<PAGE>
As filed with the Securities and Exchange Commission on June 24, 1997
Registration Number 333-26109
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
XYTRONYX, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3258753
------------------------ ------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
6730 Mesa Ridge Road, Suite A, San Diego, CA 92121 - (619) 550-3900
--------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Dr. H. Laurence Shaw
President and Chief Executive Officer
6730 Mesa Ridge Road, Suite A, San Diego, CA 92121 - (619) 550-3900
--------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code,
of agent for service)
With a copy to:
Edward F. Cox, Esq.
Donovan Leisure Newton & Irvine
30 Rockefeller Plaza, New York, New York 10112 (212) 632-3050
Approximate date of commencement of proposed sale to the public: As
soon as practicable 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 being 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 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. / /
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================================================================
Title of Each Class Proposed Maximum Proposed Maximum Amount of
of Securities to be Amount to be Offering Price Aggregate Offering Registration
Registered Registered Per Unit (1)(2) Price (1)(2) Fee
============================================================================================
<S> <C> <C> <C> <C>
Common Stock 10,416,978 $1.0625 $11,067,720 $3,353.85
($0.02 par value)(3) Shares
Common Stock 5,250,150 $1.0625 $ 5,578,284 $1,690.39
($0.02 par value)(4) Shares
Common Stock 309,734 $1.0625 $ 329,092 $ 99.72
($0.02 par value)(5) Shares
Common Stock 1,250,038 $1.0625 $ 1,328,165 $ 402.47
($0.02 par value)(6) Shares
Common Stock 2,604,245 $1.0625 $ 2,767,010 $ 838.49
($0.02 par value)(7) Shares
Class A Warrants(8) 6,500,188 $1.1875 $ 7,718,973 $2,339.08
Warrants
============================================================================================
</TABLE>
<PAGE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 475(c) under the Securities Act of 1933 on the basis of
the average of the high and low prices per share of the Registrant's Common
Stock as reported by the American Stock Exchange on April 21, 1997.
(2) Estimated solely for the purpose of calculating the registration fee on the
basis of the difference between the highest exercise price of the Warrants
and the average of the high and low prices per share of the Common Stock as
in (1) above.
(3) Represents shares of Common Stock issuable upon the conversion of shares
of Series A Convertible Preferred Stock (the "Convertible preferred Stock")
issued in the registrant's private placement of Premium Preferred Units
which closed on March 7, 1997 (the "1997 Private Placement").
(4) Represents shares of Common Stock underlying Class A Warrants (includes
5,000,150 shares underlying Class A Warrants issued in the 1997 Private
Placement, 100,000 shares underlying Class A Warrants issued to Wound
Healing of Oklahoma, Inc. in consideration of a license agreement, and
150,000 shares underlying Class A Warrants issued to Aries Trust and Aries
Domestic in consideration for a Line of Credit).
(5) Represents shares of Common Stock underlying Class B Warrants (the
"Settlement Warrants").
(6) Represents shares of Common Stock underlying Common Stock purchase
warrants, which warrants partly underlie a Unit Purchase Option and an
Advisory Option (the "Paramount Options") granted to Paramount Capital,
Inc. ("Paramount") that, in the aggregate, entitled Paramount to purchase
25 Premium Preferred Units at an exercise price equal to 110% of the per
unit price paid by the investors in the 1997 Private Placement.
(7) Represents shares of Common Stock underlying Convertible Preferred Stock,
which shares of Convertible Preferred Stock partly underlie the Paramount
Options.
(8) Class A Warrants to purchase Common Stock (includes 5,000,150 Class A
Warrants issued in the 1997 Private Placement, 100,000 Class A Warrants
issued to Wound Healing of Oklahoma in consideration of a License
Agreement, 150,000 Class A Warrants issued to Aries Trust and Aries
Domestic in consideration for a Line of Credit, and 1,250,038 Class A
Warrants issued to Paramount pursuant to the Paramount Options).
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>
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 this 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.
Subject to Completion, dated June ___, 1997
PROSPECTUS
XYTRONYX, INC.
19,831,145 SHARES OF COMMON STOCK
6,500,188 CLASS A WARRANTS
_______________________________
This Prospectus relates to an offering (the "offering") by the holders of the
Settlement Warrants and by the Securityholders named herein under the caption
"Selling Securityholders" (collectively, the "Selling Securityholders") or by
pledgees, donees, transferees or other successors in interest of the Selling
Stockholders (the "Transferees") for sale to the public of the following
securities of Xytronyx, Inc., a Delaware corporation ("Xytronyx" or the
"Company"): (i) 10,416,978 shares of the Company's common stock, par value $0.02
per share (the "Common Stock") issuable upon the conversion of shares of Series
A Convertible Preferred Stock ("Convertible Preferred Stock"); (ii) 5,250,150
shares of Common Stock underlying Class A Warrants (the "Class A Warrants");
(iii) 309,734 shares of Common Stock underlying Class B Warrants (the
"Settlement Warrants"); (iv) 1,250,038 shares of Common Stock underlying Common
Stock purchase warrants, which warrants partly underlie a Unit Purchase Option
and an Advisory Option (the "Paramount Options") granted to Paramount Capital,
Inc. ("Paramount") that, in the aggregate, entitled Paramount to purchase 25
Premium Preferred Units at an exercise price equal to 110% of the per unit price
paid by the investors in the Company's private placement of Premium Preferred
Units which closed on March 7, 1997 (the "1997 Private Placement"); (v)
2,604,245 shares of Common Stock underlying Convertible Preferred Stock, which
shares of Convertible Preferred Stock partly underlie the Paramount Options; and
(vi) 6,500,188 Class A Warrants to purchase shares of Common Stock issued by the
Company and held by the Selling Securityholders. The number of shares of Common
Stock issuable upon conversion of the Convertible Preferred Stock and upon
exercise of the Class A Warrants, the Settlement Warrants, and the Paramount
Options is subject to adjustment in certain events.
_______________________________________
<PAGE>
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL
DILUTION. SEE "RISK FACTORS" ON PAGE 9 FOR INFORMATION THAT SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS
_______________________________________
The Common Stock and Class A Warrants are separately tradable. Each Class A
Warrant entitles the holder thereof to purchase one share of Common Stock at a
price of $1.00 per share subject to adjustment, at any time from issuance until
November 26, 2005. The Class A Warrants are subject to redemption by the Company
at $.10 per warrant on 60 days' prior written notice provided that the closing
bid quotation of the Common Stock as reported on the American Stock Exchange
("AMEX"), or on such exchange on which the Common Stock is then traded, exceeds
400% of the exercise price per share for 20 consecutive trading days ending
three days prior to the date of redemption. See "Description of Securities".
If a market for the Class A Warrants develops, a holder may sell Class A
Warrants instead of exercising them.
The Company will not receive any of the proceeds from the sale of shares of
Common Stock or Class A Warrants. The Registration Statement of which this
Prospectus forms a part is being filed pursuant to the terms of certain
agreements between the Company and the Selling Securityholders.
The Selling Securityholders have advised the Company that they or the
Transferees may sell, directly or through brokers, all or a portion of the
securities offered hereby in negotiated transactions or in one or more
transactions in the market at the price prevailing at the time of sale. In
connection with such sales, the Selling Securityholders, the Transferees and any
participating broker may be deemed to be "underwriters" of the Common Stock
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"). It is anticipated that usual and customary brokerage fees will be paid
by the Selling Securityholders or Transferees in all open market transactions.
The Company will pay all other expenses of this Offering. See "Plan of
Distribution."
The Company has informed the Selling Securityholders that the anti-manipulation
provisions of Regulation M under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") may apply to the sales of their shares offered hereby. The
Company also has advised the Selling Securityholders of the requirement for
delivery of this Prospectus in connection with any sale of the shares offered
hereby. Certain Selling Securityholders may from time to time purchase shares
of Common Stock in the open market. The Selling Securityholders have been
notified that they should not commence any distribution of shares of Common
Stock unless they have terminated their purchasing and bidding for Common Stock
in the open market as provided in applicable securities regulations.
The Common Stock is listed and traded on the American Stock Exchange under
symbol "XYX." The closing price of the Common Stock on June 19, 1997 was $1
5/16 per share. No trading market for the Class A Warrants or the Settlement
Warrants currently exists.
2
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is June __, 1997.
3
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of 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 concerning the Company
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 the 13th Floor, World Trade
Center, New York, New York, 10048; and 500 West Madison Street, Suite 1400,
Chicago, Illinois, 60661. Copies of such material can be obtained upon
written request addressed to the Commission, Public Reference Section, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site at http://www.sec.gov that also contains such
material regarding the registrant. Such documents filed by the Company can
also be inspected at the offices of the American Stock Exchange, 86 Trinity
Place, New York, New York, 10006.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act. This Prospectus does not
contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is hereby
made to the Registration Statement, which may be inspected and copied in the
manner and at the sources described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission 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
March 31, 1997;
(2) The Company's Quarterly Report on Form 10-Q for the fiscal quarters
ended June 30, 1996 and September 30, 1996 and on Form 10-Q/A for the
quarter ended December 31, 1996;
(3) The Company's Current Reports on Form 8-K filed with the Commission on
April 10, 1996, April 17, 1996, May 17, 1996, May 24, 1996, June 14,
1996, June 18, 1996, July 17, 1996, October 31, 1996, December 27,
1996, March 12, 1997, and June 11, 1997;
(4) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A (File No. 0-14838),
declared effective on September 23, 1986, by which the Company's
shares of Common Stock were registered under Section 12 of the
Exchange Act and any other amendments or reports filed for the purpose
of updating such description.
4
<PAGE>
All documents filed by the Company pursuant to Sections 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 of Common Stock or Class A
Warrants shall be deemed to be incorporated by reference in this Prospectus and
to be a part hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained in any subsequently filed document which is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom a copy of this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the documents incorporated herein by reference (other than
exhibits thereto, unless such exhibits are specifically incorporated by
reference into the information that this Prospectus incorporates). Written or
telephone requests for such copies should be directed to Xytronyx, Inc., 6730
Mesa Ridge Road, Suite A, San Diego, CA 92121, Attention: Investor Relations.
Telephone: (619) 550-3900.
IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS
Certain of the statements set forth under the captions "Risk Factors" and "Use
of Proceeds" and set forth elsewhere in this Prospectus constitute "Forward
Looking Statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, which are intended to be covered by the safe harbors from
liability created thereby. All such forward looking statements involve risks
and uncertainties, including those statements regarding risks of new product
development; market uncertainty; government regulation; need for FDA and other
regulatory approval; lengthy and uncertain approval process; dependence on WHO
license agreement and BTI Agreement; risk of loss of technology; dependence on
others for marketing and manufacturing; uncertainty of protection offered by
patents and trade secrets; absence of market for Class A Warrants; the impact of
potential AMEX delisting on marketability of securities; and risk of penny stock
regulation. Many other important factors set forth under the caption "Risk
Factors" affect the Company's ability to achieve the stated outcomes and to
successfully develop and commercialize its products, including those statements
regarding development stage company; accumulated deficit; anticipated future
losses; limited cash resources; qualification of auditors' opinion; potential
need for substantial additional funds; substantial dilution; dependence upon key
personnel; and competition. As a result, there can be no assurance that the
forward looking statements in this Prospectus will prove to be accurate. In
light of the significant uncertainties inherent in the forward looking
statements included herein, the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved.
5
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE INFORMATION INCLUDED ELSEWHERE
IN THIS PROSPECTUS AND THE DETAILED INFORMATION AND FINANCIAL STATEMENTS
APPEARING IN THE DOCUMENTS INCORPORATED IN THIS PROSPECTUS BY REFERENCE.
THE COMPANY
Xytronyx, Inc., is engaged primarily in the development and commercialization of
medical products based on biotechnological research relating to the treatment
and detection of cancer and other diseases. As described more fully below, the
Company completed two transactions in the fiscal year ended March 31, 1997,
under which it acquired or otherwise gained rights to two proprietary
technologies in the area of cancer therapy, both of which are undergoing
preparation for human clinical trials.
In June 1996, the Company entered into an agreement giving it the option to
acquire Binary Therapeutics, Inc. ("BTI"). BTI is the holder of certain
proprietary technologies in the Photodynamic Therapy ("PDT") area for the
treatment of cancer.
PDT is an emerging mode of treatment for cancer which uses the combination of
light-activated drugs and nonthermal light to achieve selective, photochemical
destruction of cancer cells with minimal effect on surrounding normal tissue.
See PHOTODYNAMIC THERAPY (PDT) / BINARY THERAPEUTICS, INC. below.
In May 1996, the Company acquired an exclusive license from Wound Healing of
Oklahoma to Photodynamic Immunotherapy-TM- ("PDIT-TM-") technology, also for the
treatment of cancer. PDIT cancer treatment consists of the injection of a
combination of an infrared absorbing dye (photosensitizing drug) and an
immunoadjuvant directly into a tumor, followed by illumination with an infrared
laser. See PHOTODYNAMIC IMMUNOTHERAPY (PDIT) TREATMENT FOR CANCER/WOUND HEALING
OF OKLAHOMA below.
6
<PAGE>
The Company believes that these two separate technologies and product
development opportunities complement each other and offer potential
efficiencies and other strategic benefits in relation to development
requirements and expected uses.
Beyond the cancer therapy area, the Company also has two products which are
further along in development and are undergoing commercialization: The
Periodontal Tissue Monitor (the "PTM"), a disposable test used to assist with
the diagnosis and monitoring of periodontal disease, and the Company's
Kephra-TM- photochromic technology.
PHOTODYNAMIC THERAPY (PDT) / BINARY THERAPEUTICS, INC.
In June 1996, Xytronyx entered into an agreement (the "BTI Agreement") with BTI
under which the Company was granted an option to acquire BTI by a merger of BTI
into a wholly owned subsidiary of the Company. If the Company elects to exercise
its option, the BTI Agreement calls for the Company to issue Common Stock to the
stockholders of BTI with an aggregate acquisition value of $6,000,000. By a
letter dated February 27, 1997, the Company and BTI have agreed to extend the
period during which the Company may exercise its option to acquire BTI from
April 30, 1997 until such time as BTI has completed human clinical trials of the
Boronated Porphyrin (BOPP) at an agreed upon dose level (the "Option Period").
The Option Period was extended at the Company's request to enable BTI to
complete preclinical studies, to commence clinical trials in humans and to
demonstrate that a given dose level of BOPP in humans would not cause certain
adverse events. The acquisition price was not changed by the February 27 letter
amendment. The Company believes that the extension of the Option Period will
give it greater opportunity to access the preliminary data resulting from the
BOPP preclinical trials and the Phase I human clinical trials and to evaluate
the possibility of adverse events in human patients before determining whether
to acquire BTI. Accordingly, the Company has elected to defer exercise of the
option.
Preclinical testing of BOPP in the United States and Australia, including
testing with various animal models, has indicated that BOPP has the following
advantages over certain existing PDT agents (including hematoporphyrin or HpD,
Photofrin and Foscan) in the treatment of brain cancers:
- - Selective (as much as 400 in tumors to 1 in healthy tissue) retention of
BOPP in brain tumor models, compared to a 30 to 1 or less for existing
known compounds
- - Intracellular localization in mitochondria (the energy center of the cell)
for more efficient tumor cell killing.
- - Highly water soluble and stable under physiological conditions.
BTI and the Company are completing the pre-clinical work necessary for the
submission of an Investigational New Drug Application ("IND") to the United
States Food and Drug Administration ("FDA") with respect to BOPP for treatment
of brain cancer. BTI and the Company's current objective is to commence a Phase
I clinical study of PDT using BOPP in the treatment of brain cancer patients in
1997 after seeking IND approval. There can be no assurance, however, that IND
approval will be obtained within that time frame or at all.
7
<PAGE>
The Company believes, based upon the results of preclinical studies, that BOPP
may also be useful as a photosensitizing drug for PDT treatment of pancreatic
tumors. Patents encompassing the BOPP technology have been issued to the
Regents of the University of California in the United States and Australia,
Ireland and South Africa. Patent applications are pending in Canada, the
European Patent Organization, Japan, Norway and Israel. Rights related to the
above patents were licensed to BTI under an Exclusive License Agreement dated
July 1, 1992, as amended August 29, 1995, pursuant to which BTI is obligated to
make certain payments.
PHOTODYNAMIC IMMUNOTHERAPY (PDIT) TREATMENT FOR CANCER/WOUND HEALING OF
OKLAHOMA
The Company obtained an exclusive worldwide license to the PDIT technology in
May 1996 under an agreement with Wound Healing of Oklahoma ("WHO"), a privately
held company. The agreement calls for the Company to pay WHO royalties based on
sales of products incorporating the PDIT technology, including a minimum royalty
of $50,000 per year. The Company has also entered into a research agreement
with WHO under which the principal developers of the PDIT technology are
assisting with the preparation of the IND application to the FDA and performing
additional studies to investigate the mechanism of PDIT.
