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Avax Technologies Inc – ‘8-K/A’ for 9/8/00

On:  Tuesday, 11/7/00, at 10:58am ET   ·   For:  9/8/00   ·   Accession #:  912057-0-47541   ·   File #:  0-29222

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

11/07/00  Avax Technologies Inc             8-K/A:7     9/08/00    3:82K                                    Merrill Corp/FA

Amendment to Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K/A       Amendment to Current Report                           29     92K 
 2: EX-10.3     Material Contract                                     16     69K 
 3: EX-23.1     Consent of Experts or Counsel                          1      5K 


8-K/A   —   Amendment to Current Report
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
2Item 7. Financial Statements and Exhibits
7Report of Independent Auditors
12Notes to Consolidated Financial Statements
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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- AMENDMENT NO. 1 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 SEPTEMBER 8, 2000 (AUGUST 24, 2000) Date of Report (Date of earliest event reported) AVAX TECHNOLOGIES, INC. (Exact name of Registrant as specified in its charter) DELAWARE 000-29222 13-3575874 (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification Number) 4520 MAIN STREET, SUITE 930 KANSAS CITY, MO 64111 (Address of principal executive offices) (816) 960-1333 (Registrant's telephone number, including area code)
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) AND (b) FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL STATEMENTS. On August 24, 2000, the Company completed its acquisition of GPH, S.A. ("Holdings") and Genopoietic S.A. ("Genopoietic") each a French societe anonyme based in Paris, France. As previously announced, under the terms of the Stock Contribution Agreement dated as of July 17, 2000, as amended by that certain Agreement dated as of August 24, 2000 (the "Tax Agreement") (the "Contribution Agreement"), 100% of the outstanding shares of both Holdings, which is the majority shareholder of Genopoietic, and Genopoietic have been contributed to the Company by the shareholders of those two entities in exchange for an aggregate of 800,000 shares of the Company's common stock. Of the 800,000 shares, an aggregate of 659,756 shares issued to Professors David R. Klatzmann and Jean-Loup Salzmann, who were the two primary shareholders of Holdings, have been placed in escrow in large part to secure their indemnification obligations under the Contribution Agreement. Each of Professors Klatzmann and Salzmann also received $2,500. Professors Klatzmann and Salzmann have signed consulting agreements with AVAX International Services, Inc, an affiliate of the Company, to advance the interests of both the Company and Genopoietic. Pursuant to the Rights Agreements dated as of August 24, 2000 between the Company and each of Professors Klatzmann and Salzmann, Professors Klatzmann and Salzmann also each have the right to acquire up to an additional 1,100,000 shares of the Company's common stock, upon the successful and timely achievement of development and commercialization milestones by Genopoietic. The following financial statements for the acquired business are filed with this Amendment: 1. Consolidated Financial Statements of GPH, S.A for the years ended December 31, 1999 and 1998, With Report of Independent Auditors. 2. Unaudited Consolidated Financial Statements of GPH, S.A. for the Six-Month Period ended June 30, 2000 and 1999. 3. Unaudited Pro Forma Combined Balance Sheet at June 30, 2000 for AVAX Technologies, Inc. and GPH, S.A. 4. Notes to the Unaudited Pro Forma Combined Balance Sheet. 5. Unaudited Pro Forma Combined Statements of Operations for the Six Months Ended June 30, 2000 for AVAX Technologies, Inc. and GPH, S.A. 6. Unaudited Pro Forma Combined Statements of Operations for the year ended December 31, 1999 for AVAX Technologies, Inc. and GPH, S.A. 7. Notes to Unaudited Pro Forma Combined Statements of Operations. (c) EXHIBITS. 10.3 Rights Agreement dated as of August 24, 2000 between the Company and Professor David R. Klatzmann (an identical agreement was entered into between the Company and Professor Jean-Loup Salzmann). 23.1 Consent of Ernst & Young Audit. 1
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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. AVAX TECHNOLOGIES, INC. Date: November 6, 2000 By: /s/ David L. Tousley ----------------------------- Name: David L. Tousley Title: Chief Financial Officer 2
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EXHIBIT INDEX [Download Table] EXHIBIT NUMBER DESCRIPTION -------------- ----------- 10.3 Klatzmann Rights Agreement dated as of August 24, 2000. 23.1 Consent of Ernst & Young Audit. 3
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CONSOLIDATED FINANCIAL STATEMENTS G.P.H. S.A. YEARS ENDED DECEMBER 31, 1999 AND 1998 WITH REPORT OF INDEPENDENT AUDITORS
