1
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
Check the appropriate box:
[_] Preliminary Information Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[x] 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:
2
ICHOR CORPORATION
P.O. Box 10343, 1010 - 609 Granville Street
Vancouver, British Columbia
Canada V7Y 1G5
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 April 30, 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 is scheduled to take place on or about May 21, 2001,
but no earlier than 20 days from the date this Information Statement is
first sent to ICHOR's shareholders. The Amendment was adopted to
facilitate the issuance of approximately 33,311,398 Common Shares
1
3
and securities exchangeable into Common Shares of ICHOR to certain
shareholders of Hippocampe S.A. ("Hippocampe") in consideration for the
direct and indirect 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 Share Exchange was completed effective
March 28, 2001. In connection with the Share Exchange, certain
shareholders of Hippocampe were issued securities which become
exchangeable into Common Shares of ICHOR upon the filing of the Amendment
to the Certificate of Incorporation of ICHOR to effect the increase in the
authorized number of Common Shares of ICHOR.
The closing of the Share Exchange was publicly announced by ICHOR.
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 April 25, 2001.
2
4
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 29, 2001, the rate of exchange for the conversion of Euros
into U.S. dollars was E1 = U.S.$0.8850.
3
5
INDEX TO THE INFORMATION STATEMENT
Item Page
---- ----
Summary Term Sheet 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 34
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
Appendix A - Certificate of Amendment of Certificate of Incorporation
of ICHOR Corporation
Appendix B - Share Exchange Agreement dated for reference December 13,
2000 between ICHOR Corporation and certain shareholders of
Hippocampe S.A. (Agreement A)
Appendix C - Share Exchange Agreement dated for reference December 13,
2000 between ICHOR Corporation and certain shareholders of
Hippocampe S.A. (Agreement B)
Appendix D - Underwriting Agreement dated for reference July 24, 2000
between Hippocampe S.A. and MFC Merchant Bank S.A.
Appendix E - Credit Facility Agreement dated for reference July 27,
2000 between Hippocampe S.A. and MFC Merchant Bank S.A.
Appendix F - Assignment Agreement dated for reference December 29, 2000
among ICHOR Corporation, Hippocampe S.A. and MFC Merchant
Bank S.A.
Appendix G - Annual Report on Form 10-K of ICHOR Corporation for the
year ended December 31, 2000
Appendix H - Financial Statements of Hippocampe S.A.
4
6
SUMMARY TERM SHEET
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 Appendices 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 Appendices 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 Appendix A.
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. 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.
We completed the Share Exchange effective March 28,
2001. In connection with the Share Exchange,
certain shareholders of Hippocampe were issued
securities which become exchangeable into our Common
Shares upon the filing of the Amendment to our
Certificate of Incorporation to effect
the increase in the authorized number of our Common
Shares.
5
7
See "Description of the Amendment" and "Description
of the Share Exchange".
After giving effect to the Share Exchange and the
Amendment, including giving effect to the Common
Shares or share purchase warrants issued or
issuable in connection with the Share Exchange 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 directly and indirectly own in
aggregate approximately 66.3% of our 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 May 21, 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 P.O.
Box 10343, 1010 - 609 Granville Street, Vancouver,
British Columbia, Canada V7Y 1G5 (tel.: (604) 646-
2030). 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 company 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:
6
8
* 2,017,854 of our Common Shares issued or
issuable in connection with the Share Exchange;
and
* share purchase warrants which 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 prior to the Share Exchange,
directly and indirectly owned approximately 43.7%
of our outstanding Common Shares. Michael J.
Smith, our Secretary prior to the Share Exchange,
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 we were required to comply with
or approvals which we were required to obtain in
connection with the Share Exchange.
Tax and Accounting
Treatment of the
Share Exchange The Share Exchange was structured with the
intent that it be tax-free to us and you for
federal income tax purposes.
The Share Exchange is 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 34. See "Risk Factors".
7
9
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth selected comparative unaudited per
share data for ICHOR and Hippocampe on a historical and pro forma basis,
giving effect to the Share Exchange as a reverse purchase. 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 Appendix G;
* the historical financial statements and related notes of
Hippocampe attached as Appendix H; 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 is 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 Pro Forma(1) Historical(2) Combined
------------ ------------- --------------- ----------
($) (E) (E) (E)
(unaudited) (unaudited)
NET BOOK VALUE
PER SHARE:(3)
December 31, 2000 $ 0.01 E 0.00 E (0.02) E (0.02)
DIVIDENDS DECLARED
PER SHARE:(3)
Year ended
December 31, 2000 - - - -
NET LOSS FROM
CONTINUING
OPERATIONS
PER SHARE:(3)
Year ended
December 31, 2000 (0.08) (0.01) (0.04) (0.05)
-----------------
(1) Equivalent pro forma data for ICHOR is based on the percentage
ownership of the pro forma combined shares by shareholders of ICHOR
existing after the Share Exchange.
