<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 10, 1999
NOVAVAX, INC.
-------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-26770 22-2816046
-------- ------- ----------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation or organization) File No.) Identification No.)
8320 GUILFORD ROAD, COLUMBIA, MD 21046
-------------------------------- -----
(Address of principal executive offices) (Zip code)
(301) 854-3900
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Registrant's telephone number, including area code
NOT APPLICABLE
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(Former name or former address, if changed since last report)
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NOVAVAX, INC.
ITEMS TO BE INCLUDED IN THE REPORT
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial statements of DynCorp Biomedical Services Laboratory, attached
hereto as Appendix I.
(1) Report of Independent Accountants dated October 6, 1999.
(2) Statement of Assets Acquired and Liabilities Assumed as of December 31,
1998 and June 30, 1999 (unaudited).
(3) Statement of Operating Revenue and Expenses for the year ended December
31, 1998 and for the six months ended June 30, 1999 (unaudited) and 1998
(unaudited).
(4) Notes to Financial Statements.
(b) Unaudited Pro Forma Combined Financial Information of Novavax, Inc.,
attached hereto as Appendix II.
(1) Unaudited Pro Forma Combined Statement of Operations for the year ended
December 31, 1998.
(2)Unaudited Pro Forma Combined Statement of Operations for the six months
ended June 30, 1999.
(3) Unaudited Pro Forma Combined Condensed Balance Sheet as of June 30,
1999.
(4) Notes to the Unaudited Pro Forma Combined Financial Information
(c) Exhibits
2.1 Asset Purchase Agreement dated as of August 10, 1999, by and among
DynCorp, DynCorp Biotechnology and Health Services, Inc. and
Novavax, Inc. (Incorporated by reference to Exhibit 2.1 filed with
Novavax's Current Report on Form 8-K dated August 25, 1999).
23.1 Consent of Wagner Sharer Murtaugh & Petree dated October 12, 1999.
2
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NOVAVAX, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
NOVAVAX, INC.
(Registrant)
Date: October 18, 1999 By: /s/ Donald J. MacPhee
-------------------------
Donald J. MacPhee
Vice President and Treasurer
Chief Financial Officer
(Principal Financial and
Accounting Officer)
3
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APPENDIX 1
INDEPENDENT ACCOUNTANTS' REPORT
To DynCorp
We have audited the accompanying Statement of Assets Acquired and
Liabilities Assumed of the DynCorp Biomedical Services Laboratory (the
Division), a division of DynCorp (the Company) as of December 31, 1998 and
the related Statement of Operating Revenue and Expenses for the year then
ended. The Statement of Assets Acquired and Liabilities Assumed and the
related Statement of Operating Revenue and Expenses (the Statements) are
the responsibility of the Company's management. Our responsibility is to
express an opinion on the Statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the Statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall presentation of the Statements. We believe that our audit provides
a reasonable basis for our opinion.
As discussed in Note 1, pursuant to the terms of the Asset Purchase
Agreement dated August 10, 1999, the accompanying Statements have been
prepared solely to present the assets acquired and liabilities assumed of
the Division as of December 31, 1998, and its operating revenue and
expenses for the year then ended, and are not intended to be a complete
presentation of the financial statements of the Division.
In our opinion, the Statement of Assets Acquired and Liabilities Assumed
and the Statement of Operating Revenue and Expenses referred to above
present fairly, in all material respects, the assets acquired and
liabilities assumed of the Division as of December 31, 1998, and its
operating revenue and expenses for the year then ended pursuant to the
Asset Purchase Agreement referred to in Note 1, in accordance with
generally accepted accounting principles.
Wagner Sharer Murtaugh & Petree
Malvern, PA
October 6, 1999
4
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DYNCORP BIOMEDICAL SERVICES LABORATORY
STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
------------ -----------
(Unaudited)
<S> <C> <C>
Assets Acquired
Property and equipment, at cost $ 538 $ 538
Less accumulated depreciation (341) (368)
------- -------
197 170
------- -------
Total assets acquired $ 197 $ 170
======= =======
Liabilities Assumed
Current Liabilities
Accrued vacation $ 96 $ 60
-------- --------
Total liabilities assumed 96 60
-------- --------
Commitments and Contingencies
Excess of Assets Acquired Over
Liabilities Assumed $ 101 $ 110
======== ========
</TABLE>
See notes to the statements.
