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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. 1)
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:
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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 March , 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 exchangeable 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 April , 2001, but no
earlier than 20 days from the date this Information Statement is first sent
to ICHOR's shareholders. 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 Current Report on 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 March 15, 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 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 for such periods and the
range of high and low exchange rates for such periods:
Year Ended
December 31,
------------------------------------
1999 2000
-------------- --------------
End of the period 1.0064 0.9393
High for the period 1.1791 1.0388
Low for the period 1.0015 0.8252
Average for the period 1.0671 0.9226
The Euro did not exist prior to January 1, 1999.
On March 9, 2001, the rate of exchange for the conversion of Euros
into U.S. dollars was E1 = U.S.$0.9321.
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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 38
Security Ownership of Certain Beneficial Owners and Management 39
Unaudited Pro Forma Condensed Combined Financial Information 41
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, 2000
Exhibit 1.8 - 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 reference is made to the more detailed information
contained in this Information Statement and in the Exhibits hereto 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 our Board on January 19, 2001. The
Amendment was also approved by the written consent
of the holders of approximately 88.4% of our
outstanding Common Shares on January 19, 2001.
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 our 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 exchange for
the issuance of an aggregate of approximately
33,311,398 of our Common Shares and securities
exchangeable into our Common Shares.
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 exchangeable into our Common Shares in
connection with the Share Exchange.
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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, under certain
agreements (the "Bank Agreements") made between
Hippocampe and MFC Bank, Hippocampe shareholders
will own approximately 66.3% of our issued and
outstanding Common Shares on a diluted basis. See
"Description of the Share Exchange".
Filing of
Certificate of
Amendment 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 April , 2001, but no earlier than 20 days
from the date this Information Statement is first
sent to you. See "Description of the Amendment".
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 In accordance with 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:
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* 2,017,854 of our Common Shares to be issued
upon or following 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.
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
described 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
period 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, 2000 and attached as Exhibit 1.7;
* the historical financial statements and related notes of
Hippocampe attached as Exhibit 1.8; 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 date or for the period 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)
(unaudited)
NET BOOK VALUE
PER SHARE:(1)
December 31, 2000 $ 0.01 E (0.02) E (97.83)
DIVIDENDS DECLARED
PER SHARE:(1)
Year ended
December 31, 2000 - - -
NET LOSS FROM
CONTINUING
OPERATIONS
PER SHARE:(1)
Year ended
December 31, 2000 (0.08) (0.04) (168.03)
-----------------
(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)
-------------- --------------
Year ended December 31, 2000 4,945,385 40,274,637
---------------
(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
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The selected financial data of ICHOR set forth below should be read in
conjunction with 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, 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 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.
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 Year Year Year Year Combined
Ended Ended Ended Ended Ended Year Ended
December 31, December 31, December 31, December 31, December 31, December 31,
------------ ------------ ------------ ------------ ------------ ------------
1996 1997 1998 1999 2000 2000
------------ ------------ ------------ ------------ ------------ ------------
($000s, except per share amounts) (E000s,
except
per share
amounts)
(unaudited)
OPERATING
DATA
Fee income $ - $ - $ 144 $ - $ - E -
General and
administrative
expenses 1,042 418 497 373 733 1,198
Interest expense 423 613 102 192 - 17
Loss from
continuing
operations (1,320) (1,025) (178) (470) (628) (1,672)
Net loss (1,399) (4,054) (178) (470) (330) (1,672)
COMMON SHARE
DATA(1)
Loss from
continuing
operations
per common
share (0.51) (0.21) (0.08) (0.14) (0.08) (0.04)
Net loss per
common share (0.54) (0.83) (0.08) (0.14) (0.08) (0.04)
Cash dividends
per common
share - - - - - -
Weighted average
common shares
outstanding
(000s) 2,586 4,913 4,908 4,910 4,945 40,275
BALANCE SHEET
DATA
Working
capital 3,903 89 2,141 2,289 100 (546)
Total assets 5,582 2,028 3,281 2,681 207 845
Long-term
obligations
and redeemable
preferred stock 1,916 - - - - 242
Total stockholders'
equity 1,987 89 2,141 2,652 100 (659)
---------------
(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
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The selected financial data of Hippocampe set forth below should be
read in conjunction with the financial statements and related notes of
Hippocampe. Hippocampe reports its results in Euros (E).
