SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 7, 1997
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EPITOPE, INC.
(Exact name of Registrant as specified in charter)
Oregon
(State or other jurisdiction of incorporation)
1-10492
(Commission File No.)
93-0779127
(IRS Employer Identification No.)
8505 S.W. Creekside Place
Beaverton, Oregon 97008
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(503) 641-6115
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Item 5. Other Events.
On April 7, 1997, Epitope, Inc. ("Epitope"), filed suit in federal
court seeking damages and rescission of its acquisition of Andrew and Williamson
Sales, Co. ("A&W"). Epitope's complaint against the four former owners of A&W
alleges fraud and breach of contract in connection with A&W's distribution of
frozen strawberries through the United States Department of Agriculture ("USDA")
school lunch program. One of the owners, A&W's former president, falsely
certified the strawberries as being U.S. grown, prior to Epitope's acquisition
of A&W. The strawberries are believed to have been associated with an outbreak
of Hepatitis A in Michigan. A&W is recalling all frozen strawberries potentially
associated with the outbreak. A press release describing the lawsuit is attached
as an exhibit to this report.
Epitope and A&W have been named as defendants in lawsuits relating
to the Hepatitis A outbreak and A&W's distribution of frozen strawberries that
have been recalled. Some of the claims may be covered by insurance. Epitope and
A&W have tendered defense to their respective insurers.
On April 22, 1997, Epitope sent a letter to its shareholders
regarding developments relating to the recall of frozen strawberries by A&W. The
letter also stated that Epitope will adjourn its annual meeting of shareholders,
originally scheduled to occur on April 29, 1997, to a later date to be
announced. A copy of the letter is attached as an exhibit to this report.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
The exhibits to this report are listed in the exhibit index
following the signature page.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Epitope has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EPITOPE, INC.
Dated: April 22, 1997 By:
Gilbert N. Miller
Executive Vice President and Chief
Financial Officer
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EXHIBIT INDEX
99.1 Press release of Epitope, Inc., dated April 7, 1997.
99.2 Letter to shareholders of Epitope, Inc., dated April 1997.
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Exhibit 99.1
FOR IMMEDIATE RELEASE Contact: Gus Allen
503.641.6115
Mary Hagen
503.641.6115
EPITOPE SUES TO RESCIND A&W ACQUISITION
Beaverton OR, April 7, 1997 -- Epitope, Inc. (NASDAQ:EPTO) announced today that
it has filed a lawsuit against the former owners of Andrew & Williamson Sales,
Co. (A&W), alleging fraud and breach of contract in connection with A&W's
distribution of frozen strawberries through the United States Department of
Agriculture (USDA) school lunch program.
The frozen strawberries sold by A&W are believed to have been associated with an
outbreak of hepatitis A, a viral infection, among school children and teachers
in several Michigan schools. The Centers for Disease Control and Prevention
associated the outbreak with strawberries that were grown in Mexico and
processed at the A&W plant in San Diego on three days in 1996: April 19 and May
7 and 8. A&W's former CEO certified on November 27, 1996, that the berries were
grown in the United States.
Epitope acquired A&W's stock on December 12, 1996.
Epitope is cooperating fully with federal and state regulatory agencies on a
voluntary recall of the berries processed on April 19 and May 7 and 8, which
were sent to school lunch programs in several states.
In its lawsuit, which was filed in the United States District Court for the
District of Oregon, Epitope seeks $20 million in actual and punitive damages and
rescission of Epitope's purchase of A&W stock. Epitope alleges that the former
owners of A&W defrauded Epitope in connection with the sale, violated federal
and state securities laws and breached contractual warranties and
representations by failing to disclose the false certification of the origin of
the strawberries sold to the USDA and by certifying that A&W was in compliance
with all applicable laws and regulations, that A&W was not subject to liability
for any past or continuing violation of any law, and that the defendents knew of
no conditions or liabilities that might have a material adverse effect on A&W's
business or financial condition.
"Our first concern is to do everything we can to cooperate with the USDA, FDA
and others in protecting the public's well-being," said Epitope CEO Adolph J.
Ferro. "Epitope is a company whose employees have devoted their careers to
finding new methods to improve the health and well-being of the public and we
are outraged by the false certification."
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Epitope, Inc. is a biotechnology company that develops and markets medical
diagnostic products through its Epitope Medical Products group. Its Agritope
group is focused on the development and commercialization of novel agricultural
products using plant genetic engineering and other modern methods.
