-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KU/YIUv5neiCUNgvCxCtydH9LqAEv5iwmjCb+pHHWz7D5vogUfZwgMKJ9v69Xj0r WG/nmHPSHfUKZR6SV7XQsw== 0001144204-04-007322.txt : 20040520 0001144204-04-007322.hdr.sgml : 20040520 20040520092718 ACCESSION NUMBER: 0001144204-04-007322 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040311 ITEM INFORMATION: Changes in control of registrant ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040520 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HALOZYME THERAPEUTICS INC CENTRAL INDEX KEY: 0001159036 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 880488686 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-49616 FILM NUMBER: 04820152 BUSINESS ADDRESS: STREET 1: 11588 SORRENTO VALLEY ROAD STREET 2: SUITE 17 CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: (858) 794-8889 FORMER COMPANY: FORMER CONFORMED NAME: GLOBAL YACHT SERVICES INC DATE OF NAME CHANGE: 20010912 8-K/A 1 v03378.txt UNITED STATES 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) March 11, 2004 HALOZYME THERAPEUTICS, INC. (Exact name of registrant as specified in its charter) Nevada 000-49616 88-0488686 (State or other jurisdiction of (Commission File Number) (IRS Employer incorporation) Identification No.) 11588 Sorrento Valley Road, Suite 17 San Diego, California 92121 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (858) 794-8889 -------------- Not Applicable (Former name or former address, if changed since last report) ITEM 1. CHANGES IN CONTROL OF REGISTRANT. Effective March 11, 2004, pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), dated January 28, 2004, among privately held DeliaTroph Pharmaceuticals, Inc. dba Hyalozyme Therapeutics, Inc. ("Halozyme"), Global Yacht Services, Inc. ("Global"), a publicly traded Nevada corporation and Hyalozyme Acquisition Corporation ("Merger Sub"), a wholly owned subsidiary of Global, the Merger Sub merged with and into Halozyme, with Halozyme remaining as the surviving corporation (the "Merger"). Although Global acquired Halozyme as a result of the Merger, the shareholders of Halozyme hold a majority of the voting interest in the combined enterprise. Additionally, the Merger resulted in Halozyme's management and Board of Directors assuming operational control of Global. The following summary lists the structure of the Merger and matters completed in connection therewith: o On January 28, 2004, pursuant to an investment round completed simultaneously with the signing of Merger Agreement, Halozyme raised equity capital of approximately $8.1 million. o The shareholders of Global amended and restated Global's Articles of Incorporation to change Global's corporate name to Halozyme Therapeutics, Inc., increased the authorized number of shares of common stock to 100 million, and authorized 20 million shares of preferred stock. o Global issued 35,521,906 shares of its restricted common stock, 6,380,397 options and 11,742,665 warrants to purchase shares of its common stock to the shareholders of Halozyme in exchange for 100% of their issued and outstanding common stock, options and warrants to purchase Halozyme's common stock. o A total of 4,296,362 shares of Global's outstanding common stock were redeemed by Global from three shareholders in exchange for $42,303, or approximately $0.01 per share. o Global's shareholders own approximately 10% of the issued and outstanding shares of Halozyme's common stock, based on 39,421,906 shares outstanding after the Merger. The full text of the Merger Agreement may be found at Exhibit A to Global Yacht's definitive Schedule 14C Information Statement, as filed with the Securities and Exchange Commission on February 17, 2004. The Merger has been treated as a re-capitalization of Halozyme. Accordingly, the financial statements reflect the historical activity of Haloyzme with the capital structure of Global. Prior to the Merger, Global had limited operations. On March 11, 2004, Global changed its name to Halozyme Therapeutics, Inc. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial statements of business acquired. The audited financial statements required by this item 7 for Halozyme, as of and for the years ended December 31, 2003 and 2002, are filed as an exhibit hereto and are incorporated herein by reference. (b) Pro forma financial information. The pro forma financial information required by this item 7 for the combined balance sheet of Global and Halozyme as of December 31, 2003, and for the combined results of operations of Global and Halozyme for the year ended December 31, 2003, is filed as an exhibit hereto and is incorporated herein by reference. (c) Exhibits. The following Exhibit is filed with this Form 8-K. Exhibit No. Description 99.1 Agreement and Plan of Merger, dated as of January 28, 2004, by and among DeliaTroph Pharmaceuticals, Inc. dba Hyalozyme Therapeutics, Inc., Global Yacht Services, Inc. and Hyalozyme Acquisition Corporation (incorporated by reference to Exhibit A to the Schedule 14C Information Statement of Global Yacht Services Inc., as filed with the Securities and Exchange Commission on February 17, 2004). 99.2 Halozyme audited (i) Balance Sheets as of December 31, 2003 and 2002; (ii) Statements of Operations for the years ended December 31, 2003 and 2002; (iii) Statements of Changes in Shareholders' Equity from Inception (February 26, 1998) to December 31, 2003; (iv) Statements of Cash Flows for the years ended December 31, 2003 and 2002 and (v) related Notes to Financial Statements. 99.3 Global and Halozyme Unaudited Pro Forma (i) Combined Balance Sheet as of December 31, 2003; (ii) Combined Statements of Operations for the year ended December 31, 2003; and (iii) related Notes to Combined Financial Statements. 