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G.P.H., S.A.. Consolidated Financial Statements Years ended December 31, 1999 and 1998 [Enlarge/Download Table] CONTENTS Report of Independent Auditors...........................................................................1 Consolidated Financial Statements Consolidated Balance Sheets as of December 31, 1999 and 1998.............................................2 Consolidated Statements of Operations for the years ended December 31, 1999 and 1998.....................3 Consolidated Statements of Cash Flows for the years ended December 31, 1999 and 1998.....................4 Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1999 and 1998............................................................................5 Notes to Consolidated Financial Statements...............................................................6
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Report of Independent Auditors The Board of Directors and Stockholders G.P.H. S.A. and its subsidiary We have audited the accompanying consolidated balance sheet of G.P.H. S.A. and its subsidiary as of December 31, 1999 and 1998, and the related consolidated statements of operations, stockholders' equity and cash flows for the years ended December 31, 1999 and 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards required that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of G.P.H. S.A. and its subsidiary at December 31, 1999 and 1998 and the consolidated results of their operations and their cash flows for the years ended December 31, 1999 and 1998 in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young Audit Paris, France September 13, 2000 1
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G.P.H. S.A. and its Subsidiary Consolidated Balance Sheets (Amounts in thousands of French francs except as otherwise specified) [Enlarge/Download Table] DECEMBER 31, 1999 1998 ASSETS Current assets: Cash and cash equivalents 1,871 1,610 Accounts receivable, less allowance for doubtful accounts of FF0 632 685 Prepaid expenses and other current assets 2,955 2,811 ---------------------------------- Total current assets 5,458 5,106 Property and equipment, at cost Computer and other equipment 2,073 1,431 Furniture and fixtures 385 278 ---------------------------------- 2,458 1,709 Less accumulated depreciation (1,325) (948) ---------------------------------- Property and equipment, net 1,133 761 Investments, loans and deposits, less accumulated amortization of FF85 in 17 52 1999 and FF50 in 1998 Research & Development tax credit receivable 1,955 1,338 ---------------------------------- Total assets 8,563 7,257 ================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities 5,615 3,426 Accrued payroll and related expenses 481 393 VAT payable 694 377 ---------------------------------- Total current liabilities 6,790 4,196 ANVAR long term debt 1,800 1,303 Minority interest - 109 Stockholders' equity: Common stock (100 shares, par value at FF 2,500) 250 250 Additional paid-in capital 10,575 10,575 Retained earnings (deficit) (10,852) (9,176) ---------------------------------- Total stockholders' equity (27) 1,649 ---------------------------------- Total liabilities and stockholders' equity 8,563 7,257 ================================== SEE ACCOMPANYING NOTES. 2
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G.P.H. S.A. and its Subsidiary Consolidated Statements of Operations (Amounts in thousands of French francs except as otherwise specified) [Enlarge/Download Table] YEAR ENDED DECEMBER 31, 1999 1998 ------------------------------------- Revenues from contract manufacturing 2,921 925 Research and development revenues 3,000 4,000 ------------------------------------- 5,921 4,925 Costs and expenses: Cost of contract manufacturing 2,574 1,356 Research and development 4,830 3,805 Selling and marketing 655 632 General and administrative 1,728 1,425 ------------------------------------- 9,787 7,218 Operating loss (3,866) (2,293) Other income (expense): Other income 506 543 Interest expense (47) (69) ------------------------------------- Loss before income taxes and minority (3,407) (1,819) interest in loss of consolidated subsidiary Minority interest in loss of consolidated 109 172 subsidiary ------------------------------------- (3,298) (1,647) Income tax benefit 1,622 132 ------------------------------------- Net loss (1,676) (1,515) ===================================== SEE ACCOMPANYING NOTES. 3
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G.P.H. S.A. and its Subsidiary Consolidated Statements of Cash Flows (Amounts in thousands of French francs except as otherwise specified) [Enlarge/Download Table] YEAR ENDED DECEMBER 31, 1999 1998 ------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net loss (1,676) (1,515) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 366 398 Minority interest in net loss (109) (172) Gain from sale of interest in consolidated subsidiary (117) - Unrealized gain on short term investments (17) (29) Changes in operating assets and liabilities: Accounts receivable 53 1,038 Prepaid expenses and other current assets (713) (69) Accounts payable and accrued liabilities 2,186 56 Accrued payroll and related expenses 88 (69) VAT payable 317 (91) ------------------------------------ Net cash provided by (used in) operating activities 378 (453) ------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment (748) (407) ------------------------------------ Net cash used in investing activities (748) (407) ------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds of Anvar debt 500 700 Proceeds received from sale of interest in consolidated 131 - subsidiary Proceeds received from called up capital - 150 ------------------------------------ Net cash provided by financing activities 631 850 ------------------------------------ Net increase (decrease) in cash and cash equivalents 261 (10) Cash and cash equivalents at beginning of year 1,610 1,620 ------------------------------------ Cash and cash equivalents at end of year 1,871 1,610 ==================================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid 11 13 ==================================== SEE ACCOMPANYING NOTES. 4
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G.P.H. S.A. AND ITS SUBSIDIARY Consolidated Statements of Shareholders' Equity (Amounts in thousands of French francs except as otherwise specified) [Enlarge/Download Table] ADDITIONAL TOTAL PAID-IN PROFIT/(DEFICIT) STOCKHOLDERS' COMMON STOCK CAPITAL ACCUMULATED EQUITY ------------------- SHARES AMOUNT -------------------------------------------------------------------- Balance at December 31, 1997 100 250 10,575 (7,661) 3,164 Net loss - - (1,515) (1,515) -------------------------------------------------------------------- Balance at December 31, 1998 100 250 10,575 (9,176) 1,649 Net loss - - (1,676) (1,676) -------------------------------------------------------------------- Balance at December 31, 1999 100 250 10,575 (10,852) (27) ==================================================================== 5
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Notes to Consolidated Financial Statements December 31, 1999 and 1998 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS G.P.H. S.A. (the "Company") is incorporated as a societe anonyme or limited liability corporation under the laws of the Republic of France. The Company was organized in 1993 to develop gene therapy applications and market gene therapy treatments for cancer. The Company's business is subject to significant risks consistent with biotechnology companies that are developing products for human therapeutic use. These risks include, but are not limited to, uncertainties regarding research and development, access to capital, obtaining and enforcing patents, receiving regulatory approval, and competition with other biotechnology and pharmaceutical companies. The Company plans to continue to finance its operations with a combination of equity and debt financing and, in the longer term, revenues from operations, if any. However, there can be no assurance that it will successfully develop any product or, if it does, that the product will generate any or sufficient revenues. PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of G.P.H. S.A. and its 88.6% and 89.8%owned and controlled subsidiary Genopoietic S.A. as of December 31, 1999 and 1998, respectively. All significant intercompany balances and transactions have been eliminated. USE OF ESTIMATES The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. REVENUE RECOGNITION Research and development revenues are recognized upon installments scheduled in the contracts concluded by the Company. Revenues from contract manufacturing are recognized upon shipment. Costs incurred under these contracts are considered costs in the period incurred, regardless of when the related revenue is recognized but generally correspond to when the revenue is recognized. 6
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CASH EQUIVALENTS For purposes of reporting cash flows, the Company considers all highly liquid financial instruments with a maturity of three months or less when purchased to be cash equivalents. INVENTORIES The Company uses the FIFO method for the valuation of its inventories. The Company's inventories include raw materials and supplies for an amount of FF 323,000 and FF 295,000 as of December 31, 1999 and 1998, respectively. Inventories are included in prepaids and other current assets in the balance sheet. Provision is made for obsolete and slow-moving inventories. The provision was FF 46,000 in 1998. No provision was booked in 1999. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives which range from three to seven years. RESEARCH AND DEVELOPMENT COSTS AND RELATED TAX CREDIT Research and development costs, including payments related to patents rights and license agreements, are expensed when incurred. Such expenses form the basis for a tax credit in France which is recorded as a current tax benefit in the period in which the qualifying expenses are incurred and the credit claimed. The credit is recoverable in cash, if not used to offset taxes payable in the fourth year following its generation. The tax credit totaled FF 2,983,000 and FF 2,719,000 at December 31, 1999 and December 31,1998, respectively. Of the total amount receivable as of December 31, 1999 FF 1,028,000 is recoverable in 2000. Of the total amount receivable as of December 31, 1998 FF 1,381,000 was recovered in 1999. Current portion of tax credit is recorded in prepaids and other current assets. INCOME TAXES The liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and taxes bases of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when differences are expected to reverse. A valuation allowance is recorded if it is more likely than not that some portion or all of the deferred tax asset will not be realized. 7
