<PAGE>
PROSPECTUS
BIOSPHERICS INCORPORATED
1,809,955 SHARES OF COMMON STOCK
====================
The selling stockholder of Biospherics Incorporated ("Biospherics")
identified on page 6 hereof may offer and sell the shares covered by this
prospectus from time to time. The selling stockholder has acquired 723,982
shares of Biospherics' common stock and a stock purchase warrant to acquire up
to 1,085,973 additional shares at $6.90625 per share. Such purchases may occur
at any time during the four (4) year period ending February 23, 2004. This
prospectus may not be used by Biospherics for sales of its shares; it may only
be used by the selling stockholder for resales of Biospherics shares owned by
the selling stockholder as described herein. The selling stockholder will
receive all of the proceeds from the sale of the shares and will pay all
underwriting discounts and selling commissions, if any, applicable to the sale
of the shares. Biospherics will pay the expenses of registration of the sale of
the shares. The selling stockholder may also offer for sale additional shares of
common stock acquired upon exercise of the stock purchase warrant as a result of
stock splits, stock dividends or similar events pursuant to Rule 416 under the
Securities Act.
Our common stock trades on the Nasdaq National Market System under the
symbol "BINC". On March 8, 2000, the last reported sale price of our common
stock on the Nasdaq National Market System was $10.00 per share.
Our principal offices are located at 12051 Indian Creek Court,
Beltsville, Maryland 20705. Our telephone number is (301) 419-3900.
BEGINNING ON PAGE 2, WE HAVE LISTED SEVERAL "RISK FACTORS" WHICH YOU
SHOULD CONSIDER. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY BEFORE YOU MAKE
YOUR INVESTMENT DECISION.
Neither the Securities and Exchange Commission nor any securities
commission has approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is May 1, 2000.
<PAGE>
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS, ALONG WITH
THE OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS,
IN DECIDING WHETHER TO INVEST IN OUR SHARES. THESE FACTORS, AMONG OTHERS, MAY
CAUSE ACTUAL RESULTS, EVENTS OR PERFORMANCE TO DIFFER MATERIALLY FROM THOSE
EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS MADE IN THIS PROSPECTUS.
WE CONTINUE TO BE DEPENDENT ON OUR INFORMATION SERVICES DIVISION FOR
NEARLY ALL OF OUR REVENUE. Since the products developed by our Biotech division
have not yet been brought to market, we are almost entirely dependent on the
Information Services Division. This business is typically comprised of
relatively large contracts which are not usually for terms longer than one or
two years, subject to options to extend for one or more years. Some of this
business is awarded by competitive bidding. In many cases, the apparent low
bidder is subject to a protest action by the unsuccessful bidders that delays
the award of the contract and sometimes results in a rebidding. There can be no
assurance that we will continue to win and successfully defend these awards.
OUR INFORMATION SERVICES BUSINESS IS CURRENTLY DEPENDENT UPON
LOWER-MARGIN GOVERNMENT CONTRACTS. While our Information Services business is
comprised of both government and commercial business, the mix of such business
changes from period to period. Government business traditionally generates lower
operating margins than commercial business. In 1999, the government to
commercial business mix was more than 2 to 1.
D-TAGATOSE HAS NOT COME TO MARKET. We have granted an exclusive
worldwide license to MD Foods Ingredients amba of Denmark for the manufacture,
marketing and distribution of D-Tagatose as a food ingredient. Our receipt of
future payments from MD Foods is dependent upon MD Foods' efforts to bring this
product to market. In lieu of FDA qualification, MD Foods has assembled an
expert panel to review the safety of D-Tagatose. To our knowledge, MD Foods has
yet to commence construction of a plant to manufacture D-Tagatose. We have been
advised that construction will not begin until D-Tagatose has been certified by
the expert panel as a generally regarded as safe product. Accordingly, the sale
of D-Tagatose as a food product is largely outside of our control.
UNCERTAIN EFFECT OF PROPOSED MERGER OF MD FOODS. MD Foods has announced
that it will merge with a company headquartered in Sweden during 2000. In
addition, there has been some speculation in the European press as to whether MD
Foods is seeking a partner to collaborate with it to produce D-Tagatose. It is
uncertain as to what effect, if any, these matters may have on future sales of
D-Tagatose.
