As filed with the Securities and Exchange Commission on August 20, 1997
Registration No. 333-17177
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
PRE-EFFECTIVE AMENDMENT NO. 3 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------
Carrington Laboratories, Inc.
(Exact name of registrant as specified in its charter)
Texas 75-1435663
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 Walnut Hill Lane
Irving, Texas 75038
(972) 518-1300
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
CHRISTOPHER S. RECORD Copy to:
Vice President, Business Development NORMAN R. ROGERS
Carrington Laboratories, Inc. Thompson & Knight,
2001 Walnut Hill Lane A Professional Corporation
Irving, Texas 75038 1700 Pacific Avenue, Suite 3300
(972) 518-1300 Dallas, Texas 75201
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to the public:
From time to time after this registration statement becomes effective as
determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box.
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.
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 which 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 AUGUST 20, 1997
PROSPECTUS
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
415,000 Shares
Carrington Laboratories, Inc.
Common Stock
This Prospectus relates to the sale from time to time by certain
shareholders (the "Selling Shareholders") of Carrington Laboratories, Inc., a
Texas corporation ("Carrington" or the "Company"), of shares (the "Shares") of
Common Stock, par value $.01 per share ("Common Stock"), of the Company
acquired by the Selling Shareholders in a private placement in June 1997. See
"Selling Shareholders." The Company will receive none of the proceeds from
sales of the Shares.
The Common Stock is quoted on the Nasdaq Stock Market's National Market
("Nasdaq") under the symbol "CARN." On August 19, 1997, the closing sales
price of the Common Stock on Nasdaq was $5.75 per share. See "Selling
Shareholders."
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 use its reasonable
best efforts to register the Shares in the Registration Statement (as
hereinafter defined) of which this Prospectus is a part. The Company has also
agreed to pay all reasonable expenses incident to such registration, other
than underwriting discounts and commissions and other fees and expenses of
investment bankers and other than brokerage commissions. It is estimated that
the fees and expenses payable by the Company in connection with the
registration of the Shares will be approximately $20,000. The Company intends
to keep the Registration Statement (as hereinafter defined) of which this
Prospectus is a part effective for a period ending no later than June 20,
1998. See "Selling Shareholders."
------------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF
RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 4.
------------
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 _____________________, 1997.
<PAGE>
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.
TABLE OF CONTENTS
Page
Available Information . . . . . . . . . . . . . . . . . . . . .2
Incorporation of Certain Documents by Reference. . . . . . . . .3
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . .3
Recent Developments. . . . . . . . . . . . . . . . . . . . . . .3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . .4
Disclosure Regarding Forward-Looking Statements. . . . . . . . .6
Selling Shareholders . . . . . . . . . . . . . . . . . . . . . .7
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . .8
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . .8
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
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, registration
statements, 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. These reports, registration
statements, proxy statements and other information may be obtained from the
web site that the Commission maintains at http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended, for the registration of
415,000 shares of Common Stock with respect to the offering made hereby (such
Registration Statement, 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.
<PAGE> 2
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 December 31, 1996 (as amended by Form 10-K/A (Amendment
No. 1) filed on April 7, 1997 and Form 10-K/A (Amendment No. 2)
filed on May 1, 1997);
(2) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997 and June 30, 1997;
(3) The Company's Current Reports on Form 8-K dated May 21, 1997 and
June 20, 1997;
(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.
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, Business Development, Carrington Laboratories, Inc., 2001
Walnut Hill Lane, Irving, Texas 75038, telephone (972) 518-1300.
THE COMPANY
Carrington is a research-based pharmaceutical and medical device company
engaged in the development, manufacturing and marketing of naturally derived
complex carbohydrate and other natural product therapeutics for the treatment
of major illnesses and the dressing and management of wounds. The Company
sells, using a network of distributors, non-prescription products through its
Wound and Skin Care Division, veterinary medical devices and pharmaceuticals
through its Veterinary Medical Division and consumer products through its
consumer products' subsidiary, Caraloe, Inc. The Company's research and
product portfolio are based primarily on complex carbohydrate technology
derived from the Aloe vera L.
The Company's principal executive offices are located at 2001 Walnut Hill
Lane, Irving, Texas 75038, and its telephone number is (972) 518-1300.