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. HALOZYME THERAPEUTICS, INC. Date: May 20, 2004 By: /s/ Jonathan E. Lim ----------------------- Its: President, Chief Executive Officer Chairman of the Board (Principal Executive Officer) EX-99.2 2 v03378_ex992.txt DELIATROPH PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) FINANCIAL STATEMENTS DECEMBER 31, 2003 The Board of Directors and Shareholders DeliaTroph Pharmaceuticals, Inc. We have audited the accompanying balance sheets of DeliaTroph Pharmaceuticals, Inc., doing business as Hyalozyme Therapeutics, (a California corporation) as of December 31, 2003 and 2002, and the related statements of operations, shareholders' equity and cash flows for the years then ended and for the period from inception (February 26, 1998) to December 31, 2003. 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 of America. Those standards require 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 financial position of DeliaTroph Pharmaceuticals, Inc. as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended and for the period from inception (February 26, 1998) to December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 8 to the financial statements, the Company's significant operating losses raise substantial doubt about its ability to continue as a going concern. Management's plans regarding this uncertainty are also described in Note 8. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. CACCIAMATTA ACCOUNTANCY CORPORATION Irvine, CA January 7, 2004
DELIATROPH PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS DECEMBER 31, 2003 AND 2002 - --------------------------------------------------------------------------------------------------------- 2003 2002 ----------- ----------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 503,580 $ 88,910 ----------- ----------- Total Current Assets 503,580 88,910 PROPERTY AND EQUIPMENT - Net 130,904 134,170 OTHER ASSETS 12,763 7,500 ----------- ----------- Total Assets $ 647,247 $ 230,580 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Accounts payable $ 223,278 $ 58,800 Accrued expenses 50,162 109,085 Notes payable -- 430,000 Interest on notes payable -- 12,255 ----------- ----------- Total Current Liabilities 273,440 610,140 COMMITMENTS AND CONTINGENCIES: -- -- SHAREHOLDERS' EQUITY (DEFICIT): Series A convertible preferred stock, without par value; 4,816,000 shares authorized; 0 shares issued and outstanding in 2003; 3,803,507 shares issued and outstanding in 2002 -- 198,006 Series B convertible preferred stock, without par value; 3,473,343 shares authorized; 0 shares issued and outstanding in 2003; 5,333,350 shares authorized; 2,743,121 shares issued and outstanding in 2002 -- 1,254,672 Series C convertible preferred stock, without par value; 2,367,394 shares authorized; 2,367,114 shares issued and outstanding in 2003; 0 shares issued and outstanding in 2002 1,004,486 -- Common stock, without par value; 60,000,000 shares authorized; 15,952,980 shares issued and outstanding in 2003; 4,599,951 shares issued and outstanding in 2002 3,349,826 33,242 Deficits accumulated during the development stage (3,980,505) (1,865,480) ----------- ----------- Total Shareholders' Equity (Deficit) 373,807 (379,560) ----------- ----------- Total Liabilities and Shareholders' Equity (Deficit) $ 647,247 $ 230,580 =========== ===========
DELIATROPH PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2003 AND 2002 AND FROM INCEPTION TO DECEMBER 31, 2003 - ------------------------------------------------------------------------------------------ CUMULATIVE FROM INCEPTION (FEBRUARY 26, 1998) 2003 2002 TO 2003 ----------- ----------- ----------- EXPENSES: Research and development $ 1,145,420 $ 773,464 $ 2,410,044 General and administrative 576,452 379,438 1,201,145 ----------- ----------- ----------- OPERATING LOSS (1,721,872) (1,152,902) (3,611,189) Other income (expense) Interest expense (394,439) (12,306) (406,745) Other, net 2,086 31,243 42,229 ----------- ----------- ----------- Other income (expense) (392,353) 18,937 (364,516) LOSS BEFORE INCOME TAXES (2,114,225) (1,133,965) (3,975,705) Income tax expense 800 800 4,800 ----------- ----------- ----------- NET LOSS $(2,115,025) $(1,134,765) $(3,980,505) =========== =========== =========== Net loss per share, basic and diluted $ (0.31) $ (0.25) =========== =========== Shares used in computing net loss per share, basic and diluted 6,826,109 4,599,591 =========== ===========
DELIATROPH PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF SHAREHOLDERS' EQUITY FROM INCEPTION (FEBRUARY 26, 1998) TO DECEMBER 31, 2003 - ----------------------------------------------------------------------------------------------------------------------------------- (All share information reflects post-split amounts) SERIES A SERIES B SERIES C DEFICIT TOTAL CONVERTIBLE CONVERTIBLE CONVERTIBLE ACCUMULATED SHARE- PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK DURING HOLDERS' SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT DEVELOPMENT EQUITY ------------------- ------------------- ------------------- ----------------- ----------- --------- Initial capitalization -- -- -- -- -- -- 2,078,662 10,956 -- 10,956 Issuance of Series A preferred stock 2,520,014 132,819 -- -- -- -- -- -- -- 132,819 Net loss -- -- -- -- -- -- -- -- (41,884) (41,884) ------------------- ------------------- ------------------- ------------------- ------------------- BALANCE, DECEMBER 31, 1999 2,520,014 132,819 -- -- -- -- 2,078,662 10,956 (41,884) 101,891 Issuance of common stock for cash -- -- -- -- -- -- 2,078,662 10,956 -- 