DELAYS IN BRINGING D-TAGATOSE TO MARKET SHORTENS THE PERIOD WE ARE
ENTITLED TO ROYALTIES. Our agreement with MD Foods requires MD Foods to pay
royalties on sales of D-Tagatose during a defined period of time which
corresponds to the period that the rights to D-Tagatose are protected by U.S.
and foreign patents. The delay in bringing D-
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Tagatose to market results in a continuing shortening of the time that we are
entitled to royalty payments under the MD Foods agreement.
OTHER BIOTECH PRODUCTS ARE STILL IN THE DEVELOPMENT STAGE. While we are
in the process of attempting to develop other potential uses of D-Tagatose as
well as to develop other Biotech products, none have been developed to a stage
where any significant revenue has been generated. Development of products will
require significant additional research and development. Such additional effort
will require substantial funding which may not be available to us. There can be
no assurance that our research and development activities will result in any
saleable products. Further, it is possible that we will license or seek an
affiliation with a third party to bring some products to market. In such an
event, we would likely have minimal control over the manufacture and marketing
of such products.
OUR ABILITY TO MARKET ANY BIOTECH PRODUCTS WE DEVELOP WILL LIKELY
DEPEND ON OBTAINING FDA AND FOREIGN REGULATORY APPROVALS. Research, testing,
manufacture, labeling, distribution, marketing and advertising of new products
are subject to extensive regulation by governmental regulatory authorities in
the United States and other countries. These rigorous regulatory approval
processes can take five to ten years or more and require the expenditure of
substantial resources. There can be no assurance that we will be able to obtain
the necessary approvals for clinical testing or for the marketing of products.
OUR SUCCESS WILL DEPEND, IN PART, ON OUR ABILITY TO OBTAIN AND MAINTAIN
PATENT PROTECTION FOR OUR PRODUCTS. We have several patents for D-Tagatose and
other products under development. No assurance can be given that any additional
patents will be issued, that the protection of any patents that may be issued in
the future will be significant, or that current or future patents will be held
valid if subsequently challenged.
WE HAVE SUSTAINED LOSSES IN THE PAST AND WE MAY SUSTAIN LOSSES IN THE
FUTURE. We have incurred losses in prior years, including the last two (2)
years. Our net loss for the year ended December 31, 1999 was $5.2 million. No
assurance can be given that we will be profitable in the future.
WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL FINANCING THAT WE WILL NEED.
During 1999, our working capital decreased by $0.2 million as a result of the
loss incurred in 1999. We believe that we may need to raise more money to
continue to finance our product development operations. We may also need to
raise additional money to fund operations if the sales of D-Tagatose as a food
product continue to be delayed or are not as successful as we anticipate. We may
not be able to obtain additional financing on acceptable terms, or at all.
WE FACE INTENSE COMPETITION AND RAPID TECHNOLOGICAL ADVANCES BY
COMPETITORS. Our competitors in the Information Services business are numerous.
Many of our competitors have significantly greater financial, marketing and
distribution resources than we do. Our competitors may succeed in developing or
marketing technologies and products that are more effective than ours. In
addition, alternative sweetener(s) may enter the relevant markets prior to
D-Tagatose.
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THE PRICE OF BIOSPHERICS' COMMON STOCK HAS BEEN HIGHLY VOLATILE DUE TO
SEVERAL FACTORS WHICH WILL CONTINUE TO EFFECT THE PRICE OF OUR STOCK. Our common
stock has traded as low as $4.00 and as high as $15.00 between January 1, 1999
and February 29, 2000. Some of the factors leading to this volatility include:
- price and volume fluctuations in the stock market at large which
do not relate to our operating performance;
- relatively small amounts of our stock trading on any given day;
- fluctuations in our operating results;
- announcements of technological innovations or new products which
we or our competitors make;
- developments with respect to patents or proprietary rights; and
- the status of MD Foods' efforts to obtain approval to begin to
sell D-Tagatose in the United States.
BIOSPHERICS AND THE PRICE OF BIOSPHERICS SHARES MAY BE ADVERSELY
AFFECTED BY THE PUBLIC SALE OF A SIGNIFICANT NUMBER OF THE SHARES ELIGIBLE FOR
FUTURE SALE. All outstanding shares of our common stock are freely tradable. A
significant number of additional shares may be issued upon exercise of warrants,
including the stock purchase warrant. Sales of large amounts of common stock in
the public market could materially adversely affect the market price. Such sales
also may inhibit our ability to obtain future equity-related financing on
acceptable terms.