(2) Historical per share data for Hippocampe is adjusted to retroactively
reflect the securities ICHOR directly and indirectly issued to acquire
shares of Hippocampe.
(3) Basic and diluted per share data is the same.
8
10
The total number of shares outstanding throughout the respective
periods above is based on the weighted average shares outstanding,
calculated on a diluted basis, as follows:
Pro Forma
Historical Combined(1)
---------------------------------- ---------------
ICHOR HIPPOCAMPE(2)
----------- -------------------
Year ended
December 31, 2000 4,945,385 33,311,398 40,274,637
---------------
(1) Securities exchangeable into Common Shares of ICHOR (i.e., LuxCo
Preferred Shares) issued to certain shareholders of Hippocampe
in connection with the Share Exchange have been considered to be
outstanding Common Shares of ICHOR.
(2) These shares retroactively reflect the securities ICHOR directly and
indirectly issued to acquire shares of Hippocampe.
9
11
SELECTED FINANCIAL DATA
ICHOR
-----
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 is 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.
10
12
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) (2,058)
Net loss (1,399) (4,054) (178) (470) (330) (2,058)
COMMON SHARE
DATA(1)
Loss from
continuing
operations
per common
share (0.51) (0.21) (0.08) (0.14) (0.08) (0.05)
Net loss per
common share (0.54) (0.83) (0.08) (0.14) (0.08) (0.05)
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) issued to certain shareholders of Hippocampe in connection with
the Share Exchange have been considered to be outstanding Common Shares
of ICHOR.
11
13
Hippocampe
----------
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.
12
14
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
----------
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, primarily as a result of a decrease in revenues
derived from a research contract.
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 as a result of an increase in research activities.
General and administrative expenses increased to E403,225 in the year ended
December 31, 2000 from E48,896 in the comparative period of 1999, primarily
as a result of higher administrative expenses relating to an increase
in research activities and fees and expenses associated with the Bank
Agreements. In the year ended December 31, 2000, Hippocampe incurred an
aggregate of approximately E93,788 in arrangement fees and monthly retainer
fees relating to the Bank Agreements and approximately E154,592 in professional
fees relating to the negotiation and entering into of the Bank Agreements.
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.
13
15
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.
14
16
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
----------
As at December 31, 2000, Hippocampe was exposed to market risk from
changes in interest rates which could affect its financial condition and
results of operations. Hippocampe had not entered 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. As at December 31, 2000,
Hippocampe had debt obligations which were 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.
15
17
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 Appendix A. 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 May 21, 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 authorized capital stock of ICHOR is
currently 30,000,000 Common Shares and 5,000,000 shares of preferred
stock, $0.01 par value. Effective March 28, 2001, ICHOR completed the
Share Exchange. In connection with the Share Exchange, certain
shareholders of Hippocampe were issued securities which become
exchangeable into Common Shares of ICHOR upon the filing of the
Certificate of Amendment of the Certificate of Incorporation of ICHOR with
the
16
18
Security of State of the State of Delaware. Accordingly, the Amendment to
increase the authorized number of Common Shares of ICHOR was adopted to
accommodate the issuance to certain shareholders of Hippocampe of the Common
Shares and securities exchangeable into Common Shares of ICHOR. 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 existing shareholders, would reduce such existing
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.
17
19
DESCRIPTION OF THE SHARE EXCHANGE
Completion of the Share Exchange
--------------------------------
Effective March 28, 2001, ICHOR completed the Share Exchange. In
connection with the Share Exchange, certain shareholders of Hippocampe
were issued securities which become exchangeable into Common Shares of
ICHOR upon the filing of the Amendment to the Certificate of Incorporation
of ICHOR to effect the increase in the authorized number of Common Shares
of ICHOR.
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, effective March 28, 2001, such Hippocampe shareholders
transferred 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 Appendix B.
