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Filed pursuant to Rule 424(b)(1)
SEC File No. 33-60833
PROSPECTUS
417,000 SHARES
CARRINGTON LABORATORIES, INC.
COMMON STOCK
All the 417,000 shares (the "Shares") of Common Stock, par value $.01 per
share ("Common Stock"), of Carrington Laboratories, Inc., a Texas corporation
("Carrington" or the "Company"), offered hereby are being offered by and for the
account of certain shareholders of the Company (the "Selling Shareholders"). The
Company will receive none of the proceeds from sales of the Shares.
The Common Stock is listed on the NASDAQ National Market System
("NASDAQ") under the symbol "CARN". On July 11, 1995, the closing price of the
Common Stock on NASDAQ was $26.00 per share.
The Shares may be sold from time to time by the Selling Shareholders, or
by their pledgees, donees or other successors in interest. Such sales may be
made on NASDAQ or otherwise at prices and on terms related to the then current
market price of the Common Stock or in negotiated transactions. The Shares may
be sold by any one or more of the following methods: (a) a block trade in which
the broker or dealer so engaged will attempt to sell the Shares as agent, but
may position and resell a portion of a block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal, and resale by
such broker or dealer, for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
and (d) privately negotiated transactions. See "Plan of Distribution".
The Company has agreed with the Selling Shareholders to register the
Shares offered hereby. The Company has also agreed to pay all fees and expenses
incident to such registration, other than any brokerage discounts and
commissions payable in respect of sales of the Shares, the fees and expenses of
any attorneys and accountants employed by the Selling Shareholders and any other
costs directly incurred by the Selling Shareholders in connection with the
offering of the Shares, all of which will be paid by the Selling Shareholders.
It is estimated that the fees and expenses payable by the Company in connection
with the registration of the Shares will be approximately $25,000. The
Company intends to keep the Registration Statement (as hereinafter defined), of
which this Prospectus is a part, effective for a period of no longer than 120
days from the date of this Prospectus.
------------------------------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE 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 July 11, 1995.
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No person is authorized in connection with the offering made hereby to
give any information or to make any representation not contained or incorporated
by reference in this Prospectus, and any information or representation not
contained or incorporated by reference herein must not be relied upon as having
been authorized by the Company or any Selling Shareholder. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information herein is correct as of any time subsequent
to the date hereof.
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"). 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, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices at 7 World Trade Center, Suite 1300, New York,
New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can also be obtained from the Commission at
prescribed rates through its Public Reference Section at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act of 1933, as amended, with respect to the
Common Stock offered hereby (including all amendments or supplements thereto,
the "Registration Statement"). This Prospectus, which forms a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. Statements contained herein
concerning the provisions of certain documents are not necessarily complete and,
in each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File
No. 0-11997) pursuant to the Exchange Act are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
November 30, 1994;
(2) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995;
(3) The Company's Current Report on Form 8-K dated February 21, 1995
(Date of Event: February 9, 1995);
(4) The description of the Common Stock contained in the Registration
Statement on Form 8-A of the Company heretofore filed by the Company with the
Commission, including any amendments or reports filed for the purpose of
updating such description; and
(5) All other documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the offering of the Shares.
Any statement contained herein or in a document or information
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 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 so modified or superseded, to constitute a part of this
Prospectus.
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The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any and all of the foregoing documents or information that has been
incorporated by reference in this Prospectus, other than exhibits to such
documents (unless such exhibits are specifically incorporated by reference into
such documents). Requests should be directed to Christopher S. Record, Vice
President, Finance and Administration, Carrington Laboratories, Inc., 2001
Walnut Hill Lane, Irving, Texas 75038, telephone (214) 518-1300.
THE COMPANY
Carrington is a research based pharmaceutical company engaged in the
development, manufacturing and marketing of carbohydrate-based therapeutics for
the treatment of major illnesses and the dressing and management of wounds. The
Company is engaged in the sale of nonprescription pharmaceutical, consumer and
veterinary pharmaceutical products through a network of distributors. The
Company's research and product portfolio are based on complex carbohydrate
technology stemming from the Aloe vera plant.
The Company's principal executive offices are located at 2001 Walnut Hill
Lane, Irving, Texas 75038, telephone (214) 518-1300.
RISK FACTORS
The shares of Common Stock offered hereby involve a high degree of risk.