WE MAY BE REMOVED FROM THE NASDAQ NATIONAL MARKET SYSTEM IF WE FAIL TO
MAINTAIN CERTAIN MAINTENANCE CRITERIA. Nasdaq inquired on one occasion whether
we continue to meet the net tangible assets criterion for trading on the Nasdaq
National Market System. We currently meet all requirements but our ability to
continue to do so will depend on our future operations. The public trading
volume of our common stock and the ability of our stockholders to sell their
shares could be significantly impaired if we fail to meet the criteria and are
removed from the Nasdaq National Market System.
DIVIDENDS ON OUR COMMON STOCK NOT LIKELY. We do not anticipate paying
dividends on our common stock. We presently intend to retain future earnings, if
any, in order to provide funds for use in the operation and expansion of our
business and for further research and development; accordingly, we do not
anticipate paying cash dividends on our common stock in the foreseeable future.
OUR CHARTER DOCUMENTS MAY INHIBIT A TAKEOVER. Certain provisions of our
Amended and Restated Certificate of Incorporation, Bylaws and stock options
could:
- discourage potential acquisition proposals;
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- delay or prevent a change in control of Biospherics;
- diminish stockholders' opportunities to participate in tender
offers for our common stock, including tender offers at prices
above the then current market price; or
- inhibit increases in the market price of our common stock that
could result from takeover attempts.
WE MAY NOT BE ABLE TO RETAIN OUR KEY EXECUTIVES AND RESEARCH AND
DEVELOPMENT PERSONNEL. As a small company, our success depends on the services
of key employees in executive and research and development positions. The loss
of the services of one or more of such employees could have a material adverse
effect on us.
YEAR 2000 COMPLIANCE RELATED PROBLEMS. Many computer systems will
experience problems handling dates beyond the year 1999. Potential problems may
be embedded and may not be experienced until well beyond January 1, 2000 by
computer systems. Therefore, some computer hardware and software may need to be
modified in order to remain functional. To date, we have processed our year 2000
requirements. The majority of the costs associated with implementing the Year
2000 compliance have already been recognized and have not been material in terms
of our financial operating results. We believe there is little risk associated
with year 2000 issues. There can be no assurance, however, that there will not
be a delay in, or increased costs associated with the implementation of such
changes. Our inability to implement such changes could have an adverse effect on
our future results of operations.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, and current reports, proxy statements, and
other documents with the Securities and Exchange Commission. You may read and
copy any document we file at the SEC's public reference room at Judiciary Plaza
Building, 450 Fifth Street, NW, Room 1024, Washington, D.C. 20549 or at its
regional public reference rooms in New York, New York or Chicago, Illinois. You
should call 1-800-SEC-0330 for more information on the public reference room.
The SEC maintains an internet site at http://www.sec.gov where certain
information regarding issuers (including Biospherics) may be found. You may also
inspect and copy our SEC filings at the offices of The Nasdaq Stock Market
located at 1735 K Street, N.W., Washington, DC 20006-1500.
This prospectus is part of a registration statement that we filed with
the SEC (Registration No. 333-32504). The registration statement contains more
information than this prospectus regarding Biospherics and its common stock,
including certain exhibits and schedules. You can get a copy of the registration
statement from the SEC at the address listed above or from its internet site.
The SEC allows us to "incorporate" into this prospectus information we
file with the SEC in other documents. This means that we can disclose important
information to you by referring to other documents that contain that
information. The information may include documents filed after
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the date of this prospectus which update and supersede the information you read
in this prospectus. We incorporate by reference the documents listed below,
except to the extent information in those documents is different from the
information contained in this prospectus, and all future documents filed with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934 until we terminate the offering of these shares:
Our Annual Report on Form 10-KSB for the Year ended December 31, 1999
Our Current Report on Form 8-K filed on March 3, 2000.
Our Current Report on Form 8-K filed on April 12, 2000.
You may request a copy of these documents, at no cost, by writing or
telephoning us at:
Biospherics Incorporated
12051 Indian Creek Court
Beltsville, Maryland 20705
Attention: Richard C. Levin, Vice President
Telephone: (301) 419-3900
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. You should not assume that the
information in this prospectus or any supplement is accurate as of any date
other than the date on the front of those documents.
FORWARD-LOOKING INFORMATION
Some of the statements made in this prospectus or in the documents
incorporated by reference herein are not statements of historical fact but are
forward-looking statements. A number of risks and uncertainties, including those
discussed under the caption "Risk Factors" above and the documents incorporated
by reference herein could affect such forward- looking statements and could
cause actual results to differ materially from the statements made.
