<PAGE>
As filed with the Securities and Exchange Commission on May 2, 1996
Registration No. 333-01071
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________
CYPRESS BIOSCIENCE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-2389839
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
401 QUEEN ANNE AVENUE NORTH
SEATTLE, WA 98109
(206) 667-9242
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
_______________
JAY D. KRANZLER
VICE CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER
CYPRESS BIOSCIENCE, INC.
401 QUEEN ANNE AVENUE NORTH
SEATTLE, WA 98109
(206) 667-9242
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
_______________
COPIES TO:
FREDERICK T. MUTO, ESQ.
COOLEY GODWARD CASTRO
HUDDLESON & TATUM
4365 EXECUTIVE DRIVE, SUITE 1100
SAN DIEGO, CA 92121
_______________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: from
time to time after the effective date of this Registration Statement.
If any of the 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/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) PRICE(1) FEE(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.02 par value . . . . . 8,920,701 $2.0625 $18,398,946.81 $6,799.64
==============================================================================================================
</TABLE>
(1) Estimated in accordance with Rule 457(c) solely for the purpose of
computing the amount of the registration fee based on the average of the
high and low prices of the Registrant's Common Stock as reported on the
Nasdaq SmallCap Market on February 14, 1996, the date prior to the date
this Registration Statement was originally filed.
(2) The registration fee was previously paid in connection with the
initial filing of this Registration Statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
===============================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 2, 1996
PROSPECTUS
8,920,701 SHARES
CYPRESS BIOSCIENCE, INC.
COMMON STOCK
This Prospectus relates to 8,920,701 shares (the "Shares") of Common
Stock, par value $.02 per share (the "Common Stock") of Cypress Bioscience,
Inc. ("Cypress" or the "Company"). The Shares being offered hereby were
acquired by certain stockholders of the Company (the "Selling Stockholders")
in January 1996 at a per share sales price of $1.50. The Shares may be
offered by the Selling Stockholder from time to time in transactions on the
Nasdaq SmallCap Market, in privately negotiated transactions or a combination
of such methods of sale, at fixed prices that may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. The Selling Stockholders may effect
such transactions by selling the Shares to or through broker-dealers, and
such broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders or the purchasers of
the Shares for whom such broker-dealers may act as agent or to whom they sell
as principal or both (which compensation to a particular broker-dealer might
be in excess of customary commissions). See "Selling Stockholders" and "Plan
of Distribution."
None of the proceeds from the sale of the Shares by the Selling
Stockholders will be received by the Company. The Company has agreed to bear
certain expenses (other than fees and expenses, if any, of counsel or other
advisors to the Selling Stockholders) in connection with the registration of
the Shares being offered by the Selling Stockholders. The Company has agreed
to indemnify the Selling Stockholders against certain liabilities, including
certain liabilities under the Securities Act of 1933, as amended (the
"Securities Act"). See "Plan of Distribution."
The Common Stock of the Company is traded on the Nasdaq SmallCap Market
under the symbol "IMRE." The last reported sales price of the Company's
Common Stock on the Nasdaq SmallCap Market on April 30, 1996 was $2.4375 per
share."
_______________
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASES OF THE SHARES OFFERED
HEREBY.
_______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MAY 2, 1996.
<PAGE>
No person is authorized in connection with any offering made hereby to
give any information or make any representation not contained or incorporated
by reference in this Prospectus, and any information not contained or
incorporated herein must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, by any person in any jurisdiction in which
it is unlawful for such person to make such offer or solicitation. Neither
the delivery of this Prospectus at any time nor any sale made hereunder
shall, under any circumstances, imply that the information herein is correct
as of any date subsequent to the date hereof.
Except for the historical information contained herein, the discussion in
this Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from
those discussed here. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in the section
entitled "Risk Factors," as well as those discussed elsewhere in this
Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the
Commission's following Regional Offices: Chicago Regional Office, Suite 1400,
Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois 60661;
and New York Regional Office, Seven World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material also can be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act, with respect to the Shares being offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain portions of which are omitted in
accordance with the rules and regulations of the Commission. For further
information pertaining to the Company and the Shares, reference is made to
the Registration Statement and the exhibits and schedules thereto, which may
be inspected without charge at, and copies thereof may be obtained at
prescribed rates from, the office of the Commission at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549.
PROSORBA-Registered Trademark- column is a registered trademark of the
Company. All other brand names or trademarks appearing in this Prospectus are
the property of their respective holders.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, the Company's Proxy Statement for the 1996 Annual Meeting
of Stockholders filed on March 11, 1996 pursuant to Rule 14a-6 of the
Exchange Act, the Company's Current Report on Form 8-K dated
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<PAGE>
as of March 28, 1995, the Company's Current Report on Form 8-K dated as of
November 22, 1995, the Company's Current Report on Form 8-K dated as of
January 29, 1996, the Company's Current Report on Form 8-K dated as of March
8, 1996, the Company's Current Report on Form 8-K dated as of April 1, 1996
and the Company's Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1995 filed by the Company with the Commission are hereby
incorporated by reference in this Prospectus except as superseded or modified
herein. All documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained in any 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
which 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 modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person, including any
beneficial owner of shares of Common Stock of the Company, to whom this
Prospectus is delivered, upon written or oral request of such person, a copy
of any and all of the documents that have been or may be incorporated by
reference herein (other than exhibits to such documents which are not
specifically incorporated by reference into such documents). Such requests
should be directed to the Chief Financial Officer at the Company's principal
executive offices at 401 Queen Anne Avenue North, Seattle, Washington 98109
(telephone (206) 667-9242).
THE COMPANY
Cypress Bioscience, Inc. ("Cypress" or the "Company") was incorporated in
1981 to research, develop, manufacture and market medical devices for the
treatment and diagnosis of select immune-mediated diseases, transplantations
and cancers. The Company's first product, the PROSORBA-Registered Trademark-
column, a medical device, treats a patient's defective immune system so that
it can more effectively respond to certain diseases. The Company received
marketing approval from the U.S. Food and Drug Administration (the "FDA") in
December 1987 to distribute the PROSORBA-Registered Trademark- column for
treatment of idiopathic thrombocytopenic purpura ("ITP"), an immune-mediated
bleeding disorder. Since 1987, the Company has had approximately $23 million
of sales of the PROSORBA-Registered Trademark- column.
In February 1994, the Company entered into a 10-year exclusive
distribution agreement with Baxter Healthcare Corporation ("Baxter") granting
distribution rights of its PROSORBA-Registered Trademark- column in the
United States and Canada for the treatment of thrombocytopenia and the first
right to negotiate for new PROSORBA-Registered Trademark- column indications.