RECENT DEVELOPMENTS
Mannatech, Inc. ("Mannatech") terminated its Supply Agreement for
Manapol(R) powder with the Company's subsidiary, Caraloe, Inc. ("Caraloe"),
effective March 31, 1997. Under that agreement, Mannatech was obligated to
purchase a minimum of 225 kilograms of Manapol(R) powder per month at a price
of $1,200 per kilogram. Termination of the agreement also terminated
Mannatech's exclusive right to purchase Manapol(R) powder for certain uses in
the United States, Mexico and Canada. Mannatech was the Company's largest
customer in 1996, accounting for approximately 15% of consolidated net sales.
Caraloe and Mannatech entered into a new, non-exclusive Supply Agreement for
Manapol(R) powder effective August 14, 1997. Under the new agreement,
Mannatech is obligated to purchase a minimum of 300 kilograms of Manapol(R)
powder per month from Caraloe through August 14, 2000. The price payable by
Mannatech is dependent on the total quantity purchased during the month.
Initially, the prices range from $1,225 per kilogram for 300 kilograms down to
$1,100 per kilogram for more than 600 kilograms. The agreement provides that
the pricing schedule will be re-evaluated in May 1998 or when Mannatech's
monthly purchases exceed 700 kilograms.
<PAGE> 3
In March and May 1997, the Company repurchased all of the Series E
Convertible Preferred Stock then outstanding, thereby reducing its available
cash and its working capital. The total cost of the repurchase was
approximately $7,766,000. Immediately following the repurchase, the Company's
available cash was approximately $1,200,000, and its working capital was
approximately $5,963,000.
On June 20, 1997, the Company completed a private placement of the 415,000
Shares offered hereby to three accredited investors. The Company received
approximately $2,500,000 in the private placement. The Company agreed to use
its reasonable best efforts to register the 415,000 Shares offered hereby;
however, under the terms of the stock purchase agreement pursuant to which the
private placement was effected, the Company will not be penalized for failing
to effect such registration.
On August 14, 1997, the Company announced that David G. Shand, M.D.,
Ph.D., Executive Vice President, Research and Development, will retire
effective September 30, 1997. Under an agreement with Dr. Shand, the Company
will retain his services as a part-time consultant after his retirement for a
period of one year, subject to renewal for up to five additional one-year
terms upon written agreement by both parties. The Company anticipates the Dr.
Shand will continue to be involved in the design of protocols and the
selection of contract research organizations for the Company's clinical
programs.
The Company has initiated a search to identify and employ a senior
research and development manager with extensive drug development experience to
fill the vacancy created by Dr. Shand's retirement. In the interim, Robert
Fildes, Ph.D., a member of the Company's Board of Directors, will serve as
acting Vice President, Research and Development.
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. In each of the fiscal years 1991 through 1994, the Company had
positive earnings. The Company sustained net losses during 1995 and 1996,
although it made a small profit in the fourth quarter of 1996 (approximately
$17,000) and in the first quarter of 1997 (approximately $84,000). Thus,
there can be no assurance to shareholders that the Company will conduct its
operations profitably, either currently or in the future.
Need for Additional Funds; No Bank Credit Facility. Although the Company
had approximately $3,688,000 of cash (not including a $1,500,000 certificate
of deposit that is pledged to secure a letter of credit) at June 10, 1997,
substantial additional funding will be required to complete the development of
and to commercialize the Company's proposed prescription pharmaceutical
products. If the Company is unable to obtain additional financing, it could
have a material adverse effect on the Company's ability to complete the
development of and to commercialize the Company's proposed prescription
pharmaceutical products. No assurances are given as to the Company's ability
to obtain additional funding or as to the terms of any such funding. In
addition, the Company does not currently have a bank line of credit or other
bank credit facility available to it. To the extent that future financing
requirements are satisfied through the issuance of equity securities, the
Company's shareholders may experience dilution. The incurrence of debt
financing could result in a substantial portion of the Company's operating
cash flow being dedicated to the payment of principal and interest on such
indebtedness, could render the Company more vulnerable to competitive
pressures and economic downturns and could impose restrictions on the
Company's operations.
Costa Rica Plant. The production capacity of the Company's aloe vera
processing plant in Costa Rica, where its bulk freeze-dried aloe vera extract
is manufactured, is greater than the Company's current level of usage of the
plant. Although the Company is exploring other options to utilize the
available capacity, there is no assurance that the Company will be able to
utilize fully the Costa Rica plant's capacity. The Company's decision to
suspend testing of Aliminase[TM] oral capsules and the termination by
Mannatech of its Supply Agreement with Caraloe (see "Recent Developments")
made it necessary for the Company to review whether the carrying value of the
Costa Rica plant is recoverable. The net book value of the Costa Rica plant
as of March 31, 1996 was $3,785,000. Although the Company has concluded,
after conducting its review, that there is no impairment of value of the plant
under the applicable accounting rule, there is no assurance that future
changes in product mix or the content of Costa Rica-produced components in the
Company's current products will generate sufficient revenues to recover the
cost of the Costa Rica plant under that rule.
