As filed with the Securities and Exchange Commission on November 27, 1996
Registration No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------
BIOMUNE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Nevada 87-0380088
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
David G. Derrick,
Chief Executive Officer
Biomune Systems, Inc.
2401 South Foothill Drive 2401 South Foothill Drive
Salt Lake City, Utah 84109-1405 Salt Lake City, Utah 84109-1405
(801) 466-3441 (801) 466-3441
(Address, including zip code, and (Name, address, including zip code,
telephone number, including and telephone number, including
area code, of registrant's principal area code, of agent for service)
executive offices)
Copies to:Nolan S. Taylor, Esq.
Thomas R. Taylor Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
1000 Kearns Building
136 South Main Street
Salt Lake City, Utah 84101-1685
(801) 320-6700
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
<TABLE>
Calculation of Registration Fee
<CAPTION>
Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Securities to be Amount to Offering Price Aggregate Offering Registration
Registered be Registered(1) Per Share(2) Price(2) Fee
<S> <C> <C> <C> <C>
Common Stock,
$0.0001 par value per share 8,613,841 $2.875 $24,764,793 $7,504.48
====================================== =================== ===================== ==================== ================
</TABLE>
(1) This Registration Statement also covers an indeterminable number of
additional shares of the Registrant's Common Stock as may be issuable at
the time of conversion resulting from changes in the components of the
conversion formula and the adjustment provisions concerning the conversion
of the Registrant's Series C 8% Cumulative Convertible Non-Voting
Preferred Stock, which securities are convertible into shares of the
Registrant's Common Stock, and which shares of Common Stock are being
registered hereby.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), based on the average of the final bid and asked
prices for the Registrant's Common Stock on November 22, 1996, as reported
on the NASDAQ SmallCap Market.
Exhibit Index is on Page 25
Page 1 of 29
SUBJECT TO COMPLETION
DATED November __, 1996
PROSPECTUS
BIOMUNE SYSTEMS, INC.
8,613,841 Shares of
Common Stock,
$0.0001 par value per share
-------------------------
This Prospectus relates to a total of 8,613,841 shares of Common Stock, $0.0001
par value per share (the "Common Stock"), of Biomune Systems, Inc., a Nevada
corporation (the "Company"), including: (i) 2,525,253 shares of Common Stock
(which number of shares is based on the average closing bid prices of the Common
Stock on November 13-15, 1996, and is subject to adjustment in accordance with
the conversion formula described below) issuable upon the exercise by the
holders of shares of the Company's Series C 8% Cumulative Convertible Non-Voting
Preferred Stock, $0.0001 par value per share (the "Series C Preferred"), of the
conversion right set forth in the Designation of Rights and Preferences related
to the Series C Preferred (the "Series C Conversion Shares"); (ii) 5,300,588
shares of Common Stock issuable upon the exercise by holders of certain
outstanding options and warrants issued pursuant to agreements that contain
"piggyback" registration rights (the "Contract Warrant Shares"); and (iii)
788,000 shares of Common Stock that were issued as restricted shares of Common
Stock pursuant to certain agreements that contain "piggyback" registration
rights (the "Contract Restricted Shares"). The Series C Conversion Shares, the
Contract Warrant Shares and the Contract Restricted Shares are, collectively,
referred to herein as the "Shares." Each share of Series C Preferred may be
converted at the holder's option into the number of shares of the Company's
Common Stock determined by dividing $1,000 plus any per share accrued and unpaid
regular or special dividends by an amount equal to the Market Price (as that
term is defined below) less 25%; provided, however, that the discount from the
Market Price shall be 20% for all shares of Series C Preferred converted by a
holder prior to January 24, 1997. The applicable denominator in the formula set
forth in the immediately preceding sentence shall be referred to herein as the
"Conversion Factor". "Market Price" shall mean the average closing bid price of
the Company's Common Stock for the three trading days immediately preceding the
date of conversion, as reported by the National Association of Securities
Dealers Automated Quotation ("NASDAQ") System or such other inter-dealer system
as may list the Company's Common Stock. Notwithstanding the conversion provision
regarding the Series C Preferred, a holder thereof may not at any time hold
shares of the Company's Common Stock exceeding 4.9% of the total number of
issued and outstanding shares of Common Stock. As a result of uncertainty as to
the Market Price and Conversion Factor that may be applicable at the time of
conversion and related adjustment provisions concerning the conversion of the
Series C Preferred, this Prospectus also covers an indeterminable number of
additional shares of the Company's Common Stock. See "Description of the
Company's Capital Stock", below. Holders of the Series C Preferred must exercise
their conversion right thereunder prior to the sale of the Series C Conversion
Shares offered hereby. The Company will not receive any proceeds upon the
conversion of shares of Series C Preferred into Series C Conversion Shares or
upon the sale of the Series C Conversion Shares.
This Prospectus also relates to the offering from time to time of the Contract
Warrant Shares following the exercise of the underlying options and warrants by
the holders of certain options and warrants issued by the Company and of the
Contract Restricted Shares by the holders of certain shares of the Company's
restricted Common Stock. The restricted shares of Common Stock currently
underlying the Contract Restricted Shares were issued pursuant to exemptions
from registration under the Securities Act of 1933, as amended (the "1933 Act").
The Company will not receive any proceeds upon the sale of the Contract
Restricted Shares. The Company will, however, receive the exercise price of the
options and warrants underlying the Contract Warrant Shares upon the exercise
thereof, but will not receive any of the proceeds from the sale of the Contract
Warrant Shares. The exercise prices of the options and warrants that underlie
the Contract Warrant Shares range from $1.67 to $4.00 per share. The Company
will pay all costs and fees associated with the registration of the Shares under
federal and state securities laws and the preparation and delivery of this
Prospectus. No underwriting discounts or commissions are payable in connection
with the issuance of the Shares.
The date of this Prospectus is November ___, 1996
--------------------------------------
An Investment in the Shares Offered Hereby Involves a High Degree of Risk.
See "Risk Factors" for a Discussion of Certain Factors that Should be
Considered by Prospective Investors.
--------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Company's Common Stock is traded on the NASDAQ SmallCap Market under
the symbol "BIME". On November 22, 1996, the average of the final bid and asked
prices for the Company's Common Stock as reported on the NASDAQ SmallCap Market
was $2.875 per share.
The Shares may be sold from time to time directly by the holders thereof or
by pledges, donees, transferees or other successors-in-interest to such security
holders. Alternatively, the Shares may be offered from time to time by or
through brokers or dealers who may act solely as agents or who may acquire the
Shares as principals. The distribution of the Shares may be effected in one or
more transactions that may take place on the NASDAQ SmallCap Market, including
block trades, ordinary broker's transactions, privately-negotiated transactions
or through sales to one or more brokers or dealers for resale of such securities
as principals, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. Usual and
customary or specifically negotiated brokerage fees or commissions may be paid
in connection with such sales.
No dealer, salesman or other person or entity has been authorized to give
any information or to make any representations not contained in or incorporated
by reference in this Prospectus, and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or by any other person or entity. All information contained herein is as of the
date of this Prospectus except as otherwise indicated. Neither the delivery of
this Prospectus, nor any sale, distribution or resale made hereunder shall,
under any circumstances, create any implication that there has been no change in
the business or affairs of the Company or in the facts herein set forth since
the date hereof or since the date otherwise indicated.
Information contained herein is subject to completion or amendment. A
Registration Statement (as that term is defined below) relating to these
securities has been filed with the Securities and Exchange Commission (the
"Commission"). These securities may not be sold nor may offers to buy be
accepted prior to the time the Registration Statement becomes effective. This
Prospectus shall not constitute an offer to sell or the solicitation of an offer
to buy any security other than the Shares, nor shall this Prospectus constitute
an offer to or solicitation of any person or entity in any jurisdiction in which
such offer or solicitation cannot be lawfully made.
TABLE OF CONTENTS
PAGE
Available Information............................................... 4
Documents Incorporated by Reference................................. 4
The Company......................................................... 5
Recent Developments................................................. 5
Risk Factors........................................................ 7
Use of Proceeds.....................................................15
Selling Shareholders................................................15
Plan of Distribution................................................16
Description of the Company's Capital Stock..........................17
Experts.............................................................18
Legal Matters.......................................................18
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports, proxy statements and other information with the Commission.
Reports, proxy statements and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of such material can be obtained from the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington D.C. 20549 at prescribed rates. The Company's reports, proxy
statements and other information filed with the Commission may also be inspected
at the office of the National Association of Securities Dealers, Inc., 1733 K
Street, N.W., Washington, DC 20006, on whose NASDAQ System the Company's Common
Stock is listed for trading.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments and exhibits thereto) (collectively, the
"Registration Statement") under the 1933 Act. This Prospectus does not contain
all of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the Rules and Regulations of the
Commission. For further information, reference is made to the Registration
Statement. Each summary in this Prospectus or information included in the
Registration Statement or any exhibit thereto is qualified in its entirety by
reference to such information or exhibit. The Registration Statement and the
exhibits thereto can be inspected and copied at the public reference facilities
of the Commission referenced above.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(1) The Annual Report on Form 10-K for the fiscal year ended September 30,
1996.
