose executive officers served as a director of or member of the Compensation Committee of the Company. 28 29 COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT Section 16(a) of the Exchange Act and regulations of the Securities and Exchange Commission (the "Commission") thereunder require the Company's executive officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of initial ownership and changes in ownership with the Commission and the National Association of Securities Dealers, Inc. Such officers, directors and ten-percent stockholders are also required by the rules of the Commission to furnish the Company with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons that no other reports were required for such persons, the Company believes that, during or with respect to the period from January 1, 2000 to December 31, 2000, all of its executive officers, directors and ten-percent stockholders complied with their Section 16(a) filing obligations. COMPENSATION OF DIRECTORS The Company maintains a compensation program for each director who is not an employee of the Company or any subsidiary of the Company and who does not receive more than $50,000 in any year pursuant to a consulting contract with the Company. Pursuant to this compensation program, each such director receives cash compensation of $25,000 per annum for his services as a director. 29 30 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information, as of January 31, 2001, (except as otherwise noted), with respect to the beneficial ownership of the shares of Common Stock by (i) each person known by the Company to own beneficially more than 5% of the outstanding shares of Common Stock, (ii) each current director of the Company, (iii) each of the Named Executive Officers of the Company, and (iv) all directors and executive officers of the Company as a group.
PERCENTAGE OF NAME AND ADDRESS OF SHARES OF COMMON STOCK OUTSTANDING BENEFICIAL OWNER BENEFICIALLY OWNED(1) COMMON STOCK(2) ------------------- ---------------------- --------------- 5% Stockholders Carl C. Ichan (3) c/o Ichan Associates Corp. 3,006,000 14.63% 767 Fifth Avenue, 47th Floor New York, NY 10153 State of Wisconsin Investment Board(4) 2,211,500 10.76% Lake Terrace 121 East Wilson Street Madison, WI 53703 Directors and Named Executive Officers Carl S. Goldfischer, M.D 0 0% Daniel J. Korpolinski 0 0% J. Richard Crowley 0 0% President, Secretary and Treasurer; Director All directors and executive officers as a group (3 persons) 0 0%
-------------------------------------------------------------------------------- 30 31 (1) The inclusion herein of any shares of Common Stock deemed beneficially owned does not constitute an admission of beneficial ownership of those shares. Unless otherwise indicated, each stockholder referred to above has sole voting and investment power with respect to the shares listed. The number of shares of Common Stock beneficially owned by each director and executive officer is determined under the rules of the Commission and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which each executive officer has sole or shared voting power or investment power and also any shares of Common Stock into which any options held by such executive officer are exercisable within 60 days after January 31, 2001. (2) Based upon 20,550,773 shares of Common Stock outstanding as of January 31, 2001. (3) Based upon a Schedule 13D filed with the Commission on September 7, 1999 by High River Limited Partnership ("High River"), Riverdale LLC ("Riverdale") and Carl C. Ichan ("Ichan"), indicating shared voting and dispositive power with respect to 3,006,000 shares of Common Stock. According to statements set forth in this filing, Riverdale, an entity which is wholly-owned by Ichan, is the general partner of High River, the record holder of such shares. (4) The State of Wisconsin Investment Board filed a Schedule 13G/A with the Commission dated February 9, 2000, indicating sole voting and dispositive power with respect to 2,211,500 shares of Common Stock. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On July 3, 1996, the Company and Dr. Marr entered into an employment relating to the obligations of the Company to Dr. Marr in the event of termination of his employment. See "Employment Termination and Change in Control Arrangements" under the heading, "Item 11 -- Executive Compensation." 