5
<PAGE> 6
DYNCORP BIOMEDICAL SERVICES LABORATORY
STATEMENT OF OPERATING REVENUE AND EXPENSES
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, June 30
1998 1999 1998
----------------- ---------- ----------
(Unaudited)
<S> <C> <C> <C>
Gross revenue $ 2,416 $ 1,126 $ 1,285
Operating expenses - Research
and Development
Direct labor 612 328 316
Fringe benefits 176 89 91
Overhead 917 486 419
Materials and supplies 458 192 256
Other direct costs 83 47 90
-------- --------- --------
2,246 1,142 1,172
-------- --------- --------
Operating income (loss) $ 170 $ (16) $ 113
======== ========= ========
</TABLE>
See notes to the statements.
6
<PAGE> 7
NOTES TO THE STATEMENTS FOR
DYNCORP BIOMEDICAL SERVICES LABORATORY
1. Basis of Presentation
The Biomedical Services Laboratory Division (the Division) of DynCorp (the
Company) designs, develops, and produces experimental vaccines for U. S.
Government and private-sector clients.
The Division is not a separate legal entity. Assets and liabilities of the
division are included as components within the consolidated financial statements
of a larger legal entity of the Company. Separate revenue and operating cost
information is maintained for the Division in addition to certain asset and
liability balances; however, a complete set of financial statements are not
prepared and maintained. The accompanying statements are presented pursuant to
the Asset Purchase Agreement dated August 10, 1999, between the Company and
Novavax, Inc. (see Note 8). The statements present the operating revenue and
expenses for the year ended December 31, 1998, in addition to the balances as of
December 31, 1998 for the assets and liabilities subject to acquisition. This
information is not intended to be a complete presentation of the financial
statements of the Division, nor is indicative of the financial condition or
results of operations of the Division going forward due to potential changes in
the acquired business and the omission of various operating expenses.
The Statement of Assets Acquired and Liabilities Assumed and Statement of
Operating Revenue and Expense of the Division are comprised of certain selected
assets and liabilities in addition to contracts performed specifically by the
Division. The selected assets, liabilities, and contracts included in the
accompanying statements are directly related to the continuing operations of the
Division.
The accompanying statements have been prepared from the historical accounting
records of the Company and do not purport to reflect the assets and liabilities
or results of operations that would have resulted if the Division had operated
as a separate, unaffiliated independent entity. Since only certain assets and
liabilities are subject to acquisition, a statement of cash flows for the
Division is not applicable.
The accompanying Statement of Operating Revenue and Expenses does not include
allocations of the Company's overhead and general and administrative expenses
that did not directly benefit the operations of the Division. Major cost
elements included in this category are oversight of contracts, contract
administration, cash management, risk management, retirement plan
administration, legal services, payroll processing, accounts payable processing,
identification of bid opportunities, and proposal preparation. In addition,
interest expense and income tax expenses were not allocated to the Division as
these expenses are computed on a company wide basis and can not be accurately
allocated on a retroactive basis.
7
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NOTES TO THE STATEMENTS FOR
DYNCORP BIOMEDICAL SERVICES LABORATORY
2. Summary of Significant Accounting Policies
Use of Estimates: The preparation of the accompanying statements requires
management to make estimates and assumptions about the amounts that affect the
reported amounts of assets and liabilities at the statement date and the
reported amounts of operating revenue and expenditures during the reporting
period. Actual results may differ from those estimates.
Revenue Recognition: Revenue recognized by the Division is primarily derived
from multiple fixed price contracts of varying values and one principal ongoing
cost-plus-fixed-fee Government contract. Contract revenue for fixed price
contracts meeting specific dollar value thresholds is recognized using the
percentage of completion methodology and is comprised of the portion of expected
total contract earnings represented by actual costs incurred to date as a
percentage of the contract's total estimated costs at completion. Revenue on
cost-reimbursable contracts is recognized based upon total incurred costs plus
the applied fee percentage specified in the contract.
Fixed Assets: Property and equipment are recorded at cost, inclusive of related
sales tax, freight and any external installation charges. Assets are depreciated
by the Division on a straight line basis with useful lives determined on a
historical experience basis with lives ranging between five and ten years for
assets included in the acquisition.
