As filed with the Securities and Exchange Commission on January 12, 2001
Registration No. 333-45264
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre-Effective Amendment No. 2
to
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
NASTECH PHARMACEUTICAL COMPANY INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 11-2658569
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
45 DAVIDS DRIVE
HAUPPAUGE, NEW YORK 11788
(631) 273-0101
ATTN: STEVEN C. QUAY, M.D., PH.D.
(Address, including zip code, and
telephone number, including area code, of
Registrant's principal executive offices)
COPIES TO:
L. Kevin Sheridan, Jr., Esq. Sidney Todres, Esq.
Roberts, Sheridan & Kotel Epstein, Becker & Green
a Professional Corporation 250 Park Avenue
12 East 49th Street, 30th Floor New York, NY 10177
New York, NY 10017
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |XX|
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item
(11)(a)(1) of this Form, check the following box. |XX|
If the registrant elects to deliver its latest quarterly report to security
holders, or a complete and legible facsimile thereof, pursuant to Item
(11)(a)(2)(ii) of this Form, check the following box. |XX|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, 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(d) 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 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 of Amount to Proposed Maximum Proposed Maximum Amount of
Securities to Be Registered Be Registered Offering Price Per Share Aggregate Offering Price Registration Fee (6)
--------------------------- ------------- ------------------------ ------------------------ --------------------
<S> <C> <C> <C> <C>
Common Stock, $.006 par up to
value .............................. 1,200,000 (1) $5.93 (4) $7,116,000 $1,879
Common Stock, $.006 par
value .............................. 49,500 (2) $5.93 (5) $293,535 $77
Common Stock, $.006 par up to
value .............................. 33,000 (3) $5.93 (4) $293,535 $77
--------- ----- ---------- ------
up to
Total .............................. 1,282,500 $5.93 $7,703,070 $2,033
========= ===== ========== ======
</TABLE>
(1) Represents the 1,200,000 shares issuable to Castlebar Enterprises Limited
under equity line of credit and shares issuable upon the exercise of warrants
under the equity line of credit.
(2) Represents 49,500 shares issuable upon the exercise of warrants granted to
Castlebar Enterprises Limited under equity line of credit and to Jesup & Lamont
Securities Corporation as a placement fee.
(3) Represents 33,000 shares issuable upon the exercise of warrants that may be
granted in the future to Castlebar Enterprises Limited.
(4) The proposed maximum offering price is estimated solely for the purposes of
calculating the registration fee pursuant to Rule 457(c) and 457(g)(3) of the
Securities Act of 1933. It is based upon a price of $5.93 per share, which was
the average of the high and low reported prices of the registrant's common stock
as reported on the Nasdaq National Market System on August 31, 2000.
(5) The proposed maximum offering price is estimated solely for the purposes of
calculating the registration fee pursuant to Rule 457(g) of the Securities Act
of 1933. It is based upon the higher of the price at which the warrants may be
exercised ($5.53) and the price of the underlying shares of common stock as
determined in accordance with Rule 457(c) ($5.93).
(6) This amount has previously been paid.
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>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities, and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JANUARY 12, 2001
PROSPECTUS
[GRAPHIC OMITTED]
1,282,500 Shares
Common Stock
This prospectus relates to Castlebar Enterprises Limited's and Jesup &
Lamont Securities Corporation's resales of our common stock. We will sell shares
of our common stock to Castlebar under an equity line of credit agreement and
upon the exercise of warrants. We will sell shares of our common stock to Jesup
& Lamont upon the exercise of warrants that we granted to it as a placement fee.
The shares of common stock that Castlebar and Jesup & Lamont may resell using
this prospectus constitute 18.9% of our issued and outstanding common stock as
of September 30, 2000. Castlebar is an "underwriter" within the meaning of the
Securities Act of 1933 in connection with its resales of our shares.
Our common stock is quoted on the Nasdaq National Market under the symbol
"NSTK." The closing bid price of our common stock on the Nasdaq National Market
on January 9, 2001, was $7.875 per share.
Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 6.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Prospectus dated _________________, 2001
<PAGE>
TABLE OF CONTENTS
Page
----
Prospectus Summary......................................................... 3
Risk Factors............................................................... 6
Special Note Regarding Forward-Looking Statements.......................... 10
Use of Proceeds............................................................ 12
Price Range of Common Stock................................................ 12
Dividend Policy............................................................ 13
Capitalization............................................................. 13
Dilution................................................................... 14
Equity Line of Credit Agreement............................................ 15
Selling Stockholders....................................................... 20
Plan of Distribution....................................................... 20
Description of Capital Stock............................................... 23
Where You Can Find More Information........................................ 27
Incorporation of Information by Reference.................................. 27
Material Events............................................................ 28
Legal Matters.............................................................. 29
Experts.................................................................... 29
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained or incorporated by reference
elsewhere in this prospectus. For a more complete understanding of this
offering, you should read the entire prospectus carefully, especially the "Risk
Factors" section, and our financial statements and notes to those statements
incorporated by reference in this prospectus, before making your investment
decision.
Nastech Pharmaceutical Company Inc.
Nastech Pharmaceutical Company Inc. researches, develops and manufactures
nasally administered prescription pharmaceuticals. We investigate the commercial
weaknesses of prescription and over-the-counter pharmaceutical products
currently available in oral, injectable or other dosage forms, and we determine
the advantages an alternative drug delivery system would have for the same drug
in the market place. For example, while the oral route of drug delivery is the
most popular and least expensive method of delivery, gastrointestinal and liver
metabolism can reduce an oral drug's effectiveness. Generally, a nasal delivery
system will provide faster absorption into the blood stream than an oral product
thereby resulting in faster onset of action. Other possible advantages of this
therapy may include lower drug doses, fewer side effects, greater safety and
efficacy, greater convenience to the patient, better patient compliance of
prescribed drug therapy, and lower overall health care costs for the patient.
We have a commercial interest in two drugs, both of which are approved for sale
in the U.S. Our licensee Bristol-Myers Squibb Company markets Stadol(R)
NS(TM) (Butorphanol Tartrate), and our licensee Schwarz Pharma Inc. markets
Nascobal(R) (Cyanocobalamin, USP). To our knowledge, Stadol(R) NS(TM) is the
only nasally administered opioid pain relief medication marketed for the
treatment of moderate to severe pain and acute migraine pain. It provides
painless therapy and convenient, patient self-administration as compared to the
competitive injectable product. Similarly, Nascobal(R), our nasal vitamin B-12
product, provides patient benefits over the injectable therapy for chronic B-12
deficiency anemia. In addition to these two drugs, we have six drugs in various
stages of drug research and development, one of which we have licensed to
another pharmaceutical company so that it may develop the drug and eventually
sell it in the United States.
Our current business strategy is to expand the applications of nasal and oral
drug delivery in the prescription and over-the-counter markets. To accomplish
this objective, we plan to do the following:
o Focus initial efforts on approved drugs and early stage injectable
drugs under development
o Internally fund development through feasibility stage of safety and
efficacy
o Leverage strategic alliances
o Protect and expand intellectual property rights
The Equity Line of Credit Agreement
In order to provide a possible source of funding for our current activities and
for the development of our current and planned products, we entered into an
equity line of credit agreement with Castlebar Enterprises Limited.
Under the equity line of credit agreement, Castlebar has agreed to purchase up
to 1,200,000 shares of our common stock during the 36-month period following the
effective date of the registration statement to which this prospectus relates.
During this 36-month period, we may request a drawdown under the equity line of
credit by selling shares of our common stock to Castlebar, and Castlebar will be
obligated to purchase the shares. The minimum amount we can draw down at any one
time is $250,000 worth of common stock. We will determine the maximum amount we
can draw down at any one time at the time of the drawdown request using a
formula contained in the equity line of credit agreement. We may request a
drawdown once every 22 trading days, although we are under no obligation to
request any drawdowns under the equity line of credit.
During the 22 trading days following a drawdown request, we will calculate the
amount of shares we will sell to Castlebar and the purchase price per share. The
purchase price per share of common stock will be based on the daily volume
weighted average price of our common stock during each of the 22 trading days
immediately following the drawdown date, less a discount. We will receive the
purchase price, net of discount, less a brokerage fee payable to Jesup & Lamont
equal to 4% of the net purchase price. Jesup & Lamont is the placement agent
which introduced Castlebar to us and is a registered broker-dealer.
3
<PAGE>
Using the maximum drawdown amount formula contained in the equity line of credit
agreement, if we had requested a drawdown on January 10, 2001, the maximum
amount we could draw down at one time would have been $741,971 worth of common
stock. Using the purchase price formula contained in the equity line of credit
agreement, and assuming a volume weighted average price throughout the pricing
period equal to the $7.7445 per share volume weighted average price of our
common stock on January 9, 2001, the maximum number of shares we could have sold
to Castlebar at one time would have been 95,806 shares. Castlebar may then
resell all or a portion of these shares using this prospectus. For more details
on the maximum drawdown amount, the calculation of the purchase price and the
number of shares we will issue, see "Equity Line of Credit Agreement--The
Drawdown Procedure and the Stock Purchases" beginning on page 15.
We are registering the 1,200,000 shares of our common stock issuable to
Castlebar under the equity line of credit, the 49,500 shares underlying the
warrants that we have granted to Castlebar and Jesup & Lamont, and the 33,000
shares underlying the warrants that we may grant in the future to Castlebar. For
more details on the warrants, see "Equity Line of Credit Agreement--The Drawdown
Procedure and the Stock Purchases--Drawdown Warrants" beginning on page 16. From
time to time during the period the registration statement remains effective,
Castlebar and Jesup & Lamont, or others on their behalf, may offer for sale all
1,282,500 shares that this prospectus covers. The number of shares subject to
this prospectus represents 18.9% of our issued and outstanding common stock as
of September 30, 2000. We will prepare and file amendments and supplements to
the registration statement as may be necessary in order to keep the registration
statement effective as long as Castlebar holds shares of our stock or until
these shares can be sold under an appropriate exemption from registration. We
have agreed to bear the expenses of registering the shares, including
Castlebar's legal fees of $20,000, but not the expenses associated with selling
the shares, such as broker discounts and commissions.
---------------------
Nastech Pharmaceutical Company Inc. is incorporated under the laws of the state
of Delaware. Our principal executive offices are located at 45 Davids Drive,
Hauppauge, New York 11788, and our telephone number is (631) 273-0101. Our
principal manufacturing and administrative facility is located in the same
Hauppauge, New York facility. We maintain a website at www.nastech.com.
Information contained in our website does not constitute part of this
prospectus.
References in this prospectus, and the documents incorporated by reference in
this prospectus, to "Nastech," "we," "our," and "us" refer to Nastech
Pharmaceutical Company Inc., a Delaware corporation.
Nastech and some of the names of our products are tradenames or trademarks of
Nastech Pharmaceutical Company Inc. This prospectus and the information
incorporated by reference also contain trademarks and tradenames of other
companies.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Shares of Common Stock That
Castlebar and Jesup & Lamont Will Offer .................... 1,282,500
Offering Price ............................................. To be determined at the time Castlebar and Jesup & Lamont sell
the shares
Common Stock Outstanding
Before the Offering.................................... 6,802,485 (1)
After the Offering .................................... 8,084,985 (1) (2)
Use of Proceeds ............................................ We will not receive any proceeds from Castlebar's and Jesup &
Lamont's sales of common stock. However, we will receive the
proceeds of any common stock we sell to Castlebar under the
equity line of credit agreement and upon Castlebar's and Jesup &
Lamont's exercise of warrants when, and if, they pay the
exercise price in cash. We expect to use substantially all the
net proceeds for general corporate purposes, including working
capital, research and development and expansion of sales and
marketing activities.
Nasdaq National Market symbol .............................. NSTK
</TABLE>
------------------
(1) Excludes:
o 1,960,100 shares of common stock subject to outstanding stock
options we previously granted under our stock option plans as of
September 30, 2000, including 600,000 options we granted on August
8, 2000 to Steven C. Quay, our new President, Chief Executive
Officer and Chairman of the Board.
o 391,902 shares of common stock available for future grants under our
stock option plans.
o 34,500 shares of common stock issuable upon exercise of the warrants
we granted to Wheat, First Securities, Inc., as underwriters in
connection with an offering of our shares in 1997.
o 34,500 shares of common stock issuable upon exercise of the warrants
we granted to Volpe, Welty & Company, as underwriters in connection
with an offering of our shares in 1997.
o 16,500 shares of common stock issuable upon exercise of the warrants
that we may grant in the future to Jesup & Lamont under the equity
line of credit agreement.
(2) Assumes that we issue 1,200,000 shares of common stock under the equity
line of credit agreement and that Castlebar and Jesup & Lamont exercise
all 82,500 warrants we granted or may grant in the future to them.
5
<PAGE>
RISK FACTORS
A purchase of our common stock is speculative and involves a high degree of
risk. You should carefully consider the risks described below together with all
of the other information included or incorporated by reference in this
prospectus before making an investment decision. The risks and uncertainties
described below are not the only ones facing our company. If any of the
following risks actually occur, our business, financial condition or operating
results could be harmed. In this case, the trading price of our common stock
could decline, and you could lose all or part of your investment.
Because of Significant R&D and Other Costs, We Have Never Been Profitable, We Do
Not Expect To Become Profitable in the Foreseeable Future, and We May Never
Become Profitable
We incurred losses in each of the last three years. We incurred a net loss of
$4,546,000 for fiscal year 1997, a net loss of $876,000 for fiscal year 1998,
and a net loss of $8,350,000 for fiscal year 1999. As of September 30, 2000, we
had an accumulated deficit of approximately $28,734,000. We expect to report a
net loss for fiscal year 2000, and we expect to report net losses for the
foreseeable future. The process of developing our products requires significant
research and development, including basic research, pre-clinical and clinical
development, as well as Food and Drug Administration regulatory approval. These
activities, together with our sales, marketing, general and administrative
expenses, have resulted in operating losses in the past, and we expect these
losses to continue for the foreseeable future. We may never achieve
profitability. As a result, the market price of our common stock could decline.