In March 1995, the two companies amended the agreement whereby Baxter, among
other things, gave the Company the right to co-market with Baxter and
relinquished its first right to negotiate for new PROSORBA-Registered
Trademark- column indication. On March 18, 1996, the Company and Baxter entered
into a termination agreement terminating the exclusive distribution agreement.
Under the termination agreement, effective May 1, 1996, the Company may, among
other things, sell its PROSORBA-Registered Trademark- column directly to
customers who had previously purchased PROSORBA-Registered Trademark- columns
through Baxter, as well as directly to any other potential customers who wish to
purchase PROSORBA-Registered Trademark- columns. See "Risk Factors --
Exclusive Agreement With Baxter."
In December 1995, Martin D. Cleary resigned as Chief Executive Officer
and a member of the Board of Directors of the Company. Mr. Cleary's
resignation was a result of the Company's determination that it would best be
served by having senior management resident on the West Coast near the
Company's principal executive offices and other operations. Because Mr.
Cleary was unable to relocate from the East Coast, he agreed to resign as
Chief Executive Officer and as a director. Also in December 1995, Harvey J.
Hoyt resigned as Executive Vice President and a member of the Board of
Directors of the Company. Dr. Hoyt's resignation was a result of the
appointments of new members of senior management and the restructuring of the
Company, which restructuring eliminated Dr. Hoyt's position. Jay D. Kranzler,
M.D., Ph.D. was appointed as Chief
4
<PAGE>
Executive Officer and Vice Chairman of the Board of Directors and DebbyJo
Blank, M.D. was appointed as President, Chief Operating Officer and a member
of the Board of Directors.
The Company is in the process of developing a substantial restructuring
plan. The restructuring plan is intended to reduce the Company's overhead and
recurring costs by reducing the Company's work force and consolidating its
two manufacturing facilities into one central manufacturing facility located
in Redmond, Washington. By eliminating approximately 20 positions, the
Company expects to realize an annual salary savings in excess of $1.0
million. In addition, although the Company estimates it will incur
approximately $1.0 million in capital expenditures associated with the
consolidation of its manufacturing operations, the Company believes such
consolidation will result in a reduction of overhead expenses.
Furthermore, the restructuring plan includes relocating all of the
Company's operations, except manufacturing, from Seattle, Washington to San
Diego, California by the end of 1996. The Company believes that relocating
its operations to San Diego, recognized as the fourth largest biotechnology
center in the United States, will provide the Company with greater exposure
within the industry and better position the Company to market its products.
In addition, in the event the Company wishes to expand staffing, San Diego's
highly skilled work force will provide significant resources from which the
Company may draw upon to fill any future staffing needs. The restructuring is
not yet completed and there can be no assurance that such a restructuring
will be completed. Even if such a restructuring is completed, there can be no
assurance that it will be successfully implemented.
In December 1995, the Company completed an offering of $1,500,000 of
Senior Convertible Debentures (the "Debentures") to certain accredited
investors. In January 1996, the Company completed a private placement of
8,540,702 shares of the Company's Common Stock (the "Private Placement") with
certain accredited investors at a per share sales price of $1.50. Upon the
closing of the Private Placement, the Debentures were automatically converted
into 1,000,000 shares of Common Stock of the Company.
Allen & Company, the Company's largest stockholder, purchased $500,000
of the Debentures. Upon the closing of the Private Placement, the Debentures
purchased by Allen & Company automatically converted into 333,333 shares of
Common Stock of the Company.
Allen & Company acted as a non-exclusive placement agent for the Company
with respect to the Debenture Offering and the Private Placement, receiving a
placement fee of 6% of the gross proceeds attributable to securities actually
placed by Allen & Company. The Company paid Allen & Company a placement fee
in the form of 20,000 shares of Common Stock of the Company in connection
with the Debenture Offering and a cash fee of $225,000 in connection with the
Private Placement.
The Company was incorporated under the laws of the State of Delaware in
1981. The Company's executive offices are located at 401 Queen Anne Avenue
North Seattle, Washington, 98109-4517 and its telephone number is (206)
298-9400.
RISK FACTORS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act that
involve risks and uncertainties. The Company's actual results could differ
materially from those projected in the forward-looking statements. Factors
that could cause or contribute to such differences include, but are not
limited to, those discussed in this section, as well as those discuss in this
Prospectus. The following risk factors should be considered carefully in
addition to the other information contained in this prospectus before purchasing
the shares being offered hereby.
NEED FOR ADDITIONAL CAPITAL. The Company is actively seeking
opportunities to raise additional capital through the private equity market
and corporate partners. Such capital would be used primarily to develop new
and complete existing research and development activities, including funding
clinical trials for rheumatoid arthritis and certain platelet disorders. The
amount of capital required by the Company is primarily dependent upon the
following factors: results of clinical trials, results of current research
and development efforts, the FDA regulatory process, potential competitive
and technological advances and levels of product sales. Because the Company
is unable to predict the outcome of the previously noted factors, some of
which are beyond the Company's control, the Company is unable to estimate,
with certainty, its mid- to long-term total capital needs. There can be no
assurance that the Company will be able to raise additional capital through
the private equity market or corporate partnering transactions or that funds
raised thereby will allow the Company to maintain its current and planned
operations as provided herein. If the Company is unable to obtain additional
financing, it may be required to delay, scale back or eliminate some or all
of its research and development activities, to license to third parties
technologies that the Company would otherwise seek to develop itself, to seek
financing through the debt market at potentially higher costs to the Company
and/or to seek additional methods of financing.
5
<PAGE>
HISTORY OF OPERATING LOSSES. The Company has operated at a loss since its
formation in October 1981. In the years ended December 31, 1994 and 1995, the
Company had revenues of $4,918,126 and $4,104,224 and net losses of
$6,151,312 and $6,826,252, respectively. As of December 31, 1995, the Company
had an accumulated deficit of $44,041,634. The ability of the Company to
achieve profitability is dependent upon successful completion of anticipated
clinical trials and obtaining FDA marketing approval of the
PROSORBA-Registered Trademark- column for the treatment of additional
diseases in a timely manner, among other factors. The Company would have to
significantly scale back its plans, curtail clinical trials, and limit its
present operations in order to become profitable or operate on a break-even
basis if it does not receive marketing approval from the FDA for the
PROSORBA-Registered Trademark- column for the treatment of diseases in
addition to idiopathic thrombocytopenic purpura ("ITP"). There can be no
assurance that the Company will meet applicable regulatory standards or
successfully market its products to generate sufficient revenues to render
the Company profitable.