Similar to traditional PDT, PDIT treatment is intended to produce tumor tissue
destruction in the primary area of therapy. However, an important difference
between PDIT and PDT is that PDIT treatment is also intended to trigger an
immune reaction in the patient to complete the destruction of the primary tumor
and to also destroy metastatic tumors. The Company believes that the potential
of PDIT therapy to destroy metastatic tumors may offer an improved methodology
for treatment of cancers such as breast, lung and prostate cancer. There is no
assurance that the Company's belief will prove correct.
8
<PAGE>
The Company's scientific collaborators have obtained high response rates with
PDIT in the DMBA-4 cell line, a very challenging animal breast tumor model,
which is characterized by rapid proliferation of the primary tumor and the
formation of metastatic tumors throughout the body. Accordingly, the Company
has targeted breast cancer for initial human clinical studies with PDIT
treatment. The Company's current objective is to facilitate the initiation of
a physician-sponsored human clinical study of the treatment of breast cancer
patients in 1997. A patent application encompassing PDIT treatment was
originally filed in the United States and the countries party to the Patent
Cooperative Treaty. ("PCT") by three individual researchers. The individuals
subsequently assigned their interest in such applications to WHO in April
1995.
AST DIAGNOSTIC TECHNOLOGY: THE PERIODONTAL TISSUE MONITOR (PTM)
The Periodontal Tissue Monitor (the "PTM") is a disposable test developed by
the Company to assist dental practitioners with the diagnosis and monitoring
of the treatment of periodontitis, a serious form of periodontal disease and
the most common cause of tooth loss in adults. The PTM is a simple,
chairside, eye-readable test based on the identification of aspartate
aminotransferase ("AST"), an enzyme which is released when cells die.
The PTM is approved for sale in the United States, Canada, China and much of
Western Europe. U.S. clinical trials were completed in March 1996, and the
Company submitted a Premarket Approval ("PMA") application in respect of the
PTM to the FDA in September 1996. On June 5, 1997, the Company received an
"approvable letter" from the FDA in respect of its PMA for the PTM contingent
upon certain manufacturing requirements and labeling issues being met. On
June 23, 1997, the Company received final approval from the FDA for
commercial distribution of the PTM.
In May 1996 the Company entered into an agreement with Hawe-Neos Dental to
distribute the PTM in Europe. Hawe-Neos, which is headquartered in Bioggio,
Switzerland, has more than 60 years experience in manufacturing and marketing
dental products in Europe. Hawe-Neos launched PTM at the 27th International
Dental Show in Cologne, Germany in April 1997. In May 1996, the Company
signed a letter of intent with Steri-Oss, a leading dental implant company,
for distribution of the PTM in North America and other countries. The
Company's marketing partner in Japan, Shofu, is waiting on regulatory
approval for PTM in that country.
Two U.S. patents relating to the licensed PTM technology have been issued to
the University of Illinois, though international patent protection was only
available on one of the technologies. The Company has also been issued a
patent relating to the use of AST in a "one-step" kit format in the U.S.,
Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore, South
Africa and the European Patent Organization. A patent application has been
filed pursuant to the PCT.
KEPHRA-TM- PHOTOCHROMIC TECHNOLOGY
The name "Kephra" encompasses the Company's family of dyes which react with
sunlight or other sources of UV light. The Kephra dyes are colorless when
viewed under room fluorescent or incandescent light but become very colorful
when exposed to UV light. The Company has the ability to license this
technology for applications including consumer health, apparel, promotional
and advertising programs and other products. Patent applications for the
Company's
9
<PAGE>
Kephra-TM- photochromic technology have been filed in Australia,
Brazil, Canada, the European Patent Organization, Japan and Taiwan.
* * * * *
The Company's offices are at 6730 Mesa Ridge Road, Suite A, San Diego, CA
92121, and its telephone number is (619) 550-3900.
10
<PAGE>
THE OFFERING
Securities Offered:
Common Stock . . . . . . 19,831,145 shares of Common Stock, par value
$0.02 per share, offered by the Selling
Securityholders.(1)(2) (3)(4)(5)
Class A Warrants . . . . 6,500,188 Class A Warrants to purchase Common
Stock, currently issued and outstanding,
offered by the Selling Securityholders.(6)
Common Stock Outstanding
prior to the Offering. . . . 8,186,029 shares as of June 19, 1997.(7)
Class A Warrants Outstanding
prior to the Offering. . . . 13,392,157 warrants as of June 19, 1997.
Plan of Distribution . . . . The Common Stock and Class A Warrants offered
hereby may be sold from time to time in one or
more transactions at market prices prevailing
at the time of the sale, at prices related to
such prevailing market prices or at negotiated
prices.
Use of Proceeds. . . . . . . The Company will not receive any of the
proceeds from the sale of the shares of Common
Stock and Class A Warrants offered hereby. The
proceeds, if any, from the exercise of Class A
Warrants will be used for product development
and general corporate purposes.
AMEX Symbol for Common Stock XYX
* * * * *
(1) Includes 10,416,978 shares of Common Stock underlying the Convertible
Preferred Stock.
(2) Includes 5,250,150 shares of Common Stock underlying the Class A Warrants.
(3) Includes 309,734 shares of Common Stock underlying the Settlement Warrants.
(4) Includes 1,250,038 shares of Common Stock underlying Common Stock purchase
warrants, which warrants partly underlie the Paramount Options.
(5) Includes 2,604,245 shares of Common Stock underlying Convertible Preferred
Stock, which shares of Convertible Preferred Stock partly underlie the
Paramount Options.
(6) Includes 5,000,150 Class A Warrants issued in the 1997 Private Placement,
100,000 warrants issued to Wound Healing of Oklahoma in consideration of a
License Agreement, 150,000 warrants issued to Aries Trust in consideration
for a Line of Credit, and 1,250,038 warrants issued to Paramount pursuant
to the Paramount Options.
(7) Does not include (i) 5,317,400 shares of Common Stock available for
issuance, and options granted to date to purchase 1,710,000 shares of
Common Stock at a weighted average price of $3.08, issued to management,
key employees, directors, and consultants under various stock option plans
or by direct grant from the Board of Directors; (ii) 13,392,157 shares of
Common Stock reserved for issuance upon exercise of currently exercisable
Class A Warrants issued by the Company, (iii) 309,734 shares of Common
Stock issuable at a price of $22.00 per share to holders of warrants issued
by the Company under a June 1994 settlement agreement (see "Plan of
Distribution"), and (iv) 348,500 shares of Common Stock, and 435,625 shares
of
11
<PAGE>
Common Stock underlying Class A Warrants, reserved for issuance upon
exercise of certain options granted to Paramount in the Company's 1995
Private Placement. (see "Selling Stockholders").
12
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY IS SPECULATIVE AND INVOLVES A
HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION. INVESTORS SHOULD BE ABLE TO
WITHSTAND THE LOSS OF THEIR ENTIRE INVESTMENT. PROSPECTIVE PURCHASERS SHOULD
CAREFULLY REVIEW THE INFORMATION SET FORTH BELOW.
DEVELOPMENT STAGE COMPANY; ACCUMULATED DEFICIT; ANTICIPATED FUTURE LOSSES
The Company has generated only limited revenues from operations to date. As of
December 31, 1996, the Company had an accumulated deficit of $30,994,213, and
expects substantial losses to continue for the foreseeable future. The
Company's operations are subject to numerous risks associated with the
establishment and development of new products, particularly those based on
innovative or novel technologies. These risks include the possibility that any
or all of the Company's products will be found to be ineffective or unsafe, that
the products, once developed, although effective, are uneconomical to market,
that third parties hold proprietary rights that preclude the Company from
marketing such products or that third parties market a superior or equivalent
product. The Company's ability to generate significant revenues and
profitability will depend, among other factors, on the successful completion of
product development, obtaining regulatory approvals, establishing manufacturing
and marketing capabilities, gaining market acceptance for its products, and
obtaining adequate funds to finance operations. There can be no assurance that
the Company will generate any revenues or achieve profitability.
LIMITED CASH RESOURCES; QUALIFICATION OF AUDITORS' OPINION
As of December 31, 1996 the Company had cash of approximately $2,932,616,
including amounts received in the first closing of the 1997 Private Placement on
December 19, 1996. The Company raised an additional $5,779,000 (net of
commissions and expenses) from the second closing of the 1997 Private Placement
on March 7, 1997. The Company anticipates that its cash resources will be
depleted by the end of calendar year 1998, unless the Company undertakes
additional financings or generates revenues from product sales or marketing and
research alliances. The Company's independent auditors included an explanatory
paragraph in their report on the Company's financial statements for the fiscal
year ended March 31, 1996 as to the uncertainty relating to the Company's
ability to continue as a going concern.
POTENTIAL NEED FOR SUBSTANTIAL ADDITIONAL FUNDS
The Company has expended and intends to continue to expend substantial funds
to conduct research and development activities, including preclinical and
clinical testing of its cancer therapy technologies and its funding
commitments under its agreement with BTI. (See "Prospectus Summary" - "The
Company -- Photodynamic Therapy (PDT) / Binary Therapeutics, Inc.") The
Company currently estimates that its existing capital resources, will fund
the Company's operations through the end of calendar year 1998. Accordingly,
the Company will require significant additional funds, either from marketing
partners, product sales, or additional equity or debt financing, to complete
development and commence commercial-scale manufacturing of its products. The
actual date through which the proceeds of this Offering and the existing cash
resources will be adequate to fund the Company's operations, and the timing
and magnitude of the need for additional funds, may vary significantly based
on numerous factors, including
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(i) the timing and receipt of U.S. regulatory approval, if any, to commence
human clinical studies of the PDT and PDIT cancer technologies (all of which
in turn are dependent upon the successful completion of preclinical
activities), (ii) the timing of the establishment of any marketing
partnership(s) for the PTM and strategic partnership(s) for the PDT and PDIT
technologies, (iii) the timing and the amount, if any, of payments received
from any such partner(s), (iv) the timing and amount, if any, of revenues
generated from sales of the PTM, (v) the timing and amount, if any, of
revenues from Kephra products and (vi) the timing and the amount, if any, of
proceeds available from the exercise of the Class A Warrants included in this
Offering as well as the currently outstanding Class A Warrants and Settlement
Warrants. The Company has no commitments for any additional funding and there
can be no assurance that such funding will be available on acceptable terms,
if at all. If adequate funds on acceptable terms are not available to the
Company, the Company may be required to delay, scale back or eliminate
product development efforts, or cease operations, in whole or in part.
SUBSTANTIAL DILUTION
The number of shares of Common Stock issuable upon conversion of the
Preferred Stock and upon exercise of the Class A Warrants, the Settlement
Warrants, the Paramount Options, though subject to adjustment in certain
events, is 32,304,900 shares of Common Stock, or nearly three times the
8,186,029 shares of Common Stock issued and outstanding on June 19, 1997. The
shares of Convertible Preferred Stock and Class A Warrants which underlie the
Paramount Options are not convertible until September 11, 1997, pursuant to
the Placement Agreement between Paramount and the Company. All of the named
Selling Securityholders except Paramount and its transferees have agreed to a
nine-month lock-up period from the effective date (the "Effective Date") of
the registration statement of which this Prospectus forms part in respect of
75% of the offered holding of Common Stock and Class A Warrants. Following
each three-month period after the Effective Date, a further 25% of such
securities becomes exempt from such lock-up period. The conversion of the
Convertible Preferred Stock and the exercise of the Class A Warrants and the
Paramount Options, and the sale of the underlying shares of Common Stock (or
even the potential of such conversion, exercise or sale) may have a
depressive effect on the market price of the Common Stock and the securities
offered hereby. The conversion of the Convertible Preferred Stock and the
exercise of the Class A Warrants and Paramount Options also may have a
dilutive effect. Moreover, the ability of the Company to obtain any needed
capital on terms more favorable to the Company than those provided in the
1997 Private Placement may be adversely affected. As a result of the
Convertible Preferred Stock, the Class A Warrants and the Paramount Options
being outstanding, the Company may be deprived of favorable opportunities to
obtain additional equity capital, if it should then be needed. It is also
possible, that as long as the Convertible Preferred Stock, the Class A
Warrants and Paramount Options remain outstanding, their existence might
limit increases in the price of the Common Stock.
In the event the Company issues shares of Common Stock or otherwise obtains any
additional funding to complete development and commence commercial-scale
manufacturing of its products, the terms thereof may have a dilutive effect on
holders of the Company's securities. (See "Risk Factors" -- "Potential Need for
Substantial Additional Funds").
The Company currently has 5,317,400 shares of Common Stock available for
issuance, and has granted to date options to purchase 1,710,000 shares of Common
Stock at a weighted average price of $3.08, to management, key employees,
directors, and consultants under various stock option plans or by direct grant
from the Board of Directors. Pursuant to
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such plans, directors, key employees and consultants may be eligible to
receive stock options exercisable for Common Stock at exercise prices which
may be lower than the initial conversion price of the Convertible Preferred
Stock or the exercise price of the Class A Warrants registered herein.
Future option grants, if any, may dilute the value of the Common Stock.
ABSENCE OF MARKET FOR CLASS A WARRANTS; RESTRICTIONS ON TRANSFERABILITY
There is no established trading market for the Class A Warrants and there can be
no assurance that the Class A Warrants will be listed for trading on any
national securities exchange or quoted on NASDAQ, or that any active trading
market will develop for the Class A Warrants.
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No predictions can be made of the effect that future market sales of the shares
of Common Stock underlying the Class A Warrants, or future market sales of the
Class A Warrants, or the availability of such shares or Class A Warrants for
sale, will have on the market price of the Common Stock prevailing from time to
time. Sales of substantial amounts of Common Stock or Class A Warrants, or the
perception that such sales might occur, could adversely affect prevailing market
prices.
IMPACT OF POTENTIAL AMEX DELISTING ON MARKETABILITY OF SECURITIES
The Company currently falls below the AMEX stockholders' equity guidelines
outlined. The Company is actively taking steps to address the Exchange's
guidelines, and has recently met with representatives of the Exchange to discuss
its situation and the basis of which a determination of listing might be
deferred. If delisting were to occur, it is possible that the trading in the
Company's Common Stock would thereafter be conducted in the over-the-counter
market in the so-called "pink sheets" or the NASD's "Electronic Bulletin Board",
and it would be more difficult to dispose of the Common Stock or to obtain as
favorable a price for the Common Stock. Consequently, the liquidity of the
Common Stock could be impaired, not only in the number of shares of Common Stock
that could be bought and sold at a given price, but also through delays in the
timing of transactions and reduction in security analysts' and the media's
coverage of the Company, which could result in lower prices for the Common Stock
than might otherwise be attained and in a larger spread between the bid and
asked prices for the Common Stock. Accordingly, an investor would find it more
difficult to dispose of, or obtain accurate quotations as to the price of, the
Company's currently listed securities, resulting in a material adverse effect on
the Company and the prices of its securities.
RISK OF PENNY STOCK REGULATION
If the Company's Common Stock were delisted from the AMEX it is likely that the
Common Stock would be deemed "penny stock." The Commission has adopted
regulations which generally define " penny stock" to be any equity security that
has a market price ( as defined in the regulation) of less than $5.00 per share,
subject to certain exceptions. Such exceptions include any equity security
listed on AMEX. If the Common Stock is removed from listing on AMEX, the Common
Stock may become subject to Rules 15g-1 through 15g-6 promulgated under the
Exchange Act for non-exchange listed and non-NASDAQ securities. These rules
impose additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors
(generally, those persons with assets in excess of $1,000,000 or annual incomes
exceeding $200,000 individually or $300,000 together with their spouse). For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of the Common Stock and have received
the purchaser's written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to (i) deliver a standardized risk disclosure
document prepared by the Commission ion that provide information about penny
stocks and the nature and level of risks in the penny stock market and (ii)
provide the customer with current bid and offer quotations of the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction, a
monthly account statement showing the market value of each penny stock held in
the customer's account, and if the broker-dealer is the sole market-maker, the
broker-dealer must disclose this fact and the broker-dealer's presumed control
over the market. These disclosures may restrict the ability of broker-dealers
to sell the Common Stock and may have the effect of reducing the level of
trading activity in the secondary
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market for a stock that becomes subject to the penny stock rules. If the
Common Stock becomes subject to the penny stock rules, the holders thereof
may find it difficult to sell their shares.