Because Our Operating Results Are Subject To Significant Fluctuations and
Uncertainties, We May Not Be Able to Meet All of Our Future Expense Obligations,
and Our Failure to Meet Public Market Analysts or Investors' Expectations
Regarding Earnings May Cause Our Stock Price To Decline
Our operating results are subject to significant fluctuations and uncertainties
due to a number of factors including, among others:
o the timing and achievement of licensing transactions, including
milestones and other performance factors associated with these
contracts
o the time and costs involved in patent research and development of
our proprietary position
o continued scientific progress and level of expenditures in our
research and development programs
o the cost of manufacturing scale-up and production batches, including
vendor provider activities and costs
o the time and costs involved in obtaining regulatory approvals
o changes in general economic conditions and drug delivery
technologies
o new products and product enhancements that we or our competitors
introduce
As a result of these factors and other uncertainties, our operating results have
fluctuated significantly over the last three years, from a net loss of $4.5
million in 1997 to a net loss of $876,000 in 1998 and a net loss of $8.4 million
in 1999. Over the past six quarters, our operating results have increased by as
much as 74% and have decreased by as much as 36% from one quarter to another.
Recently, we had a larger than expected loss per share in the second quarter of
2000 due to an unexpected decline in royalty income from our licensee
Bristol-Myers Squibb's decreased sales of Stadol(R) NS(TM) and from unexpected
compensation expenses we paid to the estate of our recently deceased CEO.
Although this larger than expected loss per share in the second quarter did not
affect our business or operations because we had adequate cash reserves and in
general do not rely solely on our operating results to meet our expense
obligations, it is possible that larger than expected losses in the future
during any single quarter could affect our ability to meet all of our expense
obligations or may require us to prioritize, modify or cease some of our
development programs.
Our revenues and operating results, particularly those reported on a quarterly
basis, may continue to fluctuate significantly. This makes it difficult to
forecast our operating results. Therefore, we believe that quarterly comparisons
of our operating results will not be meaningful, and you should not rely on them
as an indication of our future performance. Also, our operating results in a
future quarter or quarters may fall below the expectations of public market
analysts or investors. If this were to occur, the price of our stock could
decline.
6
<PAGE>
If We Are Unable to Adequately Protect Our Proprietary Technology from Legal
Challenges, Infringement or Alternative Technologies, This May Hurt Our
Competitive Position
We specialize in the nasal delivery of pharmaceutical products and rely on the
issuance of patents, both in the U.S. and internationally, for protection
against nasal product competition. Although we believe that we exercise the
necessary due diligence in our patent filings, our proprietary position is not
established until the appropriate regulatory authorities actually issue a
patent, which may take up to two or three years after initial filing.
Moreover, even the established patent positions of pharmaceutical companies are
generally uncertain and involve complex legal and factual issues. Although we
believe our issued patents are valid, it is possible that others may
nevertheless challenge our issued patents, that our issued patents will not
withstand review in a court of competent jurisdiction, and that a court will
hold our issued patents to be invalid. Furthermore, it is possible that others
will infringe or otherwise circumvent our issued patents and that we will be
unable to fund the cost of litigation against them.
In addition, we may not be able to protect our established and pending patent
positions from competitive drug delivery technologies, which may provide more
effective therapeutic benefit to patients and which may therefore make our
products, technology and/or proprietary position obsolete.
If we are unable to adequately protect our proprietary technology from legal
challenges, infringement or alternative technologies, we may not be able to
compete in the pharmaceutical delivery business.
If The Commercial Opportunity for Nasally Administered Products Is Limited, This
Could Impact Our Anticipated Future Revenue Growth
The physical and chemical properties of a drug affect our ability to develop a
method of delivering it intranasally. Although we continue to explore the
feasibility of nasally delivering drugs that are large, more complex molecules,
we have more expertise in nasal delivery of smaller, less complex molecules. The
universe of nasal products that qualify as small molecules and are available for
commercialization may be limited. Accordingly, we may be subject to intense
competition in these potential products, which can affect our anticipated future
revenue growth. Although we need to accelerate our research of larger molecules,
it is possible that we will not be successful in these areas. If we are not
successful in these areas, our future revenue may not grow at all or as quickly
as anticipated.
We May Require Additional Financing in the Future, and If Additional Capital Is
Not Available, We May Have To Curtail or Cease Operations
Subject to the success of our development programs and potential licensing
transactions, we may require an additional infusion of capital to complete the
research and development activities we currently contemplate and to
commercialize our proposed products. We may need to raise additional capital to
fund more rapid expansion, to develop new products and to enhance existing
services to respond to competitive pressures, and to acquire complementary
businesses or technologies. Our future capital needs depend on many factors,
including:
o the scope, duration and expenditures associated with our current
research and development programs
o continued scientific progress in these programs
o the outcome of potential licensing transactions, if any
o competing technological developments
o our proprietary patent position, if any, in our products
o the regulatory approval process for our products
o other factors which may not be within our control
We may not be able to obtain additional financing at these times on terms
favorable to us, if at all. For example, a decline in the trading volume or
price of our common stock may reduce the maximum amount we may be able to draw
down under the equity line of credit agreement. In addition, we may not be able
to drawdown under the equity line at all if we fail to meet the preconditions in
the equity line of credit agreement. See "Equity Line of Credit
Agreement--Necessary Conditions Before Castlebar is Obligated to Purchase our
Shares." Our equity line of credit agreement limits our ability to
7
<PAGE>
raise money from other sources by prohibiting us from selling our securities to
third parties at a discount to the market price during the term of the equity
line of credit agreement. See "Equity Line of Credit Agreement--Restrictions on
Future Financings." Therefore, if we need to raise capital from other sources,
then we will have to seek Castlebar's permission. If Castlebar does not allow us
to obtain capital by selling our securities at a discount to market price, we
will have to seek financing through other means, which may not be possible on
terms favorable to us, if at all.
Without additional funding, we may have to delay, reduce or eliminate one or
more research or development programs and reduce overall overhead expenses. This
action may reduce the market price of our common stock.
If We Fail To Obtain Regulatory Approvals For Our Products, We Will Be Prevented
From Marketing Our Products and We Will Incur Substantial Losses
We embark on specific research or development projects that address unmet
medical needs. Numerous governmental authorities in the United States and other
countries subject these projects to significant regulation. For example, we must
file New Drug Applications with the Food and Drug Administration for most of
these projects. The process of completing clinical testing and obtaining FDA
approval for a new drug product requires substantial resources over a number of
years. If we do not receive the necessary regulatory approvals along the way, we
will not be able to progress clinically in our projects and may be forced to
abandon projects after incurring substantial costs. For example, the FDA
recently rejected the New Drug Application for our nasally administered
scopolamine product primarily because we failed to present adequate safety data.
This action resulted in an indefinite delay in our New Drug Application filing
program and uncertain costs of additional development until we meet with the FDA
and agree to future clinical studies. The magnitude of the costs associated with
these studies and the refiling of the New Drug Application may also result in a
deferral of our program until a collaborative partner is found to share the
future development risk. Moreover, other factors, such as a periodic
reassessment of the ranking of projects within our portfolio, may create further
uncertainty of the continuing viability of any project in process, including
nasally administered scopolamine. Finally, we may encounter significant delays
or excessive costs in our efforts, even if we are eventually successful in
achieving regulatory approval. If we cannot obtain regulatory approval of our
products, we will not be able to generate revenues and become profitable.
Because We Have No Experience in Marketing or Selling Our Proposed Products,
These Products May Never Be Successful
Even if we are able to develop our products and obtain necessary regulatory
approvals, we have no experience in marketing or commercializing any of our
proposed products. We are dependent on our ability to find collaborative
marketing partners for commercial sale of our products. Even if we find a
potential marketing partner, we may not be able to negotiate a licensing
contract on favorable terms to justify our investment or achieve adequate
revenues. In addition, a licensing transaction with a marketing partner does not
assure a product's success, which is dependent upon patients, physicians or
third-party payers accepting the product.
Our products may prove to be unsuccessful if various parties, including
government health administration authorities, private health care insurers and
other health care payers, such as health maintenance organizations and
self-insured employee plans that determine reimbursement to the consumer, do not
accept our products. We cannot assure you that reimbursement will be available
at all or at levels sufficient to allow our marketing partners to achieve
profitable price levels for our products. If we fail to achieve adequate
reimbursement levels, patients may not purchase our products and sales of these
products will be reduced.
Because We Will Face Intense Competition, This May Limit Our Ability To Achieve
Profitability
Our competitors are numerous and include, among others, major pharmaceutical
companies, biotechnology firms, universities and other research institutions.
Our competitors may succeed in developing technologies and products that are
more effective than the nasal technology we are developing or that will cause
our technology or products to become obsolete or noncompetitive.
Many of our competitors have substantially greater financial and technical
resources and production and marketing capabilities than we have. They also may
have greater experience in conducting preclinical testing and clinical trials of
pharmaceutical products and obtaining FDA and other regulatory approvals.
Therefore, our competitors may succeed in obtaining FDA approval for products
faster than we could. Even if we commence commercial sales of our products, we
will also be competing against their manufacturing efficiency and marketing
capabilities, areas in which we have limited or no experience.
8
<PAGE>
Although we believe that our ownership of patents for our nasal delivery
products will limit direct competition with these products, we must also compete
with other promising technologies such as controlled release, target organ or
site release, pumps, polymers, microemulsion, monoclonal antibodies, inhalation,
ocular, liposomal, implants, transdermal passive and transdermal
electrotransport. Our competitors may develop other products using these or
other delivery alternatives that may be as or more effective than our products
and proposed products. We may not be able to compete effectively with other
commercially available products or drug delivery technologies.
If We Have a Problem With Our Manufacturing Facility, or If We or Our Suppliers
Fail to Comply with Applicable Regulations, We May Not Be Able To Market Our
Products or Conduct Clinical Trials
We manufacture all of our products for clinical and commercial use at our
principal manufacturing facility located in Hauppauge, New York. We must produce
all of these products in compliance with federal and state regulations. These
authorities also subject our facilities to inspection. In addition, some of our
key suppliers, such as Roussel Corporation, SGD Pharma, CP Packaging and
Pfeiffer of America, are also subject to regulatory compliance. If we have a
problem at our manufacturing facility, or if we or our suppliers fail to comply
with federal and state regulations or otherwise fail to perform our respective
obligations in a timely fashion, these problems or failures could cause a delay
in clinical trials or the supply of product to market. Any significant delay
could also jeopardize our performance contracts with collaborative partners and
result in material penalties to us.
Changes in the Health Care Industry That Are Beyond Our Control May Be
Detrimental To Our Business
The health care industry is changing rapidly as the public, government, medical
professionals and the pharmaceutical industry examine ways to broaden medical
coverage while controlling the increase in health care costs. Potential changes
could put pressure on the prices of prescription pharmaceutical products and
reduce our business or prospects. We cannot predict when, if any, proposed
health care reforms will be implemented, and these changes are beyond our
control.
If There Are Unforeseen or Unknown Liabilities in Connection With the Operation
of Our Newly Acquired Business, Atossa, These Liabilities Will Reduce Our
Working Capital, Liquidity and Profitability
On August 8, 2000, we acquired Atossa HealthCare Inc., a development stage
company based in Washington state which is developing a proprietary platform of
diagnostics and treatments related to breast cancer risk assessment and
therapeutics and other women's health care products. See "Material
Events--Acquisition of Atossa HealthCare Inc." We effected the acquisition via a
merger of Atossa Acquisition Corporation Inc., a wholly owned subsidiary of
Nastech, with and into Atossa, after which Atossa became a wholly owned
subsidiary of Nastech. Unforeseen and unknown liabilities may arise in
connection with the ownership and operation of Atossa. Although we believe that
the acquisition structure and due diligence we employed minimize the risk of
pre-existing claims being successfully asserted against Nastech, it is possible
that others will assert against us claims they originally had against Atossa and
that these claims may result in material liabilities to us. The occurrence of
any liability of this kind can reduce our working capital and liquidity and make
us less profitable.
If We Fail to Integrate Our New Chief Executive Officer and the Newly Acquired
Business, or If We Lose Our Key Personnel, or If We Are Unable To Attract and
Retain Additional Personnel, Then We May Be Unable To Successfully Develop Our
Business
On August 8, 2000, we entered into an employment agreement with Steven C. Quay,
M.D., Ph.D. to replace Vincent D. Romeo, Ph.D., who died on May 1, 2000, as our
President, Chief Executive Officer and Chairman of the Board. See "Material
Events--Hiring Dr. Steven C. Quay as our new President, Chief Executive Officer,
and Chairman of the Board." We are currently integrating Dr. Quay into our
management team, and we cannot assure you that this team will perform well
together. Because we depend upon the knowledge, experience and skills of our
management and research and development personnel, our inability to successfully
integrate him into the management team could impede our ability to execute our
business plans on schedule. Our inability to successfully integrate and develop
the operations and technologies of Atossa could also reduce our profitability
and inhibit future growth.
In addition, losing Dr. Quay, or any of our other key managers could also
seriously harm our business. Although we have employment agreements with most of
our key managers, this is not a guarantee that we will be able to retain them or
that we will be able to replace any of them if we lose their services for any
reason. Competition for these managers is intense. In addition, the location of
our facilities may limit the pool of technical talent available to us. We have
employed many of
9
<PAGE>
our key managers for several years. If we have to replace any of these
individuals, we will not be able to replace the significant amount of knowledge
that they have about our operations. We do not maintain "key man" insurance
policies on any of our managers.