MANAGEMENT CHANGES; RESTRUCTURING PLAN; DEPENDENCE UPON KEY PERSONNEL.
The Company has recently undergone changes in senior management and new
management is in the process of developing and implementing a substantial
restructuring plan. The restructuring plan has not been completed and there
can be no assurance that it will be completed. Even if such a restructuring
plan is completed, there can be no assurance that the restructuring will be
successfully implemented. The Company's success is dependent upon certain key
management and technical personnel, including the new senior management
members. The loss of the services of any of these key employees could have a
material adverse effect on the Company. The Company does not currently
maintain any key employee insurance coverage. See "Management Changes and
Pending Restructuring Plan."
FDA APPROVAL AND REGULATIONS. The Company is currently planning to
conduct a controlled clinical trial of the PROSORBA-Registered
Trademark-column for treatment of rheumatoid arthritis. Although the FDA has
approved the commercial sale of the PROSORBA-Registered Trademark- column for
the treatment of ITP, there can be no assurance that current or future
clinical trials will produce data satisfactory to the FDA to establish the
effectiveness of the PROSORBA-Registered Trademark- column for treatment of
diseases other than ITP, such as rheumatoid arthritis, transplantations and
certain cancers, or that the FDA will approve the PROSORBA-Registered
Trademark- column for treatment of such diseases in a timely manner, if at
all.
The PROSORBA-Registered Trademark- column is commercially distributed
under a premarket approval ("PMA") application that was approved by the FDA
in 1987. Changes to the product and its manufacturing process, and certain
types of labeling changes must be approved by the FDA prior to
implementation. The Company currently has one supplement to the PMA pending
with the FDA for a labeling change dealing with the use of ancillary
equipment during the use of the PROSORBA-Registered Trademark- column. The
FDA has indicated to the Company that the PMA supplement would be approvable
if certain additional information is provided. There can be no assurance that
the Company will receive approval of its pending PMA supplement or any future
PMA supplements will be approved by the FDA.
Even if FDA approval is granted to market a product for treatment of a
particular disease, subsequent discovery of previously unknown problems may
result in restrictions on the product's
6
<PAGE>
future use or withdrawal of the product from the market. In addition, any
other products developed in the future will require clinical testing and FDA
marketing approval before they can be commercially exploited in the United
States. Such approval process is typically very lengthy and there is no
assurance that approvals will be obtained.
The manufacture and distribution of medical devices are subject to
continuing FDA regulation. In addition to the requirement that the device be
marketed only for its approved use, applicable law requires compliance with
the FDA's good manufacturing practices ("GMP") regulations. Failure to comply
with the GMP regulations or with other applicable legal requirements can lead
to federal seizure of non-complying products, injunctive actions brought by
the federal government, and potential criminal liability on the part of the
Company and of the officers and employees of the Company who are responsible
for the activities that lead to the violations.
COMPETITIVE ENVIRONMENT; TECHNOLOGICAL CHANGE; EFFECTIVENESS OF PRODUCTS.
The field of medical devices in general and the particular areas in which the
Company will market its products are extremely competitive. In developing and
marketing medical devices to treat immune-mediated diseases and cancers, the
Company competes with other products, therapeutic techniques and treatments
which are offered by national and international healthcare and pharmaceutical
companies, many of which have greater marketing, human and financial
resources than the Company.
The immunological therapies market is characterized by rapid
technological change and potential introductions of new products or
therapies. To respond to these changes, the Company may be required to
develop or purchase new products to protect its technology from obsolescence.
There can be no assurance that the Company will be able to develop or obtain
such products, or, if developed or obtained, that such products will be
commercially viable. In addition, there can be no assurance that the
Company's products will prove effective in the treatment of diseases other
than ITP.
DEPENDENCE ON THIRD PARTY ARRANGEMENTS. The Company's commercial sale of
its proposed products and its future product development may be dependent
upon entering into arrangements with corporate partners and other third
parties for the development, marketing, distribution and/or manufacturing of
products utilizing the Company's proprietary technology. While the Company is
currently seeking collaborative research and development arrangements and
joint venture opportunities with corporate sponsors and other partners, there
can be no assurance that the Company will be successful in entering into such
arrangements or joint ventures or that any such arrangements will prove to be
successful.
EXCLUSIVE AGREEMENT WITH BAXTER. In February 1994, the Company entered
into a 10-year exclusive distribution agreement with Baxter Healthcare
Corporation ("Baxter") granting to Baxter distribution rights of its
PROSORBA-Registered Trademark- column in the United States and Canada for the
treatment of thrombocytopenia and the first right to negotiate for new
PROSORBA-Registered Trademark- column indications. The distribution agreement
also contained certain "take-or-pay" and minimum purchase commitments.
Baxter, at its own expense, was to provide sales and marketing support for
the sale of the product
7
<PAGE>
during the term of the agreement. Baxter assumed the Company's sales and
distribution responsibilities in April 1994. The Company was to provide
significant marketing and promotional support to Baxter for the first three
years of the agreement. The Company no longer maintains a domestic sales
force.
The "take-or-pay" commitments and purchase minimums were primarily
subject to the Company having FDA marketing approval for immune
thrombocytopenic purpura and the lack of any new significant competitive
technology being introduced before October 1995 to the thrombocytopenia
therapy marketplace. The Company received a response from the FDA in January
1995 to a PMA supplement filed in March 1993 requesting the name of the
Company's approved indication be changed from idiopathic thrombocytopenic
purpura to immune thrombocytopenic purpura. The request was made by the
Company as it believes the two names are used interchangeably by the medical
community. The FDA's response denied the Company's request for such a change.
As a result of the FDA action, in February 1995, Baxter exercised its
right to re-negotiate the minimum purchase commitments. In March 1995, the
two companies amended the agreement whereby Baxter: (a) made a take-or-pay
payment for the first sales year of $3.0 million on March 31, 1995 compared
to the original $3.5 million due, (b) agreed to purchase $1.0 million of
product during the second quarter of 1995, (c) released the Company from its
obligation to provide marketing and promotional support for the second and
third years of the agreement, (d) gave the Company the right to co-market
with Baxter, (e) relinquished its first right to negotiate for new
PROSORBA-Registered Trademark- column indications, and (f) agreed under
certain circumstances to provide advance payments to the Company for Baxter's
1996 purchases. The Company agreed to eliminate purchase minimums and the
take-or-pay concept included in the original agreement and has freed Baxter
to pursue competing thrombocytopenia therapies.