10,956 Issuance of common stock for license -- -- -- -- -- -- 442,267 2,330 -- 2,330 Issuance of Series A preferred stock - net 1,283,493 65,187 -- -- -- -- -- -- -- 65,187 Net loss -- -- -- -- -- -- -- -- (125,210) (125,210) ------------------- ------------------- ------------------- ------------------- ------------------- BALANCE, DECEMBER 31, 2000 3,803,507 198,006 -- -- -- -- 4,599,591 24,242 (167,094) 55,154 Issuance of Series B preferred stock - net -- -- 1,779,608 801,709 -- -- -- -- -- 801,709 Net loss -- -- -- -- -- -- -- -- (563,621) (563,621) ------------------- ------------------- ------------------- ------------------- ------------------- BALANCE, DECEMBER 31, 2001 3,803,507 198,006 1,779,608 801,709 -- -- 4,599,591 24,242 (730,715) 293,242 Issuance of Series B preferred stock - net -- -- 963,513 452,963 -- -- -- -- -- 452,963 Issuance of common stock options to consultant -- -- -- -- -- -- -- 500 -- 500 Issuance of warrants for common stock for services -- -- -- -- -- -- -- 8,500 -- 8,500 Net loss -- -- -- -- -- -- -- -- (1,134,765) (1,134,765) ------------------- ------------------- ------------------- ------------------- ------------------- BALANCE, DECEMBER 31, 2002 3,803,507 198,006 2,743,121 1,254,672 -- -- 4,599,591 33,242 (1,865,480) (379,560) Issuance of Series C preferred stock - net -- -- 289,482 -- 2,367,114 1,004,486 -- -- -- 1,004,486 Issuance of common stock options to consultants -- -- -- -- -- -- -- 85,388 -- 85,388 Issuance of common stock due to the exercise of options -- -- -- -- -- -- 256,410 100,000 -- 100,000 Conversion of notes to common stock -- -- -- -- -- -- 3,960,359 1,272,000 -- 1,272,000 Conversion of interest on notes to common stock -- -- -- -- -- -- 300,510 99,764 -- 99,764 Beneficial conversion feature of 2003 notes -- -- -- -- -- -- -- 306,754 -- 306,754 Conversion of Series A preferred stock to common stock (3,803,507) (198,006) -- -- -- -- 3,803,507 198,006 -- -- Conversion of Series B preferred stock to common stock -- -- (3,032,603) (1,254,672) -- -- 3,032,603 1,254,672 -- -- Net loss -- -- -- -- -- -- -- -- (2,115,025) (2,115,025) ------------------- ------------------- ------------------- ------------------- ------------------- BALANCE, DECEMBER 31, 2003 -- -- -- -- 2,367,114 1,004,486 15,952,980 3,349,826 (3,980,505) 373,807 =================== =================== ===================== ==================== ====================
DELIATROPH PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2003 AND 2002 AND FROM INCEPTION TO DECEMBER 31, 2003 - ----------------------------------------------------------------------------------------------------------------------- CUMULATIVE FROM INCEPTION (FEBRUARY 26, 1998) 2003 2002 TO 2003 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(2,115,025) $(1,134,765) $(3,980,505) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 75,726 100,386 208,890 Issuance of common stock for goods and services 85,388 9,000 102,245 Issuance of common stock for license -- -- 2,330 Issuance of common stock for accrued interest on notes 87,510 12,254 99,764 Beneficial conversion feature on 2003 notes 306,754 -- 306,754 Changes in operating assets and liabilities: Prepaid expenses and other assets (5,263) (9,999) (12,763) Accounts payable and accrued expenses 105,554 156,375 273,440 ----------- ----------- ----------- Net cash used by operating activities (1,459,356) (866,749) (2,999,845) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (72,460) (194,738) (316,695) ----------- ----------- ----------- Net cash used in investing activities (72,460) (194,738) (316,695) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of notes 842,000 430,000 1,272,000 Proceeds from issuance of common stock 100,000 -- 110,956 Proceeds from issuance of Series A preferred stock - net -- -- 178,006 Proceeds from issuance of Series B preferred stock - net -- 452,962 1,254,672 Proceeds from issuance of Series C preferred stock - net 1,004,486 -- 1,004,486 ----------- ----------- ----------- Net cash provided by financing activities 1,946,486 882,962 3,820,120 ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 414,670 (178,525) 503,580 CASH AND CASH EQUIVALENTS, beginning of period 88,910 267,435 -- ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, end of period $ 503,580 $ 88,910 $ 503,580 =========== =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for income taxes $ 800 $ 800 $ 4,800 =========== =========== =========== Interest paid $ -- $ -- $ -- =========== =========== =========== Non cash investing and financing activities: Common stock issued for property and equipment $ -- $ -- $ 3,099 =========== =========== =========== Series A preferred stock issued for property and equipment $ -- $ -- $ 20,000 =========== =========== =========== Conversion of notes payable to common stock $ 1,371,764 $ -- $ 1,371,764 =========== =========== =========== Conversion of Series A preferred stock to common stock $ 198,006 $ -- $ 198,006 =========== =========== =========== Conversion of Series B preferred stock to common stock $ 1,254,672 $ -- $ 1,254,672 =========== =========== ===========
