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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C INFORMATION
Proxy Statement Pursuant to Section 14(c) of the Securities Exchange
Act of 1934
(Amendment No. )
----
Check the appropriate box:
[x] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[ ] Definitive Information Statement
ICHOR CORPORATION
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and
0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
THE REGISTRANT EXPECTS TO RELEASE THE DEFINITIVE INFORMATION STATEMENT
TO SECURITYHOLDERS ON OR ABOUT FEBRUARY 12, 2001
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ICHOR CORPORATION
17 Dame Street
Dublin 2
Ireland
INFORMATION STATEMENT
---------------------
This Information Statement is being mailed to the shareholders of record
on January 19, 2001 of ICHOR Corporation ("ICHOR"), commencing on or about
February , 2001, in connection with the prior approval, on January 19, 2001,
by the board of directors (the "Board") of ICHOR, of the corporate action
referred to below and its subsequent adoption, also on January 19, 2001, by
the holders of a majority of the shares (the "Common Shares") of common stock,
$0.01 par value per share of ICHOR outstanding. Accordingly, all necessary
corporate approvals in connection with the matters discussed herein have been
obtained, and this Information Statement is furnished solely for the purpose
of informing shareholders of ICHOR and including information under the U.S.
Securities Exchange Act of 1934, as amended (the "Exchange Act"), of the
matters discussed herein. For this reason, ICHOR is not calling a special
meeting of the shareholders in respect of the corporate action referred to
below and is not asking shareholders for a proxy or consent. The total number
of Common Shares outstanding on January 19, 2001 was 8,165,830.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
ICHOR, as authorized by the necessary approvals of the Board and the
holders of a majority of the outstanding Common Shares of ICHOR, has approved
the adoption of an amendment (the "Amendment") to the Certificate of
Incorporation of ICHOR to increase the authorized number of Common Shares of
ICHOR from 30,000,000 to 80,000,000. Specifically, Section 4 of the
Certificate of Incorporation of ICHOR will be amended to read as follows:
"4. The total number of shares of all classes of stock which
the Corporation shall have authority to issue is Eighty-Five
Million (85,000,000) shares, of which Five Million (5,000,000)
shares shall be preferred stock, $.01 par value, and Eighty
Million (80,000,000) shares shall be common stock, $.01 par
value. The preferred stock of the Corporation may be issued
from time to time in one or more series. The Board of Directors
is expressly authorized, in a resolution or resolutions
providing for the issue of such preferred stock, to fix, state
and express the powers, rights, designations, preferences,
qualifications, limitations and restrictions thereof and to fix
the number of shares of such series.
Except as otherwise provided by law, the shares of stock of the
Corporation, regardless of class, may be issued by the
Corporation from time to time in such amounts, for such
consideration and for such corporate purposes as the
Corporation's Board of Directors may from time to time
determine."
The Amendment was adopted to facilitate the issuance of approximately
33,311,398 Common Shares and securities convertible into Common Shares of
ICHOR to certain shareholders of Hippocampe S.A. ("Hippocampe") in
consideration for the direct and indirect
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transfer to ICHOR of approximately 99.9% of the outstanding shares of
Hippocampe (the "Share Exchange") pursuant to two share exchange agreements
(the "Share Exchange Agreements") dated for reference December 13, 2000. The
Amendment is scheduled to take place on or about March , 2001, but no
earlier than 20 days from the date this Information Statement is first sent to
ICHOR's shareholders. ICHOR expects that the Share Exchange will be
effectuated shortly following the Amendment. Final closing of the Share
Exchange will be publicly announced by ICHOR, and updated information, if any,
concerning the Share Exchange will be provided in a Form 8-K to be filed by
ICHOR after the closing.
Hippocampe is a privately-held research and development company engaged
in fundamental and applied research in the area of human and veterinary
biology and medicine, with a particular emphasis on humanitarian aspects
(i.e., retroviral pathogenesis, such as AIDS, oncogenesis and
transplantation).
The date of this Information Statement is January 31, 2001.
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FORWARD-LOOKING STATEMENTS
Certain statements included in this Information Statement are "forward-
looking statements" as defined in the Private Securities Litigation Reform Act
of 1995. These statements appear in a number of places in this Information
Statement and can be identified by words such as "estimates", "projects",
"expects", "intends", "believes", "plans", or their negatives or other
comparable words. Forward-looking statements are not guarantees and may
involve risks and uncertainties. Actual results could differ materially from
those expressed or implied in the forward-looking statements. Actual results
may differ materially from those expressed or implied in the forward-looking
statements. Actual results may differ materially from those expressed in the
forward-looking statements due to risks facing operations or due to actual
facts differing from the assumptions underlying certain predictions.
EXCHANGE RATES
Certain monetary amounts in this Information Statement are expressed in
Euros (E). The following table sets out the exchange rates for the conversion
of Euros into U.S. dollars as at the end of each of the following periods, the
average exchange rates (based on the average exchange rates on the last day of
each month in such periods) and the range of high and low exchange rates for
such periods.
Year Ended Nine Months Ended
December 31, September 30,
-------------- --------------------------
1999 1999 2000
-------------- -------- --------
End of the period 1.0045 1.0665 0.8765
High for the period 1.1791 1.1791 1.0388
Low for the period 1.0015 1.0124 0.8476
Average for the period 1.0590 1.0720 0.9322
The Euro did not exist prior to January 1, 1999.
On January 19, 2001, the rate of exchange for the conversion of Euros
into U.S. dollars was E1 = U.S.$0.9399.
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INDEX TO THE INFORMATION STATEMENT
Item Page
- ---- ----
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Comparative Unaudited Per Share Data . . . . . . . . . . . . . . . . . 8
Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . 10
Management's Discussion and Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . 13
Quantitative and Qualitative Disclosures About Market Risk . . . . . . 15
Description of the Amendment . . . . . . . . . . . . . . . . . . . . . 16
Description of the Share Exchange. . . . . . . . . . . . . . . . . . . 18
Related Party Transactions and Interest of Certain Persons in
Matters to be Acted Upon . . . . . . . . . . . . . . . . . . . . . . 24
Description of ICHOR . . . . . . . . . . . . . . . . . . . . . . . . . 25
Description of Hippocampe. . . . . . . . . . . . . . . . . . . . . . . 26
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Market for Common Equity and Related Stockholder Matters . . . . . . . 37
Security Ownership of Certain Beneficial Owners and Management . . . . 38
Unaudited Pro Forma Condensed Combined Financial Information . . . . . 40
Additional and Available Information . . . . . . . . . . . . . . . . . 46
Incorporation of Certain Documents by Reference. . . . . . . . . . . . 46
Exhibit 1.1 - Certificate of Amendment of Certificate of Incorporation
of ICHOR Corporation
Exhibit 1.2 - Share Exchange Agreement dated for reference December
13, 2000 between ICHOR Corporation and certain
shareholders of Hippocampe S.A. (Agreement A)
Exhibit 1.3 - Share Exchange Agreement dated for reference December
13, 2000 between ICHOR Corporation and certain
shareholders of Hippocampe S.A. (Agreement B)
Exhibit 1.4 - Underwriting Agreement dated for reference July 24, 2000
between Hippocampe S.A. and MFC Merchant Bank S.A.
Exhibit 1.5 - Credit Facility Agreement dated for reference July 27,
2000 between Hippocampe S.A. and MFC Merchant Bank S.A.
Exhibit 1.6 - Assignment Agreement dated for reference December 29,
2000 among ICHOR Corporation, Hippocampe S.A. and MFC
Merchant Bank S.A.
Exhibit 1.7 - Annual Report on Form 10-K of ICHOR Corporation for the
year ended December 31, 1999
Exhibit 1.8 - Quarterly Report on Form 10-Q of ICHOR Corporation for
the quarterly period ended September 30, 2000
Exhibit 1.9 - Financial Statements of Hippocampe S.A.
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SUMMARY
The following is a brief summary of certain information contained
elsewhere in this Information Statement. This summary is not intended to be
complete and is qualified in its entirety by the more detailed information
contained in this Information Statement and in the Exhibits hereto, to which
reference is made for a complete statement of the matters discussed below.
Capitalized terms used and not defined in this summary have the meaning set
forth elsewhere in this Information Statement. You are urged to read this
Information Statement and the Exhibits hereto in their entirety.
The Amendment
- -------------
We have approved the adoption of the Amendment to our Certificate of
Incorporation to increase the authorized number of our Common Shares from
30,000,000 to 80,000,000. See "Description of the Amendment".
A copy of the Certificate of Amendment of our Certificate of
Incorporation to effect the increase in the authorized number of our Common
Shares is attached as Exhibit 1.1.
Approval of the Amendment and the Share Exchange
- ------------------------------------------------
The Amendment was approved by unanimous written consent of the Board on
January 19, 2001. The Amendment was also approved by the written consent of
the holders of approximately 88.4% of the outstanding Common Shares on January
19, 2001, pursuant to Section 228 of the Delaware General Corporation Law.
Delaware law requires approval of the Amendment by a majority of the
outstanding Common Shares. See "Description of the Amendment".
The Share Exchange and the Share Exchange Agreements were approved by the
Board and did not require submission to you under Delaware law. See
"Description of the Share Exchange - The Share Exchange Agreements".
Purpose of the Amendment
- ------------------------
Effective December 13, 2000, we entered into the Share Exchange
Agreements to, directly and indirectly, acquire approximately 99.9% of the
outstanding shares of Hippocampe in consideration of an aggregate of
approximately 33,311,398 of our Common Shares and securities convertible into
our Common Shares. The Share Exchange is subject to certain conditions
customary for transactions of its nature including, among other things, that
we receive shareholder approval to increase our authorized share capital to a
level necessary to complete the Share Exchange. We currently have only
30,000,000 authorized Common Shares, of which 8,165,830 are issued and
outstanding. Accordingly, the Amendment was adopted to facilitate the
issuance to certain shareholders of Hippocampe of our Common Shares and
securities convertible into our Common Shares and to satisfy the afore-
mentioned condition of the Share Exchange. See "Description of the Amendment"
and "Description of the Share Exchange".
After giving effect to the Share Exchange, including giving effect to the
Common Shares or share purchase warrants to be issued to MFC Merchant Bank
S.A. ("MFC Bank"), a licensed Swiss Bank of Geneva, Switzerland, pursuant to
certain agreements (the "Bank Agreements") made between Hippocampe and MFC
Bank, Hippocampe shareholders will own approximately
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66.3% of our issued and outstanding Common Shares on a diluted basis. See
"Description of the Share Exchange".
The Amendment and the Closing of the Share Exchange
- ---------------------------------------------------
We expect to file a Certificate of Amendment of our Certificate of
Incorporation to effect the increase in the authorized number of our Common
Shares on or about March , 2001, but no earlier than 20 days from the date
this Information Statement is first sent to you. See "Description of the
Amendment".
We expect that the Share Exchange will be effectuated shortly following
the Amendment to increase the authorized number of our Common Shares. See
"Description of the Share Exchange".
Share Exchange Parties
- ----------------------
We are a corporation organized under the laws of the State of Delaware
with an office address at 17 Dame Street, Dublin 2, Ireland (tel.: 3531-679-
1688). We are a publicly traded company with our Common Shares quoted on the
Over-the-Counter Bulletin Board (the "OTC Bulletin Board") operated by the
National Association of Securities Dealers, Inc. See "Description of ICHOR".