All documents subsequently filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act and prior to the
termination of this offering, shall be deemed to be incorporated by reference in
this Prospectus. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all of the documents that have been incorporated herein by
reference, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference therein). Requests for such copies should
be directed to: Michael G. Acton, Chief Financial Officer, Biomune Systems,
Inc., 2401 South Foothill Drive, Salt Lake City, Utah 84109-1405, telephone
number (801) 466- 3441.
THE COMPANY
The Company is a development stage biopharmaceutical and nutraceutical
company that, along with its wholly owned subsidiary, Optim Nutrition, Inc.
("Optim"), is engaged primarily in the business of research, development,
production and marketing of biologic pharmaceutical drug products and
nutraceutical food supplements derived from the patented technology that is
licensed to the Company (the "Technology"). The Company believes the Technology
may produce immune enhancing protein and replicate the nutritional aspects of
colostrum. Colostrum is the primary substance by which most mammals develop
passive immunity. Nutraceutical products are food supplements that are derived
from a food base and marketed as a beneficial source of nutrients to promote
good health. The Company believes that the Technology may be utilized to develop
products to treat various gastrointestinal and infectious diseases in humans and
that products derived from the Technology may help increase the body's immune
response. The Company also believes that certain products derived from the
Technology may provide nutritional supplementation for certain individuals who
are nutritionally deprived or immune stressed or compromised.
The Company has filed Investigational New Drug Applications ("IND") with
the United States Food and Drug Administration (the "FDA"), the United States
government agency that regulates drugs for humans, on two biological
pharmaceutical drug candidates developed from the Technology: BWPT-301(TM)
(formerly known as Immuno-C), which the Company believes may prevent and/or
treat cryptosporidiosis, a gastrointestinal disease caused by the
cryptosporidium parvum (C. parvum) microorganism, which causes acute and severe
diarrhea in humans; and BWPT-302(TM), which the Company believes may be used in
the treatment of infection by the life-threatening bacteria, Escherichia coli,
strain 0157:H7 ("E. coli, strain 0157:H7"), a disease that causes severe bloody
diarrhea, and in children, a hemolytic uremic syndrome associated with a high
risk of permanent kidney damage. The Company is currently conducting Phase II
clinical trials on its BWPT-301(TM) drug candidate and plans to commence Phase
II clinical trials on its BWPT-302(TM) drug candidate.
Based upon data obtained from clinical trials and other studies involving
BWPT-301(TM) and protein concentrate (the "Base Product") that suggest potential
health-related nutritional benefits from the use of nutraceutical products
developed utilizing the Technology, the Company, through Optim, developed and is
now commercially marketing a nutraceutical product based on the Technology.
Optimune(TM) is marketed to immune-compromised individuals who need nutritional
supplementation for any number of reasons. The preliminary test marketing launch
on Optimune(TM) commenced on June 17, 1996. Commercial Marketing of Optimune(TM)
commenced on July 8, 1996.
Through Biomune's other wholly owned subsidiary, Volu-Sol, Inc.
("Volu-Sol"), the Company is also engaged in the manufacture and distribution of
medical diagnostic stains.
In addition, the Company owns the rights to certain medical waste
technologies consisting of (i) a device for the sterilization and
decontamination of medical devices and wastes, (ii) a bioremediation process to
detoxify and degrade hazardous substances and (iii) a device and process for the
safe treatment of used medical stains. In May 1996, the Company granted a
license to a third party, Biomed Patent Development, L.L.C., to use the
technology related to the medical sterilization and decontamination device in
return for certain royalties.
RECENT DEVELOPMENTS
Amendment of Articles of Incorporation to Create Series C Preferred. On
September 23, 1996 and November 27, 1996, the Company amended its Articles of
Incorporation by filing a Designation of Rights and Preferences of Series C 8%
Cumulative Convertible Non-Voting Preferred Stock (the "Series C Preferred")
with the Nevada Secretary of State. The Designation of Rights and Preferences
regarding the Series C Preferred allows for the issuance by the Company of up
to 10,000 shares of Series C Preferred. Holders of shares of Series C Preferred
are entitled to receive an annual dividend, after the dividends due and payable
on the Company's Series A 10% Cumulative Convertible Preferred Stock (the
"Series A Preferred"), Series B 10% Cumulative Convertible Non-Voting Preferred
Stock (the "Series B Preferred"), and Series D 8% Cumulative Convertible
Non-Voting Preferred Stock (the "Series D Preferred"), but prior and in
preference to any declaration or payment of any dividends on the Company's
Common Stock, at the rate of 8% per annum, or $80.00 for each share of Series C
Preferred. In addition, the Series C Preferred is entitled to certain
liquidation preferences, and each share of Series C Preferred is convertible
into the number of shares of the Company's Common Stock, at the holder's
option, determined by dividing $1,000 plus any per share accrued and unpaid
regular or special dividends by an amount equal to the Market Price less 25%;
provided, however, that the discount from the Market Price shall be 20% for
all Shares converted by a holder prior to January 24, 1997. "Market Price"
shall mean the average closing bid price of the Company's Common Stock for the
three trading days immediately preceding the date of conversion, as reported by
the NASDAQ System or such other inter-dealer system as may list the Company's
Common Stock. The holders of Series C Preferred are not entitled to voting
rights.
Private Placement of Shares of Series C Preferred. By a Confidential
Private Placement Memorandum dated September 24, 1996, as supplemented and
amended by a Supplemental Confidential Private Placement Memorandum dated
September 26, 1996 (collectively, the "Memorandum"), the Company offered and
sold a total of 5,000 shares of its Series C Preferred at an offering price of
$1,000 per share, representing total gross offering proceeds to the Company of
$5 million. The Series C Preferred was offered and sold to one "accredited
investor", as that term is defined in Rule 501(a) under the 1933 Act, pursuant
to Section 4(2) of the 1933 Act and Regulation D promulgated thereunder.
Accordingly, the Series C Preferred has not been and will not be registered
under the 1933 Act.
Agreement with Consolidated General Ltd. During October 1996, the Company
entered into an agreement with Consolidated General Ltd. for financial advisory
and investment banking services. The agreement is for an initial term of one
year and obligates Consolidated General Ltd. to assist the Company in reviewing
and evaluating (i) its financial condition and historical and projected
financial results, (ii) its operations and business prospects, (iii) the
condition of the industry and industry trends, as well as the Company's
competitive position therein, and (iv) the expansion of the Company's financial
markets and exposure to those markets. In consideration for those services, the
Company issued Consolidated General Ltd. a total of 200,000 shares of its
restricted Common Stock, which shares of Common Stock have "piggyback"
registration rights beginning on the effective date of the agreement.
Agreement with J.R. Axelrod & Company. During October 1996, the Company
entered into an agreement with J.R. Axelrod and Company for investment advisory
services and market advice. The agreement expires on September 30, 1997. During
its term, this agreement obligates J.R. Axelrod & Company to assist in arranging
for the services of investment advisors and market makers, and to provide
financial market advice and participate in fund raising activities for the
Company. In consideration for those services, the Company agreed to pay J.R.
Axelrod & Company an aggregate of 180,000 shares of restricted Common Stock
(45,000 shares quarterly) which shares of Common Stock have "piggyback"
registration rights beginning on the effective date of the agreement.
Agreement with Medifin Incorporated. During October 1996, the Company
entered into an agreement with Medifin Incorporated for multi-level marketing
and distribution services. The agreement expires on September 30, 1997. During
its term, this agreement obligates Medifin Incorporated to assist the Company in
setting up a multi-level marketing plan and product distribution system. In
consideration for those services, the Company agreed to pay Medifin Incorporated
an aggregate of 300,000 shares of restricted Common Stock (75,000 shares
quarterly), which shares of Common Stock have "piggyback" registration rights
beginning on the effective date of the agreement.
Agreement with Paramount Marketing Corp. During October 1996, the Company
entered into an agreement with Paramount Marketing Corp. for advisory services
regarding multi-level marketing techniques. The agreement commenced on October
23, 1996 and expires on September 30, 1997. During its term, this agreement
obligates Paramount Marketing Corp. to consult with and assist the Company in
setting up a multi-level marketing plan. In consideration for those services,
the Company agreed to pay Paramount Marketing Corp. an aggregate of 108,000
shares of restricted Common Stock (27,000 shares quarterly), which shares of
Common Stock have "piggyback" registration rights beginning on the effective
date of the agreement.