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FAIR VALUES OF FINANCIAL INSTRUMENTS Fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate cost due to the short period of time to maturity. Fair values of long-term debt, which have been determined based on borrowing rates currently available to the Company for loans with similar terms of maturity, approximate the carrying amounts in the consolidated financial statements. 2. ANVAR DEBT The Company receives financial support from a French governmental agency (Anvar). The grants which are subject to conditions specifying that non-compliance with such conditions could result in the forfeiture of all or a portion of the future amounts to be received, as well as the repayment of all or a portion of amounts received to date, are accounted for as long term debt. The balance of FF 1,800,000 as at December 31, 1999, in case of commercialization of the product, is reimbursable based on an annual royalty equal to 47% of the revenue related to the project. As such, the total amount of grant proceeds received is recorded as a liability in the accompanying consolidated balance sheets. In case of failure or partial success, the grant will not be reimbursable, except for an amount of FF 400,000 due by December 21, 2001. 3. LICENSE AND RESEARCH AGREEMENTS In September 1994, the Company entered into an agreement with an university, Universite Pierre et Marie Curie (UPMC) for the exclusive license of certain patents and know-how in order to manufacture, use and sell the products, methods and derivatives defined in the agreement. The Company made a one time payment of FF 600,000 which represents a lump sum contribution to the expenses incurred by UPMC before January 1, 1994. The arrangement also includes the payment of yearly royalties amounting to 7% of the net turnover until the grant obtained from ANVAR in respect of the patents concerned is reimbursed, and 3,5% of the net turnover after the achievement of the reimbursement. The royalties may not be inferior to FF 1,000,000 for the years following the year in which the first commercialization occurred. This minimum royalty is the counterpart of the exclusivity granted to the Company. During the period of the contract, the Company must reimburse the expenses incurred by UPMC for the taking out and maintenance of patents. The Company has never generated any revenue from this agreement and has therefore not paid any royalty to UPMC. As such, the lump sum payment as well as the expenses reimbursed to UPMC have been expensed. The Company has concluded at the same period a sub-licensing agreement with its subsidiary upon the prior approval of UPMC. This agreement has the same characteristics as the UPMC contract. The agreement will be terminated at the expiration of the last patent delivered and licensed (i.e. for French patents, 20 years after their taking out). In the case of no patent delivery, the agreement will be terminated no later than ten years after the last notice of patent refusal. 8
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In January 1998, the Company entered into a research agreement with Rhone Poulenc Rorer. The object of this contract is to define the collaboration of research concerning the gene therapies HSV1-TK and GMCSF, and also to define the terms and conditions of a co-exclusive sub-license of certain patents in various countries. Rhone Poulenc's contribution to the expenses relating to the research totaled FF 7,000,000. This agreement expired in 1999. 4. INCOME TAXES Significant components of the Company's deferred tax assets consist of the following : [Enlarge/Download Table] ------------------------------------------------------------------------------------- In thousands of French francs DECEMBER 31, 1999 1998 ------------------------------------------------------------------------------------- Deferred tax assets : Net operating loss carry forwards 1,703 904 Research and development costs capitalized and amortized for tax 4,350 3,624 purposes Other - 394 Total deferred tax assets 6,053 4,922 ------------------------------------------------------------------------------------- Valuation allowance (6,053) (4,922) ------------------------------------------------------------------------------------- Net deferred tax - - ===================================================================================== As of December 31, 1999, the Company had French net operating loss carry forwards of approximately FF 4,258,000 of which FF 4,180,000 has no expiration date. 5. COMMITMENTS The Company leases their Paris and Lyon office space under non-cancelable operating leases. Under the lease agreements, the Company may cancel the agreements without indemnity every three years or may renew the lease for a period up to nine years. Rent expense under these agreements was approximately FF 347,000 and FF 349,000 for the years ended December 31, 1999 and 1998, respectively. Future minimum lease payments under the non cancelable operating leases, assuming leases are terminated after the current three years period are as follows at December 31, 1999, in thousand French francs : 9