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, effective March 28, 2001, such
Hippocampe shareholders transferred their shares of Hippocampe to a new
wholly-owned subsidiary of ICHOR established under the laws of Luxembourg
("LuxCo"). In exchange for their shares of Hippocampe, such Hippocampe
shareholders were issued preferred shares of LuxCo (the "LuxCo Preferred
Shares") which will be exchangeable into Common Shares of ICHOR at the
option of the holder upon the filing of the Amendment to the Certificate
of Incorporation of ICHOR to increase the authorized number of Common
Shares of ICHOR. A copy of Agreement B is attached as Appendix C.
Hippocampe was a privately-held French company whose shareholders
consisted of persons and corporations resident in several different countries,
both within and outside the European Union (the "EU"). Such shareholders of
Hippocampe had differing financial profiles and concerns and were subject
to differing legal regimes in their resident countries. In order to
efficiently address the inherent complexities of concluding a multi cross-border
transaction between a U.S. domiciled public company and such shareholders, the
parties, with the assistance of their advisors, structured the transactin to
permit shareholders of Hippocampe resident in non-EU countries to participate
pursuant to Agreement A and receive Common Shares of ICHOR directly. The
remaining shareholders of Hippocampe resident in EU countries were permitted to
participate in the transaction pursuant to Agreement B and receive in exchange
for their Hippocampe shares, Luxco Preferred Shares which are exchangeable into
Common Shares of ICHOR. Structuring the Share Exchange in this manner was the
most efficient way to address the differing financial and other considerations
of all parties.
Upon the closing of the Share Exchange, ICHOR contributed and
transferred to LuxCo the shares of Hippocampe that ICHOR received from
Hippocampe shareholders under Agreement A for additional common shares of
LuxCo. Hippocampe became an approximately 99.9%-owned subsidiary of
LuxCo, which, in turn, is a wholly-owned subsidiary of ICHOR.
18
20
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 issued to shareholders of Hippocampe upon the
closing of the Share Exchange was 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 issued or issuable in
connection with the Share Exchange to MFC Bank pursuant to the Bank
Agreements, Hippocampe shareholders directly and indirectly own in
aggregate approximately 66.3% of the 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 are 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.
Further, ICHOR intends to seek to raise additional capital to fund
working capital requirements following the Share Exchange.
Background of the Share Exchange
--------------------------------
ICHOR was introduced to Hippocampe by MFC Bank in the fall of 2000.
MFC Bank had previously entered into the Bank Agreements with Hippocampe
and was assisting Hippocampe in effecting a merger with a public U.S.
registrant. ICHOR did not have an operating business and its focus was on
the indentification of a particular business or industry within which it
would seek an acquisition or merger.
Upon being introduced to Hippocampe, ICHOR considered Hippocampe's
business and prospects including its intellectual property portfolio,
Hippocampe's scientific publications to date, the potential functionality of
the mimicry between GP41 and IL-2 (see "Description of Hippocampe" below) and
the financial condition and organizational structure of Hippocampe.
As Hippocampe was a start-up company still in an exploratory research
stage with no history of operations, revenues or income, it was not possible to
conclude a meaningful valuation of Hippocampe. See "Risk Factors".
Therefore, since the Share Exchange constituted a reverse merger and a
meaningful valuation of Hippocampe could not be determined, negotiation of
the terms of the Share Exchange focused generally on the relative proportions
of the Common Shares of ICHOR to be held by pre-existing ICHOR shareholders
and by shareholders of Hippocampe following the Share Exchange. The principals
of ICHOR, through MFC Bank, originally proposed that pre-existing ICHOR
shareholders would retain approximately 25% of the Common Shares of ICHOR,
prior to giving effect to the securities issuable under the Bank Agreements.
Alternatively, it was proposed on behalf of the shareholders of Hippocampe
that the ICHOR shareholders would retain approximately 12% to 15% of the Common
Shares of ICHOR. Further negotiations between the parties on the terms of the
Share Exchange resulted in the parties agreeing that pre-existing ICHOR
shareholders would retain approximately 20% of the Common Shares of ICHOR,
prior to giving effect to the securities issuable under the Bank Agreements.
Pursuant to the reverse merger Share Exchange, Hippocampe would become the
surviving business with its shareholders acquiring approximately 80%
of the Common Shares of ICHOR.
In December 2000, ICHOR entered into Agreement A and Agreement B with the
Shareholders of Hippocampe.