In some cases, you can identify forward-looking statements by
terminology such as "may", "will", "should", "plans", "anticipates", "believes",
"estimates", "predicts", "potential", or "continue" or the negative of such
terms or other comparable terminology.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
events, levels of activity, performance or achievements. We do not intend to
update any of the forward-looking statements after the date of this prospectus
to conform them to actual results.
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SELLING STOCKHOLDER
The selling stockholder, RCG International Investors, LDC, acquired
723,982 shares of common stock and warrants to purchase an additional 1,085,973
shares of common stock in a February 24, 2000 private placement.
The following information is based upon information provided by the
selling stockholder. There are currently no agreements, arrangements or
understandings with respect to the sale of any of the shares. The shares are
being registered to permit public secondary trading of the shares, and the
selling stockholder may offer the shares for resale from time to time.
The following table sets forth the name of the selling stockholder, the
number of shares of common stock owned beneficially as of February 29, 2000 and
the number of shares which may be offered pursuant to this prospectus. Because
the selling stockholder may offer all, some or none of its common stock, no
definitive estimate as to the number of shares thereof that will be held by the
selling stockholder after such offering can be provided.
<TABLE>
<CAPTION>
Percentage of
Shares Beneficially Owned Maximum Outstanding Shares
Name of at February 29, 2000 Number of Shares Shares Beneficially Beneficially Owned
Selling Stockholder (1) (2) (4) Being Offered (3) Owned After Offering (4) After Offering (4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RCG International
Investors, LDC 2,657,755 1,809,955 847,800 7.28%
</TABLE>
(1) Except as otherwise noted, the information contained in the table above
reflects "beneficial" ownership of the common stock within the meaning
of Rule 13d-3 under the Exchange Act. On February 29, 2000, Biospherics
had 10,562,459 shares of common stock outstanding.
(2) The 2,657,755 shares consists of 996,782 shares directly owned; 575,000
shares which may be acquired by exercise of warrants issued to the
selling stockholder in 1999; and 1,085,973 shares which may be acquired
by exercise of the stock purchase warrant issued in the private
placement.
(3) The number of shares set forth in the table represents an estimate of
the number of shares of common stock to be offered by the selling
stockholder. The actual number of shares of common stock issuable upon
exercise of the stock purchase warrant is subject to adjustment and
could be materially less or more than such estimated number depending
on factors which cannot be predicted by Biospherics at this time. The
actual number of shares of common stock offered hereby, and included in
the Registration Statement of which this prospectus is a part, includes
such additional number of shares of common stock as may be issued or
issuable upon exercise of the stock purchase warrant by reason of any
stock split, stock dividend or similar transaction involving the common
stock in accordance with Rule 416 under the Securities Act.
(4) Pursuant to the terms of the stock purchase warrant and the 1999
warrants, such warrants are exercisable only to the extent that the
number of shares of common stock thereby issuable, together with the
number of shares of common stock owned by such holder and its
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affiliates (but not including shares of common stock underlying any
unexercised portion of the stock purchase warrant or any other warrant)
would not exceed 9.9% of the then outstanding common stock as
determined in accordance with Section 13(a) of the Exchange Act.
Accordingly, the number of shares of common stock set forth in the
table for the selling stockholder exceeds the number of shares of
common stock that the selling stockholder could own beneficially at any
given time through its ownership of the stock purchase warrant and the
1999 warrants. In that regard, beneficial ownership of the selling
stockholder set forth in the table is not determined in accordance with
Rule 13d-3 under the Exchange Act. The selling stockholder has further
agreed to not knowingly sell to any one purchaser more than 4.9% of the
outstanding common stock.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 18,000,000 shares of common
stock, $.005 par value, and 2,000,000 shares of preferred stock, $.01 par value.
As of the close of business on February 29, 2000, there were 10,562,459 shares
of common stock outstanding and no shares of preferred stock outstanding.
The holders of common stock are entitled to receive dividends when and
as declared by the Board of Directors out of funds legally available therefor.
In the event of the dissolution of Biospherics, the holders of common stock are
entitled to share ratably in the assets legally available for distribution to
its shareholders after the payment of the liquidation preference of any
outstanding preferred stock. The holders of the common stock have no preemptive,
subscription, conversion or redemption rights, and are not subject to further
calls or assessments. The common stock currently outstanding is, and the common
stock issued in this offering will be, validly issued, fully paid and
nonassessable.