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[Download Table] YEAR ENDING DECEMBER 31, AMOUNT --------------------------------------- 2000 683 2001 917 2002 691 2003 345 ------------------- Total 2,636 =================== The above schedule includes the new lease signed on August 11, 2000 described in the following footnote. 6. SUBSEQUENT EVENTS The Company was bought by Avax Technologies, Inc. on August 23, 2000. The Company entered into a new lease agreement on August 11, 2000 under which the Company may cancel the agreement without indemnity every three years or may renew the lease for a period up to nine years. The annual rent amounts to FF 690,600. 10
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CONSOLIDATED FINANCIAL STATEMENTS G.P.H. S.A. SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
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G.P.H., S.A.. Consolidated Financial Statements (Unaudited) SIX MONTHS ENDED JUNE 30, 2000 AND 1999 CONTENTS [Enlarge/Download Table] CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999...............................2 Consolidated Statements of Operations for the six months ended June 30, 2000 and 1999...............3 Consolidated Statements of Cash Flows for the six months ended June 30, 2000 and 1999...............4 Notes to Consolidated Financial Statements..........................................................5
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G. P. H. S.A. CONSOLIDATED BALANCE SHEETS (UNAUDITED) [Enlarge/Download Table] DECEMBER 31, JUNE 30, 1999 2000 ------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 287,049 $ 31,439 Accounts receivable 96,961 272,761 Prepaid expenses and other current assets 455,964 301,039 ------------------------------------------- Total current assets 839,974 605,239 Property, plant and equipment at cost 377,106 422,240 Less accumulated depreciation 203,281 222,254 ------------------------------------------- Net furniture and equipment 173,825 199,986 Research and development tax credit receivable 299,936 299,936 ------------------------------------------- Total assets $ 1,313,735 $ 1,105,161 =========================================== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable and accrued liabilities $ 1,041,722 $ 996,679 ------------------------------------------- Total current liabilities 1,041,722 996,679 Long-term debt payable 276,156 276,156 Stockholders' deficit: Common stock, Par value 2,500 French Francs ($414 USD): Authorized, issued and outstanding shares - 100 41,435 41,435 Additional paid-in capital 1,752,700 1,752,700 Foreign currency translation adjustment 953 2,077 Accumulated deficit (1,799,231) (1,963,886) ------------------------------------------- Total stockholders' deficit (4,143) (167,674) ------------------------------------------- Total liabilities and stockholders' deficit $ 1,313,735 $ 1,105,161 =========================================== SEE ACCOMPANYING NOTES PAGE 2.
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G. P. H. S.A. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) [Download Table] SIX MONTHS ENDED JUNE 30, 1999 2000 ------------------ ------------------- Revenues: Contract service revenue $ 260,877 $ 336,628 Research funding revenue 211,302 264,326 ------------------ ------------------- 472,179 600,954 Costs and expenses: Cost of contract manufacturing 169,042 148,263 Research and development 344,097 460,302 Marketing and selling 29,257 8,343 General and administrative 121,905 153,092 ------------------ ------------------- Total costs and expesnse 664,301 770,000 ------------------ ------------------- Total operating loss (192,122) (169,046) Other income (expense): Interest income 2,438 3,805 Minority interest in loss of consolidated subsidiary 17,717 -- Other, net -- 586 ------------------ ------------------- Total other income (expense) 20,155 4,391 ------------------ ------------------- Net loss $ (171,967) $ (164,655) ================== =================== SEE ACCOMPANYING NOTES. PAGE 3
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G. P. H. S.A. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) [Enlarge/Download Table] SIX MONTHS ENDING JUNE 30, 1999 2000 ----------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (171,967) $ (164,655) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 4,270 18,973 Minority interest in net loss (17,717) - Changes in operating assets and liabilities: Accounts receivable (171,566) (175,800) Prepaid expenses and other current assets 517,332 154,925 Accounts payable and accrued liabilities (154,350) (45,043) ----------------------------------- Net cash provided by (used in) operating activities 6,002 (211,600) ----------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment (20,145) (45,134) ----------------------------------- Net cash used in investing activities (20,145) (45,134) ----------------------------------- Effect of exchange rate changes on cash 223 1,124 ----------------------------------- Net decrease in cash and cash equivalents (13,920) (255,610) Cash and cash equivalents at beginning of period 273,200 287,049 ----------------------------------- Cash and cash equivalents at end of period $ 259,280 $ 31,439 =================================== SEE ACCOMPANYING NOTES. PAGE 4