Hippocampe is a privately-held corporation organized under the laws of
France with an office address at 52, Chanoine Cartellier, F-69230 Saint-Genis-
Laval, France (tel.: 334-72-39-52-09). Hippocampe is a research and
development company engaged in fundamental and applied research in the area of
human and veterinary biology and medicine, with a particular emphasis on
humanitarian aspects (i.e., retroviral pathogenesis, such as AIDS, oncogenesis
and transplantation). See "Description of Hippocampe".
Related Party Transactions and Interest of Certain Persons in Matters to be
Acted Upon
- -------------------------------------------------------------------------
Pursuant to the Bank Agreements and in connection with the provision of a
credit facility to Hippocampe, and acting as an advisor in relation to the
Share Exchange and other matters, MFC Bank has received and will receive
certain fees, including 2,017,854 of our Common Shares to be issued upon the
closing of the Share Exchange and share purchase warrants which, upon the
closing of the Share Exchange, will entitle MFC Bank to purchase up to
approximately 6,730,599 of our Common Shares, subject to final adjustment, for
a period expiring on July 31, 2003.
MFC Bank is a wholly-owned subsidiary of MFC Bancorp Ltd., which
currently, directly and indirectly, owns approximately 43.7% of our
outstanding Common Shares. Michael J. Smith, our Secretary, is the President,
Chief Executive Officer and a director of MFC Bancorp Ltd. See "Related Party
Transactions and Interest of Certain Persons in Matters to be Acted Upon".
Appraisal Rights
- ----------------
You are not entitled to appraisal rights under the Delaware General
Corporation Law in connection with the corporate actions referred to in this
Information Statement or in connection with the Share Exchange.
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Regulatory Matters
- ------------------
We are not aware of any federal or state regulatory requirements which
must be complied with or approvals which must be obtained in connection with
the Share Exchange.
Tax and Accounting Treatment of the Share Exchange
- --------------------------------------------------
The Share Exchange has been structured with the intent that it be tax-
free to us and you for federal income tax purposes.
The Share Exchange will be accounted for as a reverse purchase. See
"Description of the Share Exchange - Accounting Treatment".
Risk Factors
- ------------
The Amendment, the Share Exchange, the business of Hippocampe and any
investment in our Common Shares are subject to a number of risk factors as set
forth in this Information Statement commencing on page 33. See "Risk
Factors".
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COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth selected comparative unaudited per share
data for ICHOR on a historical and pro forma basis, giving effect to the Share
Exchange as a reverse purchase, and for Hippocampe on a historical basis. The
pro forma comparative unaudited per share data assumes the Share Exchange had
been consummated at the beginning of the periods presented. The information
set forth below is based on and derived from:
* the historical financial statements and related notes of ICHOR
incorporated by reference in this Information Statement from
ICHOR's Annual Report on Form 10-K for the year ended December
31, 1999 and Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2000, attached as Exhibits 1.7 and
1.8, respectively;
* the historical financial statements and related notes of
Hippocampe attached as Exhibit 1.9; and
* the unaudited pro forma condensed combined financial information
and related notes included elsewhere in this Information
Statement.
This information should be read in conjunction with such historical
financial statements and unaudited pro forma condensed combined financial
information and related notes.
The per share data set forth below is presented for comparative purposes
only and is not necessarily indicative of the future consolidated financial
position, the results of the future operations or the actual results or
consolidated financial position of ICHOR as the legal parent of Hippocampe
that would have been achieved had the Share Exchange been consummated as of
the dates or for the periods indicated.
Hippocampe reports its results in Euros (E). Since the Share Exchange
will be accounted for as a reverse purchase, with the continuing entity being
Hippocampe, the unaudited pro forma condensed combined financial information
below is reported in Euros.
ICHOR HIPPOCAMPE
------------------------- -----------
Pro Forma
Historical Combined Historical
------------ ------------ ----------
($) (E) (E)
NET BOOK VALUE PER SHARE:(1)
September 30, 2000 $ (0.59) E - E (59.69)
DIVIDENDS DECLARED PER SHARE:(1)
Nine months ended September 30, 2000 - - -
Year ended December 31, 1999 - - -
NET LOSS FROM CONTINUING
OPERATIONS PER SHARE:(1)
Nine months ended September 30, 2000 (0.03) - (26.89)
Year ended December 31, 1999 (0.14) (0.01) (12.64)
<FOOTNOTE>
- -----------------
(1) Basic and diluted per share data is the same.
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For Hippocampe, the total number of shares outstanding throughout the
respective periods above is 7,820 shares. For ICHOR, the total number of
Common Shares outstanding throughout the respective periods above is based on
the weighted average Common Shares outstanding, calculated on a diluted basis,
as follows:
Pro Forma
Historical Combined(1)
------------ ----------------
Nine months ended September 30, 2000 4,918,770 43,495,082
Year ended December 31, 1999 4,910,386 43,486,698
<FOOTNOTE>
- ----------------
(1) Securities exchangeable into Common Shares of ICHOR (i.e., LuxCo
Preferred Shares) to be issued to certain shareholders of Hippocampe
in connection with the Share Exchange have been considered to be
issued and outstanding Common Shares of ICHOR.
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SELECTED FINANCIAL DATA
ICHOR
- -----
The selected financial data of ICHOR set forth below should be read in
conjunction with, and is qualified in its entirety by reference to, the
financial statements and related notes of ICHOR incorporated by reference in
this Information Statement from ICHOR's Annual Report on Form 10-K for the
year ended December 31, 1999 and Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2000, and the unaudited pro forma
condensed combined financial information and related notes included elsewhere
in this Information Statement. The historical financial data may not be
indicative of ICHOR's future performance as a consolidated company.
The financial data for the nine months ended September 30, 1999 and 2000
and the pro forma financial information was derived from unaudited financial
data which includes, in the opinion of the registrant, all adjustments which
are of a normal recurring nature, including those made to conform with U.S.
generally accepted accounting principles, necessary to present fairly the data
for such periods. Results for the nine months ended September 30, 2000 are
not necessarily indicative of the results to be expected for the full year.
Hippocampe reports its results in Euros (E). Since the Share Exchange
will be accounted for as a reverse purchase, with the continuing entity being
Hippocampe, the unaudited pro forma condensed combined financial information
below is reported in Euros.
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Eleven
Pro Forma
Months
Combined
Year Ended Ended Year Ended Year Ended Year
Ended Year Ended
January 31, December 31, December 31, December 31,
December 31, December 31,
----------- ------------ ------------ ------------ ------
- ------ ------------
1996 1996 1997 1998
1999 1999
----------- ------------ ------------ ------------ ------
- ------ ------------
($000s, except per share amounts)
(E000s,
except per
share
amounts)
(unaudited)
OPERATING DATA
Fee income $ - $ - $ - $ 144 $
- - E -
General and
administrative
expenses 791 1,042 418 497
373 399
Interest expense 406 423 613 102
192 180
Loss from
continuing
operations (1,183) (1,320) (1,025) (178)
(470) (541)
Net loss (2,858) (1,399) (4,054) (178)
(470) (541)
COMMON SHARE DATA(1)
Loss from contin-
uing operations
per common share (0.48) (0.51) (0.21) (0.08)
(0.14) (0.01)
Net loss per
common share (1.16) (0.54) (0.83) (0.08)
(0.14) (0.01)
Cash dividends
per common share - - - -
- - -
Weighted average
common shares
outstanding (000s) 2,456 2,586 4,913 4,908
4,910 43,486,698(2)
BALANCE SHEET DATA
Working capital 2,417 3,903 89 2,141
2,289
Total assets 5,578 5,582 2,028 3,281
2,681
Long-term obli-
gations and
redeemable
preferred stock - 1,916 - -
- -
Total stockholders'
equity 2,438 1,987 89 2,141
2,652
Pro Forma
Combined
Nine Months
Nine Months Ended
Ended
September 30,
September 30,
---------------------------------
- ----------------
1999 2000
2000
-------------- --------------
- ----------------
($000s, except per share amounts)
(E000s, except
per share
amounts)
(unaudited)
(unaudited)
OPERATING DATA
Fee income $ - $ -
E -
General and administrative
expenses 289 275
364
Interest expense - -
- -
Income (loss) from
continuing operations (126) 69
(138)
Net income (loss) (126) 69
(138)
COMMON SHARE DATA(1)
Loss from continuing
operations per common share (0.06) (0.03)
(0.00)
Net loss per common share (0.06) (0.03)
(0.00)
Cash dividends per common share - -
- -
Weighted average common
shares outstanding (000s) 4,908 4,919
43,495,082(2)
BALANCE SHEET DATA
Working capital 1,055 2,721
333
Total assets 4,043 2,722
1,086
Long-term obligations and
redeemable preferred stock - -
242
Total stockholders' equity 2,024 2,721
162
<FOOTNOTE>
- -----------------------
(1) Basic and diluted common share data is the same.
(2) Securities exchangeable into Common Shares of ICHOR (i.e., LuxCo Preferred
Shares) to be issued to certain shareholders of Hippocampe in connection
with the Share Exchange have been considered to be issued and outstanding
Common Shares of ICHOR.
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Hippocampe
- ----------
The selected financial data of Hippocampe set forth below should be read
in conjunction with, and is qualified in its entirety by reference to, the
financial statements and related notes of Hippocampe.
The financial data for the nine months ended September 30, 1999 and 2000
was derived from unaudited financial data which includes, in the opinion of
the registrant, all adjustments, which are of a normal recurring nature,
including those made to conform with U.S. generally accepted accounting
principles, necessary to present fairly the data for such periods. Results
for the nine months ended September 30, 2000 are not necessarily indicative of
the results to be expected for a full year.
Hippocampe reports its results in Euros (E).
Nine Months
Year Ended
Ended
December 31,
September 30,
-------------------------------- -
- ----------------------
1997 1998 1999
1999 2000
---------- ---------- ---------- -
- --------- ----------
(E, except per share
amounts)
(unaudited)
OPERATING DATA
Operating revenues E 13,721 E 41,597 E 46,631 E
17,944 E 9,567
Research and development
expenses 19,958 70,239 93,902
72,984 147,618
General and administrative
expenses 33,533 38,212 48,896
30,373 72,209
Loss from continuing
operations (39,770) (67,616) (98,808)
(85,413) (210,260)
COMMON SHARE DATA(1)
Loss from continuing
operations per common
share (5.09) (8.65) (12.64)
(10.92) (26.89)
Cash dividends per common
share - - -
- - -
Weighted average common
shares outstanding 7,820 7,820 7,820
7,820 7,820
BALANCE SHEET DATA
Working capital (45,478) (40,153) (23,534)
(114,766) (295,177)
Total assets 43,497 76,852 146,167
100,996 455,999
Long-term obligations 69,669 138,394 242,209
138,394 242,209
Total stockholders' equity (90,081) (157,697) (256,505)
(243,110) (466,765)
<FOOTNOTE>
- -------------------
(1) Basic and diluted common share data is the same.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ICHOR
- -----
The management's discussion and analysis of financial condition and
results of operations of ICHOR is incorporated by reference in this
Information Statement from ICHOR's Annual Report on Form 10-K for the year
ended December 31, 1999 and Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2000.
Hippocampe
- ----------
The following discussion and analysis of the financial condition and
results of operations of Hippocampe should be read in conjunction with its
financial statements and related notes.
Hippocampe is a development stage company. It reports its results in
Euros (E).
Results of Operations
Comparison of the Nine Months Ended September 30, 2000 to the Nine Months
Ended September 30, 1999
Revenues, which consist primarily of medical products sold, decreased to
E9,567 in the nine months ended September 30, 2000 from E17,944 in the nine
months ended September 30, 1999.