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
<PAGE> 4
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 that 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.
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, 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.
<PAGE> 5
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.
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.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes or incorporates by reference "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Exchange Act. All statements other than statements of
historical fact included in, or incorporated by reference in, this Prospectus
are forward-looking statements, including without limitation, statements under
the caption "Risk Factors." Forward-looking statements generally include or
are accompanied by words such as "anticipate," "believe," "estimate,"
"expect," "intend" or similar words. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from
the Company's expectations ("Cautionary Statements") are disclosed under the
caption "Risk Factors" in this Prospectus. Cautionary Statements include but
are not limited to the possibilities that the Company may be unable to obtain
the funds needed to carry out large scale clinical trials and other research
and development projects, that the results of the Company's clinical trials
may not be sufficiently positive to warrant continued development and
marketing of the products tested, that new products may not receive required
approvals by the appropriate government agencies or may not meet with adequate
customer acceptance, that the Company may not be able to obtain financing when
needed, that the Company may not be able to obtain appropriate licensing
agreements for products that it wishes to market or products that it needs
assistance in developing, that demand for the Company's products may not be
sufficient to enable it to recover the cost of its Costa Rica plant or to
absorb all of that plant's operating costs, and that the Company's efforts to
improve its sales may not be sufficient to enable it to fund its operating
costs from revenues and available cash resources. All forward-looking
statements included or incorporated
<PAGE> 6
by reference in this Prospectus, and all subsequent written and oral
forward-looking statements attributable to the Company or persons acting on
its behalf, are expressly qualified in their entirety by the Cautionary
Statements.
SELLING SHAREHOLDERS
The Shares offered hereby are shares of Common Stock sold by the Company
to the Selling Shareholders in a private placement in June 1997 (the "Private
Placement"). The Shares were sold to the Selling Shareholders for an
aggregate purchase price of approximately $2,500,000. The purchase price was
determined through discussions between the Company and a representative of the
Selling Shareholders and was based on the last reported sale price of the
Common Stock on June 3, 1997 ($6.875), less a discount of 12.5% to approximate
the liquidity risk inherent in unregistered stock.
In connection with the Private Placement, the Company agreed to use its
reasonable best efforts to amend the Registration Statement to cover the
resale of the Shares and to keep it effective until the earliest to occur of
(i) the sale and disposition of all of the Shares, (ii) all of the Shares
become eligible for sale under Rule 144 and (iii) June 20, 1998. However,
under the terms of the stock purchase agreement pursuant to which the private
placement was effected, the Company would not have been penalized for failing
to effect such registration.
The following table sets forth certain information with respect to the
ownership of the Common Stock, as of June 10, 1997, and as adjusted to reflect
the sale of the Shares offered hereby, by each of the Selling Shareholders.
Each Selling Shareholder has sole voting and investment power with respect to
all shares indicated as being beneficially owned by such person.
<PAGE>
Beneficial Maximum Beneficial
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
- ------------------ --------- ------- --------- -------
Lucia A. Englander 20,000 * 10,000 10,000 0%
Michael C. Mewhinney 165,000 1.8% 165,000 0 0%
John L. Strauss 340,000 3.7% 240,000 100,000 1.1%
------- -------
Total 515,000 415,000
____________________
* Less than 1%.
(1) Assumes that all Shares being offered are sold.
<PAGE> 7
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 has agreed to pay all reasonable expenses incident to
registration of the Shares, other than underwriting discounts and commissions
and other fees and expenses of investment bankers and other than brokerage
commissions. It is estimated that the fees and expenses payable by the
Company in connection with the registration of the Shares will be
approximately $35,364. The Company will receive none of the proceeds from
sales of the Shares.
In the event the Shares are offered to the public by the Selling
Shareholders, they may be deemed "underwriters" within the meaning of the
Securities Act of 1933. Any broker-dealer selling the Shares as agent for a
Selling Shareholder and any broker-dealer purchasing and reselling the Shares
for its own account may also be deemed an "underwriter."
LEGAL MATTERS
The legality of the Shares offered hereby will be passed upon for the
Company by Thompson & Knight, A Professional Corporation, Dallas, Texas.
EXPERTS
The consolidated financial statements of the Company incorporated by
reference in this Prospectus and elsewhere in the Registration Statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and have been so incorporated
by reference in reliance upon the authority of said firm as experts in giving
said report.