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Notes to Consolidated Financial Statements June 30, 2000 (Unaudited) 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS G.P.H. S.A. (the "Company") is incorporated as a societe anonyme or limited liability corporation under the laws of the Republic of France. The Company was organized in 1993 to develop gene therapy applications and market gene therapy treatments for cancer. The Company's business is subject to significant risks consistent with biotechnology companies that are developing products for human therapeutic use. These risks include, but are not limited to, uncertainties regarding research and development, access to capital, obtaining and enforcing patents, receiving regulatory approval, and competition with other biotechnology and pharmaceutical companies. The Company plans to continue to finance its operations with a combination of equity and debt financing and, in the longer term, revenues from operations, if any. However, there can be no assurance that it will successfully develop any product or, if it does, that the product will generate any or sufficient revenues. The Company was acquired by AVAX Technologies, Inc. on August 24, 2000. PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of G.P.H. S.A. and its 88.6% owned and controlled subsidiary Genopoietic S.A. as of June 30, 2000 and December 31, 1999. All significant intercompany balances and transactions have been eliminated. FUNCTIONAL CURRENCY The Company's functional currency is the French Franc. For purposes of presentation herein, the Company's financial statements have been translated into the reporting currency of AVAX, the U.S. dollar. The translation rates used for assets and liabilities were end of period rates, while the statement of operations amounts were translated using a weighted average rate for the period. PAGE 5
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AVAX Technologies, Inc. Combined Pro-Forma Financial Statements (Unaudited) CONTENTS PRO FORMA FINANCIAL INFORMATION: 1. Unaudited Pro Forma Combined Balance Sheet at June 30, 2000 for AVAX Technologies, Inc. and G.P.H. S.A. 2. Notes to Unaudited Pro Forma Combined Balance Sheet. 3. Unaudited Pro Forma Combined Statements of Operations for six months ended June 30, 2000 for AVAX Technologies, Inc. and G.P.H. S.A. 4. Unaudited Pro Forma Combined Statements of Operations for the year ended December 31, 1999 for AVAX Technologies, Inc. and G.P.H. S.A. 5. Notes to Unaudited Pro Forma Combined Statements of Operations.
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AVAX Technologies, Inc. Pro Forma Combined Statements of Operations and Balance Sheet On August 24, 2000, the Company completed its acquisition of GPH, S.A. ("Holdings") and Genopoietic S.A. ("Genopoietic"), each a French societe anonyme based in Paris, France. In this transaction, 100% of the outstanding shares of both Holdings, which is the majority shareholder of Genopoietic, and Genopoietic have been contributed to the Company by the shareholders of those two entities in exchange for an aggregate of 800,000 shares (fair market value of $7,600,000 as of August 24, 2000) of the Company's common stock and $5,000 in cash consideration. Pursuant to the Rights Agreements dated as of August 24, 2000 between AVAX Technologies, Inc and each of Professors Klatzmann and Salzmann (shareholders of G.P.H. S.A.), Professors Klatzmann and Salzmann also each have the right to acquire up to an additional 1,100,000 shares of the Company's common stock, upon the successful and timely achievement of development and commercialization milestones by Genopoietic. These contingent shares have not been recorded as part of the acquisition of Holdings. As a result of the acquisition of Holdings and Genopoeitic on August 24, 2000, the pro-forma combined balance sheet as of June 30, 2000 the pro forma combined and statements of operations for the six months ended June 30, 2000 and year ended December 31, 1999 have been prepared. These statements include certain adjustments (" pro-forma adjustments") necessary to present the financial position and results of operations as if the transaction had occurred prior the actual acquisition date. The following unaudited pro forma combined financial information should be read in conjunction with AVAX's historical statements, as reported in AVAX's annual report on Form 10-KSB and quarterly reports on Form 10-QSB, as well as the form 8-K filed September 8, 2000 and in this filing on the form 8-K/A. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred had the acquisition of Holdings and Subsidiary been consummated in accordance with the assumptions set forth above, nor it is necessarily indicative of future operating results or financial position.