On March 18, 1996, the Company and Baxter entered into a termination
agreement terminating the exclusive distribution agreement. Under the
termination agreement, effective May 1, 1996, the Company may, among other
things, sell its PROSORBA-Registered Trademark- column directly to customers
who had previously purchased PROSORBA-Registered Trademark- columns through
Baxter as well as to any other potential customers who wish to purchase
PROSORBA-Registered Trademark- columns.
No assurance can be given that prior to May 1, 1996, Baxter will maximize
the Company's potential sales in North America, or that Baxter will be
successful in marketing the Company's PROSORBA-Registered Trademark- column.
There can be no assurances that the Company will be able to develop a sales
force by May 1, 1996, if at all, to sell its PROSORBA-Registered Trademark-
column directly to customers who previously purchased PROSORBA-Registered
Trademark- columns from Baxter or to any other potential customers who
wish to purchase PROSORBA-Registered Trademark- columns. In addition, even if
the Company can establish a sales force for its PROSORBA-Registered
Trademark- column, there can be no assurance that the Company will be
successful in selling its PROSORBA-Registered Trademark- columns directly to
any new customers or to any customers who previously purchased
PROSORBA-Registered Trademark- columns through Baxter.
UNCERTAINTY OF PATENT PROTECTION AND CLAIMS TO TECHNOLOGY. The Company
currently holds nine United States and four foreign patents relating to its
technology and has also filed other patent applications. In addition, the
Company has an exclusive license for a U.S. patent for a genetic screening
test to predict which rheumatoid arthritis patients will develop severe
disease. Neither the protection afforded by these patents nor their
enforceability can be assured. Furthermore, there can be no assurance that
additional patents will be obtained either in the United States or in foreign
jurisdictions or that, if issued, such additional patents will provide
sufficient protection to the Company's technology or be of commercial benefit
to the Company. Insofar as the Company relies on trade secrets and unpatented
proprietary know-how, there can be no assurance that others will not
independently develop similar technology or that secrecy will not be
8
<PAGE>
breached. There can be no assurance that the Company will be able to develop
further technological innovations.
Others have filed applications for, or have been issued, patents and may
obtain additional patents and other proprietary rights relating to products
or processes competitive with those of the Company. The scope and validity of
such patents is presently unknown. If existing or future patents are
challenged in litigation or interference proceedings, the Company may become
subject to significant liabilities to third parties or be required to seek
licenses from third parties. There can be no assurance that such licenses
would be available or, if available, obtainable on acceptable terms.
In November 1995, a complaint was filed with the United States District
Court, Northern District of California, claiming that the Company's
PROSORBA-Registered Trademark- column allegedly infringes a patent issued to
David S. Terman, M.D. which patent subsequently was assigned in July 1993 to
DTER-ENT, Inc., a California corporation. The Company first received a notice
of a claim of infringement from DTER-ENT, Inc. in July 1993. Although the
Company intends to vigorously contest the claim, there can be no assurances
that the Company will be successful.
In addition, various scientific personnel of the Company were previously
associated with non-profit research or education institutions that typically
require researchers to execute agreements giving such institutions broad
rights to inventions created or developed during the period that the
scientist is associated with such institution. Dr. Frank R. Jones, Chairman
of the Board and Chief Scientific Officer of the Company, has been a party to
such agreements in the past. While no such institution has to date asserted
rights to the Company's technology, such assertions may be made in the
future, and if made, there can be no assurances that the Company will be
successful in any such litigation.
CONCENTRATION OF OWNERSHIP. Allen & Company Incorporated beneficially
owns approximately 18.14% of the outstanding Common Stock of the Company and
is the largest stockholder of the Company.
SALES AND MARKETING. In addition to marketing through Baxter, the Company
also conducts limited marketing of the PROSORBA-Registered Trademark- column
outside the United States through foreign distributors. Sales to foreign
distributors have not been material to the Company's results from operations.
There can be no assurance that such domestic sales efforts or foreign sales
arrangements will become material to the Company's results of operations.
RECOVERABILITY OF ENDING INVENTORIES. As of December 31, 1995, the
Company's ending inventory balances consisted of $513,883 of raw materials,
$557,222 of work in progress and $77,401 of finished goods. In order to
recover such ending inventory balances, the Company would have to sell
approximately 20% more PROSORBA-Registered Trademark- column units to
customers than that amount sold to customers by Baxter during 1995. Such
increase represents approximately 60% of the total sales made by the
Company's sales force in fiscal year 1993 prior to entering into the Baxter
agreement. See "-- Exclusive Agreement with Baxter." As a result of the
termination of the Baxter Agreement, the Company is actively seeking to
establish a sales force to sell the PROSORBA-Registered Trademark- column
directly to customers who previously purchased PROSORBA-Registered Trademark-
columns from Baxter and to other potential customers who wish to purchase
PROSORBA-Registered Trademark- columns directly from the Company. Although
there can be no assurances that the Company's sales force, when and if
established, will be successful in selling the Company's product, the Company
believes, based upon historical sales figures, that it can generate
sufficient sales to recover the ending inventory balances described above
with a sales force of between 5 and 7 salespersons dedicated solely to
selling the Company's PROSORBA-Registered Trademark- column. In addition, on
May 1, 1996, the Company increased the sales price of the PROSORBA-Registered
Trademark- columns to be sold directly to customers by approximately 9%. This
is the first such price increase implemented by the Company since January 1,
1994. The Company believes that such price increase reflects a nominal price
increase for a medical device for the period covered by such increase.
However, there can be no assurance that the Company will be successful in
selling the PROSORBA-Registered Trademark- column at the increased price, if
at all.
INSURANCE REIMBURSEMENT. Successful commercialization of a new medical
product, such as the PROSORBA-Registered Trademark- column depends, in part,
on reimbursement by public and private health insurers to health care
providers for use of such product. The availability of such reimbursement is
subject to a variety of factors, many of which could affect the Company as it
commercializes use of the PROSORBA-Registered Trademark- column. Although the
Company has been generally successful in assisting health care providers in
arranging reimbursement for the use of the PROSORBA-Registered Trademark- column
in the treatment of ITP, there can no assurance that public and private insurers
will continue to reimburse for the use of the PROSORBA-Registered Trademark-
column.