Prospective purchasers should carefully consider the following risk factors, in
addition to the other information contained or incorporated by reference in this
Prospectus.
No Assurance of Profits. The Company incurred a net loss in each of the
fiscal years 1983, the year of its initial public offering, through 1990 and had
to rely on outside sources of funds to maintain its liquidity during this
period. The Company has reported net income in each of the past four fiscal
years; however, the Company reported a net loss of approximately $497,000 for
the quarter ended March 31, 1995. There is no assurance that the Company will
operate profitably in the future.
No Assurance of Regulatory Approvals. The commercialization of certain
of the Company's proposed products will require approvals from the Food and Drug
Administration (the "FDA") and comparable regulatory agencies in most foreign
countries. To obtain such approvals, the safety and efficacy of the products
must be demonstrated through extensive preclinical testing and human clinical
trials. There is no assurance that the safety or efficacy of a product, to the
extent demonstrated in preclinical testing, will be pertinent to the development
of, or indicative of the safety or efficacy of, a product for the human market.
In addition, there is no assurance that the results of clinical trials of a
product will be consistent with results obtained in preclinical tests.
Furthermore, there is no assurance that any product will be shown to be safe and
effective or that regulatory approval for any product will be obtained on a
timely basis, if at all.
No Assurance Pharmaceutical Products Will be Commercialized. The Company
currently derives no revenue from the sale of prescription pharmaceutical
products. The Company currently has several complex carbohydrate pharmaceutical
compounds under development, which are in preclinical and clinical trials.
There is no assurance that the Company's product development efforts will be
successfully completed or that required approvals can be obtained. Even if
products are approved, they may not achieve commercial success. Furthermore,
although the Company has an established sales force experienced in the marketing
of nonprescription pharmaceutical products, the Company's sales force has very
limited experience in the marketing of prescription-only drugs. There is no
assurance that the Company will be able to establish an experienced sales force
for this purpose.
3
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Need for Additional Funds. Substantial additional funding will be
required to complete the development of and to commercialize the Company's
proposed prescription pharmaceutical products. No assurances are given as to
the Company's success in obtaining additional funding or as to the terms of any
such funding.
Limited Manufacturing Experience. Although members of the Company's
management have extensive experience in the business of developing,
manufacturing and marketing human and animal health products, the Company does
not have experience in the large scale manufacture of bulk or finished dosage
forms of complex carbohydrates or any other pharmaceutical compound. In
addition, the Company will be required to expand its current manufacturing
facilities or contract with third parties to meet any requirement to produce
commercial quantities of finished oral dosage forms of its complex carbohydrates
and to meet any long-term requirement to produce commercial quantities of
finished injectable dosage forms.
Government Regulation. The Company is subject to regulation by numerous
governmental authorities in the United States and other countries. Certain of
the Company's proposed products will require governmental approval or licensing
prior to commercial use. The approval process applicable to prescription
pharmaceutical products usually takes several years and typically requires
substantial expenditures. The Company and any licensees of the Company may
encounter significant delays or excessive costs in their respective efforts to
secure necessary approvals or licenses. Future United States or foreign
legislative or administrative acts could also prevent or delay regulatory
approval of the Company's or its licensees' products. Failure to obtain
requisite governmental approvals or failure to obtain approvals of the scope
requested could delay or preclude the Company and any licensees of the Company
from marketing their products, or could limit the commercial use of the
products, and thereby have a material adverse effect on the Company's liquidity
and financial condition.
Highly Competitive Industry. There is substantial competition in the
pharmaceutical industry. Potential competitors in the United States are
numerous and include pharmaceutical, chemical and biotechnology companies. Many
of these companies have substantially greater capital resources, research and
development staffs, facilities and expertise (including in research and
development, manufacturing, testing, obtaining regulatory approvals and
marketing) than the Company. Furthermore, some competitors may achieve product
commercialization earlier than the Company.
Volatility of Stock Price. Since the Company's initial public offering
in 1983, the market price of the Common Stock has fluctuated over a wide range,
and it is likely that the price of the Common Stock will fluctuate in the
future. Announcements of a positive or negative nature regarding technical
innovations, new commercial products, regulatory approvals, patent or
proprietary rights or other developments concerning the Company or its
competitors could have a significant impact on the market price of the Common
Stock.