LIMITED TRADING VOLUME; POSSIBLE PRICE VOLATILITY
Historically, the Common Stock has generally experienced relatively low daily
trading volumes in relation to the aggregate number of shares issuable in this
Offering. The market price of the Common Stock also has been volatile and it
may continue to be volatile as has been the case with the securities of other
public medical-technology companies. Factors such as announcements by the
Company or its competitors concerning technological innovations, results of
clinical trials, new commercial products or procedures, proposed government
regulations and developments or disputes relating to patents or proprietary
rights may have a significant effect on the market price of the Company's
securities. Changes in the market price of the Common Stock may bear no
relation to the Company's actual operations or financial results. Each of the
foregoing factors may also be applicable to the Class A Warrants if a trading
market in the warrants develops in the future.
GOVERNMENT REGULATION; NEED FOR FDA AND OTHER REGULATORY APPROVAL; LENGTHY AND
UNCERTAIN APPROVAL PROCESS
Prior to marketing, each of the Company's proposed medical products,
including both the drug and light delivery components of the proposed PDT and
PDIT treatment systems, and the PTM, must undergo an extensive regulatory
approval process conducted by the FDA and applicable agencies in other
countries. The process, which focuses on safety and efficacy and includes a
review by the FDA of preclinical testing and clinical trials and
investigation as to whether good laboratory and clinical practices were
maintained during testing, is likely to take many years and require the
expenditure of substantial resources. The Company is and will be dependent
on the external laboratories and medical institutions conducting its
preclinical testing and clinical trials to maintain both good laboratory
practices established by the FDA and good clinical practices. Data obtained
from preclinical and clinical testing are subject to varying interpretations
which could delay, limit or prevent regulatory approval. In addition, delays,
limitations or rejections may be encountered based upon changes in FDA policy
for drug or medical device approval during the period of development and by
the requirement for regulatory review of each IND and New Drug Application
("NDA") relating to any pharmaceutical product proposed to be introduced by
the Company and an application for PMA relating to any medical device
proposed to be introduced by the Company. There can be no assurance that,
even after significant expenditures, regulatory approval will be obtained for
any of the Company's product candidates. Moreover, such approval may entail
significant limitations on the indicated uses for which a medical product may
be marketed. Any denials of or substantial delays in obtaining requisite
approvals or limitations on such approvals may have a material adverse effect
on the Company. Such denials, and delays in obtaining regulatory approvals
and limitations on such approvals could be experienced both domestically and
abroad.
Even if such regulatory approval is obtained, a marketed medical product and its
manufacturer are subject to continual regulatory review, and later discovery of
previously unknown problems with a product or manufacturer may result in
restrictions on such product or the manufacturing thereof, including withdrawal
of such product from the market. Change in the manufacturing procedures used by
the Company for any of the Company's approved medical products are subject to
FDA review, which could have an adverse effect upon the Company's ability to
continue the commercialization or sale of a product. The process of obtaining
FDA approval is
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costly and time consuming, and there can be no assurance that
any of the Company's products will be deemed to be safe and effective by the
FDA. The Company will not be permitted to market any of its medical products in
any jurisdiction in which the product does not receive regulatory approval.
Neither the Company nor its licensor has had any contact with the FDA or any
foreign regulatory authority regarding the PDIT technology.
DEPENDENCE ON WHO LICENSE AGREEMENT AND BTI AGREEMENT; RISK OF LOSS OF
TECHNOLOGY
The right of the Company to acquire rights to the PDT technology is derived
from the option the Company has to acquire BTI pursuant to an agreement
between the Company and BTI (the "BTI Agreement"). Under the terms of the
BTI Agreement, the Company is required to satisfy certain conditions,
including funding up to $1,250,000 of product development expenses incurred
by BTI during the Option Period, in order to exercise its rights to acquire
BTI by merger under the BTI Agreement. The Company is also required to
advance to BTI funds to repay certain indebtedness in the event the Company
completes an equity financing. The BTI Agreement was amended by a letter
agreement between the Company and BTI. The letter agreement extends the
period for the Company to exercise its option to acquire BTI and suspends the
Company's obligation to advance to BTI funds to repay the indebtedness until
after the successful completion of a clinical study of BOPP. In addition BTI
agreed to irrevocably waive the obligation of the Company to fund further
product development expenses for the period commencing February 24, 1997, and
ending the earlier of June 24, 1997 or the successful completion of the
clinical study.
The right of the Company to the PDIT technology is derived from the Company's
license agreement (the "WHO License Agreement") with WHO. The WHO License
Agreement requires the Company to pay royalties to WHO based on sales of
products incorporating the PDIT technology, including a minimum royalty of
$50,000 per year.
If the Company does not meet its obligations under the BTI Agreement, as
amended, or the WHO License Agreement in a timely manner, the Company could lose
its rights to either or both the proprietary PDT or PDIT technology. Any such
loss could have a material adverse effect on the Company.
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UNCERTAINTY OF PROTECTION OFFERED BY PATENTS AND TRADE SECRETS
The medical industry, particularly the pharmaceutical segment, places
considerable importance on obtaining patent and trade secret protection for new
technologies, products and processes. The Company's success will depend, in
part, on its ability to enjoy or obtain protection for its products and
technologies under United States and foreign patent laws and other intellectual
property laws, to preserve its trade secrets and to operate without infringing
the proprietary rights of third parties. To date, the Company has received a
number of patents, and has filed a number of other patent applications, relating
to the Company's technologies in the United States and internationally. BTI and
the Company have each benefited as a licensee from such issuances or filings of
others.
The patent positions of pharmaceutical, medical and biotechnology firms,
including the Company, are uncertain and involve complex legal and factual
questions for which important legal principles are largely unresolved. To date,
no consistent policy has been developed by the U.S. Patent and Trademark Office
regarding the breadth of claims allowed in medical device or biotechnology
patents or the degree of protection afforded under such patents. The coverage
claimed in a patent application can be significantly reduced before a patent is
issued. Consequently, the Company does not know whether any patent applications
will result in the issuance of patents. Additionally, the Company does not know
whether its existing patents (and any patents related to its patent applications
which subsequently may be issued) will provide significant proprietary
protection or will be circumvented or invalidated. Since patent applications in
the United States are maintained in secrecy until foreign counterparts, if any,
publish or issue patents and since publication of discoveries in the scientific
or patent literature often lag behind actual discoveries, the Company cannot be
certain that it or any licensor was the first creator of inventions covered by
existing patents or pending patent applications or that it or such licensor was
the first to file patent applications for such inventions. Moreover, the
Company might have to participate in interference proceedings declared by the
U.S. Patent and Trademark Office to determine priority of inventions, which
could result in substantial cost to the Company even if the eventual outcome
were favorable to the Company. There can be no assurance that the Company's
current patents, or patents relating to its patent applications, if issued,
would be held valid by a court or that a competitor's technology or product
would be found to infringe such patents.
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A number of biotechnology and high-tech companies and research and academic
institutions have developed technologies, filed patent applications or received
patents on various technologies that may compete with the Company's business.
Some of these technologies, applications or patents may conflict with the
Company's technologies, applications or patents. Such conflict could limit the
scope of the patents that the Company has or may be able to obtain or result in
the denial of the Company's patent applications. In addition, if patents that
cover the Company's activities are issued to other companies, there can be no
assurance that the Company would be able to obtain licenses to these patents at
a reasonable cost or be able to develop or obtain alternative technology.
The Company also relies upon trade secret protection for its unpatented
confidential and proprietary technology and information. There can be no
assurance that others will not independently develop substantially equivalent
proprietary technology and information, gain access to the Company's trade
secrets or disclose such technology and information, or, in general, that the
Company can meaningfully protect its unpatented technology and information.
RISKS OF NEW PRODUCT DEVELOPMENT; MARKET UNCERTAINTY
BTI's PDT technology is new and emerging and only limited preclinical and
clinical data on its safety and efficacy exits. Data relating to the Company's
PDIT technology is even more limited. The PDT and PDIT technologies have been
tested only in animal models to date; human clinical trials have not commenced
on either of these potential cancer products. There is no assurance that
commencement of human clinical trials will be approved by the FDA or any other
regulatory agencies, or that the technologies will prove effective in any such
clinical trials. None of the products underlying these technologies that the
Company proposes to develop or is developing have been approved for marketing by
regulatory authorities in the United States or elsewhere, and all will require
significant research and development, including lengthy clinical testing, prior
to their commercialization. The results of preclinical testing discussed in
this Prospectus for the Company's drug compounds and technologies are subject to
varying interpretations. Furthermore, studies conducted with alternative
designs or on alternative populations could produce results that vary from those
discussed in this Prospectus. Therefore, there can be no assurance that the
results discussed in this Prospectus or the Company's interpretation of them
will be accepted by governmental regulators or the medical community. Even if
the development of the Company's products in the preclinical phase advances to
the clinical stage, there can be no assurance that the products will prove to be
safe and effective. The products that are successfully developed, if any, will
be subject to requisite regulatory approval prior to their commercial sale, and
the approval, if obtainable, is likely to take several years. Generally, only a
very small percentage of the number of new pharmaceutical products initially
developed is approved for sale. Even if the Company's products are approved for
sale, there can be no assurance that they will be commercially successful. The
Company may encounter unanticipated problems relating to development,
manufacturing, distribution and marketing, some of which may be beyond the
Company's financial and technical capacity to solve. The failure to address
such problems adequately could have a material adverse effect on the Company's
business and prospects. No assurance can be given that the Company will succeed
in the development and marketing of any new drug products, or that the products
will not be rendered obsolete by products of competitors.
This Prospectus includes estimates of the number of patients with a particular
type of cancer or other diseases and the number of patients who might have been
candidates for a particular type of treatment. There can be no assurance of the
extent to which any of the Company's products,
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if successfully developed, will actually be used by patients. Furthermore,
there can be no assurance that the Company's sales of its products for such
uses will be profitable even if patient use occurs.
COMPETITION
The biotechnology and medical device industries are characterized by rapidly
evolving technology and intense competition. The consumer markets into which the
Kephra reversible photochromic technology is targeted for marketing are also
extremely competitive. Many of the companies in these industries have
substantially greater financial resources and development capabilities than the
Company, and many in the biotechnology and medical device industries have
substantially greater experience in undertaking clinical testing of products,
obtaining regulatory approvals and manufacturing and marketing such products.
There can be no assurance that the Company's products will be more effective or
achieve greater market acceptance than any current or future competitive
products, or that competitors will not develop products that are more effective
than the Company's or that would render the Company's products and technologies
less competitive or obsolete.
DEPENDENCE ON OTHERS FOR MARKETING AND MANUFACTURING
The Company expects to rely upon marketing partnerships with unaffiliated
medical product companies to market all of its medical products. Such reliance
may limit the Company's ability to control the commercialization of such
products. Although the Company believes that any such collaborative partners
will have an economic motivation to commercialize the products which they have
the right and responsibility to market, the amount and timing of resources
devoted to these activities generally will be controlled by each individual
partner. There can be no assurance that the Company will be successful in
establishing any such marketing partnerships, or that, if established, such
future partners will be successful in commercializing the products.
The Company also relies upon collaborative agreements with unaffiliated
companies for the manufacturing of the PTM product and the drug compounds under
development, and expects to continue to rely upon such relationships at least in
respect to production associated with initial commercial sales, and perhaps
beyond the initial stages of commercialization. Such reliance may adversely
affect profit margins on its products, and there are no assurances that the
Company can develop or maintain contract manufacturing relationships in the
future on acceptable terms, if at all. In addition, manufacturers of the
Company's products will be subject to applicable current good manufacturing
practices ("GMP") prescribed by the FDA or other rules and regulations
prescribed by foreign regulatory authorities. The Company will be dependent on
such manufacturers for continued compliance with GMP and applicable foreign
standards. Failure by a manufacturer of the Company's products to comply with
GMP or applicable foreign standards could result in significant time delays or
the inability of the Company to commercialize a product and could have a
material adverse effect on the Company.
DEPENDENCE UPON KEY PERSONNEL
The Company is currently dependent on certain executive officers, management and
scientific personnel. The loss of these individuals might have a material
adverse effect on the research and development programs and other operations of
the Company. Competition for qualified employees among medical companies is
intense, and the loss of any of such persons, or an
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inability to attract, retain and motivate additional highly skilled
employees, could adversely affect the Company's business and prospects.
There can be no assurance that the Company will be able to retain its
existing personnel or to attract additional qualified employees.
UNCERTAIN THIRD-PARTY REIMBURSEMENT; UNCERTAIN HEALTH CARE REFORM MEASURES
The Company's ability to commercialize drugs through its strategic partners will
depend, in part, on the extent to which reimbursement for the cost of such
products and related treatments will be available from government health
administration authorities, private health coverage insurers and other
organizations. There can be no assurance that adequate third-party coverage
will be available for the Company or its strategic partners to obtain
satisfactory price levels for third-party payor reimbursements. Government and
other third-party payors are increasingly attempting to contain health care
costs by limiting both coverage and the level of reimbursement for new drugs.
If adequate coverage and reimbursement levels are not provided by government and
third-party payors for uses of the Company's potential products, the market
acceptance of these products would be adversely affected. In certain European
markets pricing and profitability of prescription pharmaceuticals are subject to
government control. In France, as well as the United States, there have been and
the Company expects that there will continue to be, a number of proposals to
implement similar government controls. In addition, increasing emphasis on
managed care in the United States will continue to put pressure on the pricing
of pharmaceutical products and diagnostic tests. Cost control initiatives could
decrease the price that the Company or any of its strategic partners receives
for any products in the future and have a material adverse effect on the
Company's business, financial condition and results of operations. Further, to
the extent that cost control initiatives have a material adverse effect on the
Company's strategic partners, the Company's ability to commercialize its
products and to realize royalties may be adversely affected.
UNCERTAINTY OF PHARMACEUTICAL PRICING, REIMBURSEMENT AND RELATED MATTERS
The Company's business, financial condition and results of operations may be
materially adversely affected by the continuing efforts of government and third
party payors to contain or reduce the costs of health care through various
means. For example, in certain foreign markets pricing and profitability of
prescription pharmaceuticals are subject to government control. In the United
States, the Company expects that there will continue to be a number of federal
and state proposals to implement similar government control. In addition,
increasing emphasis on managed care in the United States will continue to put
pressure on the pricing of pharmaceutical products and diagnostic tests. Cost
control initiatives could decrease the price that the Company or any of its
strategic partners receives for any products in the future and have a material
adverse effect on the Company's business, financial condition and results of
operations. Further, to the extent that cost control initiatives have a
material adverse effect on the Company's strategic partners, the Company's
ability to commercialize its products and to realize royalties may be adversely
affected.
The ability of the Company and any strategic partner to commercialize
pharmaceutical or diagnostic products may depend in part on the extent to which
reimbursement for the products will be available from government and health
administration authorities, private health insurers and other third party
payors. Significant uncertainty exists as to the reimbursement status of newly
approved health care products. Third party payors, including Medicare,
increasingly are challenging the prices charged for medical products and
services. Government and other third
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party payors are increasingly attempting to contain health care costs by
limiting both coverage and the level of reimbursement for new therapeutic
products and by refusing in some cases to provide coverage for uses of
approved products for disease indications for which the FDA has not granted
labeling approval. There can be no assurance that any third party insurance
coverage will be available to patients for any products discovered and
developed by the Company or its strategic partners. If adequate coverage and
reimbursement levels are not provided by government and other third party
payors for the Company's products, the market acceptance of these products
may be reduced, which may have a material adverse effect on the Company's
business, financial condition and results of operations.
PRODUCT LIABILITY; LIMITED INSURANCE COVERAGE
The Company faces an inherent business risk of exposure to product liability
claims in the event that the use or misuse of its products and proposed products
result in adverse effects. The Company currently maintains $5 million of
product liability insurance coverage. There can be no assurance that such
coverage is or in the future will be adequate or that adequate insurance will be
available in the future at an acceptable cost, if at all. In addition, there
can be no assurance that a product liability claim, even if the Company has
insurance coverage, would not materially adversely affect the business or
financial condition of the Company.
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RISK OF REDEMPTION OF CLASS A WARRANTS
The Class A Warrants are subject to redemption by the Company at $.10 per
warrant on 60 days' prior written notice provided that the closing bid quotation
for the Common Stock as reported on the AMEX, or on such exchange on which the
Common Stock is then traded, exceeds 400% of the exercise price per share for 20
consecutive trading days ending three days prior to the date of redemption.
Notice of redemption of the Class A Warrants could cause the holders thereof to
exercise the Class A Warrants and pay the exercise price at a time when it may
be disadvantageous for the holders to do so, to sell the Class A Warrants at the
current market price when they might otherwise wish to hold the Class A
Warrants, or to accept the redemption price, which is likely to be less than the
market value of the Class A Warrants at the time of redemption. See
"Description of Securities - Class A Warrants."