9
<PAGE>
UNCERTAINTY OF HEALTH CARE REFORM. There are widespread efforts to
control health care costs in the U.S. and worldwide. Various federal and
state legislative initiatives regarding health care reform and similar issues
continue to be at the forefront of social and political discussion. These
trends may lead third-party payors to decline or limit reimbursement for the
Company's product, which could negatively impact the pricing and
profitability of, or demand for, the Company's product. The Company believes
that government and private efforts to contain or reduce health care costs
are likely to continue. There can be no assurance concerning the likelihood
that any such legislative or regulatory initiative will be enacted, or market
reform initiated, or that, if enacted such reform or initiative will not
result in a material adverse impact on the business, financial condition or
results of operations of the Company.
PRODUCT LIABILITY. The use of the PROSORBA-Registered Trademark- column
involves the possibility of adverse effects occurring to end-users that could
expose the Company to product liability claims. The Company believes that its
product liability insurance coverage is adequate in light of the Company's
business. However, although the Company currently maintains product liability
insurance coverage, there can be no assurance that such coverage or any
increased amount of coverage will be adequate to protect the Company and
there can be no assurance that the Company will have sufficient resources to
pay any liability resulting from such a claim.
POSSIBLE VOLATILITY OF STOCK PRICE; ABSENCE OF DIVIDENDS. There has been
a history of significant volatility in the market prices of securities of
biotechnology companies, including the Company's Common Stock. Factors such
as announcements by the Company or others of technological innovations,
results of clinical trials, new commercial products, regulatory approvals or
proprietary rights developments, coverage decisions by third-party payers for
therapies and public concerns regarding the safety and other implications of
biotechnology all may have a significant impact on the Company's business and
market price of the Company's Common Stock. No dividends have been paid on
the Common Stock to date, and the Company does not anticipate paying cash
dividends on the Common Stock in the foreseeable future.
HAZARDOUS MATERIAL. The Company's research and development programs
involve the controlled use of biohazard materials such as viruses, including
the HIV virus that causes AIDS. Although the Company believes that its safety
procedures for handling such materials comply with the standards prescribed
by state and federal regulations, the risk of accidental contamination or
injury from these materials cannot be completely eliminated. In the event of
such an accident, the Company could be held liable for any damages that
result, and any such liability could exceed the resources of the Company.
LIMITATION OF NET OPERATING LOSS CARRYFORWARDS. The Company's sale of
Common Stock in November 1990, September 1991, April 1993, and January 1996
when taken together with prior issuances, caused the limitation of Section
382 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code"), to be applicable. This limitation will allow the Company to use only
a portion of the net operating loss carryforwards to offset future taxable
income, if any, for federal income tax purposes. Based on the limitations of
Section 382 and before consideration of the effect of the sale of securities
offered hereby, the Company may be allowed to use no more than approximately
$3,700,000 of such losses each year to reduce taxable income, if any. To the
extent not utilized by the Company, unused losses will
10
<PAGE>
carry forward subject to the limitations to offset future taxable income, if
any, until such unused losses expire. All unused net operating losses will
expire 15 years after any year in which they were generated. The years in
which such expiration will take place range from 1998-2010.
SELLING STOCKHOLDERS
The Selling Stockholders represented in their purchase agreements that
they were acquiring the Shares for investment and with no present intention
of distributing the Shares. In recognition of the fact that the Selling
Stockholders, even though purchasing the Shares without a view to distribute,
may wish to be legally permitted to sell the Shares when each deems
appropriate, the Company has filed with the Commission a Registration
Statement on Form S-3, which this Prospectus forms a part, with respect to,
among other things, the resale of the Shares from time to time at prevailing
prices in the over-the-counter market or in privately-negotiated transactions
and has agreed to prepare and file such amendments and supplements to the
Registration Statement as may be necessary to keep the Registration Statement
effective until all Shares offered hereby have been sold pursuant thereto or
until such Shares are no longer, by reason of Rule 144 under the Securities
Act or any other rule of similar effect, required to be registered for the
sale thereof by the Selling Stockholders.
The following table sets forth the name of the Selling Stockholders, the
number of Shares beneficially owned by each Selling Stockholder as of January
31, 1996 and the number of Shares which may be offered pursuant to this
Prospectus. This information is based upon information provided to the
Company by the Selling Stockholders. Because the Selling Stockholders may
offer all, some or none of their shares of Common Stock, no definitive