Expenses increased to E219,827 in the nine months ended September 30,
2000 from E103,357 in the nine months ended September 30, 1999. Research and
development expenses increased to E147,618 in the current period from E72,984
in the comparative period of 1999. General and administrative expenses
increased to E72,209 in the nine months ended September 30, 2000 from E30,373
in the comparative period of 1999. Both research and development expenses and
general and administrative expenses increased as a result of an increase in
research activities.
Hippocampe reported a net loss of E210,260, or E26.89 per share, in the
nine months ended September 30, 2000, compared to E85,413, or E10.92 per
share, in the nine months ended September 30, 1999.
Comparison of the Year Ended December 31, 1999 to the Year Ended December 31,
1998
Revenues, which consist primarily of medical products sold, increased to
E46,631 in the year ended December 31, 1999 from E41,597 in the year ended
December 31, 1998.
Expenses increased to E142,798 in the year ended December 31, 1999 from
E108,451 in the year ended December 31, 1998. Research and development
expenses increased to E93,902 in the year ended December 31, 1999 from E70,239
in the comparative period of 1998. General and administrative expenses
increased to E48,896 in the year ended December 31, 1999 from E38,212 in the
comparative period of 1998. Both research and development expenses and
general and administrative expenses increased as a result of an increase in
research activities.
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Hippocampe reported a net loss of E98,808, or E12.64 per share, in the
year ended December 31, 1999, compared to E67,616, or E8.65 per share, in the
year ended December 31, 1998.
Comparison of the Year Ended December 31, 1998 to the Year Ended December 31,
1997
Revenues, which consist primarily of medical products sold, increased to
E41,597 in the year ended December 31, 1998 from E13,721 in the year ended
December 31, 1997.
Expenses increased to E108,451 in the year ended December 31, 1998 from
E53,491 in the year ended December 31, 1997. Research and development
expenses increased to E70,239 in the year ended December 31, 1998 from E19,958
in the comparative period of 1997. General and administrative expenses
increased to E38,212 in the year ended December 31, 1998 from E33,533 in the
comparative period of 1997. Both research and development expenses and
general and administrative expenses increased as a result of an increase in
research activities.
Hippocampe reported a net loss of E67,616, or E8.65 per share, in the
year ended December 31, 1998, compared to E39,770, or E5.09 per share, in the
year ended December 31, 1997.
Liquidity and Capital Resources
Hippocampe had cash of E190,241 at September 30, 2000, compared to
E36,409 at December 31, 1999.
Operating activities used cash of E116,738 in the nine months ended
September 30, 2000, compared to providing cash of E15,801 in the nine months
ended September 30, 1999. An increase in accounts payable and other
liabilities provided cash of E87,708 in the nine months ended September 30,
2000, compared to E109,557 in the nine months ended September 30, 1999.
Investing activities, consisting primarily of patent application and
maintenance fees, used cash of E161,816 in the nine months ended September 30,
2000.
Financing activities provided cash of E432,386 in the nine months ended
September 30, 2000 as a result of borrowings pursuant to a revolving term
facility. The revolving term facility is in the principal amount of up to
E1.3 million and matures on August 31, 2001. At September 30, 2000,
Hippocampe had borrowed an aggregate of E432,386 pursuant to this revolving
term facility.
Hippocampe expects that it will require substantial additional capital to
continue its research and development, clinical studies and regulatory
activities necessary to bring its potential products to market and to
establish production, marketing and sales capabilities.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
ICHOR
- -----
A discussion of the quantitative and qualitative disclosures about market
risk with respect to ICHOR is incorporated by reference in this Information
Statement from ICHOR's Annual Report on Form 10-K for the year ended December
31, 1999 and ICHOR's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2000.
Hippocampe
- ----------
Hippocampe is exposed to market risk from changes in interest rates which
may affect its financial condition and results of operations. Hippocampe does
not enter into derivative contracts for its own account to hedge against such
risk.
Interest Rate Risk
Fluctuations in interest rates may affect the fair value of financial
instruments sensitive to interest rates. An increase in interest rates may
decrease the fair value and a decrease in interest rates may increase the fair
value of such financial instruments. Hippocampe has debt obligations which
may be sensitive to interest rate fluctuations. The following table provides
information about Hippocampe's exposure to interest rate fluctuations for the
carrying amount of such debt obligations as at September 30, 2000 and expected
cash flows from these debt obligations:
Expected Future Cash
Flow
-----------------------------
- ----------------------
Carrying Fair Year Ending September
30,
Value Value 2001 2002 2003 2004
2005 Thereafter
-------- ------- ------ ------ ------ -----
- - ------ -----------
(E000s)
Debt obligations(1) E 432 E 432 E 432 E - E - E
- - E - E -
<FOOTNOTE>
- ------------------
(1) Debt obligations consist of Hippocampe's notes payable.
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DESCRIPTION OF THE AMENDMENT
ICHOR has approved the adoption of an Amendment to the Certificate of
Incorporation of ICHOR to increase the authorized number of Common Shares of
ICHOR from 30,000,000 to 80,000,000. A copy of the Certificate of Amendment
of the Certificate of Incorporation of ICHOR to effect this Amendment is
attached as Exhibit 1.1. Specifically, Section 4 of the Certificate of
Incorporation of ICHOR will be amended to read as follows:
"4. The total number of shares of all classes of stock
which ICHOR shall have authority to issue is Eighty-Five
Million (85,000,000) shares, of which Five Million
(5,000,000) shares shall be preferred stock, $.01 par value,
and Eighty Million (80,000,000) shares shall be common stock,
$.01 par value. The preferred stock of ICHOR may be issued
from time to time in one or more series. The Board of Directors
is expressly authorized, in a resolution or resolutions providing
for the issue of such preferred stock, to fix, state and
express the powers, rights, designations, preferences,
qualifications, limitations and restrictions thereof and to
fix the number of shares of such series.
Except as otherwise provided by law, the shares of stock of
ICHOR, regardless of class, may be issued by ICHOR from time
to time in such amounts, for such consideration and for such
corporate purposes as ICHOR's Board of Directors may from
time to time determine."
The Amendment was approved by unanimous written consent of the Board on
January 19, 2001. The Amendment was also approved by the written consent of
the holders of approximately 88.4% of the outstanding Common Shares on January
19, 2001. Pursuant to Section 228 of the Delaware General Corporation Law,
corporate actions can be authorized provided shareholders holding at least a
majority of the outstanding Common Shares of ICHOR on the record date consent
in writing thereto. Accordingly, all necessary corporate approvals in
connection with the Amendment have been obtained. For this reason, ICHOR is
not calling a special meeting of the shareholders in respect of the Amendment
and is not asking for a proxy or consent.
The Amendment will become effective upon filing of a Certificate of
Amendment of the Certificate of Incorporation of ICHOR with the Secretary of
State of the State of Delaware. ICHOR expects to file a Certificate of
Amendment to effect the increase in the authorized number of Common Shares of
ICHOR on or about March , 2001, but no earlier than 20 days from the date
this Information Statement is first sent to shareholders of ICHOR.
Effective December 13, 2000, ICHOR entered into the Share Exchange
Agreements to, directly and indirectly, acquire approximately 99.9% of the
outstanding shares of Hippocampe in consideration of an aggregate of
approximately 33,311,398 Common Shares and securities convertible into Common
Shares of ICHOR. The Share Exchange is subject to certain conditions
customary for transactions of its nature including, among other things, that
ICHOR receives shareholder approval to increase its authorized share capital
to a level necessary to complete the Share Exchange. The authorized capital
stock of ICHOR is currently 30,000,000 Common Shares and 5,000,000 shares of
preferred stock, $0.01 par value. Currently, 8,165,830 Common Shares are
issued and outstanding. Accordingly, the Amendment to increase the authorized
number of Common Shares of ICHOR was adopted to facilitate the issuance to
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certain shareholders of Hippocampe of the Common Shares and securities
convertible into Common Shares of ICHOR and to satisfy a condition of the
Share Exchange. The additional Common Shares to be authorized by the Amendment
will have rights identical to the currently outstanding Common Shares of
ICHOR.
Any authorized but unissued Common Shares following the completion of the
Amendment and the Share Exchange will be available for issuance by the Board
for such corporate purposes as the Board determines to be in the best
interests of ICHOR.
While the primary purpose of the increase in the authorized number of
Common Shares is to facilitate the issuance of Common Shares in connection
with the Share Exchange, it might be possible for the Board to issue a large
number of Common Shares to impede completion of a proposed hostile merger,
tender offer or other takeover attempt which some shareholders of ICHOR may at
the time deem to be in their best interest. Without further shareholder
approval, the Board could:
* adopt a "poison pill" which would, under certain circumstances
related to an acquisition not approved by the Board, give certain
holders the right to acquire additional Common Shares at a low
price; or
* sell Common Shares in a private transaction to purchasers who would
oppose a takeover or favor the current Board.
Although the proposal to increase the authorized number of Common Shares
has been prompted by business and financial considerations and not by the
threat of any known or threatened hostile takeover attempt, shareholders
should be aware that approval of this proposal could facilitate future efforts
to deter or prevent changes in control of ICHOR, including transactions in
which the shareholders might otherwise receive a premium for their shares over
then current market prices.
In addition, additional Common Shares, if issued, could reduce existing
shareholders' percentage ownership and voting power and, depending on the
transaction in which they are issued, could affect the per share book value or
other per share financial information. The issuance of additional Common
Shares, by reducing the percentage of equity of ICHOR owned by present
shareholders, would reduce such present shareholders' ability to influence the
election of directors or any other action taken by the holders of Common
Shares and would potentially reduce per share dividends, if any. In addition,
the holders of Common Shares do not have pre-emptive rights.
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DESCRIPTION OF THE SHARE EXCHANGE
The Share Exchange Agreements
- -----------------------------
ICHOR entered into a share exchange agreement ("Agreement A") dated for
reference December 13, 2000 with shareholders owning approximately 50.7% of
the issued and outstanding shares of Hippocampe. Pursuant to Agreement A,
such Hippocampe shareholders will, on the closing of the Share Exchange,
transfer their shares of Hippocampe to ICHOR in consideration of ICHOR issuing
to them Common Shares of ICHOR. A copy of Agreement A is attached as Exhibit
1.2.
ICHOR also entered into a separate share exchange agreement ("Agreement
B") dated for reference December 13, 2000 with shareholders owning
approximately 49.2% of the issued and outstanding shares of Hippocampe.
Pursuant to Agreement B, such Hippocampe shareholders will, on the closing of
the Share Exchange, transfer their shares of Hippocampe to a new wholly-owned
subsidiary that ICHOR will establish under the laws of Luxembourg ("LuxCo").
In exchange for their shares of Hippocampe, such Hippocampe shareholders will
be issued preferred shares of LuxCo (the "LuxCo Preferred Shares") which are
convertible into Common Shares of ICHOR at the option of the holder. A copy
of Agreement B is attached as Exhibit 1.3.
Upon the closing of the Share Exchange, ICHOR will contribute and
transfer to LuxCo the shares of Hippocampe that ICHOR receives from Hippocampe
shareholders under Agreement A for additional common shares of LuxCo.
Upon the closing of the Share Exchange, Hippocampe will become an
approximately 99.9%-owned subsidiary of LuxCo, which, in turn, will be a
wholly-owned subsidiary of ICHOR.
The Share Exchange and the Share Exchange Agreements were approved by the
Board and did not require submission to shareholders of ICHOR under Delaware
law. ICHOR expects that the Share Exchange will be effectuated shortly
following the Amendment to the Certificate of Incorporation of ICHOR to
increase the authorized number of Common Shares of ICHOR.