Interim Financial Information: The accompanying financial statements as of June
30, 1999 and for the six-month period ended June 30, 1999 and 1998 are
unaudited. In the opinion of the management of the Division, these financial
statements reflect all adjustments, consisting only of normal and recurring
adjustments, necessary for a fair presentation of the financial statements. The
results of operations for the six-month period ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the full year
ending December 31, 1999.
3. Property and Equipment
Property and equipment of the Division as of December 31, 1998 consisted of the
following:
<TABLE>
<S> <C>
Furniture and equipment $ 14,494
Computer equipment 40,635
Laboratory equipment 228,783
Leasehold improvements 253,840
-------
537,752
Accumulated depreciation (340,268)
-------
$ 197,484
=======
</TABLE>
8
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NOTES TO THE STATEMENTS FOR
DYNCORP BIOMEDICAL SERVICES LABORATORY
4. Contingencies and Commitments
The Division has multiple cost reimbursable contracts with the U.S. Government
with outstanding incurred cost claims subject to final audit by the U.S.
Government. In addition, the Division has multiple outstanding accounts
receivable balances from completed and in-progress fixed price contracts. Any
potential claim variances resulting from disallowances from the above stated
issues have not been included in the accompanying financial statements because
the Company has retained the risk of such variances.
5. Lease Commitments
Future minimum payments on non-cancellable operating leases, subject to
acquisition by Novavax, Inc. for office space with initial or remaining terms in
excess of one year were as follows as of December 31, 1998:
1999 $ 177,128
2000 44,607
Total rental expense for the year, net of sublease income, amounted to $170,870.
6. Business Segment and Major Customers
The Division designs, develops, and produces experimental vaccines for U.S.
Governmental and private-sector clients. The primary Government customer is the
National Institutes of Health (NIH). The Division performs both fixed price and
cost reimbursable contracts for the NIH. The primary private-sector clients are
Smithkline Beecham and Jenner Technologies. The private-sector contracts are
generally fixed price purchase order arrangements. Limited revenue is generated
by small, low value purchase orders from multiple private-sector customers.
Revenue recognized from the three largest customers during the year ended
December 31, 1998 noted above are as follows:
National Institutes of Health $ 1,150,067
Jenner Technologies 667,925
Smithkline Beecham 403,282
7. Allocations
Fringe Benefits: Fringe benefit expenses for employees of the Division are
accumulated at a higher level within the organization and allocated back to each
cost objective based upon total direct labor cost incurred. These expenses
include items such as FICA, FUI, SUI, vacation, personal leave, 401K
contributions, workman's compensation and paid time off.
9
<PAGE> 10
NOTES TO THE STATEMENTS FOR
DYNCORP BIOMEDICAL SERVICES LABORATORY
8. Subsequent Event
On August 10, 1999, DynCorp sold its interest in the Division to Novavax, Inc.
Novavax, Inc. acquired substantially all of the assets (excluding cash and
accounts receivable) of the Division for $592,000 in cash and assumed
liabilities of approximately $60,000. Additionally, DynCorp entered into a
five-year non-compete agreement, for which Novavax, Inc. will make four
quarterly payments of $37,000 each, commencing November 10, 1999.
10
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APPENDIX II
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The Unaudited Pro Forma Combined Statements of Operations assume that the
acquisition of the DynCorp Biomedical Services Laboratory (the "Division") had
occurred on January 1, 1998, combining the results of operations of Novavax,
Inc. (the "Company") and the Division for the year ended December 31, 1998 and
for the six months ended June 30, 1999. The Unaudited Pro Forma Combined
Condensed Balance Sheet as of June 30, 1999 reflects the acquisition as if it
had occurred on June 30, 1999.
On August 10, 1999, Novavax, Inc. acquired substantially all of the assets
(excluding cash and accounts receivable) of the Division for $592,000 in cash
and assumed liabilities of approximately $60,000. In addition, DynCorp entered
into a five-year non-compete agreement, for which Novavax, Inc. will make four
quarterly payments of $37,000 each, commencing November 10, 1999. Also, the
Company estimates direct costs associated with the acquisition (legal,
accounting, etc.) will be approximately $60,000. The total consideration and
direct costs for the acquisition was $860,000. The acquisition will be recorded
using the purchase method of accounting for business combinations. The following
summarizes management's preliminary allocation of the purchase price based on
the Division's June 30, 1998 Statement of Assets Acquired and Liabilities
Assumed.