19
21
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 did not have an operating business. However, ICHOR had
certain value as a public company subject to the reporting
requirements of the SEC;
* Hippocampe is a privately-held company which was 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 rank senior to common shares of LuxCo with
respect to dividends and liquidating distributions of LuxCo. However, the
LuxCo Preferred Shares are non-voting in LuxCo. All votes in respect of
LuxCo are 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 are permitted
to vote as a class with respect to certain matters involving LuxCo.
20
22
In all material respects, following the filing of the Amendment of
the Certificate of Incorporation of ICHOR to increase the authorized
number of Common Shares of ICHOR, 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 are given effect, in
part, by certain agreements entered into on the closing of the Share
Exchange, including:
* a shareholder agreement (the "Shareholder Agreement") among
ICHOR, LuxCo 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 provides 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 provides, among other things, for the following
covenants of ICHOR:
21
23
* 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;
* 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 provides for the following
principal terms, among others:
* ICHOR will issue to a trustee a single Special Voting Preferred
Share of ICHOR, to be authorized by a Certificate of
Designations filed by ICHOR with the Secretary of State of the
State of Delaware. The terms of the Special Voting Preferred
Share 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.
22
24
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 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.
Accounting Treatment
--------------------
The Share Exchange is 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.
23
25
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 received certain compensation in respect thereof,
including 2,017,854 Common Shares of ICHOR issued or issuable in
connection with 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 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 assumed 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
prior to the Share Exchange, directly and indirectly owned approximately
43.7% of the outstanding Common Shares of ICHOR. Michael J. Smith, the
Secretary of ICHOR prior to the Share Exchange, 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 issued to MFC Bank upon or to be issued to MFC Bank following the
closing of the Share Exchange, (ii) the 6,730,599 Common Shares of ICHOR
which MFC Bank is entitled to acquire pursuant to the share purchase
warrants issued to MFC Bank upon the closing of the Share Exchange, (iii)
the 970,320 Common Shares of ICHOR already beneficially owned by MFC Bank
prior to the Share Exchange, (iv) the 2,597,060 Common Shares of ICHOR
currently beneficially owned by Sutton Park International Ltd., an
affiliate of MFC Bancorp Ltd., and (v) the 1,620,000 Common Shares of ICHOR
currently beneficially owned by Parkland Ventures Limited will have to be
registered pursuant to the Securities Act before such securities can be
freely traded.
24
26
DESCRIPTION OF ICHOR
The Corporation
---------------
ICHOR was incorporated in July 1994 pursuant to the laws of the
Commonwealth of Pennsylvania under the name "PDG Remediation, Inc.". In
November 1996, ICHOR reincorporated under the laws of the State of
Delaware and changed its name to "ICHOR Corporation".
Development of ICHOR
--------------------
From its inception to December 1997, ICHOR operated in the environmental
services business. ICHOR's initial operations included a thermal
treatment facility in Florida and remediation services offices in Florida
and Pennsylvania. In December 1996, ICHOR acquired a waste oil recycling
facility in Illinois.
In response to changes in the Florida market, ICHOR closed certain
remediation services offices and sold certain remediation facilities in
1995 and 1996. ICHOR sold the balance of its remediation services
operations in April 1997 and its waste oil recycling facility in December
1997. In March 1998, ICHOR sold its wholly-owned subsidiary, ICHOR
Services, Inc. ("Services"). In 1998, following the sale of Services,
ICHOR provided consulting services to an industrial customer in Europe.
Effective June 30, 1999, ICHOR entered into a revised purchase agreement
(the "Purchase Agreement") with the former majority shareholders of Nazca
Holdings Ltd. ("Nazca") pursuant to which ICHOR acquired approximately 87%
of the issued and outstanding shares of common stock of Nazca. Nazca was
in the business of the exploration for and development of groundwater
resources in Chile.
In connection with the Purchase Agreement, ICHOR granted options (the
"Options") in favour of the former majority shareholders of Nazca,
allowing them to repurchase shares of Nazca common stock sold to ICHOR in
certain circumstances. In order to settle a dispute relating to the
validity of the purported exercise of the Options by two former
shareholders of Nazca in December 1999, ICHOR completed an agreement dated
for reference May 15, 2000 with one of the former shareholders of Nazca to
sell all of ICHOR's interest in the common stock of Nazca and loans made
by ICHOR to Nazca to fund groundwater resource exploration and
development, for a promissory note in the amount of $600,000 which accrues
interest at the rate of 5% per annum and is due on June 30, 2001. As a
result of the settlement, ICHOR has no further interest in Nazca. The
promissory note was subsequently sold by ICHOR to an affiliate for
$600,000 in December 2000. ICHOR did not provide any recourse or
guarantee on the sale of the promissory note and is not contingently
liable of Nazca does not pay the promissory note when due.