The aggregate number of Common Shares and securities convertible into
Common Shares of ICHOR issuable to shareholders of Hippocampe upon the closing
of the Share Exchange is approximately 33,311,398 Common Shares. After giving
effect to the Share Exchange, including giving effect to the Common Shares of
ICHOR and share purchase warrants to be issued to MFC Bank pursuant to the
Bank Agreements, Hippocampe shareholders will own approximately 66.3% of the
issued and outstanding Common Shares of ICHOR on a diluted basis.
All of the Common Shares and securities convertible into Common Shares of
ICHOR acquired by the shareholders of Hippocampe pursuant to the Share
Exchange will be subject to resale restrictions in accordance with United
States federal and state securities laws.
In connection with the Share Exchange, effective December 29, 2000, all
of the 467,500 issued and outstanding shares of Series 1 preferred stock in
the capital of ICHOR and 97,206 issued and outstanding shares of Series 2
preferred stock in the capital of ICHOR were, in aggregate, redeemed for
$2,170,000 and converted for 3,247,060 Common Shares of ICHOR.
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Further, ICHOR intends to seek to raise additional capital to fund
working capital requirements following the Share Exchange. The additional
capital may be raised prior to the closing of the Share Exchange as provided
for in the Share Exchange Agreements.
Reasons for the Share Exchange
- ------------------------------
In approving the Share Exchange, the Share Exchange Agreements and the
transactions contemplated therein, and subsequently the Amendment, the Board
considered a number of factors, including, but not limited to, the following:
* ICHOR currently does not have an operating business. However, ICHOR
has certain value as a public company subject to the reporting
requirements of the SEC;
* Hippocampe is a privately-held company which is seeking to reverse
merge with or be purchased by a public U.S. company in order to
attempt to gain access to funding and a greater shareholder base;
* The acquisition of approximately 99.9% of the shares of Hippocampe
gives the shareholders of ICHOR the opportunity to participate in
the biopharmaceutical and biotechnology market and to capitalize on
the research and development efforts of and the patents registered
by Hippocampe to date and in the future; and
* The Board reviewed a range of alternative strategies that might be
pursued by ICHOR and the possible values that might be achieved
through those strategies and concluded that the alternative
strategies were either unlikely to result in a greater value to
ICHOR or its shareholders or carried greater risk than the
acquisition by ICHOR of shares of Hippocampe.
The foregoing discussion of the information and factors considered and
given weight by the Board is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation of the Share
Exchange, the Share Exchange Agreements and the transactions contemplated
therein, and subsequently the Amendment, the Board did not find it practicable
to, and did not, quantify or otherwise assign relative weights to the specific
factors considered in reaching its determination. In addition, individual
members of the Board may have given different weights to different factors.
Terms and Ancillary Agreements Relating to the LuxCo Preferred Shares
- ---------------------------------------------------------------------
The LuxCo Preferred Shares will rank senior to common shares of LuxCo
with respect to dividends and liquidating distributions of LuxCo. However,
the LuxCo Preferred Shares will be non-voting in LuxCo. All votes in respect
of LuxCo will be exercised by ICHOR as the holder of all of the voting rights
in the common shares of LuxCo. Notwithstanding that the LuxCo Preferred
Shares are non-voting, the holders of LuxCo Preferred Shares will be permitted
to vote as a class with respect to certain matters involving LuxCo.
In all material respects, the LuxCo Preferred Shares will have similar
rights in ICHOR as Common Shares of ICHOR, including the right to receive
dividends and the right to vote at shareholder meetings of ICHOR. The rights
attaching to the LuxCo Preferred Shares will be
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given effect, in part, by certain agreements to be entered on the closing of
the Share Exchange, including:
* a shareholder agreement (the "Shareholder Agreement") between ICHOR
and the holders of the LuxCo Preferred Shares providing for the
support by ICHOR of the rights attaching to the LuxCo Preferred
Shares;
* a support agreement (the "Support Agreement") between ICHOR and
LuxCo providing for the support by ICHOR of the rights attaching to
the LuxCo Preferred Shares; and
* a voting and exchange trust agreement (the "Voting and Exchange
Trust Agreement") among ICHOR, LuxCo and a trustee providing for the
voting rights of the LuxCo Preferred Shares in ICHOR.
The Shareholder Agreement will provide for the following principal terms,
among others:
* Holders of LuxCo Preferred Shares will be entitled to receive
dividends equivalent to dividends paid on the number of Common
Shares of ICHOR into which such LuxCo Preferred Shares may be
exchanged;
* Holders of LuxCo Preferred Shares will have the right, at any time
at their option, to require LuxCo to exchange their LuxCo Preferred
Shares for Common Shares of ICHOR at the established exchange ratio.
Since each LuxCo Preferred Share is intended to be economically
equivalent to the number of Common Shares of ICHOR which it may be
exchanged, the established exchange ratio will be adjusted in the
event that ICHOR undertakes a stock split or consolidation, issues
stock dividends or otherwise changes its share capital;
* On the liquidation of LuxCo, holders of the LuxCo Preferred Shares
will be entitled to exchange their LuxCo Preferred Shares for Common
Shares of ICHOR at the established exchange ratio; and
* LuxCo Preferred Shares will be automatically exchanged by LuxCo for
Common Shares of ICHOR at the established exchange ratio on December
31, 2011, which automatic redemption date will be accelerated in
certain circumstances, including:
(a) if the number of outstanding LuxCo Preferred Shares falls below
5% of the number of LuxCo Preferred Shares outstanding
immediately following the completion of the Share Exchange; or
(b) upon the occurrence of a change of control of ICHOR.
The Support Agreement will provide, among other things, for the following
covenants of ICHOR:
* ICHOR will not declare or pay a dividend on Common Shares of ICHOR
unless LuxCo can simultaneously pay the same dividend on the LuxCo
Preferred Shares, and that it will cause LuxCo to declare and pay
such equivalent dividend;
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* ICHOR will satisfy all exchange requests or redemptions of LuxCo
Preferred Shares that will not cause LuxCo to be liquidated or
dissolved and that it will not undertake a stock split or
consolidation, issue stock dividends or otherwise change its share
capital without adjusting the established exchange ratio with
respect to the number of Common Shares of ICHOR for which LuxCo
Preferred Shares may be exchanged;
* ICHOR will ensure that LuxCo will have a sufficient number of Common
Shares of ICHOR in the event of a liquidation of LuxCo; and
* So long as there are any outstanding LuxCo Preferred Shares owned by
a person other than ICHOR or its affiliates, ICHOR will remain the
direct or indirect beneficial owner of all issued and outstanding
voting shares in the capital of LuxCo.
The Voting and Exchange Trust Agreement will provide for the following
principal terms, among others:
* ICHOR will issue to a trustee a single Special Voting Preferred
Share of ICHOR, the terms of which will confer on the trustee that
number of votes with respect to matters on which holders of Common
Shares of ICHOR are entitled to vote, equal to the number of
outstanding LuxCo Preferred Shares (multiplied by the established
exchange ratio), other than LuxCo Preferred Shares held by ICHOR or
any of its affiliates. As beneficiaries of the voting trust, the
holders of LuxCo Preferred Shares will have the same right to vote
in respect of meetings of holders of Common Shares of ICHOR as if
they owned Common Shares of ICHOR directly; and
* ICHOR will grant certain "insolvency put rights" to the holders of
LuxCo Preferred Shares, including but not limited to:
(a) an "automatic exchange right" that would be invoked by the
commencement of the voluntary dissolution or liquidation of
ICHOR, in which event the LuxCo Preferred Shares would
automatically be acquired by ICHOR in exchange for the
appropriate number of Common Shares of ICHOR; and
(b) an "optional exchange right" that would permit the holders of
LuxCo Preferred Shares, at their option upon the occurrence of
certain insolvency events with respect to LuxCo, to require
ICHOR to purchase the LuxCo Preferred Shares directly from the
holder, for a purchase price payable in the appropriate number
of Common Shares of ICHOR to the trustee in respect of the
voting trust, for the benefit of the holders of LuxCo Preferred
Shares in the same manner as the voting rights.
The insolvency put rights will be granted by ICHOR to the trustee in
respect of the voting trust, for the benefit of the holders of LuxCo
Preferred Shares in the same manner as voting rights.
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Representations and Warranties
- ------------------------------
The Share Exchange Agreements contain various customary representations
and warranties of the parties thereto, including, among others:
* representations by each of the parties to the respective Share
Exchange Agreements as to the authorization and the enforceability
of the respective Share Exchange Agreements against each such party;
* representations by ICHOR as to its corporate status, authorized
capital and compliance concerning filings with the U.S. Securities
and Exchange Commission (the "SEC"), as to the accuracy of its
financial statements, as to the validity of certain securities to be
issued by it and as to the corporate status and authorized capital
of and validity of certain securities to be issued by LuxCo; and
* representations by each of the shareholders of Hippocampe as to the
ownership of securities of Hippocampe, the corporate status and
authorized capital of Hippocampe, the accuracy of and absence of
material changes in the financial statements of Hippocampe, the
validity of the patents of Hippocampe and the carrying on of
business in the ordinary course since December 31, 1999.
The representations and warranties contained in the Share Exchange
Agreements will survive the closing of the Share Exchange.
Covenants
- ---------
The Share Exchange Agreements contain various customary covenants of the
parties thereto, including, among others, that the parties will use all
commercially reasonable efforts to make effective the transactions
contemplated by the Share Exchange Agreements, that ICHOR will carry on and
each of the shareholders of Hippocampe will cause Hippocampe to carry on
business in the ordinary course, that ICHOR will not and each of the
shareholders of Hippocampe will not cause Hippocampe to create or incur
material liens or debt or make any material disposition of property or
patents.
In addition, the Share Exchange Agreements contain covenants of ICHOR to
execute and deliver and, where applicable, cause LuxCo to execute and deliver
the Support Agreement, the Voting and Exchange Trust Agreement and the
Shareholder Agreement, and to issue to the trustee the Special Voting
Preferred Share of ICHOR.
Conditions
- ----------
The Share Exchange is subject to certain conditions customary for
transactions of this nature including, among others, that:
* ICHOR receives shareholder approval to increase its authorized share
capital to a level necessary to complete the Share Exchange;
* the Bank Agreements, which include an underwriting agreement,
attached as Exhibit 1.4, relating to MFC Bank's services as an
advisor in the Share Exchange and to raise capital for Hippocampe
and a credit facility agreement, attached as
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Exhibit 1.5, relating to a credit facility provided by MFC Bank to
Hippocampe, be duly and validly assigned and transferred to ICHOR;
and
* the representations and warranties of the parties are true and
correct on the closing of the Share Exchange and that, as at the
time of closing of the Share Exchange, the parties have complied
with all covenants and agreements in the respective Share Exchange
Agreements.
The Bank Agreements and any share purchase warrants referenced therein
were assigned by Hippocampe to ICHOR, effective upon the closing of the Share
Exchange, pursuant to an assignment agreement dated for reference December 29,
2000. The assignment agreement is attached as Exhibit 1.6.
Accounting Treatment
- --------------------
The Share Exchange will be accounted for as a reverse purchase of the
shares of Hippocampe by ICHOR in accordance with U.S. generally accepted
accounting principles. The accounting treatment applied in the reverse
purchase differs from the legal form of the transaction and the continuing
entity is Hippocampe.