<TABLE>
<CAPTION>
Cost Estimated lives
---- ---------------
<S> <C> <C>
Property and equipment $170 3-7 years
Goodwill and other intangible assets $690 5 years
</TABLE>
Property and equipment consists primarily of laboratory equipment that the
Company believes will continue to be used in the operations of the Division.
Goodwill and other intangible assets are being amortized over their preliminary
useful lives of five years.
The pro forma information is based on the historical financial statements of
the Company and the Division after giving effect to the acquisition using the
purchase method of accounting and assumptions and adjustments considered
appropriate by the Company, certain of which are described in the accompanying
Notes to Unaudited Pro Forma Combined Financial Information. The pro forma
information is provided for illustrative purposes only and is not necessarily
indicative of the results of operations or financial condition that actually
would have been obtained if the acquisition had occurred on the dates indicated
or of the results that may be obtained in the future.
The Unaudited Pro Forma Combined Financial Information should be read in
conjunction with the historical financial statements and the related notes
thereto of the Company and the Division. The historical financial statements of
the Division and the related notes thereto are included herein. The historical
financial statements of Novavax, Inc. and the related notes thereto have been
previously filed with the Securities and Exchange Commission and are available
from the Company upon written request.
11
<PAGE> 12
NOVAVAX, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DynCorp
Biomedical
Novavax, Services Pro Forma
Inc. Laboratory Adjustments Pro Forma
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 681 $ 2,416 $ - $ 3,097
-------- -------- --------- --------
Operating expenses:
General and administrative 2,472 - 138 (a) 2,610
Research and development 3,361 2,246 (14) (b) 5,593
------- -------- --------- --------
Total operating expenses 5,833 2,246 124 8,203
------- -------- --------- --------
(Loss) income from operations (5,152) 170 (124) (5,106)
Interest income, net 335 - (27) (g) 308
-------- -------- --------- --------
Net (loss) income (4,817) 170 (151) (4,798)
Dividend on preferred stock (225) - - (225)
Deemed dividend on preferred stock (1,583) - - (1,583)
Accretion of offering costs (420) - - (420)
-------- -------- --------- --------
Loss applicable to common stockholders $ (7,045) $ 170 $ (151) $ (7,026)
======== ======== ========= ========
Per share information (basic and diluted)
Loss applicable to common stockholders $ (.57) $ (.57)
======== ========
Weighted average number of common
shares outstanding (basic and diluted) 12,428,426 12,428,426
========== ==========
</TABLE>
See accompanying notes to unaudited pro forma combined financial information.
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NOVAVAX, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DynCorp
Biomedical
Novavax, Services Pro Forma
Inc. Laboratory Adjustments Pro Forma
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 328 $ 1,126 $ - $ 1,454
------- -------- ------- -------
Operating expenses:
General and administrative 999 - 69 (a) 1,068
Research and development 1,124 1,142 (7) (b) 2,259
------- -------- ------- -------
Total operating expenses 2,123 1,142 62 3,327
------- -------- ------- -------
Loss from operations (1,795) (16) (62) (1,873)
Interest income, net 30 - (13) (g) 17
------- -------- ------- -------
Net loss $ (1,765) $ (16) $ (75) $ (1,856)
======= ======== ======= =======
Per share information (basic and diluted)
Loss applicable to common stockholders $ (.13) $ (.13)
======= =======
Weighted average number of common shares
outstanding (basic and diluted) 14,000,418 14,000,418
========== ==========
</TABLE>
See accompanying notes to unaudited pro forma combined financial information.