We Expect To Sell Shares of Our Common Stock in the Future, including Shares
Issued Under the Equity Line of Credit, and These Sales May Dilute the Interests
of Other Security Holders and Depress the Price of Our Common Stock
As of September 30, 2000, there were 6,802,485 shares of common stock issued and
outstanding. As of September 30, 2000, there were outstanding options and
warrants to purchase approximately 2,078,600 shares of our common stock. There
are also 1,299,000 shares of common stock which are issuable under the equity
line of credit and under the warrants previously granted and which may be
granted in the future to Castlebar and Jesup & Lamont. We may also issue
additional shares in acquisitions and may grant additional stock options to our
employees, officers, directors and consultants under our stock option plans.
Lastly, subject to some restrictions in the equity line of credit agreement, we
may issue up to 300,000 shares of our common stock to investors at a discount to
market price without the consent of Castlebar.
The issuance or even the potential issuance of shares under the equity line of
credit, in connection with any other additional financing, and upon exercise of
warrants, options or rights will have a dilutive impact on other stockholders
and could have a negative effect on the market price of our common stock. In
addition, we will issue shares to Castlebar under the equity line of credit at a
discount to the daily volume weighted average prices of our common stock during
the 22 trading days after notification of a drawdown. This will further dilute
the interests of other stockholders.
If We Draw Down on the Equity Line of Credit When Share Prices Are Decreasing,
We Will Need To Issue More Shares, which Will Lead To Dilution and Potentially
Further Price Decrease
As we sell shares of our common stock to Castlebar under the equity line of
credit, and then Castlebar sells the common stock to third parties, our common
stock price may decrease due to the additional shares in the market. If we
decide to draw down on the equity line of credit as the price of our common
stock decreases, we will need to issue more shares of our common stock for any
given dollar amount that Castlebar invests, subject to the minimum selling price
we specify. The more shares that we issue under the equity line of credit, the
more diluted our shares will be and the more our stock price may decrease. This
may encourage short sales, which could place further downward pressure on the
price of our common stock.
The Anti-Takeover Provisions of Our Stockholder Rights Plan May Entrench
Management, May Delay or Prevent Beneficial Takeover Bids by Third Parties, and
May Prevent or Frustrate any Shareholder Attempt to Replace or Remove the
Current Management Even If the Shareholders Consider It Beneficial To Do So
We have a stockholder rights plan designed to protect our stockholders from
coercive or unfair takeover tactics. Under the plan, we declared a dividend of
one preferred stock purchase right for each share of common stock outstanding on
March 17, 2000. Each preferred stock purchase right entitles the holder to
purchase from Nastech 1/1000 of a share of Series A Junior Participating
Preferred Stock for $50. In the event any acquiring entity or group accumulates
or initiates a tender offer to purchase 15% or more of our common stock, then
each holder of a preferred stock purchase right, other than the acquiring
entity, will have the right to receive, upon exercise of the preferred stock
purchase right, shares of Nastech common stock or shares in the acquiring entity
having a value equal to two times the exercise price of the preferred stock
purchase right.
The intent of the stockholder rights plan is to protect our stockholders'
interests by encouraging anyone seeking control of our company to negotiate with
our board of directors. However, our stockholder rights plan could make it more
difficult for a third party to acquire us without the consent of our board of
directors, even if doing so would be beneficial to our shareholders. These
provisions apply even if the offer may be considered beneficial by some
stockholders. Furthermore, the anti-takeover provisions of our stockholder
rights plan may entrench management and make it more difficult for shareholders
to replace management even if the shareholders consider it beneficial to do so.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus and in the documents
that are incorporated by reference in this prospectus, all of which are subject
to risks and uncertainties. Forward-looking statements include information
10
<PAGE>
concerning our possible or assumed future results of operations. Also, when we
use words such as "believe," "expect," "anticipate" or similar expressions, we
are making forward-looking statements. You should not rely on the
forward-looking statements in this prospectus. Although we believe that the
expectations reflected in forward-looking statements are reasonable, we cannot
guarantee future results, levels of activity, performance or achievements. Our
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those
described in "Risk Factors" and elsewhere in this prospectus.
We believe that it is important to communicate our expectations to our
investors. However, there may be events in the future that we are not able to
predict accurately or over which we have no control. The risk factors described
in the preceding pages, as well as any cautionary language in this prospectus,
provide examples of risks, uncertainties and events that may cause our actual
results to differ materially from the expectations we describe in our
forward-looking statements. Before you invest in our common stock, you should be
aware that the occurrence of the events described in these risk factors and
elsewhere in this prospectus could materially affect our business, lower our
operating results and worsen our financial condition.
-------------------------
You should rely only on the information contained or incorporated by reference
in this prospectus. We have not authorized anyone to provide you with different
information. We are not making an offer of these securities in any state where
the offer is not permitted. The information contained in this prospectus is
current only as of the date on the front of this prospectus.
11
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from Castlebar's and Jesup & Lamont's sales of
shares. However, we will receive the proceeds from any sale of common stock to
Castlebar under the equity line of credit agreement described in this prospectus
and upon the exercise of Castlebar's and Jesup & Lamont's warrants when, and if,
they exercise the warrants. If all 1,282,500 shares covered by this prospectus
are issued -- through drawdowns under the equity line of credit and through the
exercise of warrants -- then based upon the volume weighted average price of
$7.7445 of our common stock on January 9, 2001, we would realize net proceeds of
approximately $8,107,657. This amount of proceeds takes into account the
discount to the volume weighted average price that Castlebar will receive and
the $20,000 we paid to Castlebar's legal counsel, Epstein Becker & Green P.C.,
to cover its legal and administrative expenses. It also reflects the 4%
brokerage fee payable to Jesup & Lamont, which, based on the prior example, will
equal $321,552. In addition, a portion of the proceeds from the initial drawdown
under the equity line of credit, if and when made, may be used to pay the
expenses of this offering, which are estimated at approximately $170,000.
We expect to use substantially all the net proceeds for general corporate
purposes, including working capital, research and development and expansion of
sales and marketing activities. The amounts we actually expend for working
capital and other purposes may vary significantly and will depend on a number of
factors including, but not limited to, the actual net proceeds received, the
amount of our future revenues and other factors described under "Risk Factors."
Accordingly, our management will retain broad discretion in the allocation of
the net proceeds. A portion of the net proceeds may also be used to acquire or
invest in complementary businesses, technologies, product lines or products. We
have no current plans, agreements or commitments with respect to any of these
transactions, and we are not currently engaged in any negotiations with respect
to any of these transactions. Pending these uses, the net proceeds of this
offering will be invested in short-term, interest-bearing, investment-grade
securities or guaranteed obligations of the U.S. government.
PRICE RANGE OF COMMON STOCK
Our common stock is quoted on the Nasdaq National Market under the symbol
"NSTK." The following table describes the range of high and low bid prices per
share of our common stock as reported on the Nasdaq National Market for the last
two and three-quarter years. These quotations represent prices between dealers
and do not reflect retail markups, markdowns or commissions and may not
necessarily represent actual transactions.
<TABLE>
<CAPTION>
Low High
--- ----
2000
----
<S> <C> <C>
First Quarter................................................................... $2.53 $8.38
Second Quarter.................................................................. $3.25 $5.88
Third Quarter................................................................... $4.00 $6.50
1999
----
First Quarter................................................................... $3.00 $6.25
Second Quarter.................................................................. 2.56 3.63
Third Quarter................................................................... 2.75 4.44
Fourth Quarter.................................................................. 1.56 3.63
1998
----
First Quarter................................................................... $10.38 $15.38
Second Quarter.................................................................. 7.63 12.50
Third Quarter................................................................... 3.75 8.25
Fourth Quarter.................................................................. 3.00 5.50
</TABLE>
We believe that there are currently approximately 5,000 record holders of our
common stock, including several brokerage firms holding shares in street name
for beneficial owners. On January 9, 2001, the closing bid price of our common
stock as quoted on the Nasdaq National Market was $7.875.
Castlebar and Jesup & Lamont will sell their shares on the Nasdaq National
Market, on the over-the-counter market or otherwise at prices related to the
then current market price, or in negotiated private transactions, or in a
combination of
12
<PAGE>
these methods. Castlebar and Jesup & Lamont will act independently of us in
making decisions with respect to the form, timing, manner and size of each sale.
DIVIDEND POLICY
Since our inception, we have never paid or declared any cash dividends on our
shares of common stock. However, in February 2000, we declared a dividend of one
preferred stock purchase right for each share of common stock held of record on
March 17, 2000, under a stockholder rights plan designed to protect stockholders
from coercive or unfair takeover tactics. The preferred stock purchase rights
are exercisable only when a person or group of affiliated persons accumulate or
initiate a tender offer to purchase 15% or more of our common stock. Upon
exercise, each preferred stock purchase right will entitle its holder, other
than the acquirer and its affiliates, to purchase 1/1000 of a share of our
Series A Junior Participating Preferred Stock at a price of $50 per 1/1000 of a
preferred share. The terms of the rights plan and the dividend paid on March 17,
2000, are more fully set out in the rights plan incorporated by reference as an
exhibit to the registration statement to which this prospectus pertains.
We have no current plans to pay any further dividends on our common stock and
intend to retain earnings, if any, for working capital purposes. Any future
decision to pay dividends on the common stock will depend upon our results of
operations, capital requirements, the financial condition and other factors that
the board of directors deems relevant.
CAPITALIZATION
The following table sets forth as of September 30, 2000:
(1) our unaudited actual capitalization, which includes the issuance of
600,000 shares of common stock in connection with our acquisition of
Atossa HealthCare Inc. on August 8, 2000; and
(2) our pro forma capitalization after giving effect to the issuance of
1,299,000 shares of common stock under the equity line of credit and
the warrants granted to Castlebar and Jesup & Lamont, using the
$6.00 per share market price of our common stock on September 30,
2000, and the application of the net proceeds of the offering. The
pro forma information includes the 16,500 shares underlying the
warrants that may be granted in the future to Jesup & Lamont which
are not covered by this prospectus, but does not include the
2,029,100 shares of common stock issuable upon exercise of options
and warrants outstanding at September 30, 2000, other than the
warrants granted to Castlebar and Jesup & Lamont.
This table should be read in conjunction with financial statements and the notes
included with the financial statements or incorporated by reference in this
prospectus.
<TABLE>
<CAPTION>
As of September 30, 2000
(unaudited)
---------------------------------------------
Actual (1) Pro Forma (2)
---------------------------------------------
(in thousands, except share and per share data)
<S> <C> <C>
Stockholders' equity:
Common Stock, par value $.006 per share;
authorized: 25,000,000; actual issued:
6,879,485 .................................... 41 49
Preferred Stock, par value $.01 per share;
authorized: 100,000; issued: none ............ 0 0
Additional paid-in capital ......................... 39,674 46,085
Accumulated deficit ................................ (28,734) (28,734)
Treasury stock, at cost, 77,000 shares ............. (151) (151)
-------- --------
Total capitalization ............................... $ 10,830 $ 17,249
======== ========
</TABLE>
13
<PAGE>
DILUTION
The issuance of additional shares and the eligibility of issued shares for
resale will dilute our common stock and may lower the price of our common stock.
If you invest in our common stock, your interest will be diluted to the extent
of the difference between the price per share you pay for the common stock and
the pro forma net tangible book value per share of our common stock at the time
of sale. We calculate net tangible book value per share by calculating the total
assets less intangible assets and total liabilities, and dividing it by the
number of outstanding shares of common stock.
The net tangible book value of our common stock as of September 30, 2000, was
$10,669,000, or approximately $1.57 per share, based on 6,802,485 shares
outstanding on September 30, 2000. If, on September 30, 2000, we issued
1,200,000 shares to Castlebar under the equity line of credit agreement and
received proceeds of $4.82 per share, which reflects Castlebar's discount to the
volume weighted average price for our common stock on September 30, 2000, the
fees payable to Jesup & Lamont, and the related expenses of this offering, then
our pro forma net tangible book value as of September 30, 2000 would have been
$16,458,000, or $2.06 per share. This represents an immediate increase in the
net tangible book value of $0.49 per share to existing stockholders on September
30, 2000.
If Castlebar then resold all 1,200,000 shares to the public using this
prospectus at the $6.00 per share market price of our common stock on September
30, 2000, then the purchasers of common stock under this prospectus would
realize an immediate dilution in net tangible book value of approximately $3.94
per share. The actual dilution to the purchasers under this prospectus may be
greater or less than in this example, depending on the actual price they pay for
shares, the actual prices at which we issue shares to Castlebar under the equity
line of credit agreement and how many of the vested options and warrants
outstanding have been exercised at the time of the investment.
14
<PAGE>
EQUITY LINE OF CREDIT AGREEMENT
Overview
On July 11, 2000, we entered into an equity line of credit agreement with
Castlebar Enterprises Limited in order to establish a possible source of funding
for the development of our current and planned products. The equity line of
credit agreement establishes what is sometimes also referred to as an equity
drawdown facility.
Under the equity line of credit agreement, Castlebar has agreed to purchase up
to 1,200,000 shares of our common stock during the 36-month period following the
effective date of the registration statement to which this prospectus relates.
During this 36-month period, we may request a drawdown under the equity line of
credit by selling shares of our common stock to Castlebar, and Castlebar will be
obligated to purchase the shares. Castlebar's obligation to honor all drawdown
requests and to purchase the shares is absolute, subject only to the
conditions contained in the equity line of credit agreement, see "--Necessary
Conditions Before Castlebar is Obligated to Purchase our Shares" below. We have
full recourse against Castlebar for the entire amount of all drawdown notices
during the entire term of the equity line of credit agreement.
During the 22 trading days following a drawdown request, we will calculate the
amount of shares we will sell to Castlebar and the purchase price per share
based on the volume weighted average price of our common stock, less discounts
and fees. Upon the exercise of each drawdown, we will receive the amount of the
drawdown less a brokerage fee payable to Jesup & Lamont equal to 4% of the net
purchase price for each sale. Jesup & Lamont is the placement agent which
introduced Castlebar to us and is a registered broker-dealer.