estimate as to the number of shares thereof that will be held by the Selling
Stockholders after such offering can be provided.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY NUMBER OF SHARES BENEFICIALLY
OWNED PRIOR TO SHARES BEING OWNED AFTER
OFFERING(1) OFFERED OFFERING(1)(3)
NAME OF --------------------- ------------ ---------------------
SELLING STOCKHOLDERS NUMBER PERCENT(2) NUMBER NUMBER PERCENT(2)
- -------------------- --------- ---------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C>
A. Brean Murray 50,000 .18% 50,000 0 0%
Allen, Susan 630,119 2.23% 166,667 463,452 1.64%
Apollo Medical Partners 100,000 .35% 100,000 0 0%
Aries Domestic Fund, L.P. 896,666 3.17% 866,666 30,000 .11%
The Aries Trust 894,166 3.16% 866,666 27,500 .10%
Barlow, Gordon 20,000 .07% 20,000 0 0%
Berrard, Steve 333,334 1.18% 333,334 0 0%
Binder, Richard 50,000 .18% 50,000 0 0%
Bollag, Michael 100,000 .35% 100,000 0 0%
Cantor, Michael 66,667 .24% 66,667 0 0%
Capotorto, Vito 20,000 .07% 20,000 0 0%
Chez, Ronald IRA #2 40,000 .14% 40,000 0 0%
Cless, Gerhard 340,000 1.20% 340,000 0 0%
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY NUMBER OF SHARES BENEFICIALLY
OWNED PRIOR TO SHARES BEING OWNED AFTER
OFFERING(1) OFFERED OFFERING(1)(3)
NAME OF -------------------- ------------ -------------------
SELLING STOCKHOLDERS NUMBER PERCENT(2) NUMBER NUMBER PERCENT(2)
- -------------------- ------ ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C>
Comitor, Loren 5,000 .02% 5,000 0 0%
Courcoux Bouvet (5) 35,000 .12% 20,000 15,000 .05%
Delaware Fund-
Emerging Growth 52,933 .19% 52,933 0 0%
Delaware Fund-Trend 1,280,400 4.53% 1,280,400 0 0%
DeVries, Walter 66,000 .23% 50,000 16,000 .06%
Diners Fugazy Travel and
Incentive Ltd Profit
Sharing Plan 40,000 .14% 40,000 0 0%
Doherty & Co. 135,000 .48% 100,000 35,000 .12%
Drobny Fischer Partnership 234,000 .83% 234,000 0 0%
Drueke, Paul C. 25,000 .09% 25,000 0 0%
The Pharmaceutical/Medical
Technology Fund, LP 140,000 50% 140,000 0 0%
Eisen, Nathan & Rose 33,333 .12% 33,333 0 0%
Emerge Capital (6) 40,000 .14% 40,000 0 0%
Foisie, Robert A. 133,333 .47% 133,333 0 0%
Garbelmann, Wolgang
& Barbara 20,000 .07% 20,000 0 0%
Gelber, Howard 15,000 .05% 15,000 0 0%
Goby, Jeffrey 20,000 .07% 20,000 0 0%
Gold, Arthur 10,000 .04% 10,000 0 0%
Goldstick, Phillip 34,000 .12% 34,000 0 0%
Gonsky, Sharon dba SDG
Associates 40,000 .14% 40,000 0 0%
Gordon Barlow Design PP&T 20,000 .07% 20,000 0 0%
Goulding, Randall 25,184 .09% 25,184 0 0%
Goulding, Richard 28,700 .10% 28,700 0 0%
Green, Dr. Richard 14,000 .05% 14,000 0 0%
Hakeem, James & Jacklyn 22,000 .08% 17,000 5,000 .02%
Hakeem, Robert & Jaynie 26,600 .09% 17,000 9,600 .03%
Hanosh, James J., Jr. 40,623 .14% 16,667 23,956 .08%
Hanosh, James J. 38,667 .14% 36,667 2,000 *
Hirsch, Richard L. 33,333 .12% 33,333 0 0%
Holmes, James and Donna 10,000 .04% 10,000 0 0%
Huizenga, Wayne 333,333 1.18% 333,333 0 0%
Incavo, Noel 10,000 .04% 10,000 0 0%
John F. Northway Trust 87,000 .31% 67,000 20,000 .07%
John Z. Kosowski Trust 30,000 .11% 30,000 0 0%
Judge, Jack 33,333 .12% 33,333 0 0%
Kaiser, Gary R. 72,500 .26% 50,000 22,500 .08%
Kaspar III, Charles J. 31,667 .11% 17,000 14,667 .05%
Kaufmann, Dr. Regina 16,700 .06% 16,700 0 0%
Kelabe Investment Corp. (5) 10,000 .04% 10,000 0 0%
Kranzler, Leonard, M.D. 10,000 .04% 10,000 0 0%
Kranzler, Moses 10,000 .04% 10,000 0 0%
Kushnir, Richard 30,000 .11% 30,000 0 0%
Laven, Alan 10,000 .04% 10,000 0 0%
Lehrer, Benjamin 16,667 .06% 16,667 0 0%
Levy, Steve 80,000 .28% 80,000 0 0%
Liss, Arthur 10,000 .04% 10,000 0 0%
Mackie, Robert 33,334 .12% 33,334 0 0%
Mark, Rueben 66,667 .24% 66,667 0 0%
McLaren, James I. 16,667 .06% 16,667 0 0%
MDB Capital Corporation 33,333 .12% 33,333 0 0%
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY NUMBER OF SHARES BENEFICIALLY
OWNED PRIOR TO SHARES BEING OWNED AFTER
OFFERING(1) OFFERED OFFERING(1)(3)
NAME OF -------------------- ------------ -------------------
SELLING STOCKHOLDERS NUMBER PERCENT(2) NUMBER NUMBER PERCENT(2)
- -------------------- ------ ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C>
Mizebourne Investment Corp. 13,333 .05% 10,000 3,333 *
Morgenstern, J. Michael, M.D. 10,000 .04% 10,000 0 0%
Murdoch & Company 250,000 .88% 250,000 0 0%
Nagorsky, Sy 10,000 .04% 10,000 0 0%
Nordruk Partners
Investment Co. 70,000 .25% 50,000 20,000 .07%
Olshansky, Melvin 10,000 .04% 10,000 0 0%
Olson, Arthur 20,000 .07% 20,000 0 0%
Pritikin, Mark 8,000 .03% 5,000 3,000 *
Proper Service PP&T 10,000 .04% 10,000 0 0%
Provezano, Annette 15,000 .05% 15,000 0 0%
Quagliata, Franco & Laura(7) 120,709 .43% 70,000 50,709 .18%
Redlich, Alon & Cindy 10,000 .04% 10,000 0 0%
Renov, Kalman & Ruki O. 166,667 .59% 166,667 0 0%
Rice Asset Management 200,000 .71% 200,000 0 0%
Richard Goulding
Pension Plan 16,700 .06% 16,700 0 0%
Rochon, Richard C. 133,333 .47% 133,333 0 0%
Rosenberg, Gregg 8,000 .03% 8,000 0 0%
Rosenberg, Stacey 8,000 .03% 8,000 0 0%
Rosin, Joe 16,700 .06% 16,700 0 0%
Sadosky, Andrew 16,000 .06% 16,000 0 0%
Samisa Investment Corp. 40,000 .14% 40,000 0 0%
Schachter, Jerome 20,000 .07% 20,000 0 0%
Schmidt, Karen 30,000 .11% 30,000 0 0%
Scott Partners 50,000 .18% 50,000 0 0%
Seminer, Scott 8,350 .03% 8,350 0 0%
Shapiro, E. Donald 50,000 .18% 50,000 0 0%
Sherman, Lawrence 10,000 .04% 10,000 0 0%
Sherman, Steven A. 10,000 .04% 10,000 0 0%
Shiman, Stewart 150,000 .53% 150,000 0 0%
Siciliano, Michael 20,000 .07% 20,000 0 0%
Simons, Howard "Buzz" 84,000 .30% 84,000 0 0%
Sirazi, Semir 20,000 .07% 20,000 0 0%
Stahler, Alan & Esther 166,667 .59% 166,667 0 0%
Strattman, James K.
& Julie M. 100,000 .35% 100,000 0 0%
Strattman, Robert A.