Year Ended
December 31,
------------------------------------------------
1997 1998 1999 2000
---------- --------- --------- -----------
OPERATING DATA
Operating revenues E 13,721 E 41,597 E 46,631 E 13,066
Research and development
expenses 19,958 70,239 93,902 101,019
General and
administrative
expenses 33,533 38,212 48,896 403,225
Loss from continuing
operations (39,770) (67,616) (98,808) (1,314,026)
COMMON SHARE DATA(1)
Loss from continuing
operations per common
share (5.09) (8.65) (12.64) (168.03)
Cash dividends per common
share - - - -
Weighted average common
shares outstanding 7,820 7,820 7,820 7,820
BALANCE SHEET DATA
Working capital (45,478) (40,153) (23,534) (651,588)
Total assets 43,497 76,852 146,167 625,137
Long-term obligations 69,669 138,394 242,209 242,209
Total stockholders' equity (90,081) (157,697) (256,505) (764,972)
---------------
(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, 2000.
Hippocampe
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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 Year Ended December 31, 2000 to the Year Ended December
31, 1999
Revenues, which consist primarily of medical products sold, decreased
to E13,066 in the year ended December 31, 2000 from E46,631 in the year
ended December 31, 1999.
Expenses increased to E1,326,330 in the year ended December 31, 2000
from E142,798 in the year ended December 31, 1999. Research and
development expenses increased to E101,019 in the current period from
E93,902 in the comparative period of 1999. General and administrative
expenses increased to E403,225 in the year ended December 31, 2000 from
E48,896 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. In the year ended December 31, 2000,
Hippocampe incurred non-cash fees of E805,559 payable in Common Shares of
ICHOR in connection with the closing of the Share Exchange.
Hippocampe reported a net loss of E1,314,026, or E168.03 per share, in
the year ended December 31, 2000, compared to E98,808, or E12.64 per share,
in the year ended December 31, 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.
Liquidity and Capital Resources
Hippocampe had cash of E185,428 at December 31, 2000, compared to
E36,409 at December 31, 1999.
Operating activities provided cash of E145,044 in the year ended
December 31, 2000, compared to using cash of E70,092 in the year ended
December 31, 1999. An increase in accounts payable provided cash of
E545,877 in the year ended December 31, 2000, compared to E38,003 in the
prior year. In the year ended December 31, 2000, Hippocampe incurred non-
cash fees of E805,559 payable in Common Shares of ICHOR in connection with
the closing of the Share Exchange.
Investing activities used cash of E250,246 in the year ended December
31, 2000, compared to E27,440 in the year ended December 31, 1999. Short-
term investments in certificates of deposit used cash of E121,960 in the
year ended December 31, 2000, compared to E27,440 in the prior year.
Patent application and maintenance fees used cash of E128,286 in the year
ended December 31, 2000.
Financing activities provided cash of E254,221 in the year ended
December 31, 2000, primarily 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 December
31, 2000, Hippocampe had borrowed an aggregate of E384,221 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. Hippocampe
anticipates its operations will require approximately $1.5 million in the
year ending December 31, 2001. Hippocampe will seek to raise the required
capital from lenders and/or equity or debt issuances. However, there can
be no assurance that Hippocampe will be able to raise additional capital on
terms satisfactory to Hippocampe, or at all, to finance its operations. In
the event that Hippocampe is not able to obtain such additional capital, it
would be required to restrict or even halt its operations.
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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, 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
December 31, 2000 and expected cash flows from these debt obligations:
Expected Future Cash Flow
--------------------------------------------------
Year Ending December 31,
Carrying Fair --------------------------------------
Value Value 2001 2002 2003 2004 2005 Thereafter
-------- ------ ------ ------ ------ ------ ------ ----------
(E000s)
Debt
Obligations(1) E 384 E 384 E 384 E - E - E - E - E -
-----------------
(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 April , 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 exchangeable 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
exchangeable 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 exchangeable 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.
The aggregate number of Common Shares and securities exchangeable 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 exchangeable 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 $2.2 million 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 or following
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.
In a letter dated January 21, 2000 to Mr. Ken Worm, Assistant Director
of OTC Compliance Unit of NASD Regulation, Inc., Mr. Richard K. Wulff,
Chief of Office of Small Business Policy of the SEC indicated that the
promoters or affiliates of blank check companies, as well as their
transferees, are "underwriters" of the securities issued and cannot sell
their securities of such blank check companies except through a
registration statement under the U.S. Securities Act of 1993, as amended
(the "Securities Act"). Accordingly, (i) the 2,017,854 Common Shares of
ICHOR to be issued to MFC Bank upon or following the closing of the Share
Exchange, (ii) the 6,730,599 Common Shares of ICHOR which MFC Bank will be
entitled to acquire pursuant to the share purchase warrants to be issued to
MFC Bank upon or following the closing of the Share Exchange, (iii) the
970,320 Common Shares of ICHOR currently beneficially owned by MFC Bank,
and (iv) the 2,597,060 Common Shares of ICHOR currently beneficially owned
by Sutton Park International Ltd., an affiliate of MFC Bancorp Ltd., will
have to be registered pursuant to the Securities Act before such securities
can be freely traded.