Shares Eligible for Future Sale. Future sales of shares of Common Stock
by existing shareholders, or by shareholders who receive shares of Common Stock
through the exercise of options or warrants, the conversion of preferred stock
or otherwise, could have an adverse effect on the price of the Common Stock.
No Dividends Anticipated in the Foreseeable Future. The Company has not
paid any cash dividends on the Common Stock since its initial public offering in
1983 and does not anticipate paying cash dividends on the Common Stock in the
foreseeable future. Declaration of cash dividends on the Common Stock will
depend upon, among other things, future earnings, the operating and financial
condition of the Company, its capital requirements and general business
conditions. Under the terms of a bank loan agreement, the Company is prohibited
from declaring or paying cash dividends on any of its capital stock.
Product Liability Exposure. The Company could be subject to product
liability claims in connection with the use of products that the Company and its
licensees are currently manufacturing, testing or selling or that the Company
and any licensees may manufacture, test or sell in the future. There is no
assurance that the Company would have sufficient resources to satisfy any
liability resulting from these claims or would be able to have its customers
indemnify or insure the Company against such claims. The Company currently
carries product liability insurance in the amount of $3,000,000, but there is no
assurance that such coverage will be adequate in terms and scope to protect it
against material adverse effects in the event of a successful product liability
claim.
4
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Patents. The Company has obtained patents or filed patent applications
in the United States and approximately 24 other countries in three series
regarding the compositions of acetylated mannan derivatives, the processes by
which they are produced and the methods of their use. The Company believes that
the patents it has obtained and those it is seeking constitute valuable assets.
However, patent rights resulting from issued patents are not self-enforcing.
The Company must enforce the rights if and when they are infringed.
Accordingly, there are no assurances that any patents issued to the Company give
significant commercial protection.
Obsolescence. The pharmaceutical industry has undergone rapid and
significant change. The Company expects that this field will continue to
develop rapidly, and the Company's future success will depend, in large part, on
its ability to maintain a competitive position. Rapid technological development
may result in the Company's products or processes becoming obsolete before
marketing of those products or before the Company recovers a significant portion
of the research, development and commercialization expenses incurred with
respect to those products.
Dependence Upon Key Personnel. The Company's success depends in large
part upon its ability to attract and retain highly qualified scientific,
manufacturing, marketing and management personnel. The Company believes that it
employs highly qualified personnel in all these areas. The Company, however,
faces competition for such personnel from other companies, academic
institutions, government entities and other organizations. There is no
assurance that the Company will be successful in hiring or retaining the
requisite personnel.
Antitakeover Matters. Certain provisions of the Company's Restated
Articles of Incorporation and Bylaws may be deemed to have an antitakeover
effect and may delay, defer or prevent a tender offer or takeover attempt that a
shareholder of the Company might consider in such shareholder's best interest,
including attempts that might result in the payment of a premium over the market
price for shares of Common Stock. These provisions include a provision in the
Company's Restated Articles of Incorporation authorizing the issuance of "blank
check" preferred stock by the Board of Directors of the Company without further
shareholder approval. They also include provisions in the Company's Bylaws that
divide the directors of the Company into three classes that are elected for
staggered three-year terms and that establish advance notice procedures with
respect to submissions by shareholders of proposals to be acted on at
shareholder meetings and of nominations of candidates for election as directors.
In addition, the Company has instituted a shareholder rights plan, which may
have the effect of discouraging an unsolicited takeover proposal.
5
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SELLING SHAREHOLDERS
The following table sets forth certain information with respect to the
ownership of the Common Stock, as of June 15, 1995, and as adjusted to reflect
the sale of the Shares offered hereby, by each of the Selling Shareholders.
Except as otherwise indicated, each Selling Shareholder has sole voting and
investment power with respect to all shares indicated as being beneficially
owned by such person.
<TABLE>
<CAPTION>
Ownership of Number of Ownership of
Common Stock Before Shares Common Stock After
the Offering Being Offered the Offering/(1)/
------------------------- ------------- -------------------
Number of Number of
Name Shares Percent Shares Percent
- ---------------------------------------- ------------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
Bank One Wisconsin Trust Company, 5,000 /(2)/ * 5,000 /(3)/ None --
NA, as Trustee for the Brian
Nicholas Fitzgerald Trust
Bank One Wisconsin Trust Company, 19,300 /(2)/ * 10,000 /(3)/ 9,300 *
NA as Trustee for the Carolyn J.