& Joan F. 40,133 .14% 33,333 6,800 .02%
Thomas A. Petrovito Trust 30,000 .11% 30,000 0 0%
Venturetek, L. P. 333,333 1.18% 333,333 0 0%
Vernon, Elliott 16,667 .06% 16,667 0 0%
Vitali Maritime Corp. 31,500 .11% 30,000 1,500 *
Weingrad, Michael 30,000 .11% 30,000 0 0%
Weisburg, Burton 10,000 .04% 10,000 0 0%
Wienckowski, Dr. Thomas 16,700 .06% 16,700 0 0%
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY NUMBER OF SHARES BENEFICIALLY
OWNED PRIOR TO SHARES BEING OWNED AFTER
OFFERING(1) OFFERED OFFERING(1)(3)
NAME OF -------------------- ------------ -------------------
SELLING STOCKHOLDERS NUMBER PERCENT(2) NUMBER NUMBER PERCENT(2)
- -------------------- ------ ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C>
Wierenga, Pete 84,200 .30% 50,000 34,200 .12%
Wilfam Ltd. 40,000 .14% 40,000 0 0%
Wolff, Joel 66,667 .24% 66,667 0 0%
Wood, Kenton E. 20,000 .07% 20,000 0 0%
Yahav, Yigal 34,000 .12% 34,000 0 0%
* Less than .01%
</TABLE>
(1) Unless otherwise indicated below, the persons named in the
table have sole voting and investment power with respect to
all shares beneficially owned by them, subject to community
property laws where applicable.
(2) Applicable percentage of ownership is based on 28,279,297
shares of Common Stock of the Company outstanding on
January 31, 1996, adjusted as required by rules promulgated
by the Commission.
(3) Assumes the sale of all shares offered hereby.
(4) Includes outstanding warrants to purchase 1,060,590 shares of
Common Stock of the Company (of which 760,590 shares are
purchasable for $2.50 per share and 300,000 shares are
purchasable for $2.875 per share).
(5) Shares are held in the name of Republic New York Securities, as
custodian of the shares and for the benefit of the above listed
parties.
(6) Shares are held in the name of Farbank & Co., as custodian of the
shares and for the benefit of the above listed party.
(7) Includes outstanding options to purchase 20,000 shares at an
exercise price of $2.125 per share and options to purchase 26,666
shares at an exercise price of $3.75 per share.
PLAN OF DISTRIBUTION
The Company has been advised that the Selling Stockholders or pledgees,
donees, tranferees of or other successors in interest to the Selling
Stockholders may sell Shares from time to time in transactions on the Nasdaq
SmallCap Market, in privately negotiated transactions or a combination of
such methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Selling Stockholders may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concession
or commissions from the Selling Stockholders or the purchasers of the Shares
for whom such broker-dealers may act as agent or to whom they sell as
principal, or both (which compensation to a particular broker-dealer might be
in excess of customary commission).
At any time a particular offer of Shares is made, to the extent required,
a supplemental Prospectus will be distributed which will set forth the number
of shares offered and the terms of the offering including the names or names
of any underwriters, dealers or agents, the purchase price paid by any
underwriter for the Shares purchased from the Selling Stockholders, any
discounts, commission and other items constituting compensation from the
Selling Stockholders and any discounts, concessions or commissions allowed or
reallowed or paid to dealers.
The Selling Stockholders and any broker-dealers who act in connection
with the sale of Shares hereunder may be deemed to be "underwriters" as that
term is defined in the Securities Act, and any commissions received by them
and profit on any resale of the Shares as principal might be deemed to be
underwriting discounts and commissions under the Securities Act.
Any or all of the sales or other transactions involving the Shares
described above, whether effected by the Selling Stockholders, any
broker-dealer or others, may be made pursuant
14
<PAGE>
to this Prospectus. In addition, any Shares that qualify for sale pursuant to
Rule 144 under the Act may be sold under Rule 144 rather than pursuant to
this Prospectus.
In order to comply with the securities laws of certain states, if
applicable, the Shares may be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale
or an exemption from registration or qualification requirements is available
and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Shares may not simultaneously engage in
market making activities with respect to IMRE Common Stock for a period of
two business days prior to the commencement of such distribution. In addition
and without limiting the foregoing, the Selling Stockholders will be subject
to applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation, Rules 10b-6 and 10b-7, which
provisions may limit the timing of purchases and sales of shares of the
Shares by the Selling Stockholders.
All costs associated with the shares being offered hereunder will be paid
by the Company.
The Company and the Selling Stockholders may agree to indemnify certain
persons including broker-dealers or others, against certain liabilities in
connection with any offering of the Shares, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the issuance of the Shares will be passed upon for the
Company by Cooley Godward Castro Huddleson & Tatum, San Diego, California
("Cooley Godward").
EXPERTS
The consolidated financial statements of Cypress Bioscience, Inc.
incorporated by reference from Cypress Bioscience, Inc.'s 1995 Annual Report
(Form 10-K) as of December 31, 1995 and 1994 and for the years then ended,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference
in reliance upon such report given upon the authority of such firm as experts
in accounting and auditing.
The consolidated statements of operations, cash flows and stockholders'
equity of Cypress Bioscience, Inc. for the year ended December 31, 1993,
incorporated by reference in this Registration Statement, have been
incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
15
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by the Registrant in
connection with the sale of the Common Stock being registered. All the
amounts shown are estimates except for the SEC registration fee and the NASD
filing fee.
SEC Registration fee...................... $ 6,800
Nasdaq SmallCap Market Listing Fee........ -0-
Legal fees and expenses................... 7,500
Blue sky qualification fees and expenses.. 2,500
Accounting fees and expenses.............. 5,000
Printing and engraving expenses........... 5,000
Miscellaneous............................. 5,000
-------
Total................................ $31,800
=======
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Under Section 145 of the Delaware General Corporation Law (the "DGCL"),
the Registrant has broad powers to indemnify its Directors and officers
against liabilities they may incur in such capacities, including liabilities
under the Securities Act of 1933, as amended (the "Securities Act").
The Registrant's Certificate of Incorporation and By-laws include
provisions to (i) eliminate the personal liability of its directors for
monetary damages resulting from breaches of their fiduciary duty to the
extent permitted by Section 102(b)(7) of the DGCL and (ii) require the
Registrant to indemnify its Directors and officers to the fullest extent
permitted by applicable law, including circumstances in which indemnification
is otherwise discretionary. Pursuant to Section 145 of the DGCL, a
corporation generally has the power to indemnify its present and former
directors, officers, employees and agents against expenses incurred by them
in connection with any suit to which they are or are threatened to be made, a
party by reason of their serving in such positions so long as they acted in
good faith and in a manner they reasonably believed to be in or not opposed
to, the best interests of the corporation and with respect to any criminal
action, they had no reasonable cause to believe their conduct was unlawful.