Following ICHOR's disposal of its interest in Nazca in July 2000, ICHOR
did not have an operating business. ICHOR's focus was on the
identification of a particular business or industry within which it would
seek an acquisition or merger.
25
27
DESCRIPTION OF HIPPOCAMPE
In December 2000, ICHOR agreed to acquire substantially all of the shares
of Hippocampe in consideration for Common Shares and securities
exchangeable into Common Shares of ICHOR.
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 replicate. After the replication of the viral
components by the infected host cell, virus particles are released and the
host cell is often destroyed.
26
28
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.
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
27
29
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.
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,
28
30
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 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,
-----------------
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.
29
31
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.
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
-----------------
2 See e.g., Traeger J., Laville M., Serres P.F., Cronenberger M.,
Thomas M., Rey M.J. and Bourgeat C.; 1992. A new device for specific
extracorporeal immunoadsorption of anti DNA antibodies. J. Med. Interne,
143 (1): 9-12.
30
32
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).
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.
31
33
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 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;
32
34
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.
33
35
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 are equally applicable to ICHOR. Such risk
factors include but are not limited to the following:
The costs of the Share Exchange have been substantial.
------------------------------------------------------
The costs to complete the Share Exchange have been 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 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 have experienced and 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 has reduced and 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 existing shareholders, has reduced and will reduce such
existing 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 experienced and 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.
34
36
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.
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.
35
37
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.
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;
36
38
* 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.
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 27, 2001, prior to the closing of the Share Exchange, 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 27, 2001, prior
to the closing of the Share Exchange, 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 29,
2001 regarding the beneficial ownership of ICHOR's Common Shares prior to
the closing of the Share Exchange and following the closing of the Share
Exchange by:
* each person known by ICHOR to have been a beneficial owner of
more than five percent of the outstanding Common Shares of
ICHOR on March 27, 2001, prior to the closing of the Share
Exchange;
* each person known by ICHOR to be a beneficial owner of more
than five percent of the outstanding Common Shares of ICHOR on
March 29, 2001, following the closing of the Share Exchange;
* each of the executive officers and directors of ICHOR on March
29, 2001, following the closing of the Share Exchange; and
* all executive officers and directors of ICHOR as a group on
March 29, 2001, following the closing of the Share Exchange.
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(4)
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 6.0%
MFC Merchant Bank S.A.
6, Cours de Rive,
1211 Geneva 3, Switzerland 970,320 11.9% 9,718,773(5) 19.4%
Aralis Participations
S.A.(6)(7)
Les Avouillons 4
CH-1196 Gland VD,
Switzerland - - 9,124,482 21.0%
Martine Reindle(6)
CP 18
CH-1295 Mies, Switzerland - - 13,415,847(9) 30.8%
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)
---------------- ---------- -------- ----------- -----------
Bertrand Favreau(6)
61, Rue de l'oise
F-60200 Compiegne, France - - 2,137,151 4.9%
Pierre-Francois Serres(6)
Chief Executive Officer,
President and Director - - 11,129,393(9) 25.6%
Eric Turcotte
Chief Financial Officer,
Secretary and Director - - - -
Patrice Pactol(6)
Director - - 2,137,151 4.9%
All executive officers
and directors of ICHOR
as a group (3 persons) - - 13,266,544 30.5%
----------------------
(1) Amounts and percentages give effect to securities issued or issuable
in connection with the Share Exchange, including securities
exchangeable into Common Shares of ICHOR (i.e., LuxCo
Preferred Shares) issued to certain shareholders of Hippocampe in
connection with the Share Exchange.
(2) Includes 2,597,060 Common Shares indirectly owned through Sutton
Park International Ltd. and 970,320 Common Shares indirectly owned
through MFC Bank. Sutton Park International Ltd. and MFC Bank are
wholly-owned subsidiaries of MFC Bancorp Ltd.
(3) Includes 2,597,060 Common Shares indirectly owned through Sutton
Park International Ltd. and 2,988,174 Common Shares and 6,730,599
share purchase warrants indirectly owned through MFC Bank.
(4) Parkland Ventures Limited is a wholly-owned subsidiary of Pine
Resources Corporation, a public company with securities traded
on the Canadian Venture Exchange.
(5) Includes 2,988,174 Common Shares and 6,730,599 share purchase
warrants, each of which entitles the holder to purchase one Common
Share.