<PAGE> 8
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses, other than brokerage
discounts and commissions, expected to be incurred in connection with the
offering of the Shares registered hereby. All amounts, except the Securities
and Exchange Commission registration fee, are estimated.
Securities and Exchange Commission Registration Fee. .$ 4,364
Accounting Fees and Expenses . . . . . . . . . . . . . 10,000
Legal Fees and Expenses. . . . . . . . . . . . . . . . 20,000
Miscellaneous Expenses . . . . . . . . . . . . . . . . 1,000
--------
Total . .. . .$35,364
========
_______________________________
Pursuant to the terms of the Stock Purchase Agreement filed as
Exhibit 10.1 to this Registration Statement, under which the Selling
Shareholders have been granted registration rights in connection with the
registration being effected hereby, the Selling Shareholders will pay any
underwriting discounts and commissions and other fees and expenses of
investment bankers and any brokerage commissions payable in respect of sales
of the Shares. The Company will bear all other reasonable expenses incident
to the registration of the Shares pursuant to this Registration Statement.
Item 15. Indemnification of Directors and Officers.
The Company is a Texas corporation. Article 1302-7.06 of the Texas
Miscellaneous Corporation Laws Act authorizes Texas corporations, such as the
Company, to eliminate or limit, pursuant to a provision in their articles of
incorporation, the liability of directors thereof to the corporation and its
shareholders for certain acts or omissions in the director's capacity as a
director, subject to certain limitations. Reference is made to Article
Fifteen of the Company's Restated Articles of Incorporation, which are filed
as Exhibit 4.1 hereto, that eliminates the liability of directors of the
Company for monetary damages for certain acts or omissions, subject to certain
limitations.
Article 2.02-1 of the Texas Business Corporation Act permits (and in
certain circumstances requires) Texas corporations, such as the Company, to
indemnify directors and officers thereof under certain conditions and subject
to certain limitations. Reference is made to Article Nine of the Company's
Bylaws, which are filed as Exhibit 4.2 hereto, that provides for
indemnification of directors and officers of the Company, subject to certain
limitations.
The Company maintains a directors' and officers' liability insurance
policy insuring its directors and officers against certain liabilities and
expenses incurred by them in their capacities as such and insuring the
Company, under certain circumstances, in the event that indemnification
payments are made by the Company to such directors and officers.
Pursuant to the terms of the Stock Purchase Agreement filed as
Exhibit 10.1 to this Registration Statement, the Selling Shareholders have
agreed to indemnify the Company and its directors, officers and controlling
persons against certain liabilities, including liabilities under the
Securities Act of 1933, to the extent that selling shareholders generally
indemnify and hold harmless issuers of securities in public offering by
selling shareholders with respect to information furnished by selling
shareholders.
The foregoing summaries are necessarily subject to the complete text
of the statutes, Restated Articles of Incorporation, Bylaws, insurance policy
and agreement referred to above and are qualified in their entirety by
reference thereto.
<PAGE> II-1
Item 16. Exhibits.
The information required by this Item 16 is set forth in the Index to
Exhibits accompanying this Registration Statement.
Item 17. Undertakings.
(a) Rule 415 Offering.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to the Registration
Statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement;
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the Registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) Filings Incorporating Subsequent Exchange Act Documents by
Reference.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 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.
(h) Acceleration of Effectiveness.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that, in the opinion of the Securities and
Exchange 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
<PAGE> II-2
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.
<PAGE> II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irving, State of Texas,
on the 19th day of August, 1997.
Carrington Laboratories, Inc.
(Registrant)
By: /s/ CARLTON E. TURNER
-------------------------------------
Carlton E. Turner, Ph.D.
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed by the following
persons in the capacities and on the date indicated.
Signature Title Date
------------------------- --------------------------- ---------------
* Chairman of the Board August 19, 1997
_________________________
George DeMott
* Chief Executive Officer,
_________________________ President and Director August 19, 1997
Carlton E. Turner, Ph.D. (Principal Executive Officer)
/s/ Christopher S. Record Vice President, Business
_________________________ Development and Treasurer August 19, 1997
Christopher S. Record (Principal Financial Officer)
/s/ F. Gene Winfield Corporate Controller August 19, 1997
_________________________ (Principal Accounting Officer)
F. Gene Winfield
* Director August 19, 1997
_________________________
Selvi Vescovi
* Director August 19, 1997
_________________________
Thomas J. Marquez
* Director August 19, 1997
_________________________
Robert A. Fildes, Ph.D.
