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Executive Summary

COOPER DEVELOPMENT TOLD IT FACES "UNCERTAINTY about the company's ability to continue as a going concern" by independent auditor Peat Marwick, the company said in a Feb. 8 release. Peat Marwick's report was based on financial results for the fiscal year ended Oct. 30, 1988, in which Cooper Development lost $ 25.9 mil. on revenues of $ 3.4 mil. from continuing operations. Present operations consist of pharmaceuticals unit Cooper Labs, an interest in sunglasses manufacturer Revo and holdings of 662,749 preferred shares in former parent company, Cooper Companies. Cooper Labs primarily has been working on development of two products: alpha-1 antitrypsin for respiratory diseases; and a liposomal formulation of metaproterenol sulfate for asthma and bronchitis, which is being developed under a licensing agreement with Liposome Technology. The red ink includes a $ 16.6 mil. "valuation adjustment" in the preferred stock, which Cooper Development received when its ophthalmic surgery business was merged with the Cooper Companies in October 1987. In November 1988, Cooper Development indefinitely postponed a proposed dividend divestiture of one share of the Cooper Companies stock for every five shares of Cooper Development stock. At the end of fiscal 1988, Cooper Development valued the stock at $ 34.4 mil. Peat Marwick is questioning the firm's financial viability because "continuing operations are not expected to generate sufficient cash to sustain ongoing operations at current levels and fund the deficit in net working capital and because of the uncertainty surrounding the status of the proposed special dividend," Cooper Development said. The company says it "is currently seeking financing from banks and private placements from individual and institutional sources and has received a proposal from an investment banker for a financing of approximately $ 14 mil.," and "is confident that appropriate sources of liquidity can be located." In addition, Cooper Development is evaluating the sale of its remaining Cooper Companies stock; the firm sold approximately 290,000 of its Cooper Companies shares in 1988. The company "does not believe there has been an impairment in the long-term realizable value" of the Cooper Companies stock, but acknowledged that "an adjustment to an estimated current market value of $ 60 per share is appropriate." Cooper Development also is seeking a merger with former sister company Cooper Life Sciences. In January, the Cooper Development board of directors approved a merger proposal involving an exchange of .7 share of Cooper Development stock for each Cooper Life Sciences share. The proposal is pending approval by Cooper Life Sciences directors and shareholders.

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