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RELATED PARTY TRANSACTIONS AND INTEREST OF CERTAIN
PERSONS IN MATTERS TO BE ACTED UPON
Pursuant to the Bank Agreements, MFC Bank acted as an advisor in the
Share Exchange and will receive certain compensation in respect thereof,
including 2,017,854 Common Shares of ICHOR to be issued upon the closing of
the Share Exchange. MFC Bank also provided a credit facility to Hippocampe in
connection with which MFC Bank has received certain fees as well as share
purchase warrants which, upon the closing of the Share Exchange, will entitle
MFC Bank to purchase up to approximately 6,730,599 Common Shares of ICHOR,
subject to final adjustment, at an exercise price of approximately E0.2319 and
for a period expiring on July 31, 2003.
ICHOR will assume the rights and obligations of Hippocampe under the Bank
Agreements effective upon the closing of the Share Exchange. Pursuant to the
Bank Agreements, MFC Bank has agreed to attempt to raise additional capital on
a best efforts basis to fund working capital requirements following the Share
Exchange. MFC Bank will be paid customary fees and expenses, and will receive
additional share purchase warrants, in connection with the provision of these
services. MFC Bank will have a right of first refusal until 24 months after
the closing of the Share Exchange on any financing and capital raising
activities of ICHOR.
MFC Bank will also act as the trustee under the Voting and Exchange Trust
Agreement, and will be paid customary fees and expenses in relation thereto.
MFC Bank is a wholly-owned subsidiary of MFC Bancorp Ltd., which
currently, directly and indirectly, owns approximately 43.7% of the currently
outstanding Common Shares of ICHOR. Michael J. Smith, the Secretary of ICHOR,
is the President, Chief Executive Officer and a director of MFC Bancorp Ltd.
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DESCRIPTION OF ICHOR
Information with respect to the business of ICHOR can be obtained from
ICHOR's Annual Report on Form 10-K for the year ended December 31, 1999 which
is incorporated by reference in this Information Statement.
As disclosed in the Annual Report on Form 10-K of ICHOR for the year
ended December 31, 1999, ICHOR acquired approximately 87% of the issued and
outstanding shares of common stock of Nazca Holdings Ltd. ("Nazca") effective
June 30, 1999, pursuant to a purchase agreement (the "Purchase Agreement")
among ICHOR and the former majority holders (the "Vendors") of the shares (the
"Nazca Shares") of common stock of Nazca. Nazca, through a subsidiary, is in
the business of the exploration for and development of groundwater resources
in Chile.
In addition, as disclosed in the Annual Report on Form 10-K of ICHOR for
the year ended December 31, 1999, in 1999 two of the Vendors purported to
exercise an option (the "Option") granted pursuant to the Purchase Agreement
to reacquire approximately 37.6% of the Nazca Shares. ICHOR believed the
attempted exercise to be invalid, as the conditions to be met prior to
exercise were not satisfied. A dispute arose between the two Vendors
purporting to exercise the Option and ICHOR as to the validity of the exercise
of the Option.
In order to settle the dispute relating to the purported exercise of the
Option, effective July 28, 2000, ICHOR completed an agreement with one of the
Vendors to sell all of ICHOR's interest in the Nazca Shares and certain
receivables due from Nazca to ICHOR (the "Receivables"), in exchange for a
promissory note from that Vendor in the amount of $600,000 which accrues
interest at the rate of 5% per annum and is due on June 30, 2001. ICHOR also
obtained a release from, and granted a release to, Nazca and the Vendors with
respect to any claims arising out of or connected with Nazca. The
consideration payable for the Nazca Shares and the Receivables is the result
of a negotiated settlement of a disputed claim. ICHOR has no further interest
in Nazca. For further information with respect to the settlement, including
the agreement with the Vendor referred to above, see the Current Report on
Form 8-K of ICHOR dated August 9, 2000.
Accordingly, ICHOR does not currently have an operating business. Prior
to the entering into of the Share Exchange Agreements, ICHOR's main business
was the identification of a particular business or industry within which it
would seek an acquisition or merger. Effective December 13, 2000, ICHOR
entered into the Share Exchange Agreements with Hippocampe.
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DESCRIPTION OF HIPPOCAMPE
The Company
- -----------
Hippocampe is a biotechnology research and development company organized
in 1990 under the laws of France, with research activities coordinated in
Lyon, France. Hippocampe's focus is fundamental and applied research in human
and veterinary biology and medicine, with a particular emphasis on
humanitarian aspects of such research (i.e., retroviral pathogenesis, such as
AIDS, oncogenesis and organ transplantation). Hippocampe's current objective
is to develop vaccine and therapeutic compounds and specific therapies for
certain retroviral diseases or diseases with a viral autoimmune content. The
first products and applications target human and animal AIDS.
The basic operational strategy of Hippocampe has been to divide its main
areas of research into discrete modules, each with its own scientific
interest. These modules are outsourced under Hippocampe's supervision to
specialized and complementary, public and private research teams. Hippocampe
organizes the schedule and progress of the individual research teams to
facilitate the overall development of its research goals. The research teams
are authorized to co-publish their results at the appropriate time and in
agreement with Hippocampe. However, Hippocampe retains all intellectual
property rights on the combined research results and applies for patent
protection of the research results whenever such protection is justified.
Hippocampe has a limited operating history and its products are in an
early stage of development. However, Hippocampe believes it has made a major
finding with a new and precise molecular mimicry between a conserved part of
GP41 (an HIV transmembrane protein) in a trimeric form and interleukine-2, the
immune system's conductor protein. This discovery may explain that an HIV
infection can trigger an immune response that turns against the immune system
itself. This research indicates potential for a major link that may have a
significant impact in developing animal and human AIDS vaccines and
therapeutic molecules in the field of HIV and FIV infection.
The key principal of Hippocampe is Dr. Pierre-Francois Serres. Dr.
Serres began his career as a professor and researcher at the medical faculty
of the University of Lyon in France. From 1975 and prior to starting
Hippocampe, he held various teaching and research positions at French medical
universities and biomedical institutes, among them the Institut Pasteur in
Lyon, France. Dr. Serres founded Hippocampe in 1990.
Viruses
- -------
Viruses are noncellular organisms consisting of DNA or RNA and a protein
coat. During the free and infectious stages of their life cycle, viruses do
not carry out the usual functions of living cells, such as respiration and
growth. Instead, when viruses enter a living plant, animal or bacterial cell,
they make use of the host cell's chemical energy and synthesizing ability to
replicate. After the replication of the viral components by the infected host
cell, virus particles are released and the host cell is often destroyed.
HIV
The approximately 2450 viral species identified to date are divided into
approximately 75 groups. The human immunodeficiency virus ("HIV") belongs to
the group of retroviruses, so
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named because they contain a reverse transcriptase, an enzyme that copies
viral RNA back into DNA (the reverse of the usual process in which DNA is
copied into RNA). Retroviruses include spumaviruses, oncoviruses (viruses
causing cancers) and lentiviruses (viruses with a slow pathogenic action).
HIV belongs to the subgroup of retroviruses called lentiviruses.
HIV causes a disease called acquired immunodeficiency syndrome ("AIDS").
After entering into a target cell, HIV uses its reverse transcriptase to
infect the cell's chromosomes. Thus, the infected cell is able to start
reproducing the virus. Two types of HIV involved in AIDS, HIV1 and HIV2, have
been identified. HIV2 is not as virulent as HIV1. Along with HLTV1 and HLTV2
(oncoviruses linked to leukemia), HIV1 and HIV2 are the only retroviruses that
cause diseases in humans. Other AIDS-associated lentiviruses that cause
diseases in animals include FIV (causing AIDS in felines), SIV (causing AIDS
in monkeys) and BIV (causing AIDS in bovines).
The Immune System
- -----------------
The immune system has the function of protecting the body against
infection and foreign substances, including viruses and bacteria. This
function is carried out by white blood cells (leukocytes) and by a number of
accessory cells, including B lymphocytes that produce the antibodies needed to
fight infection and cytotoxic T lymphocytes that destroy cells infected with
viruses.
When an immunocompetent cell recognizes foreign material or a biological
invader presented by macrophages, it normally induces a response. This
recognition function depends on the immune system's ability to recognize
specific foreign molecular configurations, generically referred to as
antigens. T4 lymphocytes, as central cells of the immune system, specifically
recognize foreign invaders presented by macrophages. After this specific
recognition of a presented antigen, T4 lymphocytes play a major role in the
immune response, producing interleukine-2 ("IL-2"), a central interleukine
that activates all the accessory cells previously described and the overall
immune response.
Interleukin-2
IL-2 is a hormone-like substance produced by stimulated T-cells. IL-2
causes activation of other T-cells and "orchestrates" the immune response to
non-host antigens. IL-2 also increases the proliferation and maturation of
CD4 cells. From the early stage of HIV infection, IL-2 production gradually
declines, causing the immune system to collapse.
AIDS
- ----
Viral Envelope of HIV
The viral envelope of HIV is covered with mushroom-shaped spikes that enable
the virus to attach itself to the target cell. The cap of each "mushroom" is
made of three GP120 molecules and its stem of three GP41 molecules. GP160 is
a glycoprotein that is the precursor of HIV envelope proteins GP120 and GP41.
GP120 is a glycoprotein that protrudes from the surface of HIV and binds to
the CD4 receptor of the CD4+ T-cells. In a two-step process that allows HIV
to breach the membrane of
27
29
T-cells, the GP120-CD4 complex refolds to reveal a second structure that binds
to CCR5 or CXCR4, two of several chemokine co-receptors used by the virus to
gain entry into T-cells.
GP41 is a glycoprotein embedded in the outer envelope of HIV and plays a
key role in HIV's infection of cells by carrying out the fusion of the viral
and cell membranes.
AIDS
Human AIDS is the last stage of the illness caused by the HIV virus
infection. Although HIV1 is able to trigger a strong immune response with the
production of antibodies and immunocompetent cells, it characteristically
induces a progressive decline of the immune system leading to AIDS. The main
cellular target of HIV is a special class of white blood cells critical to the
immune system and known as helper T lymphocytes, or T4 helper cells. These
cells play a major role in normal immune responses by stimulating or
activating, by way of IL-2 production, all the other cells involved in immune
protection. Once HIV has entered the helper T-cell, it can cause the cell to
function poorly or even destroy the cell. As AIDS develops, non-infected T4
cells are also destroyed. As the infection progresses, the control of HIV
levels by the immune system weakens, the viral level in the blood rises and
the level of critical T-cells declines to a fraction of its normal value.
In HIV-infected subjects, the immune system does not fulfil its function,
due to a dynamic situation involving continuous infection, destruction and
replacement of destroyed CD4+ cells with billions of new cells that are
infected and killed each day. Essentially, the immune system enters a lengthy
process of virus production, destruction and cellular regeneration. After
many years of this process, the capacity to regenerate immune cells is lost in
most cases, resulting in the absolute decline of the CD4 segment of the immune
system and the development of full-blown AIDS. HIV can also infect other
cells, including macrophages as well as certain brain, skin and liver cells.
The main observed AIDS-associated disorders are:
* a drop of peripheral IL-2;
* a decrease of non-infected helper T lymphocytes;
* lymphoproliferation disorders and microglobulin increase; and
* hypergammaglobulinemia.
Hippocampe's Findings: A Precise Molecular Mimicry between Trimeric GP41
- ------------------------------------------------------------------------
and IL-2
- --------
Molecular Mimicry between Trimeric GP41 and IL-2
Hippocampe has discovered a molecular mimicry between the trimeric GP41
and IL-2. The first results of Hippocampe's research were recently
communicated by Pr. Luc Montagnier, an internationally recognized expert in
the field of AIDS research, to the French Academy of Sciences and were
published in November 2000.1
- ----------------------------
1 Serres P.F.; 2000. Molecular mimicry between the trimeric ectodomain of
the transmembrane protein of immunosuppressive lentiviruses (HIV-SIV-FIV) and
interleukin 2. C.R. Acad. Sci. Paris, Sciences de la vie / Life Sciences, 323:
1019-1029.