* Director August 19, 1997
_________________________
James T. O'Brien
* Director August 19, 1997
_________________________
R. Dale Bowerman
* /s/ CARLTON E. TURNER Attorney-in-Fact
_________________________
Carlton E. Turner, Ph.D.
<PAGE> II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irving, State of Texas,
on the 19th day of August, 1997.
Carrington Laboratories, Inc.
(Registrant)
By:
-------------------------------------
Carlton E. Turner, Ph.D.
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed by the following
persons in the capacities and on the date indicated.
Signature Title Date
------------------------- --------------------------- ---------------
* Chairman of the Board August 19, 1997
_________________________
George DeMott
* Chief Executive Officer,
_________________________ President and Director August 19, 1997
Carlton E. Turner, Ph.D. (Principal Executive Officer)
Vice President, Business
_________________________ Development and Treasurer August 19, 1997
Christopher S. Record (Principal Financial Officer)
Corporate Controller August 19, 1997
_________________________ (Principal Accounting Officer)
F. Gene Winfield
* Director August 19, 1997
_________________________
Selvi Vescovi
* Director August 19, 1997
_________________________
Thomas J. Marquez
* Director August 19, 1997
_________________________
Robert A. Fildes, Ph.D.
* Director August 19, 1997
_________________________
James T. O'Brien
* Director August 19, 1997
_________________________
R. Dale Bowerman
* Attorney-in-Fact
_________________________
Carlton E. Turner, Ph.D.
<PAGE> II-4
INDEX TO EXHIBITS
Sequentially
Numbered
Number Exhibit Page
4.1 --- Restated Articles of Incorporation of the Company
(incorporated herein by reference to Exhibit 3.1 to
the Company's 1988 Annual Report on Form 10-K).
4.2 --- Bylaws of the Company, as amended through April 27,
1995 (incorporated herein by reference to Exhibit 3.5
to the Company's 1995 Annual Report on Form 10-K).
4.3 --- Statement of Change of Registered Office and Regis-
tered Agent of the Company (incorporated herein by
reference to Exhibit 3.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended May 31, 1991).
4.4 --- Statement of Resolution Establishing Series D Prefer-
red Stock of the Company (incorporated herein by ref-
erence to Exhibit 3.1 to the Company's Quarterly Report
on From 10-Q for the quarter ended August 31, 1991)
4.5 --- Rights Agreement dated as of September 19, 1991, between
the Company and Ameritrust Company National Association
(incorporated herein by reference to Exhibit 1 to the
Company's Report on Form 8-K dated September 19, 1991).
5.1*--- Opinion of Thompson & Knight, A Professional Corporation.
10.1 --- Form of Stock Purchase Agreement dated June 20, 1997
between the Company and Lucia A. Englander, Michael C.
Mewhinney and John L. Strauss (incorporated herein by
reference to Exhibit 1 to the Company's Report on Form
8-K dated June 20, 1997).
23.1*--- Consent of Arthur Andersen LLP.
23.2*--- Consent of Thompson & Knight, A Professional Corporation
(included in Exhibit 5.1).
24.1*--- Power of Attorney (included on the signature page of the
original Registration Statement except Christopher S.
Record and F. Gene Winfield).
______________________
* Filed herewith.
+ Previously filed.
<PAGE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated February 7, 1997
(except with respect to the matters discussed in Notes Eight and Eighteen to
the consolidated financial statements, as to which the dates are April 25,
1997 and March 4, 1997, respectively), included in the Carrington
Laboratories, Inc., and Subsidiaries Form 10-K for the year ended December 31,
1996, and to all references to our Firm included in this Registration
Statement. We also consent to the application of our report to Item 6,
"Selected Consolidated Financial Data," included in the Carrington
Laboratories, Inc., and Subsidiaries Form 10-K/A (amendment 2) for the year
ended December 31, 1996.
ARTHUR ANDERSEN LLP
Dallas, Texas
August 19, 1997
PAGE
<PAGE>
Exhibit 24.1
POWER-OF-ATTORNEY
Each person whose signature appears below constitutes and appoints
Carlton E. Turner and Christopher S. Record, and each of them (with full power
to act alone), his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for him and in his name, place and stead,
in any and all capacities to sign on his behalf individually and in each
capacity stated below any amendment, including post-effective amendments, to
Carrington Laboratories, Inc.'s Registration Statement on Form S-3 (No.
333-17177), and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents and either of them, or
their substitutes, may lawfully do or cause to be done by virtue hereof.
_________________________
Christopher S. Record
_________________________
F. Gene Winfield
<PAGE>