DELIATROPH PHARMACEUTICALS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO DECEMBER 31, 2003 FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. GENERAL AND SIGNIFICANT ACCOUNTING POLICIES GENERAL - DeliaTroph Pharmaceuticals, Inc. (a development stage company) dba Hyalozyme Therapeutics, Inc. (the "Company") was incorporated on February 26, 1998 and is a development stage, product-focused biotechnology company dedicated to the development and commercialization of recombinant therapeutic enzymes and drug enhancement systems, based on intellectual property covering the family of enzymes known as hyaluronidases. BASIS OF PRESENTATION - The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States. CASH AND CASH EQUIVALENTS - The Company considers all highly liquid investments with maturities of three months or less from the original purchase date to be cash equivalents. CONCENTRATION OF CREDIT RISK - Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company maintains its cash balances with one major commercial bank. The balances are insured by the Federal Deposit Insurance Corporation up to $100,000. PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost. Equipment and furniture are depreciated using the straight-line basis over their estimated useful lives of three years and leasehold improvements are amortized using the straight-line method over the estimated useful life of the asset or the lease term, whichever is shorter. LONG-LIVED ASSETS - The Company accounts for the impairment and disposition of long-lived assets in accordance with Statements of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. In accordance with SFAS No. 144, long-lived assets are reviewed for events of changes in circumstances, which indicate that their carrying value may not be recoverable. At December 31, 2003, the Company believes there has been no impairment of the value of such assets. INCOME TAXES - Income taxes are recorded in accordance with SFAS No. 109, Accounting for Income Taxes. This statement requires the recognition of deferred tax assets and liabilities to reflect the future tax consequences of events that have been recognized in the Company's financial statements or tax returns. Measurement of the deferred items is based on enacted tax laws. In the event the future consequences of differences between financial reporting bases and tax bases of the Company's assets and liabilities result in a deferred tax asset, SFAS No. 109 requires an evaluation of the probability of being able to realize the future benefits indicated by such assets. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion or all of the deferred tax asset will not be realized. At December 31, 2003, the Company had federal and state deferred tax assets of approximately $1,200,000 and $300,000, respectively, both consisting primarily of net operating loss carryforwards. The Company has recorded a full valuation allowance for all net deferred tax assets generated to date. The deferred tax assets and valuation allowances increased approximately $800,000 in 2003. The federal and state net operating losses of approximately $3,400,000 will begin to expire in 2018 and 2008, respectively. STOCK-BASED COMPENSATION - The Company has elected to adopt the disclosure only provisions of SFAS No. 148 and will continue to follow APB Opinion No. 25 and related interpretations in accounting for stock options granted to its employees and directors. Accordingly, employee and director compensation expense is recognized only for those options whose price is less than the market value at the measurement date. When the exercise price of the employee or director stock options is less then the estimated fair value of the underlying stock on the grant date, the Company records deferred compensation for the difference and amortizes this amount to expense in accordance with FASB Interpretation No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Options or Award Plans, over the vesting period of the options. Stock options issued to non-employees are recorded at their fair value as determined in accordance with SFAS No. 123 and Emerging Issues Task Force ("EITF") No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring or in Conjunction With Selling Goods or Services, and recognized over the related service period. Deferred charges for options granted to non-employees are periodically re-measured as the options vest. The Company's calculations were made using the Black-Scholes option-pricing model with the following weighted-average assumptions: expected life of 48 months; 100% stock volatility; risk-free interest rate of 3.0%; no dividends during the expected term; and forfeitures recognized as they occur. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the estimated life of the related options. The Company's pro forma information follows (in thousands except per share data): Year Ended 2003 2002 ------- ------- Net loss, as reported $(2,115) $(1,135) Deduct: Total stock-based employee Compensation expense determined under Fair value based method for all awards $ (149) $ (1) ------- ------- Pro forma net loss $(2,264) $(1,136) ======= ======= Net loss per share, basic and diluted, as reported $ (0.31) $ (0.25) ======= ======= Pro forma net loss per share, basic and diluted $ (0.33) $ (0.25) ======= ======= USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America necessarily 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 reporting periods. Actual results could differ from these estimates. COMPREHENSIVE INCOME (LOSS) - Comprehensive income (loss) is defined as all changes in a company's net assets, except changes resulting from transactions with shareholders. At December 31, 2003 and 2002, the Company has no reportable differences between net loss and comprehensive loss. RESEARCH AND DEVELOPMENT COSTS - Costs and expenses that can be clearly identified as research and development are charged to expense as incurred in accordance with FASB statement No. 2, "Accounting for Research and Development Costs." NET LOSS PER SHARE - In accordance with SFAS No. 128, Earnings Per Share, and SEC Staff Accounting Bulletin ("SAB") No. 98, basic net loss per common share is computed by dividing net loss for the period by the weighted average number of common shares outstanding during the period. Under SFAS No. 128, diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common and common equivalent shares, such as stock options and warrants, outstanding during the period. Such common equivalent shares have not been included in the Company's computation of net loss per share as their effect would have been anti-dilutive. 