TERMS OF SETTLEMENT WARRANTS
The exercise price and other terms of the Settlement Warrants were determined as
a result of settlement negotiations between the Company and representatives of
the plaintiffs in the class-action lawsuit described under "Settlement
Warrants." The exercise price of $22.00 per share of Common Stock does not
necessarily bear any relationship to the financial condition, results of
operations or business or financial prospects of the Company, or any other
recognized
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investment criteria, and should not be considered an indication of the actual
value of the Company's Common Stock. See "Plan of Distribution."
USE OF PROCEEDS
The Company will not receive any proceeds resulting from the sale of the shares
of Common Stock and Class A Warrants by the Selling Securityholders. See
"Selling Securityholders."
The Class A Warrants entitle the holder to purchase one share of Common Stock
from the Company at an exercise price of $1.00 per share. Exercise of the Class
A Warrants offered hereby would result in total gross proceeds to the Company of
$6,500,188. The Settlement Warrants entitle the holder to purchase one shares
of Common Stock from the Company at an exercise price of $22.00 per share. The
exercise of all the Settlement Warrants would result in total gross proceeds to
the Company of $6,814,148. In the event that any of the Class A Warrants or
Settlement Warrants are exercised in the future, net cash proceeds to the
Company would be used for general working capital purposes. The Company is not
expected to receive any proceeds from the exercise of the Placement Warrants or
the Advisory Options since they may be exercised pursuant to a cashless exercise
provision. Whether, how and to what extent any of the Class A Warrants,
Settlement Warrants, Placement Warrants or the Advisory Options will be
exercised, and whether the Placement Warrants and Advisory Options are exercised
for cash or not, cannot be predicted by the Company.
25
<PAGE>
SELLING SECURITYHOLDERS
The price for the Premium Preferred Units sold in the 1997 Private Placement
was fixed by the Board of Directors of the Company in September 1996 by
negotiation between the Company and the placement agent, Paramount. Each
unit cost $100,000 and consisted of 50,000 shares of Convertible Preferred
Stock and 50,000 Class A Warrants. The Convertible Preferred Stock was
priced at $200 per share and each share is convertible at the option of the
holder thereof into shares of Common Stock at a conversion rate corresponding
to a conversion price equal to the lesser of (i) $2.00 and (ii) 80% of the
average closing bid price of the Common Stock, on the American Stock Exchange
for the 30 consecutive trading days immediately preceding (a) the initial
closing date, (b) any interim closing date or (c) the final closing date of
the 1997 Private Placement, whichever was lowest. Based upon this formula,
the conversion price was fixed at $.96 after the December 19, 1996, initial
closing, and did not change based upon the March 7, 1997, final closing.
Also, the conversion price is to be adjusted and reset effective as of March
7, 1998 (the "Reset Date") if the average closing bid price of the Common
Stock for the 30 consecutive trading days immediately preceding the Reset
Date is less than 130% of the then applicable conversion price. (See
"Description of Securities" -- "Preferred Stock"). Each Class A Warrant
entitles the holder thereof to purchase one share of Common Stock at a price
of $1.00 per share subject to adjustment in accordance with the adjustment
provisions set forth in the Warrant Agreement (See "Description of
Securities" -- "Class A Warrants.").
26
<PAGE>
The following table sets forth certain information concerning the number
of shares of Common Stock and Class A Warrants offered hereby by each of the
Selling Securityholders and as adjusted to reflect the ownership of shares of
Common Stock and Class A Warrants after the offering. The footnotes to the
Selling Securityholder table below indicates those Selling Securityholders
which disclosed to the Company their ultimate control persons pursuant to
filings under the Exchange Act.
<TABLE>
<CAPTION>
SECURITIES
OFFERED BY THIS PROSPECTUS AFTER OFFERING
-------------------------- ----------------------------------------
NAME OF SELLING COMMON STOCK CLASS A WARRANTS
STOCKHOLDER COMMON STOCK WARRANTS SHARES PERCENT (1) NUMBER PERCENT (2)
- --------------- ------------ -------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Ross D. Ain 30,833 10,000 0 (*) 0 (*)
Aries Domestic
Fund, LP (5) 1,370,575 474,900 200,000 (*) 250,000 3.8%
The Aries Trust(5) 2,676,500 939,000 200,000 (*) 250,000 3.8%
Armen Partners L.P. 308,333 100,000 0 (*) 0 (*)
Armen Offshore
Fund Ltd. 77,083 25,000 0 (*) 0 (*)
Ronald S. Baruch 38,542 12,500 0 (*) 0 (*)
Alan R. Batkin 77,083 25,000 0 (*) 0 (*)
Mark Berg 154,167 50,000 0 (*) 0 (*)
David J. Bershad 154,167 50,000 0 (*) 0 (*)
Paine Webber
c/f IRA Alan M. Blender 38,542 12,500 0 (*) 0 (*)
Elliott Broidy 154,167 50,000 0 (*) 0 (*)
Anthony Broy 30,833 10,000 0 (*) 0 (*)
Donald C. Carter 308,333 100,000 0 (*) 0 (*)
Cass & Co.
Magnum Capital
Growth Fund 77,083 25,000 0 (*) 0 (*)
Thomas L. Cassidy
IRA Rollover 77,083 25,000 0 (*) 0 (*)
IRA FBO
Richard B. Chanin 77,083 25,000 0 (*) 0 (*)
Andrew and Barbara
Cichelli 30,833 10,000 0 (*) 0 (*)
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
SECURITIES
OFFERED BY THIS PROSPECTUS AFTER OFFERING
-------------------------- ----------------------------------------
NAME OF SELLING COMMON STOCK CLASS A WARRANTS
STOCKHOLDER COMMON STOCK WARRANTS SHARES PERCENT (1) NUMBER PERCENT (2)
- --------------- ------------ -------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Conrads 77,083 25,000 0 (*) 0 (*)
Lilia Cordero de Adame
Lilia Ma Olvera 38,542 12,500 0 (*) 0 (*)
Archibald Cox, Jr. 308,333 100,000 0 (*) 0 (*)
Daniel J. &
Patricia Ann Dorman 38,542 12,500 0 (*) 0 (*)
Dan Drykerman 77,083 25,000 0 (*) 0 (*)
Nathan Eisen 77,083 25,000 0 (*) 0 (*)
Joseph A. Fabiani 53,958 17,500 40,000 (*) 50,000 (*)
Albert Fried, Jr. 154,167 50,000 0 (*) 0 (*)
Morris Friedman 77,083 25,000 0 (*) 0 (*)
Gerald and Gloria
Frolich 38,542 12,500 0 (*) 0 (*)
Giant Trading Inc. 61,667 20,000 0 (*) 0 (*)
Gilbert Goldstein, Trustee
UIT Howard Gittis,
dated 12/23/88 154,167 50,000 0 (*) 0 (*)
Laura Gold Galleries Ltd.
Profit Sharing Trust 38,542 12,500 0 (*) 0 (*)
The Gordon Fund, L.P. 77,083 25,000 0 (*) 0 (*)
Michael J. Gordon 15,417 5,000 0 (*) 0 (*)
Robert P. Gordon 77,083 25,000 0 (*) 0 (*)
Michael G. Jesselson
12/18/80 Trust 770,833 250,000 0 (*) 0 (*)
12/18/80 Trust FBO
Jesselson Grandchildren 770,833 250,000 0 (*) 0 (*)
Patrick M. Kane 77,083 25,000 0 (*) 0 (*)
Melvin L. Katten 38,542 12,500 0 (*) 0 (*)
Donald R. Kendall, Jr
& Diane S Kendall
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
SECURITIES
OFFERED BY THIS PROSPECTUS AFTER OFFERING
-------------------------- ----------------------------------------
NAME OF SELLING COMMON STOCK CLASS A WARRANTS
STOCKHOLDER COMMON STOCK WARRANTS SHARES PERCENT (1) NUMBER PERCENT (2)
- --------------- ------------ -------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
JTWROS 38,542 12,500 40,000 (*) 50,000 (*)
John R. Kennedy
Pension Fund 77,083 25,000 0 (*) 0 (*)
Jay Kestenbaum 77,083 25,000 0 (*) 0 (*)
Keys Foundation 308,333 100,000 0 (*) 150,000 2.3%
Martin & Miriam
Knecht, JTWRS 38,542 12,500 0 (*) 0 (*)
Robert A. Knox 77,083 25,000 0 (*) 0 (*)
Harvey Krauss, Trustee
Brian Michael Krauss 38,542 12,500 0 (*) 0 (*)
Gregory & Domenica
Lechner 77,083 25,000 0 (*) 0 (*)
Benjamin Lehrer 38,542 12,500 0 (*) 0 (*)
The Lincoln Fund
Tax Advantaged, L.P. 77,083 25,000 100,000 (*) 75,000 1.16%
Lion Tower Corporation 77,083 25,000 0 (*) 0 (*)
Frank J. and Mary Anne
Loccisano 77,083 25,000 0 (*) 0 (*)
John L. Loeb, Jr. 38,542 12,500 0 (*) 0 (*)
Managed Risk
Trading, L.P. 77,083 25,000 0 (*) 0 (*)
Lawrence Manus 154,167 50,000 0 (*) 0 (*)
Dennis M. McCormack 38,542 12,500 0 (*) 0 (*)
Sean & Erin McGould 38,542 12,500 0 (*) 0 (*)
MDBC Capital Corp. 77,083 25,000 0 (*) 0 (*)
Albert R. Miller, Trustee 38,542 12,500 0 (*) 0 (*)
Albert Milstein 77,083 25,000 0 (*) 0 (*)
Reed Moskowitz 38,542 12,500 0 (*) 0 (*)
M.S.I.
Investments, LTD 154,167 50,000 0 (*) 0 (*)
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
SECURITIES
OFFERED BY THIS PROSPECTUS AFTER OFFERING
-------------------------- ----------------------------------------
NAME OF SELLING COMMON STOCK CLASS A WARRANTS
STOCKHOLDER COMMON STOCK WARRANTS SHARES PERCENT (1) NUMBER PERCENT (2)
- --------------- ------------ -------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Charles J. Murphy, Jr. 38,542 12,500 0 (*) 0 (*)
Arthur J. Nagle 38,542 12,500 0 (*) 0 (*)
Dr. Edmund C. Neuhaus
Olga M. Neuhaus 15,417 5,000 0 (*) 0 (*)
John S. Osterweis, Trustee
The Osterweis
Revocable Trust 38,542 12,500 0 (*) 0 (*)
Paul & Rebecca
Ostrovsky 19,271 6,250 0 (*) 0 (*)
Steven N. Ostrovsky 77,083 25,000 0 (*) 0 (*)
Palmetto Partners, Ltd. 308,333 100,000 0 (*) 250,000 3.8%
Paramount Capital, Inc.(3) 3,854,283 1,250,038 0 (*) 0 (*)
Ruth Peyser 77,083 25,000 0 (*) 0 (*)
Alexander Pomper 154,167 50,000 0 (*) 0 (*)
Bruce Pomper 154,167 50,000 0 (*) 0 (*)
Dr. Tis Prager 38,542 12,500 0 (*) 0 (*)
RHL Associates L.P. 77,083 25,000 0 (*) 0 (*)
Maritine Rothblatt 38,542 12,500 0 (*) 0 (*)
Abel Quezada Rueda
Mercedes Pesqueira V.,
JTWROS 15,417 5,000 0 (*) 0 (*)
David W. Ruttenberg 38,542 12,500 0 (*) 0 (*)
Sanger Investments II 30,833 10,000 0 (*) 0 (*)
Bernard Selz 231,250 75,000 0 (*) 0 (*)
Harold and Bess
Schaeffer, JTWROS 38,542 12,500 0 (*) 0 (*)
Roy and Marlena
Schaeffer, JTWROS 77,083 25,000 0 (*) 0 (*)
J.F. Shea Co., Inc. 462,500 150,000 0 (*) 0 (*)
Andrew W. Schonzeit 154,167 50,000 20,000 (*) 18,750 (*)
Richard A. Smith 77,083 25,000 0 (*) 0 (*)
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
SECURITIES
OFFERED BY THIS PROSPECTUS AFTER OFFERING
-------------------------- ----------------------------------------
NAME OF SELLING COMMON STOCK CLASS A WARRANTS
STOCKHOLDER COMMON STOCK WARRANTS SHARES PERCENT (1) NUMBER PERCENT (2)
- --------------- ------------ -------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Philip Solomon 38,542 12,500 0 (*) 0 (*)
Aaron Speisman 38,542 12,500 0 (*) 0 (*)
William M. Spencer III 154,167 50,000 0 (*) 0 (*)
Suan Investments 154,167 50,000 0 (*) 100,000 1.5%
Michael Schwartz 154,167 50,000 0 (*) 0 (*)
Michael H. Schwartz
Profit Plan 77,083 25,000 0 (*) 0 (*)
Hindy H. Taub 154,167 50,000 0 (*) 0 (*)
Herman Tauber 77,083 25,000 37,000 (*) 50,000 (*)
Myron Teitelbaum 57,813 18,750 0 (*) 0 (*)
Joseph A. Umbach 38,542 12,500 0 (*) 0 (*)
Donald E. and Virginia
V. Vinson Trust 38,542 12,500 0 (*) 0 (*)
Peri Wayne 38,542 12,500 0 (*) 0 (*)
Melvyn I. Weiss 154,167 50,000 0 (*) 0 (*)
Izaak Wilder 38,542 12,500 0 (*) 0 (*)
Wolcot Capital Inc. 38,542 12,500 0 (*) 0 (*)
Andrew B. Woldow 19,271 6,250 0 (*) 0 (*)
Robert B. Wolford 38,542 12,500 0 (*) 0 (*)
Wolfson Descendants'
1983 Trust 1,541,667 500,000 0 (*) 0 (*)
Wound Healing of
Oklahoma, Inc. 100,000 100,000 0 (*) 0 (*)
Zapco Holdings, Inc.
Deferred Compensation
Plan Trust 77,083 25,000 0 (*) 0 (*)
Holders of Settlement
Warrants as a Group 309,734 0 0 (*) 0 (*)
___________
(*) Represents, after the sale of all shares of Common Stock and Class A
Warrants encompassed by this Prospectus, less than 1% of the outstanding
Common Stock or Class A Warrants.
</TABLE>
31
<PAGE>
(1) The percentage of the outstanding Common Stock to be held by the Selling
Securityholders after the offering is calculated based on the total of
32,304,900 shares comprised of 8,186,029 shares issued and outstanding on
June 19, 1997, plus 13,701,157 shares issuable upon exercise of Class A
Warrants, Class B Warrants and 10,416,979 shares issuable upon conversion
of Convertible Preferred Stock.
(2) The percentage of the outstanding Class A Warrants to be held by the
Selling Securityholders after the offering is calculated based on the
total of 13,392,157 Class A Warrants issued and outstanding on June 19,
1997.
(3) 2,604,245 shares of Common Stock underlying Convertible Preferred Stock,
which shares of Convertible Preferred Stock partly under lie the
Paramount Options are not convertible until September 11, 1997, pursuant
to the Placement Agreement between Paramount and the Company.
(4) A majority of the named Selling Securityholders, other than Paramount,
has agreed to a nine-month lock-up period in respect of 75% of the
offered holding of each security; provided that following each three-
month period after the effective date of the registration statement of
which this Prospectus forms part, a further amount of 25% of such
securities becomes exempt from such lock-up period.
(5) Paramount Capital Asset Management, Inc. ("Paramount Capital") is the
investment manager of Aries Trust, a Cayman Islands Trust ("Aries Trust")
and the General Partner of Aries Domestic Fund, L.P., a Delaware
Corporation ("Aries Domestic"). Dr. Rosenwald is the President and sole
stockholder of Paramount Capital and may be deemed the beneficial owner
of the voting securities of the Company owned by Paramount Capital, Aries
Trust and Aries Domestic. Paramount Capital is affiliated with Paramount,
the financial advisor to the Company.
___________
32
<PAGE>
The shares of Common Stock and the Class A Warrants are being registered
under the Securities Act pursuant to the terms of certain registration rights
agreements between the Selling Securityholders and the Company entered into
at the time the Selling Securityholders acquired the shares of Common Stock
and Class A Warrants. The Company also agreed with the Selling
Securityholders that it would use its best efforts to increase the authorized
Common Stock of the Company to 100,000,000 shares within 90 days after March
7, 1997, the final closing date of the 1997 Private Placement, but in any
event no later than 270 days after such date. If after 270 days from March
7, 1997, the Company has failed to authorize sufficient shares, the Company
agreed that each of the Selling Securityholders is entitled at the investor's
option to require the Company to repurchase such investor's shares of
Preferred Stock for $200.00 per share. Each Selling Securityholder will be
entitled to receive all of the proceeds from the future sale of his, her or
its respective shares of Common Stock or Class A Warrants. Except for the
costs of including such shares of Common Stock and Class A Warrants within
the registration statement of which this Prospectus forms a part, which costs
are borne by the Company, the Selling Securityholders will bear all expenses
of any offering by them of their shares of Common Stock or Class A Warrants,
including the costs of their counsel and any sales commissions incurred.