(6) Former shareholders of Hippocampe.
(7) 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%.
(8) Includes 9,124,482 Common Shares owned by Aralis Participations S.A.
Martine Reindle is the Chairperson and a member of the Board of
Directors, and owns approximately 45% of the outstanding voting
shares, of Aralis Participations S.A.
(9) Pierre-Francois Serres also has voting rights in 2,039,038 Common
Shares be beneficially owned by Martine Reindle but held in
usufrucht by Pierre-Francois Serres.
40
42
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial
information relates to the Share Exchange, which is 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 is 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 Pro Pro Dollars
ICHOR Forma Forma Hippocampe Forma Forma (Information
Historical Adjustments ICHOR Historical Adjustments Combined Only)
---------- ----------- ----- ---------- ----------- -------- ------------
Revenues
Interest E 129 E - E 129 E 13 E (129) E 13 $ 12
Gain on disposal of
an unconsolidated
subsidiary 323 (323) - - - - -
Other 51 - 51 - - 51 48
--------- -------- ------- -------- -------- -------- --------
503 (323) 180 13 (129) 64 60
Costs and expenses
General and
administrative 795 - 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) - - - - -
--------- -------- ------- -------- -------- -------- --------
861 (66) 795 1,327 - 2,122 1,993
--------- -------- ------- -------- -------- -------- --------
Net loss E (358) E (257) E (615) E (1,314) E (129) E (2,058) $ (1,993)
========= ======== ======= ======== ======== ======== ========
Basic and diluted
loss per common
share E (0.08) E(168.03) E (0.05) $ (0.05)
========= ======== ======== ========
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.
43
45
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(1) Effective March 28, 2001, ICHOR (a United States company) and
Hippocampe (a French company) combined their operations where
Hippocampe stockholders exchanged their stock for the common stock
of ICHOR. Because Hippocampe is the continuing entity, this
combination is 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 statement of operations.
(2) The unaudited pro forma condensed combined balance sheet as of
December 31, 2000 and pro forma statement of operations for the
year ended December 31, 2000, are based on historical financial
statement of ICHOR and Hippocampe. The unaudited pro forma
condensed combined balance sheet as of December 31, 2000, gives
effect to the combination of ICHOR and Hippocampe as if it
had occurred as of December 31, 2000. The unaudited pro forma
condensed combined statement of operations for the year ended
December 31, 2000, has been prepared to illustrate the effects of
the 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:
* Elimination of gain on disposal of an unconsolidated
subsidiary and the equity in loss of unconsolidated subsidiary
recorded through the date of disposal.
44
46
* Elimination of interest earned on cash investments to give
effect to the cash redemption of preferred shares as if it
occurred on January 1, 2000.
* 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
* 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, 2000. Warrants and options are not included
in the computation of diluted loss per share because the effect of
the warrants and options would be anti-dilutive.
45
47
ADDITIONAL AND AVAILABLE INFORMATION
ICHOR is subject to the information filing requirements of the
Exchange Act and, in accordance therewith, is required to file periodic
reports, proxy statements and other information with the SEC relating to
its business, financial condition and other matters. Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Information regarding the public reference
facilities may be obtained from the SEC by telephoning 1-800-SEC-0330.
ICHOR's filings are also available to the public on the SEC's internet
site (http://www.sec.gov). Copies of such materials may also be obtained
by mail from the Public Reference Section of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by ICHOR under the Exchange
Act with the SEC are incorporated herein by reference:
* ICHOR's Annual Report on Form 10-K for the year ended December
31, 2000;
* ICHOR's Current Report on Form 8-K dated December 27, 2000 and
filed on December 29, 2000;
* ICHOR's Current Report on Form 8-K/A dated and filed on January
30, 2001; and
* ICHOR's Current Report on Form 8-K dated December 27, 2000 and
filed on March 19, 2001; and
* ICHOR's Current Report on Form 8-K dated April 10, 2001 and filed on
April 12, 2001
ICHOR's Annual Report on Form 10-K for the year ended December 31,
2000 is attached as Appendix G to this Information Statement. Appendices
A to H are furnished 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 P.O. Box 10343, 1010 - 609
Granville Street, Vancouver, British Columbia, Canada V7Y 1G5 (tel.: (604)
646-2030).
By Order of the Board of Directors,
/s/ Eric Turcotte
-----------------------------------
Eric Turcotte
Chief Financial Officer and
Secretary
April 25, 2001
46