2003 2002 ------------ ------------ Numerator - Net loss $ (2,115,025) $ (1,134,765) ============ ============ Denominator - Weighted average shares outstanding 6,826,109 4,599,591 ============ ============ Net loss per share $ (0.31) $ (0.25) ============ ============ Incremental common shares (not included in denominator of diluted earnings per share because of their anti-dilutive nature) Employee stock options 6,392,567 168,710 Warrants to outside parties 67,129 -- Warrants on notes 867,419 315,830 Series B warrants 361,969 361,969 Series C warrants 2,367,114 -- Series C option 15,304,804 -- Warrants issuable if Series C option is exercised 7,652,402 -- ------------ ------------ Potential common equivalents 33,013,404 846,509 ============ ============ If all currently outstanding potential common equivalents are exercised, the Company would receive proceeds of approximately $25.3 million. RECENT ACCOUNTING PRONOUNCEMENTS - In August 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 91, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual, and Infrequently Occurring Events and Transactions. This statement also amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. The provisions are generally to be applied prospectively. The Company adopted the provisions of this statement effective January 1, 2002. The adoption of SFAS No. 144 did not have a significant impact on the Company's financial statements. In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which addresses financial accounting and reporting for costs associated with exit or disposal activities and supersedes Emerging Issues Task Force ("ETIF") Issue 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS No. 146 requires that a liability for an exit cost, as defined in ETIF Issue 94-3, be recognized at the date of an entity's commitment to an exit plan. SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. The provisions of SFAS No. 146 will be adopted for exit or disposal activities that are initiated after December 31, 2002. In November 2002, the FASB issued FASB Interpretation No. ("FIN") 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Guarantees of Indebtedness of Others, an interpretation of FASB Statement Nos. 5, 57 and 107, and rescission of FIN 34, Disclosure of Indirect Guarantees of Indebtedness of Others. FIN 45 elaborates on the disclosures to be made by the guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also requires that a guarantor recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002; while the provisions of the disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The Company believes the adoption of the recognition provisions of such interpretation will not have a material impact on its results of operations or financial position and has adopted such interpretation on January 1, 2003, as required. In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of SFAS No. 123. This statement amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. 6 In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity, which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This statement is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatory redeemable financial instruments of nonpublic companies. For nonpublic companies, mandatory redeemable financial instruments are subject to the provisions of this statement for the first fiscal period beginning after December 15, 2003. The Company does not believe that the adoption of this statement will have a significant impact on its financial statements. 2. PROPERTY AND EQUIPMENT 2003 2002 --------- --------- Research equipment $ 195,534 $ 168,445 Office equipment and furniture 59,687 30,254 Leasehold improvements 84,573 68,636 --------- --------- 339,794 267,335 Less accumulated depreciation and amortization (208,890) (133,165) --------- --------- $130,904 $134,170 3. ACCRUED EXPENSES 2003 2002 --------- --------- Accrued wages payable $ 11,000 $ 86,667 Accrued vacation payable 39,162 22,418 --------- ---------- $ 50,162 $ 109,085 ========= ========== The 2002 accrued wages payable were due to two former officers and one current officer of the Company. The former officers were paid their accrued wages of $50,000 in February 2003. The remaining balance of $36,667 was converted to a note payable in February 2003. This note was subsequently converted to common stock (see Note 4). 4. NOTES PAYABLE In 2002, the Company issued 10% promissory notes in the amount of $355,000. As amended, principal and interest automatically convert to common stock at $0.449 per share at the closing of the next equity financing in which the Company receives gross proceeds of at least $800,000. Because market value of the common shares was below the conversion price at the commitment date, there was no beneficial conversion feature. The notes carried a 40 percent warrant coverage for the purchase of common stock (see Note 5). 