Except as noted below, none of the Selling Securityholders named in the
preceding table have had any position, office or other material relationship
with the Company or any of its predecessors or affiliates.
On November 27, 1995, Paramount and the Company entered into a Financial
Advisory Agreement whereby Paramount agreed to act as non-exclusive financial
advisor to the Company and to identify and negotiate potential acquisition
candidates, investments or strategic alliances. Pursuant to a Placement
Agency Agreement entered into between Paramount and the Company dated
September 27, 1996, the parties agreed to extend the Financial Advisory
Agreement for an additional eighteen (18) months.
Paramount acted as placement agent for the Company on its November, 1995
private placement (the "1995 Private Placement") and on the 1997 Private
Placement.
In the 1995 Private Placement, the Company completed an offering of
$3,485,000 of units consisting of Common Stock and Class A Warrants in which
Paramount acted as placement agent. In connection therewith, the Company paid
commissions of $313,650 and non-accountable expense allowances of $139,400 to
Paramount. The Company will also pay a commission to Paramount of 6% of the
gross proceeds received upon any exercise of such Class
33
<PAGE>
A Warrants. Pursuant to its engagement in connection with the 1995 Private
Placement, Paramount received the right to designate two nominees to the
Board of Directors of the Company; Michael S. Weiss, a Senior Managing
Director of Paramount, and Elliott H. Vernon were subsequently designated and
elected to the Board of Directors. Mr. Weiss and Mr. Vernon receive
customary Board member compensation. In connection with the 1995 Private
Placement, the Company issued to Paramount unit purchase warrants, at an
exercise price equal to 110% of the price per unit paid by the investors in
the 1995 Private Placement, to purchase up to 348,500 shares of Common Stock
and 435,675 Class A Warrants. Unit purchase warrants to purchase up to
20,522 shares of Common Stock and 25,652 Class A Warrants were transferred by
Paramount to Mr. Weiss. Certain affiliates of the Placement Agent were
investors in the 1995 Private Placement.
The 1997 Private Placement was completed in two stages and raised $10,000,000
(net proceeds to the Company of $8,690,000) through the sale of 100 Premium
Preferred Units at a price per Unit of $100,000, each Unit consisting of 500
shares of Convertible Preferred Stock, par value $25.00 per share, and 50,000
Common Stock purchase warrants, to accredited individuals and institutional
investors pursuant to Regulation D under the Securities Act. Paramount
received an aggregate dollar commission of $900,000 and a non-accountable
expense allowance of $410,753. The Company will also pay a commission to
Paramount of 6% of the gross proceeds received upon any exercise of the
warrants. Additionally, Paramount received a Unit Purchase Option and an
Advisory option that, in the aggregate, entitled Paramount to purchase 25
Premium Preferred Units at an exercise price equal to 110% of the per unit
price paid by the investors in the 1997 Private Placement. The 25 Premium
Preferred Units include Class A Warrants to purchase up to 1,250,038 shares
of common stock and 12,500 shares of Convertible Preferred Stock convertible
into 2,604,245 shares of Common Stock.
Paramount is affiliated with certain significant stockholders of the Company,
including the Aries Trust, a Cayman Islands Trust ("Aries Trust"), Aries
Domestic Fund, L.P., a Delaware Corporation ("Aries Domestic") and Dr.
Lindsay A. Rosenwald. Paramount is also affiliated with Paramount Capital
Asset Management, Inc. ("Paramount Capital") which is the investment manager
of Aries Trust and the General Partner of Aries Domestic. Dr. Rosenwald is
the sole stockholder of Paramount Capital.
In June 1996 the Company entered into the BTI Agreement with BTI under which
the Company was granted an option to acquire BTI. If the Company elects to
exercise its option, the agreement calls for the Company to issue common
stock to the BTI stockholders with an aggregate acquisition value of
$6,000,000. Mr. Weiss, a Director of the Company, is a Director and
Secretary of BTI. Certain other affiliates of Paramount, including Aries
Trust, Aries Domestic and Dr. Rosenwald are stockholders of BTI. Under the
BTI Agreement, as amended, the Company is required to advance to BTI funds to
repay $615,000 in indebtedness in the event that the Company exercises its
option to acquire BTI. The holders of such indebtedness are Aries Trust,
Aries Domestic and Dr. Rosenwald.
The Company and BTI have agreed to extend the period during which the Company
may exercise its option to acquire BTI by a merger of BTI into a wholly owned
subsidiary of the Company from April 30, 1997 until such time as BTI has
completed human clinical trials of Boronated Porphyrin Compounds (BOPP) at an
agreed upon dose level. The option period was extended at the Company's
request to enable BTI to complete preclinical studies, to commence clinical
trials in humans and to demonstrate that a given dose level of BOPP in humans
would
34
<PAGE>
not cause certain adverse events. The Company believes that the extension of
the option will give it greater opportunity to access the preliminary data
resulting from the BOPP preclinical trials and the Phase I human clinical
trials before determining whether to acquire BTI and to evaluate the
possibility of adverse events in human patients. Accordingly, the Company
has elected to defer exercise of the option.
In October, 1996, Aries Trust and Aries Domestic extended a line of credit
(the "Line of Credit") of up to $500,000 to the Company, which the Company
subsequently drew down but has since repaid. Aries Trust received warrants
to purchase 105,000 shares of Common Stock and Aries Domestic received
warrants to purchase 45,000 shares of Common Stock as consideration for
extending the line of credit to the Company.
In December, 1995, as a result of the Common Stock and warrants to purchase
Common Stock received in the 1995 Private Placement, Aries Trust, Aries
Domestic, and Dr. Rosenwald filed a Schedule 13D with the Commission
indicating they beneficially owned in the aggregate greater than 11% of the
issued and outstanding equity securities of the Company. In April, 1997, as
a result of the Common Stock, Preferred Stock, and options and warrants to
purchase Common Stock received in the 1997 Private Placement and for the Line
of Credit, Aries Trust, Aries Domestic, Paramount Capital and Dr. Rosenwald
filed an amendment to their earlier filed Schedule 13D indicating their
increased beneficial ownership as set forth above. David R. Walner, Associate
Director of Paramount and Secretary of Paramount Capital, has served as
Secretary of the Company, without compensation, since December 1996.
PLAN OF DISTRIBUTION
The Settlement Warrants were offered and distributed in an offering exempt
from registration under the Securities Act pursuant to Section 3(a)(10)
thereof, pursuant to the settlement of a class-action lawsuit (the "Action")
against the Company. On February 4, 1992, the Company received service of a
putative stockholder class action complaint against it, Dr. Peter Baram, its
then Chairman and CEO, and Larry O. Bymaster, its then President and COO,
filed in the U.S. District Court, Southern District of California. The
Complaint alleged various claims, including the claim that the Company failed
to disclose information regarding the prospects for U.S. Food and Drug
Administration of the Periodontal Tissue Monitor Kit. Additional similar
complaints were thereafter filed by other individuals. The Company's Board
of Directors believed the claims to be without merit but concluded that it
was in its best interest to settle the matter to avoid the expenses and risks
of continued litigation. On June 17, 1994, the U.S. District Court approved
a Stipulation of Settlement of the litigation. The settlement included all
persons who purchased the Company's stock from October 4, 1990 through and
including November 14, 1991. The settlement to the plaintiff class included
a cash payment of $2,800,000, all of which was paid by the insurers providing
liability coverage for the Company's directors and officers, and five-year
warrants (the "Settlement Warrants") to purchase 309,734 shares of Common
Stock at an exercise price of $22.00 per share. For a description of the
Settlement Warrants, see "Description of Securities -- Settlement Warrants."
All other shares of Common Stock and Class A Warrants offered hereby relate
to the 1997 Private Placement.
35
<PAGE>
The shares of Common Stock and Class A Warrants may be sold by the Selling
Securityholders or Transferees from time to time in one or more transactions
at market prices prevailing at the time of the sale, at prices related to
such prevailing market prices or at negotiated prices. The Selling
Securityholders or Transferees may sell the shares of Common Stock and Class
A Warrants offered hereby (i) through brokers and dealers; (ii) on the
American Stock Exchange in the case of the shares; (iii) any other exchanges
upon which the shares or Class A Warrants are listed; (iv) "at the market" to
or through a market maker or into an existing trading market; or (v) in other
ways not involving exchanges, market makers or established trading markets,
including direct sales to purchasers. Additionally, the shares and Class A
Warrants may also be publicly offered through agents, underwriters or
dealers. In such event the Selling Securityholders or Transferees may enter
into agreements with respect to any such offering.
The Selling Securityholders or Transferees and any dealers or agents that
participate in the distribution of shares of the Common Stock and Class A
Warrants may be deemed to be underwriters, and any profit on the sale of
shares of Common Stock and Class A Warrants by the Selling Securityholders or
Transferees and any discounts, commissions or concessions received by any
such dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act.
The sale of the shares of Common Stock and Class A Warrants by the Selling
Securityholders or Transferees may also be effected from time to time by
selling shares or Class A Warrants directly to purchasers or to or through
certain broker-dealers. In connection with any such sale, any such
broker-dealer may act as agent for the Selling Securityholders or may
purchase from the Selling Securityholders or Transferees all or a portion of
the shares or Class A Warrants as principal and thereafter may resell any
shares or Class A Warrants so purchased. Sales by any such broker-dealer,
acting as agent or as principal, may be made pursuant to any of the methods
described below. Such sales may be made on the American Stock Exchange or
other exchanges on which the Company's Common Stock is then traded, on any
exchange, if any, on which the Class A Warrants are traded, in the
over-the-counter market, in negotiated transactions or otherwise at prices
and at terms then prevailing or at prices related to the then-current market
prices or at negotiated prices.
The shares of Common Stock and Class A Warrants offered under the
Registration Statement (of which this Prospectus is part) may also be sold in
one or more of the following transactions (i) block transactions (which may
involve crosses) in which a broker-dealer may sell all or a portion of such
shares or Class A Warrants as agent but may position and resell all or a
portion of the block as principal to facilitate the transaction; (ii)
purchases by any such broker-dealer for its own account pursuant to this
Prospectus; (iii) a special offering, and exchange distribution or a
secondary distribution in accordance with applicable stock exchange rules; or
(iv) ordinary brokerage transactions and transactions in which broker-dealers
solicit purchasers. In effecting sales, broker-dealers engaged by the
Selling Securityholders or Transferees may arrange for other broker-dealers
to participate. Broker-dealers will receive commissions or other
compensation from the Selling Securityholders or Transferees in amounts to be
negotiated immediately prior to the sale that will not exceed those customary
in the types of transactions involved. Broker-dealers may also receive
compensation from purchasers of the shares or Class A Warrants, which is not
expected to exceed that which is customary in the types of transactions
involved.
36
<PAGE>
The Selling Securityholders and Transferees will pay all of the expenses
incident to the offering and sale of the shares of the Common Stock and Class
A Warrants offered under this Prospectus, including commissions and fees of
dealers or agents. The Company has paid or will pay all expenses related to
the Registration Statement, including registration fees and the fees of
counsel or other experts retained by the Company in connection with the
registration.
The Company has informed the Selling Securityholders that the
anti-manipulation provisions of Regulation M under the Exchange Act may apply
to the sales of their shares offered hereby. The Company also has advised
the Selling Securityholders of the requirement for delivery of this
Prospectus in connection with any sale of the shares offered hereby.
Certain Selling Securityholders may from time to time purchase shares of
Common Stock in the open market. These Selling Securityholders have been
notified that they should not commence any distribution of shares of Common
Stock unless they have terminated their purchasing and bidding for Common
Stock in the open market as provided in applicable securities regulations.
There is no assurance that the Selling Securityholders or the Transferees
will sell any or all of the shares of Common Stock or Class A Warrants
offered by them hereby.
DESCRIPTION OF SECURITIES
AUTHORIZED STOCK
The authorized capital stock of the Company consists of 30,000,000 shares of
Common Stock and 300,000 shares of Preferred Stock. All of the issued and
outstanding capital stock of the Company is fully paid and nonassessable.
The following descriptions of securities is not complete and is qualified in
all respects by the Company's Certificate of Corporation, as amended,
Certificates of Designations and Warrant Agreements, respectively, the forms
of which are filed as Exhibits to the Company's filings with the Commission,
including the registration statement of which this Prospectus forms part.
COMMON STOCK
There are outstanding 8,186,029 shares of Common Stock owned of record by 392
holders at June 19, 1997. The holders of Common Stock (i) have equal and
ratable rights to dividends from funds legally available therefor, when, as
and if declared by the Board of Directors of the Company; (ii) are entitled
to share ratably in all assets of the Company available for distribution to
holders of Common Stock upon liquidation, dissolution or winding up of the
affairs of the Company; and (iii) do not have preemptive or subscription
rights. There are no redemption or sinking fund provisions applicable to the
Common Stock. Each holder of Common Stock is entitled to one vote per share
for all purposes. The Board of Directors is authorized to issue additional
shares of Common Stock within the limits authorized by the Company's
Certificate of Incorporation, as amended, without stockholder action.
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PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the Board of Directors,
without further vote or action by stockholders, to issue shares of Preferred
Stock in one or more series and to determine the rights, preferences,
privileges and restrictions thereof, including the dividend rights, dividend
rate, conversion rights, voting rights, terms of redemption (including
sinking fund provisions), redemption price or prices, liquidation preferences
and the number of shares constituting any series or the designations of such
series. These rights and privileges could limit the voting power of holders
of Common Stock and restrict their rights to receive dividends or liquidation
proceeds in an adverse manner.
The Company has granted the Board of Directors authority to issue Preferred
Stock and to determine its rights and preferences to eliminate delays
associated with a stockholder vote on specific issuances. The Company
believes that this power to issue Preferred Stock will provide flexibility in
connection with possible corporate transactions. It could also have the
effect, however, of making it more difficult for a third party to acquire, or
of discouraging a third party from attempting to acquire, control of the
Company. See "Stockholders Rights Plan." The Company has no outstanding
shares of Preferred Stock and no present plans to issue any shares of
Preferred Stock other than the Convertible Preferred Stock.
The Board of Directors has authorized the issuance of up to 56,250 shares of
Convertible Preferred Stock to be designated as the Company's Series A
Convertible Preferred Stock (the "Convertible Preferred Stock"). There are
outstanding 50,000 shares of Convertible Preferred Stock, owned of record by
100 holders at June 19, 1997. The rights, preferences and characteristics of
the Convertible Preferred Stock are as follows:
DIVIDENDS
The holders of Convertible Preferred Stock will be entitled to receive
dividends as, when and if declared by the Board of Directors out of funds
legally available therefor. No dividend or distribution, as the case may be,
shall be declared or paid on any junior stock unless first the holders of the
Convertible Preferred Stock are paid a special dividend in the amount of $260
per share, and the same dividend as proposed to be paid to the junior stock
is also paid to the Convertible Preferred Stock. The Company does not intend
to pay cash dividends on the Convertible Preferred Stock or the underlying
Common Stock for the foreseeable future.
CONVERSION
Each share of Convertible Preferred Stock may be converted at the option of
the holder at any time after the initial issuance date into Common Stock at
an initial conversion price (the "Initial Conversion Price") equal to the
lesser of (i) $2.00 and (ii) 80% of the average bid price of the Common Stock
on AMEX for the thirty consecutive trading days immediately preceding the (a)
the initial closing date, (b) any interim closing date or (c) the final
closing date, whichever is lowest. The conversion price applicable at any
time to the Convertible Preferred Stock (the "Preferred Conversion Price") is
subject to adjustment upon the occurrence of a merger, reorganization,
consolidation, reclassification, stock dividend or stock split which will
result in an increase or decrease in the number of shares of Common Stock
outstanding (other than the proposed merger with BTI (see "Prospectus
Summary" - "The Company -Photodynamic Therapy (PDT) - Binary Therapeutics,
Inc."). In addition, the Preferred Conversion Price is subject to adjustment
on the date which is twelve months after the final closing date (the "Reset
Date") if the average closing bid price of the Common Stock for the thirty
consecutive trading days immediately preceding the Reset Date (the "Reset
Trading Price") is less than 130% of the
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Initial Conversion Price as adjusted (a "Reset Event"). Upon a Reset Event,
the Preferred Conversion Price will be reduced to equal the greater of (i)
the Reset Trading Price divided by 1.3 and (ii) 50% of the Initial Conversion
Price.
MANDATORY CONVERSION
The Company has the right at any time after the Reset Date to cause the
Convertible Preferred Stock to be converted in whole or in part, on a PRO
RATA basis, into shares of Common Stock if the closing price of the Common
Stock exceeds 200% of the then applicable Preferred Conversion Price for at
least 20 trading days in any 30 consecutive trading day period.