The Drawdown Procedure and the Stock Purchases
We may request a drawdown once every 22 trading days, although we are under no
obligation to do so, by faxing a drawdown notice to Castlebar, stating the
amount of the drawdown we wish to exercise and the lowest daily volume weighted
average price, if any, at which we are willing to sell the shares. Our President
and Chief Executive Officer in his sole and absolute discretion will set the
minimum volume weighted average price.
Amount of the Drawdown
The minimum amount we can draw down at any one time is $250,000 worth of common
stock. The maximum amount we can draw down at any one time will be determined at
the time of the drawdown request according to the following formula:
o 4.5% of the weighted average price of our common stock for the three
month period prior to the date of the drawdown request
o multiplied by the total trading volume of the common stock for the
three month period prior to the date of the drawdown request.
Using this formula, if we had requested a drawdown on January 10, 2001, the
maximum amount we could draw down at one time would have been $741,971 worth of
common stock, based on a weighted average price of $6.90 for the three month
period prior to January 10, 2001, and a total trading volume of 2,389,600 shares
for the three month period prior to January 10, 2001.
Calculation of Purchase Price
On the day following the delivery of the drawdown notice, a valuation period of
22 trading days will start. The price per share of common stock sold to
Castlebar will be determined on each of the 22 trading days following the
delivery of the drawdown notice as follows:
o On each trading day during the valuation period where the daily
volume weighted average price of our common stock on the Nasdaq
National Market exceeds the minimum price, if any, indicated in the
drawdown notice, the purchase price will equal to 86.5% of the
volume weighted average price on that day.
o If the volume weighted average price on a given trading day is less
than the minimum price, then Castlebar will have the option to
purchase the common stock for that day at a price equal to 86.5% of
the minimum price.
15
<PAGE>
o If Castlebar elects not to purchase shares when the volume weighted
average price is below the minimum price, then the amount of the
drawdown will be reduced by 1/22.
Number of Shares Issued
On each of the 22 trading days during the valuation period, the number of shares
to be issued to Castlebar will be determined by dividing 1/22 of the drawdown
amount by the purchase price on each trading day. If the volume weighted average
price for our common stock on any trading day during the 22 trading day
calculation period is below the minimum price, and Castlebar elects not to
purchase shares when the volume weighted average price is below the minimum
price, then we will not issue any shares on that day, and the drawdown amount
will be reduced by 1/22.
Using this purchase price formula, and assuming a volume weighted average price
throughout the pricing period equal to the $7.7445 per share volume weighted
average price of our common stock on January 9, 2001, the maximum number of
shares we could have sold to Castlebar at one time would have been 95,806
shares, based on the $741,971 maximum drawdown amount.
If we set a minimum price too high and our stock price does not consistently
meet that level during the 22 trading days after our drawdown request, the
amount we can draw and the number of shares we sell to Castlebar will be
reduced. On the other hand, if we set a minimum price too low and our stock
price falls significantly but stays above the minimum price, we will have to
issue a greater number of shares to Castlebar at the reduced price.
Payment for Shares Issued
The shares purchased on the first 11 trading days will be issued and paid for on
the 13th trading day following the drawdown request. The shares purchased on the
12th through the 22nd trading days will be issued and paid for on the 24th
trading day following the drawdown request. We will receive the purchase price
less a brokerage fee payable to Jesup & Lamont equal to 4% of the net purchase
price for each drawdown.
Short Term Warrants
The equity line of credit agreement contains a provision that obligates us to
grant Castlebar warrants to purchase a number of shares of common stock equal to
25% of the number of shares Castlebar purchases on each of the 13th and 24th
trading days following a drawdown request. However, on January 3, 2001,
Castlebar waived all its rights to receive these short term warrants.
Accordingly, we will not issue any short term warrants under this provision.
Drawdown Warrants
On the 24th trading day following the drawdown request, we will also grant
Castlebar and Jesup & Lamont warrants to purchase an additional 1,000 shares of
common stock for each $100,000 we draw down under the equity line of credit, up
to a maximum of 33,000 additional warrants for Castlebar and 16,500 additional
warrants for Jesup & Lamont. See "--The Grant of Warrants and Costs of Closing
Each Drawdown" below. This prospectus does not cover the shares underlying the
16,500 additional warrants that we may grant in the future to Jesup & Lamont.
Sample drawdown calculation
The following is an example that shows how we would calculate the number of
shares we would issue to Castlebar if we had given a drawdown notice on December
6, 2000, indicating a drawdown amount of $750,000 and a minimum price of $6.50
per share:
16
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
Greater of
Volume
Weighted Purchase
Volume Average Price Price Optional Purchase
Weighted Minimum or Minimum (after (assumed for purpose # of Shares
Trading Date Average Price Price Price discount) of example) Principal Purchased
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
12/7/00 $7.8848 $6.500 $7.885 $6.820 $34,090.91 4,998
-----------------------------------------------------------------------------------------------------------------------------------
12/8/00 $7.8021 $6.500 $7.802 $6.749 $34,090.91 5,051
-----------------------------------------------------------------------------------------------------------------------------------
12/11/00 $8.1214 $6.500 $8.121 $7.025 $34,090.91 4,853
-----------------------------------------------------------------------------------------------------------------------------------
12/12/00 $8.1348 $6.500 $8.135 $7.037 $34,090.91 4,845
-----------------------------------------------------------------------------------------------------------------------------------
12/13/00 $7.9520 $6.500 $7.952 $6.878 $34,090.91 4,956
-----------------------------------------------------------------------------------------------------------------------------------
12/14/00 $7.6041 $6.500 $7.604 $6.578 $34,090.91 5,183
-----------------------------------------------------------------------------------------------------------------------------------
12/15/00 $7.2569 $6.500 $7.257 $6.277 $34,090.91 5,431
-----------------------------------------------------------------------------------------------------------------------------------
12/18/00 $7.5192 $6.500 $7.519 $6.504 $34,090.91 5,241
-----------------------------------------------------------------------------------------------------------------------------------
12/19/00 $7.3182 $6.500 $7.318 $6.330 $34,090.91 5,385
-----------------------------------------------------------------------------------------------------------------------------------
12/20/00 $7.1170 $6.500 $7.117 $6.156 $34,090.91 5,538
-----------------------------------------------------------------------------------------------------------------------------------
12/21/00 $6.9526 $6.500 $6.953 $6.014 $34,090.91 5,669
-----------------------------------------------------------------------------------------------------------------------------------
Settlement on Day 13 $6.579 $375,000 57,150
====== ============ =======
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
12/22/00 $6.8168 $6.500 $6.817 $5.897 $34,090.91 5,782
-----------------------------------------------------------------------------------------------------------------------------------
12/26/00 $6.8022 $6.500 $6.802 $5.884 $34,090.91 5,794
-----------------------------------------------------------------------------------------------------------------------------------
12/27/00 $6.4462 $6.500 $6.500 N/A Not exercised N/A N/A
-----------------------------------------------------------------------------------------------------------------------------------
12/28/00 $6.6869 $6.500 $6.687 $5.784 $34,090.91 5,894
-----------------------------------------------------------------------------------------------------------------------------------
12/29/00 $6.8576 $6.500 $6.858 $5.932 $34,090.91 5,747
-----------------------------------------------------------------------------------------------------------------------------------
1/2/01 $6.6306 $6.500 $6.631 $5.735 $34,090.91 5,944
-----------------------------------------------------------------------------------------------------------------------------------
1/3/01 $6.5234 $6.500 $6.523 $5.643 $34,090.91 6,042
-----------------------------------------------------------------------------------------------------------------------------------
1/4/01 $7.1615 $6.500 $7.162 $6.195 $34,090.91 5,503
-----------------------------------------------------------------------------------------------------------------------------------
1/5/01 $7.5631 $6.500 $7.563 $6.542 $34,090.91 5,211
-----------------------------------------------------------------------------------------------------------------------------------
1/8/01 $7.9531 $6.500 $7.953 $6.879 $34,090.91 4,955
-----------------------------------------------------------------------------------------------------------------------------------
1/9/01 $7.7445 $6.500 $7.745 $6.699 $34,090.91 5,089
-----------------------------------------------------------------------------------------------------------------------------------
Settlement on Day 24 $6.092 $340,909 55,961
====== ============ =======
-----------------------------------------------------------------------------------------------------------------------------------
------ ------------ -------
Totals $6.329 $715,909 113,111
====== ============ =======
Less broker's (Jesup & Lamont) commission of 4% ($28,636.36)
------------
------
Net proceeds to Nastech $6.076 $687,273 113,111
====== ============ =======
</TABLE>
The Grant of Warrants and Costs of Closing Each Drawdown
At the closing of the equity line of credit on July 11, 2000, we paid $20,000 to
Castlebar's legal counsel, Epstein Becker & Green P.C., to cover its legal and
administrative expenses.
As consideration for the opening of the equity line of credit, we granted
Castlebar warrants to purchase 33,000 shares of common stock. As consideration
for Jesup & Lamont's services as placement agent in connection with this
offering, we granted Jesup & Lamont warrants to purchase 16,500 shares of common
stock. Castlebar and Jesup & Lamont may exercise these warrants at any time
prior to July 10, 2003, for $5.53 per share of common stock. However, if
Castlebar ever fails to honor a drawdown notice, in addition to all other
remedies available to us at law or in equity, Castlebar will forfeit and will
return to us for cancellation a pro-rata portion of the 33,000 warrants granted
to them, not including any warrants already exercised, based upon the portion of
the 1,200,000 share commitment that Castlebar has not previously honored,
provided that Castlebar will be able to keep a minimum of 1,650 warrants upon
the forfeiture. Upon the forfeiture, we will maintain the registration statement
in effect for a reasonable period, but not more than 20 trading days, so that
Castlebar may dispose of any remaining shares of common stock they hold.
We believe that the fair value of these warrants using customary pricing models
is approximately $100,000. The fair value of these warrants was reflected in our
financial statements and recorded in general and administrative costs and
expenses as a financing expense during the quarter ended September 30, 2000.
At the closing of each drawdown, we will also grant Castlebar and Jesup & Lamont
warrants to purchase an additional 1,000 shares of common stock for each
$100,000 we draw down under the equity line of credit, up to a maximum of 33,000
17
<PAGE>
additional warrants for Castlebar and 16,500 additional warrants for Jesup &
Lamont. This prospectus does not cover the shares underlying the 16,500
additional warrants that we may grant in the future to Jesup & Lamont. These
additional warrants will be exercisable for three years from the grant date, and
will have an exercise price equal to 120% of the average closing bid prices of
our common stock on the 15 trading days prior to closing of each drawdown.
The fair value of these drawdown warrants is not determinable at this time
because the exercise price will not be set until the occurrence of a future
event. Upon the occurrence of a future equity drawdown, the related fair value
of the warrants will be charged against paid-in capital in recognition of a
capital transaction. Until then, the warrants grantable on future drawdowns will
only be disclosed in the notes to our financial statements.
Neither Castlebar nor Jesup & Lamont will be obligated to exercise the warrants
and to purchase any shares of common stock under these warrants.
Lastly, upon the receipt of each drawdown amount from Castlebar, we will pay a
brokerage fee to Jesup & Lamont Securities Corporation equal to 4% of the net
purchase price for each drawdown. Jesup & Lamont is the placement agent which
introduced Castlebar to us and is a registered broker-dealer.
Necessary Conditions Before Castlebar is Obligated to Purchase our Shares
The following conditions must be satisfied before Castlebar is obligated to
purchase the common stock according to a drawdown notice:
o A registration statement for the shares must be effective and
available on each drawdown settlement date so that Castlebar may
freely sell the shares of shares of common stock it purchases;
o All our representations and warranties to Castlebar contained in the
equity line of credit agreement must be true and correct in all
material respects;
o We will have made reasonable efforts to obtain all permits and
qualifications in accordance with any state blue sky laws in the
states reasonably requested by Castlebar;
o We have delivered into escrow or to the Depository Trust Company the
shares of common stock being purchased;
o We have delivered to our transfer agent instructions reasonably
satisfactory to Castlebar;
o We have satisfied all laws and regulations pertaining to the sale
and issuance of the shares of common stock to Castlebar;
o We have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions that we are required
to perform, satisfy or comply with under the private equity line of
credit agreement, registration rights agreement and escrow
agreement;
o No statute, rule, regulation, executive order, decree, ruling or
injunction may be in effect which prohibits consummation of the
transactions that the equity line of credit agreement contemplates;
o No governmental authority is conducting any litigation, proceeding
or investigation, nor are any of these actions pending, which
prohibits or adversely affects the consummation of the transactions
that the equity line of credit agreement contemplates;
o There have not been any material adverse changes in our business,
operations, properties, or financial condition, except as disclosed
in our filings with the SEC;
o The SEC or the Nasdaq National Market must not have suspended
trading in our common stock, and our common stock continues to be
listed on the Nasdaq National Market;
o We will have delivered an opinion of our counsel described in the
equity line of credit agreement regarding the validity of shares and
the matters listed above;
o Twenty-two trading days have elapsed since the last drawdown
request; and
o Castlebar has received and is reasonably satisfied with other
documents as they may reasonably request.
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In addition, we may not issue any shares of common stock under the equity line
of credit if the issuance results in Castlebar beneficially owning more than
9.9% of our then outstanding common stock. Of course, any of Castlebar's resales
of shares would reduce the number of shares it beneficially owns, and would
enable us to issue additional shares to Castlebar without violating this
condition.
The listing requirements of the Nasdaq National Market also prohibit us from
issuing 20% or more of our issued and outstanding shares of common stock at a
price less than the greater of market value or book value, unless we obtain
stockholder approval.