7 In 2002 and 2003, the Company issued 10% promissory notes in the amount of $917,000. As amended, principal and interest automatically convert to common stock at $0.281 per share at the closing of the next equity financing in which the Company receives gross proceeds of at least $800,000. Because the market value of the shares was above the conversion price at the commitment date, a beneficial conversion feature of $306,754 was recorded as interest expense and additional paid in capital in October 2003, upon the Company's issuance of $1,004,486 of Series C preferred stock. The notes carried a 20 percent warrant coverage for the purchase of common stock (see Note 5). Upon closing the Series C preferred financing, the principal balance of $1,272,000 of the above described notes and $99,764 of accrued interest were converted into 4,260,869 shares of common stock of the Company. 5. SHAREHOLDERS' EQUITY ISSUANCE OF COMMON STOCK - In March 1999, the Company issued 2,078,662 shares of common stock for $10,956 in goods and services. In January 2000, the Company issued 2,078,662 shares of common stock for $10,956 in cash. In August 2000, the Company issued 442,267 shares of common stock in exchange for a license valued at $2,330. Of the common stock 4,157,324 shares were sold to founders of the Company. ISSUANCE OF COMMON STOCK OPTIONS FOR SERVICES - In September 2002, the Company issued 7,897 common stock options for consulting services valued at $500. In January 2003, the Company issued 39,488 common stock options for consulting services valued at $2,500. In April 2003, the Company issued 39,488 common stock options for consulting services valued at $2,500. In October 2003, the Company issued 39,488 common stock options for consulting services valued at $2,500. In November 2003, the Company issued 24,712 common stock options for consulting services valued at $9,638. In December 2003, the Company issued 100,000 common stock options to two former Board members and 75,000 common stock options to members of its Scientific Advisory Board. These options were fully exercisable and fully vested on the date of grant and shall expire in ten years based on the terms of the options. The fair value of these options, totaling $68,250, was recorded as a noncash stock issuance cost by the Company. SERIES A, B AND C CONVERTIBLE PREFERRED STOCK - In January 2001, the Company completed an 8 for 1 stock split of its outstanding common stock and Series A preferred stock. In November 2001 the Company completed a 2 for 1 stock split for the Series B preferred stock and warrants. In October 2003, the Company completed a 1 for 1.266199 reverse stock split of all its common stock. All share numbers and per share dollar values in the accompanying financial statements and footnotes have been restated for all periods presented to reflect the stock splits. 8 From March 1999 to January 2000, the Company sold 3,803,507 shares of Series A convertible preferred stock ("Series A") for $198,006 ($178,006 in cash and $20,000 in goods and services), net of issuance costs. From March 2001 to May 2002, the Company sold 2,743,121 shares of Series B convertible preferred stock ("Series B") for $1,254,672 in cash, net of issuance costs. During October 2003, the Company sold 2,367,114 shares of Series C convertible preferred stock ("Series C") for $1,004,486, net of issuance costs. In addition, in connection with the Series C financing, the Company issued an option to purchasers of the Series C to buy an additional 15,304,804 shares of the Company's common stock for $0.4647 per share or $7,112,142. In connection with the Series C financing, 289,482 additional shares of Series B stock were issued to the Series B investors as a result of anti-dilution provisions. Upon closing the Series C investment, the Series A and Series B were all converted to common stock. The liquidation preference of the Series C is $0.4647 per share and is payable in preference to the common stock. Following this distribution, upon liquidation, any remaining assets of the Company shall be distributed ratably to holders of the common stock. WARRANTS - In November and December of 2001, the Company granted warrants to purchase 252,721 shares of common stock at an exercise price of $0.4748 per share to purchasers of the Series B. From January to May 2002, the Company granted warrants to purchase 109,248 shares of common stock at an exercise price of $0.4748 per share to purchasers of the Series B. These warrants are exercisable until February 15, 2005. In June 2002, the Company granted, to outside parties for services, warrants to purchase 67,129 shares of common stock at an exercise price of $0.13 per share. These warrants were fully exercisable and fully vested on the date of grant and shall expire in ten years based on the terms of the warrants. The fair value of these warrants, totaling $8,500, was recorded as a noncash stock issuance cost by the Company. In connection with the notes issued in 2002 and 2003 (see Note 4), the Company granted warrants to purchase 867,419 shares of common stock at an exercise price of $0.4496 per share. In October 2003, in conjunction with the issuance of its Series C convertible preferred stock, the Company granted warrants to purchase 2,367,114 shares of common stock to purchasers of the Series C at an exercise price of $0.7667 per share, exercisable until October 15, 2008. In connection with an option the Company issued to purchasers of the Series C stock to buy an additional 15,304,804 disclosed above, the Company also granted these purchasers warrants to purchase 7,652,402 shares of common stock at an exercise price of $1.75 per share, as amended. 