LIQUIDATION
Upon (i) a liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, (ii) a sale or other disposition of all or
substantially all of the assets of the Company or (iii) any consolidation,
merger (other than the proposed merger with BTI (see "Prospectus Summary" -
"The Company -- Photodynamic Therapy (PDT) - Binary Therapeutics, Inc."),
combination, reorganization or other transaction in which the Corporation is
not the surviving entity or in which shares of Common Stock constituting in
excess of 50% of the voting power of the Corporation are exchanged for or
changed into other stock or securities, cash or any other property, after
payment or provision for payment of the debts and other liabilities of the
Company, the holders of the Convertible Preferred Stock then outstanding will
first be entitled to receive, PRO RATA (on the basis of the number of shares
of the Convertible Preferred Stock then outstanding), and in preference to
the holders of the Common Stock and any other series of preferred stock, an
amount per share equal to $260.00 plus accrued but unpaid dividends, if any.
VOTING RIGHTS
The holders of the Convertible Preferred Stock have the right at all meetings
of stockholders to the number of votes equal to the number of shares of
Common Stock issuable upon conversion of the Convertible Preferred Stock at
the record date for determination of the stockholders entitled to vote. So
long as a majority of the shares of Convertible Preferred Stock remain
outstanding, the holders of 66.67% of the Convertible Preferred Stock then
outstanding are entitled to approve (i) the issuance of any securities of the
Company senior to or on parity with the Convertible Preferred Stock; (ii) any
alteration or change in the rights, preferences or privileges of the
Convertible Preferred Stock; and (iii) the declaration or payment of any
dividend on any junior stock or the repurchase of any junior securities of
the Company. Except as provided above or as required by applicable law, the
holders of the Convertible Preferred Stock will be entitled to vote together
with the holders of the Common Stock and not as a separate class.
CLASS A WARRANTS
EXERCISE PRICE AND TERMS
Each Class A Warrant entitles the holder thereof to purchase one share of
Common Stock at a price of $1.00 per share subject to adjustment in
accordance with the adjustment provisions set forth in the Warrant Agreement
summarized below. The Class A Warrants may be exercised upon surrender of
the Class A Warrant certificate on or prior to November 26, 2005 (or, if
redeemed prior thereto, the date immediately preceding the redemption date)
at the offices of the Warrant Agent, with the subscription form on the
reverse side of the Warrant certificate completed as indicated, accompanied
by payment of the full exercise price (by cashier's or certified check
payable to the order of the Warrant Agent, or by wire transfer) for the
number of
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Class A Warrants being exercised. No fractional shares will be issued upon
the exercise of the Class A Warrants, and the Company will pay cash in lieu
of fractional shares. After November 26, 2005, the Class A Warrants will
become void and of no value. If a market for the Class A Warrants develops,
a holder may sell Class A Warrants instead of exercising them. There can be
no assurance, however, that a market for the Class A Warrants will develop or
continue.
The exercise price of the Class A Warrants bears no relation to any objective
criteria of value and should in no event be regarded as an indication of any
future market price of any of the securities offered hereby.
ADJUSTMENT
The exercise price and the number of shares of Common Stock purchasable upon
the exercise of the Class A Warrants are subject to adjustments upon the
occurrence of certain events, such as stock dividends or stock splits of the
Common Stock. Additionally, an adjustment would be made in the case of the
reclassification or exchange of the Common Stock, consolidation or merger of
the Company with or into another corporation or sale of all or substantially
all of the assets of the Company, in order to enable Class A Warrant holders
to acquire the kind and number of shares of stock or other securities or
property receivable in such event by holders of the number of shares of
Common Stock that might otherwise have been purchased upon the exercise of
the Class A Warrant. No adjustment to the exercise price of the shares
subject to the Class A Warrants will be made for dividends (other than
dividends in the form of stock), if any, paid on the Common Stock.
REDEMPTION
The Class A Warrants are subject to redemption by the Company at $.10 per
warrant on 60 days' prior written notice provided that the closing bid
quotation for the Common Stock as reported on the AMEX, or on such exchange
on which the Common Stock is then traded, exceeds 400% of the exercise price
per share for 20 consecutive trading days ending three days prior to the date
of redemption.
WARRANT HOLDER NOT A STOCKHOLDER
The Class A Warrants do not confer upon holders thereof any voting or any
other rights of a stockholder of the Company. The shares of Common Stock
issuable upon exercise of the Class A Warrants in accordance with the terms
thereof will be fully paid and nonassessable.
SETTLEMENT WARRANTS
The Board of Directors authorized the issuance of 309,734 Settlement
Warrants, to be designated as the Company's Series B Warrants, in settlement
of the Action. See "Plan of Distribution." Class B Warrants are owned of
record by 522 holders at June 19, 1997. The following description of the
Settlement Warrants is not complete and is qualified in all respects by the
Warrant Agreement and the form of Settlement Warrant filed as exhibits to the
registration statement of which this Prospectus forms part.
EXERCISE PRICE AND TERMS
Each Class B Warrant entitles the holder thereof to purchase one share of
Common Stock at a price of $22.00 per share subject to adjustment in
accordance with the adjustment provisions set forth in the Warrant Agreement
summarized below. The Class B Warrants may be exercised at any time prior to
August 11, 2001, at the offices of the Warrant Agent, with the subscription
form on the reverse side of the Warrant certificate completed as indicated,
accompanied by
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payment of the full exercise price (by cashier's or certified check payable
to the order of the Warrant Agent, or by wire transfer) for the number of
Class B Warrants being exercised. No fractional shares will be issued upon
the exercise of the Class B Warrants, and the Company will pay cash in lieu
of fractional shares. After August 12, 2001, the Class B Warrants will
become void and of no value. If a market for the Class B Warrants develops,
a holder may sell Class B Warrants instead of exercising them. There can be
no assurance, however, that a market for the Class B Warrants will develop or
continue.
The exercise price of the Class B Warrants bears no relation to any objective
criteria of value and should in no event be regarded as an indication of any
future market price of any of the securities offered hereby.
ADJUSTMENT
The exercise price and the number of shares of Common Stock purchasable upon
the exercise of the Class B Warrants are subject to adjustments upon the
occurrence of certain events, such as stock dividends or stock splits of the
Common Stock. Additionally, an adjustment would be made in the case of the
reclassification or exchange of the Common Stock, consolidation or merger of
the Company with or into another corporation or sale of all or substantially
all of the assets of the Company, in order to enable Class B Warrant holders
to acquire the kind and number of shares of stock or other securities or
property receivable in such event by holders of the number of shares of
Common Stock that might otherwise have been purchased upon the exercise of
the Class B Warrant. No adjustment to the exercise price of the shares
subject to the Class B Warrants will be made for dividends (other than
dividends in the form of stock), if any, paid on the Common Stock.
WARRANT HOLDER NOT A STOCKHOLDER
The Class B Warrants do not confer upon holders thereof any voting or any
other rights of a stockholder of the Company. The shares of Common Stock
issuable upon exercise of the Class B Warrants in accordance with the terms
thereof will be fully paid and nonassessable.
STOCKHOLDERS' RIGHTS PLAN
In April 1991, the Company's Board of Directors adopted a stockholders'
rights plan (the "Plan"). The Plan provides for the distribution of
preferred stock purchase rights to common stockholders which separate from
the Common Stock ten business days following: (a) an announcement of an
acquisition by a person (or group) ("Acquiring Party") of 15% or more of the
outstanding shares of Common Stock of the Company, (b) the commencement of a
tender offer or exchange offer for 15% or more of the Common Stock or (c) a
merger or asset sale as defined in the Plan. Under the Plan, certain related
parties are not considered to be an Acquiring Party. In addition, the Plan
was amended in December 1996 to allow the Placement Agent (and affiliates) to
acquire an unlimited amount of the outstanding Common Stock without being
characterized as an Acquiring Party. One right attached to each share of
Common Stock outstanding as of April 15, 1991 and attaches to all shares
issued thereafter. Each right entitles the holder to purchase one
one-hundredth of one share of Series R junior participating cumulative
preferred stock, par value $25.00 per share ("Unit of Preferred Stock"), at
an exercise price of $120 per Unit of Preferred Stock. The Units of Preferred
Stock are non redeemable, voting and are entitled to certain preferential
dividend and liquidation rights. The exercise price and the number of Units
of Preferred Stock issuable are subject to adjustment to prevent dilution.
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If, after the rights have been distributed, the Company is a party to a
business combination or other specifically defined transaction, each right
(other than those held by the Acquiring Party) will entitle the holder to
receive, upon exercise, Units of Preferred Stock or shares of common stock of
the surviving company with a value equal to two times the exercise price of
the right. Alternatively, a majority of the independent Directors of the
Company may direct the Company to exchange all of the then outstanding rights
for Common Stock at an exchange ratio of one share of Common Stock per right.
The rights expire April 15, 2001 and are redeemable (at the option of a
majority of the independent Directors of the Company) at $.01 per right at
any time until the tenth day following an announcement of the acquisition of
15% or more of the Company's Common Stock.
TRANSFER AND WARRANT AGENT
The transfer agent for the Common Stock, Class A Warrants and Settlement
Warrants is the American Stock Transfer and Trust Company, 6201 15th Avenue,
3rd Floor, Brooklyn, New York 11219.
LEGAL OPINIONS
The validity of the shares of Common Stock and Class A Warrants offered
hereby will be passed upon for the Company and Selling Securityholders by
Donovan Leisure Newton & Irvine, 30 Rockefeller Plaza, New York, New York,
10112.
EXPERTS
The consolidated financial statements of Xytronyx, Inc., and its subsidiaries
(the "Company," a development stage enterprise) as of March 31, 1996 and 1995
and for each of the three years in the period ended March 31, 1996, and for
the period from September 23, 1983 (date of incorporation of Xytronyx, Inc.)
to March 31, 1996 incorporated in this Prospectus by reference from the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996
have been audited by Deloitte & Touche LLP, independent auditors, as stated
in their report (which report contains an explanatory paragraph referring to
the Company's activities as those of a development stage enterprise and
describes the uncertainty regarding the Company's ability to continue as a
going concern), which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
SECURITYHOLDERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO BUY ANY OF THESE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER IN SUCH JURISDICTION.
CONTENTS
PAGE
Available Information ..........3
Incorporation of Certain
Documents by Reference .........3
Prospectus Summary .............5
Risks and Other Investment
Considerations .................9
Use of Proceeds ...............18
Selling Securityholders .......19
Plan of Distribution ..........27
Description of Securities .....29
Legal Opinions ................34
Experts .......................34
19,831,145 SHARES OF
COMMON STOCK ($0.02 PAR VALUE)
6,500,188 CLASS A WARRANTS
TO PURCHASE
COMMON STOCK
XYTRONYX, INC.
____________________________
PROSPECTUS
____________________________
JUNE ___, 1997
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various estimated amount of fees and
expenses payable in connection with this offering other than sales commissions.
All such expenses will be borne by the Registrant.
ITEM AMOUNT OF EXPENSES
Commission Registration Fees ...............................$8,724.01
Printing and Engraving Expenses .............................4,500.00
Accounting Fees and Expenses ...............................10,000.00
Legal Fees and Expenses ....................................25,000.00
Transfer Agent's Fee ........................................1,000.00
Miscellaneous ...............................................2,000.00
----------
Total $51,224.01
----------
----------
__________
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any persons, including directors and officers, who are
(or are threatened to be made) parties to any threatened, pending or completed
legal action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of their being directors or officers of such
corporation. The indemnity may include expenses, attorneys' fees, judgments,
fines and amounts paid in settlement, provided such sums were actually and
reasonably incurred in connection with such action, suit or proceeding and
provided the director or officer acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the corporation's best interests
and, in the case of criminal proceedings, he or she had no reasonable cause to
believe that his or her conduct was unlawful. The corporation may indemnify
directors and officers in a derivative action (in which suit is brought by a
stockholder on behalf of the corporation) under the same conditions, except that
no indemnification is permitted without judicial approval if the director or
officer is adjudged liable to the corporation. If the director or officer is
successful on the merits or otherwise in defense of any such actions referred to
above, the corporation must indemnify him or her against the expenses and
attorneys' fees he or she actually and reasonably incurred.
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The Sixth Article of the Registrant's Certificate of Incorporation, as
amended, provides for indemnification by the Registrant of its officers and
directors to the full extent allowed under Section 145 of the Delaware General
Corporation Law, and reads as follows:
Sixth: A director of this Corporation shall not be personally liable to
the Corporation or any stockholder for monetary damages for breach of
fiduciary duty as a director, except that this Article Sixth shall not
eliminate or limit a director's liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation Law, or (iv) for a transaction from which the director
derived an improper personal benefit.
Any repeal or modification of the foregoing provision of this Article Sixth
shall not increase the personal liability of any director of this
Corporation for any act or occurrence taking place prior to such repeal or
modification, or otherwise adversely affect any right or protection of a
director of the corporation existing at the time of such repeal or
modification.
The Corporation shall, to the fullest extent permitted by Section 145 of
the Delaware General Corporation Law, as amended from time to time,
indemnify all persons who are eligible for indemnification pursuant
thereto. The provisions of this Article Sixth shall not be deemed to limit
or preclude indemnification of a director by the Corporation for any
liability of a director which has not been eliminated by the provisions of
the Article Sixth.
Article VIII of the Registrant's Amended and Restated Bylaws provides for
indemnification by the Registrant of its officers and directors to the full
extent permitted under Section 145 of the Delaware General Corporation Law, and
reads as follows:
ARTICLE VIII: INDEMNIFICATION
Section 8.1. GENERAL. (a) The Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he or she is or
was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorney's fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him or
her in connection with such action, suit or proceeding if he or she acted
in good faith and in a manner he or she reasonable believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, has no reasonable cause to believe his or
her conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement or conviction, or upon a plea of
NOLO CONTENDERE or its equivalent, shall not, of itself, create a
presumption that such person did not act in good faith and in a manner
which he or she reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
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(b) The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment
in its favor by reason of the fact that he or she is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorney's fees) actually and reasonably
incurred by him or her in connection with the defense or settlement of such
action or suit if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged
to be liable to the Corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or the court in which such
action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnification of
such expenses which such Court of Chancery or such other court shall deem
proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in paragraphs (a) and (b) of
this Section 8.1, or in defense of any claim, issue or matter therein, he
or she shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection therewith.
(d) Any indemnification under paragraphs (a) and (b) of this Section 8.1
(unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in
paragraphs (a) and (b) of this Section 8.1 (such person being referred to
herein as an "Indemnitee"). Such determination shall be made (i) by the
Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, (ii) if such a
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion or
(iii) by the stockholders.
(e) Any Indemnitee shall be entitled to control the defense of any
action, suit or proceeding against him or her which may give rise to a
right of indemnification pursuant to this Article VIII, PROVIDED, HOWEVER,
that the Corporation shall select counsel to conduct such defense, which
counsel shall be reasonably acceptable to the Indemnitee. In the event
that an Indemnitee and other parties indemnified by the Corporation (such
Indemnitee and other parties indemnified being herein referred to
collectively as the "Indemnified Parties") are made or threatened to be
made parties to the same or similar threatened, pending or completed
action, suit or proceeding, the Indemnified Parties shall not be entitled
to separate counsel unless the counsel selected by the Corporation advises
the Corporation that there exists such material conflicts of interests
among some or all of the Indemnified Parties so as to require separate
representation for some or all of the Indemnified Parties, and such counsel
advises the Corporation of the basis for such conflict and the group of
Indemnified Parties so affected. Upon receipt of such advice of counsel,
the Corporation shall select separate counsel for such group of Indemnified
Parties, which counsel shall be reasonably acceptable to such group.
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(f) Expenses (including attorneys' fees) incurred by a director or
officer in defending any civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he or she is not entitled
to be indemnified by the Corporation pursuant to this Article VIII. Such
expenses (including attorney's fees) incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the Board of
Directors deems appropriate.
(g) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VIII shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of
expenses may be entitled under any law, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
an official capacity and as to action in another capacity while holding
such office.
(h) For purposes of the Article VIII, references to the "Corporation"
shall include, in addition to the resulting or surviving corporation, any
constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its directors,
officers, employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article VIII with respect to the resulting or
surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued.
(i) For purposes of this Article VIII, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the Corporation" shall
include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves service by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in
a manner he or she reasonably believed to be in the interest of the
participants and beneficiaries of an employees benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Article VIII.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VIII shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such person.
Section 8.2. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
any liability asserted against him or her and incurred by him or her in any
such capacity, or arising out of
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his or her status as such, whether or not the Corporation would have the
power to indemnify him or her against such liability under the provisions of
Section 145 of the General Corporation Law of the State of Delaware.