# # #
Exhibit 99.2
Dear Shareholder:
As most of you know, in late March, Andrew & Williamson Sales, Co. (A&W), a
recently acquired subsidiary of Epitope, Inc., initiated a voluntary recall of
frozen strawberries following an outbreak of Hepatitis A in several schools in
Michigan. Through epidemiologic studies, the Centers for Disease Control and
Prevention (CDC) associated A&W's strawberries with the outbreak. To date,
health officials have reported 199 confirmed cases of Hepatitis A.
We take this opportunity to update you on this important matter and to discuss
the challenges it has presented to our company. Our first concern is to protect
the public health, and we are working closely with various governmental agencies
to ensure that prompt and appropriate action has been and continues to be taken
toward that end.
As you would expect, we have fielded numerous questions about the recall. We
would like to share with you our answers to the ones most frequently asked. They
are attached for your information.
Our primary concern is an immediate one, to do everything we can to cooperate
with the FDA and other agencies in protecting the public. These have been
difficult days for Epitope, but we believe the course we have set and the
actions taken have benefited both consumers and the long term health of the
company.
Finally, we wish to thank you for your encouragement and support. Please
continue to contact us with your questions. We will keep you advised about our
progress in facing this challenge.
Sincerely,
Adolph J. Ferro, Ph.D. Roger L. Pringle
President and Chief Executive Officer Chairman
April 1997
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Q1: WHAT IS HEPATITIS A?
A: Hepatitis A is a virus which can cause flu-like symptoms. While
unpleasant, the virus is rarely life-threatening and does not
typically produce permanent damage. Additional information is
available from the Centers for Disease Control at
http://www.cdc.gov.
Q2: HOW MANY PEOPLE HAVE BEEN AFFECTED BY THIS OUTBREAK?
A: To date, health officials have notified us of 199 confirmed
cases, all in Michigan.
Q3: COULD THERE BE MORE CASES?
A: The average incubation period from time of contact with Hepatitis
A contaminated food is 28 days. It is possible additional cases will
be confirmed, although so far, none have been reported beyond those
in Michigan.
Q4: WHAT IS THE SOURCE OF THE VIRUS ASSOCIATED WITH THIS OUTBREAK?
A: Based on epidemiologic evidence, the CDC believes that certain
A&W frozen strawberries were associated with the outbreak. The
berries were processed by A&W on three days in 1996: April 19, May 7
and May 8. Introduction of the virus could have occurred during
harvesting, processing or inspection.
Available scientific methods do not permit reliable direct detection
of Hepatitis A in strawberries. Therefore, it is unlikely that the
point at which the contamination occurred will ever be known, or
that the suspected contamination will be confirmed.
Q5: WHAT IS THE EXTENT AND NATURE OF THE PRODUCT RECALL?
A: In cooperation with FDA and other governmental agencies, A&W is
recalling all frozen strawberries potentially associated with the
outbreak.
By FDA definition, this is a Class II recall. A recall is "Class II"
when the product in question "may cause temporary or medically
reversible adverse health consequences" or when "the probability of
serious adverse health consequences is remote." By comparison, a
Class I recall would involve a life-threatening contamination.
Q6: WHERE WERE THE STRAWBERRIES GROWN AND PROCESSED?
A: The recalled strawberries were grown in Mexico and processed in
A&W's facilities in San Diego, CA.
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Q7: WHAT IS THE IMPACT OF THIS ON AGRITOPE AND EPITOPE, AND WHAT ACTIONS ARE
WE TAKING ON BEHALF OF OUR COMPANIES?
A: Several important points here...
1. BACKGROUND: Epitope acquired A&W on December 12, 1996.
Prior to the acquisition, A&W contracted to supply U.S.
grown strawberries for use in the USDA school lunch
program.
On November 27, 1996, A&W's former CEO falsely certified
to the USDA that the berries were grown in the United
States. In fact, the berries were grown in Mexico.
Epitope did not know of these facts when it acquired
A&W. At the time of the acquisition, Epitope received
contractual assurances from the sellers, including the
former CEO, that A&W was in compliance with all
applicable laws and regulations and was not in default
under its agreements.
Upon learning of the false certification, Epitope
immediately contacted the USDA.
2. LAWSUIT: On Monday, April 7, 1997, Epitope filed a
lawsuit in federal court seeking to rescind the
acquisition of A&W. We believe we were seriously
defrauded by the sellers in spite of our careful due
diligence before consummating the acquisition. The
lawsuit seeks full restitution from the former owners of
A&W.