RISK FACTORS
An investment in the Company's Common Stock is highly speculative and
should only be considered by those persons or entities who can afford the loss
of their entire investment. In addition to the other information contained in
this Prospectus, the following risk factors should be carefully considered in
evaluating the Company and its business and an investment in shares of the
Company's Common Stock. The order in which the following risk factors are
presented is not intended to indicate the magnitude of the risks described.
Certain statements contained in this Prospectus or in documents incorporated by
reference into this Prospectus may constitute forward-looking statements as
defined under the Private Securities Litigation Reform Act of 1995 (the "1995
Act") in that they relate to events or transactions that have not occurred,
expectations or estimates of the Company, growth strategies or business plans of
the Company, or other events or facts that have not yet occurred and may be
deemed to be forward-looking statements under the 1995 Act. It is the intent of
the Company that all such forward-looking statements be protected by the safe
harbor provisions of the 1995 Act. The following risk factors contain
discussions of important factors that should be considered by prospective
investors related to forward-looking statements included in this Prospectus and
in the documents incorporated by reference into this Prospectus. These important
factors may cause actual results to differ materially from the results
contemplated by the forward-looking statements.
Development Stage; Technological Uncertainty. The Company is a development
stage company. Except for the activities of its subsidiary, Volu-Sol, the
Company has not produced or marketed any products (other than the marketing
launch of the Company's first nutraceutical product Optimune(TM), which
marketing launch commenced on July 8, 1996) and, accordingly, has not generated
any revenues from any of its pharmaceutical drug candidates and has not begun to
generate any revenues to date from the commercialization of Optimune(TM). To
date, the Company's resources have been dedicated to the research and
development of pharmaceutical drug and nutraceutical product candidates
utilizing the Technology and pre-clinical studies and clinical trials on those
drug candidates and studies on the Company's only nutraceutical product,
Optimune(TM). The Company has developed only two pharmaceutical drug candidates
and one nutraceutical product to date. The commercialization of the Company's
pharmaceutical drug candidates will require significant additional investment,
research and development, pre-clinical and clinical testing, and regulatory
approvals, while continued commercialization of the Company's first
nutraceutical product will require significant additional investment, research
and development, and nutritional studies. There can be no assurance that the
Company will be able to develop, produce at a reasonable cost, or market
successfully, any of its product candidates. Further, those product candidates
may prove to have undesirable or unintended side effects that may prevent and/or
limit their commercial use and salability. All of the Company's pharmaceutical
drug candidates, including BWPT-301(TM) and BWPT-302(TM), will require
regulatory approval before they can be commercialized and will be subject to
regulatory oversight upon commencement of commercial use. There can be no
assurance that any products that ultimately are developed by the Company will
generate substantial revenues or that the Company will ever be profitable.
History of Operating Losses; Uncertainty of Future Profitability. The
Company has incurred significant operating losses since its inception. As of
September 30, 1996, the Company had an accumulated deficit of $23,372,299. The
Company expects to continue to incur significant operating losses over at least
the next 12 months, primarily due to the continued market launch of Optimune(TM)
and related marketing expenditures, expansion of the Company's research and
development programs, including pre-clinical studies and clinical trials for its
existing pharmaceutical product candidates, nutritional studies for its existing
nutraceutical product, Optimune(TM), regulatory compliance requirements related
to the Company's pharmaceutical drug candidates, studies and trials for other
products that the Company or its subsidiaries may develop, and the
implementation of programs to market those products that are ultimately approved
for distribution, if any. The Company's ability to achieve profitability depends
upon its ability to successfully launch Optimune(TM) and discover and develop
new products, obtain any necessary regulatory approvals of its proposed
products, and enter into agreements for product development, manufacturing and
commercialization. There can be no assurance that the Company will ever achieve
significant revenues or profitable operations from the sale of its proposed
products.
Need for Additional Funds; Issuance of Securities; Future Dilution. The
Company expects to continue to incur significant operating losses over at least
the next 12 months, primarily due to the market launch of Optimune(TM) and
related marketing expenditures, expansion of its research and development
programs, including pre-clinical studies and clinical trials for its existing
pharmaceutical drug candidates, nutritional studies for its existing
nutraceutical product, Optimune(TM), regulatory compliance requirements relating
to its pharmaceutical drug candidates, studies and trials for other products
that the Company or its subsidiaries may develop, and the implementation of
programs to market those products that are ultimately approved for distribution,
if any. Other factors such as extended pre-clinical and clinical trials,
difficulty in obtaining regulatory approvals, competition and unforeseen market
developments, unforeseen or unexpected difficulties in securing Base Product
used in the production of the Company's products from its sole supplier in New
Zealand, changes in existing research relationships, the Company's ability to
maintain and establish additional collaborative arrangements and unexpected
expenditures relating to the Company's operations could result in the Company's
need for additional funds sooner than anticipated.
Notwithstanding revenues that may be produced through sales of Optimune(TM)
or other nutraceutical products that may be developed by the Company, the
Company anticipates that additional funds will be required to continue the
necessary levels of research and development to meet the Company's long-term
goals. The Company intends to seek such additional funding through additional
public or private financings. There can be no assurance, however, that
additional financing will be available, or, if available, that it will be
available on acceptable terms or in required amounts. If additional funds are
raised by issuing additional shares of the Company's Common Stock, further
dilution of the equity ownership of the Company's existing holders of Common
Stock may result. If adequate funds are not available, the Company may be
required to delay, scale back or eliminate one or more of its drug candidates
and/or product development programs, and/or obtain funds through arrangements
with collaborative partners or others that may require the Company to relinquish
rights to certain of its product candidates and/or technologies or products that
the Company would not otherwise relinquish.
Dependence on Licensed Technology. The Company is dependent upon the
License granted to it by Protein Technology, Inc. ("PTI") for the use of the
Technology. The Company's existing pharmaceutical drug candidates (i.e.,
BWPT-301(TM) and BWPT-302(TM)), Optimune(TM) and all additional products
currently under research and development, are derived from and based upon the
Technology. The License expires in May 1999, unless the Company, prior to such
date, has generated annual gross revenues from the sale of products developed
utilizing the Technology of not less than $2 million, in which event the License
will be automatically extended until the expiration date of the latest patent to
expire covered by the License (including any extensions to such patent
registrations). Based on the patents currently licensed thereunder, the License,
if so extended, would expire on March 28, 2006. If the License is terminated for
any reason, the Company would lose all rights to the Technology, which would
have a material adverse effect on the Company's operations and could possibly
result in the termination of the Company's business.
Government Regulation; No Assurance of Product Approval; Extensive Clinical
Testing Required. All pharmaceutical products that may be developed by the
Company will be subject to stringent government regulations, including, without
limitation, those administered by the FDA and state and local counterparts.
Similar regulatory frameworks exist in other countries, including Canada, where
the Company is also licensed to distribute its products pursuant to the License.
The Company is planning to market its pharmaceutical drugs in foreign markets if
it becomes licensed to distribute its products outside of the United States and
Canada and their territories and possessions, and has already begun to market
Optimune(TM), the Company's first nutraceutical product, in certain foreign
markets. To date, the Company has completed extensive clinical trials on
BWPT-301(TM) pursuant to the submission with the FDA of an IND and has had
substantial contact with the FDA concerning such product candidate. The Company
has also commenced clinical trials on BWPT-302(TM) pursuant to a second IND,
although communications with the FDA concerning such product candidate are at a
very early stage. Prior to marketing either of such drug candidates or any other
pharmaceutical drug candidate that the Company may develop, such drug candidates
must undergo extensive clinical trials and an extensive regulatory approval
process. Any denials or delays in obtaining the requisite approvals would likely
have a material adverse effect on the Company.
The pharmaceutical regulatory process includes extensive pre-clinical
safety, pharmacology and toxicological testing. Pre-clinical data is required
for the filing of an IND with the FDA to conduct clinical testing to establish
safety, efficacy, purity and potency of any investigational biological product.
With respect to each biologic pharmaceutical product candidate, the developer
must initially conduct a limited Phase I (safety) study, then more extensive
Phase II studies, followed by a Phase III study. This testing can take several
years and require the expenditure of substantial capital and other resources.
There can be no assurance that this testing will be completed on a timely basis
or at all. Delays or denials of marketing approval are encountered regularly.
These delays may be encountered both domestically and abroad. Prior to a company
commencing marketing of a pharmaceutical product, it must file a Product License
Application ("PLA") and an Establishment License Application ("ELA") with the
FDA and be issued the appropriate product license and establishment license. A
PLA relates to the product itself, while an ELA relates to the manufacturing
facilities to be used to manufacture the product. Both a PLA and an ELA are
required before product marketing can begin. There can be no assurance that even
after clinical testing, regulatory approval of a PLA or an ELA will ever be
obtained. If obtained, PLA and ELA regulatory approval may entail limitations on
the indicated uses for which any product may be marketed. Following regulatory
approval, if any, a product and its manufacturer are subject to continuing
regulatory oversight and review. Later discovery of problems with a product or
its manufacturer may result in restrictions on such product or its manufacturer.