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30
Hippocampe has also demonstrated that the mimicry exists in three mammal
species known to develop AIDS: humans, monkeys and felines. The discovered
host-virus autoimmune mimicry is therefore applicable to the known human and
animal AIDS-associated retroviruses.
Autoimmune Consequences for HIV-Infected Subjects
Hippocampe found some of the expected autoimmune consequences of the
described virus-host molecular mimicry in HIV-infected subjects. As expected,
HIV positive sera recognize human IL-2, and cross-reactivity was found between
the structurally and physically analogous antigenic sites of GP41 (HIV1) and
human IL-2. The tests included 2352 HIV positive and HIV negative sera. The
results demonstrated that 100% of HIV positive patients (stage II, III, IV
CDC) were positive for the anti IL-2 response.
The first results were presented by Dr. Serres in an international
symposium held in late November 2000 organized by the Merieux Foundation:
"Autoimmunity induced by infection or immunization." The presentation was
entitled: "AIDS: an immune response against the immune system. The role of a
precise tridimensional molecular mimicry." Hippocampe expects these results
to be published in the Journal of Autoimmunity in the Spring of 2001.
Therapeutic and Vaccinal Uses of Hippocampe's Findings
- ------------------------------------------------------
Current Research Objectives
Hippocampe's current research modules are focused in the following four
fields:
* Fundamental research: Hippocampe believes that the mimicry
between trimeric GP41 and IL-2 can largely explain the main AIDS-
associated disorders: a drop of peripheral IL-2; a decrease of
non-infected helper T lymphocytes; lymphoproliferation disorders
and microglobulin increase; and hypergammaglobulinemia.
Hippocampe is currently working to demonstrate that these AIDS-
associated disorders are the result of the tridimensional GP41
(HIV1 and HIV2) / human IL-2 molecular mimicry.
* Therapeutic molecules: Hippocampe believes that, based on the
mimicry, an application involving the development of particular
synthetic peptides and monoclonal antibodies (some of which have
already been developed) would inhibit the fusion between the HIV
virus and its target cell in an infected subject. Hippocampe's
strategy is to use therapeutic molecules that would make it
impossible for the virus to bind to the target cell and thus
inhibit the reproduction of HIV. Applications may complement,
and potentially even provide a substitute for, available
antiretroviral drugs. It has been shown that the transmission of
HIV depends on the viral load, and that no transmission has been
observed from individuals carrying fewer than 1,500 viral
copies/ml of blood. Therefore, treatment with therapeutic agents
may provide a strategy to control the AIDS epidemic by abolishing
or reducing transmission of HIV.
* Therapeutic and preventive vaccines: Hippocampe believes that
its findings may lead to novel therapeutic and preventive vaccine
strategies, in both human and veterinary applications.
Hippocampe believes that a preventive vaccine would be
29
31
useful against all known strains of HIV1 and HIV2 published to
date. The vaccinal approach of Hippocampe relies on the precise
immunological cross-reactivity observed between trimeric GP41 and
the cytokine IL-2.
* AIDS cartridge: Hippocampe has developed a number of therapeutic
Immunocartridges that have already been tested and approved by
the Ethics Committee for the Treatment of Systemic Lupus
Erythematosus and Hemophilia A in France. A number of
international scientific publications have described the
process.2 Hippocampe's research has demonstrated that the anti
IL-2 antibodies in HIV-infected subjects recognize sites on IL-2
that are crucial for its bioactivity. Therefore, Hippocampe
believes that the development of an "AIDS cartridge" could be
efficient in the restoration of the immune system (i.e., the
CD4/CD8 and the viral load) of HIV-infected subjects.
Products and Processes in Development
Hippocampe has targeted four prototypes that could be exploited at a
commercial level:
* Human and animal therapeutic molecules (pharmacological agents)
that could be administered to humans infected by HIV and felines
infected by FIV in order to block the cell infection by the
virus.
* Human and animal therapeutic vaccines (immunotherapeutic agents)
that could be administered to humans infected by HIV and felines
infected by FIV in order to orient the immune system for
recognizing the transmembrane glycoprotein of the virus and not
the host's IL-2.
* Human and animal preventive vaccines that could be administered
to healthy humans and felines to prevent infection by the HIV or
FIV virus.
* AIDS cartridge that could selectively remove the identified
immunosuppressive antibodies present in the serum of AIDS
patients, using peptides that have been tested for activity.
Hippocampe's Intellectual Property - Patents
- --------------------------------------------
Hippocampe's policy has been to protect its technology (products and
processes) by obtaining basic patents followed by application patents. To
date, Hippocampe has registered two patents in France, each of which has
subsequently been registered pursuant to the Patent Cooperation Treaty (PCT).
Hippocampe has also acquired an additional patent concerning the AIDS
cartridge, registered in 13 countries in Europe.
The Market
- ----------
According to the December 2000 update to the UNAIDS Report on the Global
HIV/AIDS Epidemic, the estimated number of people living with HIV/AIDS at the
end of 2000 was approximately 36 million. People newly infected with HIV in
2000 are estimated to total more
- -------------------------------
2 See e.g., Traeger J., Laville M., Serres P.F., Cronenberger M., Thomas
M., Rey M.J. and Bourgeat C.; 1992. A new device for specific extracorporeal
immunoadsorption of anti DNA antibodies. J. Med. Interne, 143 (1): 9-12.
30
32
than 5 million. In 2000, approximately 3 million people died of AIDS, which
brings the estimated total number of AIDS deaths since the beginning of the
epidemic to almost 22 million.
The following table shows the extent of the HIV/AIDS epidemic:
Estimated Estimated
number of number of Estimated
people living people newly deaths due
with HIV/AIDS Adult infected with to HIV/AIDS
at the end prevelance HIV during during
of 2000 rate 2000 2000
Country (millions) (%) (thousands) (thousands)
- ------- ------------- ---------- ------------- -----------
Sub-Saharan
Africa 25.3 8.8 3,800 2,400
South & South-
East Asia 5.8 0.6 780 470
Latin America 1.4 0.5 150 50
North America 0.9 0.6 45 20
Eastern Europe
& Central Asia 0.7 0.4 250 14
East Asia &
Pacific 0.6 0.1 130 25
Western Europe 0.5 0.2 30 7
North Africa &
Middle East 0.4 0.2 80 24
Caribbean 0.4 2.3 60 32
Australia &
New Zealand <0.1 0.1 <1 <1
TOTAL 36.1 1.1 5,300 3,000
- --------------------
Source: December 2000 update to the UNAIDS Report on the Global HIV/AIDS
Epidemic.
Accordingly, Hippocampe believes that there is an existing and future
market for safe, effective and affordable preventive vaccines for uninfected
persons and for pharmacological and/or immunological treatment of infected
individuals to curtail and reduce infection levels below the transmissible
levels. Most of the demand would come from the large populations of the
developing world, although a preventive vaccine would also be appropriate for
subgroups of high-risk individuals in industrialized countries. Recognizing
the commercial market in developing countries is constrained by limited
resources, Hippocampe's approach in this market will be to explore subsidized
production and distribution negotiated with international agencies (e.g.,
UNAIDS/World Health Organization and World Bank), bilateral aid donors (e.g.,
USAID) and The International AIDS Vaccine Initiative (IAVI).
Competition
- -----------
The biotechnology and biopharmaceutical industries are highly
competitive, especially in the field of HIV. Hippocampe faces significant
competition for some of its therapeutic compounds and for its preventive
vaccines.
Therapeutic Molecules (Pharmacological Agents)
If Hippocampe is successful in developing its therapeutic agents and
obtaining regulatory approval with respect thereto, Hippocampe believes there
are significant existing and future markets for the treatment of HIV and AIDS.
Hippocampe believes that its unique approach may provide an advantage over
existing competitors. However, Hippocampe will compete with existing
developed and approved therapies. The U.S. Department of Health and Human
Services
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33
Food and Drug Administration ("FDA") has already approved a number of
antiviral drugs to treat HIV and AIDS. The drugs fall into two categories
depending on which of the following viral enzymes they target: HIV protease or
reverse transcriptase ("RT").
The objective of approved protease inhibitor drugs is to prevent the
assembly of new virus particles. The approved protease inhibitors include
drugs such as Invirase, Fortovase, Norvir, Crixivan, Viracept and Agenerase.
RT inhibitor drugs aim at blocking reverse transcriptases and preventing
transcription of the viral genetic material from RNA to DNA. There are two
classes of RT drugs: nucleoside analogue inhibitors and non-nucleoside
inhibitors. The approved nucleoside analogue inhibitors include drugs such as
Retrovir, Videx, Hivid, Zerit, Epivir, Combivir and Ziagen. The approved non-
nucleoside inhibitors include drugs such as Viramuno, Rescriptor and Sustiva.
Both HIV protease and RT drugs have demonstrated their efficacy in terms
of HIV blood concentration and are used to slow the progression of the
disease. Furthermore, efficacy has generally been higher with drug
combinations. However, none of these drugs appear to present a cure and
mutations of the HIV's envelope produce viral strains resistant to both
classes of drugs. Toxic side effects on the peripheral nervous system and
gastrointestinal tract are additional issues relating to these drugs. Non-
compliance on combination therapies and interruptions in dosing could have an
effect on and trigger accelerated viral replication.
There can be no assurance that currently approved drugs or products
developed in the future for the treatment of HIV/AIDS by Hippocampe's
competitors will not be effectively marketed and sold, or that such drugs or
products will not render Hippocampe's therapeutic compounds obsolete,
noncompetitive or uneconomical. Hippocampe believes that numerous companies
are developing new pharmaceutical products for the treatment of the HIV/AIDS.
In addition, Hippocampe may compete with multinational companies that have
greater financial, manufacturing, technical and human resources; greater
marketing and distribution capability; greater experience in preclinical and
clinical trials; and greater experience in obtaining regulatory and FDA
approvals.
Preventive Vaccines
Hippocampe is conducting research for the development of a preventive
vaccine that would provide protection against the known strains of HIV1 and
HIV2 viruses. Hippocampe's approach to vaccine development is based on the
observed immunological cross-reactivity between the well-preserved, antigenic
and immunodominant domain of GP41 and IL-2, and relies on the observation of
expected autoimmune consequences in HIV-infected subjects.
The worldwide vaccine market is dominated by several large multinational
companies. All of these companies have greater financial, manufacturing,
technical and human resources; greater marketing and distribution capability,
greater experience in preclinical and clinical trials; and greater experience
in obtaining regulatory and FDA approvals than Hippocampe. However,
Hippocampe does not believe that any of the technologies derived from the
intellectual property portfolios of other companies have a competitive
advantage over Hippocampe's technology.
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34
RISK FACTORS
The Amendment, the Share Exchange, the business of Hippocampe and any
investment in the Common Shares of ICHOR are subject to a number of risk
factors. After completion of the Share Exchange, risk factors applicable to
the business of Hippocampe shall be equally applicable to ICHOR. Such risk
factors include but are not limited to the following:
The Share Exchange may not close.
- ---------------------------------
The Share Exchange is subject to certain conditions customary for
transactions of this nature. There can be no assurance that these conditions
will be satisfied or that the Share Exchange will be completed without
significant delays or at all. If ICHOR and the shareholders of Hippocampe do
not complete the Share Exchange for any reason, ICHOR may subject itself to a
number of material risks, including but not limited to the following:
* the price of the Common Shares of ICHOR may decline to the extent
that the current market price of Common Shares of ICHOR reflects
a market assumption that each party will complete the Share
Exchange; and
* ICHOR must pay costs related to the Share Exchange even if the
Share Exchange is not completed.