Restrictions on Future Financings
The equity line of credit agreement limits our ability to raise money by selling
our securities to third parties at a discount to the market price during the
term of the equity line of credit agreement. We may, however, sell our
securities at a discount to market price in the following situations:
o under any presently existing or future employee benefit plan, which
plan our stockholders have approved or may approve;
o under any compensatory plan for a full-time employee or key
consultant;
o in an underwritten registered public offering;
o in connection with a strategic partnership or other business
transaction, the principal purpose of which is not to raise money;
o in connection with a private placement at a discount to the current
market price of no more than 300,000 shares of common stock, or
securities convertible into 300,000 shares of common stock, where
the purchasers have registration rights;
o in connection with any bridge financing arrangement which includes,
as consideration for the lender to enter into the agreement, either
the issuance of no more than 300,000 shares of common stock, or
securities convertible into 300,000 shares of common stock, or an
option to purchase no more than 300,000 shares of common stock, or
securities convertible into 300,000 shares of common stock; and
o a transaction to which Castlebar gives its written approval.
Termination of the Equity Line of Credit Agreement
Castlebar may terminate the equity line of credit if any of the following events
occur:
o Any stop order or suspension of the effectiveness of this
registration statement issues for an aggregate of 30 trading days
during the 36-month term of the equity line of credit agreement,
with some exceptions;
o Our shares of common stock are delisted from the Nasdaq National
Market unless the delisting is in connection with the listing of the
shares on a comparable stock exchange in the United States;
o Our common stock is no longer registered under Section 12(g) or
12(b) of the Exchange Act of 1934; or
o We cease to continue our corporate existence.
We may terminate the equity line of credit if Castlebar ever fails to honor a
drawdown notice, although in this case we will also have full recourse against
Castlebar for the entire amount of all drawdown notices during the remaining
term of the equity line of credit agreement.
Indemnification of Castlebar
Castlebar is entitled to customary indemnification from us for any losses or
liabilities it suffers based upon material misstatements or omissions from the
registration statement and this prospectus, except as they relate to information
Castlebar supplies to us for inclusion in the registration statement and
prospectus.
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SELLING STOCKHOLDERS
Overview
The 1,282,500 shares of common stock registered for resale under this prospectus
constitute 18.9% of our issued and outstanding shares of common stock as of
September 30, 2000. Because we do not know for certain how or when Castlebar and
Jesup & Lamont will choose to sell their shares of common stock, we cannot
estimate the amount of securities that they will actually offer for sale. There
can be no assurance that they will sell any or all of the securities that this
prospectus covers.
The following table sets forth each selling stockholders' beneficial ownership
of our common stock as of the date of this prospectus:
<TABLE>
<CAPTION>
Nature of Relationship to Number of Common Shares Number of Common Shares
Nastech within the Last Owned Prior to this that Holder Will Offer in
Name of Security Holder Three Years Offering this Offering
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Castlebar Enterprises Limited None None Up to 1,266,000
Jesup & Lamont Securities
Corporation None None Up to 16,500
</TABLE>
Castlebar Enterprises Limited
Castlebar Enterprises Limited is a British Virgin Island corporation engaged in
the business of investing in publicly traded equity securities for its own
account. Castlebar's principal offices are located at Aeulestrasse 74, FL-9490
Vaduz, Liechtenstein. The two directors of Castlebar, Hans Gassner and Martin
Gstoehl, each have the authority to exercise any warrants granted to Castlebar
and to sell and vote the shares of common stock issued under Equity Line of
Credit Agreement and the warrants.
Other than the 33,000 warrants we granted to Castlebar in connection with
closing the equity line of credit agreement, Castlebar does not currently own
any of our securities. Other than its obligation to purchase shares of common
stock under the equity line of credit agreement, it has no other commitments or
arrangements to purchase or sell any of our securities. There are no business
relationships between Castlebar and us other than the equity line of credit
agreement.
Jesup & Lamont Securities Corporation
Jesup & Lamont Securities Corporation has acted as placement agent in connection
with the equity line of credit agreement. Jesup & Lamont introduced us to
Castlebar and assisted us with structuring the equity line of credit with
Castlebar. Jesup & Lamont's duties as placement agent were undertaken on a
reasonable best efforts basis only. It made no commitment to purchase shares
from us and did not ensure us of the successful placement of any securities.
Other than the 16,500 warrants granted to Jesup & Lamont as a placement fee,
Jesup & Lamont does not currently own any of our securities. The chief executive
officer of Jesup & Lamont, Howard F. Curd, has the sole authority to exercise
any warrants granted to Jesup & Lamont and to sell and vote the shares of common
stock issued under the warrants.
Castlebar and Jesup & Lamont have not held any positions or offices or had
material relationships with us or any of our affiliates within the past three
years other than as a result of the ownership of our common stock. If, in the
future, Castlebar's or Jesup & Lamont's relationship with us changes, we will
amend or supplement this prospectus to update this disclosure.
PLAN OF DISTRIBUTION
General
Castlebar and Jesup & Lamont may offer for sale up to 1,282,500 shares of our
common stock using this prospectus, which shares they will originally acquire
from us under the terms of the equity line of credit agreement and the warrants
we issued
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to them as more fully described under "Equity Line of Credit Agreement."
Castlebar and Jesup & Lamont will offer the shares for their own account. We do
not know for certain how or when Castlebar and Jesup & Lamont will choose to
sell their shares of common stock. We will not receive any proceeds from
Castlebar or Jesup & Lamont's sale of shares of common stock.
To permit Castlebar and Jesup & Lamont to resell the shares of common stock
issued to them, we agreed to file a registration statement and all necessary
amendments and supplements with the SEC for the purpose of registering and
maintaining the registration of the shares. We will bear all costs relating to
the registration of the common stock offered using this prospectus. We will keep
the registration statement effective until the earliest of any of the following
dates:
o the date after which none of the shares of common stock that
Castlebar holds that the registration statement covers are or may
become issued and outstanding;
o the date after which all of the shares of common stock that
Castlebar holds have been transferred to persons who may trade the
shares without restriction under the Securities Act of 1933 and we
have delivered new certificates or other evidences of ownership of
the shares without any restrictive legend;
o the date after which Castlebar sells under the registration
statement all of the shares of common stock that Castlebar holds
that the registration statement covers; or
o if Castlebar ever fails to honor a drawdown under the equity line of
credit, we will maintain the registration statement in effect only
for so long as Castlebar may request in order to dispose of any
remaining shares of common stock it holds, not to exceed 20 trading
days.
Castlebar and Jesup & Lamont will offer our common stock into the public market
from time to time using this prospectus, although there can be no assurance that
they will in fact sell any or all of the securities that this prospectus covers.
The sales may be made on the Nasdaq National Market, on the over-the-counter
market or otherwise at prices related to the then current market price, or in
negotiated private transactions, or in a combination of these methods. Castlebar
and Jesup & Lamont will act independently of us in making decisions with respect
to the form, timing, manner and size of each sale. Castlebar and Jesup & Lamont
have informed us that there are no existing arrangements between them and any
other stockholder, broker, dealer, underwriter or agent relating to the sale or
distribution of shares of common stock which they may sell through this
prospectus.
The shares of common stock may be sold in one or more of the following manners:
o block trades in which the broker or dealer so engaged will attempt
to sell the shares as agent, but may position and resell a portion
of the block as principal to facilitate the transaction;
o purchases that a broker or dealer makes for its account under this
prospectus; or
o ordinary brokerage transactions and transactions in which the broker
solicits purchases.
Castlebar and Jesup & Lamont will pay all commissions and their own expenses, if
any, associated with the sale of the shares of common stock. Castlebar and Jesup
& Lamont will sell shares without paying any underwriting discounts or
commissions, except for usual and customary selling commissions paid to brokers
or dealers. However, in effecting sales, brokers or dealers that Castlebar and
Jesup & Lamont engage may arrange for other brokers or dealers to participate.
Except as disclosed in a supplement to this prospectus, no broker-dealer will be
paid more than a customary brokerage commission in connection with any of
Castlebar or Jesup & Lamont's sales of shares of common stock. Castlebar and
Jesup & Lamont may pay brokers or dealers commissions, discounts or other
concessions in amounts to be negotiated immediately prior to the sale. The
compensation to a particular broker-dealer may be in excess of customary
commissions. Any profits that these broker-dealers make on any resale of the
shares of common stock as a principal and any commissions that these
broker-dealers receive may be deemed to be underwriting discounts and
commissions under the Securities Act of 1933. Castlebar and Jesup & Lamont may
pay commissions to any broker-dealer participating in these transactions as
agent. The purchaser of the shares of common stock may also pay commissions to
any broker-dealer participating in these transactions if the broker-dealer acts
as agent for the purchaser.
Broker-dealers may agree with Castlebar and Jesup & Lamont to sell a specified
number of shares of common stock at a stipulated price per share and, to the
extent a broker-dealer is unable to do so acting as agent for Castlebar and
Jesup & Lamont, to purchase as principal any unsold shares of common stock at a
price required to fulfill the broker-dealer commitment to Castlebar and Jesup &
Lamont. Broker-dealers who acquire shares of common stock as principal may
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thereafter resell the shares of common stock from time to time in transactions,
which may involve crosses and block transactions and which may involve sales to
and through other broker-dealers, including transactions of the nature described
above, in the over-the-counter market, in negotiated transactions or otherwise
at market prices prevailing at the time of sale or at negotiated prices, and in
connection with the resales may pay to or receive from the purchasers of the
shares of common stock commissions computed as described above. Brokers or
dealers who acquire shares of common stock as principal and any other
participating brokers or dealers may be deemed to be underwriters in connection
with resales of the shares of common stock.
Castlebar is deemed a statutory underwriter within the meaning of Section 2(11)
of the Securities Act of 1933 with respect to any shares it sells. Castlebar has
agreed to be named as a statutory underwriter and will be acting as an
underwriter in its resales of the shares of common stock under this prospectus.
Because Castlebar is deemed a statutory underwriter, the discounts and
concessions it receives upon purchases of our common stock, and any profits it
receives on the resale of the shares, will be deemed to be underwriting
discounts and commissions under the Securities Act. Each time Castlebar
purchases shares of our common stock under the equity line of credit agreement,
it will receive a substantial discount to then current market price of our
common stock. The price at which we will issue shares of common stock to
Castlebar will be 13.5% below the daily volume weighted average prices of the
common stock on the Nasdaq National Market during the 22 trading days following
a drawdown notice. Assuming an average volume weighted average price of $6.25,
based on recent daily closing bid prices of the common stock on the Nasdaq
National Market during August 2000, and assuming we use the entire line of
credit and issue all 1,200,000 shares registered for issuance under the equity
line of credit agreement, Castlebar will receive "underwriting compensation" in
the form of its discounted purchase price equal to $1,012,500, or $0.84375 per
share. In connection with the equity line of credit, we granted 33,000 warrants
to Castlebar, which are exercisable for $5.53 per share of common stock at any
time prior to July 10, 2003, and in the future we may grant Castlebar up to an
additional 33,000 warrants at the time of the drawdowns under the equity line of
credit, which warrants will be exercisable for three years from the grant date,
and will have an exercise price equal to 120% of the average closing bid prices
of our common stock on the 15 trading days prior the grant date. The warrants
granted to Castlebar will also be deemed to be underwriting commission under the
Securities Act. We estimate that the fair market value of the initial 33,000
warrants using customary pricing models is $66,667, and the fair value of the
additional 33,000 drawdown warrants will not be determinable until the exercise
price is set in the future. Lastly, at the closing of the equity line of credit
on July 11, 2000, we paid $20,000 to Castlebar's legal counsel, Epstein Becker &
Green P.C., to cover Castlebar's legal and administrative expenses in connection
with negotiating the equity line of credit.
Castlebar and Jesup & Lamont are also subject to applicable state and federal
securities laws, rules and regulations, including Rule 10b-5 and Regulation M
under the Exchange Act of 1934, and the rules and regulations of the Nasdaq
National Market. Under these rules, Castlebar and Jesup & Lamont may not:
(1) engage in market making activities at the same time as they are
engaged in a distribution of the shares of common stock for a period
beginning when this person becomes a distribution participant and
ending upon this person's completion of participation in a
distribution;
(2) engage in any stabilization activity in connection with our
securities;
(3) impose penalty bids or effect passive market making bids; and
(4) bid for or purchase any of our common stock or attempt to induce any
person to purchase any of our common stock other than as permitted
under the Exchange Act.
In addition, if either of Castlebar or Jesup & Lamont is an "affiliated
purchaser" as defined in Regulation M, they must coordinate their sales under
this prospectus with each other and with us for purposes of Regulation M as
Securities Exchange Act Release 34-38067 (December 20, 1996) requires. Neither
of Castlebar nor Jesup & Lamont, nor any of their controlling persons, has been
an officer, director or otherwise an affiliate of our company during the last
three years. In addition to the rules and regulations applicable to it,
Castlebar has also agreed not to engage in any short sales of our common stock
as long as the equity line of credit is active. These restrictions, and the
other rules and regulations applicable to Castlebar and Jesup & Lamont, may
affect the marketability of the shares of common stock.
Limited Grant of Registration Rights
We granted registration rights to Castlebar to enable it to sell the common
stock it purchases under the equity line of credit agreement. In connection with
any registration of this kind, we will have no obligation:
o to assist or cooperate with Castlebar in the offering or disposition
of the shares;
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<PAGE>
o to indemnify or hold harmless the holders of the shares, other than
Castlebar, or any underwriter that these holders designate;
o to obtain a commitment from an underwriter relative to the sale of
any the shares; or
o to include the shares within any underwritten offering we do.
We will assume no obligation or responsibility whatsoever to determine a method
of disposition for the shares or to otherwise include the shares within the
confines of any registered offering other than the registration statement of
which this prospectus is a part.