It is important to note that our pre-acquisition due
diligence was comprehensive and rigorous. We were
assisted in the acquisition by recognized professional
experts including Price Waterhouse LLP, Vector
Securities International, Inc., and various prominent
law firms. At the time of our acquisition, A&W enjoyed
an excellent reputation in the fresh produce business.
For example, the Red Book Credit Services, which
provides information for the produce industry, evaluated
A&W and awarded them their Business Character Award for
establishing and maintaining a reputation of high
ethical trading practices, business competence and
financial stability.
3. LIABILITIES: Epitope, Inc. and Agritope, Inc. were not
involved in events leading to the recall or the false
certification. A&W, even as a subsidiary of Epitope, is
a separate legal entity that should be alone responsible
for its actions. We believe that the exposure of Epitope
and Agritope is limited by the fact that we acquired A&W
after
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these activities occurred and had no prior knowledge of
the false certification.
Epitope has been named in lawsuits filed on behalf of
persons claiming damages relating to the Hepatitis A
outbreak and A&W's distribution of strawberries that
have been recalled. Some of the claims may be covered by
insurance. Epitope and A&W have tendered defense to
their respective insurers.
4. DISPOSITION OF A&W: Our board of directors has concluded
that A&W can no longer serve the purposes for which we
acquired it, to serve as part of a vertically integrated
organization producing superior, genetically engineered
produce. As a result of this conclusion, we are
conducting active negotiations with the former A&W
shareholders to rescind our acquisition. If the current
negotiations produce an acceptable agreement, we will
dismiss our lawsuit.
Q8: WHAT EFFECT WILL THIS MATTER HAVE ON THE SCHEDULED APRIL 29, 1997 ANNUAL
MEETING OF EPITOPE SHAREHOLDERS AND ON THE TARGETED STOCK PROPOSAL (I.E.,
CREATION OF EPITOPE MEDICAL PRODUCTS STOCK AND AGRITOPE STOCK AS SEPARATE
SECURITIES)?
A: In light of the recent developments concerning A&W, we will
adjourn the annual meeting to a future date to allow revision of the
prospectus/proxy statement. We will communicate with you as soon as
a new date has been selected and arrangements are in place.
We are also reevaluating the targeted stock proposal.
Q9: WHAT EFFECT WILL THIS MATTER HAVE ON THE FUTURE OF AGRITOPE?
A: We believe Agritope has a bright future. Our fundamental
technology and strategy remain sound. Our Beaverton-based R&D unit
continues to develop genetically-engineered fruits and vegetables.
In addition, we recently acquired access to five new genes of
potentially significant economic importance from the Salk Institute,
a world-renowned research center.
Vinifera, Agritope's grape plant subsidiary, is also expanding
facilities and grapevine production to meet market demand for our
plants. In an important expression of confidence from investors, two
minority shareholders of Vinifera have agreed to purchase additional
shares of Vinifera common stock for a total of $1,000,000, which
will be used to fund the expansion. The transaction is expected to
close in the next few days.
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We are moving ahead with a number of business initiatives in these
and other agricultural business areas and look forward to discussing
them with you at our annual meeting.
Q10: WHAT EFFECT WILL THIS MATTER HAVE ON EPITOPE MEDICAL PRODUCTS?
A: The A&W events described in this letter have had minimal effect
on Epitope Medical Products. EpiScreen(TM) sales to the insurance
industry are brisk and improving, and SmithKline Beecham has
increased its orders for OraSure(R) . We are continuing with
important product development work, including our rapid OraQuick
test and a second generation of OraSure. After our long effort to
develop and commercialize this important oral fluid diagnostic
technology, product sales and interest in the technology are
increasing. Again, we will update you at the annual meeting.
In summary, our first concern is to do everything we can to cooperate with the
FDA and others in protecting the public's well-being. We will continue to keep
you apprised of developments relating to A&W.
Our future is bright. We are being tested, but we are doing what is right. We
are grateful for your patience and welcome your questions at any time.
* * *
Statements in these materials about future events or performance are
forward-looking statements. Actual results could be quite different. Important
factors that could affect results include damage to business reputation
resulting from the Hepatitis A outbreak; loss or impairment of sources of
capital; unexpected liabilities; development of competing products; market
acceptance of oral testing and genetically engineered produce; development of
other methods for controlling fruit and vegetable ripening; crop failure;
changes in federal or state law or regulations; and loss of key personnel.
Although forward-looking statements help to provide complete information about
the Company, readers should keep in mind that forward-looking statements are
much less reliable than historical information.