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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, 2000
which is incorporated by reference in this Information Statement.
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. The research on these modules is 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
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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 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.
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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 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.
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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.
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
-----------------
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.
28
30
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 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. 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.
-----------------
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.
29
31
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 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
number Estimated
of people number of
living with people newly Estimated
HIV/AIDS Adult infected deaths
at the prevelance with HIV to HIV/AIDS
end of 2000 rate during 2000 during 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).
30
32
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 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
31
33
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.
32
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.
The increase in the authorized number of Common Shares of ICHOR may
-------------------------------------------------------------------
prevent or delay a change of control 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
33
35
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.
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 exchangeable 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.
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
E1,689,746 as at December 31, 2000. Hippocampe also sustained net losses
of E67,616 in 1998, E98,808 in 1999 and E1,314,026 in 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.
34
36
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 will be dependent on third parties for manufacturing, marketing
--------------------------------------------------------------------------
and sales.
----------
As Hippocampe has no manufacturing facilities, it will be entirely
dependent on third parties to produce its products. In addition, as
Hippocampe has no marketing or sales capabilities, it expects to 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.
35
37
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. Although
Hippocampe has not experienced any material conflicts with its
collaborators in the past, any conflict with its collaborators in the
future could reduce its ability to obtain future collaboration agreements
and could negatively influence its relationship with existing
collaborators. Further, certain collaborators could become competitors in
the future and/or disagreements with collaborators could develop over
rights to Hippocampe's intellectual property. In order to minimize future
risks, Hippocampe has taken steps to contractually protect its intellectual
property rights under these collaboration agreements. However, there can
be no assurance that Hippocampe's intellectual property rights will not be
violated by Hippocampe's collaborators and that Hippocampe will not be
forced to expend significant time and expense to protect such intellectual
property rights.
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.
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.
36
38
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.
37
39
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
-------------------- ---- ----
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 March 9, 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 March 9, 2001, Hippocampe had
approximately 13 holders of record of its shares. Hippocampe has not paid
any dividends on its shares.
38
40
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information as at March 9, 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
March 9, 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
March 9, 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 Percent
Name and Beneficial Percent Beneficial of
Address of Ownership of Class Ownership(1) Class(1)
Beneficial Owner (Pre-Share Exchange) (Post-Share Exchange)
---------------- --------- -------- ----------- --------
MFC Bancorp Ltd.
17 Dame Street
Dublin 2, Ireland 3,567,380(2) 43.7% 12,315,833(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% 9,718,773(4) 19.4%
Jin-Soo Choi
President
and Director of ICHOR - - - -
Charles C.S. Pang
Director of ICHOR - - - -
Jae-Sun Lee
Director of ICHOR - - - -
39
41
Amount and Amount and
Nature of Nature of
Name and Beneficial Percent Beneficial Percent
Address of Ownership of Class Ownership(1) of Class(1)
Beneficial Owner (Pre-Share Exchange) (Post-Share Exchange)
---------------- ---------- -------- ----------- -----------
Michael J. Smith
Secretary of ICHOR -(5) - -(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)(8)
Les Avouillons 4
CH-1196 Gland VD,
Switzerland - - 9,124,482 20.6%
Martine Reindle(6)
CP 18
CH-1295 Mies, Switzerland - - 13,415,847(9) 30.3%
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 5,585,234 Common Shares and 6,730,599 share purchase
warrants through MFC Bank.
(4) Upon the closing of the Share Exchange, MFC Bank will own 2,988,174
Common Shares and 6,730,599 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.
(8) The outstanding shares of Aralis Participations S.A. are
beneficially owned as follows: Martine Reindle 44.9%; Ernest Lubke -
32.3%; Karen Van Ness - 8.9%; Christian Rochet - 4.9%; Dr. Takashi
Onouchi - 3.7%; Jean-Paul Royet - 3.0%; Jean-Daniel Noir - 1.3%; M.
Masayoshi Watanabe - 0.9%; and Malin Noren - 0.1%.
(9) Includes 9,124,482 Common Shares which will be owned by Aralis
Participations S.A. Martine Reindle is the Chairperson and a member
of the Board of Directors, and owns 44.9% of the outstanding voting
shares, of Aralis Participations S.A.