Fitzgerald Trust
Bank One Wisconsin Trust Company, 5,000 /(2)/ * 5,000 /(3)/ None --
NA as Trustee for the Christopher
James DeWitz Trust
Bank One Wisconsin Trust Company, 5,000 /(2)/ * 5,000 /(3)/ None --
NA as Trustee for the Conner W.
Fitzgerald Trust
Bank One Wisconsin Trust Company, 19,300 /(2)/ * 10,000 /(3)/ 9,300 *
NA as Trustee for the Ellen P.
Fitzgerald Trust
Bank One Wisconsin Trust Company, 5,000 /(2)/ * 5,000 /(3)/ None --
NA as Trustee for the Jaimie Ty
Fitzgerald Trust
Bank One Wisconsin Trust Company, 5,000 /(2)/ * 5,000 /(3)/ None --
NA as Trustee for the James F.
Fitzgerald III Trust
Bank One Wisconsin Trust Company, 5,000 /(2)/ * 5,000 /(3)/ None --
NA as Trustee for the Michael Ryan
Fitzgerald Trust
Bank One Wisconsin Trust Company, 5,000 /(2)/ * 5,000 /(3)/ None --
NA as Trustee for the Parker Henry
Fitzgerald Trust
Bank One Wisconsin Trust Company, 5,000 /(2)/ * 5,000 /(3)/ None --
NA as Trustee for the Shannon
Fitzgerald Trust
Bank One Wisconsin Trust Company, 5,000 /(2)/ * 5,000 /(3)/ None --
NA as Trustee for the Sarah K.
O'Loughlin Trust
Dr. Gerald R. Bratton 5,000 * 5,000 /(4)/ None --
David L. Busbee 5,000 * 5,000 /(4)/ None --
Robert H. Carpenter 9,500 * 9,500 /(4)/ None --
J.P. Cullen 40,000 * 40,000 /(3)/ None --
James F. Fitzgerald, Sr. Trustee of 50,000 /(5)/ * 50,000 /(3)/ None --
the James F. Fitzgerald Charitable
Remainder Trust
</TABLE>
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<TABLE>
<CAPTION>
Ownership of Number of Ownership of
Common Stock Before Shares Common Stock After
the Offering Being Offered the Offering/(1)/
------------------------- ------------- -------------------
Number of Number of
Name Shares Percent Shares Percent
- ---------------------------------------- ------------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
James F. Fitzgerald, Sr. or Marilyn 20,000 /(6)/ * 20,000 /(3)/ None --
C. Fitzgerald, Trustees of Fitzgerald
Trust UA 3/08/94
Michael D. Fitzgerald 10,000 * 10,000 /(3)/ None --
J. Harold Helderman, M.D. 20,000 * 20,000 /(4)/ None --
T.H. Holloway 12,000 * 10,000 /(4)/ 2,000 *
JCC Ltd. 20,000 * 20,000 /(3)/ None --
Maurice C. Kemp, Ph.D. 10,000 * 10,000 /(4)/ None --
Meredith Ann Marquez Trust, 107,368 /(7)/ 1.42% 5,000 /(3)/ 102,368 1.36%
Richard N. Mercurio, Trustee
Marquez Family Trust, Thomas J. 44,300 /(8)/ * 5,000 /(3)/ 39,300 *
Marquez, Trustee, and Richard A.
Mercurio, Trustee
H. Reginald McDaniel, M.D. 98,445 /(9)/ * 25,000 /(4)/ 73,445 *
Vance Kirkland Meares 5,650 * 2,500 /(4)/ 3,150 *
James T. O'Brien 15,000 /(10)/ * 10,000 /(4)/ 5,000 *
Melissa O'Loughlin 5,000 * 5,000 /(3)/ None --
John T. Oxley 50,000 * 50,000 /(3)/ None --
George K. Steil, Sr. 14,000 * 10,000 /(3)/ 4,000 *
John L. Strauss 15,000 * 15,000 /(3)/ None --
Ian R. Tizard 20,000 * 20,000 /(4)/ None --
Carlton E. and Mary Ann DuPuy
Turner 33,168 /(11)/ * 5,000 /(3)/ 28,168 *
</TABLE>
---------------------------
* Less than 1%.
/(1)/ Assumes that all Shares being offered are sold.