In addition, there can be no assurance that, if the Share Exchange is
completed, the operations of ICHOR and Hippocampe will be successfully
integrated.
The costs of the Share Exchange are substantial.
- ------------------------------------------------
The costs to complete the Share Exchange are substantial and include,
among other things, expenses for investment bankers, attorneys and
accountants.
As a result of the Share Exchange, current holders of Common Shares of
- -----------------------------------------------------------------------
ICHOR will experience immediate and substantial dilution.
- ---------------------------------------------------------
The issuance of Common Shares and securities convertible into Common
Shares of ICHOR in connection with the Share Exchange will reduce existing
shareholders' percentage ownership and voting power in ICHOR. The issuance of
securities, by reducing the percentage of equity of ICHOR owned by present
shareholders, will reduce such present shareholders' ability to influence the
election of directors or any other action taken by the holders of Common
Shares of ICHOR and may reduce per share dividends, if any.
In addition, holders of Common Shares of ICHOR will experience an
immediate and substantial dilution in net tangible book value per share and
other per share financial information as a result of the Share Exchange.
33
35
Hippocampe has a limited operating history and is expected to continue to
- --------------------------------------------------------------------------
generate losses.
- ----------------
To date, Hippocampe has engaged primarily in research, development and
limited clinical testing. Hippocampe had an accumulated deficit of E585,980
as at September 30, 2000. Hippocampe also sustained net losses of E39,770 in
1997, E67,616 in 1998, E98,808 in 1999 and E210,260 in the nine months ended
September 30, 2000. There can be no assurance that Hippocampe will generate
profits in the foreseeable future, if at all.
Hippocampe's products are in an early stage of development.
- -----------------------------------------------------------
All of Hippocampe's products are at an early stage of development. The
successful commercialization of its products will require significant further
research, development, testing and regulatory approvals and additional
investment. If Hippocampe cannot advance its products beyond the early stages
of product development or demonstrate clinical efficacy, it may never
commercialize a product. There can be no assurance that any of Hippocampe's
products in the research or pre-clinical development stage will yield results
that would permit or justify clinical testing or that products that advance to
clinical testing will receive regulatory approval or be commercialized. In
addition, the process of obtaining regulatory approval is costly, time
consuming, uncertain and subject to unanticipated delays. If Hippocampe is
unable to commercialize the current research, or if it is unable to
commercialize the current research without significant delay, it does not have
other products from which to derive revenue.
Hippocampe's products may not achieve market acceptance.
- --------------------------------------------------------
There can be no assurance that any products Hippocampe successfully
develops, if approved for marketing, will achieve market acceptance.
Technological change and competition may render Hippocampe's potential
- -----------------------------------------------------------------------
products obsolete.
- ------------------
The biopharmaceutical and biotechnology industries continue to undergo
rapid change and competition is intense and is expected to increase.
Competitors may succeed in developing technologies and products that are more
effective or affordable than any being developed by Hippocampe or that would
render Hippocampe's technology and products obsolete and noncompetitive. Many
of Hippocampe's competitors have substantially greater experience, financial
and technical resources and production, marketing and development capabilities
than Hippocampe.
Political or social factors may delay or impair Hippocampe's ability to
- ------------------------------------------------------------------------
market its products.
- --------------------
Products developed for use in addressing the HIV/AIDS epidemic have been
and will continue to be subject to competing and changing political and social
pressures. The political and social response to the HIV/AIDS epidemic has
been highly charged and unpredictable. These pressures can transcend national
barriers. They may delay or cause resistance to bringing Hippocampe's
products to market or limit the pricing of such products.
Hippocampe may be dependent on third parties for manufacturing, marketing
- --------------------------------------------------------------------------
and sales.
- ----------
As Hippocampe has no manufacturing facilities, it may be entirely
dependent on third parties to produce its products. In addition, as
Hippocampe has no marketing or sales
34
36
capabilities, it may be entirely dependent on third parties to market and sell
its products. There can be no assurance that Hippocampe will be able to
locate third parties to manufacture, market and sell its products, to enter
into agreements on satisfactory terms or to have its products manufactured,
marketed and sold at a sufficiently low cost and in a sufficiently timely
manner.
Hippocampe will need additional funds in the future to continue its
- --------------------------------------------------------------------
operations.
- -----------
Hippocampe will require substantial future capital in order to continue
to conduct the time consuming research and development, clinical studies and
regulatory activities necessary to bring its potential products to market and
to establish production, marketing and sales capabilities. There can be no
assurance that the cash reserves of Hippocampe or the combined cash reserves
of Hippocampe and ICHOR together with any funding subsequently received will
satisfy capital requirements. In addition, there can be no assurance that
additional funding will be received or on reasonable terms. Additional
funding may significantly dilute shareholders of ICHOR or may limit
Hippocampe's rights to its currently developing technology. If adequate funds
cannot be obtained, Hippocampe may need to curtail significantly its product
development programs and/or relinquish rights to its technologies or product
candidates.
Hippocampe may become subject to product liability claims.
- ----------------------------------------------------------
Hippocampe faces an inherent risk of exposure to product liability suits
in connection with vaccines being tested in human clinical trials and products
that may be sold commercially. Hippocampe may become subject to a product
liability suit if its products cause injury or if vaccinated individuals
subsequently become infected with HIV. Regardless of merit or eventual
outcome, product liability claims may result in decreased demand for a
vaccine, injury to the reputation of Hippocampe, withdrawal of clinical trial
volunteers and loss of revenues.
Hippocampe may face difficulties in the conduct of its proprietary research
- ---------------------------------------------------------------------------
programs.
- ---------
Hippocampe conducts a significant portion of its research and development
activities through proprietary research programs. Any conflict with its
collaborators could reduce its ability to obtain future collaboration
agreements and could negatively influence its relationship with existing
collaborators. Further, disagreements with Hippocampe's collaborators could
develop over rights to Hippocampe's intellectual property. Certain
collaborators could also become competitors in the future.
Hippocampe faces uncertainties related to patents and proprietary
- ------------------------------------------------------------------
technology.
- -----------
Hippocampe's success will depend in part on its ability to:
* obtain patent protection for its products;
* preserve trade secrets;
* prevent third parties from infringing on its patents; and
* refrain from infringing on the patents of other parties, both
domestically and internationally.
35
37
Hippocampe's present patent positions are highly uncertain and any future
patents it receives for potential products may be subject to the same
uncertainty. In addition, there can be no assurance that certain claims in
the patent application process will not fail or that they receive such limited
approval that the value of any patents could diminish.
Any patents that Hippocampe procures may require cooperation with other
parties holding related patents. Hippocampe may have difficulty forming a
successful relationship with such other parties.
There can be no assurance that Hippocampe's patents or future patents
will be enforceable and afford adequate protection against competitors. In
addition, there can be no assurance that third parties will not claim that
Hippocampe's technology, current or future products or manufacturing processes
infringe their proprietary rights. Hippocampe may have to undertake costly
litigation to enforce any patents issued or licensed to it or to determine the
scope and validity of another party's proprietary rights. There can be no
assurance that a court of competent jurisdiction would validate Hippocampe's
issued or licensed patents. An adverse outcome in litigation or an
interference or other proceeding in a court or patent office could subject
Hippocampe to significant liabilities to other parties, require Hippocampe to
license disputed rights from other parties or require Hippocampe to cease
using such technology.
Hippocampe is dependent on certain key employees.
- -------------------------------------------------
Hippocampe is highly dependent on its senior scientific staff,
particularly Dr. Pierre-Francois Serres. Dr. Serres has played a critical role
in the development of Hippocampe and Hippocampe's research and development
activities. The loss of his services may prevent Hippocampe from achieving
its scientific objectives.
The price of Common Shares of ICHOR may fluctuate significantly.
- ----------------------------------------------------------------
In connection with the Share Exchange, the Common Shares of ICHOR may
experience significant volatility. Stock markets, in general, have
experienced significant volatility with respect to biopharmaceutical and
biotechnology based stocks. The volatility of biopharmaceutical and
biotechnology based stocks often does not relate to the operating performance
of the companies represented by the stock. Factors such as announcements of
the introduction of new products or services by Hippocampe or its competitors,
market conditions in the biopharmaceutical and biotechnology sectors, rumors
relating to Hippocampe or its competitors and litigation or public concern as
to safety of Hippocampe's potential products may have a significant impact on
the market price of the Common Shares of ICHOR.
36
38
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ICHOR
- -----
ICHOR's Common Shares were quoted on the NASDAQ SmallCap Market under the
trading symbol "ICHR" until February 8, 2000 when ICHOR's Common Shares were
delisted from The Nasdaq Stock Market. ICHOR's Common Shares are now quoted
on the OTC Bulletin Board under the symbol "ICHR". The following table sets
forth the quarterly high and low sale price per share of ICHOR's Common Shares
for the periods indicated:
Fiscal Quarter Ended High Low
-------------------- ---- ---
1998
March 31 $ 1.75 $ 1.25
June 30 2.00 1.25
September 30 2.25 1.25
December 31 3.25 1.25
1999
March 31 $ 2.88 1.25
June 30 3.25 1.50
September 30 4.63 1.00
December 31 5.00 2.00
2000
March 31 $ 3.25 $ 1.50
June 30 2.00 0.50
September 30 0.59 0.49
December 31 3.44 0.38
At January 19, 2001, ICHOR had approximately 18 holders of record of its
Common Shares, some of which are securities clearing agencies and
intermediaries. ICHOR has not paid any dividends on its Common Shares and
does not anticipate that it will pay any dividends in the foreseeable future.
Hippocampe
- ----------
Hippocampe is a privately-held corporation. Its shares are not traded or
quoted on a public securities market. At January 19, 2001, Hippocampe had
approximately 13 holders of record of its shares. Hippocampe has not paid any
dividends on its shares.
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39
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information as at January 19, 2001
regarding the beneficial ownership of ICHOR's Common Shares, upon the closing
of the Share Exchange and based on the current shareholder structure of
Hippocampe and ICHOR, by:
* each person known by ICHOR to be a beneficial owner of more than
five percent of the outstanding Common Shares of ICHOR on January
19, 2001;
* each of the executive officers and directors of ICHOR prior to
the closing of the Share Exchange;
* all executive officers and directors of ICHOR prior to the
closing of the Share Exchange as a group; and
* each person known by ICHOR to be a beneficial owner of more than
five percent of the outstanding shares of Hippocampe on January
19, 2001.
The following is based solely on statements filed with the SEC or other
information ICHOR believes to be reliable.
Amount and Amount and
Nature of Nature of
Beneficial Percent Beneficial Percent
Name and Address Ownership of Class Ownership(1) of Class(1)
of Beneficial Owner (Pre-Share Exchange) (Post-Share Exchange)
- ------------------- ---------- -------- ----------- -----------
MFC Bancorp Ltd.
17 Dame Street
Dublin 2, Ireland 3,567,380(2) 43.7% 12,315,832(2)(3) 24.5%
Parkland Ventures
Limited
8 Queensway House
Queen Street
St. Helier, Jersey
Channel Islands
JF2 4WD 1,620,000 19.8% 1,620,000 3.7%
Sutton Park
International Ltd.
P.O. Box 146,
Road Town,
Tortola,
British Virgin
Islands 2,597,060 31.8% 2,597,060 5.9%
MFC Merchant
Bank S.A.