Except as otherwise provided in our charter or required by law, the
holders of shares of common stock are entitled to one vote per share on all
matters to be voted on by shareholders and do not have the right of cumulative
voting in connection with elections for directors, which means the holders of
more than half the outstanding shares of common stock can elect all of the
directors.
We are also authorized to issue 2,000,000 shares of preferred stock.
Our Board of Directors is authorized to issue the preferred stock in one or more
series and, with respect to each series, to determine the preferences and rights
and the qualifications, limitations, or restrictions thereof, including the
dividend rights, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, sinking fund provisions, the number of shares
constituting each series and the designation of such series. The Board of
Directors could, without shareholder approval, issue preferred stock with voting
and other rights that could adversely affect the voting rights of the holders of
the common stock.
One of the effects of the preferred stock may be to enable the Board of
Directors to render more difficult or to discourage an attempt to obtain control
of Biospherics by means of a merger, tender offer, proxy contest or otherwise,
and thereby to protect the continuity of the management.
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PLAN OF DISTRIBUTION
The selling stockholder, or its pledgees, donees, transferees or other
successors in interest, may offer its shares at various times in one or more of
the following transactions (which may involve block transactions):
- on the Nasdaq National Market System (or any other exchange on
which the shares may be listed);
- in the over-the-counter market;
- in negotiated transactions other than on such exchanges;
- by pledge to secure debts and other obligations;
- in connection with the writing of non-traded and
exchange-traded call options, in hedge transactions, in covering
previously established short positions (so long as such short
positions were established after the effectiveness of the
Registration Statement of which this prospectus is a part) and in
settlement of other transactions in standardized or
over-the-counter options; or
- in a combination of any of the above transactions.
The shares may also be sold pursuant to Rule 144. The selling
stockholder, or its pledgees, donees, transferees or other successors in
interest, may sell its shares at market prices prevailing at the time of sale,
at prices related to such prevailing market prices, at negotiated prices, at
fixed prices or at such other prices as the selling stockholder determines from
time to time. The selling stockholder may use broker-dealers to sell its shares.
The broker-dealers will either receive discounts or commissions from the selling
stockholder, or they will receive commissions from purchasers of shares.
Under certain circumstances the selling stockholder and any
broker-dealers that participate in the distribution may be deemed to be
"underwriters" within the meaning of the Securities Act. Any commissions
received by such broker-dealers and any profits realized on the resale of shares
by them may be considered underwriting discounts and commissions under the
Securities Act. The selling stockholder may agree to indemnify such
broker-dealers against certain liabilities, including liabilities under the
Securities Act. In addition, Biospherics has agreed to indemnify the selling
stockholder with respect to the shares offered hereby against certain
liabilities, including certain liabilities under the Securities Act.
Alternatively, Biospherics may contribute toward amounts paid due to such
liabilities.
The selling stockholder will be subject to applicable provisions of the
Exchange Act and regulations under the Exchange Act which may limit the timing
of purchases and sales of shares of Biospherics' common stock by the selling
stockholder.
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The selling stockholder will pay all commissions, transfer taxes, and
other expenses associated with the sale of securities by it. The shares offered
hereby are being registered pursuant to contractual obligations of Biospherics,
and Biospherics has paid the expenses of the preparation of this prospectus. We
have not made any underwriting arrangements with respect to the sale of shares
offered hereby.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares by
the selling stockholder, but we will receive the exercise price in the event the
stock purchase warrant held by the selling stockholder is exercised.
LEGAL MATTERS
Baxter, Baker, Sidle & Conn, P.A. of Baltimore, Maryland, our counsel
in connection with the offering, has issued an opinion about the validity of the
securities being offered.
EXPERTS
The financial statements incorporated in this Prospectus by reference
to the Annual Report on Form 10-KSB for the year ended December 31, 1999, have
been so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Risk Factors.................................................................. 2
Where You Can Find More Information........................................... 5
Forward Looking Information................................................... 6
Selling Stockholder........................................................... 6
Description of Capital Stock.................................................. 8
Plan of Distribution.......................................................... 8
Use of Proceeds............................................................... 10
Legal Matters................................................................. 10
Experts....................................................................... 10
</TABLE>
1,809,955 SHARES
BIOSPHERICS INCORPORATED
COMMON STOCK
-----------------
PROSPECTUS
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May 1, 2000