We will file one or more post-effective amendments to the registration statement
of which this prospectus is a part to describe any material change to the
information in this prospectus, including with respect to the plan of
distribution, for as long as Castlebar holds shares of our stock or until the
shares can be sold under an appropriate exemption from registration. This
obligation may include, to the extent required under the Securities Act of 1933,
that a supplemental prospectus be filed, disclosing:
o the name of any broker-dealers;
o the number of shares of common stock involved;
o the price at which the shares of common stock are to be sold;
o the commissions paid or discounts or concessions allowed to
broker-dealers, where applicable;
o that broker-dealers did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus,
as supplemented; and
o any other facts material to the transaction.
Our registration rights agreement with Castlebar permits us to restrict the
resale of the shares Castlebar has purchased from us under the equity line of
credit agreement for a period of time sufficient to permit us to amend or
supplement this prospectus to include material information. If we restrict
Castlebar at any time within five trading days of the closing of any drawdown
and our stock price declines during the restriction period, then, in order to
compensate Castlebar for its inability to sell shares during the restriction
period, we will be required to issue to Castlebar a number of additional shares
of our common stock equal to the difference between:
o the product of
o the number of shares Castlebar purchases under the most recent
drawdown and still hold during the restriction period that are
not otherwise freely tradable, and
o the difference between closing bid price on the day
immediately preceding the restriction period and the closing
bid price on the day immediately after the restriction period,
minus
o the number of shares Castlebar purchases under the most recent
drawdown and still holds during the restriction period that are not
otherwise freely tradable.
If any issuance of shares to Castlebar would result in the issuance of a number
of shares which exceeds the number permitted under the equity line of credit
agreement (see "Equity Line of Credit Agreement--Necessary Conditions Before
Castlebar is Obligated to Purchase our Shares"), then in lieu of the issuance of
shares to Castlebar, we will pay Castlebar an amount in cash equal to the
closing ask price of the shares that would have been issuable under the formula
contained in the previous sentence.
DESCRIPTION OF CAPITAL STOCK
The following summary describes the material provisions of our capital stock and
is subject to, and qualified in its entirety by, our Certificate of
Incorporation including any amendments, and our By-laws, all of which are
incorporated by reference as exhibits to the registration statement of which
this prospectus is a part and by provisions of applicable law.
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We are authorized to issue up to 25,000,000 shares of common stock, par value
$0.006, and 100,000 shares of preferred stock, par value $0.01. As of September
30, 2000, 6,802,485 shares of common stock were issued and outstanding, and no
shares of preferred stock were outstanding. We believe that there are
approximately 5,000 record holders of our common stock, including several
brokerage firms holding shares in street name for beneficial owners.
Common Stock
All of our issued and outstanding shares of common stock are validly issued,
fully paid and non-assessable. All shares of our common stock to be outstanding
after this offering, when paid for and issued, will be validly issued, fully
paid and non-assessable. On March 2, 2000, in connection with the adoption of a
shareholder rights plan, our board of directors created and designated 10,000
shares of Series A Junior Participating Preferred Stock. The rights of holders
of our common stock are subject to the rights of the holders of our Series A
Junior Participating Preferred Stock and will be subject to the rights of any
preferred stock that we may create and issue in the future. The rights of
preferred stockholders may adversely affect the rights of the common
stockholders.
Voting Rights. Holders of our common stock are entitled to one vote per share on
all matters requiring a vote of the stockholders. Common stockholders have no
right to cumulative voting in the election of directors. Accordingly, a simple
majority of votes can elect each of our directors.
Liquidation Rights. In the event of liquidation of our company, all holders of
our common stock will participate on an equal basis in the net assets available
for distribution after payment of our liabilities and payment of any liquidation
preferences in favor of outstanding shares of preferred stock, if there are any.
Dividend Rights. Holders of our common stock are entitled to receive dividends
in cash or property on an equal basis, if and when the board of directors
declares dividends on the common stock, subject to any preference in favor of
outstanding shares of preferred stock, if there are any. It is our present
intention to retain our earnings, if any, for use in our business. Dividends
are, therefore, unlikely in the foreseeable future.
Preemptive Rights and Redemption. The holders of our common stock have no
preemptive rights to maintain their respective percentage ownership interest in
our other securities. Our common stock is not redeemable or subject to further
calls or assessments, although we have in the past effected a 1:100 reverse
split of our common stock followed immediately by a 100:1 forward split to
enable us to redeem odd-lot shares which were creating excessive administrative
costs for us. As of December 31, 1999, we redeemed and then retired 110,736
odd-lot shares. We also acquired 77,000 shares of our common stock in 1999, and
are holding these shares as treasury stock.
Preferred Stock
We are authorized to issue up to 100,000 shares of preferred stock, without
stockholder approval.
Under the authority granted to and vested in our board of directors, in March
2000, the board of directors created a series of preferred stock and fixed the
relative rights, preferences and limitations of the stock. The series was
designated as Series A Junior Participating Preferred Stock and consisted of
10,000 shares. The dividend and distribution rights of the holders of the Series
A Junior Participating Preferred Stock are superior to the dividend and
distribution rights of the holders of our common stock, but are junior to all
series of any other class of our preferred stock with respect to the payment of
dividends and the distribution of assets. The Series A Junior Participating
Preferred Stock is not redeemable.
Each share of Series A Junior Participating Preferred Stock entitles the holder
to 1,000 votes on all matters submitted to a vote of our stockholders, and vote
together as one class with the holders of our common stock. However, the holders
of the Series A Junior Participating Preferred Stock are entitled to vote
together as a single class on any amendment to our Certificate of Incorporation
which would materially alter or change the powers, preferences or special rights
of the Series A Junior Participating Preferred Stock.
Upon our liquidation, dissolution or winding up, the holders of Series A Junior
Participating Preferred Stock are entitled to receive $1,000, plus the amount of
any accrued and unpaid dividends, for each share of Series A Junior
Participating Preferred Stock held, subject to adjustment. Additionally, upon
any consolidation or merger of our company in which the shares of our common
stock are exchanged for other stock, securities, cash or any other property,
then each share of Series A Junior Participating Preferred Stock shall be
similarly exchanged, at the same time, into an amount per share equal to 1,000
times the aggregate amount of stock, securities, cash or any other property in
which the common stock was
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exchanged. The relative rights, preferences and limitations of the Series A
Junior Participating Preferred Stock are more fully described in the
Designations of Rights, Terms and Preferences of Series A Junior Participating
Preferred Stock included as an exhibit to our Current Report on Form 8-K dated
February 22, 2000, incorporated by reference into this prospectus.
Our board of directors has the express authority, without any stockholder vote
or action, to create additional series of preferred stock and to fix the rights,
preferences, privileges and restrictions of the preferred stock, including
dividend rights, conversion rights, voting rights, terms of redemption,
redemption prices, and liquidation preferences, and to set the number of shares
constituting any series of preferred stock.
It is impossible for us to state the actual effect on common stockholders if the
board of directors designates a new series of preferred stock. The effects of
the designation will not be determinable until the rights accompanying the
series have been designated. The issuance of preferred stock could adversely
affect the voting power, liquidation rights or other rights that owners of
common stock or other series' of preferred stock hold. We have no present plans
to issue any additional shares of preferred stock.
Stockholder Rights Plan
In February 2000, we implemented a stockholder rights plan designed to protect
our stockholders from coercive or unfair takeover tactics by causing shares of
our preferred stock with voting or conversion rights to be issued to holders who
might side with our board of directors in opposing a takeover bid. In addition,
our issuance of the shares of preferred stock with voting or conversion rights
could dilute the stock ownership of those holders. Under the stockholder rights
plan, we declared a dividend of one preferred stock purchase right for each
share of common stock held of record on March 17, 2000. The preferred stock
purchase rights are exercisable only when a person or group of affiliated
persons accumulate or initiate a tender offer to purchase 15% or more of our
common stock. Upon exercise, each preferred stock purchase right will entitle
its holder, other than the acquirer and its affiliates, to purchase 1/1000 of a
share of our Series A Junior Participating Preferred Stock at a price of $50 per
one one-thousandth of a preferred share. The holder of each right will receive
upon exercise, common shares having a value equal to two times the exercise
price of the right. For example, at an exercise price of $50 per right, each
right that the acquiror does not own would be entitled to purchase $100 worth of
common stock for $50. Assuming a value of $25 per common share at the time, the
holder of each right would be entitled to purchase four common shares for $50.
The terms of the rights plan and the dividend paid on March 17, 2000, are more
fully set out in the rights plan included as an exhibit to our Current Report on
Form 8-K dated February 22, 2000, incorporated by reference into this
prospectus.
Options and Warrants
Under our stock option plans, we are authorized to grant options to purchase a
maximum of 2,500,000 shares of common stock to our employees, officers, and
directors, and to other persons who provide us with services. As of September
30, 2000, a total of 2,422,798 options have been granted under our stock option
plans, of which 274,700 have been terminated, 40,000 have expired, 1,004,912
have vested and 147,998 have been exercised, and 391,902 options were available
for future grants under our stock option plans. Our board of directors determine
the terms of our options at the time of grant.
In connection with our 1997 public offering, we issued to the representatives of
the underwriters, warrants to purchase a total of 69,000 shares of common stock
at an exercise price of $16.80 per share, exercisable at any time through
January 23, 2002.
Following our acquisition of Atossa HealthCare Inc. on August 8, 2000, we hired
Dr. Steven C. Quay as our new President, Chief Executive Officer and Chairman of
the Board and granted him options to purchase a total of 600,000 shares of
common stock. The exercise price of the options varies from $4.09 per share to
$15.00 per share, with a weighted average exercise price of $8.60. All of these
options regardless of the exercise price will vest at the rate of 33.33% per
full year of service, and will not vest pro-rata during the interim periods.
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The following table presents all the options and warrants that were outstanding
as of September 30, 2000, including the warrants granted to Castlebar and Jesup
& Lamont:
Number of Shares Weighted Average
Purchasable Exercise Price (1)
---------------------------- -------------------------
1,360,100 (2) $4.79
69,000 (3) $16.80
49,500 (4) $5.53
600,000 (5) $8.60
--------- -----
2,078,600 $6.31
========= =====
-------------
(1) Exercise prices are rounded to the nearest cent.
(2) Shares issuable upon exercise of options granted under the stock option
plans. Does not include any options granted under the plans after
September 30, 2000.
(3) Total shares issuable upon exercise of warrants granted to Wheat, First
Securities, Inc. and Volpe, Welty & Company, as underwriters in connection
with an offering of our shares in 1997.
(4) Shares issuable upon exercise of the warrants granted to Jesup & Lamont as
a placement fee, and to Castlebar in connection with closing the equity
line of credit agreement. Does not include the additional warrants that
may be issued to Castlebar and Jesup & Lamont upon each drawdown under the
equity line of credit.
(5) Shares issuable upon exercise of options granted on August 8, 2000, to Dr.
Steven C. Quay.
Holders of options and warrants do not have any of the rights or privileges of
our stockholders, including voting rights, prior to exercise of the options and
warrants. We have reserved sufficient shares of authorized common stock to cover
the issuance of common stock subject to the options and warrants.
Section 203 of the Delaware General Corporation Law
We are subject to Section 203 of the Delaware General Corporation Law, which
prevents an "interested stockholder" from engaging in a "business combination"
with a publicly held Delaware corporation for three years following the date the
person became an interested stockholder, unless:
(1) before the person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved
the business combination;
(2) upon consummation of the transaction that resulted in the interested
stockholder's becoming an interested stockholder, the interested
stockholder owns at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced; or
(3) following the transaction in which the person became an interested
stockholder, the board of directors of the corporation approves the
transaction and holders authorize the transaction at a meeting of
stockholders by the affirmative vote of the holders of 66 2/3% of
the outstanding voting stock of the corporation that the interested
stockholder does not own.
The Delaware General Corporation Law defines an "interested stockholder" as a
person owning 15% or more of a corporation's outstanding voting stock. A
"business combination" includes mergers, stock or asset sales and other
transactions resulting in a financial benefit to the interested stockholder.
The provisions of Section 203 of the Delaware General Corporation Law could have
the effect of delaying, deferring or preventing a change in control.
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<PAGE>
Indemnification and Limitation of Liability
Our Certificate of Incorporation limits the liability of directors to the
maximum extent that Delaware law as currently or hereafter in effect permits.
Delaware law provides that directors of a corporation will not be personally
liable for monetary damages for breach of their fiduciary duty as a director,
except for liability:
(1) for breach of their duty of loyalty to the corporation or its
stockholders;
(2) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
(3) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; or
(4) for any transaction from which the director derives an improper
personal benefit.
Our Certificate of Incorporation provides for the mandatory indemnification of,
and advancement of expenses to, our directors, officers, employees and agents to
the maximum extent that Section 145 of the Delaware General Corporation Law, as
amended from time to time, permits.
Transfer Agent
The transfer agent and registrar for our common stock is the American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-2 that we have
filed with the SEC. Parts of the registration statement have been omitted from
this prospectus as the rules and regulations of the SEC permit, and this
prospectus does not contain all of the information contained or incorporated by
reference in the registration statement. In particular, statements in this
prospectus concerning the terms of certain agreements and other documents are
necessarily summaries of those documents, and in each case we refer you to the
copy of the applicable document to the extent we have filed it as an exhibit to
the registration statement. For further information on us and the information in
this prospectus, we refer you to the registration statement and its exhibits.
You may obtain copies of the registration statement and its exhibits by paying a
prescribed fee, or you may examine them without charge, at the public reference
facilities that the SEC maintains at its office at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, as well as at the Regional Offices of the SEC at
Seven World Trade Center, New York, New York 10048 and Citicorp Center, 300 West
Madison Street, Chicago, Illinois 60661. You may obtain information on the
operation of the public reference facilities by calling the SEC at
1-800-SEC-0330. In addition, you may obtain copies of the registration statement
and its exhibits at the SEC's website located at http://www.sec.gov.
We are a reporting company and file our annual, quarterly and current reports,
proxy material and other information with the Securities and Exchange
Commission. You may read and copy any materials that we file with the SEC at the
SEC's public reference facilities listed above, as well as on the SEC's website.