31 32 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A) Documents filed as part of this report: 1. FINANCIAL STATEMENTS The following financial statements are included in Part II Item 8 filed as part of this Form 10-K: Report of Independent Accounts Consolidated Statement of Net Assets in Liquidation as of December 31, 2000 and 1999 Consolidated Statement of Changes in Net Assets in Liquidation for the year ended December 31, 2000 and for the six months ended December 31, 1999 Consolidated Statements of Operations for the six months ended June 30, 1999 and years ended December 31, 1998 and 1997 (Going Concern Basis) Consolidated Statements of Cash Flows for the six months ended June 30, 1999 and years ended December 31, 1998 and 1997 (Going Concern Basis) Consolidated Statements of Changes in Stockholders' Equity for the six months ended June 30, 1999 and for the years ended December 31, 1998 and 1997 (Going Concern Basis) Notes to Consolidated Financial Statements 2. FINANCIAL STATEMENT SCHEDULES The Financial Statement Schedules have been omitted because they are either not applicable or the required information is included in the Consolidated Financial Statements or Notes thereto. 3. EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K The Exhibit Index is set forth on page 35 of this Form 10-K immediately preceding the exhibits filed as part of this annual report on Form 10-K and is incorporated by reference herein. (B) Reports filed on Form 8-K for the quarter ended December 31, 2000. None. 32 33 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. IMMULOGIC PHARMACEUTICAL CORPORATION By: /s/ J. Richard Crowley ------------------------------------- J. Richard Crowley President, Secretary and Treasurer Date: March 20, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
SIGNATURE DATE TITLE March 20, 2001 President, Secretary and Treasurer ------------------------------ (Principal Exec. and Financial Officer) J. Richard Crowley March 20, 2001 Director ------------------------------ Carl S. Goldfischer March 20, 2001 Director ------------------------------ Daniel Korpolinski
33 34 EXHIBIT INDEX IMMULOGIC PHARMACEUTICAL CORPORATION ANNUAL REPORT FORM 10-K - 2000
EXHIBIT NO. DESCRIPTION ------------------------------------------------------------------------------------- 3.01(3) Restated Certificate of Incorporation of the Registrant, as amended. 3.02(1) Amended and Restated By-laws of the Registrant. 4.01(1) Specimen certificate for shares of the Registrant's Common Stock. 4.02(1) Description of capital stock (contained in the Restated Certificate of Incorporation the Registrant, as amended, filed as Exhibit 3.01) 10.16(1) Office Lease, dated November 13, 1991, between the Registrant and Lincoln Street Trust. 10.27(2) Rights Agreement dated as of August 1, 1995, between the Registrant and the First National Bank of Boston. 10.34(4) Amendment No. 1 to the Rights Agreement dated as of April 3, 1996. 10.39(5) Consultation Agreement dated May 13, 1997 between the Registrant and J. Richard Crowley. 10.40(6) Sublease dated January 22, 1998 between the Registrant as sublandlord and Scriptgen Pharmaceuticals, Inc. as subtenant for the facility at 610 Lincoln Street, Waltham, Massachusetts. 10.41(7) License Agreement, dated June 16, 1998, by and between the Registrant and Heska Corporation. 10.42(8) Purchase Agreement, dated December 18, 1998, by and between the Registrant and Cantab Pharmaceuticals plc. 10.43(9) Amendment to the License Agreement, dated June 16, 1998, by and between the Registrant and Heska Corporation. 10.44(9) Amendment to the Office Lease, dated November 13, 1991, by and between the Registrant and Lincoln Street Trust.
34 35 10.45(9) Letter Agreement dated July 30, 1999 by and between the Registrant and Lincoln Street Trust. 21.01(1) Subsidiaries of the Registrant.
-------------------------------------------------------------------------------- (1) Incorporated by reference to the Company's Registration Statement on Form S-1 (File No. 33-39592). (2) Incorporated by reference to the Company's Form 8-K filed on July 27, 1995, as amended by Form 8-K/A on August 2, 1995, with respect to the adoption of the Rights Agreement. (3) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1996. (4) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. (5) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1997. (6) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. (7) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998. (8) Incorporated by reference to the Company's Current Report on Form 8-K dated February 2, 1999. (9) Incorporated by reference to the Company's Annual Report on Form 10-K dated March 30, 2000. The Company will furnish copies of any of the above exhibits at reasonable cost to its shareholders and upon written request to Investor Relations, 12 Alfred Street, Suite 300, Woburn, MA 01801. 35