6. STOCK OPTION PLAN The Company's 2001 Stock Option Plan (the "Plan"), as amended, provides for the granting of non-statutory or incentive stock options to acquire shares of the Company's common stock to employees of the Company. The Plan is administered by the Board of Directors and permits the issuance of options for the purchase of up to 10,000,000 shares, as amended, of the Company's common stock at exercises prices of not less than the fair market value of the underlying shares on the date of grant. Options granted under the Plan generally vest over a four-year period and expire up to a maximum of 10 years from the date of grant. 9 The following table summarizes stock option activity for the periods indicated: WEIGHTED AVERAGE EXERCISE PRICE SHARES PER SHARE -------- ---------- Outstanding, January 1, 2002 -- -- Granted 179,037 $ 0.06 Canceled (10,327) $ 0.06 -------- Outstanding, December 31, 2002 168,710 $ 0.06 Granted 6,484,962 $ 0.39 Exercised (256,410) $ 0.39 Canceled (4,695) $ 0.06 --------- Outstanding, December 31, 2003 6,392,567 $ 0.38 ========= The following table summarizes information concerning on outstanding and exercisable options as of December 31, 2003: OPTIONS OUTSTANDING OPTIONS EXERCISABLE ----------------------------------- ----------------------- WEIGHTED AVERAGE WEIGHTED WEIGHTED REMAINING AVERAGE AVERAGE EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE PRICE UTSTANDING LIFE PRICE EXERCISABLE PRICE $0.06 164,015 5.5 $0.06 61,714 $ 0.06 $0.39 6,228,552 9.9 $0.39 705,153 $ 0.39 --------- ------- 6,392,567 9.8 $0.38 766,867 $ 0.36 ========= ======= 7. COMMITMENTS AND CONTINGENCIES OPERATING LEASES - The Company leases its San Diego, California corporate office under a two-year lease. Additionally, the Company leases certain office equipment under operating leases. Rent expense totaled $123,110 and $64,958 for the years ended December 31, 2003 and 2002, respectively. Future minimum payments, by year and in the aggregate, required under the Company's noncancelable operating lease obligations consist of the following: YEAR ENDING DECEMBER 31 2004 $132,306 2005 67,492 -------- 199,798 ======== CONTRACT MANUFACTURING AGREEMENT - In November 2003, the Company entered into a contract manufacturing agreement whereby the contractor will manufacture the Company's recombinant protein to be used as the Company seeks regulatory approval for its product. The value of the contract is approximately $1,500,000 and is payable as milestones are achieved over the term of the contract in 2004. CONSULTING AGREEMENTS - In November and December 2003, the Company entered into consulting agreements with key members of its Scientific Advisory Board. In connection with these agreements, the Company issued stock options to some of these members. As discussed in Note 4, the Company recorded the fair value of these options as an expense on the date of grant. MANAGEMENT AGREEMENTS - The Company has entered into employment agreements with various members of its executive management team. The agreements are for one year and then revert to "at will" employment. INDEMNITIES AND GUARANTEES - During its normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities include those given to directors and officers of the Company to the maximum extent permitted under the laws of the State of California. The duration of these indemnities, commitments and guarantees varies. Some of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. The Company has not recorded any liability for these indemnities, commitments and guarantees in the accompanying balance sheets. MERGER AGREEMENT - The Company is currently in negotiations to merge with a public company in order to maximize shareholder value. The terms of the agreement have not yet been finalized. 8. GOING CONCERN The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has reported losses from its inception, is still in the development stage and does not have sufficient cash to cover its current operating needs. The Company is seeking to raise the additional capital it will require to meet its obligations in 2004. There can be no assurances that the Company will be successful in these efforts. * * * * * * * EX-99.3 3 v03378_ex993.txt EXHIBIT 99.3 HALOZYME UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS Effective March 11, 2004, pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), dated January 28, 2004, among privately held DeliaTroph Pharmaceuticals, Inc. dba Hyalozyme Therapeutics, Inc. ("Halozyme"), Global Yacht Services, Inc. ("Global"), a publicly traded Nevada corporation and Hyalozyme Acquisition Corporation ("Merger Sub"), a wholly owned subsidiary of Global, the Merger Sub merged with and into Halozyme, with Halozyme remaining as the surviving corporation (the "Merger"). The pro forma adjustments on the following unaudited pro forma combined financial statements have been prepared to illustrate the estimated effect of the acquisition. The unaudited pro forma combined balance sheet as of December 31, 2003, gives effect to the Halozyme acquisition as if it were completed on that date. The unaudited pro forma combined statements of operations for the year ended December 31, 2003, illustrate the effect of the acquisition of Halozyme as if it had occurred on January 1, 2003, and includes the historical audited statement of operation for Halozyme for the year ended December 31, 2003, combined with Global's audited consolidated statement of operation for the year ended December 31, 2003. The pro forma combined financial statements should be read in conjunction with the separate historical and pro forma consolidated financial statements and the notes thereto of Global contained in the 2003 Annual Report on Form 10-KSB filed on March 30, 2004. 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 if the acquisition had occurred as of the date or during the period presented nor is it necessarily indicative of future operating results or financial positions.