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NOVAVAX, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
JUNE 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
DynCorp
Biomedical
Novavax, Services Pro Forma
Inc. Laboratory Adjustments Pro Forma
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Assets:
Current:
Cash and cash equivalents $ 2,776 $ - $ (592) (c) $ 2,184
Accounts receivable 157 - - 157
Prepaid expenses and other
current assets 28 - - 28
------- ------- ------- -------
Total current assets 2,961 - (592) 2,369
Property and equipment, net 967 170 - 1,137
Patent costs, net 1,597 - - 1,597
Goodwill and other intangible
assets, net 15 - 690 (d) 705
------- ------- ------- -------
$ 5,540 $ 170 $ 98 $ 5,808
======= ======= ======= =======
Liabilities and Stockholders' Equity:
Current:
Capital lease obligations, current $ 18 $ - $ - $ 18
Non-compete installment, current - - 37 (e) 37
Accounts payable 249 - 60 (f) 309
Accrued Payroll 32 60 - 92
------- -------- ------- -------
Total current liabilities 299 60 97 456
Non-compete installments, less current - - 111 (e) 111
Stockholders' equity 5,241 110 (110) 5,241
------- -------- -------- -------
$ 5,540 $ 170 $ 98 $ 5,808
======= ======== ======= =======
</TABLE>
See accompanying notes to unaudited pro forma combined financial information.
14
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NOVAVAX, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
NOTE 1. BASIS OF PRESENTATION
Novavax, Inc. ("Novavax" or the "Company") is a biopharmaceutical company
focused on the research and development of proprietary drug delivery and
encapsulation technologies. The Biomedical Services Laboratory Division (the
"Division") of DynCorp designs, develops, and produces vaccines for U.S.
Government and private sector clients.
The Unaudited Pro Forma Combined Statements of Operations assume that the
acquisition of the DynCorp Biomedical Services Laboratory (the Division) had
occurred on January 1, 1998, combining the results of operations of Novavax,
Inc. (the Company) and the Division for the year ended December 31, 1998 and for
the six months ended June 30, 1999. The Unaudited Pro Forma Combined Condensed
Balance Sheet as of June 30, 1999 reflects the acquisition as if it had occurred
on June 30, 1999.
NOTE 2. ACQUISITION OF BIOMEDICAL SERVICES DIVISION
On August 10, 1999, Novavax, Inc. acquired substantially all of the assets
(excluding cash and accounts receivable) of the Division for $592,000 in cash
and assumed liabilities of approximately $60,000. In addition, DynCorp entered
into a five-year non-compete agreement, for which Novavax, Inc. will make four
quarterly payments of $37,000 each, commencing November 10, 1999. Also, the
Company estimates direct costs associated with the acquisition (legal,
accounting, etc.) will be approximately $60,000. The total consideration and
direct costs for the acquisition was $860,000. The acquisition will be recorded
using the purchase method of accounting for business combinations. The following
summarizes management's preliminary allocation of the purchase price based on
the Division's June 30, 1998 Statement of Assets Acquired and Liabilities
Assumed.
<TABLE>
<CAPTION>
Cost Estimated lives
---- ---------------
<S> <C> <C>
Property and equipment $170 3-7 years
Goodwill and other intangible assets $690 5 years
</TABLE>
Property and equipment consists primarily of laboratory equipment that the
Company believes will continue to be used in the operations of the Division.
Goodwill and other intangible assets are being amortized over their preliminary
useful lives of five years.
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NOVAVAX, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION, CONTINUED
NOTE 3. PRO FORMA ADJUSTMENTS
(a) Estimated increase in amortization of goodwill and other intangible assets
resulting from the purchase of the Division.
(b) Estimated decrease in depreciation expense resulting from increased useful
lives on property and equipment acquired in the purchase of the Division.
(c) Represents cash purchase price of $592,000.
(d) Consists of the following:
Estimated amounts for goodwill and other intangible assets $542,000
Estimated amount attributable to non-compete agreement $148,000
(e) Installment obligations related to non-compete agreement
(f) Records the direct costs associated with the acquisition (legal,
accounting, etc), which are estimated to be $60,000 and are included in the
purchase price allocation.
(g) Estimated reduction in interest income resulting from the use of $592,000
in cash to acquire the Division.
16
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-80277, 33-80279, 333-3384 and 333-77611) and in
the Prospectus constituting part of the Registration Statements on Form S-3
(Nos. 333-14305, 333-05367, 333-22685 and 333-46409 and 333-77609) of Novavax,
Inc. of our report dated October 6, 1999, appearing on page 4 of this Form
8-K/A.
/s/ Wagner Sharer Murtaugh & Petree
- -----------------------------------------------
Wagner Sharer Murtaugh & Petree
Malvern, PA
October 12, 1999
17