Under a policy of insurance, the Company is entitled to be reimbursed for
indemnity payments it is required or permitted to make to its directors and
officers. In addition, the Registrant's officers and directors are covered by
certain directors' and officers' liability insurance policies maintained by the
Registrant.
The Registrant has entered into Indemnity Agreements with its directors and
its officers which provide that the Registrant will pay any reasonable amount
which an Indemnitee is legally obligated to pay because of claims which may be
made against such Indemnitee by reason of the fact that such Indemnitee is or
was a director or officer of the Registrant, or is or was serving at the request
of the Registrant as a director or officer of some other entity. However, no
indemnification is provided in cases involving dishonesty or improper personal
profit. The payments to be made under such Indemnity Agreements include the
amounts of all reasonable expenses, judgments, fines, and amounts paid in
settlement, except that the Registrant is not obligated to pay fines or other
fees imposed by law which the Registrant is prohibited by law from paying as an
indemnity of for any other reason.
ITEM 16. EXHIBITS.
4.7 Form of Warrant Agreement between the Company and American
Stock Transfer and Trust Company, including specimen Class B
Warrant. (1)
5.1 Opinion of Donovan Leisure Newton & Irvine regarding the legality
of the Shares of Common Stock and Class A Warrants.*
10.48 Form of Placement Agency Agreement between Company and Paramount
Capital, Inc.*
10.49 Form of Amendment No. 1 to Placement Agency Agreement between
Company and Paramount Capital, Inc.*
10.50 Form of Subscription Agreement between Company and certain
Selling Stockholders.*
23.1 Consent of Deloitte & Touche LLP. (1)
23.2 Consent of Donovan Leisure Newton & Irvine. *
25 Powers-of-Attorney.*
_____________
(1) Filed herewith.
* Previously Filed
ITEM 17. UNDERTAKINGS.
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<PAGE>
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this registration Statement:
(i) to include any prospectus required by Section 10 (a) (3) of the
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, represents a fundamental change in the information set
forth in the Registration Statement;
(iii) to include any material information with respect to the Plan of
Distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration
Statement;
PROVIDED, HOWEVER, that paragraphs (i) and (ii) do not apply to
this Registration Statement if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15 (d) of the
Securities Exchange Act of 1934 and incorporated by reference in this
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) The undersigned Registrant hereby undertakes that, for the purpose 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 this
registration statement shall be deemed to be a new Registration Statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) 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 provisions described in the first
paragraph of Item 15 above, 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 said Securities Act and is, therefore,
unenforceable. In the event that as 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 Securities Act and will be governed by the final
adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on June 23, 1997.
XYTRONYX, INC.
By: /s/ Dr. H. Laurence Shaw
-------------------------
Dr. H. Laurence Shaw,
President and CEO
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
OFFICERS
/s/ DR. H. LAURENCE SHAW President and June 23, 1997
- ------------------------ Chief Executive Officer
Dr. H. Laurence Shaw (Principal Executive Officer)
/s/ JAMES HERTZOG Controller June 23, 1997
- ------------------------ (Principal Financial and
James Hertzog Accounting Officer)
BOARD OF DIRECTORS
/s/ DR. H. LAURENCE SHAW* Chairman of the Board and June 23, 1997
- ------------------------- Director
Dr. H. Laurence Shaw
II-7
<PAGE>
- ------------------------- Director June 23, 1997
Jack H. Halperin
- ------------------------- Director June 23, 1997
Elliott H. Vernon
- ------------------------- Director June 23, 1997
Jerry A. Weisbach
- ------------------------- Director June 23, 1997
Michael S. Weiss
* By /s/ Dr. H. LAURENCE SHAW
--------------------------
Dr. H. LAURENCE SHAW
ATTORNEY-IN-FACT
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<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
4.7 Warrant Agreement for Class B Warrants between the Company and
American Stock Transfer and Trust Company, including specimen
Class B Warrant. (1)
5.1 Opinion of Donovan Leisure Newton & Irvine regarding the legality of
the Shares of Common Stock and Class A Warrants.*
10.48 Form of Placement Agency Agreement between Company and Paramount
Capital, Inc.*
10.49 Form of Amendment No. 1 to Placement Agency Agreement between Company
and Paramount Capital, Inc.*
10.50 Form of Subscription Agreement between Company and certain Selling
Stockholders.*
23.1 Consent of Deloitte & Touche LLP. (1)
23.2 Consent of Donovan Leisure Newton & Irvine.*
25 Powers-of-Attorney*
- -----------------------
(1) Filed Herewith
* Previously filed
<PAGE>
EXHIBIT 4.7
WARRANT AGREEMENT
FOR "CLASS B WARRANTS"
AGREEMENT (this "Agreement") dated as of August 9, 1996, by and
between XYTRONYX, INC., a Delaware corporation (the "Company") and AMERICAN
STOCK TRANSFER & TRUST COMPANY, as warrant agent (the "Warrant Agent").
W I T N E S S E T H
WHEREAS, in connection with the settlement of a class action lawsuit
(the "Settlement") the Company will issue 309,734 Class B Warrants ("Warrants"),
each Warrant exercisable to purchase one share of common stock, par value $.02
per share of the Company ("Common Stock"); and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the
Warrants, and the rights of the holders thereof;
NOW THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS. As used herein, the following terms shall
have the following meanings:
(a) "Common Stock" shall mean stock of the Company of any class,
whether now or hereafter authorized, which has the right to participate in the
distributions of earnings and assets of the Company without limit as to amount
or percentage, which at the date hereof consists of 30,000,000 authorized shares
of Common Stock.
(b) "Corporate Office" shall mean the office of the Warrant Agent (or
its successor) at which at any particular time its principal business shall be
administered, which office is located at the date hereof at 40 Wall Street, New
York, NY 10005.
(c) "Exercise Date" shall mean, as to any Warrant, the date on which
the Warrant Agent shall have received both (a) the Warrant Certificate
representing such Warrant, with the exercise form thereon duly executed by the
Registered Holder thereof or his attorney duly authorized in writing, and
(b) payment in cash, or by official bank or certified check made payable to the
Company, of an amount in lawful money of the United States of America equal to
the applicable Purchase Price.
(d) "Purchase Price" shall mean the purchase price to be paid upon
exercise of each Warrant in accordance with the terms hereof, which price shall
be $22.00 per share
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subject to adjustment from time to time pursuant to the provisions of Section
8 hereof, and subject to the Company's right to reduce the Purchase Price
upon notice to all warrantholders.
(e) "Registered Holder" shall mean the person in whose name any
certificate representing Warrants shall be registered on the books maintained by
the Warrant Agent pursuant to Section 6.
(f) "Transfer Agent" shall mean American Stock Transfer & Trust
Company, as the Company's transfer agent, or its authorized successor, as such.
(g) "Warrant Expiration Date" shall mean 5:00 P.M. (New York time) on
August 11, 2001; provided that if such date shall in the State of New York be a
holiday or a day on which banks are authorized to close, then 5:00 P.M. (New
York time) on the next following day which in the State of New York is not a
holiday or a day on which banks are authorized to close. Upon notice to all
warrantholders the Company shall have the right to extend the Warrant Expiration
Date.
SECTION 2. WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES.
(a) A Warrant shall initially entitle the Registered Holder of the
Warrant Certificate representing such Warrant to purchase one share of Common
Stock upon the exercise thereof, in accordance with the terms hereof, subject to
modification and adjustment as provided in Section 8.
(b) From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall execute and deliver stock certificates in required whole
number denominations representing up to an aggregate of 309,734 shares of Common
Stock, subject to adjustment as described herein, upon the exercise of Warrants
in accordance with this Agreement.
(c) From time to time, up to the Warrant Expiration Date, the Warrant
Agent shall execute and deliver Warrant Certificates in required whole number
denominations to the persons entitled thereto in connection with any transfer or
exchange permitted under this Agreement; provided that no Warrant Certificates
shall be issued except (i) those initially issued hereunder, (ii) those issued
upon the exercise of fewer than all Warrants represented by any Warrant
Certificate, to evidence any unexercised Warrants held by the exercising
Registered Holder, (iii) those issued upon any transfer or exchange pursuant to
Section 6; (iv) those issued in replacement of lost, stolen, destroyed or
mutilated Warrant Certificates pursuant to Section 7; and (v) at the option of
the Company, in such form as may be approved by the its Board of Directors, to
reflect (a) any adjustment or change in the Purchase Price or the number of
shares of Common Stock purchasable upon exercise of the Warrants, made pursuant
to Section 8 hereof and (b) other modifications approved by Warrantholders in
accordance with Section 16 hereof.
SECTION 3. FORM AND EXECUTION OF WARRANT CERTIFICATES. (a) The
Warrant Certificates shall be substantially in the form annexed hereto as
Exhibit A (the provisions of which are hereby incorporated herein) and may have
such letters, numbers or other marks of identification or designation and such
legends, summaries or endorsements printed, lithographed,
2
<PAGE>
engraved or typed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange on which the Warrants may
be listed, or to conform to usage. The Warrant Certificates shall be dated
the date of issuance thereof (whether upon initial issuance, transfer,
exchange or in lieu of mutilated, lost, stolen, or destroyed Warrant
Certificates) and issued in registered form. Warrants shall be numbered
serially with the letters "WB."
(b) Warrant Certificates shall be executed on behalf of the Company
by its Chairman of the Board, President or any Vice President and by its
Secretary or an Assistant Secretary, by manual signatures or by facsimile
signatures printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. In case any officer of the Company who shall have signed any of
the Warrant Certificates shall cease to be such officer of the Company before
the date of issuance of the Warrant Certificates and issue and delivery thereof,
such Warrant Certificates may nevertheless be issued and delivered with the same
force and effect as though the person who signed such Warrant Certificates had
not ceased to be such officer of the Company. After execution by the Company,
Warrant Certificates shall be delivered by the Warrant Agent to the Registered
Holder.
SECTION 4. EXERCISE. Each Warrant may be exercised by the
Registered Holder thereof at any time prior to the Warrant Expiration Date upon
the terms and subject to the conditions, including without limitation,
compliance with applicable securities laws, set forth herein and in the
applicable Warrant Certificate. A Warrant shall be deemed to have been
exercised immediately prior to the close of business on the Exercise Date and
the person entitled to receive the securities deliverable upon such exercise
shall be treated for all purposes as the holder upon exercise thereof as of the
close of business on the Exercise Date. As soon as practicable on or after the
Exercise Date, the Warrant Agent shall deposit the proceeds received from the
exercise of a Warrant, and promptly after clearance of checks received in
payment of the Purchase Price pursuant to such Warrants, cause to be issued and
delivered by the Transfer Agent, to the person or persons entitled to receive
the same, a certificate or certificates for the securities deliverable upon such
exercise, (plus a certificate for any remaining unexercised Warrants of the
Registered Holder). Notwithstanding the foregoing, in the case of payment made
in the form of a check drawn on an account of such investment banks and
brokerage houses as the Company shall approve, certificates shall immediately be
issued without any delay. Upon the exercise of any Warrant and clearance of the
funds received, the Warrant Agent shall promptly remit the payment received for
the Warrant to the Company or as the Company may direct in writing.
SECTION 5. RESERVATION OF SHARES; LISTING; PAYMENT OF TAXES; ETC.
(a) The Company covenants that it will at all times reserve and keep available
out of its authorized Common Stock, solely for the purpose of issue upon
exercise of Warrants, such number of shares of Common Stock as shall then be
issuable upon the exercise of all outstanding Warrants. The Company covenants
that all shares of Common Stock which shall be issuable upon exercise of the
Warrants and payment of the Purchase Price shall, at the time of delivery, be
duly and validly issued, fully paid, nonassessable and free from all taxes,
liens and charges with respect to
3
<PAGE>
the issue thereof (other than those that arise as a result of the action or
inaction of the Registered Holder).
(b) The Company will use reasonable efforts to obtain appropriate
approvals or registrations under state "blue sky" securities laws with respect
to the exercise of the Warrants; provided, however, that the Company shall not
be obligated to file any general consent to service of process or qualify as a
foreign corporation in any jurisdiction. With respect to any such securities
laws, however, Warrants may not be exercised by, or shares of Common Stock
issued to, any Registered Holder in any state in which such exercise would be
unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes and
other governmental charges that may be imposed with respect to the issuance of
Warrants, or the issuance, or delivery of any shares upon exercise of the
Warrants; provided, however, that if the shares of Common Stock are to be
delivered in a name other than the name of the Registered Holder of the Warrant
Certificate representing any Warrant being exercised, then no such delivery
shall be made unless the person requesting the same has paid to the Warrant
Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized to requisition
the Company's Transfer Agent from time to time for certificates representing
shares of Common Stock required upon exercise of the Warrants, and the Company
will authorize the Transfer Agent to comply with all such proper requisitions.
SECTION 6. EXCHANGE AND REGISTRATION OF TRANSFER.
Subject to the restrictions on transfer contained in the Warrant
Certificates and the Subscription Agreements between the Company and the
purchasers of Units:
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class or may be transferred in whole or in part; provided that no transfers,
sales or other dispositions of the Warrants may be made except after the time
periods and in the percentages set forth in Section 1.9 of the Subscription
Agreements. Warrant Certificates to be exchanged shall be surrendered to the
Warrant Agent at its Corporate Office, and upon satisfaction of the terms and
provisions hereof, the Company shall execute, and the Warrant Agent shall
countersign, issue and deliver in exchange therefor the Warrant Certificate or
Certificates which the Registered Holder making the exchange shall be entitled
to receive.
(b) The Warrant Agent shall keep at its office books in which,
subject to such reasonable regulations as it may prescribe, it shall register
Warrant Certificates and the transfer thereof in accordance with its regular
practice. Upon due presentment for registration of transfer of any Warrant
Certificate at its office, the Company shall execute and the Warrant Agent shall
issue and deliver to the transferee or transferees a new Warrant Certificate or
Certificates representing an equal aggregate number of Warrants.
4
<PAGE>
(c) With respect to all Warrant Certificates presented for
registration of transfer, or for exchange or exercise, the subscription form on
the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in form satisfactory to
the Company, duly executed by the Registered Holder or his attorney-in-fact duly
authorized in writing.
(d) The Company may require payment by such holder of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith.
(e) All Warrant Certificates surrendered for exercise or for exchange
in case of mutilated Warrant Certificates shall be promptly canceled by the
Warrant Agent and thereafter retained by the Warrant Agent until termination of
this Agreement or resignation of the Warrant Agent.
(f) Prior to due presentment for registration of transfer thereof,
the Company and the Warrant Agent may deem and treat the Registered Holder of
any Warrant Certificate as the absolute owner thereof and of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company or
the Warrant Agent) for all purposes and shall not be affected by any notice to
the contrary.
SECTION 7. LOSS OR MUTILATION. Upon receipt by the Company and
the Warrant Agent of evidence satisfactory to them of the ownership of and loss,
theft, destruction or mutilation of any Warrant Certificate and (in case of
loss, theft or destruction) of indemnity satisfactory to them, and (in the case
of mutilation) upon surrender and cancellation thereof, the Company shall
execute and the Warrant Agent shall (in the absence of notice to the Company
and/or Warrant Agent that the Warrant Certificate has been acquired by a
bonafide purchaser) countersign and deliver to the Registered Holder in lieu
thereof a new Warrant Certificate of like tenor representing an equal aggregate
number of Warrants. Applicants for a substitute Warrant Certificate shall
comply with such other reasonable regulations and pay such other reasonable
charges as the Warrant Agent may prescribe.
SECTION 8. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES OF
COMMON STOCK OR WARRANTS. The Purchase Price in effect at any time and the
number and kind of securities purchasable upon the exercise of the Warrants
shall be subject to adjustment from time to time upon the happening of certain
events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock
into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect at the time of the record date for such dividend or
distribution or the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the price
determined by multiplying the Purchase Price by a fraction, the denominator
of which shall be the number of shares of Common Stock outstanding after
giving effect to such action, and the numerator of which shall be the number
of shares of Common Stock outstanding
5
<PAGE>
immediately prior to such action. Such adjustment shall be successively
whenever any event listed above shall occur.
(b) Whenever the Purchase Price payable upon exercise of each Warrant
is adjusted pursuant to Subsection (a) above, the number of Shares purchasable
upon exercise of this Warrant shall simultaneously be adjusted by multiplying
the number of Shares initially issuable upon exercise of this Warrant by the
Purchase Price in effect on the date hereof and dividing the product so obtained
by the Purchase Price, as adjusted.