These restrictions may include withdrawal of the marketing approval for the
product. Violation of FDA requirements in general can lead to recall or seizure
of products, injunction against production, distribution, sales and marketing,
and criminal prosecution, among other sanctions.
The cost to the Company of conducting extensive human clinical trials for
any potential biopharmaceutical product can vary dramatically based on a number
of factors, including, but not limited to, the order and timing of clinical
indications pursued, the size of the patient population, the number of
participating institutions and the number and type of end points subject to data
collection. Because of the intense competition in the market in which the
Company operates, the Company may have difficulty obtaining sufficient
populations or clinician support to conduct its clinical trials as planned and
may have to expend substantial additional funds to obtain access to such
resources, or delay or modify its plans significantly. There can be no assurance
that the Company will have sufficient resources to complete the required
clinical testing and regulatory review and approval process or that the Company
could survive the inability to obtain, or delays in obtaining, such approvals.
Moreover, there can be no assurance that clinical testing of the Company's
product candidates will provide sufficient evidence of safety and efficacy in
humans, that regulatory approvals will be granted for any product candidate, or
that it will be economically feasible to commercialize any product candidate for
which regulatory approval is ultimately granted.
In addition, the Company is also subject to the Dietary Supplement Act with
respect to its nutraceutical products. The Dietary Supplement Act governs the
labeling of and certain other matters related to dietary supplements. While the
FDA has adopted regulations that could apply to such supplements, the FDA has
decided to date not to enforce certain of those regulations. The FDA has
proposed new regulations applicable to nutraceutical products that are
anticipated to be adopted in early-1997. While the Company believes it is
currently in compliance with the Dietary Supplement Act and the FDA's proposed
regulations, there can be no assurance that the proposed regulations will be
adopted in the form proposed, that additional legislation will not be adopted in
the future to regulate nutraceutical products, or that the Company will be able
to comply with any such future laws or regulations.
Uncertainty Regarding Patents and Proprietary Rights. The pharmaceutical
industry places considerable importance on obtaining patent and trade secret
protection for new technologies, products and processes. The success of the
Company will depend in large part on its ability or on the ability of its
current licensor under the License, PTI, to defend existing or future patents,
and on their ability, and on the ability of the Company's potential future
licensors, to maintain trade secrets and operate without infringing upon the
proprietary rights of others, both in the United States and in foreign
countries. Patent protection is highly uncertain and involves complex legal and
factual questions and issues. The Company relies on four patents issued to PTI
on the Technology and a patent applied for by the Company relating to the
enhancement of the Technology, and may also rely on additional United States
patents and pending United States and foreign patent applications relating to
various aspects of its present product candidates and future product candidates
and processes that may be issued in the future. The patent application and
issuance process can be expected to take several years and could entail
considerable expense to the Company, as it may be responsible for such costs
under the terms of any technology agreements. There can be no assurance that
patents will issue as a result of any applications or that the existing patents
and any patents resulting from such applications, will be sufficiently broad to
afford protection against competitors with similar or competing technology. In
addition, there can be no assurance that such patents will not be challenged,
invalidated or circumvented, or that the rights granted thereunder will provide
competitive advantages to the Company. The commercial success of the Company
will also depend upon avoiding infringement of any patents issued to
competitors. A United States patent application is maintained under conditions
of confidentiality while the application is pending, so the Company cannot
determine the inventions being claimed in pending patent applications filed by
third parties, if any. Litigation may be necessary to defend or enforce the
Company's patent and license rights or to determine the scope and validity of
others' proprietary rights. Defense and enforcement of patent claims can be
expensive and time consuming, even in those instances in which the outcome is
favorable, and could result in the diversion of substantial resources and
management time and attention from the Company's other activities. An adverse
outcome could subject the Company to significant liability to third parties,
require the Company to obtain licenses from third parties, require the Company
to alter its products or processes, or cease altogether any related research and
development activities or product sales, any of which may have a material
adverse effect on the Company's business, results of operations and financial
condition.
With respect to the patents and other proprietary technology licensed by
the Company from PTI, PTI has not provided any representations or warranties to
the Company relating to non-infringement of third-party proprietary rights and
has not indemnified the Company against any damages or expenses arising out of
any such claims of infringement. To the extent that the Technology or any
portion thereof is found to infringe the proprietary rights of any other person
or entity, the Company could be liable for the payment of substantial damages
without the likelihood of any contribution by PTI. Such event could have a
material adverse effect on the Company's operations.
The Company also relies on trade secrets, know-how and continuing
technological advancement to maintain its competitive position. Although the
Company has entered into confidentiality agreements with its employees and
consultants, no assurance can be given that others will not gain access to those
trade secrets, that such agreements will be honored, or that the Company will be
able to effectively protect its rights to its trade secrets. Moreover, no
assurance can be given that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
the Company's trade secrets.
Technological Changes. The Company currently is engaged in the fields of
nutraceuticals, pharmaceuticals and diagnostics, all of which are characterized
by extensive research efforts and rapid technological progress and change. New
process developments are expected to continue at a rapid pace in both industry
and academia. The Company's future success will depend on its ability to develop
and commercialize its existing pharmaceutical drug and nutraceutical product
candidates and to develop new products. There can be no assurance that the
Company will successfully complete the development of any of its existing
product candidates or that any of its future products will be commercially
viable or achieve market acceptance or success. In addition, there can be no
assurance that research and development and discoveries by others will not
render some or all of the Company's programs or potential pharmaceutical drug
and nutraceutical product candidates uncompetitive or obsolete.
Dependence on Third-Party Manufacturer; Limited Source of Supply. The
Company is dependent on a single third-party manufacturer to manufacture the
Base Product used in the production of its product candidates and anticipates
the use of third-party manufacturers for the manufacture of the Base Product in
connection with the production of all products it may develop, if any, for the
foreseeable future. Pursuant to the License with PTI, the Company has agreed to
purchase all of its requirements for the Base Product from one supplier, PTI,
which, in turn, places orders for such required Base Product with a distributor
in New Zealand, which distributor contracts with a single manufacturer to
manufacture all of such requirements at its New Zealand facilities. Although the
License permits the Company to utilize alternate sources of supply during any
period in which PTI is unable to satisfy all of the Company's requirements for
the Base Product, in the event PTI or the sole manufacturer of the Base Product
fail to supply any or all of the Company's requirements for the Base Product,
there can be no assurance that alternate sources of supply will be available to
the Company at a reasonable cost or at all, and, if available at a reasonable
cost, whether the Company will be able to secure such alternate sources in a
timely manner. If such alternate sources of supply are not available on a timely
basis or on reasonable economic terms, the Company's results of operations could
be severely adversely affected.
In addition, the manufacturing facilities in which the Company's
pharmaceutical products are manufactured must conform to current FDA established
Good Manufacturing Practices ("GMP"). Although the New Zealand manufacturing
facilities have received a rating from the United States Department of
Agriculture with respect to the manufacture of the Base Product for animal
applications, those facilities have not, as of the date hereof, received FDA
approval necessary for pharmaceutical human applications. The Company has
retained a consulting firm to advise it regarding compliance by those
manufacturing facilities with current GMP standards for human applications
because the Company's pharmaceutical product candidates will be manufactured at
those facilities. The Company cannot commence marketing and/or distribution of
its pharmaceutical product candidates until the manufacturing facilities have
been properly licensed by the FDA, which license cannot be obtained until the
facilities meet then-current GMP standards. Those standards must be met on an
ongoing basis and the licensed facilities are subject to inspection by the FDA
at least once every two years. The failure of the manufacturing facilities to
meet such GMP standards in a timely manner could result in delays in the
marketing and sale of the Company's pharmaceutical product candidates until
modifications are made to comply with such standards. In the event that the New
Zealand manufacturer is unable or unwilling to make such changes, the Company
would be required to find an alternate source to manufacture its pharmaceutical
product candidates. If alternate manufacturing sources are not available on a
timely basis or on reasonable economic terms, the Company's results of
operations could be materially adversely affected.
Moreover, the Base Product for Optimune(TM) and possibly certain of the
Company's future nutraceutical products that are based on the Base Product, if
any, also will be manufactured at that same New Zealand manufacturing facility
pursuant to the License with PTI. The New Zealand manufacturing facility
currently meets all requirements for the production of the Base Product for
Optimune(TM), the Company's first nutraceutical product. While the FDA does not
currently regulate the manufacturing facilities for nutraceutical products
(other than to require that such facilities comply with its current GMP
standards), there can be no assurance that the FDA at some time in the future
will not begin regulating such manufacturing facilities. If the FDA were to
begin regulating the manufacturing facilities for nutraceuticals and if the New
Zealand manufacturing facilities did not meet those standards, the production of
the Base Product for Optimune(TM) (or any other nutraceutical product that may
be developed) will be delayed until the necessary modifications are made to
comply with those standards. If the New Zealand manufacturer were unable or
unwilling to make the necessary modifications, the Company would be required to
find an alternate source to manufacture the Base Product for Optimune(TM) (or
any other nutraceutical product that may be developed that utilizes the Base
Product).