/(2)/ Does not include shares held by Bank One Wisconsin Trust Company, as
trustee for the other trusts named in the table.
/(3)/ The shares being offered by the Selling Shareholder were purchased by the
Selling Shareholder from the Company pursuant to the terms of a stock
purchase agreement (the "Stock Purchase Agreement") dated April 5, 1995,
between the Company and the Selling Shareholder. The Stock Purchase
Agreement granted the Selling Shareholder certain registration rights with
respect to these shares. The Company has registered such shares for sale
pursuant to this Prospectus as required by the Stock Purchase Agreement.
/(4)/ Consists of shares the Selling Shareholder presently has the right to
acquire through the exercise of warrants granted to such person by the
Company. The Company granted these Selling Shareholders the right to
include such shares in this offering as consideration for their agreement
to exercise their warrants with respect to such shares not later than the
45th day following the effectiveness of the Registration Statement of
which this Prospectus is a part.
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/(5)/ Does not include 107,800 shares held by Mr. Fitzgerald directly or 53,500
shares held by trusts for which Mr. Fitzgerald serves as trustee.
/(6)/ Does not include 107,800 shares held by Mr. Fitzgerald directly or 83,500
shares held by trusts for which Mr. Fitzgerald serves as trustee.
/(7)/ Includes 102,368 shares held either directly or indirectly by the
Meredith Ann Marquez Trust, Richard N. Mercurio, Trustee.
/(8)/ Includes 39,300 shares held either directly or indirectly by the Marquez
Family Trust, Thomas J. Marquez, Trustee, and Richard N. Mercurio,
Trustee. Mr. Marquez currently serves as a director of the Company.
/(9)/ Includes 41,292 shares held by the H. Reginald McDaniel, M.D. &
Associates Defined Benefit Plan, as Trustee.
/(10)/ Mr. O'Brien currently serves as a director of the Company.
/(11)/ Includes 28,168 shares either held by Dr. Turner, or that Dr. Turner has
the right to acquire pursuant to presently exercisable options. Dr.
Turner is the Chief Executive Officer, President and a director of the
Company.
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by the Selling Shareholders, or by
their pledgees, donees or other successors in interest. Such sales may be made
by the Selling Shareholders on NASDAQ or otherwise at prices and on terms
related to the then current market price of the Common Stock or in negotiated
transactions. The Shares may be sold by any one or more of the following
methods:
(a) a block trade in which the broker or dealer so engaged will attempt to
sell the Shares as agent, but may position and resell a portion of a block as
principal to facilitate the transaction;
(b) purchases by a broker or dealer as principal, and resale by such broker
or dealer, for its account pursuant to this Prospectus;
(c) ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
(d) privately negotiated transactions.
The Selling Shareholders may effect such transactions by selling the Shares
to or through brokers or dealers. Such brokers or dealers will receive
compensation in the form of discounts or commissions from the Selling
Shareholders, and they may also receive commissions from the purchasers of the
Shares for whom they may act as agents. Such discounts or commissions from the
Selling Shareholders or such purchasers are not expected to exceed those
customary in the types of transactions involved.
The Company will pay all fees and expenses incident to the registration of
the Shares, other than any brokerage discounts and commissions payable in
respect of sales of the Shares, the fees and expenses of any attorneys and
accountants employed by the Selling Shareholders and any other costs directly
incurred by the Selling Shareholders in connection with the offering of the
Shares, all of which will be paid by the Selling Shareholders. It is estimated
that the fees and expenses payable by the Company in connection with the
registration of the Shares will be approximately $25,000. The Company
will receive none of the proceeds from sales of the Shares.
In the event the Shares are offered to the public by the Selling
Shareholders, they may be deemed "underwriters" within the meaning of the
Securities Act of 1933. Any broker-dealer selling the Shares as agent for a
Selling Shareholder and any broker-dealer purchasing and reselling the Shares
for its own account may also be deemed an "underwriter".
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LEGAL MATTERS
The legality of the Shares offered hereby will be passed upon for the
Company by Thompson & Knight, A Professional Corporation, Dallas, Texas.
EXPERTS
The consolidated financial statements and financial statement schedules of
the Company incorporated in this Prospectus by reference to the Annual Report on
Form 10-K of the Company for the year ended November 30, 1994 have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and have been so incorporated in reliance upon the
authority of said firm as experts giving said reports.
9