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AVAX TECHNOLOGIES, INC. COMBINED PRO-FORMA BALANCE SHEETS (UNAUDITED) [Enlarge/Download Table] AVAX (A) PRO-FORMA TECHNOLOGIES, G.P.H. S.A. PRO-FORMA JUNE 30, INC. CONSOLIDATED ADJUSTMENTS 2000 CONSOLIDATED HISTORICAL --------------------------------- ASSETS ---------------------------------------------------------------------------------- Current assets: Cash and cash equivalents $ 8,031,145 $ 31,439 - $ 8,062,584 Marketable securities 25,236,815 - - 25,236,815 Accounts receivable - 272,761 - 272,761 Prepaid expenses and other current assets 350,094 301,039 - 651,133 ---------------------------------------------------------------------------------- Total current assets 33,618,054 605,239 - 34,223,293 Property, plant and equipment at cost 2,776,841 422,240 - 3,199,081 Less accumulated depreciation 293,823 222,254 - 516,077 ---------------------------------------------------------------------------------- Net furniture and equipment 2,483,018 199,986 - 2,683,004 Intellectual property and other intangible - - 6,022,585 6,022,585 assets (2)(3)(4) Research and development tax credit - 299,936 - 299,936 receivable Deferred acquisition costs 449,911 - (449,911) (4) - ---------------------------------------------------------------------------------- Total assets $ 36,550,983 $ 1,105,161 $ 5,572,674 $ 43,228,818 ================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 798,835 $ 996,679 $ 5,000 (1) $ 1,800,514 ---------------------------------------------------------------------------------- Total current liabilities 798,835 996,679 - 1,800,514 Long-term debt - 276,156 - 276,156 Minority interest in consolidated 1,345,073 - - 1,345,073 subsidiaries Stockholders' equity: Preferred stock, $.01 par value: Series B convertible preferred stock: - - - - Series C convertible preferred stock: 936 - - 936 Common stock, $.004 par value: Authorized shares - 62,089 41,435 (38,235) (1)(2) 65,289 30,000,000 Additional paid-in capital 60,508,452 1,752,700 5,844,100 (1)(2) 68,105,252 Subscription receivable (422) - - (422) Foreign currency translation adjustment (252,786) 2,077 (2,077) (2) (252,786) Deferred compensation (31,535) - - (31,535) Accumulated deficit (25,879,659) (1,963,886) (236,114) (2)(3) (28,079,659) ---------------------------------------------------------------------------------- Total stockholders' equity 34,407,075 (167,674) 5,567,674 39,807,075 ---------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 36,550,983 $ 1,105,161 $ 5,572,674 $ 43,228,818 ================================================================================== SEE ACCOMPANYING NOTES
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AVAX TECHNOLOGIES, INC. NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET A. G.P.H. S.A. functional currency is the French Franc. For purposes of presentation herein, the Company's financial statements have been translated into the reporting currency of AVAX, the U.S. dollar. Translation rates used for assets and liabilities were end of period rates. 1) Record acquisition by issuing 800,000 shares of AVAX common stock and record $5,000 liability payable to selling shareholders. 2) Adjustment to reflect the elimination of Holdings stockholders' equity accounts. 3) Purchase price allocated to intellectual property and other intangibles at estimated fair value, and in process research and development, which estimated fair value is recorded as an increase in accumulated deficit. 4) Reclassify deferred acquisition costs, which related to capitalized costs associated with the acquisition, to Intellectual property and other intangible assets.