Competition. The Company competes with a number of entities that are
currently developing pharmaceutical drugs derived from or that include
antibodies extracted from various by-products of cow's milk or colostrum,
including several companies that are developing and producing products and
product candidates to prevent and/or treat cryptosporidiosis. In addition, the
Company competes with a number of other companies that utilize other
technologies and that target the same infections, organisms or diseases in
humans. Such competitors include numerous academic and research organizations
and pharmaceutical and biotechnology companies pursuing production from the
colostrum of hyper- immunized cows and/or colostrum-based or colostrum-like
drugs (e.g., ImmuCell Corporation and GalaGen, Inc.). Hyper-immunization
involves the injection or other exposure of a cow with a particular disease or
microorganism and the extraction from the cow's milk or colostrum of the
antibodies that are produced by the cow. Many of these competitors have
substantially greater capital resources, research and development capabilities,
and manufacturing and marketing resources, capabilities and experience than does
the Company. The Company's competitors may succeed in developing products that
are more effective or less costly than any products that may be developed by the
Company, or that gain regulatory approval prior to any of the Company's
products.
The Ross Products Division of Abbott Laboratories, which the Company
believes currently dominates the United States market in sales of nutritional
supplements and meal replacements, is now marketing two products commercially--
Ensure(R) and Advera(R). Ensure(R) is being marketed to the elderly and others
as a nutritional supplement or meal replacement, while Advera(R) is being
marketed to people who are HIV positive or have AIDS as a nutritional supplement
or meal replacement and as a way to manage their weight loss. Both of those
products can be used as either a nutritional supplement or as a meal
replacement, depending upon the ability of the person to eat and digest solid
foods. Advera(R) is currently being advertised primarily for its weight
restoration/maintenance characteristics, and thus is being targeted to the same
market at which Optimune(TM) is being targeted, although Optim intends only to
market Optimune(TM) as a nutritional supplement (and not as a meal replacement).
Accordingly, Optimune(TM) may compete with Advera(R).
In addition, other companies have competitive pharmaceutical drugs that are
in more advanced stages of clinical testing than are the Company's product
candidates. The Company also expects that the number of market entrants, and
thus its competitors and potential competitors, will increase as more
colostrum-based products receive commercial marketing approvals from the FDA or
analogous foreign regulatory agencies. Any of these entrants may be more
successful than the Company in manufacturing, marketing and distributing their
products. There can be no assurance that the Company will be able to compete
successfully in any market.
Uncertainty of Pharmaceutical Pricing and Reimbursement; Health Care
Reform. The future revenues and profitability of and availability of capital for
biotechnology and biopharmaceutical companies may be affected by the continuing
efforts of governmental and third-party payors to contain or reduce the cost of
health care through various means. For example, in certain foreign markets, the
profitability of prescription pharmaceuticals is subject to governmental
regulation and control. There have been, and there may continue to be, a number
of federal and state proposals to implement similar governmental regulation and
controls in the United States. It is uncertain what form any health care
legislation may take or what actions federal, state and private payors may take,
if any, in response to the proposed reforms. The Company cannot predict whether
any reforms will ever be implemented, or the effect, if any, of any implemented
reform on the Company's business. Moreover, there can be no assurance that any
implemented reform will not have a material adverse effect on the Company's
results of operations or future performance. The Company's long-term ability to
market any of its product candidates successfully may depend in part on the
extent to which reimbursement for the cost of such products and related
treatments will be available from public and private health insurers and other
organizations. Third-party payors are increasingly challenging and seeking to
reduce the cost of medical products and services. The reimbursement status of
newly-approved health care products is highly uncertain and, accordingly, there
can be no assurance that third-party coverage will enable the Company to
maintain price levels sufficient to realize an appropriate return on investment
or to operate profitably.
Dependence on Qualified Personnel; Potential Conflict of Interest;
Part-Time Consultants. The Company's success is dependent upon its ability to
attract and retain qualified scientific and management personnel. The loss of
the services of certain of the principal members of the Company's management and
scientific staff, and particularly David G. Derrick, the Company's Chief
Executive Officer and Chairman of the Board, Milton G. Adair, the Company's
President and a director of the Company, Frank A. Eldredge, Ph.D., the Company's
Executive Vice President -- New Product Development, and David O. Lucas, Ph.D.,
one of the members of the Company's Scientific Advisory Board, could have a
substantial adverse effect on the Company. In order to commercialize its
products and product candidates, the Company must maintain and expand its
personnel, particularly in the areas of clinical trial management and product
sales and marketing. The Company faces intense competition for such personnel
from other companies, academic institutions, government entities and other
research organizations. There can be no assurance that the Company will be
successful in attracting and hiring or retaining qualified personnel. Moreover,
managing the integration of new personnel and Company growth generally could
pose significant risks to the Company's development and progress. The Company
relies on consultants and advisors, including the members of its Scientific
Advisory Board, to assist the Company in formulating its research and
development strategy. All of the Company's consultants and advisors only devote
a portion of their time to the business of the Company and may from time to time
serve as officers, directors, consultants or advisors to other pharmaceutical or
biotechnology companies. There can be no assurance that such other companies
will not in the future have interests that conflict with those of the Company.
While the Company provides its management and key employees with incentive
compensation, including stock options and bonuses, that the Company believes are
competitive with incentive compensation provided by other companies in the
biopharmaceutical industry, none of the Company's management or key employees
other than David G. Derrick, the Company's Chief Executive Officer and Chairman,
are retained pursuant to an employment agreement and, therefore, the Company has
no assurances as to the commitment of any of such employees for any period of
time. All of the Company's employees have entered into confidentiality
agreements with the Company not to disclose any of the Company's confidential
information.
Product Liability Exposure; Insurance. Product liability risk is inherent
in the testing, manufacture, marketing and sale of the Company's products and
product candidates, and particularly the Company's pharmaceutical drugs, and
there can be no assurance that the Company will be able to avoid significant
product liability exposure. Product liability insurance for the pharmaceutical
industry, when available, is extremely expensive. The Company currently
maintains a general liability insurance policy with coverage limits of $1
million per occurrence and a product liability insurance policy with coverage
limits of $20 million per occurrence, the latter of which insurance policy is
required under the License with PTI. There can be no assurance that the Company
will be able to maintain such insurance in sufficient amounts to protect the
Company against such liabilities at a reasonable cost. In addition, the Company
is required to indemnify PTI against any product liability claims incurred by
PTI as a result of any products developed and commercialized or sold by the
Company. PTI has not made, and is not expected to make, any representations as
to the safety or efficacy of the Base Product or as to any products that may be
made or used under rights granted pursuant to the License. Any future product
liability claim against the Company and/or PTI (with respect to products
developed using the Technology) could result in the Company paying substantial
damages, which may have a material adverse effect on the business and financial
condition of the Company.
Litigation. On October 12, 1995, a Proposed Class Action Complaint for
Violations of the Federal Securities Laws was filed in the United States
District Court for the District of Utah, Central Division, by Roman Sterlin
(Civil No. 2:95CV-0944G) (the "Complaint"). The Complaint names as defendants
the Company, David G. Derrick (the Company's Chief Executive Officer and
Chairman of the Board), Aaron Gold (a director of the Company), Charles J.
Quantz (a director of the Company), Jack D. Solomon (a founder of the Company
and a member of the Company's Business Advisory Board), Genesis Investment
Corporation (a shareholder of the Company) and The Institute for Social &
Scientific Development, Inc. (a shareholder of the Company). The Complaint,
among other things, alleges violations of Sections 10(b), 20(a) and 20A(a) of
the 1934 Act, Rule 10b-5 promulgated under the 1934 Act, and general
misappropriation of material non-public information. The Company was served with
the Complaint on October 26, 1995. On November 27, 1995, the Company filed an
Answer to the Complaint and denied the allegations therein. On May 10, 1996, the
court ordered the plaintiff to file an Amended Complaint. The plaintiff filed
his Amended Complaint on or about August 6, 1996. The Amended Complaint alleges
violations of Sections 10(b), 20(a) and 20A(a) of the 1934 Act and Rule 10b-5
promulgated thereunder, and general misappropriation of material non-public
information. The Company filed a Motion to Dismiss the Amended Complaint on
September 25, 1996. The Company believes that the allegations in the Amended
Complaint are baseless and the Company believes it has meritorious defenses.