(c) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least five cents (0.05)
in such price; provided, however, that any adjustments which by reason of this
Subsection (c) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment required to be made hereunder. All
calculations under this Section 8 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be. Anything in this Section
8 to the contrary notwithstanding, the Company shall be entitled, but shall not
be required, to make such changes in the Purchase Price, in addition to those
required by this Section 8 as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in shares of Common Stock
or any subdivision, reclassification or combination of Common Stock, hereafter
made by the Company shall not result in any Federal Income tax liability to the
Registered Holder of Common Stock or securities convertible into Common Stock
(including Warrants).
(d) Whenever the Purchase Price is adjusted, as herein provided, the
Company shall promptly but no later than 20 days after any request for such an
adjustment by the Registered Holder, cause a notice setting forth the adjusted
Purchase Price and adjusted number of Shares issuable upon exercise of each
Warrant, and, if requested, information describing the transactions giving rise
to such adjustments, to be mailed to the Registered Holder at his last address
appearing in the warrant register of the Warrant Agent, and shall cause a
certified copy thereof to be mailed to its Warrant Agent. The Company may
retain a firm of independent certified public accountants selected by the Board
of Directors (who may be the regular accountants employed by the Company) to
make any computations required by this Section 8, and a certificate signed by
such firm shall be conclusive evidence of the correctness of such adjustment.
(e) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (a) above, the Registered Holder of this Warrant
thereafter shall become entitled to receive any shares of the Company, other
than Common Stock, thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Subsection (a) above.
(f) Irrespective of any adjustments in the Purchase Price or the
number or kind of shares purchasable upon exercise of this Warrant, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the similar Warrants initially
issuable pursuant to this Agreement.
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SECTION 9. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of
any reclassification, capital reorganization or other change of outstanding
shares of Common Stock of the Company, or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger with
a subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification, capital reorganization or other change
of outstanding shares of Common Stock of the class issuable upon exercise of
this Warrant) or in case of any sale, lease or conveyance to another corporation
of the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
holder shall have the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance.
Any such provision shall include provision for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section 9 shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances.
In the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the Company other that Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Subsection (a) of Section (8) hereof.
SECTION 10. FRACTIONAL WARRANTS AND FRACTIONAL SHARES.
(a) If the number of shares of Common Stock purchasable upon the
exercise of each Warrant is adjusted pursuant to Section 8 hereof, the Company
shall nevertheless not be required to issue fractions of shares, upon exercise
of the Warrants or otherwise, or to distribute certificates that evidence
fractional shares. With respect to any fraction of a share called for upon any
exercise hereof, the Company shall pay to the Holder an amount in cash equal to
such fraction multiplied by the current market value of such fractional share,
determined as follows:
(1) If the Common Stock is listed on a national securities exchange
or admitted to unlisted trading privileges on such exchange or
listed for trading on the Nasdaq National Market System ("NMS"),
the current market value shall be the last reported sale price of
the Common Stock on such exchange on the last business day prior
to the date of exercise of this Warrant or if no such sale is
made on such day or no closing sale price is quoted, the average
of the closing bid and asked prices for such day on such exchange
or system; or
(2) If the Common Stock is listed in the over-the-counter market
(other than on NMS) or admitted to unlisted trading privileges,
the current market value shall be the mean of the last reported
bid and asked prices reported by the National
7
<PAGE>
Quotation Bureau, Inc. on the last business day prior to the date of
the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported,
the current market value shall be prescribed by the Board of
Directors of the Company.
SECTION 11. WARRANT HOLDERS NOT DEEMED STOCKHOLDERS. No holder of
Warrants shall, as such, be entitled to vote or to receive dividends or be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of such Warrants for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the holder of Warrants, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such Holder shall have exercised such Warrants and
been issued shares of Common Stock in accordance with the provisions hereof.
SECTION 12. RIGHTS OF ACTION. All rights of action with respect to
this Agreement are vested in the respective Registered Holders of the Warrants,
and any Registered Holder of a Warrant, without consent of the Warrant Agent or
of the holder of any other Warrant, may, on his own behalf and for his own
benefit, enforce against the Company his right to exercise his Warrants for the
purchase of shares of Common Stock in the manner provided in the Warrant
Certificate and this Agreement.
SECTION 13. AGREEMENT OF WARRANT HOLDERS. Every holder of a
Warrant, by his acceptance thereof, consents and agrees with the Company, the
Warrant Agent and every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books of the
Warrant Agent by the Registered Holder thereof in person or by his attorney duly
authorized in writing and only if the Warrant Certificates representing such
Warrants are surrendered at the office of the Warrant Agent, duly endorsed or
accompanied by a proper instrument of transfer satisfactory to the Warrant Agent
and the Company in their sole discretion, together with payment of any
applicable transfer taxes; and
(b) The Company may deem and treat the person in whose name the
Warrant Certificate is registered as the holder and as the absolute, true and
lawful owner of the Warrants represented thereby for all purposes, and the
Company shall not be affected by any notice or knowledge to the contrary, except
as otherwise expressly provided in Section 7 hereof.
SECTION 14. CANCELLATION OF WARRANT CERTIFICATES. If the Company
shall purchase or acquire any Warrant or Warrants, the Warrant Certificate or
Warrant Certificates evidencing the same shall thereupon be canceled by it and
retired. The Warrant Agent shall also
8
<PAGE>
Exhibit 4.7
cancel Common Stock following exercise of any or all of the Warrants
represented thereby or delivered to it for transfer, split up, combination or
exchange.
SECTION 15. CONCERNING THE WARRANT AGENT. The Warrant Agent acts
hereunder as agent and in a ministerial capacity for the Company, and its
duties shall be determined solely by the provisions hereof. The Warrant
Agent shall not, by issuing and delivering Warrant Certificates or by any
other act hereunder be deemed to make any representations as to the validity,
value or authorization of the Warrant Certificates or the Warrants
represented thereby or of any securities or other property delivered upon
exercise of any Warrant or whether any stock issued upon exercise of any
Warrant is fully paid and nonassessable.
The Warrant Agent shall account promptly to the Company with
respect to Warrants exercised and concurrently pay the Company, as provided
in Section 4, all moneys received by the Warrant Agent upon the exercise of
such Warrants. The Warrant Agent shall, upon request of the Company from
time to time, deliver to the Company such complete reports of registered
ownership of the Warrants and such complete records of transactions with
respect to the Warrants and the shares of Common Stock as the Company may
request. The Warrant Agent shall also make available to the Company and
Paramount for inspection by their agents or employees, from time to time as
either of them may request, such original books of accounts and record
(including original Warrant Certificates surrendered to the Warrant Agent
upon exercise of Warrants) as may be maintained by the Warrant Agent in
connection with the issuance and exercise of Warrants hereunder, such
inspections to occur at the Warrant Agent's office as specified in Section
17, during normal business hours.
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price provided in this Agreement, or to determine
whether any fact exists which may require any such adjustments, or with respect
to the nature or extent of any such adjustment, when made, or with respect to
the method employed in making the same. It shall not (i) be liable for any
recital or statement of facts contained herein or for any action taken, suffered
or omitted by it in reliance on any Warrant Certificate or other document or
instrument believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties, (ii) be responsible for any failure on
the part of the Company to comply with any of its covenants and obligations
contained in this Agreement or in any Warrant Certificate, or (iii) be liable
for any act or omission in connection with this Agreement except for its own
negligence or willful misconduct.
The Warrant Agent may at any time consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good faith
in accordance with the written opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or
demand of the Company shall be sufficiently evidenced by an instrument signed by
the Chairman of the Board, President, any Vice President, its Secretary, or
Assistant Secretary, (unless other evidence in
9
<PAGE>
Exhibit 4.7
respect thereof is herein specifically prescribed). The Warrant Agent shall
not be liable for any action taken, suffered or omitted by it in accordance
with such notice, statement, instruction, request, direction, order or demand
believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable compensation
for its services hereunder and to reimburse it for its reasonable expenses
hereunder; it further agrees to indemnify the Warrant Agent and save it
harmless against any and all losses, expenses and liabilities, including
judgments, costs and counsel fees, for anything done or omitted by the
Warrant Agent in the execution of its duties and powers hereunder except
losses, expenses and liabilities arising as a result of the Warrant Agent's
negligence or willful misconduct.
The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a
result of the Warrant Agent's own negligence or willful misconduct), after
giving 30 days' prior written notice to the Company. At least 15 days prior
to the date such resignation is to become effective, the Warrant Agent shall
cause a copy of such notice of resignation to be mailed to the Registered
Holder of each Warrant Certificate at the Company's expense. Upon such
resignation, or any inability of the Warrant Agent to act as such hereunder,
the Company shall appoint a new warrant agent in writing. If the Company
shall fail to make such appointment within a period of 15 days after it has
been notified in writing of such resignation by the resigning Warrant Agent,
then the Registered Holder of any Warrant Certificate may apply to any court
of competent jurisdiction for the appointment of a new warrant agent. Any
new warrant agent, whether appointed by the Company or by such a court, shall
be a bank or trust company having a capital and surplus, as shown by its last
published report to its stockholders, of not less than $10,000,000 or a stock
transfer company. After acceptance in writing of such appointment by the new
warrant agent is received by the Company, such new warrant agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; but if for any reason it shall be
necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed and delivered by the resigning
Warrant Agent. Not later than the effective date of any such appointment the
Company shall file notice thereof with the resigning Warrant Agent and shall
forthwith cause a copy of such notice to be mailed to the Registered Holder
of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant
agent may be converted or merged or any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be a
party or any corporation succeeding to the trust business of the Warrant
Agent shall be a successor warrant agent under this Agreement without any
further act, provided that such corporation is eligible for appointment as
successor to the Warrant Agent under the provisions of the preceding
paragraph. Any such successor warrant agent shall promptly cause notice of
its succession as warrant agent to be mailed to the Company and to the
Registered Holder of each Warrant Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its
or their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise
10
<PAGE>
Exhibit 4.7
deal with the Company in the same manner and to the same extent and with like
effects as though it were not Warrant Agent. Nothing herein shall preclude
the Warrant Agent from acting in any other capacity for the Company or for
any other legal entity.
SECTION 16. MODIFICATION OF AGREEMENT. The parties hereto may by
supplemental agreement make any changes or corrections in this Agreement (i)
that it shall deem appropriate to cure any ambiguity or to correct any
defective or inconsistent provision or manifest mistake or error herein
contained; (ii) that it may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Warrant Certificates;
PROVIDED, HOWEVER, that this Agreement shall not otherwise be modified,
supplemented or altered in any respect except with the consent in writing of
the Registered Holders of Warrant Certificates representing not less than 50%
of the Warrants then outstanding; and PROVIDED, FURTHER, that no change in
the number or nature of the securities purchasable upon the exercise of any
Warrant, or the Purchase Price therefor, or the acceleration of the Warrant
Expiration Date, shall be made without the consent in writing of the
Registered Holder of the Warrant Certificate representing such Warrant, other
than such changes as are specifically prescribed by this Agreement as
originally executed.
SECTION 17. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail,
postage prepaid as follows: if to the Registered Holder of a Warrant
Certificate, at the address of such holder as shown on the registry books
maintained by the Warrant Agent; if to the Company, at 6555 Nancy Ridge
Drive, Suite 200, San Diego, California 92121, Attention: Dale A. Sander,
and if to the Warrant Agent, at 40 Wall Street, New York, NY 10005, Attention
_______________.
SECTION 18. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
reference to its principles of conflict of laws.
SECTION 19. BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of the Company and the Warrant Agent (and their
respective successors and assigns) and the holders from time to time of
Warrant Certificates. Nothing in this Agreement is intended or shall be
construed to confer upon any other person any right, remedy or claim, in
equity or at law, or to impose upon any other person any duty, liability or
obligation.
SECTION 20. TERMINATION. This Agreement shall terminate on the
earlier to occur of (i) the close of business on the Expiration Date of all
the Warrants; (ii) the date upon which all Warrants have been exercised.
SECTION 21. COUNTERPARTS. This Agreement may be executed in
several counterparts, which taken together shall constitute a single document.
11
<PAGE>
Exhibit 4.7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
XYTRONYX, INC.
By: /s/ Dale A. Sander
------------------------
Dale A. Sander
Chief Financial Officer
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By: /s/ Herbert J. Lemmer
------------------------
Name: Herbert J. Lemmer
Title: Vice-President
12
<PAGE>
Exhibit 4.7
THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT
BE TRANSFERRED NOR MAY THIS WARRANT BE EXERCISED UNTIL (1) A REGISTRATION
STATEMENT UNDER THE ACT SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO, OR
(2) RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE ISSUER TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN
CONNECTION WITH SUCH PROPOSED TRANSFER OR EXERCISE NOR IS SUCH TRANSFER OR
EXERCISE IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS.
No. Warrants
VOID AFTER August 11, 2005
WARRANT CERTIFICATE FOR PURCHASE
OF COMMON STOCK
XYTRONYX, INC.
This certifies that FOR VALUE RECEIVED ____________________________
____________ or registered assigns (the "Registered Holder") is the owner of
the number of Warrants ("Warrants") specified above. Each Warrant initially
entitles the Registered Holder to purchase, subject to the terms and
conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one fully paid and nonassessable share of Common Stock,
$.02 par value ("Common Stock"), of XYTRONYX, INC., a Delaware corporation
(the "Company"), at any time commencing August 9, 1996 and prior to the
Expiration Date (as hereinafter defined), upon the presentation and surrender
of this Warrant Certificate with the Subscription Form on the reverse hereof
duly executed, at the corporate office of American Stock Transfer, as Warrant
Agent, or its successor (the "Warrant Agent"), accompanied by payment of an
amount equal to $22.00 for each Warrant (the "Purchase Price") in lawful
money of the United States of America in cash or by official bank or
certified check made payable to Xytronyx, Inc. The Company may, at its
election, reduce the Purchase Price.
This Warrant Certificate and each Warrant represented hereby are
issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"),
dated August 9, 1996 by and among the Company, the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby are subject
to modification or adjustment.
1
<PAGE>
Exhibit 4.7
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued.
In the case of the exercise of less than all the Warrants represented hereby,
the Company shall cancel this Warrant Certificate upon the surrender hereof
and shall execute and deliver a new Warrant Certificate or Warrant
Certificates of like tenor, which the Warrant Agent shall countersign, for
the balance of such Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
August 11,2001. If such date shall in the State of New York be a holiday or
a day on which the banks are authorized to close, then the Expiration Date
shall mean 5:00 P.M. (New York time) the next following day which in the
State of New York is not a holiday or a day on which banks are authorized to
close. The Company may, at its election, extend the Expiration Date.
This Warrant Certificate is exchangeable, upon the surrender hereof
by the Registered Holder at the corporate office of the Warrant Agent, for a
new Warrant Certificate or Warrant Certificates of like tenor representing an
equal aggregate number of Warrants, each of such new Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender. Upon due presentment with any tax or
other governmental charge imposed in connection therewith, for registration
of transfer of this Warrant Certificate at such office, a new Warrant
Certificate or Warrant Certificates representing an equal aggregate number of
Warrants will be issued to the transferee in exchange therefor, subject to
the limitations provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any limitation, the right to vote
or to receive dividends or other distributions, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided in
the Warrant Agreement.
Prior to due presentment for registration of transfer hereof, the
Company may deem and treat the Registered Holder as the absolute owner hereof
and of each Warrant represented hereby (notwithstanding any notations of
ownership or writing hereon made by anyone other than a duly authorized
officer of the Company) for all purposes and shall not be affected by any
notice to the contrary.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York without reference to its
principles of conflict of laws.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed, manually or in facsimile by two of its officers
thereunto duly authorized and a facsimile of its corporate seal to be
imprinted hereon.
XYTRONYX, INC.
2
<PAGE>
Exhibit 4.7
Dated: August 9, 1995
By
-----------------------------
Name: Larry O. Bymaster
Title:
------------------------------
Name: Dale A. Sander
Title: Secretary
[Seal]
AMERICAN STOCK TRANSFER & TRUST
COMPANY
By
----------------------------
Name:
Title:
3
<PAGE>
Exhibit 4.7
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
[please print or type name and address]
of the Warrants represented by this Warrant Certificate, and
hereby irrevocably constitutes and appoints
Attorney to transfer this Warrant Certificate on the books of the Company,
with full power of substitution in the premises.
Dated:
X
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE.
4
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to the
Registration Statement of Xytronyx, Inc. on Form S-3 of our report dated May
8, 1996 (June 4, 1996 as to Note 7), which report includes an explanatory
paragraph referring to the activities of the Company as those of a
development stage enterprise and describes the uncertainty regarding the
Company's ability to continue as a going concern, appearing in the Annual
Report on Form 10-K of Xytronyx, Inc. for the year ended March 31, 1996 and
to the reference to us under the heading "Experts" in the Prospectus which is
part of this Registration Statement.
DELOITTE & TOUCHE LLP
San Diego, California
June 24, 1997