The Registrant believes that these provisions are necessary to attract and
retain qualified persons as Directors and officers. These provisions do not
eliminate the Directors' or officers' duty of care, and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of
non-monetary relief will remain available under the DGCL. In addition, each
Director will continue to be subject to
II-1
<PAGE>
liability pursuant to Section 174 of the DGCL, for breach of the Director's
duty of loyalty to the Registrant, for acts or omissions not in good faith or
involving intentional misconduct, for knowing violations of law, for acts or
omissions that the Director believes to be contrary to the best interests of
the Registrant or its stockholders, for any transaction from which the
Director derived an improper personal benefit, for acts or omissions
involving a reckless disregard for the Director's duty to the Registrant or
its stockholders when the Director was aware or should have been aware of a
risk of serious injury to the Registrant or its stockholders, for acts or
omission that constitute an unexcused pattern of inattention that amounts to
an abdication of the Director's duty to the Registrant or its stockholders,
for improper transactions between the Director and the Registrant and for
improper loans to Directors and officers. The provision also does not affect
a Director's responsibilities under any other law, such as the federal
securities law or state or federal environmental laws.
The Registrant has entered into a letter agreement with a certain
executive officer whereby the Registrant has agreed to pay for expenses
(including attorney's fees) incurred by such executive officer in connection
with an ongoing SEC inquiry in advance of any final disposition of such
inquiry. In the event it is ultimately determined that such executive officer
is not entitled to indemnification under the terms of the Registrant's Bylaws
or other applicable laws or regulations such executive officer is obligated to
repay all amounts advanced by the Registrant on such executive officer's behalf.
The Registrant has an insurance policy covering the officers and
Directors of the Registrant with respect to certain liabilities, including
liabilities arising under the Securities Act or otherwise.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------
5.1 Opinion of Cooley Godward Castro Huddleson & Tatum
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Coopers & Lybrand L.L.P., Independent Accountants
II-2
<PAGE>
23.3 Consent of Cooley Godward Castro Huddleson & Tatum.
Reference is made to Exhibit 5.1
24.1 Power of Attorney. Reference is made to page II-6.
- ------------------
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to provisions described in Item 15 or otherwise, the registrant has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant 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 Act and will be governed by the
final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a)
or 15(d) of the Exchange 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.
(2) To deliver or cause to be delivered with the Prospectus, to each
person to whom the Prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the Prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule
14c-3 under the Exchange Act; and where interim financial information
required to be presented by Article 3 of Regulation S-X are not set forth in
the Prospectus, to deliver or caused to be delivered to each person to whom
the Prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the Prospectus to provide such
interim financial information.
(3) That, for the purposes of determining liability under the Act, each
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.
II-3
<PAGE>
(4) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(5) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to include any
additional or changed material information on the plan of distribution.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
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
Amendment No. 2 to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Seattle, State of
Washington, on May 2, 1996.
CYPRESS BIOSCIENCE, INC.
By: /s/ Alex P. de Soto
------------------------------------
Alex P. de Soto
Vice President and
Chief Financial Officer
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 to Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Jay D. Kranzler* Vice Chairman of the Board of
- -------------------------------- Directors and Chief Executive May 2, 1996
Jay D. Kranzler, M.D. Ph.D. Officer
(Principal Executive Officer)
/s/ Alex P. de Soto Vice President and Chief
- -------------------------------- Financial Officer (Principal May 2, 1996
Alex P. de Soto Financial Officer)
DebbyJo Blank* Director, President and Chief
- -------------------------------- Operating Officer May 2, 1996
DebbyJo Blank, M.D.
Richard M. Crooks, Jr.*
- -------------------------------- Chairman of the Board May 2, 1996
Richard M. Crooks, Jr.
Philip J. O'Reilly*
- -------------------------------- Director May 2, 1996
Philip J. O'Reilly
Jack H. Vaughn*
- -------------------------------- Director May 2, 1996
Jack H. Vaughn
* By Alex P. de Soto as attorney-in-fact
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- -------- ----------- ----------
<S> <C> <C>
5.1 Opinion of Cooley Godward Castro Huddleson & Tatum
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Coopers & Lybrand L.L.P., Independent Accountants
23.3 Consent of Cooley Godward Castro Huddleson & Tatum.
Reference is made to Exhibit 5.1
24.1 Power of Attorney. Reference is made to page II-6
__________
</TABLE>
II-7
<PAGE>
EXHIBIT 5.1
February 20, 1996
IMRE Corporation
401 Queen Anne Avenue North
Seattle, WA 98109
Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by IMRE Corporation (the "Company") of a Registration
Statement on Form S-3 (the "Registration Statement") with the Securities and
Exchange Commission, including a related prospectus filed with the
Registration Statement (the "Prospectus"), covering the public offering of up
to 9,560,702 shares of the Company's Common Stock, par value $.02 (the
"Shares"), to be sold by certain stockholders, as described in the
Registration Statement.
In connection with this opinion, we have examined and relied upon the
Registration Statement and related Prospectus, the Company's Certificate of
Incorporation and Bylaws, both as amended, and the originals or copies
certified to our satisfaction of such records, documents, certificates,
memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when sold and issued in accordance with the Registration
Statement and related Prospectus, will be validly issued, fully paid, and
nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in
the Prospectus included in the Registration Statement and to the filing of
this opinion as an exhibit to the Registration Statement.
Very truly yours,
COOLEY GODWARD CASTRO
HUDDLESON & TATUM
By: /s/ FREDERICK T. MUTO
----------------------------
Frederick T. Muto
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 2 to the Registration Statement (Form S-3, No. 333-01071) and
related Prospectus of Cypress Bioscience, Inc., formerly known as IMRE
Corporation, and to the incorporation by reference therein of our report
dated January 23, 1996, with respect to the consolidated financial statements
of Cypress Bioscience, Inc. at December 31, 1995 and 1994 and for each year
then ended, included in its Annual Report (Form 10-K/A) for the year ended
December 31, 1995, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Seattle, Washington
May 1, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to incorporation by reference in Amendment No. 2 to the
registration statement of Cypress Bioscience, Inc. (formerly IMRE Corporation)
on Form S-3 (Form S-3 No. 333-01071) of our report dated March 15, 1994, on
our audit of the consolidated statements of operations, cash flows and
stockholders' equity of IMRE Corporation for the year ended December 31, 1993
included in its Annual Report on Form 10-K, as amended, for the year ended
December 31, 1995, filed with the Securities and Exchange Commission.
/s/ Coopers & Lybrand L.L.P.
Seattle, Washington
May 1, 1996