However, at this stage of the litigation the Company is unable, with any degree
of certainty, to predict the outcome of the litigation. The Company intends to
vigorously defend against this lawsuit.
Volatility of Stock Price. The market price of the Company's Common Stock,
like that of the securities of other biopharmaceutical and biotechnology
companies, has been and in the future may be highly volatile. Factors such as
announcements by the Company or its competitors concerning technological
innovations, new products or procedures developed by the Company or its
competitors, proposed governmental regulations and developments in both the
United States and foreign countries, disputes relating to patents or proprietary
rights, publicity regarding actual or potential results relating to product
candidates under development by the Company or its competitors, and economic and
other external factors, as well as period-to-period fluctuations in financial
results, may have a significant effect on the market price of the Company's
Common Stock.
Limited Trading Volume and Related Matters; Continued NASDAQ Listing.
Historically, there has been limited trading volume in the Company's Common
Stock. In addition, there can be no assurance that a market will continue to be
made or that any securities analysts will provide coverage on the Company's
Common Stock. Although the Company currently satisfies the minimum listing
requirements for the NASDAQ SmallCap Market, no assurance can be given regarding
the Company's continued NASDAQ SmallCap Market listing. If the Company's Common
Stock were delisted from the NASDAQ SmallCap Market, holders of Shares would
likely find it more difficult to sell their Shares. Accordingly, no assurance
can be given that such factors will not adversely affect the market for the
Shares.
Shares Eligible for Future Sale; Registration Rights. As of November 15,
1996, 20,094,490 shares of Common Stock were issued and outstanding,
approximately 5,250,000 of which (including the Contract Restricted Shares) were
"restricted securities," as that term is defined under Rule 144 of the 1933 Act,
and such restricted securities either presently or in the future, may be sold
pursuant to registration under the 1933 Act, in compliance with Rule 144 or
pursuant to another exemption therefrom. Rule 144, as currently in effect,
provides that, in general, a person who has beneficially owned restricted
securities for a period of at least two years may, within any three month
period, sell in brokerage transactions an amount of "restricted securities" that
does not exceed the greater of 1% of the issuer's then-outstanding securities or
the average weekly trading volume of the issuer's securities during the four
calendar weeks prior to such sale. Rule 144, as currently in effect, also
permits, under certain circumstances, the sale of shares without regard to the
limitations described above, by non-affiliates of the Company, after holding
such shares for at least three years. Of the restricted securities presently
outstanding, the majority may currently be sold pursuant to Rule 144.
In addition, as of November 18, 1996, an aggregate of approximately
2,786,838 shares of Common Stock were issuable upon the conversion of shares of
the Company's Series A Preferred, Series B Preferred and Series C Preferred, and
9,321,305 shares of Common Stock were issuable upon exercise of outstanding
options and warrants. All of such shares of Common Stock will become eligible
for sale in the public market at prescribed times in the future.
A substantial portion of the shares of Common Stock issuable upon exercise
of outstanding options and warrants are subject to registration rights.
Accordingly, such shares of Common Stock may be eligible for sale in the public
market, prior to the expiration of the two-year holding period currently
applicable pursuant to Rule 144 for restricted securities. Conversions of shares
of convertible Preferred Stock or sales of significant amounts of the Company's
Common Stock could adversely affect the prevailing market price of the Common
Stock.
No Dividends. The Company has never paid cash dividends on its Common Stock
or on any of the outstanding Series of Preferred Stock. It is the Company's
intention to retain its earnings, if any, to finance the operation and expansion
of its business and, therefore, the Company does not expect to pay cash
dividends on the Shares in the foreseeable future. The Company is required to
pay dividends on its Series A Preferred, Series B Preferred and Series C
Preferred, which dividends may either be paid in cash or in additional shares of
the respective Series of the Company's Preferred Stock. Any dividends paid in
cash on any of the Series A Preferred, Series B Preferred or Series C Preferred
will be required to be paid before any cash dividends are paid on the Common
Stock.
Private Securities Litigation Reform Act of 1995. All forward-looking
statements contained herein are deemed by the Company to be covered by and to
qualify for the safe harbor protection provided by the 1995 Act. Shareholders
and prospective shareholders should understand that several factors govern
whether any forward-looking statement contained herein will be or can be
achieved. Any one of those factors could cause actual results to differ
materially from those projected herein. These forward-looking statements include
plans and objectives of management for future operations, including plans and
objectives relating to the products and the future economic performance of the
Company. The Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996 (which Annual Report is incorporated herein by reference)
sets forth those forward-looking statements and associated risks.
USE OF PROCEEDS
The Company will not receive any proceeds from (i) the issuance of the
Series C Conversion Shares upon the conversion of the Series C Preferred, (ii)
the issuance of the Contract Warrant Shares following the exercise of the
underlying options and warrants, or (iii) the sale of the Series C Conversion
Shares, the Contract Warrant Shares or the Contract Restricted Shares by the
holders thereof. The Company will, however, receive the exercise price of the
options and warrants underlying the Contract Warrant Shares upon the exercise
thereof. The exercise prices of the options and warrants that underlie the
Contract Warrant Shares range from $1.67 to $4.00. The net proceeds from the
exercise of those options and warrants, if any, will be used by the Company for
working capital and general corporate operational purposes.
SELLING SHAREHOLDERS
The following table provides information with respect to the Company's
Series C Preferred (i.e., CYGNI S.A.) and options and warrants previously issued
by the Company to certain of its investors and consultants pursuant to
agreements that contain "piggyback" registration rights (i.e., Flurina
Development S.A.; Allen & Co, Inc.; Ladenburg, Thalmann & Co, Inc.; William
Baquet; A.L. Sarroff; CYGNI S.A.; and Aurora Consultants, L.L.C.). The exercise
prices of those options and warrants range from $1.67 to $4.00. In addition,
the following table sets forth certain information, as of the date hereof, with
respect to shares of restricted Common Stock held by or issuable to certain of
the Company's consultants (i.e., J.R. Axelrod & Company; Paramount Marketing
Corp.; Consolidated General Ltd.; and Medifin Incorporated). Those shares of
Common Stock were issued or will be issued pursuant to agreements that contain
"piggyback" registration rights that became effective as of the date of the
respective consultant's agreement. See "Recent Developments", above. The
holders of the Series C Preferred, those options and warrants and those
consultants are, collectively, referred to herein as the "Selling Shareholders."
Except as otherwise indicated in this Prospectus and with the exception of
their ownership of options, warrants and shares of restricted Common Stock of
the Company, the Selling Shareholders have no material relationship with the
Company. The column labeled "Options and Warrants Owned" includes the shares of
Common Stock that underlie options and warrants that have been issued to the
consultants listed. The column labeled "Shares of Restricted Common Stock Owned
or Issuable" includes shares of restricted Common Stock that have been issued or
that are issuable to the consultants listed. The column labeled "Shares of
Common Stock Offered" indicates the number of shares of restricted Common Stock
owned or issuable upon exercise of options or warrants, which are the only
shares of such Selling Shareholders being registered hereunder.
Shares of
Restricted Shares of
Options and Common Stock Common Stock
Selling Shareholder Warrants Owned Owned or Issuable Offered
CYGNI S.A. -- 2,525,253(1) 2,525,253
Flurina Development S.A. 1,470,588(2) -- 1,470,588
William Baquet 1,200,000 -- 1,200,000
Allen & Company, Inc. 1,000,000 -- 1,000,000
Ladenburg, Thalmann & Co., Inc. 600,000 -- 600,000
A.L. Sarroff 500,000 -- 500,000
CYGNI S.A. 500,000(3) -- 500,000
Medifin Incorporated -- 300,000 300,000
Consolidated General Ltd. -- 200,000 200,000
J.R. Axelrod and Company -- 180,000 180,000
Paramount Marketing Corp. -- 108,000 108,000
Aurora Consultants, L.L.C. 30,000 -- 30,000
- -------------------
(1) Represents the number of shares of the Company's Common Stock issuable
upon the exercise by CYGNI S.A., the holder of the Series C Preferred, of the
conversion right set forth in the Designation of Rights and Preferences related
to Series C Preferred as of November 18, 1996, which number of shares is based
on the average closing bid prices of the Common Stock on November 13-15, 1996,
and is subject to adjustment in accordance with the conversion formula described
hereinabove.
(2) Represents the number of shares of the Company's Common Stock issuable to
Flurina Development S.A. upon the exercise of warrants issued to Flurina
Development S.A. in connection with the Company's offer and sale of shares of
Series D Preferred, which number of shares of Common Stock was increased in
connection with the offer and sale by the Company of the Series C Preferred.
(3) Represents the number of shares of the Company's Common Stock issuable upon
the exercise by CYGNI S.A. of the warrant to purchase a total of 500,000 shares
of the Company's Common Stock issued in connection with the offer and sale by
the Company of the Series C Preferred.