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AVAX TECHNOLOGIES, INC. COMBINED STATEMENTS OF OPERATIONS (UNAUDITED) [Enlarge/Download Table] SIX MONTHS ENDED JUNE 30, 2000 AVAX TECHNOLOGIES, (A) INC. G.P.H. S.A. PRO-FORMA CONSOLIDATED CONSOLIDATED ADJUSTMENTS PRO-FORMA ------------------ ----------------- ------------------ ------------------ HISTORICAL Revenues: Contract service revenue $ - $ 336,628 $ - $ 336,628 Research funding revenue - 264,326 - 264,326 ---------------- ---------------- ------------------ ------------------ - 600,954 - 600,954 Costs and expenses: Cost of contract manufacturing - 148,263 - 148,263 Research and development (1) 3,240,838 460,302 398,048 4,099,188 Marketing and selling - 8,343 - 8,343 General and administrative (3) 2,322,080 153,092 32,137 2,507,309 ---------------- ---------------- ------------------ ------------------ Total costs and expenses 5,562,918 770,000 430,185 6,763,103 ---------------- ---------------- ------------------ ------------------ Total operating loss (5,562,918) (169,046) (430,185) (6,162,149) Other income (expense): Interest income 750,116 3,805 - 753,921 Minority interest in loss of consolidated subsidiary 158,983 - - 158,983 Other, net - 586 - 586 ---------------- ---------------- ------------------ ------------------ Total other income (expense) 909,099 4,391 - 913,490 ---------------- ---------------- ------------------ ------------------ Net loss attributable to common stockholders $ (4,653,819) $ (164,655) $ (430,185) $ (5,248,659) ---------------- ---------------- ------------------ ------------------ Net loss per common share $ (.32) $ (.35) ================ ================ ================== ================= Weighted average number of common shares outstanding 14,408,136 15,208,136 ================ ================ ================== ================= SEE ACCOMPANYING NOTES.
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AVAX TECHNOLOGIES, INC. COMBINED STATEMENTS OF OPERATIONS (UNAUDITED) [Enlarge/Download Table] YEAR ENDED DECEMBER 31, 1999 AVAX TECHNOLOGIES, (A) INC. CONSOLIDATED G.P.H. S.A. PRO-FORMA CONSOLIDATED ADJUSTMENTS PRO-FORMA ------------------ ------------------ -------------- ------------- HISTORICAL Revenues: Contract service revenue $ - $ 474,779 $ - $ 474,779 Research funding revenue - 487,620 - 487,620 ----------------- ----------------- --------------- ------------- - 962,399 - 962,399 Costs and expenses: Cost of contract manufacturing - 418,378 - 418,378 Research and development (1) 5,175,695 785,068 796,096 6,756,859 Marketing and selling - 106,464 - 106,464 General and administrative (3) 3,376,278 280,869 64,273 3,721,420 ----------------- ----------------- --------------- ------------- Total costs and expenses 8,551,973 1,590,779 860,369 11,003,121 ----------------- ----------------- --------------- ------------- Total operating loss (8,551,973) (628,380) (860,369) (10,040,722) Other income (expense): Interest income 661,951 82,245 - 744,196 Interest expense - (7,639) - (7,639) Minority interest in loss of consolidated subsidiary (2) 22,459 17,717 (17,717) 22,459 Other, net - 263,640 - 263,640 ----------------- ----------------- --------------- ------------- Total other income (expense) 684,410 355,963 (17,717) 1,022,656 ----------------- ----------------- --------------- ------------- Net loss attributable to common stockholders $ (7,867,563) $ (272,417) $ (878,086) $ (9,018,066) ----------------- ----------------- --------------- ------------- Net loss per common share $ (.74) $ (.79) ----------------- ----------------- --------------- ------------- Weighted average number of common shares outstanding 10,642,366 11,442,366 ================= ================= ================ ============ SEE ACCOMPANYING NOTES.
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AVAX Technologies, Inc. NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS A. G.P.H. S.A. functional currency is the French Franc. For purposes of presentation herein, the Companies financial statements have been translated into the reporting currency of AVAX, the U.S. dollar. Translation rates used for statement of operations amounts were translated using a weighted average rate for the period. (1) - Record amortization of intellectual property and other intangible assets on a straight line basis over a seven year period which is the average remaining life of the patents protecting the acquired intellectual property. (2) - Eliminate minority interest in loss of subsidiary. No minority interest exist after the acquisition. (3) - Record amortization of initial deferred acquisition costs incurred related to the acquisition. Amortized over a seven-year period.

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12/21/0114
Filed on:11/7/00
11/6/003
9/13/007
For Period End:9/8/001248-K
8/24/001248-K
8/23/0016
8/11/0016
7/17/002
6/30/0022710QSB
12/31/9922810KSB
6/30/9921810QSB
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