40
42
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.
41
43
Unaudited Pro Forma Condensed Combined Balance Sheet
December 31, 2000
(E000s)
Pro
Forma
Combined
U.S.
Pro Pro Dollars
ICHOR Hippocampe Forma Forma (Information
Historical Historical Adjustments Combined Only)
---------- ---------- ----------- -------- ------------
ASSETS
Current Assets
Cash and short term
investments E 213 E 334 E - E 547 $ 514
Accounts receivable,
net 7 64 - 71 67
Other assets - 98 - 98 92
--------- -------- ------- -------- --------
Total current assets 220 496 - 716 673
Patents and Other - 129 - 129 121
--------- -------- ------- -------- --------
E 220 E 625 E - E 845 $ 794
========= ======== ======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and
other liabilities E 114 E 764 E - E 878 $ 825
Note payable - 384 - 384 360
--------- -------- ------- -------- --------
Total current
liabilities 114 1,148 - 1,262 1,185
Payable to Shareholders - 242 - 242 228
Shareholders' Equity
Common stock 10,258 925 (10,152) 1,031 968
Retained deficit (10,076) (1,690) 10,076 (1,690) (1,587)
Treasury stock (76) - 76 - -
--------- -------- ------- -------- --------
106 (765) - (659) (619)
--------- -------- ------- -------- --------
E 220 E 625 E - E 845 $ 794
========= ======== ======= ======== ========
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
42
44
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2000
(E000s, except per share amounts)
Pro
Forma
Combined
U.S.
Pro Pro Dollars
ICHOR Hippocampe Forma Forma (Information
Historical Historical Adjustments Combined Only)
---------- ---------- ----------- -------- ------------
Revenues
Interest E 129 E 13 E - E 142 $ 133
Gain on disposal of
an unconsolidated
subsidiary 323 - - 323 303
Other 51 - - 51 48
--------- --------- ------- -------- --------
503 13 - 516 484
Costs and expenses
General and
administrative 795 403 - 1,198 1,125
Research and
development - 101 - 101 95
Bank fee - 806 - 806 757
Interest - 17 - 17 16
Equity in loss of
unconsolidated
subsidiary 66 - - 66 62
--------- --------- ------- -------- --------
861 1,327 - 2,188 2,055
--------- --------- ------- -------- --------
Net loss E (358) E (1,314) E - E (1,672) $ (1,571)
========= ========= ======= ======== ========
Basic and diluted
loss per common
share E (0.08) E (168.03) E (0.04) $ (0.04)
========= ========= ======== ========
Weighted average
number of shares
outstanding 4,945,385 7,820 40,274,637 40,274,637
========= ========= ========== ==========
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
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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 years ended December 31, 2000 and 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. For the
balance sheet as of December 31, 2000, the rate of exchange for the
conversion of US. Dollars into Euros was the rate in effect as of
December 31, 2000, or E1 = U.S.$0.9393. For the statement of
operations for the year ended December 31, 2000, the rate of
exchange used was the average for the year then ended or E1 =
U.S.$0.9226. The translation adjustments did not result in
significant foreign currency gains or losses in the unaudited pro
forma condensed combined statements of operations.
(2) The unaudited pro forma condensed combined balance sheet as of
December 31, 2000 and pro forma statements of operations for the
year ended December 31, 2000, are based on historical financial
statements of ICHOR and Hippocampe. The unaudited pro forma
condensed combined balance sheet as of December 31, 2000, gives
effect to the proposed combination of ICHOR and Hippocampe as if it
had occurred as of December 31, 2000. The unaudited pro forma
condensed combined statements of operations for the year ended
December 31, 2000, have been prepared to illustrate the effects of
the proposed combination of ICHOR and Hippocampe as if the
combination occurred January 1, 2000.
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:
* 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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* Consolidating entry to record the reverse purchase
transaction.
(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.
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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, 2000;
* ICHOR's Current Report on Form 8-K dated February 9, 2000;
* ICHOR's Current Report on Form 8-K/A dated August 9, 2000;
* ICHOR's Current Report on Form 8-K dated December 27, 2000; and
* ICHOR's Current Report on Form 8-K/A dated January 30, 2001.
ICHOR's Annual Report on Form 10-K for the year ended December 31,
2000 is attached as Exhibit 1.7 to this Information Statement. Exhibits
1.1 to 1.8 are being filed with this Information Statement.
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).
By Order of the Board of Directors,
/s/ Jin-Soo Choi
-----------------------------------
Jin-Soo Choi
President
March 15, 2001
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