INCORPORATION OF INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" information that we file with
them, which means that we can disclose important information to you by referring
you to the documents filed with them. The information incorporated by reference
is an important part of this prospectus. We incorporate by reference the
following documents which we have previously filed with the SEC:
1. Our Annual Report on Form 10-K/A for the fiscal year ended December
31, 1999;
2. Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2000; and
3. Our Quarterly Report on Form 10-Q for the quarter ended June 30,
2000; and
4. Our Quarterly Report on Form 10-Q/A for the quarter ended September
30, 2000; and
27
<PAGE>
5. Our Current Report on Form 8-K dated February 22, 2000; and
6. Our Current Report on Form 8-K dated July 12, 2000; and
7. Our Current Report on Form 8-K dated August 8, 2000.
Copies of our above-mentioned 10-K/A and 10-Qs are included with this
prospectus. If you need another copy of these documents, we will provide you
with a free copy upon oral or written request. However, we will not include
exhibits to those documents unless they are specifically incorporated by
reference into this prospectus. Requests should be directed to:
Nastech Pharmaceutical Company Inc.
Attn: Steven C. Quay, M.D., Ph.D.
President & Chief Executive Officer
45 Davids Drive
Hauppauge, New York 11788
(631) 273-0101
In making a decision to buy our common stock, you should rely only on the
information incorporated by reference or contained in the prospectus. We have
not authorized anyone to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it.
You should assume that the information appearing in this prospectus is accurate
only as of the date on the front cover of this prospectus. Our business,
financial condition, results of operations and prospectus may have changed since
that date.
MATERIAL EVENTS
The following are the material events that have occurred during our most recent
fiscal quarter. These events are also described in our most recent quarterly
report delivered to our stockholders:
Acquisition of Atossa HealthCare Inc.
On August 8, 2000, we acquired Atossa HealthCare Inc., a development stage
company based in Washington State which is developing a proprietary platform of
diagnostics and treatments related to breast cancer risk assessment and
therapeutics and other women's health care products. The acquisition was
effected via a merger of Atossa Acquisition Corporation Inc., a wholly owned
subsidiary of Nastech, with and into Atossa. Following the merger, Atossa became
a wholly owned subsidiary of Nastech. The merger was accounted for as a purchase
and was intended to be a tax-free plan of reorganization under Section 368(a) of
the Internal Revenue Code of 1986, as amended.
As part of the merger, the shareholders of Atossa received one share of our
common stock for each 5.051 shares of Atossa common stock held at the time of
the merger. The total consideration we paid for Atossa -- 600,000 shares of
Nastech common stock, with a market value of approximately $2,500,000 -- was
agreed upon between Nastech and Atossa after extensive negotiations. The amount
of consideration paid for Atossa was based exclusively on these negotiations.
The consideration paid does not bear any relationship to the net book value of
Atossa and may not necessarily bear any relationship to any other recognized
measure of value. The terms of merger are more fully set out in the Agreement
and Plan of Reorganization included as an exhibit to the registration statement
of which this prospectus forms a part.
Through August 8, 2000, Atossa had an accumulated deficit totaling approximately
$242,000. Atossa's research and development efforts had been focused principally
on the development of a non-invasive diagnostic test kit which tests for breast
cancer as well as the genetic and other cellular changes within the breast that
precede, by many years, the appearance of cancer. The test kit analyzes samples
of breast fluid, containing cancer markers, abnormal cells and malignant cells,
from the breast nipple following the nasal administration of oxytocin, a brain
pituitary hormone. Atossa has a patent pending covering the use of oxytocin for
breast cancer diagnosis. To date, Atossa has not conducted any clinical trials
of the test kit.
Nastech anticipates that the continued development of the acquired technology
from Atossa will cost approximately $16 million and will take approximately four
and one-half years before the technology is developed into a commercially viable
product, if ever. We intend to seek research collaborations to partially
28
<PAGE>
or fully fund these development costs. Successful commercialization of the
acquired technology is subject to the same risks as are associated with our
other research activities.
In connection with the acquisition of Atossa, we recorded a charge of $2.3
million based on management's estimate of the value of the acquired in-process
research and development. We valued the in-process R&D based on the income
approach that focuses on the income-producing capability of the assets. The
underlying premise of this approach is that the value of an asset can be
measured by the present worth of the net economic benefit -- cash receipts less
cash outlays -- to be received over the life of the assets. We made significant
assumptions and estimates in the valuation of in-process R&D, including:
o the stage of development of the test kit;
o future revenues based on royalties;
o growth rates for the test kit;
o product sales cycles;
o an estimated life of the test kit of 17 years from the date of
introduction;
o an effective income tax rate of 40%;
o a probability of success factor of 20%; and
o a discount rate of 50% to reflect present value and the risk of
developing the acquired technology into a commercially viable
product.
The investment in Atossa amounted to less than 20% of our total assets as
indicated on our December 31, 1999 balance sheet. The assets and the income
(loss) of Atossa also amounted to significantly less than 20% of our total
assets and income (loss), respectively, as indicated on our December 31, 1999
financial statements. The acquisition of Atossa did not involve the acquisition
of any plants, equipment or other physical property, other than cash of
approximately $30,000 and goodwill of $171,000.
Hiring Dr. Steven C. Quay as our new President, Chief Executive Officer, and
Chairman of the Board
Following the merger, Steven C. Quay, M.D., Ph.D., the founder of Atossa, became
our President, Chief Executive Officer, and Chairman of the Board. In 1991, Dr.
Quay founded SONUS Pharmaceuticals, Inc. to develop ultrasound agents based on
his inventions. EchoGen(R), SONUS' first product, is approved for sale in
Europe. In 1984, Dr. Quay founded Salutar Inc. to develop magnetic resonance
imaging contrast agents and was awarded 24 patents covering magnetic resonance
imaging technology. At Salutar, he launched the pharmaceuticals OmniScan(R) and
TeslaScan(R), which are approved for use in the United States, Europe and Japan.
Dr. Quay holds more than 40 patents, is a member of a broad range of scientific
and business associations and has published more than 100 papers in diagnostic
imaging, oncology, protein chemistry and genetics. Dr. Quay has served on the
faculty of Stanford University School of Medicine and as the industrial
representative to the Food & Drug Administration Advisory Panel for Radiological
Products. He holds an M.D., M.A. and Ph.D. from the University of Michigan
Medical School. Dr. Quay completed post-graduate research at the Massachusetts
Institute of Technology and received his residency training at the Massachusetts
General Hospital. Dr. Quay is 50 years old.
Following the merger, Dr. Quay beneficially owns 593,939 shares of our common
stock, which equals approximately 8.7% of our outstanding shares. The terms of
Dr. Quay's employment are set out in the Employment Agreement included as an
exhibit to the registration statement of which this prospectus forms a part.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon by Roberts,
Sheridan & Kotel, a Professional Corporation.
EXPERTS
The financial statements of Nastech Pharmaceutical Company Inc. as of December
31, 1999, and for each of the years in the three-year period ended December 31,
1999, are incorporated by reference in this prospectus and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference herein, upon the authority of said firm
as experts in accounting and auditing.
29
<PAGE>
1,282,500 Shares
[GRAPHIC OMITTED]
Common Stock
PROSPECTUS
_____________, 2001
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The fees and expenses we incurred in connection with the offering are payable by
us and, other than registration, filing and listing fees, are estimated as
follows:
Securities and Exchange Commission Registration Fee................... $2,033
Nasdaq Fee for Listing of Additional Shares........................... $13,000
Legal Fees and Expenses............................................... $130,000
Accounting Fees....................................................... $15,000
Miscellaneous Fees and Expenses....................................... $10,000
----------
Total................................................................. $170,033
========
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Our Certificate of Incorporation provides that the indemnification provisions of
Sections 102(b)(7) and 145 of the Delaware General Corporation Law shall be
utilized to the fullest extent possible. Further, the Certificate of
Incorporation contains provisions to eliminate the liability of our directors to
Nastech or its stockholders to the fullest extent permitted by Section 102(b)(7)
of the Delaware General Corporation Law, as amended from time to time.
Section 145 of the Delaware General Corporation Law provides that a corporation
may indemnify directors and officers as well as other employees and individuals
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
any threatened, pending or completed actions, suits or proceedings in which such
person is made a party by reason of such person being or having been a director,
officer, employee or agent of the corporation. The Delaware General Corporation
Law provides that Section 145 is not exclusive of other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 102(b)(7) of the Delaware General Corporation Law permits a corporation
to provide in its certificate of incorporation that a director of the
corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for 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 a knowing violation of law, (iii) for
unlawful payments of dividends or unlawful stock repurchases, redemptions or
other distributions, or (iv) for any transaction from which the director derived
an improper personal benefit. Our Certificate of Incorporation provides for such
limitation of liability.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, is permitted for our directors, officers or controlling
persons, pursuant to the above mentioned statutes or otherwise, we understand
that the Securities and Exchange Commission is of the opinion that such
indemnification may contravene federal public policy, as expressed in said Act,
and therefore, may be unenforceable. Accordingly, in the event that a claim for
such indemnification is asserted by any of our directors, officers or
controlling persons, and the Commission is still of the same opinion, we (except
insofar as such claim seeks reimbursement from us of expenses paid or incurred
by a director, officer of controlling person in successful defense of any
action, suit or proceeding) will, unless the matter has theretofore been
adjudicated by precedent deemed by our counsel to be controlling, submit to a
court of appropriate jurisdiction the question whether or not indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
At present, there is no pending litigation or proceeding involving any of our
directors, officers or employees as to which indemnification is sought, nor are
we aware of any threatened litigation or proceeding that may result in claims
for indemnification.
I-1
<PAGE>
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement:
Exhibit
Number Description
------ -----------
2.1* Equity Line of Credit Agreement dated July 11, 2000, between
Registrant and Castlebar Enterprises Limited
2.1(A) Waiver Letter dated January 3, 2001, from Castlebar Enterprises
Limited to the Registrant regarding Section 2.1(f)(ii) of the Equity
Line of Credit Agreement.
2.2* Registration Rights Agreement dated July 11, 2000, between
Registrant and Castlebar Enterprises Limited
2.3* Escrow Agreement dated as of July 11, 2000, among Registrant,
Castlebar Enterprises Limited and Epstein Becker & Green, P.C.
2.4* Stock Purchase Warrant dated July 11, 2000, issued to Castlebar
Enterprises Limited
2.5* Stock Purchase Warrant dated July 11, 2000, issued to Jesup & Lamont
Securities Corporation
2.6 Agreement and Plan of Reorganization dated as of August 8, 2000,
among Registrant, Atossa Acquisition Corporation, a Delaware
corporation and wholly-owned subsidiary of Registrant, and Atossa
HealthCare, Inc. (Filed as Exhibit 2.1 to Registrant's Current
Report on Form 8-K (Commission File No. 0-13789) dated August 8,
2000, and incorporated herein by reference).
4.1 Registration Rights Agreement dated July 11, 2000, between
Registrant and Castlebar Enterprises Limited (filed as Exhibit 2.2)
4.2 Rights Agreement dated February 22, 2000 between Registrant and
American Stock Transfer & Trust Registrant as Rights Agent. (Filed
as Exhibit 1 to Registrant's Current Report on Form 8-K (Commission
File No. 0-13789) dated February 22, 2000, and incorporated herein
by reference). The Rights Agreement includes the Designation of
Rights, Terms and Preferences of Series A Junior Preferred Stock as
Exhibit A, the form of Rights Certificate as Exhibit B, and the
Summary of Rights as Exhibit C thereto.
5* Opinion and consent of Roberts, Sheridan & Kotel, a Professional
Corporation
10.1 Licensing Agreement with UKRF. (Filed as Exhibit 10.4 to the
Registrant's Registration Statement on Form S-18, as amended
(Commission File No. 2-88605-NY), filed on December 23, 1983, and
incorporated herein by reference.)
10.2 Lease for facilities at 45 Davids Drive, Hauppauge, NY. (Filed as
Exhibit 10B to the Registrant's Annual Report on Form 10-KSB for the
year ended June 30, 1995 (Commission File No. 0-13789), and
incorporated herein by reference.)
10.3 Sublicense Agreement with Bristol-Myers Squibb Co. (Filed as Exhibit
10E to the Registrant's Registration Statement on Form S-1, as
amended (Commission File No. 33-5717), filed on May 15, 1986, and
incorporated herein as reference.)
10.4 Agreements between Registrant, and RiboGene, Inc. (as successor in
interest to Rugby Laboratories, Inc., and Darby Pharmaceuticals,
Inc.) (Filed as Exhibit 10D to the Registrant's Registration
Statement on Form S-1, as amended (Commission File No. 33-5717),
filed on May 15, 1986, and incorporated herein by reference.)
10.5 1995 Agreement between the Registrant and RiboGene, Inc. (Filed as
Exhibit 10F to the Registrant's Annual Report on Form 10-KSB for the
year ended June 30, 1995 (Commission File No. 0-13789), and
incorporated herein by reference.)
10.6 Stock Option Agreements. (Filed as Exhibit 10M to the Registrant's
Annual Report on Form 10-KSB for the year ended June 30, 1995
(Commission File No. 0-13789), and incorporated herein by
reference.)
10.7 License Agreement with The DuPont Merck Pharmaceutical Registrant.
(Filed as Exhibit 10N to the Registrant's Registration Statement on
Form SB-2, as amended (Commission File No. 33-70180), filed on
October 12, 1993, and incorporated herein by reference.)
10.8 Nasal Drug Evaluation and Option Agreement. (Filed as Exhibit 10K to
the Registrant's Annual Report on Form 10-KSB for the year ended
June 30, 1996 (Commission File No. 0-13789), and incorporated herein
by reference.)
10.9 Agreement with Ciba Self-Medication, Inc. (Filed as Exhibit 10J to
the Registrant's Annual Report on Form 10-KSB for the year ended
June 30, 1996 (Commission File No. 0-13789), and incorporated herein
by reference.)