HALOZYME THERAPEUTICS, INC. AND GLOBAL YACHT SERVICES, INC. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET DECEMBER 31, 2003 - ------------------------------------------------------------------------------------------------------------------------------------ HISTORICAL HISTORICAL PRO FORMA PRO FORMA HALOZYME GLOBAL ADJUSTMENTS COMBINED 2003 2003 2003 2003 ----------- ----------- ----------- ----------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 503,580 $ 47,517 $ (47,517)(C) $ 503,580 ----------- ----------- ----------- ----------- Total Current Assets 503,580 47,517 (47,517) 503,580 PROPERTY AND EQUIPMENT - Net 130,904 - - 130,904 OTHER ASSETS 12,763 - - 12,763 ----------- ----------- ----------- ----------- - Total Assets $ 647,247 $ 47,517 $ (47,517) $ 647,247 ============ ============ ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 223,278 $ 32,701 $ 67,299 (b) $ 323,278 Accrued expenses 50,162 4,752 (4,752)(b) 50,162 ----------- ----------- ----------- ----------- Total Current Liabilities 273,440 37,453 62,547 373,440 COMMITMENTS AND CONTINGENCIES: - - - - SHAREHOLDERS' EQUITY: Series C convertible preferred stock 1,004,486 - (1,004,486)(d) - Common stock 3,349,826 8,196 (3,342,069)(d) 15,953 Additional paid-in-capital - 185,874 4,152,485 (d) 4,338,359 Accumulated deficit (184,006) 184,006 (d) - Deficits accumulated during the development stage (3,980,505) - (100,000)(b) (4,080,505) ----------- ----------- ----------- ----------- - Total Shareholders' Equity 373,807 10,064 (110,064) 273,807 ----------- ----------- ----------- ----------- - Total Liabilities and Shareholders' Equity $ 647,247 $ 47,517 $ (47,517) $ 647,247 =========== =========== =========== ===========
HALOZYME THERAPEUTICS, INC. AND GLOBAL YACHT SERVICES, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2003 - ------------------------------------------------------------------------------------------------------------------------------------ HISTORICAL HISTORICAL PRO FORMA PRO FORMA HALOZYME GLOBAL ADJUSTMENTS COMBINED 2003 2003 2003 2003 ----------- ----------- ----------- ----------- REVENUES: $ - $ 25,705 $ (25,705)(a) $ - COST OF REVENUES: - 27,003 (27,003)(a) - ----------- ----------- ----------- ----------- GROSS PROFIT (LOSS) - (1,298) 1,298 - EXPENSES: Research and development 1,145,420 - - 1,145,420 General and administrative 577,252 77,793 22,207(b) 677,252 ----------- ----------- ----------- ----------- OPERATING LOSS (1,722,672) (79,091) (20,909) (1,822,672) Other income (expense) Interest expense (394,439) - - (394,439) Other, net 2,086 - - 2,086 ----------- ----------- ----------- ----------- Other income (expense) (392,353) - - (392,353) LOSS BEFORE INCOME TAXES (2,115,025) (79,091) (20,909) (2,215,025) Income tax expense - - - - ----------- ----------- ----------- ----------- NET LOSS $(2,115,025) $ (79,091) $ (20,909) $(2,215,025) =========== =========== =========== =========== Net loss per share, basic and diluted $ (0.31) $ (0.01) $ (0.27) =========== =========== =========== Shares used in computing net loss per share, basic and diluted 6,826,109 8,196,362 8,196,362 =========== =========== ===========
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. BASIS OF PRESENTATION The unaudited pro forma combined financial statements of Halozyme have been prepared assuming the Merger has been treated as a recapitalization of Halozyme. Accordingly, the combined financial statements reflect the historical activity of Halozyme and the capital structure of Global. The pro forma adjustments are based on management's estimates of the fair value and useful lives of the assets acquired and liabilities assumed and have been prepared to illustrate the estimated effect of the acquisition. The unaudited pro forma combined balance sheet as of December 31, 2003, gives effect to the Halozyme acquisition as if it was completed on that date. The unaudited pro forma combined statements of operations for the year ended December 31, 2003, illustrate the effect of the acquisition of Halozyme as if it had occurred on January 1, 2003, and includes the historical audited statement of operation for Halozyme for the year ended December 31, 2003, combined with Global's unaudited pro forma combined statement of operation for the year ended December 31, 2003, which gives effect to the acquisition of Halozyme as of March 11, 2004, as if the acquisition were completed on January 1, 2003. 2. PRO FORMA ADJUSTMENTS AND ASSUMPTIONS FOR HALOZYME Effective March 11, 2004, pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), dated January 28, 2004, among privately held DeliaTroph Pharmaceuticals, Inc. dba Hyalozyme Therapeutics, Inc. ("Halozyme"), Global Yacht Services, Inc., ("Global") a publicly traded Nevada corporation and Hyalozyme Acquisition Corporation ("Merger Sub"), a wholly owned subsidiary of Global, the Merger Sub merged with and into Halozyme, with Halozyme the survivor for accounting purposes. (a) Adjustments to Revenues and Expenses Eliminates historical activity of Global. (b) Adjustments to Expense Eliminates the historical expenses of Global and adds estimated expenses related to being a public company. (c) Adjustments to Cash Eliminates historical activity of Global. (d) Adjustments to Equity Adjustments to reflect the capital structure of Global. * * * * * * * -----END PRIVACY-ENHANCED MESSAGE-----