PLAN OF DISTRIBUTION
The Shares may be sold from time to time directly by the Selling
Shareholders or by pledges, donees, transferees or other successors-in-interest
to the Selling Shareholders. Alternatively, the Shares may be offered from time
to time by or through brokers or dealers who may act solely as agents, or who
may acquire the Shares as principals. The distribution of the Shares may be
effected in one or more transactions that may take place on the NASDAQ SmallCap
Market, including block trades, ordinary brokers' transactions, privately
negotiated transactions, or sales through one or more broker-dealers for resale
of such securities as principals, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, or at negotiated
prices. Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the Selling Shareholders in connection with such
sales.
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK
The Company's authorized capital stock consists of 500 million shares of
Common Stock, $0.0001 par value per share, and 50 million shares of Preferred
Stock, $0.0001 par value per share. As of November 15, 1996, the Company had
issued and outstanding 20,094,490 shares of Common Stock; 76,137 shares of
Series A Preferred, which were convertible into 228,411 shares of Common Stock;
11,058 shares of Series B Preferred, which were convertible into 33,174 shares
of Common Stock; and 5,000 shares of Series C Preferred, which were convertible
on that date (using the average closing bid prices for November 13-15, 1996 to
calculate the Market Price for purposes of this calculation) into 2,525,253
shares of Common Stock. As of November 15, 1996, the Company had -0- shares of
Series D Preferred issued and outstanding.
Common Stock. Holders of shares of the Company's Common Stock are entitled
to one vote for each share of Common Stock held of record on all matters
submitted to a vote of the shareholders. There is no cumulative voting for the
election of directors. Subject to preferences that may be applicable to any
issued and outstanding shares of the Company's Preferred Stock, holders of
shares of Common Stock are entitled to receive ratably such dividends as may be
declared by the Company's Board of Directors out of funds legally available
therefor. In the event of the liquidation, dissolution or winding up of the
Company, holders of shares of Common Stock are entitled to share ratably in all
assets remaining after payment of all creditors and all payments required to be
made with respect to any issued and outstanding shares of the Company's
Preferred Stock. Holders of Common Stock have no preemptive rights and have no
rights to convert their shares of Common Stock into any other securities. All of
the issued and outstanding shares of Common Stock are fully paid and
non-assessable. As of November 15, 1996, there were 20,094,490 shares of Common
Stock issued and outstanding.
Series A Preferred. As of November 15, 1996, the Company had 76,137 shares
of Series A Preferred issued and outstanding, which shares of Series A Preferred
can be converted at any time into shares of the Company's Common Stock. The
offering price for the Series A Preferred was $5.00 per share, and each share of
Series A Preferred (after taking into consideration the stock split effected as
a 200% stock dividend effective as of June 14, 1994) is convertible on a
one-for-three basis into shares of the Company's Common Stock. Dividends on the
Series A Preferred are cumulative at an annual rate of $0.50 per share of Series
A Preferred (after adjusting for the June 14, 1994 stock split), payable each
year in either cash or additional shares of Series A Preferred at the discretion
of the Company's Board of Directors. Once dividends have been paid on the Series
A Preferred, holders of Series A Preferred do not participate in dividends paid
to holders of shares of Common Stock. Commencing on January 1, 1996, the Series
A Preferred became redeemable at the option of the Company at a redemption price
of $5.00 per share, plus accrued but unpaid dividends. Upon liquidation, the
holders of Series A Preferred are entitled to a liquidation preference of $5.00
per share, plus accrued but unpaid dividends. Each share of Series A Preferred
is entitled to one vote for each share of the Company's Common Stock into which
the Series A Preferred may be converted and votes with the Common Stock as if it
were one class.
Series B Preferred. As of November 15, 1996, the Company had 11,058 shares
of Series B Preferred issued and outstanding, which shares of Series B Preferred
can be converted at any time into shares of the Company's Common Stock. The
Series B Preferred was offered at $15.00 per share and is convertible into
shares of Common Stock on a one- for-three basis (after taking into
consideration the June 14, 1994 stock split). Subject to dividends payable on
senior securities of the Company, cumulative annual dividends of $1.50 per share
of Series B Preferred, payable each year in either cash or additional shares of
Series B Preferred, are payable at the discretion of the Company's Board of
Directors. Once dividends are paid on the Series B Preferred, holders thereof do
not participate in dividends paid to holders of shares of the Company's Common
Stock. Commencing on January 1, 1996, the Series B Preferred became redeemable
at the option of the Company at a redemption price of $15.00 per share, plus
accrued but unpaid dividends. Upon the liquidation of the Company, the holders
of the Series B Preferred are entitled to a liquidation preference of $15.00 per
share, plus accrued but unpaid dividends (to be paid after the payment of the
liquidation preference due on the Company's Series A Preferred). Holders of
Series B Preferred are not entitled to voting rights.
Series C Preferred. As of November 15, 1996, the Company had 5,000 shares
of Series C Preferred issued and outstanding, which shares of Series C Preferred
could have been converted on that date (using the average closing bid prices for
November 13-15, 1996 to calculate the Market Price) into 2,525,253 shares of the
Company's Common Stock. The Designation of Rights and Preferences related to the
Series C Preferred requires that dividends be paid at the rate of 8% per annum,
subject to the rights of the holders of shares of Series A Preferred, Series B
Preferred and Series D Preferred, prior to and in preference of any declaration
or payment of any dividends on the Common Stock. Dividends on the Series C
Preferred may, however, at the option of the Company's Board of Directors, be
paid either in cash or in additional shares of Series C Preferred. Subject to
certain conversion limitations on the Series C Preferred as set forth in the
Series C Preferred Designation of Rights and Preferences, each share of Series C
Preferred may be converted into the number of shares of Common Stock determined
by dividing $1,000 plus any per share accrued and unpaid regular or special
dividends by an amount equal to the Market Price less 25%; provided, however,
that the discount from the Market Price shall be 20% for all shares of Series C
Preferred converted prior to January 24, 1997.
Series D Preferred. As of November 15, 1996, the Company had -0- shares of
Series D Preferred issued and outstanding. All of the shares of Series D
Preferred that had been issued were either converted into shares of the
Company's Common Stock during fiscal 1996 or were cancelled on September 30,
1996 in connection with the issuance and sale of the Series C Preferred on that
date. The Designation of Rights and Preferences related to the Series D
Preferred requires that dividends be paid at the rate of 8% per annum prior to
the payment of dividends on any class or series of shares of the Company's
equity securities that are junior to the Series D Preferred unless full
cumulative dividends have been paid or contemporaneously are declared and paid
or set apart for payment on the Series D Preferred. Dividends on the Series D
Preferred may, however, at the option of the Company's Board of Directors, be
paid in either cash or additional shares of Series D Preferred. Shares of the
Company's Series D Preferred were convertible into shares of the Company's
Common Stock commencing 40 days after the date of the Series D Preferred
Designation of Rights and Preferences determined by dividing $1,000 by an amount
equal to the Market Price (as that term is defined in the Series D Preferred
Designation of Rights and Preferences) per share of the Company's Common Stock
less 25%; provided, however, that shares of Series D Preferred converted within
90 days of the closing date were converted by dividing $1,000 by an amount equal
to the lesser of (a) the bid price for the Company's Common Stock on the closing
date or (b) the Market Price of the Company's Common Stock less 20%, but in
neither event could such denominator be less than $1.60.
The Company's Board of Directors has the authority, without any further
vote or action by the shareholders, to issue additional Series of Preferred
Stock and to fix the rights, preferences, privileges and restrictions, including
the dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption (including sinking fund provisions), redemption prices, liquidation
preferences, the number of shares of each such additional Series, and the
designation of any such additional Series of Preferred Stock.
Transfer Agent. The transfer agent for the Company's Common Stock is
American Stock Transfer & Trust Company, 40 Wall Street, 46th Floor, New York,
New York 10005.
EXPERTS
The consolidated financial statements included in the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1996, which are
incorporated by reference in the Registration Statement, have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
LEGAL MATTERS
Certain legal matters relating to the Shares will be passed upon for the
Company by LeBoeuf, Lamb, Greene & MacRae, L.L.P., 1000 Kearns Building, 136
South Main Street, Salt Lake City, Utah 84101-1685.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Registration Fee ...................................$ 7,504.48
NASD Listing Fee ...................................$ 7,500.00
"Blue Sky" Fees and Expenses........................$ 2,500.00*
Accounting Fees and Expenses........................$ 6,000.00*
Legal Fees and Expenses .............................$15,000.00*
Transfer Agent Fees.................................$ 300.00*
Printing Costs......................................$ 500.00*
Miscellaneous.......................................$ 195.52*
Total.........................................$39,500.00*
All such fees and expenses will be borne entirely by the Company.
- -----------------------
* Estimated
Item 15. Indemnification of Directors and Officers.