10.10 Employment Agreement with Andrew P. Zinzi. (Filed as Exhibit 10.11
to the Registrant's Registration Statement on Form S-2 (Commission
File No. 333-16507), filed on November 20, 1996, and incorporated
herein by reference.)
10.11 Employment Agreement with Dr. Vincent D. Romeo. (Filed as Exhibit
10.11 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997 (Commission File No. 000-13789), and
incorporated herein by reference.)
10.12 Employment Agreement with Robert H. Rosen. (Filed as Exhibit 10.12
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997 (Commission File No. 000-13789), and incorporated
herein by reference.)
10.13 Evaluation and Option Agreement with the Consumer Health Care
Division of Pfizer Inc. (Filed as Exhibit 10.12 to the Registrant's
Registration Statement on Form S-2 (Commission File No. 333-16507),
filed on November 20, 1996, and incorporated herein by reference.)
10.14 Development and License Agreement with DynaGen, Inc. (Filed as
Exhibit 10.13 to the Registrant's Registration Statement on Form S-2
as amended (Commission File No. 333-16507), filed on November 20,
1996, and incorporated herein by reference.)
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<PAGE>
10.15 License and Supply Agreement with Schwarz Pharma, Inc. (Filed as
Exhibit 10J to the Registrant's Financial Report on Form 10Q for the
Quarter Ended June 30, 1997 (Commission File No.000-13789), filed on
August 14, 1997, and incorporated herein by reference.)
10.16 License and Supply Agreement with Schwarz Pharma, Inc. (Filed as
Exhibit 10.12 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1997 (Commission File No. 000-13789), and
incorporated herein by reference.)
10.17 License and Supply Agreement with Meda AB. (Filed as Exhibit 10.12
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997 (Commission File No. 000-13789), and incorporated
herein by reference.)
10.18 License and Supply Agreement with Tzamal Pharma Ltd. (Filed as
Exhibit 10.18 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1998 (Commission File No. 000-13789), and
incorporated herein by reference.)
10.19 International Distribution Agreement with Cambridge Selfcare
Diagnostics Limited. (Filed as Exhibit 10.19 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1998
(Commission File No. 000-13789), and incorporated herein by
reference.)
10.20 Employment Agreement with Dr. Charan Behl. (Filed as Exhibit 10.20
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 (Commission File No. 000-13789), and incorporated
herein by reference).
10.21 Employment Agreement with Andrew P. Zinzi. (Filed as Exhibit 10.21
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1999 (Commission File No. 000-13789), and incorporated
herein by reference).
10.22 Termination and Release Agreement with Schwarz Pharma, Inc. (Filed
as Exhibit 10.22 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1999 (Commission File No. 000-13789),
and incorporated herein by reference).
10.23 Employment Agreement with Steven C. Quay, M.D., Ph.D., dated August
8, 2000. (Filed as Exhibit 10.1 to the Registrant's Current Report
on Form 8-K dated August 8, 2000 (Commission File No. 000-13789),
and incorporated herein by reference).
13.1 Annual report to security holders on Form 10-K/A dated December 31,
1999. (Filed on January 12, 2001 (Commission File No. 000-13789),
and incorporated herein by reference).
13.2 Quarterly report to security holders on Form 10-Q dated March 31,
2000. (Filed on May 11, 2000 (Commission File No. 000-13789), and
incorporated herein by reference).
13.3 Quarterly report to security holders on Form 10-Q dated June 30,
2000. (Filed on August 8, 2000 (Commission File No. 000-13789), and
incorporated herein by reference).
13.4 Quarterly report to security holders on Form 10-Q/A dated September
30, 2000. (Filed on November 15, 2000 (Commission File No.
000-13789), and incorporated herein by reference).
23.1 Consent of KPMG LLP
23.2* Consent of Roberts, Sheridan & Kotel, a Professional Corporation
(included in Exhibit 5)
24* Power of Attorney
--------------------
* Filed with the original Registration Statement dated September 6, 2000.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus frilled with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
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<PAGE>
(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; and
(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 this
offering.
The undersigned registrant hereby undertakes to deliver or cause to be delivered
with the prospectus, to each person to whom the prospectus is sent or given, the
latest annual report to security holders that is incorporated by reference in
the prospectus and furnished pursuant to and meeting the requirements of Rule
14-a or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim
financial information required to be presented by Article 3 of Regulations S-X
are not set forth in the prospectus, to deliver, or cause to be delivered to
each person to whom the prospectus is sent or given, the latest quarterly report
that is specifically incorporated by reference in the prospectus to provide such
interim financial information.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hauppauge, State of New York on this 12th day of
January, 2001.
NASTECH PHARMACEUTICAL COMPANY INC.
By: /s/ Steven C. Quay
--------------------------------
Steven C. Quay, M.D., Ph.D.
President, Chief Executive Officer and
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on January 12, 2001.
Signature Title
--------- -----
/s/ Steven C. Quay President, Chief Executive Officer and
--------------------------------- Chairman of the Board Officer (Principal
Steven C. Quay, M.D., Ph.D. Executive Officer)
/s/ Andrew Zinzi Chief Financial Officer
--------------------------------- (Principal Financial and Accounting Officer)
Andrew Zinzi
/s/ Devin N. Wenig Director
---------------------------------
Devin N. Wenig
/s/ Bruce R. Thaw Director
---------------------------------
Bruce R. Thaw
/s/ Grant W. Denison Director
---------------------------------
Grant W. Denison
/s/ Ian R. Ferrier Director
---------------------------------
Dr. Ian R. Ferrier
/s/ Joel Girsky Director
---------------------------------
Joel Girsky
/s/ Alvin Katz Director
---------------------------------
Alvin Katz
/s/ John V. Pollock Director
---------------------------------
John V. Pollock
II-5
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
2.1* Equity Line of Credit Agreement dated July 11, 2000, between
Registrant and Castlebar Enterprises Limited
2.1(A) Waiver Letter dated January 3, 2001, from Castlebar Enterprises
Limited to the Registrant regarding Section 2.1(f)(ii) of the Equity
Line of Credit Agreement.
2.2* Registration Rights Agreement dated July 11, 2000, between
Registrant and Castlebar Enterprises Limited
2.3* Escrow Agreement dated as of July 11, 2000, among Registrant,
Castlebar Enterprises Limited and Epstein Becker & Green, P.C.
2.4* Stock Purchase Warrant dated July 11, 2000, issued to Castlebar
Enterprises Limited
2.5* Stock Purchase Warrant dated July 11, 2000, issued to Jesup & Lamont
Securities Corporation
2.6 Agreement and Plan of Reorganization dated as of August 8, 2000,
among Registrant, Atossa Acquisition Corporation, a Delaware
corporation and wholly-owned subsidiary of Registrant, and Atossa
HealthCare, Inc. (Filed as Exhibit 2.1 to Registrant's Current
Report on Form 8-K (Commission File No. 0-13789) dated August 8,
2000, and incorporated herein by reference).
4.1 Registration Rights Agreement dated July 11, 2000, between
Registrant and Castlebar Enterprises Limited (filed as Exhibit 2.2)
4.2 Rights Agreement dated February 22, 2000 between Registrant and
American Stock Transfer & Trust Registrant as Rights Agent. (Filed
as Exhibit 1 to Registrant's Current Report on Form 8-K (Commission
File No. 0-13789) dated February 22, 2000, and incorporated herein
by reference). The Rights Agreement includes the Designation of
Rights, Terms and Preferences of Series A Junior Preferred Stock as
Exhibit A, the form of Rights Certificate as Exhibit B, and the
Summary of Rights as Exhibit C thereto.
5* Opinion and consent of Roberts, Sheridan & Kotel, a Professional
Corporation
10.1 Licensing Agreement with UKRF. (Filed as Exhibit 10.4 to the
Registrant's Registration Statement on Form S-18, as amended
(Commission File No. 2-88605-NY), filed on December 23, 1983, and
incorporated herein by reference.)
10.2 Lease for facilities at 45 Davids Drive, Hauppauge, NY. (Filed as
Exhibit 10B to the Registrant's Annual Report on Form 10-KSB for the
year ended June 30, 1995 (Commission File No. 0-13789), and
incorporated herein by reference.)
10.3 Sublicense Agreement with Bristol-Myers Squibb Co. (Filed as Exhibit
10E to the Registrant's Registration Statement on Form S-1, as
amended (Commission File No. 33-5717), filed on May 15, 1986, and
incorporated herein as reference.)
10.4 Agreements between Registrant, and RiboGene, Inc. (as successor in
interest to Rugby Laboratories, Inc., and Darby Pharmaceuticals,
Inc.) (Filed as Exhibit 10D to the Registrant's Registration
Statement on Form S-1, as amended (Commission File No. 33-5717),
filed on May 15, 1986, and incorporated herein by reference.)
10.5 1995 Agreement between the Registrant and RiboGene, Inc. (Filed as
Exhibit 10F to the Registrant's Annual Report on Form 10-KSB for the
year ended June 30, 1995 (Commission File No. 0-13789), and
incorporated herein by reference.)
10.6 Stock Option Agreements. (Filed as Exhibit 10M to the Registrant's
Annual Report on Form 10-KSB for the year ended June 30, 1995
(Commission File No. 0-13789), and incorporated herein by
reference.)
10.7 License Agreement with The DuPont Merck Pharmaceutical Registrant.
(Filed as Exhibit 10N to the Registrant's Registration Statement on
Form SB-2, as amended (Commission File No. 33-70180), filed on
October 12, 1993, and incorporated herein by reference.)
10.8 Nasal Drug Evaluation and Option Agreement. (Filed as Exhibit 10K to
the Registrant's Annual Report on Form 10-KSB for the year ended
June 30, 1996 (Commission File No. 0-13789), and incorporated herein
by reference.)
10.9 Agreement with Ciba Self-Medication, Inc. (Filed as Exhibit 10J to
the Registrant's Annual Report on Form 10-KSB for the year ended
June 30, 1996 (Commission File No. 0-13789), and incorporated herein
by reference.)
10.10 Employment Agreement with Andrew P. Zinzi. (Filed as Exhibit 10.11
to the Registrant's Registration Statement on Form S-2 (Commission
File No. 333-16507), filed on November 20, 1996, and incorporated
herein by reference.)
10.11 Employment Agreement with Dr. Vincent D. Romeo. (Filed as Exhibit
10.11 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997 (Commission File No. 000-13789), and
incorporated herein by reference.)
10.12 Employment Agreement with Robert H. Rosen. (Filed as Exhibit 10.12
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997 (Commission File No. 000-13789), and incorporated
herein by reference.)
10.13 Evaluation and Option Agreement with the Consumer Health Care
Division of Pfizer Inc. (Filed as Exhibit 10.12 to the Registrant's
Registration Statement on Form S-2 (Commission File No. 333-16507),
filed on November 20, 1996, and incorporated herein by reference.)
10.14 Development and License Agreement with DynaGen, Inc. (Filed as
Exhibit 10.13 to the Registrant's Registration Statement on Form S-2
as amended (Commission File No. 333-16507), filed on November 20,
1996, and incorporated herein by reference.)
10.15 License and Supply Agreement with Schwarz Pharma, Inc. (Filed as
Exhibit 10J to the Registrant's Financial Report on Form 10Q for the
Quarter Ended June 30, 1997 (Commission File No.000-13789), filed on
August 14, 1997, and incorporated herein by reference.)
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<PAGE>
10.16 License and Supply Agreement with Schwarz Pharma, Inc. (Filed as
Exhibit 10.12 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1997 (Commission File No. 000-13789), and
incorporated herein by reference.)
10.17 License and Supply Agreement with Meda AB. (Filed as Exhibit 10.12
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997 (Commission File No. 000-13789), and incorporated
herein by reference.)
10.18 License and Supply Agreement with Tzamal Pharma Ltd. (Filed as
Exhibit 10.18 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1998 (Commission File No. 000-13789), and
incorporated herein by reference.)
10.19 International Distribution Agreement with Cambridge Selfcare
Diagnostics Limited. (Filed as Exhibit 10.19 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1998
(Commission File No. 000-13789), and incorporated herein by
reference.)
10.20 Employment Agreement with Dr. Charan Behl. (Filed as Exhibit 10.20
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 (Commission File No. 000-13789), and incorporated
herein by reference).
10.21 Employment Agreement with Andrew P. Zinzi. (Filed as Exhibit 10.21
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1999 (Commission File No. 000-13789), and incorporated
herein by reference).
10.22 Termination and Release Agreement with Schwarz Pharma, Inc. (Filed
as Exhibit 10.22 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1999 (Commission File No. 000-13789),
and incorporated herein by reference).
10.23 Employment Agreement with Steven C. Quay, M.D., Ph.D., dated August
8, 2000. (Filed as Exhibit 10.1 to the Registrant's Current Report
on Form 8-K dated August 8, 2000 (Commission File No. 000-13789),
and incorporated herein by reference).
13.1 Annual report to security holders on Form 10-K/A dated December 31,
1999. (Filed on January 12, 2001 (Commission File No. 000-13789),
and incorporated herein by reference).
13.2 Quarterly report to security holders on Form 10-Q dated March 31,
2000. (Filed on May 11, 2000 (Commission File No. 000-13789), and
incorporated herein by reference).
13.3 Quarterly report to security holders on Form 10-Q dated June 30,
2000. (Filed on August 8, 2000 (Commission File No. 000-13789), and
incorporated herein by reference).
13.4 Quarterly report to security holders on Form 10-Q/A dated September
30, 2000. (Filed on November 15, 2000 (Commission File No.
000-13789), and incorporated herein by reference).
23.1 Consent of KPMG LLP
23.2* Consent of Roberts, Sheridan & Kotel, a Professional Corporation
(included in Exhibit 5)
24* Power of Attorney
--------------------
* Filed with the original Registration Statement dated September 6, 2000.
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