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