6, Cours de Rive,
1211 Geneva 3,
Switzerland 970,320 11.9% 9,718,772(4) 19.4%
Jin-Soo Choi
President and
Director of ICHOR - - - -
Young-Soo Ko
Director of ICHOR - - - -
Jae-Sun Lee
Director of ICHOR - - - -
38
40
Amount and Amount and
Nature of Nature of
Beneficial Percent Beneficial Percent
Name and Address Ownership of Class Ownership(1) of Class(1)
of Beneficial Owner (Pre-Share Exchange) (Post-Share Exchange)
- ------------------- ---------- -------- ----------- -----------
Michael J. Smith
Secretary of ICHOR -(5) - -(5) -
All executive officers
and directors of ICHOR
as a group (4 persons) - - - -
Pierre-Francois Serres(6)
52, Chanoine Cartellier
F-69230 Saint-Genis-Laval,
France - - 11,129,393(7) 25.1%
Aralis Participations
S.A.(6)
Les Avouillons 4
CH-1196 Gland VD,
Switzerland - - 9,124,482 20.6%
Martine Reindle(6)
CP 18
CH-1295 Mies,
Switzerland - - 4,291,365 9.7%
Bertrand Favreau(6)
61, Rue de l'oise
F-60200 Compiegne,
France - - 2,137,151 4.8%
Patrice Pactol(6)
130 Route du Bouleau
F-69125 Brindas, France - - 2,137,151 4.8%
- --------------------
(1) Securities exchangeable into Common Shares of ICHOR (i.e., LuxCo
Preferred Shares) to be issued to certain shareholders of Hippocampe in
connection with the Share Exchange have been considered to be issued
and outstanding Common Shares of ICHOR.
(2) MFC Bancorp Ltd. indirectly owns 2,597,060 Common Shares through Sutton
Park International Ltd. and 970,320 Common Shares through MFC Bank.
(3) Upon the closing of the Share Exchange, MFC Bancorp Ltd. will
indirectly own 6,431,560 Common Shares and 5,884,272 share purchase
warrants through MFC Bank.
(4) Upon the closing of the Share Exchange, MFC Bank will own 3,834,500
Common Shares and 5,884,272 share purchase warrants, each of which
entitles the holder to purchase one Common Share.
(5) Michael J. Smith is the President, Chief Executive Officer and a
director of MFC Bancorp Ltd.
(6) Current shareholders of Hippocampe.
(7) Pierre-Francois Serres will also have voting rights in 2,039,038 Common
Shares which will be beneficially owned by Martine Reindle but held in
usufrucht by Pierre-Francois Serres.
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41
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial
information relates to the Share Exchange, which will be accounted for as a
reverse purchase. The following unaudited pro forma condensed combined
financial information has been prepared based upon the historical financial
statements and related notes of ICHOR and Hippocampe, respectively, giving
effect to the Share Exchange.
Hippocampe reports its results in Euros (E). Since the Share Exchange
will be accounted for as a reverse purchase, with the continuing entity being
Hippocampe, the unaudited pro forma condensed combined financial information
is reported in Euros. The accounting treatment applied in a reverse purchase
differs from the legal form of the transaction and the continuing entity is
Hippocampe.
The unaudited pro forma condensed combined financial information does not
purport to present the financial condition and results of operations of ICHOR
and Hippocampe had the Share Exchange actually been completed as of the dates
indicated. In addition, the unaudited pro forma condensed combined financial
information is not necessarily indicative of the future results of operations
and should be read in connection with the historical financial statements and
related notes of ICHOR and Hippocampe, respectively.
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42
Unaudited Pro Forma Condensed Combined Balance Sheet
September 30, 2000
(E000s)
Pro Forma
Combined
U.S.
Dollars
ICHOR Hippocampe Pro Forma Pro Forma (Information
Historical Historical Adjustments Combined Only)
---------- ---------- ----------- --------- -----------
ASSETS
Current Assets
Cash and
investments E 2,395 E 190 E (2,476) E 109 $ 96
Accounts
receivable,
net 26 76 - 102 89
Note
receivable 685 - - 685 600
Other assets - 119 - 119 104
------- ------ --------- ------ ------
Total
current
assets 3,106 385 (2,476) 1,015 889
Patents and
Other - 71 - 71 62
------- ------ --------- ------ ------
E 3,106 E 456 E (2,476) E1,086 $ 951
======= ====== ========= ====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable
and other
liabilities E 1 E 249 E - E 250 $ 219
Note payable - 432 - 432 379
------- ------ --------- ------ ------
Total current
liabilities 1 681 - 682 598
Payable to
Shareholders - 242 - 242 212
Shareholders'
Equity
Preferred stock 6,136 - (6,136) - -
Common stock 6,619 119 (4,816) 1,922 1,683
Retained
deficit (9,569) (586) 8,395 (1,760) (1,542)
Treasury
stock (81) - 81 - -
------- ------ --------- ------- ------
3,105 (467) (2,476) 162 141
------- ------ --------- ------- ------
E 3,106 E 456 E (2,476) E 1,086 $ 951
======= ====== ========= ======= ======
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
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43
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 1999
(E000s, except per share amounts)
ICHOR Hippocampe Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- ---------
Revenues
Interest E 143 E - E - E 143
Other 28 47 - 75
-------- ---------- ---------- ---------
171 47 - 218
Costs and
expenses
General and
administrative 350 49 - 399
Research and
development - 97 - 97
Interest 180 - - 180
Equity in loss
of unconsolidated
subsidiary 83 - - 83
-------- ---------- ---------- ---------
613 146 - 759
-------- ---------- ---------- ---------
Net loss E (442) E (99) E - E (541)
======== ========== ========== =========
Basic and
diluted
loss per
common share E (0.13) E (12.64) E (0.01)
======== ========== =========
Weighted average
number of shares
outstanding 4,910,386 7,820 43,486,698
========= ========== ==========
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
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44
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Nine Months Ended September 30, 2000
(E000s, except per share amounts)
Pro Forma
Combined
U.S.
Dollars
ICHOR Hippocampe Pro Forma Pro Forma (Information
Historical Historical Adjustments Combined Only)
---------- ---------- ----------- --------- ----------
Revenues
Interest E 107 E 10 E - E 117 $ 103
Gain on
disposal
of an uncon-
solidated
subsidiary 316 - - 316 277
Other 6 - - 6 5
---------- ---------- ----------- --------- ----------
429 10 - 439 385
Costs and
expenses
General and
administrative 292 72 - 364 319
Research and
development - 148 - 148 130
Equity in loss
of uncon-
solidated
subsidiary 65 - - 65 57
---------- ---------- ----------- ---------- ----------
357 220 - 577 560
---------- ---------- ----------- ---------- ----------
Net income
(loss) E 72 E (210) E - E (138) $ (121)
========== ========== =========== ========== ==========
Basic and
diluted
loss per
common
share E (0.03) E (26.85) E (0.00) $ (0.00)
========== ========== ========== ==========
Weighted
average
number of
shares out-
standing 4,918,770 7,820 43,495,082 43,495,082
========== ========== ========== ==========
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
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45
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(1) ICHOR (a United States company) and Hippocampe (a French company)
plan to combine their operations where Hippocampe stockholders will
exchange their stock for the common stock of ICHOR. Because
Hippocampe will be the continuing entity, this combination will be
accounted for as a reverse purchase.
During the first nine months of 2000 and the year ended December 31,
1999, ICHOR had no significant operations other than the disposal of
an unconsolidated subsidiary. Hippocampe is a company in the
development stage which is involved in the research and development
of human health products. Hippocampe's main research efforts have
been concentrated in the prevention and treatment of the AIDS virus.
All of Hippocampe's activities have been conducted in France. The
combined companies expect to continue the research and development
activities.
Consistent with the location of its activities, beginning January 1,
1999, Hippocampe adopted the Euro (E) as its corporate currency.
Accordingly, Hippocampe prepared its 2000 and 1999 historical
financial statements in Euros. Because Hippocampe is the continuing
entity, these pro forma financial statements have been prepared
using Euros. The financial statements of ICHOR have been restated
from U.S. dollars to Euros for each period presented. The
translation adjustments did not result in significant foreign
currency gains or losses in the pro forma condensed combined
statements of operations.
(2) The unaudited pro forma condensed combined balance sheet as of
September 30, 2000 and pro forma statements of operations for the
nine month period ended September 30, 2000 and the year ended
December 31, 1999 are based on historical financial statements of
ICHOR and Hippocampe. The unaudited pro forma condensed combined
balance sheet as of September 30, 2000 gives effect to the proposed
combination of ICHOR and Hippocampe as if it had occurred as of
September 30, 2000. The unaudited pro forma condensed combined
statements of operations for the nine months ended September 30,
2000 and the year ended December 31, 1999 have been prepared to
illustrate the effects of the proposed combination of ICHOR and
Hippocampe as if the combination occurred January 1, 1999.
The pro forma condensed combined financial statements may not be
indicative of the actual results of the acquisition. The pro forma
adjustments are based upon available information and certain
assumptions that management believes are reasonable. The
accompanying unaudited pro forma condensed combined financial
statements should be read in connection with the historical
financial statements of ICHOR and Hippocampe.
(3) Pro forma adjustments include the effect of the following:
* ICHOR'S redemption and conversion of all 564,706 outstanding
ICHOR preferred shares for cash of E2,476,000 and 3,247,060
shares of common stock;
* Issuance of 33,311,398 shares of ICHOR common stock and shares
convertible into shares of common stock of ICHOR to the
shareholders of Hippocampe; and
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46
* Issuance of 2,017,854 shares of ICHOR common stock to MFC Bank,
a related party, in settlement of transaction fees. For the
purposes of the unaudited pro forma financial statements, the
transaction fee is recorded at the quoted market price of ICHOR's
common stock as at September 30, 2000 ($0.51 per share or
E1,174,000).
(4) Pro forma loss per share is adjusted to give effect to the issuance
of shares to affect the acquisition, and the redemption and
conversion of the preferred shares, as if these transactions had
occurred on January 1, 1999. Warrants and options are not included
in the computation of diluted loss per share because the effect of
the warrants and options would be anti-dilutive.
45
47
ADDITIONAL AND AVAILABLE INFORMATION
ICHOR is subject to the information filing requirements of the Exchange
Act and, in accordance therewith, is required to file periodic reports, proxy
statements and other information with the SEC relating to its business,
financial condition and other matters. Such reports, proxy statements and
other information can be inspected and copied at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. Information regarding the public reference facilities may be obtained
from the SEC by telephoning 1-800-SEC-0330. ICHOR's filings are also
available to the public on the SEC's internet site (http://www.sec.gov).
Copies of such materials may also be obtained by mail from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by ICHOR under the Exchange Act
with the SEC are incorporated herein by reference:
* ICHOR's Annual Report on Form 10-K for the year ended December
31, 1999; and
* ICHOR's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2000.
ICHOR will provide without charge to each person, including any
beneficial owner of such person, to whom a copy of this Information Statement
has been delivered, on written or oral request, a copy of any and all of the
documents referred to above that have been or may be incorporated by reference
herein other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference herein). Requests for such copies
should be directed to 17 Dame Street, Dublin 2, Ireland (tel.: 3531-679-1688).
Additionally, ICHOR is providing copies of its Annual Report on Form 10-K for
the year ended December 31, 1999 and its Quarterly Report on Form 10-Q for the
period ended September 30, 2000 as Exhibits 1.7 and 1.8, respectively, with
this filing.
All documents filed by ICHOR pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Information Statement
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Information
Statement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Information Statement.
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48
By Order of the Board of Directors,
/s/ Jin-Soo Choi
-----------------------------------
Jin-Soo Choi
President
January 31, 2001
47