Section 78.751 of the Nevada Private Corporations Act, as amended (the
"Nevada Act"), permits a corporation organized thereunder to indemnify its
directors, officers, employees and agents for certain of their acts. The
Company's Amended and Restated Articles of Incorporation (filed with the Nevada
Secretary of State on August 4, 1995) have been framed so as to conform to
Section 78.751 of the Nevada Act.
In general, under the Nevada Act, any director, officer, employee or agent
may be indemnified against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred in connection
with an action, suit or proceeding to which such person is a party if that
person acted in good faith and in a manner that he reasonably believed to be in
or not opposed to the best interests of the corporation. To the extent that any
such person has been successful on the merits or otherwise in defense of any
such action, suit or proceeding or in defense thereof, he must be indemnified by
the corporation against expenses, including attorneys' fees, actually and
reasonably incurred. Any indemnification must be made by the corporation only
after a determination (i) by vote of the stockholders, (ii) by majority vote of
a quorum of the independent directors, or (iii) by independent legal counsel,
that the applicable standard of conduct was met by the person to be indemnified.
The circumstances under which indemnification is granted in connection with an
action brought by or on behalf of the corporation are generally the same as
those set forth above.
Under the Nevada Act indemnification may also be granted pursuant to the
terms of agreements that may be entered into by the corporation. The Nevada Act
also grants Nevada corporations the power to purchase and maintain insurance
that protects its officers and directors against any liabilities incurred in
connection with their services in such positions, and such a policy of insurance
may be obtained by the Company in the future.
The Company's Amended and Restated Articles of Incorporation and Amended
and Restated Bylaws (which were adopted by the Company's Board of Directors on
March 22, 1996) provide for indemnification of the officers and directors of the
Company as set forth below.
Article VII of the Company's Amended and Restated Articles of Incorporation
provides as follows:
ARTICLE VII
Elimination of Liability; Indemnification
7.1. Elimination of Liability. No director or officer of the
Corporation will be liable to the Corporation or its shareholders for
damages for breach of fiduciary duty as a director or officer, excepting
only (a) acts or omissions that involve intentional misconduct, fraud or a
knowing violation of law or (b) the payment of dividends in violation of
Nevada Revised Statutes Section 78.300. In the event that the Nevada
Private Corporations Law is amended after the filing of these Amended and
Restated Articles of Incorporation to authorize corporate action further
eliminating or limiting the personal liability of a director or officer,
then the liability of a director or officer of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Nevada Private
Corporations Law, as so amended.
7.2. Mandatory Indemnification. The Corporation shall indemnify the
directors and officers of the Corporation to the fullest extent permitted
by the Nevada Private Corporations Law as the same now exists or may
hereafter be amended.
7.3. Mandatory Payment of Expenses. The Corporation shall pay the
expenses incurred by a director or officer in defending any civil,
criminal, administrative or investigative action, suit or proceeding in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it should be ultimately determined that he or she is
not entitled to be indemnified by the Corporation as authorized by the
Nevada Private Corporations Law.
7.4. Effect of Amendment or Repeal. Any amendment to or repeal of any
of the provisions in this Article VII shall not apply to or have any effect
on the liability or alleged liability of any director or officer of the
Corporation, or otherwise affect any right or protection of a director or
officer of the Corporation, for or with respect to any acts or omissions of
the director or officer occurring prior to the amendment or repeal, except
as otherwise required by a mandatory provision of law.
Article IV of the Company's Amended and Restated Bylaws provides as
follows:
ARTICLE IV
BOARD OF DIRECTORS
Section 4.16. Indemnification; Advancement of Expenses. The Corporation
shall indemnify the officers and directors of the Corporation to the fullest
extent permitted by the Nevada Private Corporations Act as the same now exists
or may hereafter be amended. In the event that the Nevada Private Corporations
Act is amended after the filing of the Corporation's Amended and Restated
Articles of Incorporation with the Nevada Secretary of State's Office so as to
authorize corporate action further eliminating or limiting the personal
liability of an officer or director, then the liability of an officer or
director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Nevada Private Corporations Act as so amended. The Corporation
shall pay the expenses incurred by an officer or director in defending any
civil, criminal, administrative or investigative action, suit or proceeding in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such officer or director to repay such
amount if it should by ultimately determined that he or she is not entitled to
be indemnified by the Corporation as authorized by the Nevada Private
Corporations Act. Any amendment to or repeal of any of the provisions in this
Section 4.16 shall not adversely affect any right or protection of an officer or
director of the Corporation for or with respect to any act or omission of such
director occurring prior to such amendment or repeal.
Section 4.17. Indemnification of Employees and Agents. The Corporation may,
to the extent authorized from time to time by the Board of Directors, grant
rights to indemnification and to the advancement of expenses to any employee or
agent of the Corporation to the fullest extent permitted by the provisions of
Section 4.16 of these Bylaws and Article VII of the Corporation's Amended and
Restated Articles of Incorporation.
In addition, the Company has entered into separate Indemnification
Agreements with each of its directors and officers.
Item 16. Exhibits.
5.1 Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P. as to the legality of
the Shares registered hereby.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P. (included in
Exhibit 5.1 hereto).
24.1 Power of Attorney (contained on page II-24 of this Registration
Statement).
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any Prospectus required by Section 10(a)(3) of the 1933
Act;
(ii) to reflect in the Prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) shall not apply to
information required to be included in a post-effective amendment by those
paragraphs that are contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the 1934 Act that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the 1933
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the termination of
the offering.
(4) For purposes of determining any liability under the 1933 Act, each
filing of the registrant's Annual Report pursuant to Section 13(a) or Section
15(d) of the 1934 Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the 1934 Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission, such indemnification is against
public policy as expressed in the 1933 Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the issuer of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Salt Lake City, State of Utah, on the 25th day of November, 1996.
BIOMUNE SYSTEMS, INC.
(Registrant)
By: /s/ David G. Derrick
David G. Derrick
Its: Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David G. Derrick as his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
all Exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
/s/ David G. Derrick Chief Executive Officer and November 25, 1996
David G. Derrick Chairman of the Board of
Directors (Principal
Executive Officer)
/s/ James J. Dalton Vice Chairman of the Board November 25, 1996
James J. Dalton
/s/ Milton G. Adair President and Director November 25, 1996
Milton G. Adair
/s/ Michael G. Acton Chief Financial Officer and November 25, 1996
Michael G. Acton Controller (Principal Financial
and Accounting Officer)
/s/ Aaron Gold Director November 25, 1996
Aaron Gold
/s/ Charles J. Quantz Director November 25, 1996
Charles J. Quantz
/s/ Thomas Q. Garvey III Director November 25, 1996
Thomas Q. Garvey III
/s/ Christopher D. Illick Director November 25, 1996
Christopher D. Illick
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
5.1 Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P. as to the legality
of the Shares registered hereby........................................26
23.1 Consent of Arthur Andersen LLP.........................................27
23.2 Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P.
(included in Exhibit 5.1 hereto).......................................28
24.1 Power of Attorney (contained on page II-24 of this Registration
Statement).............................................................29
EXHIBIT 5.1
[LETTERHEAD OF LEBOEUF, LAMB, GREENE & MACRAE, L.L.P.]
November 25, 1996
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W., Judicial Plaza
Washington, D.C. 20549
Re: Biomune Systems, Inc. Form S-3 Registration Statement Relating to 8,613,841
Shares of Common Stock (the "Registration Statement")
Ladies and Gentlemen:
As counsel for Biomune Systems, Inc., a Nevada corporation (the "Company"),
in connection with its proposed registration of a total of 8,613,841 shares,
subject to adjustment, of its Common Stock, $0.0001 par value per share,
pursuant to the Registration Statement, it is our opinion that the relevant
number of the shares of Common Stock being registered will be legally issued,
fully paid and non-assessable upon the occurrence of any of the following: (a)
the conversion of shares of the Company's Series C 8% Cumulative Convertible
Non-Voting Preferred Stock into shares of Common Stock, (b) the exercise of
certain outstanding options and warrants for shares of Common Stock and the
receipt by the Company of the agreed exercise price for such options and
warrants, and (c) the exchange by certain holders of shares of the Company's
restricted Common Stock for shares of Common Stock registered on the
Registration Statement.
We consent to the inclusion of our opinion as an Exhibit to the
Registration Statement under the Securities Act of 1933, as amended.
Very truly yours,
/s/ LeBoeuf, Lamb, Greene & MacRae, L.L.P.
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement on Form S-3 of our report dated
November 5, 1996 included in Biomune Systems, Inc.'s Annual Report on Form 10-K
for the year ended September 30, 1996 and to all references to our Firm included
in this Registration Statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
November 22, 1996
EXHIBIT 23.2
See Exhibit 5.1 for consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P.
EXHIBIT 24.1
See page II-24 of the Registration Statement for Power of Attorney.
